e$ as "travellers check?

There has been all this talk about potential legal problems with banks
issuing ecash. Lots of terms have been tossed around which I only
bearly understand like "bearer bonds" and such. And some things I
understand more, like the prohibition on private scrip. 
 
But someone a long time ago brought up traveller's checks, and the similarity
between them and ecash. The similarity seems pretty darn close to me. 
You pay some money to American Express, you get a note issued by them, you
give it to a merchant, he redeems in with AE for money. There's a fee charged
somewhere along the line. Well, you pay some money to First Digital Bank, you
basically get an electronic promissary note, you give it to a merchant for
a service or product, and he redeems it with First Digital for US dollars. 
 
I dont' know much about economics, but as far as I can tell this seems a pretty
solid analogy. If I'm missing something, can someone try to explain to me
using small words what it is I'm missing. Otherwise, what regulation is there
of people who issue traveller's checks? It's clearly not _illegal_ to issue
travellers checks, so I dont' see why it would be illegal under current laws
to issue ecash, despite all the interesting talk about bearer bonds and
private issued scrip. But perhaps there is strict regulation or something?

Jonathan Rochkind says:
> But someone a long time ago brought up traveller's checks, and the similarity
> between them and ecash. The similarity seems pretty darn close to me. 

Travellers checks are not anonymous.

What people basically don't seem to understand here is that the
government is now run administratively and not legislatively. Congress
ceeded huge amounts of power to regulators, who have enormous
latitude. They can decide arbitrarily to accept or reject various
proposals based entirely on their whim.

Their whim, for the past few decades, has been to reduce as much as
possible the capacity to engage in untraceable transactions. Because
of that, any bank proposing to improve the capacity to produce such
transactions is going to get into trouble with the regulators, who are
acting to try to lessen such capacities. It really doesn't matter what
the details of existing law are.

Perry

On Mon, 22 Aug 1994, Perry E. Metzger wrote:

[....]

> Their whim, for the past few decades, has been to reduce as much as
> possible the capacity to engage in untraceable transactions. Because
> of that, any bank proposing to improve the capacity to produce such
> transactions is going to get into trouble with the regulators, who are
> acting to try to lessen such capacities. It really doesn't matter what
> the details of existing law are.

It's slighly more than a whim too, I think.  I think I recall something 
about encouraging use of *traceable* electronic funds transfer for more 
transactions is something like an official statement from one of the not 
too distant G7 meetings.

Another point not directly related to Perry's post:  This list seems to 
"know" that people *want* anonymous digital cash.  Does anybody actually 
know *how* *much* people want this?  Is Joe Common willing to pay 
something extra for this anonymity functionality?  Does anybody have 
facts about this, or is it just assumptions??  "Since we think it's good, 
everybnody must want it!"

-- Rolf


----------------------------------------------------------------------
Rolf Michelsen                           "Nostalgia isn't what it
Email: rolf.michelsen@delab.sintef.no     used to be..."
Phone: +47 73 59 87 33                   
----------------------------------------------------------------------

But someone a long time ago brought up traveller's checks, and the
   similarity between them and ecash. [...]  You pay some money to
   American Express, you get a note issued by them, you give it to a
   merchant, he redeems in with AE for money. [etc...]

   I dont' know much about economics, but as far as I can tell this
   seems a pretty solid analogy.

What you have described is a financial model for digital cash, which
is only part of a complete model.  The financial model is, as you
point out, pretty easy.  You buy an instrument and then use it in lieu
of a more direct transfer.  The privacy to counterparty comes about
because the issuer's name is on the instrument, not yours; the issuer
is a proxy for identity.

   It's clearly not _illegal_ to issue
   travellers checks, 

No, but in certain places where they are used in lieu of greenbacks,
aka Federal Reserve Banknotes, it _is_ illegal to use them without
certain reporting requirements.  (Duncan can elaborate, as he's much
more up on the details here.)  Complicity in failure to report can
also be criminal.  And an issuer that sets up a system to thwart
reporting requirements could easily be considered _prima facie_
evidence of conspiracy to evade reporting.

When the government doesn't want anonymity, expect that it will be
difficult to create.

Eric

On Sun, 28 Aug 1994, Eric Hughes wrote:

>    But someone a long time ago brought up traveller's checks, and the
>    similarity between them and ecash. [...]  You pay some money to
>    American Express, you get a note issued by them, you give it to a
>    merchant, he redeems in with AE for money. [etc...]
> 
>    I dont' know much about economics, but as far as I can tell this
>    seems a pretty solid analogy.
> 
> What you have described is a financial model for digital cash, which
> is only part of a complete model.  The financial model is, as you
> point out, pretty easy.  You buy an instrument and then use it in lieu
> of a more direct transfer.  The privacy to counterparty comes about
> because the issuer's name is on the instrument, not yours; the issuer
> is a proxy for identity.
> 
>    It's clearly not _illegal_ to issue
>    travellers checks, 
> 
> No, but in certain places where they are used in lieu of greenbacks,
> aka Federal Reserve Banknotes, it _is_ illegal to use them without
> certain reporting requirements.  (Duncan can elaborate, as he's much
> more up on the details here.)  Complicity in failure to report can
> also be criminal.  And an issuer that sets up a system to thwart
> reporting requirements could easily be considered _prima facie_
> evidence of conspiracy to evade reporting.

	traveller's checks are an extremely easy way to defraud
	any bank that issues them,  what will happen to this
 	difficulty factor if they are anonymous ?

Greg Ecker says:
> 	traveller's checks are an extremely easy way to defraud
> 	any bank that issues them,  what will happen to this
>  	difficulty factor if they are anonymous ?

Digitally signed notes are not forgeable.

.pm

> > 	traveller's checks are an extremely easy way to defraud
> > 	any bank that issues them,  what will happen to this
> >  	difficulty factor if they are anonymous ?
> 
> Digitally signed notes are not forgeable.

   Right.
  
   I doubt very seriously that there is anything on the planet that is 
*ABSOLUTELY* unforgable.   It all comes down to how much energy and 
resources one is willing to sink into the project.

-jon
( THEY CAN STOP THE PARTY, BUT THEY CAN'T STOP THE FUTURE )
( --------------------[ entropy@intnet.net ]------------- )

> > 
> > Digitally signed notes are not forgeable.
> 
>    Right.
>   
>    I doubt very seriously that there is anything on the planet that is 
> *ABSOLUTELY* unforgable.   It all comes down to how much energy and 
> resources one is willing to sink into the project.

This is, with due respect quibbling. "Unforgeable" and "unbreakable"
are commonly used terms of art, which we (mostly) all know have
caveats about computational power attached to them. 

Purists may want all such statements modified with things like
"effectively unforgeable" and "effectively unbreakable." Whatever.

It's always important for people to understand that cyphers may be
only computationally secure (to some amount of crunch), but one need
not dwell on it.

Perry was answering a "yeah, but what if people forge digital cash?"
type of question. His brevity was understandable.

--Tim May


-- 
..........................................................................
Timothy C. May         | Crypto Anarchy: encryption, digital money,  
tcmay@netcom.com       | anonymous networks, digital pseudonyms, zero
408-688-5409           | knowledge, reputations, information markets, 
W.A.S.T.E.: Aptos, CA  | black markets, collapse of governments.
Higher Power: 2^859433 | Public Key: PGP and MailSafe available.
"National borders are just speed bumps on the information superhighway."

> This is, with due respect quibbling. "Unforgeable" and "unbreakable"
> are commonly used terms of art, which we (mostly) all know have
> caveats about computational power attached to them. 

   True; I, unfortunately, missed the context of that statement and took 
it as a blind faith declaration rather than a reply to a question. 

-jon
( THEY CAN STOP THE PARTY, BUT THEY CAN'T STOP THE FUTURE )
( --------------------[ entropy@intnet.net ]------------- )

Jonathan Cooper says:
> > > 	traveller's checks are an extremely easy way to defraud
> > > 	any bank that issues them,  what will happen to this
> > >  	difficulty factor if they are anonymous ?
> > 
> > Digitally signed notes are not forgeable.
> 
>    Right.
>   
>    I doubt very seriously that there is anything on the planet that is 
> *ABSOLUTELY* unforgable.   It all comes down to how much energy and 
> resources one is willing to sink into the project.

Sure, but if the resources are higher than the return there is no
economic incentive to do it. The trick is to keep the costs high
enough.

In the case of some public key problems, it is also possible to make
the cost of forgery impossibly high, in which case the attacker is
forced to try to physically steal the key or play similar games.

The question is not whether fraud will be attempted -- it will be
attempted. The question is whether we can lower it from a substantial
fraction of the cost of doing business to noise. If one's insurance
premiums against fraud drop to levels comparable to one's expenditures
on coffee filters for one's staff, then you know that you are in the
right ballpark.

Perry