[Cryptography] Cryptocurrency Exchange without a trusted third party

Bill Frantz frantz at pwpconsult.com
Sun Jan 15 17:46:58 EST 2017


On 1/15/17 at 1:37 PM, ron at flownet.com (Ron Garret) wrote:

>OK, I agree with all of that.  However: it seems to me that 
>there is another solution to the problem that a TTP can screw 
>you over (which I acknowledge as a very real problem): make the 
>TTP *auditable*, that is, design your TTP protocol in such a 
>way that *if* the TTP defects that defection will be 
>immediately discoverable to anyone who bothers to check.  Now 
>the TTP can only defect successfully if no one bothers to 
>check.  The odds of that are small enough that no rational TTP 
>will take the risk *even if no one is actively auditing them*.  
>The net result (I claim) will be a system that is as reliable 
>in practice as a blockchain, but a lot more efficient.
>
>What’s wrong with that argument?

The TTP could decide to cash in its reputation capital and 
disappear. This has occurred in real life. One story:

Back in the 1960s, Japanese cameras were very expensive in the 
US as there was only one importer and it could and did charge 
monopoly prices. A company in Hong Kong addressed this situation 
by mail ordering cameras from Hong Kong. I actually ordered a 
camera from then. It came without the name plate -- trademark 
law was used to enforce the one importer policy. I also receive 
a letter which contained the name plate and the two screws to 
attach it. I was happy.

This company became quite popular and received many orders. 
There came a time where it was cashing checks/money orders etc., 
but not shipping. After about 9 months people realized that it 
was never going to ship and checked the address in Hong Kong. It 
had flown the coop with all the cash. It had cashed in its 
reputation capitol.

Cheers - Bill

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