--- begin forwarded text Date: Sun, 7 Feb 1999 13:18:55 -0400 (AST) From: Ian Grigg <[EMAIL PROTECTED]> To: [EMAIL PROTECTED] Subject: "How DigiCash Blew Everything" Reply-To: [EMAIL PROTECTED] Sender: <[EMAIL PROTECTED]> List-Subscribe: <mailto:[EMAIL PROTECTED]?subject=subscribe%20dbs> Editor's note. This was translated by some dutch natives, and then edited by myself for style. It is only about half-way done, others might feel free to finish it or comment on the rough translation. iang =====8<=======8<=======8<=======8<=======8<=======8<=======8<=== How DigiCash blew everything In September 1998 the high-tech company DigiCash finally went bankrupt. The office in Palo Alto, California was remained open for a while but it was merely a stay of execution. Two months ago the company filed for Chapter 11. Nobody realises, but with the "pending failure" of DigiCash, a bit of Dutch Glory died. The company made a brilliant product. Even Silicon Valley was jealeous of the avant garde technology invented in the Amsterdam Science Park. Internet "guru" Nicholas Negroponte went so far as to call the electronic payment system, ecash, "The most exciting product I have seen in the past 20 years". The rise and fall of DigiCash: a story about paranonia, idealism, amateurism and greed. David Chaum The name of one man stands out way above anyone else in the history of DigiCash: David Chaum, US citizen, born into a wealthy family, brilliant mathematicion and one who had to always have things his own way (1). After travelling around the world he ended up in Amsterdam in the late 80's. Here, he became head of the cryptography department of the CWI (Centre of Mathamatics and Information Science). Cryptography is the science of encoding and decoding of data, in order to maintain privacy, for privacy. Chaum had build built a big reputation in this field in the previous few years. Insiders estimated he was in the top 5 of the world at the time. And at the CWI, they also worked on electronic payment systems. In the early 90s, Rijkswatarstaat (2) became interested as they were thinking about introducing automatic toll-collection roads. Chaum got together a few researchers, mainly from earlier contacts with the university of Eindhoven. All guys who knew each other through a "young researchers" programme sponsored by Philips. They had all spent their youth programming behind a computer. Enthusiastically they started, and within little over a week the job was done. DigiCash Rijkswatarstaat was satisfied and the team got another assignment. That was the moment when Chaum heard the "sound of money." Why couldn't he turn the patents he claimed in the 80s into money?. On April 20th 1990 the company DigiCash was founded. Unfortunately Rijkswatarstaat decided to put the advanced system on the shelf and to continue with the old standby, number plate recognition. Chaum could have divested himself of the company and continued his work at the CWI, but he had apparently tasted the forbidden fruit of business. He decided to market his research other ways: smart cards, point-of-sale applicatons, cash registers and telebanking. Of course, he had to quit his job at the CWI because of the risk of conflict of interest. Financing of the company was done privately by the American. Former DigiCash employees agree that Chaum and his family had at least contributed a few million. It all started out quite nicely. The new company sold a smart card for closed systems which was a cashcow for years. It was at this time that the first irritatants appeared. Even if you are a brilliant scientist, that doesn't mean you are a good manager. David Chaum was a control freak, someone who couldn't delegate anything to anyone else. "That resulted in slowing down research" explains an ex-DigiCash employee who wished to remain anonymous. "We had a lot of half-finished product. He always directed things the other way." This drove a few people crazy and it didn't take long before the first resigned and started their own company. In 1992 Boudewij de Kerf and Eduard de Jong quit the company and went to Silicon Valley where they invented and sold an operating system to Sun Microsystems for a substantial sum. Ecash Annoying as he was, David Chaum had brilliant ideas. In 1993 he invented the digital payment system ecash. According to insiders, it was a technically perfect product which made it possible to safely and anonymously pay over the Internet. This was a field in which a lot of work needed to be done, according to the ever-paranoid cryptographers. They considered that to pay with your credit card was extremely insecure. Someone only had to intercept the number to be able to spend someone else's money. Credit cards are also very cumbersome for small payments. The transaction fees are simply too high. Ecash however was perfectly suited to sending electronic pennies and dimes over the Internet. It was especially this idealism that prevented people from leaving the stubborn Chaum. Enthusiasm waxed for the elegance of his perfect ideas. There were even people flying in from the US to witness the birth of something beautiful, which was unusual, as this is usually associated with big pay checks and leased Mercedes in the parking lot (3). An ex-employee: "And no nonsense like 'We are going to make this company as big as possible, as soon as possible, and sell out'. No, we really wanted to make this product as big as possible." People who visited and walked around the Matrix building of the Amsterdam Science Park acknowledge that there was a young and dynamic atmosphere. No fast suits, but more like a club. Real whizz kids who got coffee from the machine with their own electronic gagdets. More to follow... (1) Dutch expression is "to the bone." (2) Dutch Department of Public Works. Responsible for waterways and roadways. (3) "lease-bak" is a derogative term in Dutch. --- end forwarded text ----------------- Robert A. Hettinga <mailto: [EMAIL PROTECTED]> Philodox Financial Technology Evangelism <http://www.philodox.com/> 44 Farquhar Street, Boston, MA 02131 USA "... however it may deserve respect for its usefulness and antiquity, [predicting the end of the world] has not been found agreeable to experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire'
