Re: underground digital economy

At 04:39 PM 1/17/96 -0600, jim@bilbo.suite.com (Jim Miller) wrote:
>
>The existing underground economy uses the same money as the aboveground  
>economy (i.e. paper money, for the most part).  Could a significant  
>underground digital economy develop if the aboveground digital economy  
>used only identified e-money?
>
  Let's consider a general case: we have a number of market segments,
and a number of currencies.  The currencies may float between the markets
and translate into one another.

  If the currencies are independent from the markets, the flow of funds
may cross the currency boundary, then a market boundary (or vice versa).
If not, these crossings maybe synchronized - to enter the next market
segment, you have to exchange the currency. All you need to have all
the "economies" running is some gates between the currencies somewhere
in the system.

  There are lots of alternative currencies in any society, including
balances of personal favors between people; usually they do not have
currency conversion problems, even if explicitly regulated.

  If you sell a new version of CryptoDoom for digicash, and would like to
buy a car that is only sold for paper money, and I have a car to sell and
want to buy your CryptoDoom, *somewhere* in the market there will appear
an exchange agent that would help us complete the transaction. In the
case of parallel digital currencies this exchange market would be very
liquid because of the high speed, low cost, and security/privacy of the
transactions.

  I have some personal experience with similar issues, in my attempts
to move money in and out of Russia. In these transactions cash rarely
crosses the border.  If an American A1 wants to send some dollars to
a Russian R1 who needs roubles, and a Russian R2 wants to send some
roubles to American A2 who needs dollars, then A1 pays dollars to A2,
and R2 pays roubles to R1.  Since both inter-market and inter-currency
transactions should be balanced, such schemes would always be possible.

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Alexander Chislenko <sasha1@netcom.com>
Public Home page:        http://www.lucifer.com/~sasha/home.html
World Future Society[B]: http://www.lucifer.com/~sasha/refs/wfsgbc.html
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On Wed, 17 Jan 1996, Alexander 'Sasha' Chislenko wrote:

>   If you sell a new version of CryptoDoom for digicash, and would like to
> buy a car that is only sold for paper money, and I have a car to sell and
> want to buy your CryptoDoom, *somewhere* in the market there will appear
> an exchange agent that would help us complete the transaction. In the
> case of parallel digital currencies this exchange market would be very
> liquid because of the high speed, low cost, and security/privacy of the
> transactions.

This model isn't as practical as it seems.  For one thing, it is a classic
case of barter: exchange for things that you want but don't have.  This
becomes extremely difficult with specialization.  Letsay I make only
CryptoDoom, its the only thing that I have the skills to make.  The things
that I want but can't produce each day are numerous: food, transport,
housing, ad infinitum.  One-to-one barter is only usefull if both agents
(in a 2 agent economy) need only 2 goods and specialize.

This is the root of money: a means of exchange between heterogenous
products.  Allthough a parallel digital internetwork would allow
occasional barters to increase there viability, it does not mean that
barter will replace money.  But there's some ambiguity here: What is
implied by "The case of parallel digital currencies this exchange market
would...."?  Does this recomend exchange markets (barter) or fiat
(currency)? 

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Patiwat Panurach      	     Whatever you can do, or dream you can, begin it.
eMAIL: pati@ipied.tu.ac.th      Boldness has genius, power and magic in it.
m/18 junior Fac of Economics		-Johann W.Von Goethe
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