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dbts: Privacy Fetishes, Perfect Competition, and the ForegoneAlternative



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At 12:38 PM -0500 on 10/27/98, Steve Bellovin wrote on dbs:

> For the record, though, I not only don't think that cryptography should
> make the state vanish, I don't think that it will.

Cryptographer ~== Libertarian, certainly. Much less Anarchist.

I like to joke that David Chaum is a liberal statist with a privacy fetish.
PRZ was, too, but, after his bout with a certain kangaroo court prosecutor,
I bet he isn't so liberal anymore. :-)

Crypto *is*, however, a liberty/anarchy magnet. It certainly changed my
thinking about a whole lot of things, including how the state will collapse,
someday, in a giant paroxysm of technological determinism. ;-).


Dragging this back to the topic of the DBS list itself (and, frankly, the
topic is a subset of the cryptography list, too, and lots of others,), the
paradox of financial cryptography, and, more specifically, digital bearer
settlement, is not that it gives you privacy and freedom (anarchy? :-)),
it's because it gives you *cheaper* transactions. Transactions which just
happen to be anonymous.  You don't *have* to keep records in the normal
course of business in order to keep your transactions from unraveling at
some later date.

You can monitor your own business operations, certainly.  But you're not
*forced* to, by some, um, regional monopoly. That's attractive. To lots of
economic actors, besides terrorists, drug dealers, pedophiles and money
launderers. :-). To machines, for instance, but also to actors in  markets
which are, as they say in economics, perfectly competitive, where things
are sold like commodities are.

This is opposed to so-called monopolistic competition, where all of a
company's products are branded as much as possible. McDonald's versus Burger
King is a good example of monopolistic competition. McDonald's doesn't make
something *exactly* like a Whopper, for instance, if they did, they'd be sued
for copyright violation, or even patent enfringement, though they do make
branded, and patented, almost-substitutes. Coke and Pepsi are the same kinds
of thing. Except for the Secret Coke Formula, of course. :-).

But, stuff like soybeans, or switched bits on a wire, or copies of Linux, or
cash, or debt, or even equity in the portfolio aggregate like a stock index,
are not *branded*, they're *graded*.

Every item in a perfectly competitive market is perfectly substitutable with
any other item in that market.  If you're trading graded commodities, you
don't *care* who you're doing business with. You care about what they're
selling you. And it's something which you can verify the quality of on an
independent basis. Those grades are certified by someone with a reputation,
of course, but even those reputations are graded to the extent that they're
priced in a market somewhere. A NYSE seat, for instance, has a price on it,
and I think internet product-certifying reputations will too, someday.
That's what a digital bearer underwriter is, when you think about it.


I think, over time, that Moore's law and a geodesic internetwork gives us
increasingly perfect, and not monopolistic, competition, and, in practically
every market you can imagine. Graded surgical instructions, say.

And to bring up that paroxysm again, if you could convert teleoperated machine
instructions like surgery into graded, fungible, and cash-settled,
commodities, why not force, currently the product of that most monopolistic of
competitors, the nation-state?

Anyway, I think that these perfectly competitive markets will be the of
hallmark of a geodesic information economy, just like marketing and branding
and monopolistic competition are the hallmarks of a late-industrial,
hierarchically-organized, mass-media economy.


But, again, it is the reduced *cost* of those cryptographically-enabled
transactions which will drive everything else, and that is a logical outcome
of the technology of financial cryptography and digital bearer transactions.

The cost of anything is the foregone alternative.


Cheers,
Bob Hettinga


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Robert A. Hettinga <mailto: [email protected]>
Philodox Financial Technology Evangelism <http://www.philodox.com/>
44 Farquhar Street, Boston, MA 02131 USA
"... however it may deserve respect for its usefulness and antiquity,
[predicting the end of the world] has not been found agreeable to
experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire'