At 9:22 PM -0400 on 5/23/01, Craig Spencer wrote:
> Unfortunately, this is not quite accurate. All "digital bearer
> instrument"
> schemes require a central clearing mechanism to prevent double
> spending. This
> amounts to an account based system.
Fortunately, :-), it doesn't. I've gone over this point with *everybody*,
including cryptographers like Ron Rivest, :-), and I can see how you can be
confused, but don't conflate an *on-line* system, which is, in fact,
necessary for non-repudiation in any current internet payment system,
book-entry or bearer, with an *account-based*, or *book-entry* system, like
VISA, or ACH, SWIFT, or even E-Gold.
For starters, you might want to try reading up on the cryptography of
bearer transactions a bit. I'd suggest Applied Cryptography, or, if you're
going to actually write code, the CRC Handbook of Applied Cryptography.
In an internet bearer transaction system, underwriter doesn't know *who*
(except for their IP address :-)) is exchanging the tokens in question,
*except* when someone double spends. That's a big difference. The closest
thing to record-keeping in a bearer system, the encrypted (m-of-n hashes
where both m and n equals 2, for those of you in Rio Linda) copies of spent
bearer certificates, can be just *deleted* after some mutually agreed, and
financially calculable, period of time, because they contain no useful
*information* after some point.
In book-entry, account-based systems, you *must* keep a record, an
auditable, *readable* record, of *all* transactions you do, and,
furthermore, you as the buyer or seller, and not just the financial
intermediary, *must* be able to know *who* wrote those records, down to
their physical location, so you can call the cops send them to jail if they
lie to you during the execution, clearing, or settlement of any trade in
question, from the time the transaction is executed until some significant
time, usually many years, into the future.
Big difference there. If someone lies in an internet bearer transaction,
they just break the protocol, and the transaction simply doesn't execute,
much less clear and settle. And, of course, internet bearer transactions,
per se, don't require lawyers and cops, which maybe nice for individual
liberty, and all, but, more mundanely, they just cost too much money to use
on a ubiquitous geodesic internet with lots automated transactions flying
by.
Again, just because non-repudiation -- and, probably, some unknown
cryptographic axiom itself necessitating that any participant in a
cryptographically strong payment system share some conditionally-revealed
secret with a financial intermediary in real-time -- requires us to do only
on-line transactions for any transaction to execute clear and settle,
especially instantaneously, it doesn't mean that a given transaction system
is account-based.
Cheers,
RAH
--
-----------------
R. 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'
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