[4218] in cryptography@c2.net mail archive
Re: Digital Bearer Documents -- an Oxymoron ??
daemon@ATHENA.MIT.EDU (Robert Hettinga)
Tue Feb 16 00:52:04 1999
In-Reply-To: <199902152311.XAA23696@server.eternity.org>
Date: Mon, 15 Feb 1999 19:35:22 -0500
To: Adam Back <aba@dcs.ex.ac.uk>, worley@world.std.com
From: Robert Hettinga <rah@shipwright.com>
Cc: dbs@shipwright.com, dcsb@ai.mit.edu, micropay@ai.mit.edu, e$@vmeng.com,
cryptography@c2.net, cypherpunks@cyberpass.net, mac-crypto@vmeng.com
At 6:11 PM -0500 on 2/15/99, Adam Back wrote:
> Bob's thoughts are that as it will save so much
> money, that the local governments declaring it illegal won't be a show
> stopper.
Welllll, my thinking these days on the spook vs. anti-spook fight, and, by
extension, cops vs. anti-cops, or statists vs. anti-statists, or whatever,
is, "a pox on both your houses".
People on both sides of the fence are bad for business, I figure. :-).
Deregulation is certainly icing on the cake, :-), and I do think that
digital bearer transactions will, as part of what Moore's Law does to
computer networks, change the power equation back to proprietors and
individuals, after centuries of hierarchical economies of organizational
scale, culminating in modern industrial corporations and nation-states. I
might even agree with Adam and some cypherpunks that political risk is
becoming a not-insignificant component of transaction cost these days,
especially in places like the former USSR, and, political instability can
occur anywhere, at any time.
But, to think that this change in transaction cost will occur because of
privacy and anonymity alone is to put the cart before the horse.
Like I keep saying: If privacy mattered in the economics of transaction
settlement, we wouldn't have book-entry transactions.
I assert that digital bearer transactions will reduce transaction costs,
and they will do so as a sheer structural -- *mechanical* -- reduction in
the costs of financial operations themselves. They will have the same
effect on modern "computerized" financial operations that book-entry
settlement did on the old world of paper bearer transactions.
The fact that this transaction-cost reduction gives us enormous strides in
financial privacy, and, probably, major diseconomies of scale in the size
of firms themselves, is marvellous, of course. But, those are still just
accidents of mathematics. Like most of the rest of reality. :-).
So, Adam's quote above, note that I only quoted that part, is more or less
right. I think that digital bearer transaction settlement will save so much
money, in just plain risk-adjusted transaction cost, that it will be
"permitted" by nation-states, in the same way that nation-states "permit"
railroads or airplanes. Or book-entry settlement.
Reality, progress, is not optional.
If anonymous digital bearer transactions actually are cheaper than
book-entry settlement, it isn't the end of the world, even for government.
:-). Governments will just have to figure out how to raise money without
taxing book-entry transactions. Lord knows they've done it before. And, of
course, it may even force them to compete in some of the markets they
control monopolistically. But, that's not the point of doing transactions
with digital bearer transactions, or any other way.
The only reason to adopt any kind of transaction is that it's cheaper to
use, on a risk-adjusted basis than anything else.
Let's hope I'm right. It sure will make things interesting. :-).
Cheers,
Robert Hettinga
-----------------
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'
