The Bank of the Internet!? (fwd)
No, I didn't read this entire message, but I thought it may be relevant... Forwarded message: *> From dummy Wed Feb 29 12:12:12 1990 *> X-EB: ------------------------------ *> Date: Fri, 8 Oct 1993 16:01:46 -0700 *> From: Arthur Chandler <arthurc@SFSUVAX1.SFSU.EDU> *> Subject: The Bank of the Internet!? *> *> Yesterday I went to hear a very interesting talk by Eric Hughes, one of *> the founding members of the Cypherpunk list/organization. Unlike most *> encryption pop journalists, who seem to limit themselves to PGP, this *> fellow brought up several boggling ideas: *> 1) "Cryptography is all economics." *> In other words, all encryption schemes come down to: how much $ am I *> willing to spend to keep you from getting into my secret info, and how *> much $ are you willing to spend to get it?" *> 2) There are two methods to keeping secrets on the NET (or IRL): trust *> some one, or trust an algorithm. And, in general, human trust is cheaper *> than technology. *> 3) The US government classifies encryption schemes as munitions, and is *> accordingly places all encryption technology under export restrictions *> controlled by the state department. *> 4) Claude Shannon's two basic principles of encryption: confusion and *> diffusion. *> *> He also mentioned something called a "blind signature" -- a special form *> of digital signature that keeps users unknown (through encryption) to both *> the bank they deposit with and sellers they transact with. I didn't *> understand this "blind digital signature" idea. Can anyone out here explain? *> *> But the real boggler is that this fellow Eric is, with the backing of *> the Electronic Frontier Foundation, going to start a Credit Union based on *> up-to-date encryption schemes and using the Internet as the monetary *> highway! It involves using something called digital money -- a system of *> encrypted data that expires over time, but that a highly flexible ability *> to purchase quantities or services. The data itself will be located *> over several nodes, so that no one site has all the info about your *> account, but that any "quorum number" of bank nodes can reconstruct the *> whole picture of your assets. Anyone trying to crack the system would *> have to crack, not just one or two nodes, but a quorum number. Such nodes *> will be distributed internationally, though favoring nations with *> encryption-favorable legislation. *> ************************************** *> I'm oversimplifying all this. But the whole notion of a Bank of the *> Internet, backed by the EFF and running encrypted international monetary *> transactions seems... well, this is Future Culture: what do you think? *>
Zeek forwarded a message written by Arthur Chandler which appears to have appeared on Future Culture. This reply is going both to the cypherpunks list (worldwide) and also to the austin-cypherpunks list (a locality); some comments may be obvious for one group or the other. There are several small factual details incorrect in this post, most of which I will not try to correct. As he said, "I'm oversimplifying all this." One in particular, though, should be. The EFF is not "backing" a credit union, at least not the national organization. Members of EFF-Austin, a local chapter of the EFF, (well, the only local chapter, but that's another story) are looking to form their own credit union. Their efforts will provide a model for other such efforts. True, it will use the "internet as the monetary highway" (a phrase I delight in), but at least at the outset will neither issue digital money nor deploy internationally distributed secret sharing. I did talk about both of these, but not as specifically regards any particular financial project. Eric
It's quite a jolt, to see one's post on one list (FutureCulture) pop up on another list (Cypherpunks). Well, it pays to stay networked. :<) I understand -- and believe I stated in the post -- that all these efforts seem to be in the future conditional tense (or is it future optimistic tense?). But I'll repeat what I mentioned to Eric at the meeting: It jarred me to see someone so blithely planning to enter into the world of international finance from an essentially "outsider" frame of reference. As impressed as I was by the range and depth of Eric's understanding of the technical aspects of encryption, I have the feeling that setting up such a revolutionary scheme -- which would threaten both traditional banking enterprises and the governments that monitor and tax them -- is bound to encounter opposition much more massive and sophisticated than he indicated. To be fair, he could only talk about the high points of his plans in the context of the afternoon talk. But I kept having flashbacks to the1960s and 70s, when counterculture groups laid intricate plans to overwhelm or endrun "the system." Put bluntly, any plans to enter international finance without a substantial component aimed at lining up political and traditional financial clout seems to me to be doomed to the dustbin of visionary schemes. After the smoke clears, we are far more likely to see Chase Manhattan with a platoon of hired cryptologists than EFF or Cypherpunks wheeling and dealing on a global scale. That's my &v$>{/! worth. <--- Encrypted digital $.02
Arthur Chandler writes:
Put bluntly, any plans to enter international finance without a substantial component aimed at lining up political and traditional financial clout seems to me to be doomed to the dustbin of visionary schemes. After the smoke clears, we are far more likely to see Chase Manhattan with a platoon of hired cryptologists than EFF or Cypherpunks wheeling and dealing on a global scale.
I think that somehow you have acquired a rather distorted impression of what is actually being proposed, at least here in Austin. Also, I think you are rather underestimating the knowledge and experience of the participants. When Eric came out here to be a guest speaker at our EFF-Austin crypto conference, we had been corresponding since last spring on the topic of establishing a fully digital Credit Union. I had planned to spend the summer working on it, but I got roped into creating Illuminati Online. Although things had been on the back burner, I had continued to do legal and regulatory research, make contacts, visit Credit Unions and talk to their staff, etc. Credit Unions have an interesting history and philosophy that places them somewhere between an "outsider" movement and an "insider" movement. They are legal (obviously), but can be started by any reasonably large group or combination of groups of like-minded individuals in a geographical area. They are non-profit, member-controlled financial institutions that nowadays are permitted to offer the same range of banking services as a "bank." Many successful ones started from extremely modest beginnings. I get the feeling you think that we are going into this blindly or naively. In the process of researching this project, I have consumed over forty hours of pro-bono legal time from a local lawyer, and have spent about as long reading the relevant laws and regulations myself. I know that Eric has certainly done even more legal research in this area than I have. Eric's crypto research at the moment is heavily focused towards financial transactions; I worked in banking MIS for three years. I have an offer from the CFO of the largest CU in Austin to act as an advisor. At the moment we are beginning the process of surveying members of local groups and employers in the high tech field to see if they are interested in being part of the field of membership of a fully digital Credit Union. We had our first Austin cypherpunks meeting yestereday, and it's clear that they will be the core of the new CU. I don't deny that the venture faces serious obstacles (writing software, putting together a field of membership, starting operations, etc.) Certainly it could fail, and end up on the "dustbin." I think that compared to many of the schemes that have been proposed on this list it is a good middle-ground approach. If other, similar Credit Unions are established, it would be the beginning of a national network that could pool resources for the purpose of creating or embellishing software and purchasing third-party services. This proposal is not about "wheeling and dealing", but rather about providing high-quality, secure banking services to average people, delivered by a democratic, member-centered institution. This may sound like some fantasy out of the 60's, but it's actually a extension of a fantasy out of the 19th century that has taken root all over the world. Also, I would like to emphasize, while these institutions are dedicated to the establishing of new or modified digital transactions, they are not intended, in any way, to break the law, avoid taxes, or push what I can't help but think of as the "Tim May .sig agenda" outside the bounds of the law. Many of us believe in aspects of that agenda, but this is an approach to push the envelope from the legal side. Doug -- ---------------- /\ Douglas Barnes cman@illuminati.io.com / \ Chief Wizard (512) 448-8950 (d), 447-7866 (v) / () \ Illuminati Online metaverse.io.com 7777 /______\
Doug Barnes writes:
Also, I would like to emphasize, while these institutions are dedicated to the establishing of new or modified digital transactions, they are not intended, in any way, to break the law, avoid taxes, or push what I can't help but think of as the "Tim May .sig agenda" outside the bounds of the law. Many of us believe in aspects of that agenda, but this is an approach to push the envelope from the legal side.
And I think this is a wise thing to do. I comment these folks for pursuing this, all the more so becuas a "credit union" is not the sexiest thing I can think of (not compared to data havens at least). But it'll be the solidly middle class apps like digital credit unions that wil help further colonized cyberspace (and cypherspace). Meanwhile, I'm fairly "out" about my crypto preferences, and intend to continue talking about crypto anarchy. I'm sure you folks wouldn't want it any other way. Good luck! -Tim (infamous .sig follows) -- .......................................................................... Timothy C. May | Crypto Anarchy: encryption, digital money, tcmay@netcom.com | anonymous networks, digital pseudonyms, zero 408-688-5409 | knowledge, reputations, information markets, W.A.S.T.E.: Aptos, CA | black markets, collapse of governments. Higher Power: 2^756839 | Public Key: PGP and MailSafe available. Note: I put time and money into writing this posting. I hope you enjoy it.
Arthur Chandler <arthurc@crl.com> writes:
It jarred me to see someone so blithely planning to enter into the world of international finance from an essentially "outsider" frame of reference. [...]
Put bluntly, any plans to enter international finance without a substantial component aimed at lining up political and traditional financial clout seems to me to be doomed to the dustbin of visionary schemes. After the smoke clears, we are far more likely to see Chase Manhattan with a platoon of hired cryptologists than EFF or Cypherpunks wheeling and dealing on a global scale.
It has to start somewhere pal. We are trying to start something small for a specific reason (at least I am, I do not presume to speak for Doug or the other cypherpunks working with us on the austin digital credit union): We want to be the ones who will define the protocol for currency on the net. We have specific goals regarding privacy and security which may be at odds with certain members of the traditional finance power structure. If you know anything about how network protocols really come into being it is because someone actually goes out, does the damn coding, and then people refine that work later. We want to score first so that others are forced to follow our lead, it only takes a small push at the beginning to determine the course of certain phenomena. I could care less if eventually the Citicorps and Chase Manhattans enter our arena and provide real banking services to the net. In fact, I one day hope to pitch them on that very idea. The point of our work down here is that we want to define the currency. We want to make it secure, private, and anonymous. What kind of standards your future net.bank may have on transaction records and other items relating to the net currency is between you and your bank, I want to make sure that the currency itself gives the possiblity for the highest possible levels of these "cypherpunk qualities". We are staring small and have no real plans on becoming future banking powerhouses (The Gnomes of Austin perhaps... :) but we would rather it be us who define the standard than Chase Manhattan or the US Government. jim mccoy
Jim McCoy says:
We want to be the ones who will define the protocol for currency on the net. [...] We are staring small and have no real plans on becoming future banking powerhouses (The Gnomes of Austin perhaps... :) but we would rather it be us who define the standard than Chase Manhattan or the US Government.
I don't care for the Government, but I suspect that Chase Manhattan has a much better idea of the problems involved in cash transfer and accounting systems than you guys do. People who've never worked for financial institutions rarely understand where the real problems are. I don't mean this to be patronizing -- I have a good deal of respect for the smarts of people like Eric Hughes -- but its simply the truth. I remember the first time I did some research into back office systems and discovered where the real expenses at an institution were -- and nearly fell over in shock. Real world bank people have to worry about things like how to make sure that exceptional cases involving manual intervention (which represent well over 95% of expense) are minimized, they worry about auditing and making sure that systems are structured in such a way as to avoid constructing the capacity to embezzle into the system. They have to worry about downtime, clearing regulations, imaging documents, and other gunk. I say gunk because its all largely unglamorous in the same way that 99% of mechanical engineering is now both unglamorous and yet still critical to the safety of, say, automobiles. Doing these all right are skills which I have gained a good deal of respect for over the years. A bunch of hackers with experience in nothing but cryptography might get some of the privacy aspects right at the expense of producing a system which is otherwise unworkable. I wish you luck, but I want to warn you in advance that there is a good reason that computer people doing design work at banking institutions are usually a rare breed that get paid six figure salaries. If you set out to do this, it isn't going to be a part time job, and it isn't going to be something you can do without a good deal of expertise, either learned the hard way or hired. Perry
I don't care for the Government, but I suspect that Chase Manhattan has a much better idea of the problems involved in cash transfer and accounting systems than you guys do. People who've never worked for financial institutions rarely understand where the real problems are.
I don't mean this to be patronizing -- I have a good deal of respect
Oh really? :-) I worked for First City National Bank in MIS for three years... I'm sure Chase has the drop in terms of experience, but you need to realize that these institutions are the IBMs of the financial world. How much truly innovative tech do you see out of IBM, despite all the centuries of experience locked up in meetings? (I went to work for them after First City, so I got to see it frist hand.) Also, the Credit Union movement was started by amateurs in the 19th century, and the bulk of CUs are still started by rank amateurs today, albeit the regulators like to see some folks who have at least a basic grasp of accounting (of which do indeed have.) I think that you are overestimating the sexiness of this project, as did an earlier poster. It's really quite ordinary, except that rather than being driven merely by a desire to get low-cost loans and a customer-centered approach, our field of membership gets all the digital banking services we can legally provide.... and if a few standards get set on the way, all the better :-). Doug -- ---------------- /\ Douglas Barnes cman@illuminati.io.com / \ Chief Wizard (512) 448-8950 (d), 447-7866 (v) / () \ Illuminati Online metaverse.io.com 7777 /______\
Douglas Barnes says:
Oh really? :-) I worked for First City National Bank in MIS for three years... I'm sure Chase has the drop in terms of experience, but you need to realize that these institutions are the IBMs of the financial world. How much truly innovative tech do you see out of IBM, despite all the centuries of experience locked up in meetings?
Plenty. Find me a workstation with the sort of uptime a 3090 running MVS will give you. I think this is a matter of neglect and a lack of market pressure, but let it never be said that IBM's problem was a lack of technological expertise. They have possibly the finest manufacturing technology engineers in the world, and world class computer jocks, even in the mainframe world. They have expertise in scads. Their problem has always been an inability to understand that they are in a competitive marketplace. Thats why they are always suprised when their machines don't sell even though they are priced too high. They are also too big to manage.
Also, the Credit Union movement was started by amateurs in the 19th century, and the bulk of CUs are still started by rank amateurs today, albeit the regulators like to see some folks who have at least a basic grasp of accounting (of which do indeed have.)
Hey, thats fine, but if you aspire to revolutionize a business you should first understand it. To my knowledge, most credit unions do not produce financial innovations.
I think that you are overestimating the sexiness of this project, as did an earlier poster. It's really quite ordinary,
Thats my point. The ordinary day to day problems of producing good banking software are not trivial. Designing a dam for a large river presents no technological challenges whatsoever. Try doing it without a lot of specialized knowledge. So you are starting a bank. Tell me -- can you tell me what a bankers acceptance is? What the clearing time is for checks? What sort of securities instruments a bank is allowed to invest in? If you find yourself with fractional pennies in a transaction, what do you do with them? Can you tell me what organization sets accounting practices in the U.S., and what the name of their major publication is? Whats a CUSIP number? If one of your credit union's members cashes a savings bond, what sort of tax information must your accounting system keep, and what forms are you obligated to file, and when? How do you clear a check from an out of country bank? Indeed, how do you clear a a check from an american bank? What, legally, is a check? What language is needed on a loan document to make the loan transferable? This stuff isn't difficult. There is just scads of it. Getting the software to handle all of it properly isn't a part time job. Stating that you are setting out to produce "the" banking protocols of the future when you don't grok banking yet is a bit on the hubristic side. Perry
Plenty. Find me a workstation with the sort of uptime a 3090 running MVS will give you.
Since you asked... I don't know what the average uptime of a 3090 is, but from several years of experience as a Unix sysadmin, most of the Sun systems I've been involved with easily had uptimes ranging months at a time. Powering down a system for maintenance or adding equipment was more common than crashes. If you insist on promoting the reliability of the 3090, perhaps you'd be so kind as to cite some figures. I'd hazard to guess though that a 3090 could be sufficiently mismanaged to produce dismal uptimes as well as a workstation can. In any case, your rather condescending attitude about workstations only seems to reinforce what I percieve as a condescending attitude towards the people inteding to start the digital credit union. And since some of the more high-profile cypherpunks are not just workstation users but inventors of the technology, I would think that your comments have probably similiarly affected other members of this group. Aside: welcome to Robert Woodhead who is in the best position to know what my username means. ---- jingoro@tcp.com -- Jim Lick -- jingoro@rahul.net -- jIngOrO@CaveMUCK ---- --:):-- perfect little dream the kind that hurts the most -- |\| | |/| --:(:-- --- CaveMUCK is back! --- Telnet to cave.tcp.com (128.95.10.106) port 2283 --- -- Finger me for fun, excitement or for my PGP Public Key Encryption Block --
Kasuga Jingoro says:
Plenty. Find me a workstation with the sort of uptime a 3090 running MVS will give you.
Since you asked... I don't know what the average uptime of a 3090 is, but from several years of experience as a Unix sysadmin, most of the Sun systems I've been involved with easily had uptimes ranging months at a time.
This isn't cypherpunks stuff. I'll happily argue with you elsewhere. Perry
writes Kasuga Jingoro:
Plenty. Find me a workstation with the sort of uptime a 3090 running MVS will give you.
Since you asked... I don't know what the average uptime of a 3090 is, but from several years of experience as a Unix sysadmin, most of the Sun systems I've been involved with easily had uptimes ranging months at a time. Powering down a system for maintenance or adding equipment was more common than crashes. If you insist on promoting the reliability of the 3090, perhaps you'd be so kind as to cite some figures. I'd hazard to guess though that a 3090 could be sufficiently mismanaged to produce dismal uptimes as well as a workstation can.
I have (well, I manage) a sun 4/280 server, and it was once up for 180 days straight, but we restarted it just because it had been up for what we thought was a really long time... In my experience, Big Blue machines only talk to themselves correctly, and don't talk to much else. Just my $0.02 -nate -- +-----------------------------------------------------------------------+ | Nate Sammons email: nate@VIS.ColoState.Edu | Colorado State University Computer Visualization Laboratory | Finger nate@monet.VIS.ColoState.Edu for my PGP key | #include <std.disclaimer> | Title 18 USC 2511 and 18 USC 2703 Protected --> Monitoring Forbidden +--------+ Always remember "Brazil"
Perry E. Metzger <pmetzger@lehman.com> writes:
Jim McCoy says:
We want to be the ones who will define the protocol for currency on the net. [...]
I don't care for the Government, but I suspect that Chase Manhattan has a much better idea of the problems involved in cash transfer and accounting systems than you guys do. People who've never worked for financial institutions rarely understand where the real problems are. [...]
This is true. We are not trying to do this alone. We are working with a major local credit union to be able to handle these sorts of things. We also have people involved who have some real experience in this area. I guess I will say that we are trying to cover all of the bases as best we can (if you want a real fun mind-warp examine commercial paper and electronic wire transfer law...) and that we are going to do something. Enough has been bounced around in conversation here, we are going to try to get something done now... jim
Jim McCoy says:
Perry E. Metzger <pmetzger@lehman.com> writes:
Jim McCoy says:
We want to be the ones who will define the protocol for currency on the net. [...]
I don't care for the Government, but I suspect that Chase Manhattan has a much better idea of the problems involved in cash transfer and accounting systems than you guys do. People who've never worked for financial institutions rarely understand where the real problems are. [...]
This is true. We are not trying to do this alone. We are working with a major local credit union to be able to handle these sorts of things. We also have people involved who have some real experience in this area.
Well, I'm glad that you understand that there is a problem here.
I guess I will say that we are trying to cover all of the bases as best we can (if you want a real fun mind-warp examine commercial paper and electronic wire transfer law...)
I have. Commercial paper isn't actually too bad -- its pretty logical once you understand the principles.
and that we are going to do something. Enough has been bounced around in conversation here, we are going to try to get something done now...
I wish you luck. Perry
participants (9)
-
Arthur Chandler -
cman＠IO.COM -
hughes＠ah.com -
Jim McCoy -
Kasuga Jingoro -
nate＠rodin.VIS.ColoState.EDU -
Perry E. Metzger -
tcmay＠netcom.com -
zeek＠IO.COM