[fc-discuss] Financial Cryptography Update: On Digital Cash-like Payment Systems

[John Kelsey]

From: cyphrpunk <cyphrpunk at gmail.com>
Sent: Oct 24, 2005 2:14 PM
Subject: Re: [fc-discuss] Financial Cryptography Update: On Digital Cash-like Payment Systems

On 10/22/05, Ian G <iang at systemics.com> wrote:

>Note that e-gold, which originally sold non-reversibility as a key
>benefit of the system, found that this feature attracted Ponzi
>schemes and fraudsters of all stripes, and eventually it was forced
>to reverse transactions and freeze accounts. It's not clear that any
>payment system which keeps information around to allow for potential
>reversibility can avoid eventually succumbing to pressure to reverse
>transactions. Only a Chaumian type system, whose technology makes
>reversibility fundamentally impossible, is guaranteed to allow for
>final clearing. And even then, it might just be that the operators
>themselves will be targeted for liability since they have engineered
>a system that makes it impossible to go after the fruits of criminal
>actions.

More to the point, an irreversible payment system raises big practical
problems in a world full of very hard-to-secure PCs running the
relevant software.  One exploitable software bug, properly used, can
steal an enormous amount of money in an irreversible way.  And if your
goal is to sow chaos, you don't even need to put most of the stolen
money in your own account--just randomly move it around in
irreversible, untraceable ways, making sure that your accounts are
among the ones that benefit from the random generosity of the attack.
The payment system operators will surely be sued for this, because
they're the only ones who will be reachable.  They will go broke, and
the users will be out their money, and nobody will be silly enough to
make their mistake again.

>CP

--John

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