On Thu, 31 Aug 1995, Timothy C. May wrote:
You don't have to look to death and inheritance for this problem to crop up. Similar situations arise when:
But these are problems of fraud that the criminal and civil justice systems already comprehend. I think what is posited is something a bit more unique.
- a pseudonym simply decides to dissolve the current pseudonym and shift focus to another pseudonym (perhaps transferring a bunch of assets, then simply vanishing and leaving "no forwarding address')
(This is of course the basis of any number of scams and "boiler room operations." Crypto does not completey eliminate scams like this, and, in fact, generates some new kinds of scams.)
- this is also a well-known problem with any services that handle money, valuables, etc. For example, the money courier who vanishes to Rio de Janeiro.
I don't think bonding is applicable in this posit, given the assumed established creditworthiness of the original anonym. Perhaps he originally posted a bond, but the market would probably have dispensed with that condition as an unnecessary formality at some point in his glowing credit history. MacN
This is one thing that _bonding_ is designed to partially ameliorate. One posts a bond which is greater than the amount being carried, or at least is some large amount. (Calculations are complex, and various agencies may have various policies, depending on other reputation factors.)
Since the anonym behaved reputably during its life, it developed what would have been a credit-worthy reputation, had it been a (traceable) pseudonym. But, since there's nothing to link the anonym to its heirs (or ancestors), the creditors of the anonym must eat the loss.
The concept of "reputation capital" is a critical one.
ideally, one never "trusts" an agent with a transaction greater than the value of the reputation capital he will lose if he defaults.
There are still scams and manouvers to thwart this reputation capital scheme. The agent planning to "defect" (default, split, abscond, renege, etc.) can try to pile up as many pending transactions as possible, anticipating that the various transactees will be unaware of each other. (This of course happens in real life.)
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 problem, either.
...
A market which permits anonyms to have credit based on reputation will probably have a constant stream of defaults caused by such behavior, representing a significant risk factor in extending credit to anonyms which can't be predicted by reputation.
Comments?
Lots of issues need to be thought about. My hunch is that economists, game theorists, and scam artists will all discover digital money and pseudonyms and will explore various aspects of this situation.
I devoted a pretty big chunk of my Cyphernomicon to these "darker sides" of anonymity, of reputation capital, and suchlike. By no means did I cover all the issues of "crypto anarchy," but I suggest interested folks take a look at the chapter on crypto anarchy for more discussion.
--Tim May
---------:---------:---------:---------:---------:---------:---------:---- Timothy C. May | Crypto Anarchy: encryption, digital money, tcmay@got.net 408-728-0152 | anonymous networks, digital pseudonyms, zero Corralitos, CA | knowledge, reputations, information markets, Higher Power: 2^756839 | black markets, collapse of governments. "National borders are just speed bumps on the information superhighway."