John posed the question ``what is money?'' He feels that electronic commerce is ready, or nearly so, from a technical standpoint, but that there has been insufficient consideration of what will ``back'' digital currency. He listed five properties of electronic markets (attributed to J. Yannis Bakos). One: the cost of communicating products and prices is lower. Two: the benefits of participation increase with the number of participants. Three: there are substantial initial switching costs. Four: they require large investments and benefit greatly from economies of scale. Five: potential participants are faced with uncertainties regarding the benefits.
He argues that given the importance of telecommunication for electronic markets, the market financial service providers will demand significant control over the telecommunications infrastructure and capacity. There are three types of money: the inherently valuable, that which has been directly backed by something inherently valuable, and money which has no direct value. Digital money is clearly not the first, and it is unlikely that states will initially give it the authority needed for the third, so what will back digital money? John suggested telecommunications bandwidth as a possibility. This concept raises many unaddressed issues. He detailed FLAG (Fibre-optic Link Around the Globe) as an example of the broadening connection between commerce and telecommunications. FLAG is a telecommunications cable which is principally funded not by telecommunications interests, but by investment houses.
While digital currency is being used on a small scale today, John argues that significant policy issues have been obscured by concern over the technical challenges.