Cyphernomicon Index
Cyphernomicon 12.8

Digital Cash and Net Commerce:
Other Digital Money Systems

   12.8.1. "There seem to be many variants....what's the story?"
           - Lots of confusion. Lots of systems that are not at all
              anonymous, that are just extensions of existing systems.
              The cachet of digital cash is such that many people are
              claiming their systems are "digital cash," when of course
              they are not (at least not in the Chaum/Cypherpunk sense).
           - So, be careful. Caveat emptor.
   12.8.2. Crypto and Credit Cards (and on-line clearing)
           + Cryptographically secure digital cash may find a major use
              in effectively extending the modality of credit cards to
              low-level, person-to-person transactions.
             - That is, the convenience of credit cards is one of their
                main uses (others being the advancing of actual credit,
                ignored here). In fact, secured credit cards and debit
                cards don't offer this advancement of credit, but are
                mainly used to accrue the "order by phone" and "avoid
                carrying cash" advantages.
             - Checks offer the "don't carry cash" advantage, but take
                time to clear. Traveller's checks are a more pure form of
             - But individuals (like Alice and Bob) cannot presently use
                the credit card system for mutual transactions. I'm not
                sure of all the reasons. How might this change?
             - Crypto can allow unforgeable systems, via some variant of
                digital signatures. That is, Alice can accept a phoned
                payment from Bob without ever being able to sign Bob's
                electronic signature herself.
           - "Crypto Credit Cards" could allow end users (customers, in
              today's system) to handle transactions like this, without
              having merchants as intermediaries.
           - I'm sure the existing credit card outfits would have
              something to say about this, and there may be various
              roadblocks in the way. It might be best to buy off the VISA
              and MasterCard folks by working through them. (And they
              probably have studied this issue; what may change their
              positions is strong crypto, locally available to users.)
           - (On-line clearing--to prevent double-spending and copying
              of cash--is an important aspect of many digital cash
              protocols, and of VISA-type protocols. Fortunately,
              networks are becoming ubiquitous and fast. Home use is
              still a can of worms, though, with competing standards
              based on video cable, fiber optics, ISDN, ATM, etc.)
   12.8.3. Many systems being floated. Here's a sampling:
           + Mondex
             - "Unlike most other electronic purse systems, Mondex, like
                cash, is anonymous.  The banks that issue Mondex cards
                will not be able to keep track of who gets the payments.
                Indeed, it is the only system in which two card holders
                can transfer money to each other.
                ""If you want to have a product that replaces cash, you
                have to do everything that cash does, only better,"
                Mondex's senior executive, Michael Keegan said.  "You can
                give money to your brother who gives it to the chap that
                sells newspapers, who gives it to charity, who puts it in
                the bank, which has no idea where it's been.  That's what
                money is."" [New York Times, 1994-09-06, provided by John
           + CommerceNet
             - allows Internet users to buy and sell goods.
             - "I read in yesterday's L.A. Times about something called
                CommerceNet, where sellers and buyers of workstation
                level equipment can meet and conduct busniess....Near the
                end of the article, they talked about a proposed method
                for  exchanging "digital signatures" via Moasic (so that
                buyers and sellers could _know_ that they were who they
                said they were) and that they were going to "submit it to
                the Internet Standards body"" [, 1994-06-
           + NetCash
             - paper published at 1st ACM Conference on Computer and
                Communications Security, Nov. 93, available via anonymous
                ftp from PROSPERO.ISI.EDU as /pub/papers/security/netcash-
             - "NetCash: A design for practical electronic currency on
                the Internet  ... Gennady Medvinsky and Clifford Neuman
                "NetCash is a framework that supports realtime electronic
                payments with provision of anonymity over an unsecure
                network.  It is designed to enable new types of services
                on the Internet which have not been practical to date
                because of the absence of a secure, scalable, potentially
                anonymous payment method.
                "NetCash strikes a balance between unconditionally
                anonymous electronic currency, and signed instruments
                analogous to checks that are more scalable but identify
                the principals in a transaction.  It does this by
                providing the framework within which proposed electronic
                currency protocols can be integrated with the scalable,
                but non-anonymous, electronic banking infrastructure that
                has been proposed for routine transactions."
             + Hal Finney had a negative reaction to their system:
               - "I didn't think it was any good.  They have an
                  incredibly simplistic model, and their "protocols" are
                  of the order, A sends the bank some paper money, and B
                  sends A some electronic cash in return.....They don't
                  even do blinding of the cash.  Each piece of cash has a
                  unique serial number which is known to the currency
                  provider.  This would of course allow matching of
                  withdrawn and deposited coins....These guys seem to
                  have read the work in the field (they reference it) but
                  they don't appear to have understood it." [Hal Finney,
           + VISA Electronic Purse
             - (A lot of stuff appeared on this, including listings of
                the alliance partners (like Verifone), the technology,
                the plans for deployment, etc. I regret that I can't
                include more here. Maybe when this FAQ is a Web doc, more
                can be included.)
             - "PERSONAL FINANCE - Seeking the Card That Would Create A
                Cashless World. The Washington Post, April 03, 1994,
                FINAL Edition By: Albert B. Crenshaw, Washington Post ...
                "Now that credit cards are in the hands of virtually
                every living, breathing adult  in  the  country-not to
                mention a lot of children and the occasional family  pet-
                and  now  that  almost  as  many people  have  ATM cards,
                card companies are wondering where future growth will
                come from.
                "At *Visa* International, the answer is: Replace cash
                with plastic.
                "Last month,  the  giant  association  of  card issuers
                announced it had formed a coalition of banking and
                technology companies to develop technical standards  for
                a  product it dubbed the "Electronic Purse," a plastic
                card meant to replace coins and bills in small
                transactions."  [provided by Duncan Frissell, 1994-04-05]
             - The talk of "clearinghouses" and the involvement of VISA
                International and the Usual Suspects suggest
                identity-blinding protocols are not in use. I also see no
                mention of DigiCash, or even RSA (but maybe I missed that-
                -and the presence of RSA would not necessairly mean
                identity-blinding protocols were being planned).
                Likely Scenario: This is *not* digital cash as we think
                of it. Rather, this is a future evolution of the cash ATM
                card and credit card, optimized for faster and cheaper
                Scary Scenario: This could be the vehicle for the long-
                rumored "banning of cash." (Just because conspiracy
                theorists and Number of the Beast Xtian fundamentalists
                belive it doesn't render it implausible.)
             - Almost nothing of interest for us. No methods for
                anonymity. Make no mistake, this is not the digital cash
                that Cypherpunks espouse. This gives the credit agencies
                and the government (the two work hand in hand) complete
                traceability of all purchases, automatic reporting of
                spending patterns, target lists for those who frequent
                about-to-be-outlawed businesses, and invasive
                surveillance of all inter-personal economic transactions.
                This is the AntiCash. Beware the Number of the AntiCash.
   12.8.4. Nick Szabo:
           - "Internet commercialization in itself is a _huge_ issue
              full of pitfall and  opportunity: Mom & Pop BBS's,
              commercial MUDs, data banks, for-profit pirate and porn
              boards, etc. are springing  up everywhere like weeds,
              opening a vast array of both needs of privacy and ways to
              abuse privacy.  Remailers, digital cash, etc. won't become
              part of this Internet commerce way of life unless they are
              deployed soon, theoretical flaws and all, instead of
              waiting until The Perfect System comes along.  Crypto-
              anarchy in the real world will be messy, "nature red in
              tooth and claw", not all nice and clean like it says in the
              math books.  Most of thedebugging will be done not in any
              ivory tower, but by the bankruptcy of businesses who
              violate their customer's privacy, the confiscation of BBS
              operators who stray outside the laws of some jurisdication
              and screw up their privacy arrangements, etc. Anybody who
              thinks they can flesh out a protocol in secret and then
              deploy it, full-blown and working, is in for a world of
              hurt.  For those who get their Pretty Good systems out
              there and used, there is vast potential for business growth
              -- think of the $trillions confiscated every year by
              governments around the world, for example." [Nick Szabo,
   12.8.5. "What about _non-anonymous_ digital cash?"
           - a la the various extensions of existing credit and debit
              cards, traveller's checks, etc.
           + There's still a use for this, with several motivations"
             - for users, it may be _cheaper_ (lower transaction costs)
                than fully anonymous digital cash
             - for banks, it may also be cheaper
             - users may wish audit trails, proof, etc.
             + and of course governments have various reasons for
                wanting traceable cash systems
               - law enforcement
               - taxes, surfacing the underground economy
   12.8.6. Microsoft plans to enter the home banking business
           - "PORTLAND, Ore. (AP) -- Microsoft Corp. wants to replace
              your checkbook with a home computer that lets the bank do
              all the work of recording checks, tallying up credit card
              charges and paying bills.... The service also tracks credit
              card accounts, withdrawals from automated teller machines,
              transfers from savings or other accounts, credit lines,
              debit cards, stocks and other investments, and bill
              payments." [Associated Press, 1994-07-04]
           - Planned links with a consortium of banks, led by U.S.
              Bancorp, using its "Money" software package.
           - Comment: Such moves as this--and don't forget the cable
              companies--could result in a rapid transition to a form of
              home banking and "digital money." Obviously this kind of
              digital money, as it is being planned today, is very from
              the kind of digital cash that interests us. In fact, it is
              the polar opposite of what we want.
   12.8.7. Credit card clearing...individuals can't use the system
           - if something nonanonymous like credit cards cannot be used
              by end users (Alice and Bob), why would we expect an
              anonymous version of this would be either easier to use or
              more possible?
           - (And giving users encrypted links to credit agencies would
              at least stop the security problems with giving credit card
              numbers out over links that can be observed.)
           - Mondex claims their system will allow this kind of person-
              to-person transfer of anonymous digital cash (I'll believe
              it when I see it).

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