At 12:57 PM 8/28/94 -0700, Hal wrote:
hughes@ah.com (Eric Hughes) writes:
One solution is clear and direct: charge for each redemption attempt. In that situation, multiple attempts get rejected, and the issuer is recompensed for the attempt. No morality need be invoked.
The problem is, the fraud doesn't occur (typically) when the note is redeemed at the bank, it occurs when the note is exchanged at the market. Is this proposing to charge the merchant when he in good faith turns in the cash which was given to him by the customer, and it turns out bad? What cruel irony! Here he is already cheated once, and the bank will charge him an extra fee as additional punishment?
I must be misunderstanding. This seems not to deter double-spenders at all.
The more I think about this, Eric, the more I think I caved in too early. Can you explain exactly how charging a back-end load on a digital cash certificate prevents double-spending?
There remains an issue as to the size of this redemption fee, which would have to be small. In order to optimize the transaction costs of charging this fee, a bank might be willing to accept identity in escrow for the transaction and to remove the fee for good transactions. Identity might be a pseudonym revealed after 10 bad attempts, say. This system removes the requirement for identity and substitutes it for an economic optimization based on identity.
This reminds me of the previous discussion of holding a person's cash bond hostage for good behavior. In this case, you're holding unencumbered redemption rights hostage and reducing transaction costs in relation to the person's relative risk. I think I get it now. I sort of took it on faith before, but I'm not so sure all this is necessary, see below.
Here I am lost completely. Whose identity is in escrow? The person to whom the coin is given in the first place? But I thought we were referring to a double-spending protocol in which users revealed their identity to the bank. Apparently not? Is the idea here that the bank doesn't know the user's identity, but some other escrow holder does, and it gets revealed only if the user double-spends 10 times? But that would still be identity-based, just with different rules about when it gets exposed. I really don't follow this at all.
I think that the business model I've been proposing may handle this a bit. In order for someone to cash out, they need to be able to speak to an ATM machine, which implies a bank-acceptable identity (whatever that means). It allows for nyms to trade offline, and it banks on being able to catch the nym by police work (Ace Ventura, Nym Detective!) if a "self-credentialed" nym double spends. Since most fraud schemes require a nym to do it, web-of-trust stuff would have to apply in the case of transactions with nyms. It's ugly, but it should work.
To me, there is no problem with revealing identity in certain situations as long as it is unlinkable to my other activities.. And I will be much more willing to lend credit or other forms of trust to pseudonyms if I know that they are willing to pay the ultimate price of punishment to their own very physical bodies if they cheat me. What more assurance could I want? And yet, as long as all parties are honest, we have no fear of our identities being revealed against our will.
I'm pretty sure I'm a little more loosey goosey about this. I think that there may be enough of an enforcement mechanism even if nyms remain completely anonymous. Cheers, Robert Hettinga ----------------- Robert Hettinga (rah@shipwright.com) "There is no difference between someone Shipwright Development Corporation who eats too little and sees Heaven and 44 Farquhar Street someone who drinks too much and sees Boston, MA 02331 USA snakes." -- Bertrand Russell (617) 323-7923