Re: More FUD from First Virtual

[Nathaniel Borenstein <nsb@nsb.fv.com>]

Excerpts from mail.nonpersonal: 8-Dec-95 Re: More FUD from First Vir..
jim bell@pacifier.com (1033*)

> What can stop it?  What should stop it?

Jon's right in identifying government as an entity that might try to
stop it, and might succeed to a frightening extent.  But they're not the
only ones.  Plenty of financial industry people and corporations have
similar motivations.  However, the real problem, I believe, is involved
in the technology of deploying and operating anonymous e-cash.

From a deployment standpoint, e-cash will be crippled if there are even
a few highly visible incidents in which the security of the system is
compromised, because it will scare the dickens out of whoever's doing
the conversion to real money (not to mention the users!).  Given that
the system is being built and administered by human beings, such
incidents are almost inevitable.  To put it simply:  anonymous e-cash is
a technological artifact that is designed in such a way as to create a
catastrophic failure scenario.  However low-probability such a scenario
is, I am a firm believer in Murphy's law:  what can go wrong will go
wrong.  The history of technology is overflowing with examples that
underscore this fact.

Now, people do effectively use technologies with low-probability
catastrophic risks, but they generally do so because of a compelling
motivation.  People strap themselves into the space shuttle because, in
exchage for the risk, they get to go into orbit, a pretty unusual
opportunity.  Many medical procedures bear catastrophic risks which
people endure in the hope of relief from pain or other ailments.  

For a real-world example, I have an inner ear disorder that makes me
frequently dizzy.  There's an operation that would have about a 95%
chance of curing me, and a 5% chance of making me deaf.  As a musician,
I have no motivation to take this gamble.  Alan Shepherd had the same
inner ear disorder, but he wasn't a musician, and he needed to be cured
of the dizziness in order to fly an Apollo rocket to the moon.  He had
the surgery and flew to the moon.  If I had a chance to fly to the moon,
I might risk my hearing too, but absent that possibility I prefer the
dizziness.  The big question is what motivates people to accept risks.

The real open question about anonymous digital cash is whether people
will want it badly enough to bear that kind of risk.  My guess is that a
few people will, and that a few (even fewer) small banks will accept the
risk, so there will indeed be a niche in anonymous cash.  But I think
that for better or worse, most people and banks won't value anonymity so
highly as to incur a low-probability catastrophic risk, which I think is
inherent in anonymous cash.

> Well, maybe I haven't been following those reasons, but I see little or no
> reason privacy should "inevitably carry a high surcharge."  If the relevant
> encryptions had to be carried out with a pencil and a piece of paper, that
> claim would make sense, but remember, we've got MICROPROCESSORS on our side!

The cost isn't the computation.  The cost comes primarily from the
efforts (both practical and actuarial) that will be made by the
underwriters to minimize and amortize their risk.  As Lloyds of London
has demonstrated, almost any risk can be undertaken at a high enough
premium....
--------
Nathaniel Borenstein <nsb@fv.com>       | (Tense Hot Alien In Barn)
Chief Scientist, First Virtual Holdings | VIRTUAL YELLOW RIBBON:
FAQ & PGP key: nsb+faq@nsb.fv.com       | http://www.netresponse.com/zldf