--- begin forwarded text Date: Fri, 29 Aug 1997 13:18:43 -0400 (EDT) To: e$@thumper.vmeng.com Subject: The Information Silk Road Cc: rah@shipwright.com, "R. Jason Cronk" <rjasonc@pobox.com> From: Ted Anderson <ota+@transarc.com> Sender: <e$@vmeng.com> Precedence: Bulk List-Software: LetterRip 2.0 by Fog City Software, Inc. List-Unsubscribe: <mailto:requests@vmeng.com?subject=unsubscribe%20e$> List-Subscribe: <mailto:requests@vmeng.com?subject=subscribe%20e$> -----BEGIN PGP SIGNED MESSAGE----- Subject: The Information Silk Road In this note I criticize recursive auction markets as a good model for the global market in public information. Instead I suggest an agent based model where data merchants compete to be suppliers of information to clients based almost entirely on value they above and beyond the value of the information itself. I ignore issues of data ownership and data privacy. I realized that e$ is perhaps not the best forum for this message and welcome redirection to a more appropriate venue. The Information Silk Road I would like to draw a distinction between trading in digital services and trading information. There are interesting proposals to use market-based mechanisms to manage computer resources such as memory and CPU cycles[1] or network bandwidth[2]. Attempts have been made to extend this idea to trading information, such as the recursive auction market[3]. While the similarities between computer resources and the material world are close enough to make market-based ideas quite successful, I don't think the same is true for markets in information. Differences stem from the fact that information can be copied with perfect fidelity and essentially zero cost while both physical commodities and computing resources are strictly limited in quantity. - From another point of view, the problem is that the responsibilities of ownership are different. Market-based mechanisms work by clearly identifying an owner for each resource. The owner (in computational contexts this is usually a software agent) then tries earn enough income from its asset to pay expenses. The job of the owner is then to avoid overuse (the tragedy of the commons problem) and underuse. However, with information, overuse is impossible (maximizing the use of information is actually beneficial to general good) and only underuse is a risk. Underuse of information can even lead to a problem not shared with other limited commodities, it may be lost altogether. Practically speaking there is another difference between computer resource commodities and information products. For example, any memory page can be sold to a software agent and numerous agents will compete for a fixed pool of identical pages. However, while I can endlessly replicate a piece of information, each customer won't need more than one of each datum. While different agents may occasionally request the same piece of information, this is often rare. Partly this is because a even small cache near the customer will mean that the server only gets a single request from each cache miss, not from each customer request. Therefore, an information seller must stock a huge selection of data and only expect a very tiny fraction of them to be to be in high demand. Still, I would like to see both the digital silk road (markets for computer services) and the information silk road (markets for data) built. I am particularly interested in the design of the data merchants that will be the traders on the information silk road. Recursive Auction Market A useful contribution of the recursive auction market idea is that it denigrates to concept of information ownership. While ownership of information may still be useful to prevent valuable information from disappearing altogether (by being replaced in every supplier's inventory by more profitable data) it has nowhere near the standing of ownership of finite commodities. The recursive auction market idea assumes that data in high demand would propagate from suppliers or intellectual property producers, through intermediate distributors, to consumers as fast as the network could carry it. At each stage the data is auctioned to the highest bidder who must factor into his bid price the network transfer charges[2] and his ability to further resell it. As the data is distributed, the rarity premium available to early sellers disappears, leaving only the basic network delivery costs. These auctions require multiple simultaneous buyers. However it would seem that this would be a very unusual case. Except for a few extreme cases, the market for data will consist of multiple buyers spread out in time. This means that a significant expense of the seller is for the storage of the data between buyers. This storage rental must be factored into the data's price. This is a hard cost that depends on the interval between requests of each piece of data. Rarity, and the premium it adds to the price, is usually an ephemeral, even self-defeating, property of data. This suggests that an auction is not a good general paradigm to use for trading information. Data Merchants A better model of the information silk road has a large population of data merchants spread throughout the network. Their mission is to maintain an inventory of data in anticipation of being able to resell it profitably at a later time. Viewed individually these data merchants provide a data caching service. While viewed collectively, the information silk road is a replicated data storage facility[4]. So what services can a data merchant offer which customers might be willing to pay for. In other words, how can they add value. Locality. Assuming some distance (as the packets fly) sensitivity to network transport charges, data will be cheaper from a local supplier than from a distant one. This means that a merchant can pay the transport charges to obtain the distant data once and attract local buyers by charging less than it would cost them to fetch it from a remote source. As long as there are multiple local buyers and the data storage costs incurred between requests is small compared to the differential between remote and local network transport charges then the local vendor can turn a profit. Authoritativity. For small data, where the cost of transferring the data is comparable to the cost of requesting it, it will be useful for a client to pass its requests to a single merchant and expect a high probability of obtaining the data. Without consulting an authoritative source the client will potentially have to contact many merchants before finding the data it seeks. Unless the data is large this cost may dwarf the actual transfer cost. Being an authoritative source does not have to be a global property, but might apply to narrowly defined types of data: hostname to IP address mappings, perl scripts, or Cypherpunks messages. Being authoritative depends upon the data merchant maintaining a persistent reputation. Interestingly an authoritative source doesn't actually have to store any data, it may operate purely as a locator service. Speed. Some data merchants may strive to provide data rapidly but spending more on rotating media, doing more aggressive prefetch and caching, and having bigger servers and network connections. For some customers and some data, paying a premium for speed could be quite desirable. Anonymity. Guaranteeing privacy for a client's requests could be an attractive option. This is an other feature that would depend upon the merchant maintaining a good reputation. [1] Mark S. Miller and K. Eric Drexler, "The Agorics Papers", http://www.webcom.com/~agorics/agorpapers.html. [2] Norman Hardy and Eric Dean Tribble, "The Digital Silk Road", http://www.webcom.com/~agorics/dsr.html. [3] http://www.transarc.com/~ota/RecursiveAuctionMarket.txt [4] eternity data storage service -----BEGIN PGP SIGNATURE----- Version: 2.6.2 iQCVAwUBNAcEPgGojC9e/wyBAQE0QAP+IGeBTV4WAOG2IlP+ACh8PXShQdAe4bph 4HNPZt6HD8shdHrqgbtl4j1GXOa9VLrYtuhgoPdLAFQHTz/W3jQ+eVVJoCwUsQ0a oMYJB2gwSbRB7jFzTaWNE8n3DO42m49SPiys3jCuAg2GSteA+ar9cLWNIPClqLWw 8jkrjKjP7MI= =PltB -----END PGP SIGNATURE----- --------------------------------------------------------------------- Where people, networks and money come together: Consult Hyperion http://www.hyperion.co.uk info@hyperion.co.uk --------------------------------------------------------------------- Like e$? Help pay for it! See <http://www.shipwright.com/beg.html> Or, for e$/e$pam sponsorship, <mailto:rah@shipwright.com> --------------------------------------------------------------------- --- end forwarded text ----------------- Robert Hettinga (rah@shipwright.com), Philodox e$, 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' The e$ Home Page: http://www.shipwright.com/