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Electronic Cash Ryan Lackey 2 August 2002 DEF CON X – 1400h.

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Presentation on theme: "Electronic Cash Ryan Lackey 2 August 2002 DEF CON X – 1400h."— Presentation transcript:

1 Electronic Cash Ryan Lackey 2 August 2002 DEF CON X – 1400h

2 Who I am Ryan Lackey, Resident of Sealand in the North Sea Cofounder and CTO of HavenCo, Ltd. Worked in cypherpunk ventures for years; got interested when on the net at an early age before regulations Remember the net post-accessibility and pre- regulation; want to re-create that state

3 HavenCo Founded in 1999 Founded in 1999 Profitable! Growing! Profitable! Growing! May do last-minute talk this year May do last-minute talk this year Currently CTO Currently CTO Increasingly automated operations Increasingly automated operations Personally planning to remain involved in an engineering/management capacity Personally planning to remain involved in an engineering/management capacity Exciting things happening in the next 12 months Exciting things happening in the next 12 months

4 Environment Trend toward increased regulation Trend toward increased regulation Commerce is speech Commerce is speech Financial systems are essential to commerce Financial systems are essential to commerce Commerce is the most regulated area Commerce is the most regulated area Take an active role in technical change, rather than trying to reform legal system; “write code, not laws” Take an active role in technical change, rather than trying to reform legal system; “write code, not laws”

5 Motivation for ecash Technically secure payment system, widely available, can limit free speech restrictions, both specific to commerce and in general Technically secure payment system, widely available, can limit free speech restrictions, both specific to commerce and in general System must be widely available to be worthwhile System must be widely available to be worthwhile Rather than fighting a long losing battle, a decisive victory for freedom Rather than fighting a long losing battle, a decisive victory for freedom Technically interesting problem; very interesting business problem Technically interesting problem; very interesting business problem

6 What do we mean by ecash? Two-way anonymity Two-way anonymity “Bearer” (with double-spending protection) “Bearer” (with double-spending protection) Inherently p2p Inherently p2p Strong cryptography Strong cryptography Fungible, divisible Fungible, divisible Fundamentally low transaction costs, automated Fundamentally low transaction costs, automated Action at a distance; network based Action at a distance; network based

7 Alternatives to ecash Existing banking systems Existing banking systems Credit cards Credit cards Non-cryptographic, centralized account- based systems Non-cryptographic, centralized account- based systems Cash (physical) Cash (physical) Living in a world of suck Living in a world of suck

8 History of Ecash David Chaum David Chaum Patents Patents Digicash Digicash Non-cryptographic electronic cash (gaming) Non-cryptographic electronic cash (gaming) Lots of startups, lots of strategies, all failed Lots of startups, lots of strategies, all failed Cypherpunks mailing list, etc. Cypherpunks mailing list, etc.

9 Applications Overview Simple user-user payments Simple user-user payments Retail purchasing (particularly information) Retail purchasing (particularly information) Gambling Gambling Offshore stock/bond instrument market Offshore stock/bond instrument market Task markets Task markets Micropayments Micropayments Agent-based computing Agent-based computing

10 Historical Efforts Digicash – focused on payments, closed Digicash – focused on payments, closed Various smartcard systems (Mondex, etc.) Various smartcard systems (Mondex, etc.) Card issuer supported systems Card issuer supported systems E-gold E-gold Closed non-ecash systems (paypal, etc.) Closed non-ecash systems (paypal, etc.) Startup Startup

11 Commercial and noncommercial margins Non-convertible online assets (everquest) Non-convertible online assets (everquest) Money within games Money within games Lots of demo code libraries (-lucre, etc.) which haven’t been deployed Lots of demo code libraries (-lucre, etc.) which haven’t been deployed

12 Reasons for failure Patents scare away investment Patents scare away investment Startup business model uncertain Startup business model uncertain High degree of risk in general High degree of risk in general Not really an ideal business model Not really an ideal business model Larger project than a small group can easily do Larger project than a small group can easily do Needs to be fairly developed before useful Needs to be fairly developed before useful Regulation and jurisdictional issues Regulation and jurisdictional issues

13 Model for success Solve small problems Solve small problems Open-source Open-source Open, distributed, but with a non-exclusive central core running Open, distributed, but with a non-exclusive central core running Separation of roles; technical challenges solved in technical way, business in marketplace Separation of roles; technical challenges solved in technical way, business in marketplace Don’t solve hard problems up front; lots of good work has been done Don’t solve hard problems up front; lots of good work has been done HavenCo as useful platform for deployment HavenCo as useful platform for deployment

14 OpenDBS Open Digital Bearer Settlement Open Digital Bearer Settlement Personal project for several years Personal project for several years One of the reasons I started HavenCo One of the reasons I started HavenCo Open-source, decentralized Open-source, decentralized Simply as an experiment; if successful, great Simply as an experiment; if successful, great Designed for ease of deployment and integration Designed for ease of deployment and integration

15 Technical architecture Protocol-agile Protocol-agile Servers on tamper-resistant hardware Servers on tamper-resistant hardware Instruments flexible Instruments flexible Designed for complete decentralization Designed for complete decentralization Open-source; signed code with reviews and guarantees of execution Open-source; signed code with reviews and guarantees of execution Good abstraction model Good abstraction model

16 Issuance model Issuers (create cash) Issuers (create cash) Users (spend/receive payments) Users (spend/receive payments) Markets (convert one kind of cash to others) Markets (convert one kind of cash to others) (also: trust agents holding assets, brokers, ratings agencies, wallet providers, financial consultants, bookies, etc.) (also: trust agents holding assets, brokers, ratings agencies, wallet providers, financial consultants, bookies, etc.)

17 Business architecture Anyone can run any kind of ecash business for free Anyone can run any kind of ecash business for free Natural monopolies exist, primarily in markets and some kinds of instruments Natural monopolies exist, primarily in markets and some kinds of instruments Automated market and display rendering encourage multiple currencies Automated market and display rendering encourage multiple currencies

18 Funding model Focused on minimizing costs; more money seems to encourage failure in this industry Focused on minimizing costs; more money seems to encourage failure in this industry Primarily out of pocket (mine) Primarily out of pocket (mine) Basically non-commercial Basically non-commercial Other companies can do specific sub- technologies Other companies can do specific sub- technologies

19 Customers and marketing plan Gaming clients are main anchor goal Gaming clients are main anchor goal Simple apps (user to user payments) Simple apps (user to user payments) Self-contained larger apps as good demos (mail service which uses ecash as anti-spam bounty) Self-contained larger apps as good demos (mail service which uses ecash as anti-spam bounty) Offshore stock/bond/etc. market is main long-term goal Offshore stock/bond/etc. market is main long-term goal

20 Regulations Even if legal now, can become illegal overnight Even if legal now, can become illegal overnight I’m focusing on the technology and technical security; it’s up to users to figure out legality I’m focusing on the technology and technical security; it’s up to users to figure out legality Lots of uses, some of which are probably totally legal; developed with good uses in mind Lots of uses, some of which are probably totally legal; developed with good uses in mind

21 Deployment Working back end (if lame) Working back end (if lame) Simple system for users later in the year Simple system for users later in the year Held up by other job responsibilities, but well along Held up by other job responsibilities, but well along

22 How the community can help Keep fighting legal/PR battle Keep fighting legal/PR battle Integrate ecash into existing applications Integrate ecash into existing applications Set up ecash-integrated services Set up ecash-integrated services Develop clients, test Develop clients, test Audit server code and tamper-resistant hardware Audit server code and tamper-resistant hardware Become an Issuer! Broker! Market! Become an Issuer! Broker! Market! Internship Internship

23 HavenCo Internship Program 8-12 weeks in Europe 8-12 weeks in Europe 5-9 weeks spent on-site working on projects; we may provide assistance in deployment 5-9 weeks spent on-site working on projects; we may provide assistance in deployment No real pay, but small stipend + expenses + colo No real pay, but small stipend + expenses + colo Starting small; may expand Starting small; may expand Subject: “Internship” Subject: “Internship”

24 Q&A Ecash questions Ecash questions HavenCo questions HavenCo questions Etc. Etc. (After talk, I’ll be in room 1551) (After talk, I’ll be in room 1551)


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