Jason W Solinsky <solman@MIT.EDU> writes:

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Enter Ingve the insurance salesman. Ingve will guarantee to others that you are certified by Charles by offering them bets. So suppose that Microsquish sends you its advertising agent and the agent is offering a 10 nano-slinkys [a cyberspatial monetary unit] bonus if you can produce one of Charles's certifications. Charles is charging 8 nano-slinkys. In steps Ingve. You've told Ingve that you are certified by Charles as a frequent purchaser of big brother inside computers. So Ingve says: "I'll convince Microsquish to accept my word that you have Charles's certification in exchange for just four nanoslinkys. But if at my request you ask for the certification and Charles's says you aren't certified then you owe me 64 nano-slinkys." Since you are sure that you are certified you accept the deal. Then Ingve goes to Microsquish and offers to insure your certification. Each time Microsquish accepts a certification from Ingve for you, Ingve will pay Microsquish 2 nano-slinkys but will be able to get your business (and thus offset that with the four nano-slinkys). But, if it turns whenever Microsquish wants to it can check up on your certification from Charles at cost (8 nano-slinkys). If Charles certifies you all is well. Otherwise, you owe Ingve 64 nano-slinkys and Ingve has to pay up Microsquish's insurance claim (which could be quite large depending on the policy.

One thing I don't follow here is under what circumstances a "challenge" will occur. Presumably Microsquish will not blindly accept all of Ingve's assurances since they are backed only by promises. Can Microsquish force Ingve to go to his clients and make them produce certificates? Who pays for that? Maybe if you factor in that cost it won't look so bad for Charles.

First, just let me note that there are a thousand ways to structure it. In my example, Microsquish gets to hold a challenge whenever they want to. If everybody is being honest Microsquish will lose eight nano-slinkys each time they challenge so they won't do it frequently. If everybody is not being honest, Microsquish will collect substantial damages.

Also, just because Charles can't get what he wants for his certifications doesn't mean he is being cheated.

I refuse to get into another vocabulary fight :) Lets just say that Charles isn't geting as much as he would like. Pay per use is good for the consumer... note the resentment that high software prices have created. Although everybody wins by adopting a system that better approximates reality, ala superdistribution (but we are dealing with authentication here, not information and after thinking about it alot I have decided that authentication is NOT necessarily a form of information in that you can easily demonstrate to somebody that you have been authenticated without giving them the ability to prove it to somebody else [again lets not get into a terminology debate, my point is that the intangible asset here has a different set of properties from the kind we usually deal with in information economy scenarios]), the consumer with his smaller buying power wins the most. So it would really suck for Charles to lose big at the hands of the consumer because he tried to do something that dramatically improved the consumer's position. Now that I think about it, its possible that I'm in error approaching this problem from a cryptographic standpoint. Maybe the correct course of action is to establish a cybergovernment which prohibits "Ingve the insurance salesman" attacks and then set up the fine structure such that the conspirators will have an enormous incentive to turn each other in.

It's a market, after all. You could just as well say that somebody else opens up a certification shop that sells certifications just like Charles' for less. It's not the fault of the protocol that Charles' business dries up. If the value of his certifications drops (as in your scenario) then his business should decrease.

Agreed, but it is highly desirable for charles NOT to be forced into selling certifications for a one time fee from the standpoint of all involved. Assuming Charles is intelligent, unless we can demonstrate to him a system that prevents these kinds of attacks, he's going to be stuck with the one time fee payment scheme.

Last, I'd say your problem exists just as clearly without Ingve. You could make a deal with Microsquish promising that you would be able to get certifications if asked, with some agreed-upon procedure by which Microsquish could demand that you produce one, with appropriate penalties. In that case probably Microsquish would believe some percentage of people and Charles' business would again fall off. In practice Ingve might be useful to help even up fluctuations but the problem arises just as clearly without him.

Yeah. I hadn't been looking at it that way because in my model Ingve gets played by an agent. There IS, however, an argument for giving control of Ingve to a third party. As I note above, every time Microsquish checks on the consumer it loses money. An Ingve could act as an intermediary between Microsquish and a far larger number of consumers. The relationship thus built (combined with statistical reality) allow Microsquish to use far fewer test cases and place a significant (but of course not total) amount of trust in Ingve's methods for guaranteeing valid licenses [whatever they may be. It is quite conceivable that there are other things which can alter the probabilities besides actually challenging the consumer to get a certification from Charles]. This saves Microsquish, and infact the whole system, money. Cheers, Jason W. Solinsky BTW, perhaps there is an easier solution: only permit Cherles's certifications to exist in an environment that he controls. Smart cards and remote computers can easily do this, although remote computers are undesirable due to their communications overhead.

Jason W Solinsky <solman@MIT.EDU> writes, quoting me:

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First, just let me note that there are a thousand ways to structure it. In my example, Microsquish gets to hold a challenge whenever they want to. If everybody is being honest Microsquish will lose eight nano-slinkys each time they challenge so they won't do it frequently. If everybody is not being honest, Microsquish will collect substantial damages.

One thing I'd add is that Charles still makes money whenever there is a challenge. If there were no challenges then there would be nothing to keep people honest. So it's not a matter of eliminating pay per use of certifications, it's just a matter of the frequency with which they are used vs other kinds.

True, but we desire something that scales linearly with use.

Also, as the challenges become less frequent, Charles can actually raise his rates and still let everyone else make money. He can even charge more than the 10 that Micro is paying for challenges, which he could probably not have done in the non-probabilistic (pre-Ingve) system. It sounds like Micro is paying the challenge fees (in at least one version) and if the penalties against cheaters are great enough it won't challenge very frequently, in which case a larger fee by Charles can be absorbed.

So you are pointing out that Charles has the ability to move the system towards a one-time fee system. This is true, but the logic in the above paragraph is tainted by the fact that the insurance company can shift the payouts so that the frequency of challenges becomes arbitraily small. Charles becomes unable to properly charge some customers without overcharging others.

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Now that I think about it, its possible that I'm in error approaching this problem from a cryptographic standpoint. Maybe the correct course of action is to establish a cybergovernment which prohibits "Ingve the insurance salesman" attacks and then set up the fine structure such that the conspirators will have an enormous incentive to turn each other in.

These tend to be non-local solutions, with a lot of overhead and extra mechanisms. Maybe you can make it work with your "government" but I'm afraid you may come to lean on it as the solution to all of your problems. Why bother with cryptography for anything; just have a "government" where everybody has posted a ruinous bond which they forfeit if they break a "law", then legislate communications privacy, non- duplication of electronic cash, bit commitments, etc., with heavy incentives for people to report cheaters?

I agree, I only suggested it because it doesn't look likr cryptography can help me out here.

Again, though, people could just swear they've seen a Charles certificate and these witnesses will undercut Charles.

As I said, I think there will still be a place for per-use certifications, but the market will decide how much they are used vs other kinds. I don't think you should worry so much about trying to fine tune the system so this one technology wins. There are a lot of possibilities that people may come up with.

Maybe I'm looking at it wrong. The challenge is to pay the certifier based on the value he provides. Perhaps in situations like these YOU are providing the per use value and the service of the certification agency is of the one-time nature. Suppose you have created a piece of software which is compatible with system X. You need somebody to certify that compatibility. Each time you sell a copy of that software you receive a certain amount extra because its compatibility has been certified, but I could argue that the extra value is due to the carefulness of the programer and that the value created by the certifier really is one time. But what about systems in which selling signatures on a one time basis is truly critical to operation. Consider the example of a user who is going to buy a car. This characteristic is worth a lot of money to companies who sell cars, but they need a way to verify it. I have envisioned (and even written some code for) agents that would come along and offer gift certificates good for any car in class X. The gift certificates would sell below face value. The agent who sells these certificates can then use the information that it has sold you the certificate to attract advertisers at a high price. You save the amount by which the gift certificate was discounted, the agent keeps any money made beyond the discount, and the advertisers get the attention of a hot prospect. But how could this system work if pay-per use authentication is not possible? [now that I think about it, I guess it is possible to contact the advertisers ahead of time and be promised a bounty for each prospect found.] Cheers, JWS