Re:backing

F_GRIFFITH@CCSVAX.SFASU.EDU said:
>Greshams law: "bad money drives out good"
>i.e. where people have a choice (e.g. gold vs greenbacks post Civil
>War), in making payments, they will use the lesser value money and
>keep the higher value.  Thus, the lesser value money will circulate,
>the higher value money will not.

So in essence you're saying that poorly-backed digital currency will
win out over e.g. U.S. dollars?

That's an interesting concept.

(I mean the above literally, not sarcastically; I don't care to take
either one side or the other of this question right this instant,
although I will say that there must be some extra caveats to add.)
	Doug

Doug Merritt says:
> F_GRIFFITH@CCSVAX.SFASU.EDU said:
> >Greshams law: "bad money drives out good"
> >i.e. where people have a choice (e.g. gold vs greenbacks post Civil
> >War), in making payments, they will use the lesser value money and
> >keep the higher value.  Thus, the lesser value money will circulate,
> >the higher value money will not.
> 
> So in essence you're saying that poorly-backed digital currency will
> win out over e.g. U.S. dollars?
> 
> That's an interesting concept.

A digital currency can be backed by gold held in some secure location
like the Zurich Free Transit Warehouse. U.S. Dollars are backed by
absolutely nothing other than blind faith in the U.S. Governement.
Who's kidding whom?

In any case, Gresham's Law applies to situations in which two coins of
differing metalic content are both made legal tender -- it doesn't
really apply in a general case.

Perry

> 
> A digital currency can be backed by gold held in some secure location
> like the Zurich Free Transit Warehouse. U.S. Dollars are backed by
> absolutely nothing other than blind faith in the U.S. Governement.
> Who's kidding whom?
> 

Actually, there is still an element of trust involved, that (as a
previous poster pointed out) the entity who actually holds your gold
won't run off with the gold, or give it to someone else, etc. Still
(in the best of all worlds) rather have more solidly-backed currency, 
but you still have to trust someone at some point. I'd rather have
US dollars than gold-backed currency from an even less trustworthy gov't.

The important freedom is being able to choose whom and what you trust,
without having to slide into a pure barter economy.

Also note that I can draw numerous (albeit somewhat outlandish) scenaria 
involving the depreciation of gold; while it's very, very unlikely, it
might pay to be at least moderately diversified. Note what happened to the 
value of gold and silver in the 16th c.

Doug

-- 
----------------                                             /\ 
Douglas Barnes            cman@illuminati.io.com            /  \ 
Chief Wizard         (512) 448-8950 (d), 447-7866 (v)      / () \
Illuminati Online          metaverse.io.com 7777          /______\

Doug Barnes wrote:

> Actually, there is still an element of trust involved, that (as a
> previous poster pointed out) the entity who actually holds your gold
> won't run off with the gold, or give it to someone else, etc. Still
> (in the best of all worlds) rather have more solidly-backed currency, 
> but you still have to trust someone at some point. I'd rather have
> US dollars than gold-backed currency from an even less trustworthy gov't.
> 
> The important freedom is being able to choose whom and what you trust,
> without having to slide into a pure barter economy.

There is _always_ some element of trust involved. Crypto changes this
in a subtle way I'll get to later.

The Swiss bank that holds "your" gold (or whatever) can in theory tell
you "But, Herr Barnes, you of course withdrew your holdings
yesterday!" Likewise, your local bookie can refuse to pay you what he
owes you (I guess you can threaten to break _his_ legs!), or can claim
he already paid "you" the day before. Such "burnings" have always been
possible, and yet these systems work and are actually quite stable.

That these "trust" systems work is related to tit-for-tat strategies
in the iterated Prisoner's Dilemma problem, in expectation of future
business, and in the whole related area of _reputations_. Your local
bookie pays up because to not pay up would eventually have
repercussions for his future business...and he deems his _real_ business
is making book, not burning any one customer. Emergent behavior.
Spontaneous order. 

Secret accounts and crypto make the equation even more interesting.

Anyone depositing money (dollars, gold, who cares, really) into an
account and getting back some form of digital money can:

- test the system by redeeming small amounts of the money

- actually be a service which makes deposits and then redeems the
digital money as a "testing service" (issuing a signed report, for a
fee, which reprots on the reliability of banks...all privately done,
of course)

Digital money is a kind of shell game (with no insult intended to
either shell games or digital money). $10,000 converted into, say, 100
separate pieces of digital money issued by many different banks,
circulating around and being redeemed and reissued....well, it would
be apparent pretty quickly--and word would spread--if the money was
not being redeemed.

Some percentage of all the digital money "in circulation" will
actually be primarily "pinging" money, designed to ping (test) the
system.  (After a while, expect this to go down.) The beauty is that
the untraceability means a bank doesn't know it's being tested by a
"pinger" or by another bank, or if the money belows to some "Little
Guy" who might otherwise be fair game for a rip-off (putatively,
although "Little Guys" are not ripped-off by banks in the current
system, either).

I've said this before: CRYPTO + DIGITAL REPUTATIONS = A NEW ERA.
Crypto researchers like Chaum seem mostly oblivious to the nature of
reputations, of escrow services (untraceable, too). and of this whole
very natural aspect of transactions. Many of the currently "unsolved"
problems with digital money fade away--I contend, and will discuss if
there's interest--when the elements of reputation and reputation
capital are included.

(I can understand the reason cryptologists have for purely
mathematical or formal proofs, but the problems now stymieing them
with digital coins (e.g., the lack thereof) and the like are solvable
by injecting local reptutation considerations.)


The ecology of these banks, transfer channels, etc., will be quite
interesting to study. I expect fairly robust feedback mechanism will
evolve naturally be market forces.

Crypto makes a lot of interesting things possible.


-- 
..........................................................................
Timothy C. May         | Crypto Anarchy: encryption, digital money,  
tcmay@netcom.com       | anonymous networks, digital pseudonyms, zero
408-688-5409           | knowledge, reputations, information markets, 
W.A.S.T.E.: Aptos, CA  | black markets, collapse of governments.
Higher Power: 2^756839 | Public Key: PGP and MailSafe available.
Note: I put time and money into writing this posting. I hope you enjoy it.

tcmay@netcom.com (Timothy C. May) wrote:

> Many of the currently "unsolved"
> problems with digital money fade away--I contend, and will discuss if
> there's interest--when the elements of reputation and reputation
> capital are included.

I'm surprised that many didn't jump on this offer.  Maybe it's their
preoccupation with Detweiler's shock at discovering that pseudospoofing can be
an effective defense against his cherished tyranny of the majority.  I for one
would value your discussion.  Please.

	John E. Kreznar		| Relations among people to be by
	jkreznar@ininx.com	| mutual consent, or not at all.

-----BEGIN PGP SIGNED MESSAGE-----


writes John E. Kreznar:
>
>tcmay@netcom.com (Timothy C. May) wrote:
>
>> Many of the currently "unsolved"
>> problems with digital money fade away--I contend, and will discuss if
>> there's interest--when the elements of reputation and reputation
>> capital are included.
>
>I'm surprised that many didn't jump on this offer.  Maybe it's their
>preoccupation with Detweiler's shock at discovering that pseudospoofing can be
>an effective defense against his cherished tyranny of the majority.  I for one
>would value your discussion.  Please.
>
>	John E. Kreznar		| Relations among people to be by
>	jkreznar@ininx.com	| mutual consent, or not at all.
>

As would I.

- -- 
+-----------------------------------------------------------------------+
| Nate Sammons   email: nate@VIS.ColoState.Edu
|   Colorado State University Computer Visualization Laboratory
|   Finger nate@monet.VIS.ColoState.Edu for my PGP key
|   Key fingerprint =  2D CD 07 CA 7B EC A8 4A  86 7F F3 A8 1D 15 65 46
|   Title 18 USC 2511 and 18 USC 2703 Protected --> Monitoring Forbidden
+--------+ Guerrilla Cryptographer             Always remember "Brazil"