"If the operators of an escrow service are anonymous, then either their accessible assets had better be enough that you can recover losses if they walk with your goods, or their opportunity cost of defecting on their clients had better be high enough (in terms of lost revenue, lost opportunity on outstanding customer goodwill, name recognition, channels, etc.) that they are sufficiently unlikely to that you will take the risk." It seems to me that there are many parallels between this state of affairs and that which prevailed in the American West of the 1800s, with respect to banking .... there were no agencies insuring deposits, and only the rep- -utation of the bank's president - usually a leader of the community - was guarantee upon the funds. Bank robberies were not uncommon, depositors were few, runs on the bank, I speculate, may not have been unknown in those cir- -cumstances where the community of bank depositors lost confidence in the bank or its officers. Another parallel which occurs to me is that of the computerized trading that occurred when programs controlled trading in, um, was it October of 1987 that the stock market shuddered ? 1989 ? ... it suggests the inevitability of software shuttling funds around at cyberspace speeds to take advantage of ebbs and flows in the economic tides of the human race, around the world ... It would be interesting to further study the origins of banking, as I expect such a study would provide many such parallels by which the case for digi- -tized banking could be made stronger ... -- richard
Our mechanisms for estimating credibility of a guarantor partly assume that life can be made difficult for the guarantor if they renege. Those intuitions are often completely wrong if the guarantor is anonymous. That's the main point of what I was saying. few, runs on the bank, I speculate, may not have been unknown in those cir- -cumstances where the community of bank depositors lost confidence in the bank or its officers. My understanding of the history of banking is that there are ZERO documented cases of runs on banks before the gov't started mucking with the banking industry. They started that mucking based on some economists projection that such a run could happen, so the gov't had to protect the pipul from it. It would be interesting to further study the origins of banking, as I expect such a study would provide many such parallels by which the case for digi- -tized banking could be made stronger ... It also has strong arguments for free banking, which is consequence of cryptographic electronic banking. dean
From: tribble@xanadu.com (E. Dean Tribble)
My understanding of the history of banking is that there are ZERO documented cases of runs on banks before the gov't started mucking with the banking industry. They started that mucking based on some economists projection that such a run could happen, so the gov't had to protect the pipul from it.
Not strictly speaking the case -- there were instances of bank runs under free banking systems, but restriction clauses usually eliminated these problems immediately. Restriction clauses permitted banks to briefly suspend payments in gold, with a heavy interest penalty paid by the bank. Such clauses allowed banks to stop runs, but they could not be lightly used. In any case, runs were quite infrequent under free banking systems. In any case, I believe that digital banknote systems, when they arrive, will almost certainly involve explicit issuance banks rather than any sort of anonymous banks. Likely such banks will first appear offshore and will, at least at first, be nothing more than banks that accept cryptographically signed electronic mail in the stead of checks and bank drafts. Perry
participants (3)
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pmetzger＠shearson.com -
Richard Childers -
tribble＠xanadu.com