@internet -- Your Cash Ain't Nothin' But Trash

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After Hours Reality Check Magazine A Season in Methven Our Host Send Me Mail

Home Articles STARK REALITIES About This Site My PGP Public Key

After Hours Reality Check Magazine A Season in Methven Our Host Send Me Mail

Home Articles STARK REALITIES About This Site My PGP Public Key

After Hours Reality Check Magazine A Season in Methven Our Host Send Me Mail

Home Articles STARK REALITIES About This Site My PGP Public Key

After Hours Reality Check Magazine A Season in Methven Our Host Send Me Mail

Home Articles STARK REALITIES About This Site My PGP Public Key

After Hours Reality Check Magazine A Season in Methven Our Host Send Me Mail

Home Articles STARK REALITIES About This Site My PGP Public Key

After Hours Reality Check Magazine A Season in Methven Our Host Send Me Mail

One September afternoon in 1992, I was standing on the platform at the Munich train station, waiting for the overnight Paris Express. While waiting, I watched a well-dressed man who'd been fishing through a fistful of change fling a dull, coppery-looking coin away with an expression of mingled disgust, fury and revulsion.

I couldn't help myself. I had to find out what inspired such an elaborate display of contempt.

I tracked the offending article down to the corner where it had rolled. It turned out to be a Turkish 500 lire piece -- a coin worth no more than half a U.S. penny in Istanbul and nothing at all to a man trying to rent a locker in the Munich train station.

That's the thing about money. It has no inherent value of its own (leaving aside the commodity value of coinage). Instead, its real function is to represent the worth of other things -- labor, for instance, or goods.

Nowadays, currency and coinage are mostly the preserve of governments. That wasn't always the case. Back in Medieval and Renaissance times, European banks issued their own money. Wealthy banks offered strong currencies, backed by plentiful assets. Shakier institutions issued more dubious bills.

Those bank notes were, more than anything else, symbols. And, like most symbols, their value depended, more than anything, on the faith that ordinary people placed in them. The less faith people have in a currency's value, the less it is worth in real-world purchasing power. That rule hasn't changed since the time of the Medicis.

And it also applies to electronic commerce.

Philosophers and social critics from Aristotle to Adam Smith have discoursed on the nature of money and the sources from which it springs. As a concept, divorced from the material goods and direct services that its purchasing power represents, money should easily be able to make the leap to the virtual world of the Internet -- and, beginning with U.C. Berkeley PhD David Chaum in the 1980's, a number of Internaut visionaries have tackled the problem of creating a universal standard for digital money.

They've all failed.

King Midas In Reverse

The requirements for electronic cash are easy to specify: it should provide anonimity for the buyer, it should be freely transferrable to third parties, it should be counterfeit-proof, it should be readily divisible and it should be widely accepted by merchants -- all just like "real" money. In addition, unlike actual specie, it should provide some level of protection against theft or accidental loss, it should be easy to use, and it should be transparently convertible to any currency at need.

The biggest problem, of course, is guaranteeing near-universal acceptance. It's a standards problem and, just as is the case with the rest of the computing universe, the central issue is not a lack of standards but a vast oversupply of them.

Between 1994 and 1997, no less than five "digital cash" schemes, nine "cyber credit card" models and a half-dozen "virtual checkbooks" were announced by one or another startup or consortium. Some were merely smoke and mirrors, never intended to be more than a psychological weapon in the endless cold war between financial giants. Others were solidly-grounded in off-the-shelf crypto technology and existing standards. Most fell somewhere in between those two poles -- partially baked, execrably marketed products touted by folks who were wholly incapable of convincing the public that it ought to spend its hard-earned paychecks purchasing digital cash that virtually no one accepted with which to fill electronic "wallets" that were cumbersome and non-portable.

Electronic commerce -- something that, today, we're beginning to take entirely for granted -- was new in the world and the smart guys in the lab coats assured each other that making a success of virtual money was just a matter of collecting a critical mass of users. And that was something that would inevitably happen -- much like the collapse of the State in classical Marxism.

Except it didn't.

The users, bless their self-interested little souls, didn't want a new form of money. They were perfectly content using credit cards and personal checks for most purchases, and, for the most part, they had every reason to feel that way. After all, most digital merchants cheerfully accept credit cards, and those that don't ship their merchandise C.O.D..

The lab coats were flabbergasted. What about users' precious anonimity? What about security? And what about micropayments? Didn't these websurfing masses care about that stuff?

Well, no. As it turned out, they didn't.

Money, That's What I Want

At a guess, the average webrider has long since given up any hope of preserving his or her anonimity. After all, if you use credit cards, ATM cards or merchant affinity cards -- IDKYDG, anyone? -- at all regularly, the big credit reporting firms already have you fixed pretty firmly in their cross-hairs. People aren't stupid. They know there's already lots and lots of detailed information about them out there and they know that more gets added to the pile every time they whip out their trusty plastic money.

If the horse has already been stolen, there's not much urgency about locking the barn. Since the first set of digital payment schemes was primarily oriented toward small purchases, the anonimity offered by using electronic money wasn't particularly compelling.

As for security, that, too, is a relative virtue. After all, how many people do you, personally, know who've had their credit card information stolen as a result of an online transaction?

Yeah. Me, too.

The only credit card information theft that I, personally, have experienced was after renting a car from Budget on Ashby Avenue in Berkeley. While I was vacationing in Yosemite, some punk in Richmond was ordering computer and video gear from Damark with my plastic. It annoyed the hell out of me -- and it happened in meat space, not on the Internet.

As for micropayments -- amounts under a dollar for which the expense of processing a credit card payment far exceeds the value of the purchase itself -- so far, there's precious little demand for such animals. Sure, Brittanica would like to charge its online readers by the article and so would UPI and its brethren. So what?

Other than casual customers -- for whom nearly any payment scheme is likely to be overly cumbersome -- most users of these and other services (such as online gaming centers) that could benefit from micropayment capabilities are content to instead pay monthly subscription fees. That's certainly true of sites that offer adult content -- and they make up a very large chunk of the online economy and tend, as a group, to be innovators when it comes to electronic commerce.

For those few instances where periodic subscription fees won't work, combining payment aggregation and minimum billings solves the micropayment problem quite handily. The merchant tracks the user's debt and periodically -- say, every month or so -- posts a single bill covering all the charges the user has incurred since the last payment. If the total falls below a set minimum -- five dollars, perhaps -- the user is charged the minimum amount.

MCI already does this with its MCI One Net long distance plan. It uses off-the-shelf technology and is capable of handling charges as small as $0.05 (MCI's Sunday rate for a one-minute call).

So, who needs digital cash, anyway?

Hell To Pay

DigiCash, David Chaum's original California venture and one of the first ecash vendors, filed for Chapter 11 bankruptcy in November, 1998. Chaum himself has since moved on to chair CAFE, a European consortium focused on "electronic wallets and the smart cards they hold" and remains Managing Director of DigiCash bv, a Netherlands-based incarnation of his foundering California company.

First Virtual Holdings, one of the earliest entrants in the cyber moola sweepstakes has recently changed its name to MessageMedia and shed its emoney beginnings like a cast-off carapace. It now offers "advanced messaging systems and services for Internet commerce." Chief Scientist Nathaniel Borenstein -- who, with Marshall Rose, is best known as the co-developer of MIME -- is no doubt greatly relieved.

CyberCash, while staying in the virtual money game, has dropped the CyberCoin wallet system in favor of its new "InstaBuy" service -- essentially a credit card billing service.

The Mondex smart-card system, majority owned by Mastercard International, is apparently a modest hit in Guelph, Ontario. Americans, however, unlike Canadistas, seem obdurately resistant to the advantages of smart cards and, while they're a hit with European and Asian populations, every attempt to market them in the U.S. has hit a stone wall of consumer resistance.

And someday -- maybe -- Microsoft's Secure Electronic Transaction system will emerge from its lo-o-ong development phase and move beyond the pilot program stage in which it's been stuck for the past year-and-a-half.

In the meantime, Compaq has closed the beta period for Digital's "Millicent" micropayment system -- one of the better-kept secrets of our time -- and promised to roll out a newer, better Millicent Real Soon Now.

I'm not holding my breath.

I am holding on to that Turkish 500-lire coin, though. As a symbol of real versus perceived value, I think it's beyond price.

(Copyright© 1999 by Thom Stark--all rights reserved)