Before we begin: we define cash here to mean something very much like paper
money. For something to be cash, it must have the properties of:
- Universal acceptance across a very wide geopolitical area, such as an entire
country or an entire continent.
- Assured anonymity, such that payments are, if not theoretically impossible to
track from point to point, at least infeasible enough in practice that it might as
well be theoretically impossible.
- Ease of use.
Many casual definitions of cash seem to use the phrase "anonymous cash", which is similar
to "free gift" -- the qualifier shouldn't be necessary, but the very term has been
polluted by entities offering half-solutions that lack one or more of the desireable
features of real cash. When we say cash, we mean (at least) all the properties above.
We are not necessarily talking about a micropayments system, e.g., one that is
efficient for very small transactions. Such a system could be very useful for
charging by-the-page or even by-the-byte for copyrighted content, but tends to be very
difficult to implement in practice due to the overhead of the system used to manage it.
Our problems are difficult enough without trying to be efficient enough for micropayments
as well. For our purposes, we'll assume that any system that's efficient enough to make a
one-dollar payment reasonable is efficient enough. Maybe we'll come up with a system that
allows people to charge a millicent for something instead, but we may not be so lucky that
we can improve the system by five orders of magnitude.
People have been trying to bring cash to the net for years, and the prospects don't look
much better now than they did years ago. Efforts have been stymied by at least four major
- Cryptographic export restrictions from various countries (still enough in
effect in the US to hinder commercial deployment, and in general to create
interoperability problems in almost any system likely to be deployed worldwide).
- Intellectual property fights leading to very slow deployment.
- Governmental resistance, due mostly to fears of illegal activity, money
laundering, and tax evasion. (This latter seems especially peculiar, considering
that income tax evasion would require that the employer also fail to keep a paper
trail, and that sales tax evasion is already complicated by jurisdictional issues
even in meatspace.)
- Lack of consumer demand, because most consumers either don't understand how
little privacy they have with, e.g., credit-card systems, or don't care, or have
been convinced that the effort required to fix the situation is too great.
And yet real cash has numerous advantages:
- Privacy. Many transactions that could be made on the net today are
not made because consumers fear that their purchasing habits may be
disseminated to unknown third parties. (This is particularly an issue when
purchasing bits -- after all, since nothing physical is being shipped anywhere,
there is no need, in theory, that the consumer need disclose any identifying
- Bounded liability. Using something like a credit- or debit-card has its
risks: the card number may be later misused, either by the other party to the
transaction, or by some third party. This is a risk in meatspace transactions as
well as online, of course, but many people worry more about it online regardless.
Even though most credit card companies will refund all of a disputed amount
(without even the $50 deductable legally required in the US), many people are still
leery of disclosing credit card information online. Cash, on the other hand, is
safer -- while the merchant may pocket the cash and fail to deliver the goods, at
least that is all that might happen.
- Everyone is a merchant. Credit-card companies are notoriously reluctant to
let just anyone accept a charge card. Yet the peer-to-peer nature of the network
makes it natural that two ordinary people might wish to exchange cash without having
to go through some troublesome middleman; this is done in meatspace every day.
A modest proposal
How might we solve this? One solution might be to
convince a credit-card company to sell prepaid cash cards.
For example, imagine this scenario: You want to buy something on the net, but you don't
want to tell a possibly unbounded number of people what you're buying. You walk into the
local 7-11 and plunk down $10 in paper money. In return, you get a card that looks
approximately like a credit card, except that it's really cheaply made -- probably a
laminated piece of paper like a subway Metro card. It's worth $10 (or maybe $9.95, and the
credit card company gets the nickel). You then go buy a book online, and supply the card
number for payment, just typing it into the form on the web page like it was any random
credit card. If you can't use up the last 75 cents on the card buying things, you bring
it back to 7-11 the next time you buy a card, and those 75 cents are added to some more
paper money to refill a new card.
This solves almost all of the above problems, immediately. It does not require any
sort of cryptographic infrastructure that isn't already deployed; instead, it uses the
preexisting credit-card database structure. It is definitely anonymous, because you paid
for the card using something else anonymous, namely paper money, and didn't need to supply
any other identification in the transaction, because paper money is honored everywhere
without additional ID. (It is possible that two successive purchases on the card could be
correlated, so it may be wise to change cards frequently to break such connections;
similarly, if there is any possibility that refilling a new card from an old one might
make an entry somewhere that links the two cards, perhaps it's better to abandon the last
75 cents on the card -- or hand it off to a stranger on the street in return for 3
What are the problems with this scenario? There are several:
Unfortunately, we've now arrived at a solution that is so easy technically that all the
pieces are virtually in place (with the exception of peer-to-peer payments) -- but we must
convince businesses to do the right thing, and, in
particular, that it's worth more than their data-mining efforts.
- Credit-card companies want to do data mining. This anonymous system deprives
them of one of the most valuable assets of the credit-card business, namely the
detailed profiling of every single thing you buy with the card, and the subsequent
sale of that information to eager buyers.
- It requires physical infrastructure, in the form of 7-11's (or whatever) that
are willing to hand out cards. Obviously, you wouldn't want to get one of these
cards in the mail, in return for a check or a credit-card payment -- you could be
virtually assured that such a card is not anonymous and is being
tracked to you by the issuing entity.
- It's not really peer-to-peer. It has the same centralized-acceptance
problems that credit-cards do; there's no easy way to convince somebody who isn't
online with the issuing agency what the card is worth, so it can't easily be traded
hand-to-hand the way paper money can.
How can we possibly do this? That's something we need to figure out at the workshop.
Last modified: Thu Apr 13 18:14:41 EDT 2000