ecash-info

[hughes@ah.com (Eric Hughes)]

   Anyway, when I screwed up the guts to ask, Chaum told me that the going
   price for the underwriter's license/code was $275K plus a percentage of the
   net profits.

It's no small wonder that he's not gotten anywhere.  Anybody who wants
an operational cut of a finance system is asking for way more money
than anybody might want to pony up.  A bank (or similar) wants to buy
technology, not a partner.

   the increase in traffic about his inactivity in promotion leads me to
   believe that he's either working hard in getting his product market-ready,
   which makes sense, or he's dropping the ball, which I would charitably say
   is an unfair reading of the facts.

A third possibility is that he's just not getting anywhere.  If you
want too much money for what someone else is willing to pay, you don't
make a sale.

There are three potential benefits from any Internet money system:

1. The ability to transact and settle to the outside banking system.
2. The ability to keep one's transactions private from one's counterparty.
3. The ability to keep one's transactions private from the bank, and
   hence the government.

Having property 2 subsumes 1, and having 3 subsumes both 2 and 1.

Here's the crux.  ONLY property one has large and direct and immediate
economic benefits to the issuer.  Property two has a very small
increase in revenue, and property three has an additional, even
smaller increase.  These relative revenues can be explained by the
fact that privacy for your average transaction is not worth a whole
lot, and so if you raise your rates to go after the lucrative market
who wants property 3, you lose most of your customer who only need
property one.

If you were a bank, would you pick system 1, 2, or 3?  System one will
result in direct customer fees.  System two will result in, perhaps,
very slightly higher fees, and some dissatisfied retailers who want to
be subsidized for the collection of transaction data.  System three,
again, has about the same revenue available, and in addition will get
the regulators pissed off!

So, with these three kinds of transaction systems in competition with
each other, which do you think will win?

Let me answer that for you.  It's system 1.

Now Chaum wants to offer system 3, and it's expensive to purchase.
Surprised at lack of success?  Not at all.

Eric