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Re: A problem with anonymity
At 11:32 PM 8/31/95, Scott Brickner wrote:
>I was thinking about some issues related to electronic commerce, and it
>occurred to me that there is a significant problem in conducting
>business with untraceable pseudonyms (anonyms?). The problem occurred
>to me while considering inheritance.
>If one operates a business under an anonym (as opposed to the sort of
>conditionally traceable pseudonym proposed by AT&T in "Anonymous Credit
>there's a strategy for transferring unlimited funds to one's
>Consider a business which typically has a lot of assets, but which are
>offset by a lot of liabilities --- almost any sort of VAR will do, for
>instance. In your will, you leave the key to unlock a private message
>to your heir, in which you hand over the information necessary to
>assume your anonym. Since the heir presumably has his own identity
>(whether anonymous or not is immaterial, except to *his* heirs), and
>the anonym can't be linked to you, he has no reason to care about
>maintaining the reputation of the anonym. In dismantling the anonym,
>he sells its assets to his own identity at a fraction of their worth,
>and defaults on the liabilities.
You don't have to look to death and inheritance for this problem to crop
up. Similar situations arise when:
- a pseudonym simply decides to dissolve the current pseudonym and shift
focus to another pseudonym (perhaps transferring a bunch of assets, then
simply vanishing and leaving "no forwarding address')
(This is of course the basis of any number of scams and "boiler room
operations." Crypto does not completey eliminate scams like this, and, in
fact, generates some new kinds of scams.)
- this is also a well-known problem with any services that handle money,
valuables, etc. For example, the money courier who vanishes to Rio de
This is one thing that _bonding_ is designed to partially ameliorate. One
posts a bond which is greater than the amount being carried, or at least is
some large amount. (Calculations are complex, and various agencies may have
various policies, depending on other reputation factors.)
>Since the anonym behaved reputably during its life, it developed what
>would have been a credit-worthy reputation, had it been a (traceable)
>pseudonym. But, since there's nothing to link the anonym to its heirs
>(or ancestors), the creditors of the anonym must eat the loss.
The concept of "reputation capital" is a critical one.
ideally, one never "trusts" an agent with a transaction greater than the
value of the reputation capital he will lose if he defaults.
There are still scams and manouvers to thwart this reputation capital
scheme. The agent planning to "defect" (default, split, abscond, renege,
etc.) can try to pile up as many pending transactions as possible,
anticipating that the various transactees will be unaware of each other.
(This of course happens in real life.)
Whether cryptographic protocols (cf. the "encrypted open books" proposal by
eric Hughes for one approach which may be useful) solve this problem is not
known at this time. But the non-crypto world has of course not solved this
>A market which permits anonyms to have credit based on reputation will
>probably have a constant stream of defaults caused by such behavior,
>representing a significant risk factor in extending credit to anonyms
>which can't be predicted by reputation.
Lots of issues need to be thought about. My hunch is that economists, game
theorists, and scam artists will all discover digital money and pseudonyms
and will explore various aspects of this situation.
I devoted a pretty big chunk of my Cyphernomicon to these "darker sides" of
anonymity, of reputation capital, and suchlike. By no means did I cover all
the issues of "crypto anarchy," but I suggest interested folks take a look
at the chapter on crypto anarchy for more discussion.
Timothy C. May | Crypto Anarchy: encryption, digital money,
[email protected] 408-728-0152 | anonymous networks, digital pseudonyms, zero
Corralitos, CA | knowledge, reputations, information markets,
Higher Power: 2^756839 | black markets, collapse of governments.
"National borders are just speed bumps on the information superhighway."