Re: digital cash and identity disclosure

[Stephan Somogyi <somogyi@digmedia.com>]

At 12:20 21.10.95, Adam Shostack wrote:

>Michael Froomkin wrote:
>
>| i would like to propose the following radical idea:  Chaumian digicash is
>| a nice curiosity.  The future in the mdeium term (10+ years) for better
>| or worse belongs to Mondex.
>
>       Deploying hardware is VERY expensive.

Expense of deployment for this type of scheme does not seem to be a
consideration for banks; they stand to make a ton of money as a result.
There are areas where banks will resist spending money on new hardware,
but smart-card stuff isn't one of them.

> 30m internet users at $100 (half hardware, half tech support) is 3
> billion dollars to deploy today.  Secure commerce on the internet would
> drive that 30m figure (which will probably double this year anyway) way
> up.

Adding hardware to a personal computer to read from and write to smart
cards will cost money, but the majority of bank customers will not be
interested in Internet-based transactions for quite some time. So while
the potential market of Internet consumer financial transactors seems
large, it is dwarfed by the sum total of bank customers who are likely
to wind up with some form of non-pilot smart card-based payment system
within the next 2 years.

I've been told that a PCMCIA card that reads smart cards would around
$30ish; I've not had the time to follow this claim up, so it could be
off by a bit. Assuming it's accurate, the price doesn't present a
significant hurdle to the typical PC-based consumer. And if there is
enough demand, I'm sure that smart card readers will find their way
into desktop and laptop machines over time. For example, Catapult's
XBAND modem for Genesis and SNES has an ISO smart-card reader/writer in
it; such a consumer device's manufacturing cost is sensitive to even a
few pennies, so it can't've cost much to put it in there.

I consider it much likelier that non-Internet specific payment systems
will adapt to the Net, instead of Net-specific payment schemes seeing
broad deployment. To clarify: I consider CyberCash and FV to be
Net-adaptations of conventional schemes, rather than brand new payment
systems.

> Digicash doesn't need observer cards, which gives them a huge advantage.
>  If they ever sign with a real bank.

There is a US law called the Bank Secrecy Act that defines the
responsibilities of banks with regard to audit trails, record keeping,
and disclosure of financial transaction information. After talking to
quite a few people both in the regulatory and business realms recently,
I am convinced that truly anonymous e-cash simply isn't going happen in
the US. And the US is going to have considerable influence on how
things go in the rest of the world; whether this is a good thing or not
is, unfortunately, an unrelated and purely philosophical debating
point.

Based on my knowledge of the backing behind Mondex at this relatively
early stage in the game, I am inclined to agree with Michael.

_______________________________________________________________________
Stephan Somogyi               Senior Editor               Digital Media