[11773] in Commercialization & Privatization of the Internet
Re: Random Thoughts Regarding RSA/NCSA/EIT
daemon@ATHENA.MIT.EDU (Peter Deutsch)
Tue Apr 19 04:44:04 1994
From: Peter Deutsch <peterd@bunyip.com>
Date: Mon, 18 Apr 1994 20:24:29 -0500
In-Reply-To: "Rob Raisch, The Internet Company"'s message as of Apr 18, 11:03
To: "Rob Raisch, The Internet Company" <raisch@internet.com>,
Pat Farrell <pfarrell@netcom.com>
Cc: com-priv@psi.com
Hi all,
I'm not an economist, nor do I usually play one on the
Internet, so bear with me here if I say something
particularly stupid...
[ Rob Raisch wrote: ]
> On Sun, 17 Apr 1994, Pat Farrell wrote:
>
> > >> Assume we still use credit card numbers for the financial part.
> >
> > Or digital cash. Cash was once legal tender.
>
> Hmmm... digital cash is an oxymoron. You cannot have digital cash since
> the very nature of cash is its physicality. . .
Actually, I don't agree that's the physical nature of money
that sets money apart. It's what it represents.
I think what distinguishes money is that it liberates the
buyer and the seller from the need for both to be present
for a transaction to take place, as is required in a
barter economy (it's sort of like email, in a sense, if
you'll cut me some slack, in that it does not require both
sender and receiver to be present for a message to be
transmitted).
I've always seen a dollar bill as in effect a promise to
do a fixed amount of work for the bearer in the future,
acquired in exchange for whatever it was swapped for. If
you trade something to someone for one of these thingies
(in effect, a portable promise), you can trade that promise
back to someone else later for another good or service.
Thus, the original swap need not have both participants in
place to occur.
There's nothing about physicality of the representation of
the promise required here, the trick is to pass the
promise on without it being cloned or duplicated along the
way (I'd obviously rather not have to do the promised
amount of work more than once for the good received). If
I'm interpreting this correctly, inflation is just in
effect more promises going into circulation than
capability of work. In this case, For the same amount of
work to be done we get less work for each fixed promise
redeemed.
Now, I can impress a promise onto a magnetic strip, if I
want, or encode it as a series of echos across the canyon,
provided I find someone willing to honour the promise
later and exchange me something for it. In doing so, we
expect the bearer to surrender their promise, which leads
me to define the central characteristic of money that it
is a promise exchanged for other things. In this world
view, it's physicality has nothing to do with it.
> . . . The protections that cash
> offers against duplication are all physical and economic. It costs more
> to copy money than its face value.
I'm not sure that the people at Canon would agree with you
on that one!
Copying can be cheap. Certainly in times of rampant
inflation the value of the precious metals in coins might
exceed the face value of the coin, but this is hardly true
for paper money today.
If you accept that a dollar bill is merely a token which
indicates the amount of work that someone is willing to do
for you upon redemption than why does that token have to
be printed on paper? Why can't it be encoded inside a
smart card? Think of that smart card as a dollar bill
that can be wiped clean and reused for a $20 next time
around and I think you'll be closer to the mark.
The trick to making people trust digital money is then
merely to ensure that when the exchange takes place, the
initial bearer has the good for which he exchanged his
digital cash, but no longer has the digital token he or
she started with. We're may need a protocol or two, plus a
bit of smarts, but hey there are lots of smart people on
the Internet who grok protocols.
In fact, someone named David Chaum holds several patents
in this area. For those interested, I recall that he had
an article in Scientific American a while ago which
explained how it all works. Of course, I'm probably
showing how long it's been since I've had a life as it's
probably been years since this article ran, but it does
explain how it all works in some detail. From what I
recall it involves a bit of digital encryption, a trusted
third party or two and the usual people named Alice and
Bob, but all signs are that it will work fine, if we
choose to use it. There remains only the implementation...
> Even in a scenerio where each transaction is handled in real-time with
> the issuing agency (bank), all I have to do is "become you" and then your
> "cash" is mine.
Again, I'd refer you to Chaum's work in this area. He's
presented papers at past Crypto conferences, there's his
Scientific American piece and he holds various patents in
this area you can look up.
For what it's worth, I met him once last year in San
Francisco briefly and I gather he has now formed a company
to market his patents. He certainly seemed convinced
enough that there's something to all this.
. . .
> And here is where the real issue is... We have all been assuming that
> these transactions are not physically linked -- ie. as an arbitrary
> on-line user I can provide my identity to a vendor and enter into a
> contractual relationship.
>
> But keeping your credentials on a smartcard is only as useful as the
> ubiquity of smartcards and smartcard enabled workstations. This is
> another 'dongle' -- it represents physical identity. But, it means
> everyone on-line will need one. Which hardware manufacturer should I
> invest in, do you think?
Actually, the trick is not convincing people you are who
you say you are (in fact, one of the things many people
like about our current money technology is that this is
not in fact necessary to use it). The trick seems to be in
convincing the recipient that the money will be honoured
when it is passed on to the next person in an exchange
while making sure that you and he can't both turn up with
a similar claim. That's where the clever encryption
technology come in, to prevent zero-cost copying.
Once you accept that you can pass on the promise to
someone else, the natural question to arise is why we
would need to pass on the physical thing it was written
on, at all? We don't do need to send the physical
representation (ie. the floppy) when we ftp a file, or
send email, so why should we need to send the thing upon
which the promise is written when using digital money?
For digital cash to work, all we need is some assurances
that if we move a promise from one place to another the
original promise either goes away or _is no longer valid_.
Note that this may not mean something as crude as deleting
a copy of a promise. It may mean performing a mathematical
manipulation that renders a digital signature invalid, or
even that the entire system provides architectural support
for other ways to invalidate a signature. Provided that
signature no longer can be verified as valid after it is
exchanged it would seem to have the properties we need of
money.
This may all sound a little far-fetched, but from
everything I've read it can work fine.
- peterd
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My proposal for funding the Internet is pretty simple. I vote we institute
an "Information Superhighway" tax, the proceeds of which will be used to
fund network infrastructure. The way this would work is simple - every time
someone uses the words "Information Superhighway" or any of its derivatives
we strike them with a sharp object and make them pay a $10 fee (of course,
the sharp object is not actually needed to make this scheme work, it's just
in there because it seems an appropriate thing to do...)
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