From: IN%"nsb+limbo@nsb.fv.com" "Nathaniel Borenstein" 6-DEC-1995 07:21:19.03 I had assumed that there was a market discount, but it's still not quite that simple. It's very hard for markets to deal with *unbounded* risk. The biggest problem I see with most of the crypto-cash schemes is that there is a legitimate scenario -- however low-probability you might assess it to be -- of break-the-bank catastrophic failure, i.e. in which someone gains the keys that allow him to essentially print money. This kind of low-probability, infinite-cost risk is the kind of thing that gives underwriters the heebie jeebies. There's a good reason that most companies have "Ltd" after their name instead of "Unlimited", in those countries where that's the naming convention. -------------------------- The risk in question is not infinite-cost. If the person who gets ahold of the keys starts simply making lots and lots of money, in a free market the prices in digital cash for everything will start going up. This phenomenon will be spotted, and those taking the particular variety in question will stop accepting it. Losses are limited to however much was out there at a given time, and if there are multiple systems with free-market interconversion between them, that may not be very much. People will move out of a decaying monetary system if: A. the new system is as easy to get as the old; and B. the new system is as easy to spend as the old. If the person who gets the keys simply uses them on a small scale, then the resulting inflation and loss of value can simply be dealt with using the discount mechanism. It's no longer infinite risk. -Allen