CFP96 Paper

For the plenary session: Electronic Money

Simson Garfinkel


PO Box 4188
Vineyard Haven, MA 02568
(508) 696-7222
simsong@vineyard.net simsong@acm.org
http://vineyard.net/simson/

Digital Cash Scenarios

Scenario #1: Lost Savings

My name is Linda Peterson. I'm 70 years old, and penniless. Two years ago, I opened one of those digital cash accounts at the local bank. The manager told me that it would be safe, secure and private. That privacy was important to me, because I was sick and tired of getting calls during dinner from people trying to sell me things.

Well, I canceled my credit cards, arranged for my social security checks to be deposited directly into my bit cash account, and the calls finally stopped coming. And I discovered that using bitcash was easier than anything I had ever dreamed. I could buy my groceries, pay my rent, my electric bills, and -- even better -- I could do it all over the phone. That was great last winter, when I broke my hip and couldn't leave the house for a month.

Then one day, my bit card stopped working. My PC said that there was no money left in the account. "Now, how could that be?" I thought. "There must be some kind of mistake."

I went to the bank and the manager that I spoke with had moved to a new job. His replacement told me that all of my money had been withdrawn in a series of hundred-dollar transactions over the past month. Since the system was anonymous and untraceable, there was no way to find who had taken the money. And since it had all been done with my secret key, they said that I had no way to contest the transfer. My key, they said, was better than my signature.

That new manager even hinted that I might have taken the money out myself. They said that somebody had tried to do the very same thing a month ago, and that person was now awaiting trial for filing a false police report.

How can I get my money back?

Scenario #2: Digital Counterfeiting.

My name is Special Agent Jenkins. I'm an investigator with the Secret Service, working on a counterfeiting case. And it's tough. Last year, my office got a priority call from an economist at Stanford. The economist was looking at something called the money supply and the money velocity, and both were increasing a little too fast. They just didn't add up.

It had taken the economist a few months to figure out what was happening. She finally figured the organization was printing its own electronic money -- just like the U.S. government does. This counterfeit U.S. digital currency looked just like the real thing, except it was a fraud. She even found some of it -- a digital dollar that was signed and sealed by the U.S. Government's secret key, yet had a serial number that had never been issued.

Now, I'm not a technologist like you people, but I told the economist that we would help her out. I asked her what should we do? Should we put together an investigation looking for somebody making those credit cards with the chips on them? She said "no" -- the money that was being made, she said, was on the Internet. It was everywhere and nowhere. And it was encrypted, she said, so that we wouldn't even know it if we found it. And it was increasing, at the rate of $700 to $800 thousand dollars a day.

Now, $700K might not be a lot of money to those guys who oversee fedwire, but it comes to something like $200M a year. And since all of this electronic money is being backed by the good faith and value of the US government under the Electronic Banking and Commerce Act of 1998, that $200M is essentially a tax on the U.S. Citizens. And i'ts getting bigger -- last month, we estimate, the total fraud was up to $900K/month, and it is increasing still.

We don't know if this knowledge has been sold on the black market, or what. But we do know that with more than a trillion dollars moving every day on the Internet alone, it's going to be nearly impossible to track these counterfeiters down. That's why I've come here for suggestions.

Scenario #3: Cash Cards

My name is Tangent. Dr. Chaum, I'd like to thank you for your brilliant idea of conditional payer anonymity, because you have made my lifestyle possible.

A few years ago, I was cruising around late at night, when I saw a man who had a very expensive car at one of those late-night florist shops. You know, the robot shops, where you put in your cash card and you get the flowers? So I followed this guy home, told him that I was with the flower company, got him to left me into his house. Then I took out a gun and told him to give me his digital wallet or I would blow his head off.

You know what? He gave me his card. Then he told me his PIN. Then I broke my promise, and I shot him.

As far as I was concerned, this was the perfect crime. Because I had no relationship with this guy. I had his card. And the cash that's inside the card is anonymous. What a deal!

I had myself a little conditionally anonymous spending spree. It seemed too good to be true, but it wasn't. Thanks to all of you civil libertarians!

At the end of the week, I was out of cash, so I did the same thing again. Now I'm on John Doe #5. The best thing is, there's no way that you can know where I'm going to strike next.

But now I've got a problem, and that's why I've come to talk to you. There are now forces inside the U.S. Government who want to make conditional anominity illegal. They want to have escrowed identity inside the digital cash cards! Can you believe this? I've been watching this very closely, because it's my livelihood that they are talking about. The civil libertarians are chanting "when anonymous digital cash is outlawed, then only outlaws will have anonymous digital cash." But if you outlaw anonymous cash, the government will put me out of business, because my business model depends on getting cash from others.

What do you recommend that I do?

Web resources on Electronic Money

http://www.marktwain.com/shops.htm l
http://ganges.cs.tcd.ie /mepeirce/project.html
http://gopher .econ.lsa.umich/EconInternet/Commerce.html
http://inet.nttam.com/H MP/PAPER/136/abst.html
http://netmarket.com/nm/pages/home
http://mondex.com/mondex/home.html
http://www.ex.ac.uk/~RD avies/arian.money.html
http://www.u-net.com/gmlets/hom e.html
http://www.edi.wi.ca/ediwi
http://www.premenos.com
http://www.ema.org/ema
http://www.fv.com/html/fv_main.ht ml


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Last updated June 23, 1996
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