-----BEGIN PGP SIGNED MESSAGE----- When a person does business pseudonymously (where I consider pseudonymity to be == anonymity & non-repudiation & two-way communication (where non-repudation presupposes some sort of identifier of the actor)) then that person is exempt (for the most part) from the threat of physical retribution, the force of law, etc. Thus in order to be trusted with some valuable information such as money this person needs to offer up some collateral which can be debitted in the case that they violate their contract. Of course this raises the question of who holds the collateral, and it is a big open spot where statists might jump in with their tired old rhetoric (as soon as they clue in to what's going on here), but I sincerely hope that a highly redundant, interdependent, robust set of private "lien, escrow and arbitration" agencies take up the job. As a simple example, pseudonymous E-bank customers can be required to keep positive balances in their accounts, and in the case that they are caught trying to double-spend or commit other fraud, a fine can be withdrawn from this account by the bank. This model can be applied to any pseudonymous transaction or contract. It is important to note that this technique does *not* eliminate the risk of fraud-- it reduces the likelihood that the pseudonymous customer can commit fraud successfully and it *increases* the likelihood that the bank can do so. Of course this is not necessary if we are not giving the pseudonym any opportunity to cheat us (because we are using all on-line clearing etc.) but for most (I think) applications it is necessary to extend to the pseudonym some amount of trust, in the form of a "loan" or other credit, or, in the form of other digital credentials, access to information etc. etc. I consider this to be a very important idea for the development of the cyberspace economy/community/libertaria and as I mentioned it is a point where it would be more easy for the statists to attempt an inroad into said community. I envision a situation in which a pseudonym cannot cheat anyone out of more money than he has already put up as collateral on his contract. Thus mere cyber-fraud is never profitable. Instead, the only way to cheat people is to subvert the escrow&arbitration agencies into ruling unfairly in your favor, allowing you to abscond with your collateral and so forth. This, unfortunately, moves the whole mess of "law and society" from the elegant cryptographic solutions that we all love back into the realm of politics, social ideology and so forth, but I think we are in a better position to insure fair dealings now that we have these cryptographic capabilities like non-repudiation & privacy, and the currency & transaction protocols which follow from them. Note that because the escrow&arbitration agencies are likely to be large, redundant and interdependent a petty criminal will not have much chance of subverting them, but a major one-time heist is theoretically effective, as is the organized, large-scale extortion which does not heist it all at once but which instead siphons off an extortion (tax) payment at regular intervals. (Note strong resemblance between this last criminal strategy and the behavior of most governments.) Of course I'm not the first to think about these kinds of things. Nick Szabo (szabo@netcom.com) in particular has thought a lot about making the escrow&arbitration process mathematically deterministic, when he talks about his "liens" and "smart contracts", but my intuition is that the domain of contracts which are amenable to mathematically-controlled escrow&arbitration is much smaller than the domain of contracts which need a trusted intelligence to do the escrow&arbitration. (Nick also discusses the trusted-intelligence issues, such as using n-of-m key splitting to distribute the arbitration power.) In summary: lien, escrow and arbitration agencies, which are endowed by the principals with the authority to adjudicate fraud cases, and which are entrusted by the principals with the electronic cash, crypto keys, and so forth to enforce their decisions, will be essential to the operation of the pseudonymous economy. These agencies will themselves be the targets and/or the perpetrators of theft, however. Concerned citizens of the world need to start thinking about how to minimize these risks. Factors to consider include: The relatively low start-up costs of such agencies, the role of governments, mafia, or other force-wielding organizations, and "the problem of pseudonymity" (can't tell if two pseudonyms are under same True Person's control) possibly leading to a single organization controlling a large enough share of escrow&arbitration services that it can initiate heists or extortion. I'll be trying to write these ideas of mine into a set of HTML documents for display on my web pages. I appreciate all constructive correspondance. (P.S. Of course a pseudonym's reputation may be considered by some to be valuable enough to use as this "collateral" or "lien". It wouldn't be so considered by me. I'd take cash.) Regards, Bryce signatures follow  "To strive, to seek, to find and not to yield." <a href="http://www-ugrad.cs.colorado.edu/~wilcoxb/Niche.html"> bryce@colorado.edu </a>  -----BEGIN PGP SIGNATURE----- Version: 2.6.2 Comment: Auto-signed under Unix with 'BAP' Easy-PGP v1.01 iQCVAwUBMKLZp/WZSllhfG25AQH/UQQAuGGRVjQBqpzY3+3ndpTdipFYkEIiRkaF c+6+FbdsUokCqcbSkTS1Dc/vOt3FRgtScvW9fvbMj0S5oqaLzvrHebLYASgeoihx AezLI0q8Cf2yKCYC4+e5bq/QPB78ZVsEGnnEDxIedRiLIFz72hCmCi9t+ybCYB9r yaRjAyNiAxg= =fGb2 -----END PGP SIGNATURE-----