net.wars - A money of our own?
by Wendy M Grossman | posted on 10 May 2009
Wendy Grossman looks at e-money, and starts to fantasise about becoming a Bank With A Sense Of Humour ...
I was enchanted to learn this week that as of April 27 in the UK private organisations can now issue their own electronic money. The Financial Services Authority's idea seems to be to create the framework for micropayments, that long sought Holy Grail of ecommerce. You know, the emoney-creating organization has to be able to put up £1 million or 2 percent of the float, whichever is higher. But the FSA goes on to say that the requirements can be waived for smaller organizations, which is how I started fantasizing about a currency backed by, you know, by you and me.
I think an electronic currency backed by, say, the NTK guys, a couple of privacy groups, and a bunch of Internet freedom type outfits would have a lot of pizzazz. Money with a sense of humour (not that the NTK guys are interested). I'm not sure what you'd buy with it, but I love the idea of being able to trade in peuros (privacy enhanced euros) and pents (obviously the related coinage).
Alternative currencies are, of course, nothing new. My old home town, Ithaca NY, has "Ithaca Hours," which are accepted by many local merchants as if they were legal tender. You earn Ithaca Hours by working for someone who pays you in them (at a pegged rate of $10 an hour), or by accepting them in exchange for goods or services. Some people have even managed to pay their mortgages with them at the local credit union, and the point the creators make is that a purely local currency stays in the region to help local people hire each other instead of leaving to go kill rain forests or something. The founders figured that in the first ten years about $85,000 of Ithaca Hours were issued representing millions of dollars' worth of local trading.
But alternative currencies have not so far flourished on the Net, from 1995's Digicash to the more recent Beenz. You'd think that frequent flyer miles would be an ideal model for an online currency, which is what Beenz most closely resembled, but somehow it never really worked. People are very skittish about what they'll put their money in - and the risk they'll take varies directly with the amount of payoff they think they have a chance at. People will buy lottery tickets - the program I'm so fond of describing as the government's attempt to undermine public understanding of statistics - because they're cheap and they carry the possibility of rewarding the buyer with many millions of pounds. But they wouldn't put $20 into a cleverly encrypted Digicash purse so they could buy articles to read anonymously online.
When it comes to money, people tend to be very conservative. ("How much do I need to give of you of this here play money?" a Minnesota folksinger asked in a Winnipeg coffeeshop, offending an entire roomful of silent Canadians. He meant to parody American attitudes towards that vari-colored stuff everywhere else has, but it fell splat.) Money, in the end, is all about trust, and until fairly recently the only agencies who were trusted enough to back currency were governments. Of course there are those who are so far down the road of mistrust that they only trust gold bars, but most people like something a little more portable.
On the Net so far, everyone has voted with their wallets and come down firmly on the side of credit cards. They're known, they're guaranteed at least somewhat against theft, governments are happy because they're trackable, and they're not money, they're debt. It's really content providers - artists, publishers, software coders - who long for micropayments, not the public at large, which is generally quite happy going along getting most stuff for free (and copying the rest). Payment aggregators like Qpass and Paypal have made it possible to pay relatively small sums for items in eBay auctions or single archive articles from the New York Times (if $2.95 is small). Pulling together a dozen smaller payments into one credit card transaction (Qpass) or allowing individuals to accept credit card payments (Paypal) is a valuable service, and one the Net really needed.
But the dream mathematician David Chaum was promulgating in the early 1990s was of anonymous digital cash, the online equivalent of spending a couple of untrackable quarters to buy a newspaper. And that we just don't have - and there are plenty of forces lined up against such a system. As computer security expert Russell Brand said not long ago, the pixels are lined up to create a total surveillance society. With the EU set to force non-EU companies to charge VAT on online services, including digital downloads of music and software, supplied to EU residents, the dream of anonymous digital cash looks even further away.
Russell's idea was that you might not have to change too many pixels to swing the picture the other way. I'm not sure if peuros and pents would do much more than allow like-minded people to trade in their own trusted manner, but if Ithaca's any guide, the idea seems alive with possibilities.
Wendy M. Grossman’s Web site has an extensive archive of her books, articles, and music, and an archive of all the earlier columns in this series. Readers are welcome to post here, at net.wars home, follow on Twitter or send email to netwars(at) skeptic.demon.co.uk (but please turn off HTML).