Re: IRS LEARNING . . .

["Perry E. Metzger" <pmetzger@lehman.com>]

Phil Karn says:
> Anyway, back to cryptography, I do suspect that the government will
> eventually point to digital cash as justification for controlling all
> of cryptography. Or they will refuse to back it up in court as legal
> tender, thus helping undermine it. I know there's this concept called
> "reputation" that's supposed to take the place of the government
> enforcing contracts, but I have a hard time understanding just how it
> will work for very large transactions between individuals (like buying
> a house or even a used car).

You don't need legal tender laws to make a currency worthwhile.

In many third world countries, U.S. Dollars and German Marks are more
accepted than local currencies for transactions. There are no laws in
those countries mandating that these currencies be accepted -- indeed
the laws usually make them illegal -- and yet they are accepted. If
Union Bank of Switzerland set up a digital cash system that officially
was not sanctioned for use in the U.S. but in practice could be, it
would make little difference whether the U.S. Government liked,
sanctioned, or even permitted it.

How could "reputation" take the place of government in the enforcement
of contracts? Well, I'd say that you don't quite have the right
question in mind, but I would direct you to Bruce Benson's "The
Enterprise of Law." Basically, I will start by pointing out that
modern contract law was developed entirely in private merchant courts
without any power of enforcement, and yet still worked. The system in
question, the Lex Mercatoria, was only co-opted fairly recently by
state-based legal systems. There are many ways that contracts can be
enforced without the use of the state, and I don't mean through the
use of mafia hit-men, either.

Perry