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Re: Geodesic Payment Systems? (was Re: Meeting notes from ANSI X.9Meeting on Electronic Payment)

From:	IN%"[email protected]"  "Nathaniel Borenstein"  5-DEC-1995 09:37:47.34

A true geodesic structure is self-supporting and self-structuring.  A
cryptographic infrastructure can and should be similar, I agree
completely.  However, a *monetary* infrastructure needs convertability,
and the points of conversion are always the best targets of attack for
criminals.  (I've been casting about for an analogy to physical
geodesics, and it's hard to find one.  The best I can come up with is to
imagine that in order to convert a carbon buckyball to a more
conventional set of carbon molecules, you had to do it through a service
bureau that was capable of error, fraud, or subversion by outside
criminals.  This would ONLY matter if you ever wanted to do such
conversions, but it would matter a lot then, especially if you had to
suffer a serious financial loss if you got the wrong carbon molecules at
the end of the process.)

IF you wanted to settle for a totally non-convertible economy (like
rubles in the old Soviet Union, or like the LETS system on the net
today, as I understand it) then you could build it geodesically.  But if
you want to be able to convert back and forth between Internet payment
systems and non-Internet payment systems, it can never be truly
geodesic.  It will always be attackable at the points of conversion. 
(You may "trade digital certificates", but how do you know the ones
you're receiving were obtained for legitimate real-world value?) 
Because of this, the underwriting financial institutions, who have a
very reasonable desire to limit their own risk, will inevitably seek the
protection-by-traceability offered by something less than perfect
anonymity.  We may not like it, but it's a very natural position to be
taken by those who are actually bearing the financial risks at the point
	All of this is assuming that the digital currency being produced has
a one-to-one ratio with some "real" currency. If, for instance, the digital
certificates were indeed bought with a one-to-one ratio from the producer, but
were traded to others for "real" cash at some market-determined discount, the
market would incorporate the risk. The traders who were willing to take the
risk that the certificates were not actually worth one dollar/whatever would
be able to make a profit by the difference between one digital dollar and one
"real" dollar. The problem is simplified even more with privately backed