-----BEGIN PGP SIGNED MESSAGE----- Hash: SHA1 Vamping on Adam's post a little more... At 2:50 AM +0100 4/26/03, Adam Back wrote:
Another bad aspect of identity is that it afects usability -- everyone has to be a registered and identified user at the bank to participate, even if they allow accountless operation just to meet the offline double-spending system.
This is bad for functionality as you'd like to be able to fully participate without ever registering with or identifying yourself to the bank.
My thinking about this has been that net-originated non-identity-linked self-signed ssh-style keys work better for internet bearer transaction methods like Chaum's blind signature protocols, and that, for the sake of security at least, they shouldn't be associated with the book-entry account/PIN/Password/SSL-PKI-Key required to convert an asset from book-entry form to internet bearer form. The result is, not-coincidentally, lower risk-adjusted transaction cost in the conversion of those assets form book-entry to bearer form, and, yes, the conversion is an identified one, because of the phase change between protocol-enforced and law-enforced financial operations. However, only to convert money into a bank-account balance, for instance, does one need to be identified to the financial system, which only makes sense, because that data is required to prevent transaction repudiation there. The result of independent self-signed keys is that people without accounts in the book-entry transaction system can still safely buy and sell digital goods on the net, at least, because the system, while using keys, is inherently accountless. It also grows an economy that can only reside on the net, which is desirable for lots of reasons. These tokens have to be moved on and off the net easily, and, more important, they have to be able to be *reserved* in book-entry form at the outset anyway. Notes, coins, whatever, are redeemed for dollars, for instance, transferred to your bank through the ACH system, or gold through GoldMoney/e-Gold, or equity through a securities depository, or whatever. Otherwise, they're meaningless, financially. Financial instruments have to be fungible *and* exchangeable or they don't exist, and the only other financially useful things to exchange them into, dollars in a bank or the PayPal system, for instance, are off-the-net book-entry assets. So, in the early stages of an internet bearer economy, we're looking at notes and coins that move around the net almost exactly the way that physical notes and coins do. People withdraw cash from a book-entry account, spend it on the net using different protocols than the ones they used for withdrawal, earn it with the same protocol they spent it, and deposit cash using the same way they withdrew it. The same can be said for bearer financial transactions, except that "cash" would be replaced with some kind of depository receipt (Steve Schear and I came up with "Unsponsored Network Depository Receipt" one afternoon on the phone), and "spend" would be replaced with "trade". At some point, an entirely bearer market evolves, with bearer assets (don't say it fast...) backed up by and exchangeable into other bearer assets, just like we do with book-entry assets now. A direct-to-the-net bearer bond issue would be underwritten by some financial entity on behalf of a borrower without needing to float a book-entry issue and then creating depository receipts to be held in internet bearer form. At that point, connections to existing book-entry systems would become as vestigial as capital market book-entry system connections are to physically delivered bearer certificates these days, in the same way that whole issues of stock are currently traded in book-entry form, but technically "owned" by a single firm, with a single certificate in a vault at the Depository Trust Company, for instance. Cheers, RAH -----BEGIN PGP SIGNATURE----- Version: PGP 8.0 - not licensed for commercial use: www.pgp.com iQA/AwUBPqqQUcPxH8jf3ohaEQKW7QCfQgMhjNl11jc05vekRKS1/3PYn0oAn3bZ SsoEw3L3ImvAD5KxBTXPjRuY =W+n5 -----END PGP SIGNATURE----- -- ----------------- R. A. Hettinga <mailto: rah@ibuc.com> The Internet Bearer Underwriting Corporation <http://www.ibuc.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'