Error 402: The First Secure Monetary Transaction Online

Last week, we kicked off our Error 402 series on the history (and hopefully future) of web monetization, by talking about much of the framing of what this series will be about. I started it out by noting that it has been 30 years since I first got online in 1993. That also happened to be right about the point at which the ability to exchange money online became a thing.

While the predecessor of the Internet, the ARPANET goes back to the late 1960s, it was gradually replaced by what became the Internet with the adoption of protocols like TCP/IP and then having the National Science Foundation (NSF) establish NSFNET, which officially resulted in the phasing out of the ARPANET in 1990. This is right about the time that Tim Berners-Lee was creating the concept of the World Wide Web, with the first web server showing up at the end of 1990.

Around this same time, the government started waking up to the potential of such a network. While he is often mocked as taking credit for creating the Internet" (or inventing" it, though he never said that), Al Gore was the author of the High Performance Computing Act of 1991 that basically supercharged the internet. Among other things, it funded the National Center for Supercomputing Applications (NCSA) at the University of Illinois at Urbana Champaign (UIUC) where a young Marc Andreessen created Mosaic, the first web browser with integrated graphics, which supercharged the World Wide Web.

Again, right as the HCPA was supercharging the web, the NSF decided in 1991 to lift commercial restrictions on the Internet.

While some of the early commercialization was around companies setting up their own access ramps to the Internet in the form of Internet Service Providers, plenty of people were planning out other ways to make money online. In the summer of 1994, the NY Times wrote an article proclaiming the first secure credit card transaction online for a music CD:

From his work station in Philadelphia, Mr. Brandenburger logged onto the computer in Nashua, and used a secret code to send his Visa credit card number to pay $12.48, plus shipping costs, for the compact disk Ten Summoners' Tales" by the rock musician Sting.

Much of the article focuses on the wonders of encryption that allowed this transaction to occur securely, but notably towards the end of the article, it's admitted that many people had actually been making purchases less securely prior to this, though it quotes PGP creator Phil Zimmermann talking about his hope that encrypted transactions will open the floodgates for online commerce:

Although Net Market has been selling various products like CD's, flowers and books for several months on behalf of various merchants, yesterday was the first time they had offered digitally secure transactions.

I think it's an important step in pioneering this work, but later on we'll probably see more exciting things in the way of digital cash," said Philip R. Zimmermann, a computer security consultant in Boulder, Colo., who created the PGP program.

Digital cash, Mr. Zimmermann explained, is a combination of cryptographic protocols that behave the way real dollars behave but are untraceable."

And while the NY Times article declared the (new) Internet open for business," it still took a while before we figured out exactly what that would look like. And those early days certainly were not about monetizing content online, but rather selling goods, which is what we'll cover in next week's article.