To Home page

Net Money

Net money. Net money that is reasonably liquid, that many people acquire, that many people spend, money that is readily convertible to worthwhile goods and services. Don't worry about blinding and all that. Once any sort of net money is flowing in large amounts, all that stuff then becomes possible and desirable. If there is no liquidity, nobody cares about blinding, and if you have blinding it does you no good anyway without liquidity.

Once we get that, we will shortly get it all. As long as we do not have that, we have very little.

Digicash failed because it was proprietary. For net money to be a success we need a standard for transferring promises to pay that is separate from the software issuers, and thus separate from the issuers of promises to pay or deliver. It has to be a standard such that anybody can play, anyone can write software that will interoperate with software written by others, and anyone can issue promises to deliver anything, so that Ann, Bob, and Carol can transfer and exchange promises between each other subject only to the need to trust each other, without needing permissions or licenses from anyone else.

And it has to have software that is competitive with existing methods of transferring value.

Credit cards are very competitive for transactions of modest size, because of the additional services, in particular dispute arbitration and resolution provided by the card issuers, and because of their large installed base. Smaller players cannot hope to compete in that area.

We have however no adequate means for small payments, five dollars to fractions of a cent. This offers a fertile opportunity for the development of net money.

We also have no entirely satisfactory means for large low margin payments.

The large payment problem could be addressed by some system that provided a tight connection between internet money and US dollars in US banks, or, better, a system that provided a tight connection between internet money and US dollars in non US banks, or, if we had a large and liquid micropayment system, it could be provided by a tight connection between micro and macropayments.

If several banks in some moderately popular banking haven allowed people to transfer funds instantly and cheaply from one account to another within the haven, through digitally signed messages passing through https protocol, this would make it possible to readily solve the large payment problem by offering the means to create a tight connection between net dollars and offshore dollars. If this were done then the revolution would ensue within a few years. So far none have been willing to do this, perhaps out of fear of reprisals, more likely out of sheer inertia.

The offshore dollar system is probably larger and more liquid, and is certainly considerably more free, than the onshore dollar system, but it is inconvenient for modest payments. People use it primarily for transfers of many thousands of dollars. Also the connection between the offshore dollar and the onshore dollar is weak, because it is inconvenient, slow, and costly, to transfer dollars between the offshore and onshore banking systems.

I see no possibility that anyone will be permitted to create a strong connection between an internet dollar and the onshore dollar, whereas it is quite possible that someone will get away with creating a strong connection between the internet dollar and the offshore dollar.

Alternatively, (and perhaps more likely) a satisfactory solution to the micropayment problem automatically brings in its train a solution to the large payment problem, since the software must accumulate many small promises into a few large promises, and provide means to transfer these large promises through numerous intermediaries, thus a large volume of micropayments will create the liquidity for macropayments. We do not need the banks to win this one, though they would be very handy.

Large promises to pay could acquire value not through a fast and cheap connection to the banking system, whether onshore of offshore, but through a fast and cheap connection to the micropayment system, resulting in an internet dollar that derives its liquidity from the internet market, and is coupled to the US dollar no more strongly, and no less strongly, than the offshore dollar is coupled to the onshore dollar.

Of course for this to work, we will need a large and liquid market for aggregated micropayments. The existing finance systems for self publishing, dirty pictures, and gambling, really do not work very well, so there seems an obvious and large market for micropayments.

One cent, or half a cent, is probably the sweet spot for pages and dirty picture, with quarters being the sweet spot for games and gambling.

Obviously pay pages cannot and should not be searched by search engines, so the typical design would be a free, searchable, index page containing lead in paragraphs and pay links to the non free pages on the site, or a collection of free summary pages each containing a pay link to the corresponding non free page, or (better) both a free index page and also a collection of free summary pages.

We want the payment system to introduce no additional delays when we click on a link, so the index page should cause any necessary negotiations between the browser and server so that the server is ready to accept the coins of this particular user, so that the user can get the pay page with a single message, a single URL containing a coin. The server then immediately starts downloading the page without waiting for any further messages to complete, and simultaneously attempts to deposit the coin.

Suppose you are browsing dirty pictures, and both you and the server are clients of the same token issuer. Then the token issuer knows that you are browsing the dirty picture pages, and knows how much money the dirty picture issuer is making.

But for the scheme to be successful, we need many token issuers, and the means to transfer aggregated token values between issuers, so that in general the entity that takes your bank money and provides you with net money, and the entity that takes the dirty pictures servers net money and provides it with bank money, will be very different entities, probably in very different jurisdictions, separated by a chain of intermediaries, who have an economic incentive to aggregate transactions, thus obscuring individual spending and getting.

If any creditworthy person can issue tokens, privacy is not such a big problem, and if the aggregated values representing large numbers of tokens are readily transferable in a large liquid market intermediary market, it is not a problem at all, since the dirty picture issuer and the guy looking at the dirty pictures are likely to be anonymous to the token issuer.

Micropayments have not failed. They have not yet been tried. We still have not seen a scheme attempted that had all the requirements that real net money will need. It is simply quite a bit of work to design these things, and to get them deployed in a form that ordinary mortals can use.

These documents are licensed under the Creative Commons Attribution-Share Alike 3.0 License