Subject: Small/Secure Payment Business Models

From: Ronald Duncan <[email-masked]>
Date: Mon, 31 Dec 2001 17:45:00 +0000

What is the secret of success?

Why have beenz and others failed?

e.g. Why did Paribas fail with key line?

What is a Virtual Currency?

Convertibility - When to you cross over and get into the money laundering
regs?

Why small, what about the billon dollar barters?

How do you get the liquidity?

Go for it!

I am certainly very interested in all of these topics and how to roll out
our currency and other services.

Regards -- Ronald

-----Original Message-----
From: Steve Schear [mailto:[email-masked]]
Sent: 31 December 2001 17:13
To: Ronald Duncan; [email-masked]
Cc: [email-masked]
Subject: Re: Guys Please stop

At 12:33 PM 12/31/2001 +0000, Ronald Duncan wrote:
>It has been interesting, but it is getting a little out of hand.
>
>Please flame each other in private.

Sorry if the exchange appeared to be a bit too private.  I saw it as an 
opportunity to discuss some of the underlying, but not often discussed, 
issues surrounding small payment business models.  I think most on this 
list, including myself, want to see a thousand payment system flowers 
bloom.  We live in interesting times.  The legal, market and technical 
landscape underlying payment systems is in great flux.  Many approaches 
have been suggest or tried and its only by understanding what 
considerations drove the decisions of others that we can learn from one 
another and improve chances for future success.

steve

---

From: Steve Schear <[email-masked]>
Date: Mon, 31 Dec 2001 20:55:12 -0800

>What is the secret of success?

Politically: having enough juice to buy off Congress and get regulations 
favoring/protecting your turf.  Regulations always favor the regulated.

Operationally: immediate settlement with extremely low direct costs, 
non-repudiation, an efficient automation interface, bi-directionality 
[fostering an active, competitive exchange market], combined with zero 
credit or liquidity risk.

>Why have beenz and others failed?

They weren't real currencies. Flooz was an online gift certificate scheme, 
and Beenz was a shopping incentive scheme. Didn't matter how many times 
Beenz said they were a "web currency" for the sake of the business plan and 
the marketing, they were still just incentive points.

Beenz and Flooze (Digital Based Currencies) failed, in part, because they 
are not a direct money for goods or money for service. The net seems to 
support systems that are deflationary and peer to peer. So middle men tend 
to get squeezed out.  Is Paypal next?

Payment systems must be very careful regarding the 'hardness' , or ability 
to repudiate, the payments accepted to fund them.  Flooz's immediate 
demise  was linked to a credit card scam ring, but the underlying cause was 
a failure to observe good payment risk management.

                                                         Scale of Monetary 
Hardness

Hardness          Item
1                  Street cash, US dollars
(Hard)
2                  Street cash, euro currencies, japan
3                  e-gold
4                  Street cash, other regions
5                  Interbank transfers of various sorts (wires etc), bank 
checks
6                  personal checks
7                  Consumer-level electronic account transfers (eg bPay)
8                  Business-account-level retail transfer systems
(Soft)
9                  Paypal and similar 'new money' entities, Beenz
10                Credit cards
(Ridiculously soft)

Observe that say stock brokerages definitely do not accept credit cards or 
Paypal to fund an account. They will only accept instruments that are very 
hard, such as wire transfers or certified bank checks. When hard money is 
required, only money-types with a hardness of about 5 or better will do the 
job. Observe though that even money order and bank wires can and have been 
reversed.

>What is a Virtual Currency?

What is a real currency?  The existence of fiat paper?

>Convertibility - When to you cross over and get into the money laundering

Whenever you deal in an open value system and regulators find you have been 
doing business with someone they consider a criminal or a pariah.  It often 
doesn't matter if they were so considered when you were dealing with them 
or that there was little likelihood you could have determined they were 
engaged in what then or later was consider criminal.

The term 'money laundering' used to mean proceeds from a criminal 
enterprise, but over the past few decades it has come to mean any attempt 
to interfere with a government's interest, Constitutional or not, in 
enforcing financial transparency.  Being accused of being a money launder 
has become the modern day equivalent of being called a Communist in the 
McCarthy era.

>Why small, what about the billon dollar barters?

What about them?  Why not?

>How do you get the liquidity?

Don't allow credit.  Prevent repudiation.