E-Money (That's What I Want)

The killer application for electronic networks isn't video-on-demand. It's going to hit you where it really matters - in your wallet. It's, not only going to revolutionize the Net, it will change the global economy.

By Steven Levy

Clouds gather over Amsterdam as I ride into the city center after a day at the headquarters of DigiCash, a company whose mission is to change the world through the introduction of anonymous digital money technology. I have been inundated with talk of smart cards and automated toll takers and tamper-proof observer chips and virtual coinage for anonymous network ftps. I have made photocopies using a digital wallet and would have bought a soda from a DigiCash vending machine, but it was out of order.

My fellow passenger and tour guide is David Chaum, the bearded and ponytailed founder of DigiCash, and the inventor of cryptographic protocols that could catapult our currency system into the 21st century. They may, in the process, shatter the Orwellian predictions of a Big Brother dystopia, replacing them with a world in which the ease of electronic transactions is combined with the elegant anonymity of paying in cash.

He points out the plaza where the Nazis rounded up the Jews for deportation to concentration camps.

This is not idle conversation, but a topic rooted in the Chaum Weltanschauung - state repression extended to the maximum. David Chaum has devoted his life, or at least his life's work, to creating cryptographic technology that liberates individuals from the spooky shadows of those who gather digital profiles. In the process, he has become the central figure in the evolution of electronic money, advocating a form of it that fits neatly into a privacy paradigm, whereby the details of people's lives are shielded from the prying eyes of the state, the corporation, and various unsavory elements.

Fifteen years ago, David Chaum seemed a Don Quixote in Birkenstocks, a stray computer scientist talking of a technology that appeared more rooted in science fiction than high finance. Today, still bearded, but wearing a well-tailored suit, he stands in the thick of a movement that seems unstoppable - the digitization of money. His passion now is to explain that the change need not be oppressive. He travels among bankers and financiers, he runs a company, he proselytizes. And he hopes somebody listens, because the wild card in the era of digital money is anonymity, and David Chaum thinks we're in trouble without it. Dollar Bills or Bill Dollars

The next great leap of the digital age is, quite literally, going to hit you in the wallet. Those dollar bills you fold up and stash away are headed, with inexorable certainty, toward cryptographically sealed digital streams, stored on a microchip-loaded "smart card" (a plastic card with a microchip), a palm-sized "electronic wallet" (a calculator-sized reader and loader for those cards), or the hard disk of your computer, wired for buying sprees at the virtual mall.

Of course, real money - the trillions of dollars handled each day by banks, other financial institutions, and government clearinghouses - is already digital. No physical tokens are exchanged: all transactions are conducted using streams of bits. But digitizing the final mile of electronic money, where the coin and dollar bill go the way of the vinyl LP, will make all the difference in the world. It will not only change the physical way you spend your money, it will alter the way you view your own economic being. And depending on the manner in which it is implemented, digital money might allow others to view your financial status with a decidedly discomfiting intimacy.

http://www.wired.com/wired/archive/2.12/emoney_pr.html