I have created this web page reviewing the various efforts to bring a
cashlike medium to the internet.
A lot of people have done a lot of things on these projects, and
doubtless my somewhat cynical reviews contain many errors. I would
appreciate some corrections.
In order to be useful, a protocol for the transfer of value for the
internet must be on most desktops, in most browsers, in many web
servers, yet many the existing proposals involve proprietary software,
and many of them involve a banking monopoly for the issuer of the
software. It seems unlikely that many other financial intermediaries
would wish to participate in such a grotesquely uneven playing
field.
Many of these proposals require the issuer and protocol developer to
be intimately involved in every transaction, with the notable and
important exception of the IBM and SOX proposals. They require everyone
using cash to buy or sell on the net to have an account with the issuer
and protocol developer, and the protocol developer's copyrights give it
a total monopoly of net money issue.
For a protocol to become widely used, a wide variety of players must
play along. There has to be something in it for everyone.
Mondex
Electronic Cash: Faces a fatal critical mass problem.
This is the most advanced, best funded, and most widely deployed
transmissible form of cash. It is a smartcard, a tiny tamper proof
computer the size and shape of a credit card, that keeps a truthful
account of its owners balance; designed to be used in a wholly cashlike
manner, rather than a credit card like manner. If it is indeed
tamperproof, and if it comes into wide use, it will trivially solve the
problems of cashlike transactions through the internet and many other
problems as well. Its great weakness is that by design it must be
deployed through the banks and with the cooperation of the banks, and
the banks are somewhat ambivalent. Many banks all around the world have
signed on, but most of them are promoting it in a way likely to
guarantee failure, making it impossible to achieve critical mass.
Another big problem is that every person who uses it must make a
significant investment in hardware, which no one wants to do until it
has already achieved critical mass, making the critical mass problem
even more severe than with a software only solution. People are
reluctant to install new software, but they are even more reluctant to
install new hardware.
Some people, myself among them, doubt that the cards are truly
tamperproof. A tampered card could appear to be always full of Mondex
money, no matter how much the owner spends, generating perfect
counterfeit Mondex money and placing it in circulation.
There are numerous smart cards and smart card proposals and smart
card alliances in Europe, and they are moving towards
interoperability. Other
programs also claim to be the leading smart card program, but right
now the bottom line is that smart cards are not particularly useful for
buying or selling stuff over the internet, despite numerous grandiose
announcements by alliances representing vast amounts of wealth and
market power. Other such alliances have come and gone.
e-gold
Gold backed units of account, that can be transferred from one person to
another. It is inconveniently manual. The transaction fees are rather
high for a cash substitute, though still lower
than credit cards. The software is proprietary and no good. And yet
for some strange reason this form of net money is bizarrely popular. To
judge by the number of hits I get, it is far more widely accepted than
any other scheme. It seems that despite the widespread demonetization of
gold, this barbarous relic still holds remarkable power over men's
minds, more power than mere paper can. Jim Ray claims to turn over one
or two hundred thousand dollars worth of transactions per month, which
is consistent with level of acceptance that I see. An insignificant
proportion of total net transactions, but a vastly higher proportion
than any other scheme has achieved.
Despite curious power of this relic, and the comparative success of
this scheme (or rather lesser failure), this form of net money has as
yet failed to achieve anything like critical mass, and its success is
merely comparative. It is used within narrow circles, a group of
inconveniently small islands that have yet to merge.
IBM
Micro Payments: Looks good, not yet ready for release. This is
planned to be an open protocol, though it is not yet open. Supports
intermediation, indeed the concept is that there will be many money
issuers (billing system operators) who will mostly choose, most of the
time, to accept each others money. The money will be truly cashlike, in
that relations between billing system operators and merchants will be
casual and short term. Since the protocol shall be open IBM cannot gouge
money issuers in the event that the protocol becomes a success, nor can
money issuers gouge merchants since they will have no monopoly power.
This plan avoids the division-of-spoils issues that harmed so many other
attempts to promote internet money. Unlike so many proposals that
suffered from self defeating greed, the plan is that there will be
something in it for everyone, making it much easier to achieve critical
mass.
IBM of course, has no plans to give away the software, but if the
protocol is truly open, as promised, they will not achieve or seek any
monopoly power over internet money issue, since any other software
writer will be able to write to the IBM standard without needing
permission, thus limiting IBM to merely huge profits should the scheme
succeed.
Sox
An open source open source effort to create internet money. This project
is still going, and we are promised a manifestation of it as digigold
real-soon-now, in association with e-gold, but the previous key
developer has left, having come to the conclusion that it would not be
usable by the masses in the form originally envisaged. The form
originally envisaged is now undergoing some changes.
Java
Electronic Commerce Framework (JECF): This proposal is an extension
to Java that is intended to solve the browser side deployment problem,
and a demo (the wallet) that uses these extensions.
Instead of having to change all browsers to handle a new cash
protocol, we would simply write the protocol in Java, and the browser
would download the protocol implementation from the web site issuing the
instruments of exchange.
This Java extension seems to me to have been designed by an
excessively large committee with incompatible and conflicting desires,
but if the later versions turn out to be usable, and come to be widely
distributed with browsers, this will greatly reduce the critical mass
problem.
Millicent
Microcommerce System : The Millicent proposal requires highly
trusted vendors, therefore not anyone can accept script. This makes the
script less money like, and makes it more difficult to achieve critical
mass.
Millicent has some big money partners and support, such as KDD, and
is going ahead with its plans. It is targeting uncontroversial material
such as dictionary searches and pictures. In their trial, they claimed
total turnover of about ten thousand dollars, about as much as e-gold
claims to turn over in two or three days. They employed only very
respectable vendors in their trial. If their product is limited to
highly respectable vendors, it appears to me that it is inherently
incapable of achieving critical mass.
Ecash
by DigiCash and a real-world
application of it. Dead. Killed by fear and greed, mostly fear. They
were afraid of offending anyone, so they crippled their
cash so that they could vet anyone who wanted to use it, and then used
that vetting power to exclude the major early adopter market:
Pornographers. Chaum, the founder, neither endorses or denies the rumor
that his banking partners were ambivalent about its potential
success.
www.ecoin.com:
Doomed by unbounded greed. Proprietary, no public documentation, no
support for intermediation. Same as so many other swiftly vanishing
proposals.
I$:
Doomed by unbounded greed. Proprietary, worthless public documentation,
no support for intermediation, patents of the obvious pending. Same as
so many other swiftly vanishing proposals.
Clickshare:
Doomed by unbounded greed. This is not so much a micropayment protocol
as a protocol for monitoring users. If you monitor users, one of the
many things you can do with the information is to bill them according to
their resource usage. This, of course, assumes that the user and the
payment intermediary trusts the vendors, which again makes this proposal
far from cashlike. The payment intermediary would have to monitor and
enforce the good conduct of the vendors, doing the same things the
credit card companies already do better. This seems fairly useless as a
form of money, though it might be useful in providing information about
us to advertisers so that they can target their junk mail, and to
governments for nefarious purposes, and will quite possibly be a
"success" in that function.
SEMPER
(Secure Electronic Marketplace for Europe): Doomed by insufficient
greed, instead of excessive greed. A mere talk shop for European
intellectuals. Because European intellectuals are not permitted to
become rich, they feel no great urgency to put any of their excellent
and entirely workable proposals into action.
SET
(Secure Electronic Transactions by MasterCard and Visa): Making
credit cards easier and safer to use on the internet. Not cashlike, but
it could make it feasible to use credit cards for smaller transactions,
substantially reducing the demand for cash.
Cybercash:
They do credit card stuff. From time to time they float various somewhat
cashlike proposals, among them "CyberCoin", though seemingly without
much serious intention of actually making them happen.
CAFE
(Conditional Access For Europe: Died in 1996. A horse designed by a
committee. The vast power and wealth of its backers would have solved
the critical mass problem, had they come up with something acceptable.
Based on the excellent and entirely workable proposals of Stephen
Brands.
NetBill
(Carnegie Mellon University): Died in 1997. Sold to Cybercash, and
Cybercash despite the name, is not doing much that is cashlike. Netbill
requires both customers and merchants to have an account with the same
commerce provider. The protocol was compatible with intermediation, but
no intermediation is proposed. One possible reason for the failure was
that the response was rather slow, due to the numerous steps required
for protocol completion, making it unsuitable for downloading dirty
pictures. If you are going to bill people nickels, they expect instant
gratification.
NetCash
(University of Southern California): Died in 1994. A great design,
free from all the flaws and evils of the other designs. Killed by fear.
They were afraid to offend any banker.
NetCheque A
cheque payment model. Died in 1994. A great design, free from all the
flaws and evils of the other designs. Dead. Killed by fear. They were
afraid to offend any banker.
PayCash
payment system: A payment system based on the ruble, which nobody
uses, least of all Russians. Proprietary. Dollar payments promised
soon.
Cybank:
Doomed by excessive greed. Both customer and merchant must have an
account with Cybank.
Internet
Information Payments Collaborative: Not a proposal, merely a
conference aimed at getting broad consensus behind some proposal, so as
to achieve critical mass by getting existing big financial institutions
on side. But there is no real consensus on those things that matter
most.
EMoney:
Not emoney, just another bank with a buzzword.
James A. Donald: Current Net Cash Proposals
1999 May 14 See all postsJames A. Donald
satoshinakamotonetwork@proton.me
https://satoshinakamoto.network
I have created this web page reviewing the various efforts to bring a cashlike medium to the internet.
"Existing proposals, and why they are going nowhere fast"
A lot of people have done a lot of things on these projects, and doubtless my somewhat cynical reviews contain many errors. I would appreciate some corrections.
Current Net Cash Proposals
In order to be useful, a protocol for the transfer of value for the internet must be on most desktops, in most browsers, in many web servers, yet many the existing proposals involve proprietary software, and many of them involve a banking monopoly for the issuer of the software. It seems unlikely that many other financial intermediaries would wish to participate in such a grotesquely uneven playing field.
Many of these proposals require the issuer and protocol developer to be intimately involved in every transaction, with the notable and important exception of the IBM and SOX proposals. They require everyone using cash to buy or sell on the net to have an account with the issuer and protocol developer, and the protocol developer's copyrights give it a total monopoly of net money issue.
For a protocol to become widely used, a wide variety of players must play along. There has to be something in it for everyone.
Mondex Electronic Cash: Faces a fatal critical mass problem.
This is the most advanced, best funded, and most widely deployed transmissible form of cash. It is a smartcard, a tiny tamper proof computer the size and shape of a credit card, that keeps a truthful account of its owners balance; designed to be used in a wholly cashlike manner, rather than a credit card like manner. If it is indeed tamperproof, and if it comes into wide use, it will trivially solve the problems of cashlike transactions through the internet and many other problems as well. Its great weakness is that by design it must be deployed through the banks and with the cooperation of the banks, and the banks are somewhat ambivalent. Many banks all around the world have signed on, but most of them are promoting it in a way likely to guarantee failure, making it impossible to achieve critical mass.
Another big problem is that every person who uses it must make a significant investment in hardware, which no one wants to do until it has already achieved critical mass, making the critical mass problem even more severe than with a software only solution. People are reluctant to install new software, but they are even more reluctant to install new hardware.
Some people, myself among them, doubt that the cards are truly tamperproof. A tampered card could appear to be always full of Mondex money, no matter how much the owner spends, generating perfect counterfeit Mondex money and placing it in circulation.
There are numerous smart cards and smart card proposals and smart card alliances in Europe, and they are moving towards interoperability. Other programs also claim to be the leading smart card program, but right now the bottom line is that smart cards are not particularly useful for buying or selling stuff over the internet, despite numerous grandiose announcements by alliances representing vast amounts of wealth and market power. Other such alliances have come and gone.
e-gold Gold backed units of account, that can be transferred from one person to another. It is inconveniently manual. The transaction fees are rather high for a cash substitute, though still lower than credit cards. The software is proprietary and no good. And yet for some strange reason this form of net money is bizarrely popular. To judge by the number of hits I get, it is far more widely accepted than any other scheme. It seems that despite the widespread demonetization of gold, this barbarous relic still holds remarkable power over men's minds, more power than mere paper can. Jim Ray claims to turn over one or two hundred thousand dollars worth of transactions per month, which is consistent with level of acceptance that I see. An insignificant proportion of total net transactions, but a vastly higher proportion than any other scheme has achieved.
Despite curious power of this relic, and the comparative success of this scheme (or rather lesser failure), this form of net money has as yet failed to achieve anything like critical mass, and its success is merely comparative. It is used within narrow circles, a group of inconveniently small islands that have yet to merge.
The Rest: Promising, but not yet quite existent, or existent but halted dead in the water.
IBM Micro Payments: Looks good, not yet ready for release. This is planned to be an open protocol, though it is not yet open. Supports intermediation, indeed the concept is that there will be many money issuers (billing system operators) who will mostly choose, most of the time, to accept each others money. The money will be truly cashlike, in that relations between billing system operators and merchants will be casual and short term. Since the protocol shall be open IBM cannot gouge money issuers in the event that the protocol becomes a success, nor can money issuers gouge merchants since they will have no monopoly power. This plan avoids the division-of-spoils issues that harmed so many other attempts to promote internet money. Unlike so many proposals that suffered from self defeating greed, the plan is that there will be something in it for everyone, making it much easier to achieve critical mass.
IBM of course, has no plans to give away the software, but if the protocol is truly open, as promised, they will not achieve or seek any monopoly power over internet money issue, since any other software writer will be able to write to the IBM standard without needing permission, thus limiting IBM to merely huge profits should the scheme succeed.
Sox An open source open source effort to create internet money. This project is still going, and we are promised a manifestation of it as digigold real-soon-now, in association with e-gold, but the previous key developer has left, having come to the conclusion that it would not be usable by the masses in the form originally envisaged. The form originally envisaged is now undergoing some changes.
Java Electronic Commerce Framework (JECF): This proposal is an extension to Java that is intended to solve the browser side deployment problem, and a demo (the wallet) that uses these extensions.
Instead of having to change all browsers to handle a new cash protocol, we would simply write the protocol in Java, and the browser would download the protocol implementation from the web site issuing the instruments of exchange.
This Java extension seems to me to have been designed by an excessively large committee with incompatible and conflicting desires, but if the later versions turn out to be usable, and come to be widely distributed with browsers, this will greatly reduce the critical mass problem.
Millicent Microcommerce System : The Millicent proposal requires highly trusted vendors, therefore not anyone can accept script. This makes the script less money like, and makes it more difficult to achieve critical mass.
Millicent has some big money partners and support, such as KDD, and is going ahead with its plans. It is targeting uncontroversial material such as dictionary searches and pictures. In their trial, they claimed total turnover of about ten thousand dollars, about as much as e-gold claims to turn over in two or three days. They employed only very respectable vendors in their trial. If their product is limited to highly respectable vendors, it appears to me that it is inherently incapable of achieving critical mass.
Ecash by DigiCash and a real-world application of it. Dead. Killed by fear and greed, mostly fear. They were afraid of offending anyone, so they crippled their cash so that they could vet anyone who wanted to use it, and then used that vetting power to exclude the major early adopter market: Pornographers. Chaum, the founder, neither endorses or denies the rumor that his banking partners were ambivalent about its potential success.
www.ecoin.com: Doomed by unbounded greed. Proprietary, no public documentation, no support for intermediation. Same as so many other swiftly vanishing proposals.
I$: Doomed by unbounded greed. Proprietary, worthless public documentation, no support for intermediation, patents of the obvious pending. Same as so many other swiftly vanishing proposals.
Clickshare: Doomed by unbounded greed. This is not so much a micropayment protocol as a protocol for monitoring users. If you monitor users, one of the many things you can do with the information is to bill them according to their resource usage. This, of course, assumes that the user and the payment intermediary trusts the vendors, which again makes this proposal far from cashlike. The payment intermediary would have to monitor and enforce the good conduct of the vendors, doing the same things the credit card companies already do better. This seems fairly useless as a form of money, though it might be useful in providing information about us to advertisers so that they can target their junk mail, and to governments for nefarious purposes, and will quite possibly be a "success" in that function.
SEMPER (Secure Electronic Marketplace for Europe): Doomed by insufficient greed, instead of excessive greed. A mere talk shop for European intellectuals. Because European intellectuals are not permitted to become rich, they feel no great urgency to put any of their excellent and entirely workable proposals into action.
SET (Secure Electronic Transactions by MasterCard and Visa): Making credit cards easier and safer to use on the internet. Not cashlike, but it could make it feasible to use credit cards for smaller transactions, substantially reducing the demand for cash.
Cybercash: They do credit card stuff. From time to time they float various somewhat cashlike proposals, among them "CyberCoin", though seemingly without much serious intention of actually making them happen.
CAFE (Conditional Access For Europe: Died in 1996. A horse designed by a committee. The vast power and wealth of its backers would have solved the critical mass problem, had they come up with something acceptable. Based on the excellent and entirely workable proposals of Stephen Brands.
NetBill (Carnegie Mellon University): Died in 1997. Sold to Cybercash, and Cybercash despite the name, is not doing much that is cashlike. Netbill requires both customers and merchants to have an account with the same commerce provider. The protocol was compatible with intermediation, but no intermediation is proposed. One possible reason for the failure was that the response was rather slow, due to the numerous steps required for protocol completion, making it unsuitable for downloading dirty pictures. If you are going to bill people nickels, they expect instant gratification.
NetCash (University of Southern California): Died in 1994. A great design, free from all the flaws and evils of the other designs. Killed by fear. They were afraid to offend any banker.
NetCheque A cheque payment model. Died in 1994. A great design, free from all the flaws and evils of the other designs. Dead. Killed by fear. They were afraid to offend any banker.
PayCash payment system: A payment system based on the ruble, which nobody uses, least of all Russians. Proprietary. Dollar payments promised soon.
Cybank: Doomed by excessive greed. Both customer and merchant must have an account with Cybank.
Internet Information Payments Collaborative: Not a proposal, merely a conference aimed at getting broad consensus behind some proposal, so as to achieve critical mass by getting existing big financial institutions on side. But there is no real consensus on those things that matter most.
EMoney: Not emoney, just another bank with a buzzword.