[45610] in Cypherpunks
(fwd) Economics of Digital Money.
daemon@ATHENA.MIT.EDU (Robert Hettinga)
Tue Dec 19 09:17:33 1995
Date: Tue, 19 Dec 1995 08:57:13 -0500
To: cypherpunks@toad.com
From: rah@shipwright.com (Robert Hettinga)
--- begin forwarded text
Date: Tue, 19 Dec 1995 12:42:23 +0700 (GMT+0700)
From: Patiwat Panurach <pati@ipied.tu.ac.th>
To: ecash@digicash.com
Subject: Economics of Digital Money.
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The Economics of Digital Commerce: An analysis of
Digital Cash, ElectronicFund Transfers, and eCash
By: Patiwat Panurach
Faculty of Economics
Thammasat University
Bangkok, Thailand
The extraordinary growth of international interconnected computer network=
s
and the pervasive trend of commerce to utilize these networks as a new fi=
eld
for there operations has catalyzed the demand for new methods of payments=
.
These new methods must attain unprecedented levels of security, speed,
privacy, decentralization, and internationalization for =ECdigital commer=
ce=EE
to be
accepted by both consumers and entrepreneurs.
This paper seeks to analyze 3 such methods of electronic payments. First=
shall
be the generic type of electronic fund transfer that is widely in use. S=
econd,
the ongoing proposals for an open =ECdigital cash=EE standard. Lastly is=
a real
world technology currently in implementation called eCash. These 3 metho=
ds
are examined in terms of the dynamics of transaction clearance, the effec=
ts on
money supply and the macroeconomy, there classification in terms of =ECmo=
ney=EE
or =ECcash=EE, and the comparative viewpoints of monetary authorities, fi=
nancial
institutions, and consumers. This paper will not attempt to go into deta=
il on
the myriad of encryption systems, protocols, algorithms and other technic=
al
matters concerning the new systems. These are all secondary aspects of
electronic payment. As there basis, electronic payment systems are simp=
ly
logical evolutionary steps that began with the realization of the limits=
of
barter. The need to pay for transactions is the root of all electronic
payment
systems.
The first method of electronic payments that shall be examined has been =
in use
for a relatively long time. It is the =ECelectronic checking system=EE. =
For many,
=ECElectronic Checking=EE and =ECElectronic Payment=EE are the same thing=
, although
this is not always so. Electronic Checking simply uses the existing ban=
king
structure to its fullest potential by eliminating paper checks. Electron=
ic
Checking is an extremely varied system. Some examples of it include
=85 paying for university fees via ATM card
=85 paying telephone bills via monthly bank account deductions
=85 large value overseas fund transfers
Conceptually, Electronic Checking, and almost all Electronic Payments,
involves 3 agents1:
1. buyer
2. seller
3. intermediary
The buyer initiates a transaction with the seller and the seller demands
payment. The buyer then obtains a unique certification of payment (physi=
cally
called a check) from the intermediary. This debits the buyer's account w=
ith
the intermediary The buyer then gives the certification to the seller and=
the
seller gives the certification to the intermediary. This credits the se=
ller's
account with the intermediary.
Schematically, this is a =ECconventional=EE checking transaction. But wh=
en it is
conducted electronically, the certification is an electronic flow that i=
s
documented by the intermediary. Most important, the attainment of the
certification, the transfer of the certification, and the debiting and
crediting of
the accounts occurs instantaneously. If the buyer and seller don't use th=
e same
intermediary, some standardized clearing house system between
intermediaries is usually used.
Since electronic checking is essentially checking, it can be analyzed as
checking. Payments made via electronic checking would be conducted outsi=
de
of cash and paper. Instead of sending a check or paying at a counter, th=
e
buyer would initiate an electronic checking certification. If this is do=
ne
as a
substitute for paying in cash, electronic checking could susbstantually r=
educe
the transactions demand for money. In essence, this is not electronic ch=
ecking
but electronic cash. But if it is a substitute for conventional checking=
,
it would
just increase the speed of the transaction. From the economic standpoint=
,
there
is no difference in the dynamics of the checking process from normal chec=
ks
--- end forwarded text
-----------------
Robert Hettinga (rah@shipwright.com)
e$, 44 Farquhar Street, Boston, MA 02131 USA (617) 958-3971
"Reality is not optional." --Thomas Sowell
The NEW(!) e$ Home Page: http://thumper.vmeng.com/pub/rah/
>>>>Phree Phil: Email: zldf@clark.net http://www.netresponse.com/zldf <<=
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