Will this replace banking?

© 1999 Claire Wolfe

Money, in Hardyville, is a private matter -- just as it used to be everywhere. What you have and what you do with it is between you and your banker, you and the shopkeeper, you and you alone.

Unless the government has take-to-the-judge evidence that the $10,000 you just deposited is a payoff for rubbing out your lawyer's brother's mother-in-law (You know, like, actual harm has been done to an actual victim), it has no cussed business sticking its nose into your financial affairs -- not to tax you, not to keep statistical tables on you, not "for your own good," and not to go on fishing expeditions about such non-crimes as "money laundering" or that silliest bureauspeak crime of all -- "structuring."

If there were a Bank of Hardyville, the tellers wouldn't question you about why you were making withdrawals, wouldn't file Suspicious Activity Reports, wouldn't demand your National ID number or fingerprints, wouldn't routinely report your account to the tax vampires, and wouldn't sniff down their quasi-governmental noses at you. They'd treat you as a valued customer, not a crook or a peasant.

Besides all that, the confidentiality of your relationship with your banker would be as sacrosanct as that with your lawyer.

It goes without saying that there's no bank in Hardyville.

Are you kidding? Any banker who tried to set up that kind of operation would be arrested just ahead of his customers. So here in town we mostly use cash, money orders, barter and even the occasional bit of gold or silver. But these methods have their limitations and inconveniences.

e-gold -- and soon, DigiGold

Bob-the-Nerd -- he of the No Name (and Mostly Out-To-Lunch-Back-in-20-Minutes) Computer Store -- has for several years been beating the drum for a different type of store-and-spend currency option, called e-gold.

e-gold has been offered on the Net for about three years -- which makes it about as established as Lloyds of London. Well, in cyberspace terms, anyway. Because of the bankruptcy of an earlier, much-ballyhooed electronic money system -- David Chaum's Digicash (now ignominiously known as Digicrash) -- e-gold has had a struggle establishing a major market base or getting coverage from the once-burned wired press.

Though I've written about e-gold in my books, I've personally ignored it because it didn't offer the one thing Internet commerce ought to enable -- truly, totally anonymous transactions. So, a couple of months ago, when James Ray -- "chief mouth" of e-gold started nagging me (Yes, Jim, you nagged) to write about e-gold, I said nope, no way, not interested, ho hum.

Then two things happened. First, a whole raft of orders for my books turned up missing in the mail under circumstances that pointed at theft, rather than mere postal incompetence. One of those orders was from an e-gold advocate, who kindly refrained from saying, "I told you so." Second, at a conference, I heard one of e-gold's techno-mavens, Douglas Jackson, (another is Ian Grigg) refer to something new -- something called DigiGold. DigiGold, he said, will be a "strongly privacy enabled" electronic medium of exchange that uses e-gold as its backing. An anonymous currency with a metal base!

As soon as I heard that, I said, "Hey, Jim! Tell me more." Now (though I stop short of endorsing either of these systems and urge you to investigate for yourself) I'm kind of excited.

First, a little on e-gold

Before getting to DigiGold, here's some quick background on e-gold. If you want to know more, just follow the link to their website.

Unlike other electronic exchange media, e-gold isn't just fiat government notes turned into bookkeeping blips. The stuff is real money. When you open an e-gold account, you can opt to store your currency as gold, silver, platinum or palladium -- metal in a warehouse. Everything in your account is 100-percent metal-backed. If you want verification that the metal is there, and assurance that these guys aren't going to take your money and run, check their website. (Jim Ray doesn't mind answering those questions -- but he does wonder why we don't ask our local bankers just how much real money they keep in their empty vaults!)

To open an account, you give minimal information about yourself -- information even a privacy freak like me considered non-invasive. Though they want an actual, physical address, it doesn't even have to be yours. No ID. No SSN. No fingerprints, either.

Of course, e-gold isn't banking as they'd be the first to note. It's a currency system. You won't be paid interest on the metal in your account. In fact, you'll have to pay small transaction and storage fees. That's how they make their money. (Opening the account is free and you don't have to put in any money to start with.)

What can you do with e-gold?

You can also donate to worthy causes. One of the finest, Jews for the Preservation of Firearms Ownership, has account number 105440. Or there's Texans Against Intrusive Government; they're bringing suit against the use of SSNs on drivers licenses. TAIG holds account number 105988. Tons, ounces or grams of gold will also be welcome in an account I'm uncommonly fond of, 106974. (Only kidding, only kidding. Well, about the tons, anyway.)

It's necessary to have account numbers to make transactions, so I'm not giving away any secrets here. Security comes through password protection, secure servers and such. And that brings us to. ...


e-gold is private in the sense that they don't sell customer information, and that you can open an account using personal information of your choice. But being physically located in the U.S., with its leagues of financial enforcers, they don't dare offer an anonymous transaction system.

DigiGold -- debuting soon -- is a different critter.

DigiGold is, first of all, a bearer system. Whoever holds DigiGold can spend it. And as with cash or gold coins purchasers don't have to identify themselves to vendors and (this being the Internet) it's even possible for vendors to be unknown to purchasers. It's private. Unlike e-gold, DigiGold will have no transaction fees.

That also means it has the same vulnerabilities as cash. As Jim says, "Light a cigar with a $100 bill -- and that bill's gone." If you sent a DigiGold payment unencrypted and it was snagged by a stranger, that stranger would be richer by X-amount of DigiGold. So there are certainly risks. Unlike most gov-cash, however, it's got a metal backing.

DigiGold is 100 percent e-gold backed. (Later, that will change to 25 percent e-gold, 75 percent commercial notes; DigiGold intends to be a profitable operation.)

While e-gold is a Delaware corporation that must remain "pure as the driven snow" in the eyes of the fedgov, DigiGold will be an offshore entity -- in fact, an entity that exists only in cyberspace.

"Ah, yes," some gov-o-snoop is muttering right now, "Another cyberspace purveyor of money laundering, dope-dealing, terrorism, right-wing extremism, smut and all those other wonderful things that let me build my agency's budget. Oh, goody."

And of course DigiGold could be used by criminals -- for instance, by the CIA to hide payments for one of its drug-smuggling operations. It could be used exactly -- as Jim Ray notes -- the way "Alan Greenspan money is used by criminals every day. The fact is, unimaginative people use anonymity irresponsibly. Responsible people use anonymity to solve real problems." (Like the problem of bureaucrats sticking their noses into private affairs.)

Are governments everywhere going to hate DigiGold? Is Bill Clinton a womanizer? Of course, those who love to control others, and who see "crime" in every expectation of privacy, are going to detest DigiGold -- and it will be quite interesting to see whether the power of the state or the power of the sovereign individual prevails (as James Dale Davidson and Lord William Rees-Mogg predict in the linked book of that name).

Bottom line: No amount of government intrusion will halt crime. But impenetrable financial privacy may halt government intrusion.

"If DigiGold was sold as the best thing ever to happen to Murder Inc. (or the CIA), that would be terrible," Jim agrees. "But this is going to be the best thing that ever happened to liberty. Think about it; Thomas Jefferson would have been horrified by a government that snooped into everyone's record books." If DigiGold is all its promoters say, it could give us back something our ancestors accepted as a given.

"Something like DigiGold is technologically and mathematically inevitable," Jim concludes. "Trying to build barriers against it is like trying to build sand castles against tidal waves. If they destroy this system, someone else will build another one. I just hope to see it happen peacefully and for prosperity."

To find out more

DigiGold is currently in "late alpha or early beta" testing stage. It isn't yet ready for marketing -- though it could go live in the next few months. If you have computer expertise and want to know more, you can check out DigiGold and related technologies at: