Digital Bearer Cash           

Following is a speculative discussion of the possible uses of digital cash within companies, or closed trading environments.

Digital cash has been techically possible for some years, under a variety of techniques (some blinded, some not, some requiring a server online someplace at the time of exchange, some not, etc)

Evangelists for pure, anonymous digital bearer securities or digital cash say it would be orders of magnitude more efficient than currencies, banks and bank transactions. They say it would be so much cheaper, the economy itself would undergo beneficial changes. In any case, if real Digital Bearer Cash is as efficient as they say, businesses might shift substantially to use the first credible digital money that emerges. Of course, authorities block this development for a number of reasons.

One result of DBC would be that accounting and supply chain software would become vastly simpler, and different in structure.

Much of the historical cause of our whole accounting software architecture (cash accounting, POs, invoicing, later settling of Accounts Payble and Accounts Receivable in aggregates, etc.) arose out of needs to conduct business in spite of the inconvenient and disruptive workflows for handling cash, writing checks, dealing by mail, going to banks with piles of checks from customers, etc. It is the nature of our money (and to a lesser extent, the paper postal system) that caused all of the whole workflows which contemporary software is designed to ease. Bank reconciliations, invoicing, paying bills, etc. would all disappear.

Many people right now are building new e-business processes on internet. The accounting aspects of these new websites and business models, at least in the small business market, are fairly primitive. They usually have "accounting" mechanisms merely for closing sales, charging credit cards etc.

The best of these systems reflect a new paradigm, in which one or another form of transaction now lives in repositories at a central point visible on internet rather than in any one company's server. You see it in SCM and shared project or manufacturing or time/billing systems. By keeping the data structures for the Supply Chain on a shared server visible on internet, they eliminate whole categories of errors and differences and data redundancy in the separate systems. Here, http:/, for example.

But even these new-technology web-based transaction environments could be dust, if DBC happened. Why would each party to the various business environments maintain messaging interfaces to a shared server and maintain complicated systems of financial accounting in big ERP systems, when they could just remit money itself embedded within their messages, and run their whole Extranet on a point-to-point architecture? If you receive the XML message with money embedded, you would perform the action. Otherwise, it would go into the error pile.

I would love to read a thorough academic analysis of the effects DBC may have on accounting workflow. The interesting question is, what portions would remain and what new functions or opportunities would result?

For example, why couldn't digital cash be implemented by ERP or SCM vendors, for internal use by corporations or groups of trading partners? It could result in some major breakthrus in efficiency.

Perhaps it would be some adaptation of DBC having cargo space for a little XML message in it, containing purchasing, or delivery, or accounting data. Look at it another way: you might say, the Digital Cash was embedded within the XML docs such as Biztalk, Rosetta, CBL and all the rest.

Can you imagine how much simpler the accounting and administrative systems could become? Within a company it could serve as the whole system of budgetary and fiscal control for departments and business units. The whole supply chain could function without any centrallized controller knowing what the departmental parts are doing. Corporate profits and accounting measurement could be derived off of certain streams in the message flows. Whew.

Or within wider systems like vertical industries. The cash would inevitably spill out of the supply chain and become a new sort of currency. The issuers would reap gains from seignorage, etc. etc. (I seem to recall that technologies exist for encoding self-computed interest, so that upon any exchange or ultimate redemption, the amount of DBC automatically reflects a yeild...)

* Todd Boyle CPA Kirkland WA

Ok, here are some random electronic cash links...   date 6/99. not maintained.

Things will certainly get interesting if there is ever an outbreak of anonymous digital cash.  Here is a viewpoint on anonymous DBC.  And here is another page on dbs-scm.

TB  6/99