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Current Net Cash Proposals
In order to be useful, a protocol for the transfer of value for the
internet must be on most desktops, in most browsers, in many web
servers, yet many the existing proposals involve proprietary software, and
many of them involve a banking monopoly for the issuer of the software.
It seems unlikely that many other financial intermediaries would wish to
participate in such a grotesquely uneven playing field.
Many of these proposals require the issuer and protocol developer
to be intimately involved in every transaction, with the notable and
important exception of the IBM and SOX proposals. They require everyone
using cash to buy or sell on the net to have an account with the issuer
and protocol developer, and the protocol developer's copyrights give it a
total monopoly of net money issue.
For a protocol to become widely used, a wide variety of players must
play along. There has to be something in it for everyone.
Mondex Electronic Cash:
Faces a fatal critical mass problem.
This is the most advanced, best funded, and most widely deployed
transmissible form of cash. It is a smartcard, a tiny tamper proof
computer the size and shape of a credit card, that keeps a truthful
account of its owners balance; designed to be used in a wholly
cashlike manner, rather than a credit card like manner. If it is indeed
tamperproof, and if it comes into wide use, it will trivially solve the
problems of cashlike transactions through the internet and many other
problems as well. Its great weakness is that by design it must be
deployed through the banks and with the cooperation of the banks, and the
banks are somewhat ambivalent. Many banks all around the world have
signed on, but most of them are promoting it in a way likely to guarantee
failure, making it impossible to achieve critical mass.
Another big problem is that every person who uses it must make a
significant investment in hardware, which no one wants to do until it has
already achieved critical mass, making the critical mass problem even
more severe than with a software only solution. People are reluctant to
install new software, but they are even more reluctant to install new
Some people, myself among them, doubt that the cards are truly
tamperproof. A tampered card could appear to be always full of Mondex
money, no matter how much the owner spends, generating perfect counterfeit
Mondex money and placing it in circulation.
There are numerous smart cards and smart card proposals and smart card
alliances in Europe, and they are moving towards interoperability.
also claim to be the leading smart card program, but right now the bottom
line is that smart cards are not particularly useful for buying or
selling stuff over the internet, despite numerous grandiose announcements
by alliances representing vast amounts of wealth and market power. Other
such alliances have come and gone.
backed units of account, that can be transferred from one person to
another. It is inconveniently manual. The transaction fees are rather
high for a cash substitute, though still
lower than credit cards
. The software is proprietary and no good. And yet
for some strange reason this form of net money is bizarrely popular. To
judge by the number of hits I get, it is far more widely accepted than any
other scheme. It seems that despite the widespread demonetization of
gold, this barbarous relic still holds remarkable power over men's minds,
more power than mere paper can. Jim Ray claims to turn over one or two
hundred thousand dollars worth of transactions per month, which is
consistent with level of acceptance that I see. An insignificant
proportion of total net transactions, but a vastly higher proportion than
any other scheme has achieved.
Despite curious power of this relic, and the comparative success of this
scheme (or rather lesser failure), this form of net money has as yet failed to
achieve anything like critical mass, and its success is merely
comparative. It is used within narrow circles, a group of
inconveniently small islands that have yet to merge.
The Rest: Promising, but not yet quite existent, or existent but
halted dead in the water.
IBM Micro Payments:
Looks good, not yet ready for release. This is
planned to be an open protocol, though
it is not yet open. Supports intermediation, indeed the concept is that
there will be many money issuers (billing system operators) who will
mostly choose, most of the time, to accept each others money. The money
will be truly cashlike, in that relations between billing system operators
and merchants will be casual and short term. Since the protocol shall be
open IBM cannot gouge money issuers in the event that the protocol becomes
a success, nor can money issuers gouge merchants since they will have no
monopoly power. This plan avoids the division-of-spoils issues that
harmed so many other attempts to promote internet money. Unlike
so many proposals that suffered from self defeating greed, the plan
is that there will be something in it for everyone, making it much easier
to achieve critical mass.
IBM of course, has no plans to give away the software, but if the
protocol is truly open, as promised, they will not achieve or seek any
monopoly power over internet money issue, since any other software writer
will be able to write to the IBM standard without needing permission,
thus limiting IBM to merely huge profits should the scheme succeed.
An open source
open source effort to create internet
money. This project is still going, and we are promised a
manifestation of it as digigold real-soon-now, in association with e-gold,
but the previous key developer has left, having come to the conclusion
that it would not be usable by the masses in the form
originally envisaged. The form originally envisaged is now
undergoing some changes.
Java Electronic Commerce Framework (JECF):
This proposal is an extension to Java
that is intended to solve the browser side deployment problem, and a demo
(the wallet) that uses these extensions.
Instead of having to change all browsers to handle a new cash
protocol, we would simply write the protocol in Java, and the browser
would download the protocol implementation from the web site issuing the
instruments of exchange.
This Java extension seems to me to have been designed by an excessively
large committee with incompatible and conflicting desires, but if the
later versions turn out to be usable, and come to be widely distributed
with browsers, this will greatly reduce the critical mass problem.
Millicent Microcommerce System :
The Millicent proposal requires highly trusted vendors,
therefore not anyone can accept script. This makes the script less money
like, and makes it more difficult to achieve critical mass.
Millicent has some big money partners and support, such as KDD, and is
going ahead with its plans. It is targeting uncontroversial material such
as dictionary searches and pictures. In their trial, they claimed
total turnover of about ten thousand dollars, about as much as e-gold
claims to turn over in two or three days. They employed only very
respectable vendors in their trial. If their product is limited to
highly respectable vendors, it appears to me that it is inherently
incapable of achieving critical mass.
Ecash by DigiCash
it. Dead. Killed by fear and greed, mostly fear. They were afraid of
offending anyone, so they
their cash so that they could vet anyone who wanted to use it, and then used
that vetting power to exclude the major early adopter market: Pornographers.
Chaum, the founder, neither endorses or denies the rumor that his banking
partners were ambivalent about its potential success.
unbounded greed. Proprietary, no public documentation, no support for
intermediation. Same as so many
other swiftly vanishing proposals.
unbounded greed. Proprietary, worthless public documentation, no support
for intermediation, patents of the obvious pending. Same as so many
other swiftly vanishing proposals.
unbounded greed. This is not so much a micropayment protocol as a
protocol for monitoring users. If you monitor users, one of the many
things you can do with the information is to bill them according to their
resource usage. This, of course, assumes that the user and the payment
intermediary trusts the vendors, which again makes this proposal far from
cashlike. The payment intermediary would have to monitor and enforce the
good conduct of the vendors, doing the same things the credit card
companies already do better. This seems fairly useless as a form of
money, though it might be useful in providing information about us to
advertisers so that they can target their junk mail, and to governments
for nefarious purposes, and will quite possibly be a "success" in that
SEMPER (Secure Electronic Marketplace for Europe):
insufficient greed, instead of excessive greed.
A mere talk shop for European intellectuals. Because European
intellectuals are not permitted to become rich, they feel no great
urgency to put any of their excellent and entirely workable
proposals into action.
SET (Secure Electronic Transactions by MasterCard and Visa):
cards easier and safer to use on the internet. Not cashlike, but it could
make it feasible to use credit cards for smaller transactions,
substantially reducing the demand for cash.
They do credit
card stuff. From time to time they float
various somewhat cashlike proposals, among them "CyberCoin", though
without much serious intention of actually making them happen.
CAFE (Conditional Access For Europe:
Died in 1996. A horse
a committee. The vast power and wealth of its backers would have
solved the critical mass problem, had they come up with something
acceptable. Based on the excellent and entirely workable proposals
of Stephen Brands.
NetBill (Carnegie Mellon University):
Sold to Cybercash, and Cybercash despite the name, is not doing much that
is cashlike. Netbill requires both customers and merchants to have an
account with the same commerce provider. The protocol was compatible with
intermediation, but no intermediation is proposed. One possible reason
for the failure was that the response was rather slow, due to the numerous
steps required for protocol completion, making it unsuitable for
downloading dirty pictures. If you are going to bill people nickels, they
expect instant gratification.
NetCash (University of Southern California):
Died in 1994. A
design, free from all the flaws and evils of the other designs.
Killed by fear. They were afraid to offend any banker.
cheque payment model. Died in 1994. A great design, free from all the
flaws and evils of the other designs. Dead. Killed by fear. They were
afraid to offend any banker.
PayCash payment system:
system based on the ruble, which nobody uses, least of all Russians.
Proprietary. Dollar payments promised soon.
Doomed by excessive
customer and merchant must have an account with Cybank.
Internet Information Payments Collaborative:
Not a proposal, merely a conference aimed at
getting broad consensus behind some proposal, so as to achieve critical
mass by getting existing big financial institutions on side. But there is
no real consensus on those things that matter most.
Not emoney, just another
bank with a buzzword.