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Subject: Re: Digital Bearer Cash
Date: 10/03/1999  edited 7/2000 
Author: Todd Boyle <tboyle@rosehill.net>

(There are some digital cash links, at bottom if you're interested)
Robert Hettinga is perhaps the most tireless and persistent advocate of digital bearer cash. See his http://www.philodox.com">http://www.philodox.com website and other accomplishments with your favorite search engine.
Lately it has sunk into my consciousness that digital cash might be motivated by something besides privacy, tax avoidance, or outright laundering.. I suppose others also fall into this preconception and if you are one of them, maybe you should read  further, to look at some other aspects of it.

Pure digital cash would obviously be radically cheaper to administer than banks and bank transactions.  Businesses  might shift substantially to use the first credible digital money that emerges, to reach the administrative cost savings.

Money can be encrypted within bearer 'tokens' with a variety of techniques (some blinded, some not, some requiring a book entry or server someplace, some not, etc)

As a result, accounting software will become unnecessary, or at least,  vastly different in structure for many companies.  Accounting would only remain necessary for a few of today's users, and for narrower purposes.

Much of the historical cause of our whole accounting software architecture (cash accounting, POs, invoicing, later settling of 
Accounts Payable 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.

Everybody knows the current, labor intensive accounting will be replaced fairly soon. Electronic banking and all kinds of billing solutions will see to that. But nobody has even a hint of the complete revolution that would result in accounting software if digital cash is adopted.

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 or value chain, on a shared server visible on internet, they eliminate whole categories of errors and differences and data redundancy in the separate systems. 

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?  DBS would enable them to simply remit money itself, embedded within their messages,  and run their whole production process 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.

Suddenly, it doesn't even matter whether the guy next to you on the production line is an employee or a contractor. Commerce would spill across the borders between companies.

I would love to read a thorough academic analysis of the effects DBS may have on accounting workflow. I'm beginning to realise that if this happens, the current infrastructure will be toast. The interesting question is, what portions would remain and what new functions would an accounting system require...
For example, why couldn't digital cash be implemented by ERP vendors or Supply Chain providers, at least for internal use by corporations?  It would make an absolutely splendid accounting device.
Perhaps it would be some adaptation of DBS having cargo space for a little XML message in it, containing administrative
or accounting data.  Looked at backwards, you might say, the DBS was embedded within the XML docs now conceived as messages by Biztalk, Rosetta, xCBL and all the rest.

Can you imagine how much simpler the accounting and administrative systems could become?  Especially within relatively closed systems like vertical industries. Whew.  You could go live with this in a period of months.  The cash could spill out of the supply chain and become a new currency. 

Two years ago they were talking about Supply Chain Management, SCM, which in hindsight, was from viewpoint of the big manufacturer, forcing the suppliers integration choices.  Now the descriptions for the software became more symmetrical, because supplier's systems integration problems in aggregate, over so many sites are much more expensive than big manufacturers.  All those costs eventually become part of production costs.  

Likewise downstream distribution actors needed real data integration.  And those distributors held the key because 
   a. they have the customer.  Let's face it.
   b. their demand signals must travel up the value network to
      sources of production, efficiently
A year ago I started ranting about shared transaction repository, and that is explained at http://www.gldialtone.com/STR.htm
Now it seems, there might not be any server at all.  The REA system of accounting has emerged, now that the internet
really enables it for the first time.  And people are talking about a smart chip on every can of chickpeas in the supermarket. The chips are getting down around 1 cent.
What seems to emerge is a whole new network-based architecture where there aren't any databases anyplace, and there is an encrypted token for everything.  Money, raw material, finished product.  Account receivable or payable. Whatever.  These tokens will have a beginning and an end.  In eastern religion we had brahma, vishnu and shiva.  

Anyways, these tokens are like "titles" to an automobiles. They represent the product.  They are passed up and down the network along with the necessary XML document to explain the content (or perhaps, the XML is within the token).
You might have pennies or dollars invested in fifty thousand of these little buggers, and you will index them in your tokens directory, to maintain a sort of receivables control.
There would be no more ambiguity what was the nature or timing of any particular transaction.  The role of auditors and CPAs will be much reduced. Everything will be much more efficient. http://www.gldialtone.com/clearGLs.htm
And with no surrender of privacy, no big-brotherish system. The more you think of it, the weirder it gets.
> From: Steve Bellovin
> Subject: legal status of digital signatures
> Date: Fri, 09 Jun 2000
> According to the AP, U.S. House and Senate negotiators have reached a
> compromise on legislation that will set national standards for digital
> signatures and the like.  Details are in
> http://www.nandotimes.com/no_frames/technology/story/0,4500,500213819-500301920-501670828-0,00.html
There will be, ahem... some minor emphasis on digital signatures! If I count the cards correctly, digital timestamps figure in here someplace too.  Otherwise there is a whole cottage industry of maintaining archive copies of peoples' dealings for safekeeping.
* Todd F. Boyle CPA    http://www.GLDialtone.com/
* International Accounting Services LLC    tboyle@rosehill.net
* 9745-128th Av NE, Kirkland WA 98033      (425) 827-3107
* XML accounting, web ledger, ASP, GL Dialtone, whatever.