W3C home > Mailing lists > Public > public-webpayments@w3.org > June 2014

Re: Rise of the machines - use cases for digital cash (was Re: Proof of Concept: Identity Credentials Login)

From: Manu Sporny <msporny@digitalbazaar.com>
Date: Sun, 15 Jun 2014 15:07:41 -0400
Message-ID: <539DEEFD.1050900@digitalbazaar.com>
To: public-webpayments@w3.org
On 06/14/2014 06:43 AM, Ricardo Varela wrote:
> "To be honest, I arrived not with a spec or even a goal in mind, but
>  rather just some observations about our online payments, that 1)
> when I pay online there's always somebody between me and the person
> I'm trying to pay, 2) the transaction often does not happen
> immediately, there is often some waiting period and 3) Quite often
> one or both of the participants must pay a transaction fee." "Then I
> noticed that these characteristics all disappear when I pay cash.
> It's 1) DIRECT, 2) IMMEDIATE & 3) FREE. Incidentally, there is at
> least one other observation, 4) I get my change in cash"
> 
> I think that analogy is actually a bit misguided. There is a third 
> party involved in EVERY transaction where there is no direct trust 
> between you (the person paying) and the merchant (the person 
> receiving).

+1

Just wanted to underscore this important point by Ricardo, as the whole
"We're going to create a payment system with no fees!" rhetoric is
misguided in general.

Dave L., more specifically to your point, cash is not free. It has
tremendous fees associated with it; namely, the cost of inefficiency,
and a standing police, military, and legal system to enforce
transactions. Those fees tend to be hidden from you, but they're there
and they're non-trivial. To put a figure on it, cash costs the average
American family $1,739/year[1].

Even direct barter has fees associated with it (the cost of transporting
the bartered items to/from the buyer/seller). The second you get into an
indirect barter situation, you're going to add fees due to the trust
relationship that's required. Either 1) you already have the necessary
relationships, and thus the fees are paid in the time it took you to
build and maintain your network or relationships, or 2) you need to pay
someone (fees) to broker the deal.

Just because we can get great efficiencies via the Web/Internet doesn't
mean that we can drive the cost/fees of a payment system to 0. We reduce
the costs by an order of magnitude or more, but it would violate
information theory to say that we can build a payment system where one
could transact for "free".

That said, you probably didn't mean "free". You probably meant that we
can gain great efficiencies via automation (technology), using a global,
efficient communication network (the Internet), and removing as many
intermediaries as possible (peer-to-peer).

I don't think many people on this list would disagree with you on that
point as it's why most of us are involved in this group. :)

-- manu

[1] http://www.cnbc.com/id/101103705

-- 
Manu Sporny (skype: msporny, twitter: manusporny, G+: +Manu Sporny)
Founder/CEO - Digital Bazaar, Inc.
blog: The Marathonic Dawn of Web Payments
http://manu.sporny.org/2014/dawn-of-web-payments/
Received on Sunday, 15 June 2014 19:08:10 UTC

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