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A plan for the introduction of internet cash.


The opportunity

The internet needs methods by which value can be stored on the net and swiftly transferred. While credit card methods and account methods are superior for some cases, they are unsatisfactory for others. The internet needs something that can be used like cash.

The first business to support a protocol that becomes widely adopted is likely to obtain early adopter revenues of the order of ten million dollars. If commerce in general moves to the internet, then in the long run that business might, if it or its successor remains dominant, obtain the revenue corresponding to the interest on a float of around three hundred billion, a revenue stream probably of around ten billion dollars a year. See revenue estimates.


The problem: Critical mass

These very exciting prospects have lured many businesses to attempt to provide such facilities, the best known being Mark Twain Bank. All have failed. In existing proposals I briefly review most of these proposals and their failure.

The key problem in introducing a medium of exchange to the internet is critical mass. You will not get sellers accepting your medium until you get lots of buyers offering your medium, and vice versa. Yet none of these businesses adopted a business model targeted at the critical mass problem. All acted as if they had a solution for which there was existing widespread demand, when this was not the case:


The initial niche market in which to first achieve critical mass: Pornography

The customers of pornographers want a payment mechanism that is payer anonymous and suited to small transactions. The merchants want a system that is irrevocable (which payee anonymity ensures) and suited for small transactions. The system I describe in Anonymous Electronic Cash provides payer/payee anonymity and can provide support for small transactions.

Customers do not like to subscribe, or use credit cards to subscribe, because the porn merchants tend to be scammers, and because they fear embarrassing stuff on their credit card bills. There have been famous events where interesting items on someone's credit card have come back to haunt him many years later.

Pornography merchants do not like credit cards because of very high chargebacks. A major problem with existing payment mechanisms is something porn sites call the gak factor. Husbands run up a credit-card bill at Suzy's Smut Shop, then go "gak" when their wives see the monthly statement. Most, of course, deny any knowledge of the nefarious charges. The wife then calls the bank that issued the card, reports the charge as bogus, and the bank cancels it. The porn site is out the price of the subscription and has to pay the bank a penalty fee for the charge-back.

Small transactions also mean easier sales: If you charge someone a nickel or a quarter for a little bit of pornography, you can take advantage of the potato chip effect. It is easier to sell someone pornography by the quarter than by the subscription.

Pornography has always led the early adoption of new technologies. Pornography drove the deployment of the VCR and of CD-ROM drives. Just a few years ago, 65% of all CD-ROM's sold were pornographic.

Of course the pornography market is already an inconveniently large market, too large to easily establish critical mass. We shall start by targeting a niche within the niche, some unusual and unpopular sexual preference.


The plan

First we create the minimum system that will allow one person to pay another through the internet with payer/payee untraceability. This has capability has never existed. (Magic money never provided any usable redemption system.)

This requires a server from which anyone could purchase coins without human intervention, and which could exchange or redeem coins without human intervention.

Because we want a server that is always up, and provides the swift long distance response that the internet is designed for, the client program would talk HTTP to the server when one purchases, exchanges, or redeems coins.

Redemption is the hard part since we need to pay people over the internet and paying people money over the internet is precisely the problem that we seek to solve.

We could use the existing e-gold mechanism, allowing people to purchase e-gold with the coins, or we could allow them to spend the coins to direct the server to send a conventional check through the banking system, having the server pretend to be a human client of one of the many banks that allow you to log on through the internet, and direct them to send a paper check to someone. Convertibility into e-gold would be the least work, and would provide the fast response that people expect for redemption. E-gold is not widely acceptable, but this is after all only intended to be a working prototype, a basis for an internet standard, and people do have faith in gold.

For the product to be useful and widely adopted we will eventually need to provide an interface to the banking system, a way to purchase bank instruments with electronic coins, or rather several interfaces, taking advantage of several regulatory jurisdictions, but we will not need this for the initial task, which is to establish a brand identity. The long run objective is to give away the software, and make money off the brand.

The likely early adopters are sellers of bootleg mp3s and purchasers of illegal porn. This deployment is unlikely to generate any significant income. This initial step is merely to prove concepts, generate publicity, and establish a brand name.

The brand name will be applied to a number of later products, with tokens that represent various kinds of value, and servers in various jurisdictions. By using a brand name that has been around for a while, this will give users confidence that we will not take their money and run, as some purporting to offer internet transaction services have done.

This initial project will merely enable individuals to manually transfer money from one individual to another through any transfer of text, among them email, icq and hotline. Hotline is analogous to ftp plus chat. Many hotline users have a considerable need for some payee anonymous form of payment, particularly those who run hotline servers.

To be useful, to be a product capable of generating income, we need to create software that allows servers to sell downloads for cash, and allows people to purchase downloads from their browser. So the next step is to create such software. (Later, much later, we will also support shopping carts but that will put us in direct competition with Visa and Mastercard, which is not a good place to start.)

We know from the experience of those that have done this before that merely creating the tools and offering them will not be enough. After creating the necessary tools, we will need to go out and artificially create critical mass within some narrow specialty. No one could create critical mass on the internet as a whole, or even in the pornography industry as a whole, however it should be feasible to create critical mass within a portion of the industry specializing in serving some narrow, unusual, and repugnant sexual preference.

If we create tools that make it reasonably easy and convenient to sell information using our protocol and we make these tools freely available for anyone to use without need for our knowledge or permission and we achieve critical mass within some narrow and particular market, then things should avalanche. We should in due course see world wide adoption of our standard, resulting in world domination for those financial transaction products which have the earliest and strongest brand name association with that protocol.

Once the bandwagon is rolling, and we have critical mass within a large and rapidly growing portion of the internet economy, then we IPO the brand (having already given away the software, without which the brand would be worthless) and retire rich.