Is paper currency outdated?

In another thread it was asked if the new gold coins are worth hanging onto. I said no, and went into a rant about how all physical currency (coins and bills) is a holdover from the Roman Empire and has no future in the 21st century. I suggested that we ditch all the bills and coins entirely and use electronic funds tranfers (EFT’s) in every transaction including vending machines (person to person tranfers would have to done by check). That is, to buy a sandwich from a vending machine (or anywhere else) you would stick your credit/debit card in a slot, press a few buttons and out pops lunch. Assuming that new security measures are taken to thwart credit card fraud (e.g. requiring a finger print scan or a pin number for transactions in excess of $100), I think it would be a convenient and modern way of doing business. I realize that there would be some expenses involved in converting everything to an EFT system but there are expenses to maintaining the old paper system as well. The US mint costs tax payers billions per year (they are spending $44 million just to promote the new dollar coin, each of which, BTW, costs 12 cents to mint). Paper currency can be stolen by absolutely any idiot with a gun and sometimes people are killed for the money in their pockets. I’m not saying there won’t be risks involved with EFTs (i.e. credit card fraud, check fraud, wire fraud, computer errors wiping out your bank balance…) but we are already living with those risks right now. When was the last time someone was shot to death in an attempted wire fraud? How would an all EFT economy add to those risks for anyone except for the all cash people who don’t even have bank accounts (I’ve met a few in my life)? Just think of how difficult it will be for criminals to do business with no cash available. How could a street punk sell drugs, by check? What do you think are the pros and cons of a paperless economy?

A major concern is privacy. cash is untraceable.

Another point is that we are a long way from being able to use electronic transfers for everyday small stuff

and there’s inertia. People tend to stick with what they know.

Scientific American, Aug 92, carries an article called achieving electronic privacy that proposes a system of electronic cash, electronic signatures etc. Very interesting.

it proposes a system where electronic payments are untraceable.

Well, the first thing that comes to mind is that there are the people you mention, who don’t have checking accounts. How do they exist in an electronic funds world? Barter?

If you remember the old Max Headroom show, hard currency was replaced by credit “sticks”. Each person had a tube-like device and some sort of machine that allowed you to transfer “credits” to another person’s account. Check out Sony’s latest “memory stick” line of devices (digital cameras, etc). Pretty close.

Reminds me of a little side-story in some Heinlein SF story… The government bans cash and forbids anything but electronic cash in order to get rid of all black marketers. The Supreme Court rules that cash is legal.

Anyway, I’ll stick with paper money. No dollar coins for me. Whenever I get some of those Susan Bs or Sacajaweas, I give them back and ask if I can have American money instead. I’ve never had a paper dollar fall out of my pocket and drop down the crack of the couch where I can’t get it back.

This is a direct steal from 3001: the final odysee, but WTH. Imagine this: Every person has a small biochip (Chip based on C instead of Si, cheaper and better able to create complex, 3D patterns in a relatively small space. Look at DNA, essentially two long chains bound in a double-helix pattern. That small chain is carbon-based and can encode all the physical traits of a living being. Pretty good, eh? Imagine a dense cube where the structure itself can encode information in read-write format. Whole libraries encoded in carbon crystals. Immune to magnets. Very good technology to develop.) implanted in the tip of their right or left index finger. That chip serves as a kind of debit card, a credit card, a legal ID, etc. It would be the ultimate system of ID, even more important than a fingerprint. But privacy would still be maintained. Here’s how. Funds transfers would be encrypted as in the abovementioned Scientific American article (don’t have it around right now, but I did read it), and everything would be encrypted to some level just as a basic security measure. People might have a group of IDs, one for a chat room, one for a fantasy game, etc. Only the legal one can enter into contracts or own assets. However, a semi-ID can use the legal ID’s money to conduct business, as long as the legal ID gets the assets gained through that transaction. All this is, of course, based around computers. Computers will be to the 21st century what phones are to the 90s, even moreso.

The OP mentions that currency (paper & coins) are a hold back from the Roman Empire. Well I’m sure that the “Golden Rule” (those with the gold rule) is also a hold back from the Roman Empire and this is exactly why currency that you can actually hold will never be replaced. Do you really think that some rich old fart would rather have some sort of “electronic credits” or cold hard cash? Do you think politicians (kickbacks, bribes, soft money) will let this happen? In my opinion, never.

SarumanRex, I’m a big believer in electronic currency as well. This isn’t some pipe dream, it’s been in extensive use in Europe for many years in phone cards. They’ve tried a few trial runs in the U.S. (Notably at the Olympics in Atlanta in 96), but it just hasn’t caught on here. Really because of sailor’s point, i.e. inertia.

sailor, with today’s electronic cash technology, it is just as non-tracable as regular cash. As I say, it’s pretty extensively used by phone systems in Europe.

For those that follow the high-tech futures world, there’s a big wave coming called wireless. Tons and tons of development is going on right now on next generation cell phones, PDAs and pagers which will have extensive Internet capabilities. There are many who believe that these new devices will also become electronic wallets in the very short future.

I thought this thread was about alternate types of hard currency.

In the last decade in Asutralia, all of our paper notes have either been replaced by coins ($1 and $2), or by high-tech plastic notes ($5, $10, $20, $50, $100) which are almost impossible to forge. The Australian Mint says that both durability and security were the major reasons for the changes. Coins were accepted readily, but there were a couple of minor problems with the plastic notes, as well as some minor reluctance from the public, at first. But now, plastic notes have been completed accepted - for once you trulty can launder your money with no detrimental effects!

[hijack] DVousMeans mentions the new plastic Australian banknotes, which are indeed rather good and can be washed without harm. They do look a litle different from the old ones though.

A few years ago an Australian arrived at Heathrow and went to change some $A for Sterling. The assistant looked puzzled at the strange plastic notes. The man explained that they were new, but the clerk was unconvinced. The person behind him interupted, saying that he could help.

The notes were genuine, and it was his signature on the banknote. It was the Governor of the Reserve Bank (ie our Greenspan). [/hijack]


billiehunt, as far as I know, phone cards are just as available in the US as they are in Europe and I do not think you can call them “digital cash” in any sense of the word. They are basically an account with the phone co who keeps track of how much is left on the account. (And you still need cash to buy them)

Supposing you are thinking of a system where you carry a card that just says how much it has and is deducted by the vendor there’s no way it would work as digital cash. it is too easy to counterfeit and/or it is not anonimous. If the card is not identified when it is charged and discharged, the system is unworkable. If it is identified, it is traceable. On top of that it is way more complicated than pure cash

The answer is not so easy. It is studied in that Scientific American article where it develops the concept of “blind signatures” which solves the problem (almost) and is technically very involved. I have posted a copy of the article here in tif format. If anyone can do an OCR for me I would gladly appreciate it.

I believe as of today there is no simple electronic alternative that gives you the anonimity and the security against forgery of cash.

sailor wrote

US and Eurpoean phone cards are two different beasts. The US ones are as you describe: They contain a serial number that matches an account in the phone company computer system.

European smartcards are totally different. They contain a sealed chip that contains the electronic money. Physically opening them destroys the content. They use a cryptographic technique to ensure that money can’t be “created” in them. They have been in wide use for at least 5 years.

These are anonymous, and solve all the problems you describe.

By the way, my background is networking and security, and I have several patents in the area (of networking and security, not electronic cash specifically). I’m very familiar with modern day cryptographic techniques, if you’d like a description of how these things work.

Is this the same article, sailor?:
Achieving Electronic Privacy
The author is David Chaum of Digi-Cash.

Yes Gilligan, thanks, that is the same article although missing the illustrations which are quite helpful in understanding the concept.

billehunt, OK, I was not aware that European cards are different in the way they work and I do not know enough about them to judge them. I would need to understand the basics of how they work to know if they are indeed anonimous and safe. can they be recharged? If you have some description of how they work I would be interested.

If they cannot be recharged the point is moot because in a way, they are just a different form of physical money except more expensive and inconvenient. Now that you mention this I seem to remember that they have some kind of memory that is burnt out as you use the money and cannot be regenerated. Is this so?

The point is not whether they are safe for $20 transactions but whether they are safe for $1,000,000 transactions.

To be true electronic money you need a card that can be recharged and cannot be identified by the entity recharging it or the entity discharging it. If they can identify it somehow then they can collude to identify you. If they cannot identify the card then all the information is in the card and i think it would be relatively easy for someone with knowledge to recharge it.

Something may be safe enough for small transactions like phone calls but not safe enough for bigger things.

Also, if paper money is to disappear we all need to have a way of transferring money. Suppose I meet you on the street and want to return the dollar I owe you. How can we transfer the dollar from my card to yours?

As I say, I do not have enough information on how they work and if you do, I would be very interested in learning more about this subject. In the meanwhile I remain skeptical and would prefer to continue to use paper money :slight_smile:

Many colleges already come close to a cashless economy. At both Montana State and Villanova, and I would imagine many other schools, the student ID’s are tied to accounts that can be used for purchases at any on-campus location: Dining halls, food courts, bookstore, etc. Villanova also had cash chips in the cards similar to what billehunt descibed for use in vending machines and laundry rooms, although they often malfunctioned. They could be recharged, but I don’t know if the technology involved was confidential.

I think the big issue is person-to-person transactions. Do you really want to write checks for your Saturday evening penny-ante poker games with your buddies?

Without more information it is imposible to have a formed opinion but i would guess:

If when the card is charged and debited both parties (card and other party)identify themselves to each other, then there is no anonimity. The bank and the merchant can easily collude to identify you.

Now suppose the bank and card do not identify each other. The bank just puts cash into a card it does not identify. How can this be done so it cannot be forged? I cannot see how. Maybe it is not worth it if all you can get is the laundry done at your dorm. but imagine if you could buy cars and houses. If you find out the way to do this you can sell cards worth any amount you want at half price.

The article mentioned solves the problem only up to a certain point and the system is extremely complicated. Not to mention, as we say, that it makes it very inconvenient for very small amounts.

Would the corner beggar have to get a card reading device? :slight_smile:

And how about the “float”? Can you imagine having to have the money actually in your account to cover that bad check you wrote for the weekend?

Not that the banks use the float :rolleyes:

One of the benefits of the cashless system I envisioned is that you always have access to all of your money (except money markets, savings accounts, mutual funds…) and all of your credit. It would be easy to have your Visa card cover your bank overdrafts (assuming you have some available credit). In the system that I imagined all of your cash accounts would be tied together such that your paycheck is direct deposited into your main cash account (which everyone would have to have) and then all your bills would be paid out of this account automatically. The phone company or the Visa company, for example, would send you a monthly statement and you would have 20 days to challenge the charges before the bank went ahead and paid the bill. Some companies, such as Cox cable, already provide this service. To me, this system seemed infinitely superior to the one we have. The only people who had to use their debit card (which everyone would be issued) are those who have no credit, everyone else could just charge everything, review the charges at the end of the month for anything fishy, and be secure in the knowledge that their money is safe.
After reading all the posts I have concluded that this idea is not going to come to fruition any time soon. Not because of security issues, technology issues, or the expense of implementation but because of people issues. A lot of honest people who have nothing to hide don’t trust banks, credit reporting agencies, and the government to properly protect the vast information on personal spending this system would provide. They have very good reasons to be concerned. Many other people, powerful people like politicians and moguls, will oppose this idea because they have a plenty to hide. Whether it be criminal activity (drug traficing, drug using, bribery, embezlement, frequenting prostitutes, funding a terrorist organization, tax evasion, organized crime activities…) or just embarassing stuff like buying porno, these folks will beat this idea into the ground. There won’t be any easy way to distinguish between the legitimate privacy advocates and all the criminals.

The idea for a secure “blind” signature using public key encryption (PKE) was very interesting but is so complicated that no one who isn’t a cryptologist can understand it. If people can’t understand something they are going to be very reluctant about trusting it with all their money. Thanks for all the input but I suspect that this is a dead horse.

Yup, cash is going to be around for a long time to come for the reasons mentioned: convenience and privacy.

Think about it. An electronic system has to be a system where only information is exchanged. The security has to be in the protocol, nothing physical. To combine that with anonimity is close to imposible.

In other words, you have to give someone information (and only information) that will allow him to retrieve $1 from any bank without telling him who you are or where you got the dollar. And it has to be forgery proof. It ain’t easy.

Once you have that worked out, you have to deal with the convenience part. Physical money will be around for a long time.

Then there’s the matter of power. With cash, you can buy food from the hotdog vendor or from the menacing looking man selling illegal things out of his trunk.

If you get a form factor like the one on the sci-fi series Trex (sp?), which is like a floppy on steroids, and has it’s own power source, then you overcome that obstacle. This device (we’ll call it a money pod) would have to:

  1. Have non-volatile memory
  2. Withstand a fair amount of physical abuse
  3. Use biometrics to operate ONLY for the user
  4. Make withdrawals from the bank WIRELESSLY, and securely
  5. Create non-repudiable transaction receipts (one for each party) that are only readable by the parties themselves
  6. Have some means for transactions that involve more than two parties
  7. Either have a UI in itself, or plug easily into another device to provide the UI

Also, imagine this scenario: Man with money pod goes to the store, and buys an expensive ring. Instead of obtaining a paper receipt, he figures the transaction record on the pod is sufficient. He places the ring in his pocket, price tag still on the box the ring came in. Store security mistakenly thinks he’s shoplifted it, and demands proof of purchase. The man uses some kind of UI to find the transaction for the ring, and mark it to make the summary information visible to the cop. Only the summary information (who now owns the ring), only that one transaction, only to that cop, only that one time. Once the man has selected the correct item, he plugs his pod into the store pod reader, the biometrics confirm that the pod is his, and the record confirms that the ring is his as well.

If you think through all the stuff above, there’s a LOT of technology that has to be worked out, and made ubiquitous before we’re all walking around with money pods. All the technologies are out there (wireless PDAs, PKI, etc.), in one form or another, it just has to be integrated, made robust and generally foolproof, and most importantly, made ubiquitous.