Re: Voice/Fax Checks

[hfinney@shell.portal.com]

Robert Hettinga writes:

>As someone who's been thrashing this a little bit, I've gotten stuck on
>exactly how to "*undercut*" the transaction costs of existing methods.  Got
>any ideas?  Are those transaction costs as a percentage of total cost
>meaningful enough to embue digital cash with the rocket-like competitive
>advantage we hope for?

It's pretty clear that credit cards don't work for some of the transactions
people want to do:

1) one-cent and fractional-cent charges for connecting to a useful Web
page or ftp site.  A useful resource like this wouldn't have to charge much
on a per-user basis to fund the equipment and people.

2) Transactions with individuals or small companies who are not VISA clients.
It's not that easy for a mail-order shoestring startup to get the ability to
accept VISA cards.  Because of the danger of fraud, the credit card companies
like to see a storefront and/or some previous history.  Someone who writes a
nifty PGP shell and wants to sell it for $10 per will have this problem.

3) People who don't like giving out their credit card numbers to an unknown
email address.  This is the flip side of the above.  The danger of fraud is
always present, and the more people I've given my card number to, the more
chance that I'll get burned.  Of course most states have protection laws in
place, but it's still going to be a major hassle.

Now, 2 and 3 can probably be addressed by electronic checks, and I think the
secure Mosaic announcement included that possibility.  I suspect that echecks
are a considerably stronger competitor to ecash than today's credit-card
infrastructure.  For one thing, an echeck can be sent in the clear, while
ecash has to be sent encrypted; an eavesdropper can spend ecash but not an
echeck.

Example 1, the fractional-cent transaction, will be tough to address by any
technology IMO.  Even with ecash, there are a lot of questions.  Is it on-
line or off-line?  Does the server actually try to validate each half-cent
or does it just trust people?  If the latter, how much fraud is likely, and
how would we track down and penalize the half-cent counterfeiters?  Solving
these problems is going to add overhead which will make it hard to deal with
such small sums efficiently.  How many cash businesses sell low-value items
for pennies today?  Not many.

>Light dawns on Marblehead. (Massachusetts joke).  Isn't the point of
>digital cash that you *can* send it through unsecure mail and buy things?

No, I don't think you can.  Ecash can generally be cashed by the bearer
so it has to be sent through secure mail.  That is why I was saying that
echecks might be better for those purposes.

I don't understand the Telescript agent world well enough to judge whether
it would drive a market for ecash.  I have the impression that at least with
the initial implementations the agents will not be on the Internet as we
know it but rather on a separate AT&T network of special servers.  So they
may not have much impact for a while on the "net" as we know it.

Hal