Impressionistic Transcript by Cory Doctorow Future of Money Summit Plenary Panel 10/28/03: Decentralized Economic Systems and Monetary Evolution: This group of emergent thinkers will address the shape that new monetary systems will take, as the result of the application of decentralization. They will focus on how the global network economy and decentralized information environment will impact global monetary systems. Moderator: Greg Berry Speakers: Susan Landry is a senior Gartner analyst who does financial stuff. Ron Rivest is an MIT Comp Sci prof at MIT EE and works in crypto/infosec. He founded RSA and invented RSA public-key crypto. He founded Peppercoin, a micropayment co. Won the Turing Prize. Gideon Samid is prez of Clearbit, an Israeli cryto guy. He's an advocate of equivocation-prone cryptosystems. Reid Hoffman is a founding teammember from PayPal, now CEO of LinkedIn. Did the govt/banking/infrastructure work for PayPal. Used to work for Apple, Fujitsu, -- Greg Berry: Info and money are inextricably linked. Moore's Law, Metcalfe's Law and Hock's CRUSTI all effect money. Money is to people like water is to fish. We don't question it, it's all around,a nd it drives nearly all of our decisions. Given changes in info, what is worthy of improving in money? -- Susan Landry: How will infosci changes change money: it's all about centralization v. decentralization/aggregation v disaggregation. Tech enables disaggregation. It breaks monolithic infrastructure into smaller, mix-and-match pieces. The implications are beginning to be seen in money. Take house-hunting: you start by shopping for a home, figuring out how big your down payment is, how much mortgage you qualify for, think about insurance, etc. They're all parts of home-buying. They used to be undertaken separately, at banks, insurers, etc. The distribution system was monolithic from the provider's perspective. Now they can be broken down and recombined around the customer, so Century 21 can aggregate everything around a customer. Redefines centralization. What was central used to be in the eyes of provider of financial instruments; now it's around customers. Banks have swallowed each other in M&A mania, turning into vertically integrated orgs. We're hypocrites to consider the Future of Money without examining changes to biz processes. Bankers are myopic -- they examine payments but not the processes that invent them. What's the gestalt of money and payment. -- Ron RIvest: We have two kinds of money: those based on gold atoms and those based on bits. If you try to make bit-based systems work like gold-based systems, it won't work. We can't ship gold atoms over the Internet, so we need to use bit-based systems. There's a naive belief in the Internet yielding decentralized payment systems, but payment systems require centralized points. What will be decentralized will be players -- phones, PDAs -- but the accounts will remain centralized. We need crypto: biometries can authenticate you, but strong crypto will secure your instructions. What happen to anonymity if you need to continually identify yourself? Have we lost anonymity? Yes. Even though we can use ephemeral identities, etc, the policy domain insists on eliminating money-laundering through eliminating anonymity. The courts are going to have to hash out the difference between anonymous speech and anonymous spending. Moore's Law says that crypto is free now. -- Gideon Samid: Money is like shit: it's no good unless you spread it around -- Francis Bacon If Bill Gates had all the money, it would be no good to him -- no one would be spending dollars and they'd become obsolete. Money is only good when it's spread, when people can transact and express preference through money. The net allows strangers to interact, to exchange money and services. That's what PayPal enables. Today, plastic money is just a pointer to records in a database. Tomorrow, plastic will contain cryptographic expressions that embody money. You'll be able to email those bits and it will ass though you had sent money. We're moving from gold to bits. Money relies more and more on "guaranteed" crypto. But if -- for some reason -- there is an error in computation, we could have catastrophes in which banks go tits up. The difference between yesterday and today's bank robbers is that the new robber can bring down an entire bank at once, rather than attacking it one branch at a time. That's the risk that the ability to transact with strangers gives rise to. -- Reid Hoffman: There's a re-definition of what's centralized/decentralized. We look at currency like we look at platforms. We want one or very few. That's why PayPal used dollars, not Beenz or Flooz, etc. We need one or two currencies (Euros, dollars, etc) to ease transaction overheads. The structure of tomorrow's money is accounting systems, not gold. WRT crypto-based, non-pointer-based monetary systems: What we found at PayPal is that people care a lot about convenience and the feeling of security, but sell their privacy very cheaply. People want fast and safe transactions, but they don't worry about their privacy. Mobile phone companies have become billing systems. Payment infrastructure is being integrated into software that you d/l to your computer. The info is more portable: your credit-record is more accessible, it can be used to quickly get a credit-line, found a reputation system, etc. As this is integrated into IT systems, we'll get a wealth of apps, build on a centralized server. How do you make the convenience sufficient to drive new market apps? PayPal was successful by enabling new merchants -- lower barrier to entry than getting a Mastercard acct. It's a P2P system in that it allows individuals to accept payments. We have a lot of IP in the antifraud systems that make that happens. The centralized system allows for the antifraud systems, which allows for the very fast creation of merchant accts. -- Greg: Gartner is decentralized, its people spread out over the world, but its info systems are centralized. -- Susan: Tech and infrastructure makes collaboration possible, but there's something else. Practices and standards -- the way you do business, either as co-workers or an ad-hoc -- are important. Tech enables the formation of groups, which have governance and interaction. [?? Can't figure out her point -- Ed] -- Greg: Is there a change in social systems driving monetary changes? -- Gideon: It's the other way around. Changes in the convenience of payment drives social changes. Take charity: lots of people won't give money to big charities for fear of the admin overheads in running a big org. New tech allows people to say, "I want to send money directly to the person who will use it." (Ed: This is pretty simplistic. Sending $0.19/day to a child in Africa won't feed him; a relief agency that aggregates lots of daily $0.19s will make the $0.19 go far) -- Reid: There's a lot of Digital ID work today which will influence payment systems. Today, payment systems have to spend a lot of effort resolving identity; if there was an identity platform it would make building lightweight financial systems easier. Payment is more than money-for-goods: it's accountability, etc. -- Greg: How is social software applying to monetary systems? -- Reid: In the past six months, people have gotten interested in sixdegrees-like apps, like LinkedIn. EBay is enabled by security -- people are willing to use it because it's fast and safe. More identity and more reputation will enable more marketplaces, especially in services (Ed: viz Google Answers) -- Gideon: To make the new marketplace complete, we need a cash equivalent. The ability to transact anonymously. This clashes with the war on terror, but it's necessary. -- Susan: Banks are intermediaries that help reduce buyer/seller risk while transactions are in play. Any non-cash payment has to have someone who assesses the ability of parties to pay and manage liability. When this stuff is happening with no latency in an IT-based system, the reliability of promise assessment is greatly improved (the immediacy reduces the predictive event-horizon). -- Ron: We'll automate like crazy, which will drive down margins but increase volume, for steady revenues. Agents: we'll see more of them. AI isn't there yet -- you can't let an algorithm buy a present for your wife, but you can use them to execute complex financial transactions. Trust-algorithms are the next big crypto thing. -- Susan: The law will want to know if digital IDs will hold up in court. In the US, the progress has been very slow (Check 21 Act). -- Gideon: Legislators only legislate in sensational situations. These aren't sensational issues. The courts will make the law as a result of messy cases. -- Reid: Once money is overseas, it's very hard to follow. Every border that a transaction crosses adds $100K to the break-even point for investigation. There's going to be a lot of work in peering/traceability across borders. -- Ron: Digital signatures are pretty settled. -- Reid: We spent months trying to add the un-banked to PayPal. It's hard. -- Gideon: Teenagers don't have bank-accounts. The credit-card companies are trying to reach out to them via anonymous cards, but the PATRIOT Act killed it. -- Susan: 13-15% of US adults don't have bank accts. Why do some choose to stay off the books? Immigration, trust, ethics... -- Reid: The systems of tomorrow will be traceable and taxed. We tax income rather than wealth because income is easier to track. That may be transformed tomorrow. -- Susan: On Aug 10, a cosmonaut in orbit was married to his fiancee, who was in TX. He returned yesterday and they kissed for the first time. What jurisdiction did this take place in? Who gets to tax the wedding-license? -- Reid: [Are telcos credible micropayment infrastructure?] Telco will go through many serious changes, like the music industry is today. If you have a way to deliver transactions to a device that's on you, that may be sufficient to drive a payment system. It's a possibility. How do you create robust, ubiquitous payment systems that include bank-like risk-management? How do you enable convenience? -- Susan: It's already happened in Helsinki and in London with the congestion charge. It's not being driven by the telcos or a new payment system -- it's driven by the problem at hand. We need to collect money on the fly for toll-plazas, etc. The cellphone as a payment device works where it fits that problem in terms of ubiquity and convenience. -- Ron: Consumer choice: people want to use payments through cellulars. Mobiles are good at processing small payments.