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+++ S P E C I A L R E P O R T +++
"Paying Digitally Without Credit Cards "
"Private Digital Currencies" 

by Elwyn Jenkins 
July 14, 2000

Moderator's Comments

Hi All:

On Thursday, I had the pleasure of having lunch with Elwyn Jenkins, who is the leading authority on digital currencies. I was so impressed, that I had to publish two of his articles. It is projected that digital currency will be the primary method of payment by 2004. So this is a key issue for all of us.

A short blurb from his bio:
"Dr Elwyn Jenkins is a business technologist who translates academic and futurist concepts into commercial reality today. His interests and capabilities are drawn from an understanding of futurist academic concepts grounded in delivery of those concepts in leading edge technology. Dr. Jenkins specializes in developing business cases, technological specification and establishing, enthusing and leading teams of people who will effect those plans to make them into real business systems. "

George Matyjewicz, C.M.O.
Moderator, E-Tailer's Digest


"Paying Digitally Without Credit Cards" 
by Elwyn Jenkins 

How many people feel that the Credit Card companies are ripping them off? How many people would like to be rid of credit cards? Many, many of you! I know because you have told me in an online survey. Very soon you can be rid of that ugly credit card debt and the ever so costly payment system supplied by credit card companies! The Internet changes everything!

Cardless Payments

How about this? Rock up to Starbucks, order a coffee and when asked for your money
you say, " I'd like to pay with PayPal". You then are given an appliance into which you
enter your e-mail address and password for PayPal. Instantly it is paid and at little cost
to you.

Now how about this? Spend an hour in Home Depot sorting out all those items that the Minister of the Interior has listed so neatly. Up to the Payment Counter and "oh no" forgot to bring Credit Cards. How much is this? $250 or so, no trouble I will pay with e-Gold. Select payment method "E-Gold", enter amount, "$250.34" then enter account number and passphrase. Presto it is instantly paid for and you walk out having accomplished something you had promised to do since you can't remember when!!

Look people, no cards!! This is real. The Internet is bringing the potential for cardless payments in a store using Digitized Payment systems.

How many are there and what do they offer?

It is quite difficult to keep track of all the payment systems erupting as the Internet evolution charges on but here goes a list of ones you should check out:

Direct Payment from your bank account (cardless and could be in stores as well as used on Internet).

Achex a new cardless system that is not really running yet. It promises to allow you to make payments by entering a username and password and paying straight from your own banking account. Great idea, you do not have to keep a balance in a Digitized Currency like PayPal or e-Gold. Look now you can register today! 

eMoneyMail makes it possible to make a payment from your own account to any other person of whom you know their e-mail address. Possible to put this on a terminal in a store. This is not a Digital Currency; it is like writing a digital check. See also Achex. 

Tradesafe a way to pay for things online using a credit card for verification of who you are (not as payment) and a bank account routing number. 

Barter Payments (Internet only)

BarterTrust this is something you do online only and will have little impact on how you buy in a store. 

BigVine.com is the barter thing again and not likely to be a big application in physical stores. 

Ubarter exactly what it says: you barter. Unlikely to be used except on its own site. 

Digitized Currencies to Spend & Loyalty Programs (possible non-Internet applications)

Beenz now you can spend beenz using a beenz Mastercard. Pity about the fact that you need a card. What about using your username and password in a store to buy? It is possible and most likely to happen. 

Cybergold a rewards program that gives you money. I do not think you will be able to spend this widely. 

Flooz this Digitized value is given away in Gift Certificate form. You can spend this in many e-commerce sites. Not in a store yet. 

Digitized currencies with wide application (likely to form basis of wider currency and payment systems both online and elsewhere).

e-Gold perhaps one of the best thought out Digitized Currencies on the Internet. You can spend your E-Gold through your telephone right now using a web browser, and soon there will be hundreds of physical stores where you can go cardless!! 

Paypal / X.com a great payment system and Digital Currency online. Used at most auction sites and can also be used by beaming from Palm Pilot to Palm. Also to be available on telephones soon. 

PayPlace a PayPal look alike without the million or so users. Not sure about the backing of this Currency. It is definitely tied to the USD and is not anything different to use than PayPal. Disincentive is that very few other people use PayPlace and therefore not used much. 

Teen Budgeting and Spending Accounts (Online only).

Cybermoola.com this is more a budgeting type program that focuses young people's attention on particular sites where you can spend your money. 

DoughNET.com - Ditto. 

Icanbuy another concept where you budget your money. Specially interest to kids who cannot use a credit card because they do not have one. 

RocketCash a great system for kids to buy stuff. Allows kids to be cardless on the Internet. The complex relationship it has with credit cards makes it unlikely to be used in physical stores. 

Convenient way to pay for information online

Pointclick a micro payment method to pay for online information. Unlikely to be used widely apart from online information. 

Escrow Services (Online application most obvious).

Iescrow this is where you still use your credit card but have some security in knowing you will get your money/goods as the payment is escrowed until goods have been received and the purchaser is happy. 

Escrow.com another escrow service where you use your current payment methods such as credit card, etc. 

Internet Clearing Corporation an escrow service tied to use of credit card payments. 

Itrustyou.com an escrow service in six languages for International trade person to person. Payment is made by credit card and received by wire or check. 

What does this mean practically?

The most versatile Digital Currencies and Payment Services are E-Gold and PayPal. E-Gold is perhaps a sounder currency to purchase and hold in the long term whereas PayPal is the most useful for small item purchases on the Internet.

On occasion I have used a direct debit from my checking account. When it gets going Achex is likely to be the most useful. Simply, Achex will be the way the cardless and those who wish to be cardless can pay for everything everywhere.

If you have a need for an escrow service, care to barter or need another of the applications they can be useful. But most of these other services are for small niche groups who need or want such a service.

The Future of Digital Currencies and Payments

We have not seen, yet, the ideal Currency and Payment solution mix that we will see in the next year or two. All this is still very much in its infancy. Stay tuned.

Copyright Elwyn Jenkins


Private Digital Currencies 
by Elwyn Jenkins 

Will these currencies be replaced? 

Do we need folding stuff in our physical wallets? Or can we eventually beam money from Palm to Palm and never have to have the green stuff in our pockets?

These and other questions surrounding the topic of Digital Currencies are now becoming more and more interesting to discuss. With the failure of DigiCash's eCash, CyberCash's CyberCoin, and other digital currencies many thought they had seen the last of private digital currencies. Those in the know, however, have been watching the private digital currency "e-Gold" (www.e-gold.com) and have been waiting to see when they get going and really make something of the Digital Currency World.

Instead of e-Gold taking center stage this year, a new digital currency burst onto the scene: PayPal (www.paypal.com). With more than 1.5 million customers, PayPal has shown that a Digital Currency can actually be useful. Not that e-Gold was not useful, but that PayPal added the pizzaz of a novel method of payment added to its Digitization of Value. With the advent of PayPal the world of payments will never be the same. PayPal demonstrated that it was possible to e-mail, beam and phone value in its digitized form from consumer-to-consumer.

PayPay has also not been entirely forthcoming over what is meant by 'beaming' value via email. PayPal does not transmit value as advertised. In point of fact 'beaming' is no more than email notification that some value is in escrow, awaiting the recipient's to claim it.

Just like any other currency, holding some of the stuff does not bear it interest. The stuff can be used for immediate settlement: just like if I paid you five folding ones out of my pocket.

Can these private digital currencies survive? Will they form a part of our future? The last question can be answered more easily. Yes, they will form part of our future. Will PayPal survive, and will e-Gold survive beyond next year? The answers are perhaps not yet clear, although by the looks of things they have the potential to survive.


PayPal is a Digital Currency backed by United States Dollars. A Mutual Fund of USD is maintained by X.com the parent body to support the digitized value. To be absolutely explicit, PayPal Dollars (let's use the shortening PPD to be consistent with other currency acronyms USD, AUD, GBP, and so on) are not USD. What you keep in your PayPal account is a digital currency that is guaranteed by X.com a private business to be maintained in one-to-one parity with USD. That is, when you transfer value into a PayPal account you get one PPD per USD. When you transfer value out of the account you get one USD for each PPD.

Is there any advantage in owning this currency (PPD) than say owning USD? If the currency is always in parity with USD then I can own either and my value is much the same. That is, the $200 in my pocket and the $200 in my PayPal account are equivalent and will likely remain that way as long as X.com does not go bankrupt.

What is the benefit of owning PPD? Really it is another form of convenience. The folding stuff in my wallet is convenient because I can pay anyone I come into contact physically an amount of money, most everyone here in USA takes the green folding stuff. BUT when I surf the Internet, I cannot use the green folding stuff. It is impossible to move it along the telephone wire to Online.Store.Amazon.com. This is where the Digital Stuff a la PayPal becomes useful!

Will PayPal survive? Just going on its current business proposition, it is difficult to know how well it can survive. Its only business proposition as of now is making money on the underlying asset in a Mutual Fund. There are no fees for entering the system, no fees for exiting the system. Moneychangers cannot list them and charge a fee; when I buy Hong Kong Dollars I am charged a fee of 2.5% for doing so. When I buy PPD I get them free of exchange fees. Exchange fees give the Fed good chump change to keep the green stuff minted. PayPal does not get anything for minting the stuff. Oh, you say, but PPD is digital it doesn't cost anything to mint that stuff. Sorry, it costs, but not as much as minting the green stuff. Equipment, Internet connection, people and offices all cost money.

Someone, somewhere needs to pay for minting PPD. Until we see an answer to that, we must be unsure of whether PPD will still be a currency in which you can receive your next payment from me. In short, PayPal is a business in the making. Until we see how it shapes up as a business, we must have doubts on its sustainability. Even if it does have millions of users, unless someone pays for the minting process it cannot survive.


Why do I speak of these guys in the same article as PayPal? While they have not gained the notice of more than a million or more customers as have PayPal, e-Gold has got it together! They have sustainability worked out and they will be profitable by the end of 2000, while the rest of the dot.com media darlings continue to bleed red ink at prodigious rates.

Smart move one: choose a value other than USD to back the Digital Currency. This is an advantage as people have a reason to hold the stuff -- hedge your bets on holding USD parity stuff with holding Gold parity stuff. E-Gold is a store of value that has a potentially different future regulating its worth into the future.

Smart move two: create a network of merchants who will make money by selling Digital Stuff. We all know that networks are the key to the future of business. Kevin Kelly has demonstrated that for us.

Smart move three: separate the exchange functions (outsourced to Market Makers) from the currency functions.

Smart move four: mind the bottom line, and focus on profit rather than fame.

Smart move five: make all the holders of the stuff pay for minting the stuff and the costs of operating the digital currency. Each holder is charged 1% per annum for holding the stuff.

Smart move six: share the wealth, but moving away from the retail market whenever competitors begin to serve specific niches more adroitly, and migrating toward a role as wholesaler and market maker of last resort.

Smart move seven: strike where the other guy ain't. PayPal, E-MoneyMail, etc. are hemmed in by national borders. Currently, each is US-only, and it is rumored that they have plans to clone themselves in Europe and Japan. E-Gold, on the other hand, has moved across borders since Day One, and is currently developing markets wherever there are Internet connections or web-enabled mobile phones. By the time PayPal reaches China, India, and Latin America, e-gold will have been there a long, long time.

Sustainable? Yes the model is sustainable, but will it catch on? There is a business there for thousands of people to be involved (different to the model of PayPal). There should be no doubt in anyone's mind that e-Gold is built on a sustainable model. What we now need to see is whether these guys can get the marketing right to sell their service to people who matter.

Yes, there is a future for Digital Money. But how will it evolve and what will be possible in the next few months? Stay tuned.

Copyright Elwyn Jenkins
About the author: Dr Elwyn Jenkins is a business technologist who translates academic and futurist concepts into commercial reality today. His interests and capabilities are drawn from an understanding of futurist academic concepts grounded in delivery of those concepts in leading edge technology. Dr. Jenkins specializes in developing business cases, technological specification and establishing, enthusing and leading teams of people who will effect those plans to make them into real business systems. 


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