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Re: A problem with anonymity

1.  Anonymity raises the price of credit; the market will
	decide, probably variously, how that increase will
	be distributed among borrowers.

2.  I suspect the taxation authorities would have an interest
	and that it would be counter-anonymity, producing
	friction that would further increase the above cost.


On Thu, 31 Aug 1995, 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
> Cards" <URL:ftp://ftp.research.att.com/dist/anoncc/anoncc.ps.Z>),
> there's a strategy for transferring unlimited funds to one's
> posterity.
> 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.
> 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.
> Since the process of taking an anonym from scratch to a positive
> reputation would be reasonably short (presumably not too much longer
> than taking a real name or pseudonym the same distance), especially when
> helped along by being fed the profits from the legitimate business of
> an ancestor anonym, it's likely that a single individual could pull off
> such an asset transfer at least two or three times a decade, as well as
> at inheritance time.
> 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.
> Comments?