Re: uncensorable net based payment system?

[nospam-seesignature@ceddec.com]

On Thu, 31 Jul 1997, Adam Back wrote:

> The internet looks like it is slowly moving towards anonymous
> micropayments for services, and metering for scarce resources.

The big problem will be fraud.  How do you know the ISP you are buying
disk space from won't disappear after you have prepaid a year of disk
space?

I am not sure of the economics of moving to micropayments (A post in the
e$ lists noted that Taxis can meter, but Jitneys have a flat rate, and
that encryption necessary for ecash uses lots of cpu cycles and space to
check for double spending - so even micropayments *must* cost far less to
transact than what is being paid for), but assuming we go that direction:

Any currency in bandwidth would likely be short-lived - you would keep
your reserves in a more standard commodity (or even currency) exchange
certificate, and spend those - one assumes that currency/commodity
e-changes would be common and run by arbitrageurs who will send you real
cash or commodities or warehouse receipts if you really want them.

You would dial one of several access companies and insert e-coin.  These
e-coins would be aggregated, so that the bandwidth usage would be
calculated, and the e-coins would propogate up as necessary to maintain
bandwidth (and inform your client to cough up more e-coins as you use it)
- the profit comes from extra e-coins not forwarded to the upstream
bandwidth provider.  The extra e-coins would be sent to an interest
bearing account in a tax-free authority, and the records for the locals
will come from a modified random poetry program.  With encryption, they
won't be able to determine packet content, and maybe not even destination. 
And if they try to do it per packet, 1M packets will be the norm, etc. 

(Some south american country had a very high telephone tax, so an american
company set up a system where you could dial here, and it would call back
(untaxed) and set up a third call - a proxy phone if you like.  The two
calls originating from the US were cheaper than the one call there - the
country eventually blocked all calls to Nebraska, so the company moved to
a 202 area code - I forget the other details, but you see what will
happen). 

> 	- be immune to government hidden taxations such as printing
> 	  new money as a form of tax

You cannot make any thing immune from this, but with everyone watching the
central banks, you either have your ecash in commodities, or watch the
foreign exchange markets closely, or have your software agent or broker do
this for you.  Any hint of inflation and everyone will dump the currency
and anything denominated in that currency, so even mild inflation will
become instant hyperinflation.

> 	- be immune from government taxation

None of this is directly taxable, but look for a $100/phone line tax if
they really get desparate (and then look for spread-spectrum digital
wireless to replace landlines - those tiny bursts are awfully hard to
track and meter).  The can also try going after the backbone providers,
but then foreign owned satellites would pick up the slack.  You can only
tax something until an untaxed substitute becomes cheaper, and there are
lots of substitutes.

> 	- be a stable form of cash (in the face of rapidly
> 	  depreciating assets like Mb/years of storage as mass storage
> 	  devices continue their price plumet.)

No form of cash is stable since cash is a measure of value, and everything
else it would be exchanged for is changing.  Even gold and silver change
exchange rates.  One of the functions of cash is as a store of value.
Thus it isn't really cash if it is in a wasting asset.

> A problem with this is that the market prices of the assets is
> continually dropping.  How do I hedge against this.  Can I buy
> futures?  Sell 100 Mb/sec for 3 days now in exchange for 200 Mb/sec
> for 3 days in 1 years time at an predicted equivalent value? 

I think you simply wouldn't store value in this form - any currency
threatened with inflation is obtained very close to the point of exchange
and converted back to a stable currency by the merchant ASAP.

One of the ways to avoid large doublespending databases are to create the
ecash notes for this with very short lifetimes, which would work well with
rapidly depreciating assets.  But the only way to avoid lots of CPU cycles
is to issue very large (100Kpacket) notes, but you will lose anything you
don't use in the session.

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