The Crypto-Financial Paradox

[jamesd at echeque.com]

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On 21 Nov 2001, at 2:02, R. A. Hettinga wrote:
> This is nothing new for long-time subscribers to this list.
> As Eric Hughes kept saying when I first got here in 1994,
> it is immediate and final settlement that attracts the
> capital and payment system markets to cryptographic
> protocols like Chaum's blind signatures, and not 
> particularly anonymity.

People want immediate and final settlement when purchasing
rights over assets.   They do not want immediate and final
settlement when purchasing services, or goods that must be
physically delivered.  Rather, for physical delivery, they
want the final settlement to be as closely tied to actual
delivery as possible --they want the arbitration provided by
the credit card companies.

> So, as has ever been the case, whoever builds a robust, 
> instantly-settled, identity-independent,
> internet-ubiquitous transaction mechanism that actually
> works in production for assets people want to trade in
> large quantity is going to do quite well for themselves by
> saving the entire economy a whole lot of money

In such a system, the digital certificates must ultimately
reflect control over assets, in other words they must be
functionally equivalent to bearer bonds and, more
importantly, bearer shares.

Needless to say, bearer shares are illegal almost everywhere.

Any system that does what you describe must be located in a
haven, and will be met by great wrath.

Often repressive countries, notably Ireland and China, offer
very free market conditions to foreign investors, while
keeping the assets of their own nationals under rigid
control.  In this situation nationals furtively export their
capital, then reimport their capital under the appearance of
being foreign capital.   Havens are used to launder this
capital, and bearer shares and similar mechanisms are used by
the nationals to keep control over this seemingly foreign
capital.

Thus even if the system you describe is simply a more
efficient settlement system, it is also a system that will
immediately enable large numbers of people to illegally
escape repressive controls on capital.

Thus just as any genuinely privacy protecting micropayment
system will promptly be used to pay for child pornography,
any genuinely efficient assets trading mechanism will
immediately be used to escape governmental controls, and is
already illegal on that basis. 

    --digsig
         James A. Donald
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     /HCJqlSn3M4Klt9t8tiB0gTVB2FE73axuvLxehHY
     41FYMJp89a/coN4Ux+WrfrKr0lti8BSoMRE2htbET