DBCs now issued by DMT

[bear]

On Thu, 5 Dec 2002, Peter Fairbrother wrote:

>OK, suppose we've got a bank that issues bearer "money".
>
>Who owns the bank? It should be owned by bearer shares, of course.
>
>Can any clever person here devise such a protocol?

I thought about this problem for several months.

The problem I kept running into and had no way around is that if the
holders are truly anonymous, then there is no way for them to seek
redress for fraudulent issue or fraudulent transactions.  If the
banker goes broke, people want to be able to make a claim against the
banker's future earnings for whatever worthless currency they were
holding when it happened, and they cannot do that from a position of
anonymity.  People want a faithless banker punished, meaning jail time
or hard labor, not just burning a nym.

The sole method for any truly anonymous currency to acquire value is
for the banker to promise to redeem it for something that has
value. So the banker, if it's to have a prayer of acceptance, cannot
be anonymous.

And the minute the banker's not anonymous, the whole system is handed
on a platter to the civil authorities and banking laws and so on, and
then no part of the system can be reliably anonymous because the
entire infrastructure of our legal system requires identity.

Look at the possibilities for conflict resolution.  How can the
anonymous holder of an issued currency prove that he's the beneficiary
to the issuer's promise to redeem, without the banker's cooperation
and without compromising his/her anonymity?  And if s/he succeeded in
proving it, who could force an anonymous banker to pay up?  And if you
succeeded in making the banker pay up, how could the banker prove
without the cooperation of the payee that the payment was made and
made to the correct payee?

We use a long-accepted fiat currency, so we're not used to thinking
about the nitty-gritty details that money as an infrastructure
requires. It is hidden from us because our currency infrastructure has
not broken down in living memory.  We shifted from privately issued
currency to government-issued currency largely without destabilizing
the economy.  Then once people were accustomed to not thinking of a
promise to redeem as being the source of value, we went off the gold
standard.  Our economy hasn't broken yet, but you have to realize that
this situation is a little bizarre from the point of view of currency
issue.  We're not thinking anymore about the promise to redeem
currency for something of value, and the implications of failure to
honor that promise, because we live in a sheltered and mildly bizarre
moment in history where those things haven't been relevant for a long
time to the currency we use most.  But any new currency would have to
have a good solid solution for that issue.

The only way I found to decentralize the system, at all, was the model
where all the actors are pseudonymous rather than anonymous, each user
has the power to issue currency, and different issued currencies were
allowed to fluctuate in value against each other depending on the
degree of trust or value of the underlying redemption commodity.
Money becomes a protocol and a commodity and labor exchange in raw
form, rather than a simple sum - it's back to the barter system.

>I'd guess that all the Bank's finances should be available to anyone who
>asks. That should include an accounting of all the "money" issued. And not
>be reliant on one computer to keep the records.

An interesting idea, but it more or less prohibits offline
transactions involving a currency issue.  It also means the entire
market must be finite and closed.

>Or the propounders wanting to: make a profit/control the bank?

I do not think that there are profits to be made as an issuer of
anonymous or hard-pseudonymous money.  That's one of the reasons I
advocate the "everyone is potentially a mint" model -- the expenses of
issue, and the cost of doing business uphill against trust until one's
issue is trusted, should be shared in something like equal proportions
by people who undertake it voluntarily.

				Bear


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