[ISN] MS Patents Anonymous Ecash

From: mea culpa (jerichoat_private)
Date: Fri Jun 26 1998 - 12:05:59 PDT

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    Forwarded From: Aleph One <aleph1at_private>
       MS Patents Anonymous Ecash
       by Chris Oakes 
       4:00am  26.Jun.98.PDT
       Microsoft has been awarded a patent on technology that electronic cash
       transactions to remain anonymous.
       The patent, issued on 15 June, was given to the Redmond, Washington,
       giant for a system of creating "untraceable electronic cash," a
       technology that lets consumers spend digital money without banks being
       aware of specifics, including user identity.
       Microsoft had no comment on the technology Thursday, and experts were
       still analyzing the patent in an effort to understand its workings.
       Despite the lack of details, the development raised speculation about
       Microsoft's plans for electronic-payment technology and whether the
       patent could be an effort to stymie the proliferation of anonymous
       Some people think that "Microsoft has patented it so that it will
       never see the light of day," said Phillip Hallam-Baker, a security and
       electronic transaction consultant. "But I don't think that's
       accurate.... You don't create a system by sitting on a patent."
       Such a patent is typical when a company is serious about developing an
       idea, Hallam-Baker said, adding, "I wouldn't read into it that this
       represents a policy direction."
       Security expert Bruce Schneier said he didn't think the move amounted
       to much more than a patent on research the company has been conducting
       for a long time. (The patent application was filed in 1995.)
       "I don't believe this means they're going to be doing [anonymous
       micropayment technology]," Schneier said. "This is not a blocking
       patent, this is not an overarching patent. I'm not scared."
       No patents in the area of anonymous micropayment are fundamental
       enough to make all businesses dependent upon one company's technology.
       At the forefront of this sort of electronic cash, Schneier said, is
       DigiCash, a company led by digital money pioneer David Chaum.
       "This is something that Chaum pioneered and still hasn't really been
       able to profit from."
       With standard micropayment technology, a bank issues validated "coins"
       to customers. Much like a cashier's check, the validation stamp
       indicates an amount and the bank's signature on the coin. But since
       the bank knows each coin it issues and to whom it was issued, the
       person's use of the coin can be tracked.
       DigiCash's eCash works around the problem by letting the bank stamp a
       coin without tying it to a particular user. In this system, the
       customer's computer creates a coin and sends it to the bank in a
       digital "envelope" to hide its identity. The bank stamps it "blindly"
       through the envelope. The coins are unrecognizable to the bank, and it
       doesn't know from which account the coins came.
       By contrast, the CyberCoin payment system of CyberCash, by
       contrast, offers no such anonymity. Any payment can be reconciled to
       the user.
       But Zona Research analyst Vernon Keenan says DigiCash has not been
       very successful in finding customers for its system, suggesting the
       short-term outlook is bleak not only for anonymous digital cash, but
       digital cash in general. "The idea of micropayments has not been
       successful on PCs, because you need to install a wallet and other
       support mechanisms on PCs," Keenan said.
       A wallet is a piece of software kept on a user's hard disk that stores
       the documents associated with electronic payments, such as credit card
       information, the tokens of electronic cash systems such as DigiCash,
       and security certificates.
       The only way any of these systems will be successful, Keenan said, is
       if wallets are built into a browser or operating system. This has come
       to pass with the release of Windows 98, he said, but it will be years
       before a critical mass of users has installed and started to use the
       wallet technology of that operating system.
       Keenan was among those who didn't see great significance in
       Microsoft's patent. "If [Microsoft] is going to make a business out of
       it, great. It would be nice to see untraceable ecash," said Schneier.
       "But I'm not sure there's a valid business model."
       The anonymity is important to many anticipating ecash, but the extra
       infrastructure it may require has to be underwritten by somebody. The
       only people interested enough would be consumers.
       "What are people willing to pay for anonymous electronic transactions?
       The answer is not very much. As a privacy advocate, I'm sort of
       disheartened by that. But life is life," said Schneier.
       Consultant Hallam-Baker said, "All this is really saying is that
       Microsoft has committed to investing resources into investigating an
       area of electronic payment."
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