[Cryptography] The threat of privacy
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Mon Aug 3 10:38:22 EDT 2020
The Threat of Privacy
By Charles M. Kahn1
Like artists, we academics want to believe that if one of our works doesn’t get enough attention it’s because we’re ahead of our time. I’d like to pretend that everything I’ve written is pathbreaking, and will eventually be recognized for its true importance. But I have to admit that there are really only a couple of cases where I can say with hindsight that something I wrote has been ahead of its time.
One of them2 is a paper written with Jamie McAndrews and Will Roberds, published in 2005, and titled “Money is Privacy.” We wrote it partly as a response to Narayana Kocherlakota’s famous paper “Money is Memory,” which could be taken as arguing that cash is essentially a record‐keeping device, tracking who was a net creditor and who a net debtor to society with respect to resources provided or consumed. The implication was that if it became easy to keep credit records directly, cash could wither away.
In our paper we argued instead that a key role of cash was its ability to protect the purchaser’s identity. So we predicted that, even while the reductions in costs of record keeping and increases in the speed of data transmission were expanding the usage of credit‐ and deposit‐account‐ based payments arrangements, cash would survive. Because the desire for privacy would always generate demand for cash, it would be a mistake—and ultimately futile—to attempt to abolish it. At the time, people were attuned to many of the problems of privacy, but there had not yet been a clear recognized link between the value of privacy and the role of payments systems. (Remember, bitcoin was only released in 2009).
1 Keynote address at “Financial Market Infrastructure Conference II: New Thinking in a New Era” at De Nederlandsche Bank, Amsterdam, 7‐8 June 2017.
2 The other was my dissertation, back in 1980. It was on liquidity and the pricing of illiquid assets. At that time, no one thought this was an important issue in finance: financial markets were liquid; everybody “knew” that. So the work went nowhere. Oh well.
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