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Re: [decentralization] Guide to DMT Rand operation

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  • Wes Felter
    ... [snip] ... I wasn t suggesting it too seriously; I just wanted to throw out an example for you to tear apart. After reading your analysis I remember why a
    Message 1 of 33 , Jan 1, 2002
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      on 12/31/01 12:11 AM, Todd Boyle at tboyle@... wrote:

      >>> DBCs and DMT are stuck today for the same reasons all of the products
      >>> from trad banking and software vendors are stuck: there is no secure OS,
      >>> or even secure *device* that is fit to contain cash.
      >>
      >> Even the iButton or smart cards? Besides, it's just another kind of risk;
      >> why is the risk of having some digital cash lost or stolen that much worse
      >> than the risk of having a credit card payment refused?
      >
      [snip]
      >
      > I can't believe you are suggesting the iButton or smart cards as
      > a solution for this problem...

      I wasn't suggesting it too seriously; I just wanted to throw out an example
      for you to tear apart. After reading your analysis I remember why a secure
      UI is also needed to manage digital cash

      > I guess you are thinking, we will only
      > use the iButton or SmartCard at retail terminals?

      No, I think that would be worse because you never know what the terminal is
      saying to your device. (like "This is a hold-up! Gimme all your digital
      cash!")

      Wes Felter - wesley@... - http://felter.org/wesley/
    • Clay Shirky
      ... Agreed, but I d change the when to an if . Cash cards generate higher value if they are paid in advance, and if they have a high degree of non-use (like
      Message 33 of 33 , Jan 4, 2002
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        > It's a bankable asset. Just like cash. All you have to do is
        > convince your banker. If your banker is the issuer, then that's easy.
        > The others will come along when the business volume is high enough.

        Agreed, but I'd change the 'when' to an 'if'. Cash cards generate
        higher value if they are paid in advance, and if they have a high
        degree of non-use (like rebates). The more they behave like actual
        cash, the less they have those properties.

        So I'm not disputing that they can be made to behave like cash, I'm
        disputing the business case that would lead to that outcome.

        > The infrastructure requirement can be reduced from hardware and
        > maintenance overhead (which scales with volume) to complexity overhead
        > (which amortizes over volume), by decentralization. The benefits
        > remain, for the "bank", which gets your USD/EUR/CNY *now*, and pays
        > out later.

        But the differences you gloss over here is that the "bank" is actually
        several banks, and you can't easily decentralize if you're Starbucks
        or McDondalds. So when McDonald's banks my money but I buy coffee at
        Starbucks, to Starbucks that's _worse_ than a cash transaction, and
        when Starbucks takes my money but I buy at McDonald's, Starbucks takes
        on the overhead of dealing with an external creditor and the risk that
        the average purchase at McD is larger than the average purchase at
        Starbucks, thus depleting their advantage faster.

        So, Starbucks would make more money than the present situation if they
        sell so many more more of the new interoperable cards (or sell at high
        enough values) to offset a) the additional expense of honoring
        external cards (== 30 day billing as opposed to ~5 with banks), b) the
        (small) overhead of an additional creditor and c) the risk that the
        money will disappear faster if its more useful.

        (As a side note, Starbucks specifically envisions non-use as a common
        scenario, and has contractual provisions for draining your account
        after a year. See http://www.starbucks.com/card, Terms and Conditions)

        Furthermore, the new 'card as cash' has to be more attractive to them
        than simply saying "If we want to accept external cards, the existing
        infrastructure is fine with us."

        So my contention is that on the profitibility scale

        Store card > Existing Infrastructure > Fungible cash card

        -clay
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