Re: Bypassing the Digicash Patents

It is hard to understand why a system where it is impossible to track
payments (Chaumian anonymity) is cheaper than one where it is possible
to do so, but we choose not to.  If avoiding tracking payments is cheaper
than tracking them, why wouldn't participants just not bother to track
them even when they theoretically could?

Granted, there are situations where taking away someone's options can make
him better off.  The classic example would be the Prisoner's Dilemma, which
I will assume people here are familiar with.  Given the choice to cooperate
or defect, standard analysis predicts that both players will defect.  Remove
that option, and they will be forced to cooperate, leading to a better
("lower cost") outcome for both.  The structure of the game forced them to
take advantage of an option which has the net result of costing them more.

The question is whether this kind of reasoning would apply financial
transactions.  Is it really true that taking away the option of tracking
transactions is going to save money overall?  Sure, not keeping records
is a priori going to be cheaper than keeping them, but the question is
how much the loss of those records is going to hurt you.

Presumably records are kept to protect against various risks.  Without
that protection, you need other means to control the risk.  But if those
means exist and they are cheaper than record-keeping, then again even
without anonymity it should be cheaper to use those methods in place of
the records.

I think we would need to see a more detailed explanation of exactly why
it is that people can't save money today by avoiding keeping records,
when they could do so if it were impossible to keep records.

(One possible explanation is that it would be a regulatory effect.
People are forced by the government to keep records, to their detriment,
that they would prefer not to keep.  With anonymous bearer certificates
it would not be possible to keep the records so people might hope to
escape the regulations.  However the problem with this reasoning is that
the same forces which require the record-keeping would be likely to ban
the use of instruments which prevent keeping records.)

Hal

At 10:19 AM -0800 5/4/97, Hal Finney wrote:
>It is hard to understand why a system where it is impossible to track
>payments (Chaumian anonymity) is cheaper than one where it is possible
>to do so, but we choose not to.  If avoiding tracking payments is cheaper
>than tracking them, why wouldn't participants just not bother to track
>them even when they theoretically could?

I'll give a simple example, related to cash vs. other payment mechanism in
ordinary store transactions. The key is that traceable, identifiable
payments offer more opportunities for repudiation of debts, for increased
paperwork to handle such disputes, etc.

Concert tickets, at least here in California at BASS and similar outlets,
is a "cash and carry" proposition...no credit cards accepted. Why?
According to the clerks I've talked to over the years, cash and carry means
any cancellations of concerts forces the purchaser to arrange for a refund
either directly through the concert promoter or by arrangement at the
ticket office.

With repudiable (repudiatable?) payment systems, those involving promises
to pay or credit arrangements, one can "cancel a check" or notify VISA that
a charge is being disputed. These hassles ripple back through the system.

Thus, an "anonymous" (more precisely, a nonrepudiatable) transfer system is
cheaper for the seller.

(And such cash systems are almost certainly cheaper for merchants for other
types of transactions. Getting the money immediately has to be at least as
cheap as having checks, credit cards, tabs, etc. Obviously.)

Chaumian anonymity acts like this cash and carry system.

Also, from the merchant's point of view, having a system "where it is possible
to do so, but we choose not to" opens up the possibility of sting
operations, with a traceable records. I imagine most drug sellers would
prefer a system where no traceability can ever be turned on.

Of course the sellers and buyers may have differing judgments on the costs
and values of anonymity, depending on various factors.

--Tim May

Having said all this, I don't buy Bob Hettinga's "leap of faith" that
anonymous bearer instruments (or whatever he calls his geodesic things)
will automatically and obviously be cheaper than less anonymous
alternatives. For some things they will be, for others things they won't.

--Tim May


There's something wrong when I'm a felon under an increasing number of laws.
---------:---------:---------:---------:---------:---------:---------:----
Timothy C. May              | Crypto Anarchy: encryption, digital money,
tcmay@got.net  408-728-0152 | anonymous networks, digital pseudonyms, zero
W.A.S.T.E.: Corralitos, CA  | knowledge, reputations, information markets,
Higher Power: 2^1398269     | black markets, collapse of governments.
"National borders aren't even speed bumps on the information superhighway."

A million monkeys operating under the pseudonym 
 "Hal Finney <hal@rain.org>" typed:
>
> It is hard to understand why a system where it is impossible to track
> payments (Chaumian anonymity) is cheaper than one where it is possible
> to do so, but we choose not to.  If avoiding tracking payments is cheaper
> than tracking them, why wouldn't participants just not bother to track
> them even when they theoretically could?


This is an excellent question, Hal.  I've been thinking about it 
since I saw a similar post of yours earlier today.


> Granted, there are situations where taking away someone's options can make
> him better off.  The classic example would be the Prisoner's Dilemma, which
> I will assume people here are familiar with.  Given the choice to cooperate
> or defect, standard analysis predicts that both players will defect.  Remove
> that option, and they will be forced to cooperate, leading to a better
> ("lower cost") outcome for both.  The structure of the game forced them to
> take advantage of an option which has the net result of costing them more.


In the case where the problem of nymity is that one actor can later
prove the fact of the transaction, and this is a cost, I can see 
how the option of anonymity could make a cheaper transaction 
possible.  However, I think that this is _not_ the case that Robert
Hettinga is interested in.  I think the case that Bob is talking 
about is when the cost is the possibility of incurring legal 
liability from the transaction.


So it is true that _if_ the transactions were unconditionally 
anonymous, _then_ you would not have the costs of legal liability,
but it does not follow that anonymity is the _only_ way to avoid 
the cost.


Frankly, I think the best way to avoid that cost in the forseeable
future is the time-tested method of saying "I make no warranties, 
etc. etc. and incur no contractual obligation blah blah and so 
forth.", as part of your deal.


I think this can be accomplished done without using any 
cryptographic technique more complicated than simple 
authentication.


Regards,

Zooko Journeyman

Disclaimers follow:  I am not a crook.  NOT speaking for DigiCash 
or any other person or organization.  No PGP sig follows.

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

At 11:19 AM 5/4/97 -0700, Hal Finney wrote:

>Presumably records are kept to protect against various risks.  Without
>that protection, you need other means to control the risk.  But if those
>means exist and they are cheaper than record-keeping, then again even
>without anonymity it should be cheaper to use those methods in place of
>the records.
>
>I think we would need to see a more detailed explanation of exactly why
>it is that people can't save money today by avoiding keeping records,
>when they could do so if it were impossible to keep records.

I think what's important here is that the risks which are controlled/reduced
by keeping extra information are tied to the payment method(s) selected - for
example, most merchants try to get location/contact information when they
take a check, because there's some risk that the check will be returned
(sometimes in as long as 2-3 weeks) after the customer and the merchandise is
long gone. If checks cleared instantly, this wouldn't be necessary - and I
think merchants would forego collecting this information (they do now, for
physical cash purchases) because collecting it costs extra employee time,
storing/indexing it takes space/time, it annoys customers, and it leads to
some lost sales (where otherwise qualified customers are rejected because
their [lack of] credit/payment history makes them look like a bad risk).

The situation is similar for credit card purchases - the merchant doesn't
need to worry about tracking you down (because they'll get paid anyway, once
the transaction's been approved), but they do need to comply with the
requirements of their bank and the card issuer .. which include, if I
remember correctly, retaining the customer's signature (or notes of phone
authorization) for at least 60 days following the transaction. Big retailers
spend an enormous amount of time/energy/money keeping track of millions of
little slips of paper with people's signatures on them, and now they're
moving to expensive/complex/scary to consumers digital signature capture
systems.

Neither of these databases/filing systems is necessary for cash transactions,
and I can't think of a merchant who's tried to make me comply with them while
making a cash purchase. I don't think merchants are in a special hurry to
keep more information which isn't really interesting to them, anyway. 

So why do merchants take checks and credit cards, if they impose extra costs?
Because physical cash can be more expensive. Physical cash is difficult
because it (1) there's a risk of loss or theft/robbery, (2) keeping change on
hand is difficult/annoying, (3) it doesn't easily integrate with
accounting/inventory systems, (4) it's difficult to deal with in bulk. For
the most part, digital cash doesn't have these problems, but it doesn't have
the risk associated with repudiable payment methods (like checks and credit
cards), so it's not necessary to keep extra information to offset or reduce
that extra risk. 

So that's why digital cash wins, or ought to, if it's deployed before we're
all part of the Borg and privacy is irrelevant. 


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--
Greg Broiles                | US crypto export control policy in a nutshell:
gbroiles@netbox.com         | 
http://www.io.com/~gbroiles | Export jobs, not crypto.
                            |

Greg Broiles <gbroiles@netbox.com> writes:
> example, most merchants try to get location/contact information when they
> take a check, because there's some risk that the check will be returned
> (sometimes in as long as 2-3 weeks) after the customer and the merchandise is
> long gone. If checks cleared instantly, this wouldn't be necessary - and I
> think merchants would forego collecting this information (they do now, for

As usual, Greg the C2Net shill writes total bullshit about things he
knows nothing about.  Try paying cash at Radio Shack, and see if they
ask for your name and address for their mailing list.  I guess Greg
is not the type to buy anything at Radio Shack.  What a fitting
employee for C2Net.

---

Dr.Dimitri Vulis KOTM
Brighton Beach Boardwalk BBS, Forest Hills, N.Y.: +1-718-261-2013, 14.4Kbps

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

At 10:54 PM 5/4/97 -0700, Greg Broiles wrote:
>-----BEGIN PGP SIGNED MESSAGE-----
>
>At 11:42 PM 5/4/97 EDT, Dr.Dimitri Vulis KOTM wrote:
>>Greg Broiles <gbroiles@netbox.com> writes:
>>> example, most merchants try to get location/contact information when they
>>> take a check, because there's some risk that the check will be returned
>>> (sometimes in as long as 2-3 weeks) after the customer and the
merchandise
>is
>>> long gone. If checks cleared instantly, this wouldn't be necessary - and
I
>>> think merchants would forego collecting this information (they do now,
for
>>
>>As usual, Greg the C2Net shill writes total bullshit about things he
>>knows nothing about.  Try paying cash at Radio Shack, and see if they
>>ask for your name and address for their mailing list.  I guess Greg
>>is not the type to buy anything at Radio Shack.  What a fitting
>>employee for C2Net.

I really knew what specific actions caused people to have such a NASTY
opinion of C2net.  I have seen mistakes on their part, but nothing to warrent
the kind and amount of venom I have seen from people.  Maybe I missed
something somewhere...  (Or is this one of those "people who disagree with me
are <fill in insult here>"?)

>I avoid Radio Shack as a general rule, because I haven't been pleased with
>the quality of their products and I find their privacy-hostile behavior
>annoying. But when I have made purchases at Radio Shack, I've had no trouble
>with them if I say "This is a cash sale. You don't need my name or address."

I only go to Radio Shack as a LAST resort.  Every electronic part I have
bought from them has failed.  (Usually before instalation.)  About the only
thing I have ever bought from them that was worth what I paid for it was a
printer cable.

>But I understand you're considerably less courageous in person than you are
>from behind a terminal a few thousand miles away, so it's entirely possible
>that a mousy Radio Shack clerk asking for your name does pose a significant
>threat to your privacy. I had overlooked the "wimpy nerd" problem in my
>earlier message. Thanks for pointing out my oversight. In the future, please
>assume that when I mention a hypothetical consumer, I mean one of average or
>greater fortitude. Perhaps you can find a friend who's not scared of the
>Radio Shack clerks to make your purchases for you?

There seem to be more and more companies that ask nosey questions at the cash
register.  Toys R Us has been asking for a home phone number every time I
shop there.  (And every time I give them a random number.  They just ask for
a home phone munber.  I never say it is *MY* home phone number.)

I suggest memorizing the address and phone number of some local establishment
or business.  (In Vullis's case, the local methadone clinic might be in
order...)  Government buildings, stadiums, massage parlors and the like are
also useful.  When these people start finding out that the data is bogus,
maybe they will stop relying on it so much.  (Learning to lie to sales people
with a straight face it a useful skill.  Something I learned being a
programmer I guess...)

And if you think that is bad, you should hear what I tell the pollsters in
the mall... ]:>

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---
|            "Mi Tio es infermo, pero la carretera es verde!"            |
|"The moral PGP Diffie taught Zimmermann unites all| Disclaimer:         |
| mankind free in one-key-steganography-privacy!"  | Ignore the man      |
|`finger -l alano@teleport.com` for PGP 2.6.2 key  | behind the keyboard.|
|         http://www.ctrl-alt-del.com/~alan/       |alan@ctrl-alt-del.com|

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

At 09:45 AM 5/5/97 -0800, Tim May wrote:
>At 10:22 PM -0800 5/4/97, Alan Olsen wrote:
>
>>I really knew what specific actions caused people to have such a NASTY
>>opinion of C2net.  I have seen mistakes on their part, but nothing to
warrent
>>the kind and amount of venom I have seen from people.  Maybe I missed
>>something somewhere...  (Or is this one of those "people who disagree with
me
>>are <fill in insult here>"?)
>
>This is an easy one. The only continuing insults I see come from Vulis. No
>further explanation is needed.

I have seen the same attitude from Toto and Atilla, as well as a couple of
others.  It is not just Vulis.

>(One wonders why Vulis does not simply program one of his insultbots to
>spew out a daily insult.)

Don't give him ideas...

>I happen to believe C2Net overreacted to Vulis' slur about the quality of
>Stronghold, and I strongly, strongly believe that Sandy S. should not have
>censored the Vulis post while being an employee of C2Net (that is, he
>should have done one or more of the following: let it pass the way so many
>off the wall posts were passed, announce publically what he was doing at
>the very least, recuse himself from the decision due to conflict of
>interest, or, best of all, quit as censor).

I have my own problems with Sandy's actions in that one.  If it had *JUST*
dealt with those things that could not be handled by filters (the spam and
the anon flames), then I would have not had a problem with that.  Instead the
censorship was arbitrary and pretty heavy handed.  I do not agree what
happened, but I resist using the kind of vitrol that others seem to think
neccisary.  I just cannot see the reason for such venom in this case.

>But the C2Net flap is behind us. The continuing claims that it was C2Net
>which instructed Gilmore to remove Vulis are incorrect--Gilmore actually
>receives his instructions from the Elders of Zion, relayed through the San
>Francisco representatives of the Bilderburgers.

I thought it was the Aluminum Bavariati in league with the Build-A-Burger
Conspiracy and the Parisian Metro Gnomes.

Judging by Vulis's posts in the past, I would not trust him for ANY
information.

Vulis uses insults and personal attacks to cause emotional pain to his
percived enemies.  An example of this are his posts about Bruce Baugh.  Vulis
made all sorts of unsavory claims about Bruce that he *KNEW* were unture.  He
did it because he knew that he could hurt Bruce by doing so.  (I know Bruce
very well.  Vulis was lying and it was vindictive.  None of what he said
about Bruce was true.)  What it did was drive Bruce off of the Cypherpunks
list.  I have seen similar incidents from him.  In my view he has a great
amount of negative reputation capitol.  I have a hard time understanding why
people like Toto seem to cut him so much slack.

>As for stores asking for personal info, this is unsurprising. Fortunately,
>one can always refuse to give it, or lie, or just shrug. No laws yet demand
>this information be given (except for sales of guns and other such
>almost-contraband). Stores seek information for marketing, for decisions on
>placement of new stores (which is why zip codes are sometimes asked for),
>etc.

They claim the information is for marketing.  My dislike of marketing people
makes me tempted to give them even more bogus info...  The temptation is
difficult at times.

>"Identity is just another credential in a negotiation."

"Welcome to the Global Village.  You are number six."

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---
|            "Mi Tio es infermo, pero la carretera es verde!"            |
|"The moral PGP Diffie taught Zimmermann unites all| Disclaimer:         |
| mankind free in one-key-steganography-privacy!"  | Ignore the man      |
|`finger -l alano@teleport.com` for PGP 2.6.2 key  | behind the keyboard.|
|         http://www.ctrl-alt-del.com/~alan/       |alan@ctrl-alt-del.com|

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

At 11:42 PM 5/4/97 EDT, Dr.Dimitri Vulis KOTM wrote:
>Greg Broiles <gbroiles@netbox.com> writes:
>> example, most merchants try to get location/contact information when they
>> take a check, because there's some risk that the check will be returned
>> (sometimes in as long as 2-3 weeks) after the customer and the merchandise
is
>> long gone. If checks cleared instantly, this wouldn't be necessary - and I
>> think merchants would forego collecting this information (they do now, for
>
>As usual, Greg the C2Net shill writes total bullshit about things he
>knows nothing about.  Try paying cash at Radio Shack, and see if they
>ask for your name and address for their mailing list.  I guess Greg
>is not the type to buy anything at Radio Shack.  What a fitting
>employee for C2Net.

I avoid Radio Shack as a general rule, because I haven't been pleased with
the quality of their products and I find their privacy-hostile behavior
annoying. But when I have made purchases at Radio Shack, I've had no trouble
with them if I say "This is a cash sale. You don't need my name or address."

But I understand you're considerably less courageous in person than you are
from behind a terminal a few thousand miles away, so it's entirely possible
that a mousy Radio Shack clerk asking for your name does pose a significant
threat to your privacy. I had overlooked the "wimpy nerd" problem in my
earlier message. Thanks for pointing out my oversight. In the future, please
assume that when I mention a hypothetical consumer, I mean one of average or
greater fortitude. Perhaps you can find a friend who's not scared of the
Radio Shack clerks to make your purchases for you?


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--
Greg Broiles                | US crypto export control policy in a nutshell:
gbroiles@netbox.com         | 
http://www.io.com/~gbroiles | Export jobs, not crypto.
                            |

At 10:22 PM -0800 5/4/97, Alan Olsen wrote:

>I really knew what specific actions caused people to have such a NASTY
>opinion of C2net.  I have seen mistakes on their part, but nothing to warrent
>the kind and amount of venom I have seen from people.  Maybe I missed
>something somewhere...  (Or is this one of those "people who disagree with me
>are <fill in insult here>"?)

This is an easy one. The only continuing insults I see come from Vulis. No
further explanation is needed.

(One wonders why Vulis does not simply program one of his insultbots to
spew out a daily insult.)

I happen to believe C2Net overreacted to Vulis' slur about the quality of
Stronghold, and I strongly, strongly believe that Sandy S. should not have
censored the Vulis post while being an employee of C2Net (that is, he
should have done one or more of the following: let it pass the way so many
off the wall posts were passed, announce publically what he was doing at
the very least, recuse himself from the decision due to conflict of
interest, or, best of all, quit as censor).

But the C2Net flap is behind us. The continuing claims that it was C2Net
which instructed Gilmore to remove Vulis are incorrect--Gilmore actually
receives his instructions from the Elders of Zion, relayed through the San
Francisco representatives of the Bilderburgers.

As for stores asking for personal info, this is unsurprising. Fortunately,
one can always refuse to give it, or lie, or just shrug. No laws yet demand
this information be given (except for sales of guns and other such
almost-contraband). Stores seek information for marketing, for decisions on
placement of new stores (which is why zip codes are sometimes asked for),
etc.

"Identity is just another credential in a negotiation."

--Tim May


There's something wrong when I'm a felon under an increasing number of laws.
---------:---------:---------:---------:---------:---------:---------:----
Timothy C. May              | Crypto Anarchy: encryption, digital money,
tcmay@got.net  408-728-0152 | anonymous networks, digital pseudonyms, zero
W.A.S.T.E.: Corralitos, CA  | knowledge, reputations, information markets,
Higher Power: 2^1398269     | black markets, collapse of governments.
"National borders aren't even speed bumps on the information superhighway."

Tim May <tcmay@got.net> writes:

> At 10:22 PM -0800 5/4/97, Alan Olsen wrote:
>
> >I really knew what specific actions caused people to have such a NASTY
> >opinion of C2net.

As if he forgot...

> This is an easy one. The only continuing insults I see come from Vulis.

How would you know, old fart?  You've announced that you killfile me and
a dozen other people who know C2Net for what they are.  Therefore you
can't "see" anything coming from me, unless you're lying again.

> But the C2Net flap is behind us.

Yeah, right.  That's coming from the same individual who didn't object
to C2Net's "moderation" of this mailing list when Cocksucker John Gilmore
announced it, and who also supported Cocksucker John Gilmore's forcibly
unsubscribing me from the mailing list by repeating his lies about
the "volume", not the "contents" of my writings that got my plug pulled,
alluding to the bogus numbers like "50 articles / day" and "megabytes
of Serdar Argic reposts [about the genocide of 2 million Moslems and
Sephardic Jews by the Armenians]".

Timmy, you're a liar.

> As for stores asking for personal info, this is unsurprising. Fortunately,
> one can always refuse to give it, or lie, or just shrug. No laws yet demand
> this information be given (except for sales of guns and other such
> almost-contraband). Stores seek information for marketing, for decisions on
> placement of new stores (which is why zip codes are sometimes asked for),
> etc.

If the Arab terrorist Sameer "Gas All Kikes" Parekh and his obsequitous
lackeys Greg Broils and Sandy Sandfart and their NSA bosses had it their
way, you'd have to show your Federal ID card every time you pay cash and
also record the serial numbers on the notes. (I understand that recording
the serial numbers is the standard practice in some countries.)

---

Dr.Dimitri Vulis KOTM
Brighton Beach Boardwalk BBS, Forest Hills, N.Y.: +1-718-261-2013, 14.4Kbps

On Mon, 5 May 1997, Tim May wrote:

> But the C2Net flap is behind us. The continuing claims that it was C2Net
> which instructed Gilmore to remove Vulis are incorrect--Gilmore actually
> receives his instructions from the Elders of Zion, relayed through the San
> Francisco representatives of the Bilderburgers.

Actually he recieved those instructions from the great Cthulhu himself 
while channeling the same in a fit of glossalia brought on by a diet 
consisting of way too many cypherpunks message of high spam content.
The fact that the very elder gods themselves have directed the hand of 
John in this matter is a very subtle hint at how silly Vulis is.

Why, the great Nyarlatheotep, the great, mad, blind god at the center of the
universe finds Vulis's constant spams a competitive threat to his quest for
chaos which is why he has asked Cthulu to send his minions at toad.com. 

Ia! Ia!  All hail Cthulu. :)

 -- Ray
 High priest of calamari, stir fried, not shaken.

=====================================Kaos=Keraunos=Kybernetos==============
.+.^.+.|  Ray Arachelian    | "So make a move and plead the fifth,   |./|\.
..\|/..|sunder@sundernet.com|  'cause you can't pleade the first!"   |/\|/\
<--*-->| ------------------ |                                        |\/|\/
../|\..| "A toast to Odin,  | For with those which eternal lie, with |.\|/.
.+.v.+.|God of screwdrivers"| strange aeons, even death may die.     |.....
======================== http://www.sundernet.com =========================

At 3:02 PM -0700 5/4/97, Tim May wrote:
>(And such cash systems are almost certainly cheaper for merchants for other
>types of transactions. Getting the money immediately has to be at least as
>cheap as having checks, credit cards, tabs, etc. Obviously.)

An exception may be for businesses like all-night gas stations, where
robbery is a significant cost of doing business.


-------------------------------------------------------------------------
Bill Frantz       | God could make the world   | Periwinkle -- Consulting
(408)356-8506     | in six days because he did | 16345 Englewood Ave.
frantz@netcom.com | not have an installed base.| Los Gatos, CA 95032, USA

On Sun, 4 May 1997, Hal Finney wrote:

> Presumably records are kept to protect against various risks.  Without
> that protection, you need other means to control the risk.  But if those
> means exist and they are cheaper than record-keeping, then again even
> without anonymity it should be cheaper to use those methods in place of
> the records.

Records are kept for (a) tax compliance, (b) as a way of further 
marketting spam that tracks usage/purchase patterns.  Presumably the 
marketting weasels require this info because of their belief that doing 
so will increase sales in the long run.

> (One possible explanation is that it would be a regulatory effect.
> People are forced by the government to keep records, to their detriment,
> that they would prefer not to keep.  With anonymous bearer certificates
> it would not be possible to keep the records so people might hope to
> escape the regulations.  However the problem with this reasoning is that
> the same forces which require the record-keeping would be likely to ban
> the use of instruments which prevent keeping records.)

I'd predict that in such cases mom & pop candy stores and small grocery 
stores wouldn't bother with record keeping, while big huge stores with 
marketting spam budgets would.

Though all things considered some record keeping is needed for inventory 
tracking, employee pay, etc.

=====================================Kaos=Keraunos=Kybernetos==============
.+.^.+.|  Ray Arachelian    | "So make a move and plead the fifth,   |./|\.
..\|/..|sunder@sundernet.com|  'cause you can't pleade the first!"   |/\|/\
<--*-->| ------------------ |                                        |\/|\/
../|\..| "A toast to Odin,  | For with those which eternal lie, with |.\|/.
.+.v.+.|God of screwdrivers"| strange aeons, even death may die.     |.....
======================== http://www.sundernet.com =========================

At 2:19 pm -0400 on 5/4/97, Hal Finney wrote:

> It is hard to understand why a system where it is impossible to track
> payments (Chaumian anonymity) is cheaper than one where it is possible
> to do so, but we choose not to.  If avoiding tracking payments is cheaper
> than tracking them, why wouldn't participants just not bother to track
> them even when they theoretically could?

I believe Greg Broiles and others have answered this sufficiently for now.

I'll vamp a little by saying, of course, that there's no way to tell until
the two methods of digital cash are actually measured. However, I'd, um,
bank, on the Chaumian variety, if the patents were ever unencumbered by
Digicash's unfortunate business model.

I'll also comment on the "information exaust" issue by saying that I agree
with Hal's hypothesis that one of the reasons that the information is there
is because of the non-repudiation requirements of government enforcement.
It behooves marketers to then leverage the cost distortion of the finance
department's data collection engine by adding in, at the margin, a little
additional data for processing. On the net, there will be no requirement
for this. The only people who need to keep books will be the meatspace
net-affiliated banks. The only books kept in putting money on the net or
taking it off, would be an aggregate number at the trustee, and the
withdrawls and deposits of people taking money on and off the net from
their respective personal and business bank accounts. The underwriter and
every transaction on the net, particularly those for information
(everything from music to surgery), do not need any transaction information
storage. A lot of incentive to keep money on the net, over time. Also, the
smaller the transaction size, the more important freedom from transaction
storage becomes. Again, the idea of micromoney "mitochondria", a
micropayment-settlement system for various internet resources, like SMTP,
or even bandwidth, comes to mind.


So, Tim and Ray also have right idea when they talk about how most small
businesses don't need all the information they're forced to collect by the
government for one reason or another. And, again, I claim that the net and
Moore's law creates *dis*economies of scale, probably to the microbusiness,
bot-sized, level, someday. And, the smaller the business entity, the less
information it really needs to operate. As you subdivide a market, the more
you trend towards perfect competition. (Of course, I mean "perfect
competition" in the commodity-price use of the phrase, where one soybean is
as good as any other. Fungible, in other words.) Branded soybeans are an
oxymoron, which is why you can buy and sell futures in them.


Finally, with the most abject apologies to the superior (with a brick, sir)
financial knowlege of Mr. Chrispin, the very best piece of information
about an efficient market for something is its most recent price.

No, I don't think this represents the end of the "marketing concept" as a
business model, but certainly when transaction cycles can be measured in
the microsecond range, a swarm of autonomous entities will probably do a
better job of fulfilling consumer wants than a multi-month top-down market
analysis by an MBA.

Cheers,
Bob Hettinga

-----------------
Robert Hettinga (rah@shipwright.com), Philodox
e$, 44 Farquhar Street, Boston, MA 02131 USA
Lesley Stahl: "You mean *anyone* can set up a web site and compete
               with the New York Times?"
Andrew Kantor: "Yes."  Stahl:  "Isn't that dangerous?"
The e$ Home Page: http://www.shipwright.com/

On Mon, May 05, 1997 at 03:00:09PM -0400, Ray Arachelian wrote:
> On Sun, 4 May 1997, Hal Finney wrote:
> 
> > Presumably records are kept to protect against various risks.  Without
> > that protection, you need other means to control the risk.  But if those
> > means exist and they are cheaper than record-keeping, then again even
> > without anonymity it should be cheaper to use those methods in place of
> > the records.
> 
> Records are kept for (a) tax compliance, (b) as a way of further 
> marketting spam that tracks usage/purchase patterns.  Presumably the 
> marketting weasels require this info because of their belief that doing 
> so will increase sales in the long run.

Speaking of risks, if I have several billion dollars worth of fully
anonymous, fully fungible digital cash sitting on my hard disk, how do
I protect it from loss, theft, or damage? If I encrypt it somehow, and
forget my key, I am out a lot of money.  If the disk is sitting on a 
vanilla computer of some sort, I have to worry about the security of 
the OS.  I have to worry about a disk crash destroying my fortune.  
In short, I have security concerns.

I mention this because one of the costs of cash is protecting it.  
For large sums this cost is non-trivial.  This will be true with 
digital cash as well.

One of the purposes of banks is to provide a secure storage 
infrastructure.  But if you put your ecash in a bank you damn well 
want to be sure that you can get it back, which means that the bank 
*must* have records associating your deposits with you (or your 
nym).

With computers, record keeping is cheap, but security is expensive.  
The cost of securing records is inversely related to the amount of 
public exposure -- the more people know something, the harder it is 
to alter the data.

With ecash you don't have just the abstract value of information as a 
motivation for thieves -- you have real money, and, with current 
computer security levels, an essentially open target, crypto or not.

Therefore, anonymous transactions do have costs that non-anonymous 
ones do not, and this cost differential potentially grows 
non-linearly with the amount involved.

-- 
Kent Crispin				"No reason to get excited",
kent@songbird.com			the thief he kindly spoke...
PGP fingerprint:   B1 8B 72 ED 55 21 5E 44  61 F4 58 0F 72 10 65 55
http://songbird.com/kent/pgp_key.html