In Cyberspace, Nobody Can Hear You Write a Check : Cash? History, The Evolution of Money is Moving Way Faster Than the ATM line. Guard Your Passwords

February 04, 1996|Daniel Akst | Daniel Akst writes the weekly "Postcard From Cyberspace" column in The Times. His last article for the magazine was on the 1980s

Money is coined liberty, said Dostoyevski, a fact I bear in mind as I climb the impossibly steep stairs to the canal-side "Secret Annex" in Amsterdam, in which Anne Frank and her family hid from the Nazis. Survival in the annex depended on the courage of the family's Gentile helpers, and the cash box from which the Franks drew the coin of their sustenance. I feel spoiled walking through these hushed rooms, gross with freedom and affluence, my pockets full of credit cards and travelers checks, all useless had I been forced to hide with the Franks and their friends. In their situation, what you needed was some divisible unit of exchange that you could hand to someone else with no trace of its provenance attached. What you needed, in other words, was money.

Cash grants its user the cloak of anonymity, which in those days was a tattered cape indeed. Amsterdam is a city historically hospitable to Jews; Sephardim fleeing the Spanish Inquisition helped make it this metropolis Europe's diamond center. But the municipal authorities, in an excess of organizational zeal, kept meticulous records at a low-slung brick building in the city's Plantage district. It's still there, next to the zoo, with a plaque on the front. This was the city registry, where they recorded your name, your address and your religion. When the Nazis arrived in 1940, their chores were thus lightened. The registry granted its owners the power of life and death; when it was clear what the data were being used for, resistance fighters tried to destroy the records, which were too tightly packed to burn. Dutch Jewry burned instead.

These lessons are not lost on plump, rabbinical David Chaum, an extraordinarily insightful cryptographer whose little company on the outskirts of Amsterdam is developing a way to carry the tradition of cash onto the frontier of cyberspace, so that purchases on the growing global network of computers known as the Internet can be made securely and privately. Unlike, say, American Express, whose databanks theoretically could be used to assemble detailed dossiers on the lives of its cardholders, Chaum's system would make such elaborate knowledge of an individual's actions, habits and beliefs unobtainable. It sounds harmless enough until you consider the implications in light of the history of money, whose increasing intangibility over the centuries reaches something of an apotheosis in the airy offices of Chaum's company, DigiCash BV.

Chaum is generally agreed to be the father of something called 'digital cash," which is like regular cash in that it can be spent with privacy but unlike regular cash in that it has no physical presence. Think of it as the spirit of cash, or maybe even its soul, the essence of the thing without the corporeal shell.

As a concept, Chaumian digital cash has enormous ramifications. Basically, it means that anyone with a personal computer could take on the money-creating functions of a bank--even a central bank, like the Federal Reserve. If I did that, no one would accept my currency, of course. But what if General Motors did it? Or a consortium of Swiss Banks? No less than Walter Wriston, the legendary former chairman of Citicorp, has observed that DigiCash is "reviving in modern guise something very close to the old American free-banking system." The system, in other words, that existed before there was a single national currency.

Money is fascinating stuff, and it was to understand this purest new form of the substance I have spent so much of my life worrying about that I'd come to Amsterdam. I wanted to meet the man who had liberated cash from the encumbrance of its body and to find out from the liberator--whose ideas have implications for commerce, privacy and national sovereignty--precisely what he thinks he is doing.

A Question of Privacy

If David Chaum were motivated solely by making money--receiving income, we should say in this context--he would long ago have signed a deal with some of the major companies rushing into the field of electronic transactions. Like all missionaries, however, Chaum is a man of faith, so profit manifestly is not his primary goal. Chaum is an American, a Jew from Los Angeles with a Ph.D. in cryptography from UC Berkeley. He is a large, soft-spoken man with a graying beard and a ponytail. Although he likes meeting with journalists because his main interest is in selling his ideas, the same spirit that brought forth those ideas keeps him from talking much about himself, which does little to dispel the vague air of cyberspace paranoia that clings to them.

"I'm not paranoid," he insists. "I resist giving out unnecessary information."

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