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[Taler] Money with capabilities

From: Özgür Kesim
Subject: [Taler] Money with capabilities
Date: Wed, 18 Aug 2021 16:07:37 +0200

Hello Talerians,

This is a post about the question: "What social impact would money
have if it comes with certain constraints?".  It is a longer post and
I thank you right away for taking your time to read it.

My aim is to initiate a discussion and investigation of the landscape
of scenarios and arguments for and against adding capabilities to
digital money.

Let me start with my premise.

#  1    Universal Purchasing Power (UPP) of money and its implications

Cash money is fungible:  Any two coins with the same denomination can
be used to pay the same kind of stuff. It gives money _universal
purchasing powers_ (UPP).  This clearly is a property that serves many
people, if not the majority, well.  However, there are also
consequences to UPP that negatively effect various groups of people,
as I want to describe in the next sections.

## 1.1  Privacy disclosure

For certain goods, the purchasing power of money is _not sufficient_
to buy it:  For alcohol or other legal drugs, you have to prove to be
of sufficient age.  Similar age restrictions apply when purchasing
certain games, media and services.  Other purchases might require
specific permits:  Renting a car, buying medical equipment, chemical
components or weapons, etc.

The general approach in these scenarios is to take the UPP of money as
a given and to ask you for a proof of the fulfillment of the
requirements, usually by _disclosing your identity_ or parts of it.
(And I am not even considering the dangers of running IT-systems to
store personal information here.)

So here we have cases where UPP leads to the disclosure of private

## 1.2  Limitation of economic freedom

The universality of the purchasing power of money can also have a
_limiting_ effect for some people:  For example, minors usually need
the assistance and/or supervision of the guardians/parents for online
purchases, as parents might not trust them otherwise to purchase only
permitted goods.

So here we have a case where UPP leads to limitation of economic

## 1.3  Reduced wellfare

Here is a delicate one: In public debate over wellfare provided by the
state (or - on a personal level - on an encounter with a person in
severe need), we notice reluctance in parts of the population to
provide direct financial support to the needy.  This is often
rationalized by prejudgement that the beneficiary would be using the
money for goods that is considered harmful for him or herself.

So here we have a case - if we take these concerns at faith value -
where UPP hinders support and wellfare.

## 1.4  Assisting personal harm and financial ruin

As we learn from social sciences, individuals may have difficulty to
make sensible financial decisions.  For example elderly people or
people with cognitive disabilities might need assistance when dealing
with their allowances.  People with severe addiction to substances,
gambling, shopping etc. might eventualy suffer from financial ruin and
severe detriment to their health as consequence of their compulsary
purchasing decisions.

So here we have cases where UPP assists in leading to personal harm
and financial ruin.

#  2    Money with capabilities

But what if there would be a type of money that has different
_capabilities_?  That is: money without _universal_ purchasing powers
but with a set of selected capabilities? (Of course, that type of
money would exist _alongside_ with the usual UPP-money)

## 2.1  Prior art: foodstamps, coupons etc.

In fact, we do already have similar restricted mechanisms for
purchase, such as foodstamps and coupons with limited purchasing power
(either limited to specific goods or specific vendors).  For the sake
of argument let's consider those as money with Limited Purchasing
Power (LPP).

In a sense, I'm going present a generalized mechanism for money with
LPP in the context of GNU Taler.  But with a twinge of euphemism I'm
going to call it (limited) _capabilities_ instead of restrictions.

## 2.2  Purchasing capabilities

Assume that we have a set of well defined capabilites, like

| capability  | semantics                                                  |
| ----        | ----                                                       |
| age 8+      | Can be used to buy goods only allowed for age group 8+     |
| age 18+     | Can be used to buy goods only allowed for age group 18+    |
| alcohol -5% | Can be used to buy goods with ethanol content less than 5% |
| nighttime   | Can be used when puying between 8pm and 6am                |
| etc..       | ...                                                        |

Also assume that these capabilities are publicly documented, so that
there is no doubt what they mean.  We can even assume that they where
defined and publicized by a legal authority.

Now let's imagine that some of the minted money in circulation was
inseperably bonded during minting with a selection of these

For example, a minting authority cold give out money with capabilities
"age 14+" and "alcohol -5%", allowing that money to be used when
buying stuff for age group 14 and older and beverages with alcohol
content of less than 5%.

Of course, the payment systems and inventories of merchants need to be
able to recognize and handle those capabilities accordingly.  We can
assume that standard UPP-money would implicitely have all capabilities

## 2.3  Subsidiarity and authority

In the previous section I wrote "minting authority" as the authority
that bonds selected capabilities to the money.  But in the context of
GNU Taler we can even split and delegate some of the power of choice
of capabilites, for example:

Parents should be the authority that chooses the appropriate age group
for the pocket money they are giving their children.  Similarly, legal
guardians should be able to make such decisions for their wards.

So we shall assume that the principle of subsidiarity[^1] applies 
when the capabilities are selected by guardians for the money and the
receiver of that money.

[^1]: [Subsidiarity](https://en.wikipedia.org/wiki/Subsidiarity)

#  3    Impact of money with capabilities

Here I want to lay out some of the positive and negative impacts of
money with capabilities that I can think of.   These thoughts are not
complete and probably biased so the whole section is open for

## 3.1  Positive impacts

I claim that with the introduction of capabilities for money, we offer
relief in all the problems mentioned in sections 1.1 through 1.4.

Money with age restrictions would make ID based age verification
unnecessary. Similary for access to alcohol.  This would protect the
privacy of the buyer and resolve the issues in section 1.1.
(At least for those cases where showing an ID is not mandatory for
other legal reasons - like medical equipment.)

With money only having certain capabilities, guardians might be
willing to let their wards make free(r) choices without supervision.
This would increase economic freedom for the wards (see section 1.2).

The argument can be extended to the case in section 1.3:  People might
be less reluctant to help people in need, if they have some control
over the purchasing power of the money - for example: if one can not
buy alcohol with it.

And finally, money with limited capabilities might be usefull when
counceling or treating people with addictions.  A sensible selection
of capabilities for their allowances might help to avoid selfharm (see
section 1.4.)

##  3.2         Negative impacts

I will now describe the negative impacts that came to my mind.

### 3.2.1       Misuse in oppressive goverments

One could make the argument that the introduction of money with
limited capabilites could be misused by oppressive goverments:  They
could give out money with only certain capabilities set and make its
use mandatory to every person and merchant.

However, I don't think that oppressive goverments would need a
monetary system to enforce such control.  They can (and do) simply put
pressure on the merchants or declare some transactions as illegal.

While I do see how capability based money could be used as a means to
inact oppression, I don't see how UPP money reduces oppression in such
a society - mainly because there is no money with UPP in those
societies in first place due to the limited access to markets.

### 3.2.2       Lock-in to limited capabilities

One could make the argument that people who are given only money with
limited capabilities might be permenantly locked-out from legal access
to money with UPP.  For example: Authorities might allow refugees only
limited access to the market by giving them money with reduced

However, in the context of GNU Taler there are at least two options
available for the owner of money with limited capabilities:

1. Peer-to-peer transactions could be used to exchange coins with
   limited capabilities for coins with UPP for a fee.  This would
   allow for transparent and controllable transactions.

2. Based on trust, another person with access to UPP-money could
   simply share their (UPP) coins in exchange for the coins with
   limited capabilities.

So I think that a monetary system based on GNU Taler can offer
enough opportunities for exchange of UPP-money from LPP-money.

# 4     Preliminary Conclusion

I started with the premise that universal purchasing power of money
has negative effects one some people in certain circumstances.  I
argue that the introduction of money with limited, selectable
capabilities, can be a relief or improvement in such situations.  For
the presented negative impacts of such money, I either show that
solutions exists or that the negative impact would exist different
form even without money with limited capabilities.

I don't claim to have covered all circumenstances, use-cases, positive
and negative impacts (I'm neither a sociologist nor economist).  But
based on my arguments I conclude that the introduction of money with
selectable, limiting capabilities (alongside with UPP money) would
provide a net benefit for societies.

By ending this section I open the discussion.

#  Appendix

## A    Sketch of the technical realisation in GNU Taler

Imagine we select a particular set of capabilities an put them into an
ordered list, like:

1. [ ] age 0+
2. [ ] age 8+
3. [ ] age 14+
4. [ ] age 18+
5. [ ] alcohol low
6. [ ] alcohol high
7. [ ] nighttime

An exchange server in GNU Taler could offer to mint coins of specific
denominations and a given list of capabilities, such as the one above.

A custodian or subsidiary whith the ability to withdraw money from the
exchange could select particular capabilities for a coin. For example,
a parent might choose for its adolescent child:

1. [x] age 0+
2. [x] age 8+
3. [x] age 14+
4. [ ] age 18+
5. [x] alcohol low
6. [ ] alcohol high
7. [ ] nighttime

Those selected capabilities would than be bound to the coin that is

Technically we can realize this the following way:

1. The custodian generates one cryptographic key pair per capability
   (in our example: 7 key pairs).

2. The hash of all public keys goes into the minting process and binds
   the capabilities to the coin.

3. The custodian gives all public keys to the ward but _only_ the
   private keys for the permitted capabilities.
   (In our example: Only the private keys to the 1., 2., 3. and 5.
   capabilities are given to the minor).

4. On a purchase, the merchant can require some of those capabilities
   to be set for particular goods - or that UPP money is used for the
   (In our example:  When buying beer from a store, the system might
    require the "alcohol low" capability to be set.)

5. If the ward is in possesion of the corresponding private key for
   the required capability, it can sign the contract with those keys
   and the merchant can verify them according to the public keys.

There are a lot of details, complications and optimizations missing in
this description, but this is basically the gist of it.


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