[117944] in Cypherpunks
Will this replace banking?
daemon@ATHENA.MIT.EDU (Robert Hettinga)
Thu Sep 16 11:28:23 1999
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Date: Thu, 16 Sep 1999 10:14:18 -0400
From: "Robert A. Hettinga" <rah@philodox.com>
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Subject: Will this replace banking?
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THURSDAY
SEPTEMBER 16
1999
Will this replace banking?
© 1999 Claire Wolfe
Money, in Hardyville, is a private matter -- just as it used to be
everywhere. What you have and what you do with it is between you and
your banker, you and the shopkeeper, you and you alone.
Unless the government has take-to-the-judge evidence that the $10,000
you just deposited is a payoff for rubbing out your lawyer's
brother's mother-in-law (You know, like, actual harm has been done to
an actual victim), it has no cussed business sticking its nose into
your financial affairs -- not to tax you, not to keep statistical
tables on you, not "for your own good," and not to go on fishing
expeditions about such non-crimes as "money laundering" or that
silliest bureauspeak crime of all --
<http://www.ncjrs.org/txtfiles/assetfor.txt> "structuring."
If there were a Bank of Hardyville, the tellers wouldn't question you
about why you were making withdrawals, wouldn't file
<http://www.ustreas.gov/fincen/sarptfin.html>Suspicious Activity
Reports, wouldn't demand your National ID number or fingerprints,
wouldn't routinely report your account to the tax vampires, and
wouldn't sniff down their quasi-governmental noses at you. They'd
treat you as a valued customer, not a crook or a peasant.
Besides all that, the confidentiality of your relationship with your
banker would be as sacrosanct as that with your lawyer.
It goes without saying that there's no bank in Hardyville.
Are you kidding? Any banker who tried to set up that kind of
operation would be arrested just ahead of his customers. So here in
town we mostly use cash, money orders, barter and even the occasional
bit of gold or silver. But these methods have their limitations and
inconveniences.
e-gold -- and soon, DigiGold
Bob-the-Nerd -- he of the No Name (and Mostly
Out-To-Lunch-Back-in-20-Minutes) Computer Store -- has for several
years been beating the drum for a different type of store-and-spend
currency option, called
<http://www.e-gold.com/e-gold.asp?cid=106974>e-gold.
e-gold has been offered on the Net for about three years -- which
makes it about as established as Lloyds of London. Well, in
cyberspace terms, anyway. Because of the bankruptcy of an earlier,
much-ballyhooed electronic money system -- David Chaum's
<http://www.ecashtechnologies.com/>Digicash (now ignominiously known
as Digicrash) -- e-gold has had a struggle establishing a major
market base or getting coverage from the once-burned wired press.
Though I've written about e-gold in my books, I've personally ignored
it because it didn't offer the one thing Internet commerce ought to
enable -- truly, totally anonymous transactions. So, a couple of
months ago, when <mailto:jray@e-gold.com>James Ray -- "chief mouth"
of e-gold started nagging me (Yes, Jim, you nagged) to write about
e-gold, I said nope, no way, not interested, ho hum.
Then two things happened. First, a whole raft of orders for my books
turned up missing in the mail under circumstances that pointed at
theft, rather than mere postal incompetence. One of those orders was
from an e-gold advocate, who kindly refrained from saying, "I told
you so." Second, at a conference, I heard one of e-gold's
techno-mavens, Douglas Jackson, (another is Ian Grigg) refer to
something new -- something called DigiGold. DigiGold, he said, will
be a "strongly privacy enabled" electronic medium of exchange that
uses e-gold as its backing. An anonymous currency with a metal base!
As soon as I heard that, I said, "Hey, Jim! Tell me more." Now
(though I stop short of endorsing either of these systems and urge
you to investigate for yourself) I'm kind of excited.
First, a little on e-gold
Before getting to DigiGold, here's some quick background on e-gold.
If you want to know more, just follow the
<http://www.e-gold.com/e-gold.asp?cid=106974>link to their website.
Unlike other electronic exchange media, e-gold isn't just fiat
government notes turned into bookkeeping blips. The stuff is real
money. When you open an e-gold account, you can opt to store your
currency as gold, silver, platinum or palladium -- metal in a
warehouse. Everything in your account is 100-percent metal-backed. If
you want verification that the metal is there, and assurance that
these guys aren't going to take your money and run, check their
website. (Jim Ray doesn't mind answering those questions -- but he
does wonder why we don't ask our local bankers just how much real
money they keep in their empty vaults!)
To open an account, you give minimal information about yourself --
information even a privacy freak like me considered non-invasive.
Though they want an actual, physical address, it doesn't even have to
be yours. No ID. No SSN. No fingerprints, either.
Of course, e-gold isn't banking as they'd be the first to note. It's
a currency system. You won't be paid interest on the metal in your
account. In fact, you'll have to pay small transaction and storage
fees. That's how they make their money. (Opening the account is free
and you don't have to put in any money to start with.)
What can you do with e-gold?
Pay money to other e-gold account holders.
Purchase items from vendors who have e-gold accounts.
Through a process called OutExchange, pay your bills or make
pre-arranged payments to merchants that don't have e-gold accounts.
(You still can't go into the drugstore and write an e-gold check.)
Make transactions of any size.
Make transactions in any major currency or by weight of any of the four metals.
You can also donate to worthy causes. One of the finest,
<http://www.jpfo.org>Jews for the Preservation of Firearms Ownership,
has account number 105440. Or there's <http://www.taig.org>Texans
Against Intrusive Government; they're bringing suit against the use
of SSNs on drivers licenses. TAIG holds account number 105988. Tons,
ounces or grams of gold will also be welcome in an account I'm
uncommonly fond of, 106974. (Only kidding, only kidding. Well, about
the tons, anyway.)
It's necessary to have account numbers to make transactions, so I'm
not giving away any secrets here. Security comes through password
protection, secure servers and such. And that brings us to. ...
DigiGold
e-gold is private in the sense that they don't sell customer
information, and that you can open an account using personal
information of your choice. But being physically located in the U.S.,
with its leagues of financial enforcers, they don't dare offer an
anonymous transaction system.
DigiGold -- debuting soon -- is a different critter.
DigiGold is, first of all, a bearer system. Whoever holds DigiGold
can spend it. And as with cash or gold coins purchasers don't have to
identify themselves to vendors and (this being the Internet) it's
even possible for vendors to be unknown to purchasers. It's private.
Unlike e-gold, DigiGold will have no transaction fees.
That also means it has the same vulnerabilities as cash. As Jim says,
"Light a cigar with a $100 bill -- and that bill's gone." If you sent
a DigiGold payment unencrypted and it was snagged by a stranger, that
stranger would be richer by X-amount of DigiGold. So there are
certainly risks. Unlike most gov-cash, however, it's got a metal
backing.
DigiGold is 100 percent e-gold backed. (Later, that will change to 25
percent e-gold, 75 percent commercial notes; DigiGold intends to be a
profitable operation.)
While e-gold is a Delaware corporation that must remain "pure as the
driven snow" in the eyes of the fedgov, DigiGold will be an offshore
entity -- in fact, an entity that exists only in cyberspace.
"Ah, yes," some gov-o-snoop is muttering right now, "Another
cyberspace purveyor of money laundering, dope-dealing, terrorism,
right-wing extremism, smut and all those other wonderful things that
let me build my agency's budget. Oh, goody."
And of course DigiGold could be used by criminals -- for instance, by
the CIA to hide payments for one of its drug-smuggling operations. It
could be used exactly -- as Jim Ray notes -- the way "Alan Greenspan
money is used by criminals every day. The fact is, unimaginative
people use anonymity irresponsibly. Responsible people use anonymity
to solve real problems." (Like the problem of bureaucrats sticking
their noses into private affairs.)
Are governments everywhere going to hate DigiGold? Is Bill Clinton a
womanizer? Of course, those who love to control others, and who see
"crime" in every expectation of privacy, are going to detest DigiGold
-- and it will be quite interesting to see whether the power of the
state or the power of the
<http://www.amazon.com/exec/obidos/ASIN/0684832720/wolfeslodge>soverei
gn individual prevails (as James Dale Davidson and Lord William
Rees-Mogg predict in the linked book of that name).
Bottom line: No amount of government intrusion will halt crime. But
impenetrable financial privacy may halt government intrusion.
"If DigiGold was sold as the best thing ever to happen to Murder Inc.
(or the CIA), that would be terrible," Jim agrees. "But this is going
to be the best thing that ever happened to liberty. Think about it;
Thomas Jefferson would have been horrified by a government that
snooped into everyone's record books." If DigiGold is all its
promoters say, it could give us back something our ancestors accepted
as a given.
"Something like DigiGold is technologically and mathematically
inevitable," Jim concludes. "Trying to build barriers against it is
like trying to build sand castles against tidal waves. If they
destroy this system, someone else will build another one. I just hope
to see it happen peacefully and for prosperity."
To find out more
DigiGold is currently in "late alpha or early beta" testing stage. It
isn't yet ready for marketing -- though it could go live in the next
few months. If you have computer expertise and want to know more, you
can check out DigiGold and related technologies at:
<http://webfunds.org/webinstalldemo/>to test DigiGold.
<http://www.systemics.com/docs/ricardo/>for info and source code on
the underlying payment system.
<http://www.cryptix.org>strong encryption products and news.
<http://www.digigold.com>currently under construction, but soon to be
DigiGold HQ.
Followup -- A small victory and a small defeat: WND advertiser, <
http://www.pplthomas.com/>Pre-Paid Legal Services, has announced it
will stop requiring Social Security numbers for membership. Thank
you, Pre-Paid. However, the young man whose
<http://www.worldnetdaily.com/bluesky_cwolfe/19990819_xccwo_not_everyt
.shtm
l>story brought this membership policy to light has -- in the face of
the legal stonewalling of his mega-corporate employer -- decided he
must accept a Social Security number, simply to survive. I applaud
his courage for taking the battle as far as he was able.
Claire Wolfe illustration by Wayne D. Holt
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ve>GO TO CLAIRE WOLFE'S ARCHIVE
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Robert A. Hettinga <mailto: rah@ibuc.com>
The Internet Bearer Underwriting Corporation <http://www.ibuc.com/>
44 Farquhar Street, Boston, MA 02131 USA
"... however it may deserve respect for its usefulness and antiquity,
[predicting the end of the world] has not been found agreeable to
experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire'
