Re: Ecash fraud resolution

[Jim Choate]

On Thu, 24 Jan 2002, David Honig wrote:

> Over a decade ago I learned from published work 
> that if a logical problem is posed as cheating (an underage 
> person trying to buy ethanol IIRC)

Why is this 'cheating'?

> humans are much much better at solving the logical problem than if it is
> expressed otherwise.  Some cog scis think this is evidence of 
> hardwiring for social cheating perception.

Duh. Take a bottle away from a baby when it's feeding (cheating from its
point of view I'd suspect).


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Re: Ecash fraud resolution

[Morlock Elloi]

> of reputation is, if not hard-wired, pretty much universal. And the only
> way it /can/ work is by assuming that he who can be trusted in small
> things can be trusted in great. You tend to believe that someone who

This is a transparency issue. The customer (woman) assumes that she can infer
the working of the mechanism and predict the future behaviour by collecting
whatever is available at present. The better the mechanism is understood, the
better prediction.

This implies that true reputation can be based on rather sophisticated
expertise about the object's inner logic and extensive data collection.

This being almost impossible in practice, we resort to hype. All present
reputation is generally based on well-managed hype. Due to this unfortunate
built-in mechanism which makes us trust others' opinions, it is enough to
initially fabricate mass approval to actually achieve one.

So, for the long time to come, the only working true reputation will be based
on customer knowing where the vendor lives and how his vendor's kids commute to
school.


=
end
(of original message)

Y-a*h*o-o (yes, they scan for this) spam follows:
Great stuff seeking new owners in Yahoo! Auctions! 
http://auctions.yahoo.com

Re: Ecash fraud resolution

[mattd]

 >>If transaction cost is low enough, commodities become money, and money 
commodities. There's no need for a numeraire. Someday. :-). Cheers, RAH <<

http://www.cyberclass.net/bartable.htm

Barter Units of Money or BUMs should smell as sweet.There is a tide in the 
affairs of BUMs that taken at the flood leads on to good fortune.

http://www.mindspring.com/~do-music/trade/  Keeping it simple for stupid 
since april 01.

Re: Ecash fraud resolution

[David Honig]

At 10:37 AM 1/24/2002 +, Ken Brown wrote:
>How unusual. All I am left with is the trite insight that in human
>beings (and I suspect any species with a decent memory in which males
>play, or can play, a significant part in rearing offspring) assessment
>of reputation is, if not hard-wired, pretty much universal. And the only
>way it /can/ work is by assuming that he who can be trusted in small
>things can be trusted in great. You tend to believe that someone who
>lies and cheats about little things can't be trusted with big things. So
>the most successful liar is someone who remains scrupulously honest
>until the moment comes for lying. (So maybe you should never marry
>anyone you haven't often played cards with!)  Not exactly
>ground-breaking.
>
>Ken 

Over a decade ago I learned from published work 
that if a logical problem is posed as cheating (an underage 
person trying to buy ethanol IIRC) humans are
much much better at solving the logical problem than if it is
expressed otherwise.  Some cog scis think this is evidence of 
hardwiring for social cheating perception.

Re: Ecash fraud resolution

[R. A. Hettinga]

At 10:37 AM + on 1/24/02, Ken Brown wrote:


> Maybe, in general, the more kinds of money there "are" the less money is
> distinct from goods.

Right. That's Gene Fama (efficient market hypothesis), Fisher Black
(Black-Scholes option pricing model), et. al., "new" monetary economics
idea, circa 1980 or so.

If transaction cost is low enough, commodities become money, and money
commodities. There's no need for a numeraire. Someday. :-).

Cheers,
RAH

-- 
-
R. A. Hettinga 
The Internet Bearer Underwriting Corporation 
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'

Re: Ecash fraud resolution

[Ken Brown]

Absurdly enough, I had a dream about this last night. I was worrying
about assessment of reputation and I realised how it had to work. The
particular problem was the well-known one in evolutionary biology: how
does a female choose which male to allow to beget, and which to allow to
father,  her children.  Stuff about seahorses and anisogamous monoecious
reproduction (except in my dream I couldn't remember the word
"monoecious")

Strange to say, after I woke up, I couldn't remember the answer :-)

How unusual. All I am left with is the trite insight that in human
beings (and I suspect any species with a decent memory in which males
play, or can play, a significant part in rearing offspring) assessment
of reputation is, if not hard-wired, pretty much universal. And the only
way it /can/ work is by assuming that he who can be trusted in small
things can be trusted in great. You tend to believe that someone who
lies and cheats about little things can't be trusted with big things. So
the most successful liar is someone who remains scrupulously honest
until the moment comes for lying. (So maybe you should never marry
anyone you haven't often played cards with!)  Not exactly
ground-breaking.

Ken 

Tim May wrote:
> 
> On Wednesday, January 23, 2002, at 08:36  AM, Michael Motyka wrote:

[...]

> > Forgetting for the moment the nature of the goods or services that are
> > exchanged couldn't the cash transfer be broken into many very small
> > transfers with acknowledgment on each? First there must be some sort of
> > agreement to pay. If the payment transactions halt when there is a
> > dispute there are three classes of money : paid, unpaid and disputed. At
> > least this leaves a smaller amount to be disputed.
> >
> 
> The general rule of thumb is:
> 
> When the payoff for defection (fraud, failure to pay) is greater than
> the likely/expected future revenue stream from honorable behavior,
> defection is more likely.

[...]

> Remember that international trade has gone on for centuries, even
> millennia, with various "transaction failures" being possible: a ship
> sails into a port carrying goods and the local satrap decides to simply
> seize the cargo rather than offer goods in return, a payment is made in
> gold that turns out to be painted lead bricks, and so on. Likewise,
> black market or ostensibly illegal transactions have been happening.
> Examples abound. Lots of transaction failures are possible.

An important point lots of people forget. The systems don't have to be
perfect, they just have to be good enough.

Another reason for quantum transactions, it limits the loss. (well, it
is the same reason of course, but looked at a different way) One of the
reasons I don't mind carrying 20 pound notes but I dislike 50 pound
notes (& if there was such a thing as a 500 pound note I wouldn't ever
use one) is that, although I don't like losing 20 pounds, it isn't going
to cause me much real grief.  500 pounds would be a bit of a blow.

 
> In these examples, there is little recourse to "courts." Of course, both
> examples are good examples of anarchies. (A point well-made by David
> Friedman over the years and by Bruce Benson in his exhaustive treatment
> of the Law Merchant, the anarcho-capitalistic system used by traders
> from various parts of the world to deal with each other in the absence
> of top-down authoritarian law.)
> 
> The mistake so many critics/observers of digital cash (cryptographers
> especially) make is to expect digital cash to solve problems rigorously
> that are not rigorously solved when the forms of payment are chests of
> gold, IOUs, shipments of grain, or even Federal Reserve Notes. Or to
> solve the fraud problem that banks could easily pull off if they wished
> to (but don't). The protocol for digital cash must be seen as just one
> part of the larger ecology of economic transactions between actors with
> varying world models (beliefs in what other actors will likely do).

[...]

Re: Ecash fraud resolution

[Ken Brown]

Anonymous wrote:
> 
> If there is no fraud dispute mechanism, and Bob is paying Alice, only
> Alice can profit from the fraud.  Presumably when the fraud occurs,
> whichever party is at fault, Alice will refuse to deliver Bob the goods.
> Hence if Bob defauds Alice by giving her bad cash, he will not accomplish
> anything.  He will not get the goods, he will not get anything.  At most
> he can complain that she cheated him, but if he is lying anyway he can
> probably make such complaints without bothering to go through the trouble
> of doing a real transaction with her.
> 
> So the real need with a reputation system is to detect the case where
> the seller, rather than the buyer, commits fraud.  Luckily this is
> easier as sellers often seek to build up their reputations and develop
> persistent identities.

In an /entirely/ online system, I'm not sure there is a real distinction
between sellers and buyers. One person sends another some stream of bits
that the other perceives to have a value.  The other sends a different
stream of bits.  It could be e-cash of some kind, or the password into
some system, or the text of Iain Banks's next novel, or a sequence of
pictures of a young Peruvian woman taking her clothes off, or a ripped
CD of Beta Band out-takes,   or a detailed map of on oil reservoir in
the Permian Basin of Texas.  The difference between barter and
cash-payment is lessened if markets can be cleared electronically all
but instantly.  And both "money" and "goods" can be part-transmitted and
part-paid.

Maybe, in general, the more kinds of money there "are" the less money is
distinct from goods. 

> eBay is a good example of a reputation system in action.  It is not
> perfect but it does a reasonably good job.  Many buyers will refuse
> to bid on auctions if the seller has a reputation less than 20 or so.
> Sellers generally have much less stringent requirements on buyers;
> at most they want to see a positive reputation.

Of course it is different when physical goods change hands. (THe
difference between "physical" goods and the others isn't, of course,
that bitstreams aren't physical, but that their value lies only in their
information content. Other electrons would have done just as well. Or
the same message printed on paper. Especially if that message is "I
promise to pay the bearer on demand...")

Re: Ecash fraud resolution

[jamesd]

--
On 23 Jan 2002, at 8:40, Nomen Nescio wrote:

> It's been said that the defining test of a payment system
> is how it behaves when things go wrong.
>
> A dispute arises over an ecash payment.  Alice says Bob
> sent her ecash but when she tried to exchange it she
> learned that it had already been spent (double-spent).  Bob
> says that he sent Alice good ecash, and that she must have
> exchanged it twice so as to get a fake double-spending
> indication.
>
> Connections to the bank are anonymous so there is no way to
> learn who performed an exchange.
>
> How to resolve it?]

Bob creates a transient and temporary identity
Bob_incorporated_at_cayman_siles.

Alice creates a similar identity Alice_incorporated_at_Nauru

Bob transfers cash anonymously to this alternate identity,
pays Alice nymously, 

--digsig
 James A. Donald
 6YeGpsZR+nOTh/cGwvITnSR3TdzclVpR0+pr3YYQdkG
 sFJ6T8FYMR9TT6ypq8Mf6sR1qWSnHioI9PtvaH2Q
 4EfRfVMZFeOa1qE69z0p044354GgYmlyOS3Z4SvkB

Re: Ecash fraud resolution

[Neil Johnson]

Watch the last tape in the US Public Broadcasting Systems (PBS) series "21st 
Centutry Jet".

It shows the transaction between Boeing and United Airlines for the purchase 
of Boeing's First 777 jet.

Multiple Lawyers, Bankers, Company and Government officials spread accross 
the US  on a conference call to verify the money was transferred, that the 
registration change for the aircraft was properly filed, etc.

Even though "cash" wasn't involved, with that amount of money changing hands
both parties weren't taking any chances.

-Neil

Re: Ecash fraud resolution

[Tim May]

On Wednesday, January 23, 2002, at 08:36  AM, Michael Motyka wrote:

> Tim May <[EMAIL PROTECTED]> wrote :
>> Escrow and online clearing.
>>
>> As you defined it, there is of course no way to resolve the problem. No
>> more so than if Alice says she sent ordinary cash in the mail and Bob
>> claims he never got it, or it was in the wrong amount, and so on.
>>
>> --Tim May
>>
> Forgetting for the moment the nature of the goods or services that are
> exchanged couldn't the cash transfer be broken into many very small
> transfers with acknowledgment on each? First there must be some sort of
> agreement to pay. If the payment transactions halt when there is a
> dispute there are three classes of money : paid, unpaid and disputed. At
> least this leaves a smaller amount to be disputed.
>


The general rule of thumb is:

When the payoff for defection (fraud, failure to pay) is greater than 
the likely/expected future revenue stream from honorable behavior, 
defection is more likely.

-- the local restaurant _could_ claim that a customer had ordered and 
eaten something he hadn't, and thereby pocket an extra $10 or whatever, 
but the loss of future business from this customer, those who hear about 
it, and even reports in the press or by rating agencies (who might be 
anonymous customers) will likely exceed the short-term payoffs for 
fraud. Importantly, neither the law nor being able to trace the true 
name of the restaurant owner is crucial to why this kind of fraud is 
rare.

-- a bank can trivially claim "You withdrew your money yesterday." 
Scrawled signatures on withdrawal slips are meaningless as proof. And 
yet banks don't. The reasons are related to the above example.

Granted, depositing real money in the First Nigerian Bank of Anonymous 
Accounts may be a problem, given their penchant for frauds. But the Bank 
of Orlin Grabbe probably will value reputation.

And, as you and others (cf. Cyphernomicon, '94) note, breaking up a 
transaction into small pieces has many advantages. Not the least of 
which is "pinging" (testing) the account. One reason we trust banks is 
because of a Bayesian history of banks (in non-Nigerian-type places) 
always "honoring" their accounts.

Inasmuch as transactions/accounts are untraceable, anyone can ping a 
bank, or moneychanger, or merchant, with lots of small transactions. 
Much has been written about this.

Everyone has different language for this, and for the situation Mike 
describes, and so on.

Without carefully knowing what it meant by "some sort of agreement to 
pay" and "dispute" and so on, I can't say whether Mike is on the right 
track (and, so that Mike doesn't waste his time writing definitions, I 
don't currently have any time to analyze English language story problems 
about payment failures).

Remember that international trade has gone on for centuries, even 
millennia, with various "transaction failures" being possible: a ship 
sails into a port carrying goods and the local satrap decides to simply 
seize the cargo rather than offer goods in return, a payment is made in 
gold that turns out to be painted lead bricks, and so on. Likewise, 
black market or ostensibly illegal transactions have been happening. 
Examples abound. Lots of transaction failures are possible.

In these examples, there is little recourse to "courts." Of course, both 
examples are good examples of anarchies. (A point well-made by David 
Friedman over the years and by Bruce Benson in his exhaustive treatment 
of the Law Merchant, the anarcho-capitalistic system used by traders 
from various parts of the world to deal with each other in the absence 
of top-down authoritarian law.)

The mistake so many critics/observers of digital cash (cryptographers 
especially) make is to expect digital cash to solve problems rigorously 
that are not rigorously solved when the forms of payment are chests of 
gold, IOUs, shipments of grain, or even Federal Reserve Notes. Or to 
solve the fraud problem that banks could easily pull off if they wished 
to (but don't). The protocol for digital cash must be seen as just one 
part of the larger ecology of economic transactions between actors with 
varying world models (beliefs in what other actors will likely do).

Reputational/Bayesian enforcement is much more powerful than statist law.

--Tim May, Citizen-unit of of the once free United States
" The tree of liberty must be refreshed from time to time with the blood 
of patriots & tyrants. "--Thomas Jefferson, 1787