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At 10:12 AM +0300 on 9/27/99, [EMAIL PROTECTED] wrote:
> One small final comment: physical cash is not really anonymous (bills
> have serial numbers, and certainly coins may contain secret marks. Why?
To prevent forgery, of course.
Blinding, statistical testing, expiration dates, and issue-epochs, and do
the same thing with digital bearer instruments.
The reason I think that digital bearer transactions will be cheaper than
digital book-entry transactions is because an asset changes hands
irrevocably, because its transfer instantaneous, because the transaction
is pre-authorized by signature or hash-value, and because there is no
need to store records of the transaction in several places at once for an
indeterminate period of time. (as many as seven or eight duplicate sets
of book entries, kept for at least 7 years, for an American check-cleared
credit card transaction, for instance).
If you bundle those transactions, like with a few (unmentioned :-))
"counter cash" schemes, you only get some form of execution, but only
delayed clearing and settlement. The asset itself is not readily
spendable for other assets without an awful amount of overhead and risk,
as Mondex has shown us. (For instance, your limit on Mondex transactions,
both up and down the transaction-size ladder, is limited by the capacity
quickly evolve a monoculture of smart cards, all of which must be
functionally equivalent, replaceable only en masse, and all at
significantly higher cost than a software upgrade to a more generic
secure device would be.)
For small value transactions, like with MicroMint, you keep a statistical
sample to prevent double spending and throw most used digital bearer
certificates away on redemption, while using a fixed expiration date to
prevent long-term forgery.
For high value transactions, like with Chaum and Brands blind signatures,
you keep a single record of all transactions, but you have a
financially-calculable expiration date to deal with key theft and keep
the size of the spent-certificate database manageable.
I claim that both of the above will prove to be three orders of magnitude
cheaper -- in risk-adjusted system-wide transaction cost, and certainly
to the "merchant", the receiver of the asset in question -- than an
equivalent book-entry electronic transaction settlement mechanism.
Since electronic book-entry settlement achieved the same dramatic
reduction of transaction cost over paper bearer transactions, I expect
that, sooner or later, digital bearer settlement will become the dominant
asset-transfer mechanism, certainly in total value transferred, and, if
the same promise holds for microtransactions, in total transaction counts
as well.
I agree with you, Amir, that ultimately this has to be proven in the
market.
Which is why I started IBUC.
Cheers,
RAH
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Robert A. Hettinga <mailto: [EMAIL PROTECTED]>
The Internet Bearer Underwriting Corporation <http://www.ibuc.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'
