[4214] in cryptography@c2.net mail archive
bearer = anonymous = freedom to contract
daemon@ATHENA.MIT.EDU (Robert Hettinga)
Mon Feb 15 18:36:46 1999
Date: Mon, 15 Feb 1999 18:17:22 -0500
To: micropay@ai.mit.edu, dcsb@ai.mit.edu, e$@vmeng.com, cryptography@c2.net,
cypherpunks@cyberpass.net, mac-crypto@vmeng.com
From: Robert Hettinga <rah@shipwright.com>
--- begin forwarded text
Date: Mon, 15 Feb 1999 22:36:56 GMT
From: Adam Back <aba@dcs.ex.ac.uk>
To: dbs@philodox.com
Subject: bearer = anonymous = freedom to contract
Sender: <dbs@philodox.com>
List-Subscribe: <mailto:requests@philodox.com?subject=subscribe%20dbs>
We have had some discussion of what a "bearer" certificate is from
Amir Herzberg, Ron Rivest, Bob Hettinga and others.
A bearer certificate is an instrument payable to "the bearer" rather
than an identifiable individual. I think this distinction is
historically accurate wrt financial terminology also.
To trade the bearer instrument there are two protocols depending on
whether the trading parties trust each other:
a) parties who trust each other
simply hand over a peice of paper -- ownership is transfered instantly
without requiring a third party in the protocol.
b) parties who don't trust each other use the issuer to check the
validity of the certificate.
There was some discussing about whether the term bearer has natural
connotations of offline clearing. It perhaps does.
Offline clearing is nice, but in practice hard to obtain without
tamper resistant tokens (eg peer to peer transactions with observer
chips, say). But offline clearing is not the most interesting
feature, the more interesting property is anonymity. Offline clearing
is harder to achieve in the short term due to hardware requirements.
Much of the cost of book entry comes from the legal system which is
unavoidably bought with it. This is because most legal systems do not
honour illegal contracts.
For example say that we want to create an internet payment system (say
like IBM's micro payment system): we might get some lawyers to write
up a contract saying that we define the transaction to have
irreversibly settled after the value has moved between two accounts,
or after the token has changed hands. However one party may claim
that this is unfair in his particular case because the goods were not
of good quality or whatever, and proceed to use government backed
legal systems to get the money back. The cost comes about because
some one has to pay for all the lawyers. Often the person who
defrauded someone is hard to extract money from, meaning that the rest
of the system has to absorb the cost.
The problem arises because we can not write contracts which are immune
from being overridden by a court on various grounds. People break
contracts by invoking laws which are held to be impossible to override
with a contract, and have incentive to do so if it is in their
financial interests.
Cryptographically assured anonymity frees trading parties to contract
without fearing that the other party will renege on the contract and
use government backed courts to enforce some term contrary to the
contract. The reason is simple: you can not sue someone you can not
identify. They are then free to use any third party arbitration
services they choose. Probably the arbitration services need to be
anonymous too to ensure their freedom to decide strictly according to
the terms of the contract and not according to the laws of government
legal systems.
This is where the cost savings come from. You can replace all the
whole dispute resolution problem, lawyers, judges, aggresive
repudiations (falsely repudiated transactions), etc. with a
cryptographic protocol providing anonymity.
Adam
--- end forwarded text
-----------------
Robert A. Hettinga <mailto: rah@philodox.com>
Philodox Financial Technology Evangelism <http://www.philodox.com/>
44 Farquhar Street, Boston, MA 02131 USA
"... however it may deserve respect for its usefulness and antiquity,
[predicting the end of the world] has not been found agreeable to
experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire'
