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New money

It seems that the Glastonbury Festival, which I tend to sniffily dismiss as a Woodstock wannabe, is to get rid of cash. I can understand their thinking: cash is expensive for the festival to transport, store, and guard and creates security problems for individual festival-goers, too. Mr Cashless himself, James Allan, will be pleased. Although, given his squirming reaction to being offered cash at a conference a few months ago, it's hard to believe he'd regard an outdoor festival as sufficiently hygienic to attend.

But here is the key bit:

As well as convenience and security issues, Barclaycard's Mr Mathieson said that information gathered from transactions could be valuable for future marketing. "For example if the system knows what time you went and bought a beer and at which bar, it can make a guess which band you were about to see," he said. "Then the organizers could send you information about upcoming tours. The opportunities are exciting."

Talk about creepy! Your £5 notes do not climb out of your wallet to chirp eagerly about what they'd like to be spent on.

One of the things we talked about in the history of cypherpunks session at CFP last week (the video recording is online) was what ever happened to digital cash, something often discussed in the early 1990s, when cryptography was the revolution. First proposed by David Chaum in an influential Scientific American article in 1992, it was meant to be genuinely the equivalent of anonymous cash.

Chaum's scheme was typically brilliant but typically facing a hard road to acceptance (he has since come up with a clever cryptographic scheme to secure electronic voting). Getting it widely deployed required two things: the cooperation of banks and the willingness of consumers to transfer what they see as "real money" into an unfamiliar currency with uncertain backing. Consumers have generally balked at this kind of thing; the early days of the Net saw a number of attempts at new forms of payment, and the only ones that have succeeded are those that, like Paypal, build on existing and familiar currencies and structures. You could argue that frequent flyer miles are currency and they are, but they generally come free with purchases; when people do buy them with what they perceive as "real" money it's to acquire a tangible near-term benefit such as a cheap ticket, elite status for their next flight, or a free upgrade.

Chaum understood correctly, however, that the future would hold some form of digital cash, and the anonymous version he was proposing was a deliberately chosen alternative to the future he saw unfolding as computerized transactions took hold.

"If the trend toward identifier-based smart cards continues, personal privacy will be increasingly eroded," he wrote in 1992. And so it has proved: credit cards, debit cards, mobile phone and online payments are all designed to make every transaction traceable.

"The banking industry has a vested interest in not providing anonymous payment mechanisms," said Lance Cottrell at CFP, "because they really like to know as much information as they can about you." Combine that with money-laundering laws and increased government surveillance, and anonymous digital cash seems pretty well dead. The one US bank that tried offering DigiCash, the St Louis, Missouri-based Mark Twain bank, dropped the offering in September 1998 because of low take-up; shortly afterwards DigiCash went into liquidation.

Before heading out to CFP, my bedtime reading was Dave Birch's Digital Money Reader 2010, a compilation of all his digital money blog postings, with attached comments, from the past year. Birch is seriously at war with physical cash, which he seems to perceive as the equivalent of an unfair tax on people like him, who would rather do everything electronically. Because the costs of cash aren't visible to consumers at point of use, he argues, people are taught to think of it as free, where electronic transactions have clearly delineated costs. If people were charged the true cost of paying with cash, surely the percentage of cash payments - still around 80 percent in Europe - would begin to drop precipitously.

But it seems clear that the hidden cost of electronic payments as they are presently constituted is handing over tracking data. A truly anonymous Oyster card costs nothing extra in financial terms, but you pay with convenience: you must put down a £5 deposit for a prepaid card at a tube station, and you must always remember to top it up with notes at station machines. Similarly, you can have an anonymous Paypal account in the sense that you can receive funds via a throwaway email address and use them only to buy digital goods that do not require a delivery address. But after the first $500 or so you'll have to set up another account or provide Paypal with verifiable banking information. Because we have so far not come up with a good way to estimate the value of such personal data, we have no way to calculate the true cost of trackable electronic payments.

Still, it occurs to me writing this that if cash ever does die under the ministrations of Birch and his friends, the event will open up new possibilities for struggling post offices everywhere. Stamps, permanently redeemable for at least their face value, could become the new cash.

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.


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