--- begin forwarded text Mime-Version: 1.0 X-Sender: rah@pop.sneaker.net Date: Mon, 19 Oct 1998 11:20:38 -0400 To: dbs@philodox.com From: Robert Hettinga <rah@shipwright.com> Subject: dbts: The Economic Cause of Privacy Sender: <dbs@philodox.com> Precedence: Bulk List-Subscribe: <mailto:requests@philodox.com?subject=subscribe%20dbs> X-Web-Archive: http://www.philodox.com/dbs-archive/ -----BEGIN PGP SIGNED MESSAGE----- At 7:45 AM -0400 on 10/19/98, Anonymous forwarded this to the dbs list:
It's just another financial privacy rant, though a relatively decent one. It's from J. Orlin Grabbe, who was at FC98, BTW. When I met him at S&PBank's party at Cap Julaca, he seemed like a nice, though fairly intense, guy. Financial privacy *makes* you intense, I suppose. Nonetheless, like all financial privacy rants, Orlin's reverses cause and effect, but it's not really his fault. Remember, the reason we have no financial privacy these days is because we have book-entry settlement, which relies on biometric identity, known physical location, and the force of a nation state as the ultimate "error-handler" to prevent repudiation in the transaction protocol. The reason we have book-entry settlement itself is because it is several orders of magnitude cheaper than physical delivery of paper bearer certificates. The *only* way to have financial privacy in a book-entry world is to engage in the financial equivalent of steganography, which, no matter how financially and legally facile -- even elegant -- it is, at the margin it costs more to hide money than not to. It will always cost more in a book-entry economy, and for structural reasons. Worse, most of these accounting and legal gyrations are just plain old security by obscurity, something most crypto-clueful people learn, fairly early on, to treat with the utmost scorn and derision. If my hypothesis is right, and digital bearer settlement is significantly cheaper than book-entry settlement, say three orders of magnitude cheaper, then financial privacy will be the default state of affairs sooner or later. It will actually cost *more* to keep transaction records and the physical location of economic actors than not to. No amount of physical force, much less law, accounting, or "policy", will change that physical, economic, fact. A fact which every economic actor, from the smallest proprietor to the largest nation state, will end up ignoring at their peril. The reason digital bearer settlement will be faster, and thus cheaper, is because the cryptographic protocol breaks before the transaction can. Unlike a book entry protocol, where you can execute a trade and then renege on it later, causing bounced checks, charge-backs, broken trades, DKs and the like, software using a digital bearer protocol can execute *only* if both parties cannot renege on the transaction in the first place. One of the best guarantors of that inability to renege is, paradoxically, cryptographically certain anonymity. Immediate and final clearing and settlement means that you tend not to care who you've done business with in the first place, but cryptographic anonymity not only makes the transaction stronger and safer, it is the very enabling technology of the process, the thing which makes digital bearer transaction settlement the fastest, and, systemically, the cheapest transaction technology to use. Again, it's just like air travel. You can go very fast on land, much faster than it takes to fly even without wings, as sound-barrier-breaking speed records show us. But, the physical, economic fact is, people can travel the fastest and cheapest over the longest distances when they fly, so that's what they do. They don't fly just because the view's nicer, or, as I've joked before, "to slip the surly bounds of earth". And, most important, this economic reality, that economics ultimately determines a technology's use, is true no matter what the intent is of any airplane -- or bearer protocol -- designer. The cost of anything is the foregone alternative. One of costs of book-entry settlement is privacy, surely, but in a world of strong financial cryptography and ubiquitous geodesic networks, the primary cost of book-entry settlement is wasted time and computing resources. Costs which will eventually force the adoption of digital bearer transaction settlement, giving us ubiquitous financial privacy -- and freedom -- as a result. Effects of our technology, in other words. Not its cause. Cheers, Bob Hettinga -----BEGIN PGP SIGNATURE----- Version: PGP for Personal Privacy 5.5.5 iQEVAwUBNitXcMUCGwxmWcHhAQHApAf/f1mtuoqig0dsyOa6d5n39N4O8EmCykST eF2+s+cDP6Nur4KZ8PdFXczfQIBot3Hn7NYWR1cUwvuxE2yJJSBDLKd3MK7ubQey qyLtRA8Z033q2OqUmMIc3v62QrtusBO1Xbbdgx800Z5IyuwlprfN6VPcaNpTzIl6 zmdS8KLjj1z2I/C0gi715cyQ/X9y11FHrgvXmF/7HTcbH+mtxQHxxl44DrbqVPBQ XTPU09+1UpVirhIq7KQgSAXD+GFNsr5LGSRVsdtXGQJy8mbSkmsMMOrVOG32yqa9 Ual0RqEC7ELQQLWx+86g7f5loNJEQzgTggYOGZs0AIIZJPUG1WnvAw== =PqXA -----END PGP SIGNATURE----- ----------------- Robert A. Hettinga <mailto: rah@philodox.com> Philodox Financial Technology Evangelism <http://www.philodox.com/> 44 Farquhar Street, Boston, MA 02131 USA "... however it may deserve respect for its usefulness and antiquity, [predicting the end of the world] has not been found agreeable to experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire' --- end forwarded text ----------------- Robert A. Hettinga <mailto: rah@philodox.com> Philodox Financial Technology Evangelism <http://www.philodox.com/> 44 Farquhar Street, Boston, MA 02131 USA "... however it may deserve respect for its usefulness and antiquity, [predicting the end of the world] has not been found agreeable to experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire'