A piece of the action (a book to check out)
Joseph Nocera, author of A Piece of the Action, a history of the credit card industry, says digital currency is facing “a chicken-and-egg question” but points out that credit cards encountered the same problem, and that their acceptance took decades. In fact, 2003 was the first year credit cards and other electronic systems carried more payments than bank checks.
As they come to appreciate just how long the road ahead will likely be, some financial cryptographers are searching for niches where they can flourish in the short term. Take, for example, Waltham, MA-based startup Peppercoin, the brainchild of MIT computer scientists Sylvio Micali and Ron Rivest. Peppercoin is attempting to specialize in very small sums (see “The Web’s New Currency,” December 2003).One of its bigger initiatives is developing a cryptographic system that would enable people to use their credit cards at parking meters, an application that would be prohibitively expensive for the traditional credit card network, which has a minimum transaction fee of about a quarter. If Peppercoin’s technology can cut transaction costs enough, it can capture this market and also make it possible for people to spend small amounts online.