[118125] in Cypherpunks
Re: e-gold: RE: ecash means anonymous & untraceable
daemon@ATHENA.MIT.EDU (Robert Hettinga)
Mon Sep 20 11:44:23 1999
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Date: Mon, 20 Sep 1999 11:11:06 -0400
To: Digital Bearer Settlement List <dbs@philodox.com>,
cypherpunks@cyberpass.net
From: Robert Hettinga <rah@shipwright.com>
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Reply-To: Robert Hettinga <rah@shipwright.com>
--- begin forwarded text
Date: Mon, 20 Sep 1999 10:17:58 -0400
From: Charles Evans <cevans@e-gold.com>
Reply-To: cevans@e-gold.com
To: e-gold list <e-gold-list@free-market.net>
Subject: Re: e-gold: RE: ecash means anonymous & untraceable
Sender: owner-e-gold-list@free-market.net
Anonymous <nobody@replay.com> wrote:
> I am still unclear on how DigiGold differs from e-gold...
>
> Is it that DigiGold plans eventually to move away from 100% gold banking?
backing, not "banking"
> They only guarantee 25%. This way they make money off the float and so
> users don't get charged storage and transaction fees.
>
> But if you look at the big picture, is it clear that this is an
> advantage???
Only experience will tell. It is not an either/or question for Gold &
Silver Reserve. There are eight gold-backed and eight fiat currencies
that we intend to make a market between: e-gold (gold), e-gold (silver),
e-gold (platinum), e-gold (palladium), DigiGold (gold), DigiGold
(silver), DigiGold (platinum), DigiGold (palladium), on the one hand,
and AUD, CAD, DEM, FFR, GBP, JPY, SFR, USD, on the other.
The founders of DigiGold Ltd. apparently believe that there is a market
for a currency with DigiGold's unique properties, in addition to the
market for a currency with e-gold's unique properties.
DigiGold, e-gold, and G&SR are being run as businesses. The only
relevant test for their principals is market success.
For those who prefer the security of 100% precious metal backing, and
are willing to pay for it in the form of fees, there is e-gold.
For those who prefer bearer media that carry no storage or transaction
processing costs, and are willing to pay for it in the form of
fractional-reserve risk, there is DigiGold.
For those who prefer exchange media regulated by, and backed by the full
faith and credit of, democratically elected governments, there are fiat
and fiat-back derivatives.
no risk risk
fees e-gold banks, eCash
no fees [?] DigiGold
In a relatively open market, suppliers and demanders determine the
basket of available goods and services. Some -- probably neither "none"
nor "all" -- will prefer e-gold. Others will prefer DigiGold. Yet
others will prefer alternative payment systems. And there will be those
who diversify across several.
> After all, ordinary banknotes were 100% backed by assets, even in a
> fractional reserve system. They just weren't backed by gold.
There is a difference between solvency and liquidity. A bank can be
solvent (i.e., not bankrupt) and still not be able to make good on its
liabilities. There are liquid assets and illiquid assets. It is little
comfort -- a la the bank run scene in the movie, _It's_a_Wonderful_Life_
-- to depositers to know that their bank is solvent, but that their
checking balances are backed by mortgages.
One of the most troubling puzzles in banking is matching the term
structures of liabilities and assets. Typically, they have heavier
weighting on the short-term end with liabilities (demand checking,
passbook, CDs, etc.) and heavier weighting on the long-term end with
assets (car loans, mortgages, etc.).
One of DigiGold's cardinal rules, and one of the key reasons that we at
G&SR expect to embrace it once it is finally released, is that the
term-structures of liabilities and assets are to be matched much more
closely. In practice, we expect that this will mean that DigiGold's
liabilities will be short-term; i.e., it is our understanding that
DigiGold Ltd. will not invest in mortgages, but only in short-term,
highly liquid e-gold denominated debt.
In this way, DigiGold is fundamentally different from anything that the
banking system has to offer. It is also categorically different from e-gold.
> And since DigiGold notes are denominated in grams of gold, what happens if
> gold shoots up in value as it did around 1980?
DigiGold Ltd. will borrow e-gold and lend e-gold. What happens to the
USD, JPY, EUR, price of tea in China, and all the rest will be of little
consequence. This Straw Man presumes that the e-gold economy is somehow
founded in the fiat economy. It is not.
> Beyond that, DigiGold holders are dependent on the personal
> financial reserves of Doug and Barry. Hope they have deep pockets.
DigiGold Ltd. is a non-US corporation that is wholly owned by non-US
persons. The responsibility for covering shortfalls is to reside
strictly with this company and its shareholders.
> All this is not to say that fractional reserve banking is fraudulent
> or evil, as some extremists maintain. Nothing's wrong with any such
> relationship as long as everyone understands what is being offered and
> agrees with the terms.
Unlike Central Banks, the contract defining DigiGold's liabilities are
publicly available.
> The main question is whether supporters of DigiGold are fairly describing
> its characteristics. The amount of privacy offered is left vague.
> The name DigiGold suggests a degree of gold backing which is not
> necessarily being maintained.
Read the contract, it is in the wallet.
> The principals behind DigiGold need to do a much better job of explaining
> exactly how their system works. As they move into a public beta phase
> they must make this information available. Otherwise they are going
> to have more articles like the one in World Net Daily which are full of
> mistakes and misleading statements. This will just lead to trouble in
> the long run.
This is true as far as it goes, however:
A) Documentation is everyone's bane.
B) Journalists can be counted on to get the story wrong.
We've lost count how many articles misspell even URL!
Charles W. Evans
Gold & Silver Reserve
Executive VP, Business Development
--- end forwarded text
-----------------
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'
