-----BEGIN PGP SIGNED MESSAGE----- Tim May said in article <ac6b9e29040210042a10@[205.199.118.202]>:
he sells its assets to his own identity at a fraction of their worth, and defaults on the liabilities. ^^^^^^^^^^^^^^^^^^^^^^^^^^^ .. ideally, one never "trusts" an agent with a transaction greater than the value of the reputation capital he will lose if he defaults. .. Whether cryptographic protocols (cf. the "encrypted open books" proposal by eric Hughes for one approach which may be useful) solve this problem is not known at this time. But the non-crypto world has of course not solved this
At 11:32 PM 8/31/95, Scott Brickner wrote: .. problem, either.
I've often thought that in a system of digital pseudonyms, where no-one need trade with a negative reputation (a reputation deficit?), something like Akerlof's Market for Lemons will arise, and _all_ pseudonyms will be treated as (reputationally) worthless. [Akerlof, if I remember my economics right (and I am confident that I will be corrected if I don't) analysed a market for used cars. There were two types of cars: good ones, and lemons. A purchaser couldn't tell the difference until she had bought the car. Since the expected value of a used car was less than the value of a good car, purchasers wouldn't pay the good car price. But that would mean owners of good cars wouldn't offer them for sale (in this market). So the only cars for sale would be lemons :-)] As Tim points out, this is a non-crypto problem as well, and devices such as bonds or (which are game-theoretically similar) expensive advertising or plush premises [if they spent an unrefundable $20million on the Rolling Stones, they're not likely to throw it all away by ripping you off for $100 ;-)] are used to convince potential customers of one's bona fides. How these transfer to the world of cyber-finance, I'm not sure, but I suspect it leaves a role for True Names in the management of credit risk: as escrow agents, middlemen, clearing houses etc. [Although, having said that, if the Akerlof analysis applies, you just *can't* grant (unsecured) credit to pseudonyms - the percentage of defaulters will be 100...] But these Names are True only in the sense that they are juridically persistent (that is, if they transact today, they can be sued tomorrow), and need not be traceable to any True People (Warm Bodies?) - anonymously held corporations, for example. If you can't rely on the unsecured promise of a digital pseudonym, and you can't accept reputation as 'security', how do you extend credit? Dm -----BEGIN PGP SIGNATURE----- Version: 2.6.2 iQCVAwUBMEd+81lo3j8JHzalAQFo0AQAkohUuFg6QwRaY7X5LwF1YXCby1uCKQmI FfmQHmEa55oeht9Vc4DN1V+dIGjVWRIxS3ib/oRYsXY9HWo8pI3gMKhbnsBf3OzN jVuoUR8Tgx1HcX59uBjbpxKNHFw5U4gPN70zvbLJhbw1UHWr24tq5RJri22coCh7 1Dm016RMHns= =rl4c -----END PGP SIGNATURE-----