FM Interviews
First Monday


FM Interviews: David Chaum

Dr. David Chaum is the founder and Chief Technology Officer of DigiCash, a company that has pioneered electronic cash innovations. David received his Ph.D. in Computer Science, with a minor in Business Administration, from the University of California at Berkeley and taught at New York University Graduate School of Business Administration and at the University of California at Santa Barbara.

In 1990, he founded DigiCash and simultaneously built up a cryptography research group at the Center for Mathematics and Computer Science (CWI) in Amsterdam. In 1993, he left CWI to devote his full resources to being CEO of DigiCash, which had grown since its beginnings in 1990 with 12 employees to a staff of 25.

This interview was conducted and written by Jens-Ingo Brodesser, of the Moving Art Studio in Brussels. It will be part of a book in press entitled New Forms for Financial Exchange (ISBN 90-76426-01-5), to be published by Frederic Jadoul and Jens-Ingo Brodesser at Moving Art Studio. The Moving Art Studio is an independent laboratory for multilateral communication.

David Chaum (DC): Good morning, David Chaum.

First Monday (FM): Hello, this is Jens-Ingo Brodesser from Moving Art Studio in Brussels. Last year in June [1998] we held an independent meeting on the form and affects of electronic money. During this meeting the Digicash's E-cash was described as being the most suitable form of electronic cash - being both confidential and secure ...

DC: Privacy protection, that's right.

FM: We've recently been hearing that Digicash is bankrupt, is this true?

DC: Yes, unfortunately that's true. There are different kinds of bankruptcy. This one is a Chapter 11 Reorganization here in California. Basically the assets are going to be sold. Someone will probably buy them and carry on with the product. That seems to be what's happening.

FM: How did this bankruptcy happen?

DC: [laughs] I can't really comment on that. You can look at our Web site and draw your own conclusions.

FM: The system has been licensed to huge interest groups like Deutsche Bank and Mark Twain Bank.

DC: Yes, I know. [laughs] The system is still alive in Switzerland (Swiss Netpay from Credit Suisse) and Australia. If you look at the Digicash Web site you can see all the places where it's operational. You are just wondering how Digicash can be bankrupt while all these people are using it.

FM: Now that the Digicash technology is no longer available to people wanting to make secure and anonymous online transactions, the only things remaining are insecure and unconfidential systems such as VISA cards.

DC: At the moment, but I think that things will change.

FM: Do you think that there will be again an online payment system like E-cash - a system that doesn't keep user profiles? There are some smart card systems like the Geldkarte in Germany or La Carte Proton in Belgium, but these route every transaction over hidden shadow accounts where the users' expenses are tracked.

DC: They do? - I didn't know. Digicash is up for sale and I think whomever buys it will continue to operate it.

FM: Here in Belgium for instance there is Proton, but the problem with this kind of payment system is that everything you buy with it is recorded.

DC: And it's also that people assume that this is not taking place. The way these products are often promoted to the public is that they are essentially like cash.

FM: Yes. Also often the banks don't give any choice to the customers. Here in Europe we have the EC-card which now has an EEPROM printed on it. You are ready to use this system and think that it is a kind of cash system but actually it's a credit card.

DC: Right.

FM: So you are going to sell the patents and technology on which Digicash is based to someone who will try to get it back into the market?

DC: That's correct.

FM: There's been no hostility towards Digicash from the national banks fearing it will affect their monopoly? At first we thought that there was a strong lobby that caused the Digicash project to fail.

DC: No, but one can never be sure about what really is going on in the banking world. We haven't experienced any overt problems.

FM: The credit card companies also represent a strong lobby in this market. Did they see your system as a threat?

DC: Hmm - [long pause] well - [long pause] - It differs. We tried to ally ourselves with some of the credit card companies. Obviously there are all kind of players in the field which can see us either as a threat or an opportunity. [laughs] It just depends - and they could also view it as too early to worry about.

FM: Do you think then that the Digicash technology entered the market too early - that people aren't yet used to this kind of technology?

DC: There were things like that. Electronic commerce was hardly happening at the consumer level when Digicash was trying to gain momentum. The ease with which things could be integrated into the Web has improved a lot since we were most active. The technological infrastructure was a little less optimal then for us than it is today - as far as making it easy for consumers and merchants to use it. I expect that it will get even easier.

FM: Are you thinking about SSL?

DC: Well, a whole lot of things - the way you can maintain and update software over the net ... just a whole lot of problems that we ran into. When we started people were using all kinds of imperfect ways to get access to the net. There was a lot more diversity and uncertainty at that point. It was harder for the end user to make things work well easily.

FM: Will there be an anonymous and secure electronic cash system soon, or is there a general trend towards existing systems which just carry the credit card principle on the net? As I said before, there is often a strong interest in tracking the users' behaviour, knowing what they are buying, where they are buying it and being also able to connect this information to targeted advertisement.

DC: I think you have both kind of forces. The thing about the interest in having consumer controlled privacy protection is that most people (most consumers) aren't that aware of it, and it's not really a viable option today, but I believe that it could dominate if it is both made readily available in an easy to use manner and awareness of it is created. Because there are also a lot of problems with abuses on the net, you see what I am saying?

The sacred distinction between money and just payment systems is fading.

FM: In the Digicash system there are electronic coins issued. In the past this has been, to a very large extent, a monopoly of the State and the national banks.

DC: That's true, but look at all kinds of other payment systems. The sacred distinction between money and just payment systems is fading. There is online electronic payment in general and it is hard to say whether or not it is really money. I think this is a non-issue. We haven't received any problems about that. Just look at any kind of technical system of this general online nature. Either, like the smart card, or whatever, it's electronic money - the card is the money or the data is the money, or you could look at this as a bill paying system where actually the money is stored in the banking system. It's just a matter of how you want to interpret - for the consumer it's often nice to tell them that their card is the money - has the money on it, but for the bank regulators you can say, well, the money is in this pool account while these balance numbers are stored on the card. It's more a matter of how you want to interpret the technical system than there really being a clear distinction between an electronic form of money itself compared to just an electronic banking system.

FM: And the banks like Deutsche Bank and Mark Twain Bank - did they stop their Digicash services or are they still available?

DC: If you look at our Web site you will see that several services are still alive, those particulars ones are not. Credit Suisse with Swiss Netpay is and in Australia it's alive and I think that Bank Austria is too, but they are not doing very much.

FM: Are these services offered just for local customers or can people from all over the world apply for an E-cash Account?

DC: The Swiss one is more for Credit Suisse customers but I believe that the Australian one does allow you to pay with credit cards. At least it was supposed to do so, I am not sure if it does at the moment. But most of the places you can buy stuff are in Australia so it's not that interesting outside of Australia.

FM: Why did Deutsche Bank stop their Digicash services?

DC: Actually I don't know.

FM: You didn't get any explanation?

DC: As I am only loosely affiliated with Digicash at this moment I am sure that there are more people here at Digicash who know all the details - I don't personally know.

FM: What are your plans for now? What are you working on?

DC: I'm working on some new stuff that's as much as I can say on that at this moment.

Digital money will replace paper money eventually. Digital cash is actually better than paper money in the physical world because of the way it solves the privacy problem and at the same time attenuates the possibility for criminal use.

FM: How do you perceive the future of digital money?

DC: I think that it will replace paper money eventually and will be a dominant form of money. Digital cash as I've developed it is actually better than paper money in the physical world because of the way it solves the privacy problem and at the same time attenuates the possibility for criminal use. It also has the advantage of being visible in the physical world as well as in cyberspace. So, that gives me confidence that it will replace paper money at some point.

FM: Thank you very much.

DC: Well thanks. I wish I could be more detailed in my answers, but right now things are in a state where I can't be. I hope you appreciate that. Perhaps we will have a chance to discuss things in more detail, especially when things get rolling again.


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