From: pmetzger@lehman.com

In every time and place that [gold backing] was eliminated, the currency eventually collapsed

Non-gold backed currency is reputation based. The debasement of a reputation based currency looks a lot like the game theory strategy of "tit for tat, but if you can get away with tricking them, go for it"; the tit for tat is needed to keep the reputation and works both ways: (1) if a currency issuer debases value relative to another currency issuer, people will switch money to the better currency (switching to a better reputation issuer, if possible), (2) counterfeiters are tracked down and stopped to uphold the reputation. The "if you can get away with tricking them, go for it" can be easily be performed when major currency issuers work together to debase all at the same time. Luckily, this kind of collusion doesn't hold together well (like OPEC). So we already have reputation based currency as represented by hard to reproduce paper. Similarly, a reputation based digital deposit could be built that is based on ordinary currency. (I view anonymous transaction as being completely orthogonal to this.) Paul E. Baclace peb@procase.com