From: peb@PROCASE.COM (Paul Baclace)
Date: Tue, 19 Oct 93 11:22:25 PDT
To: cypherpunks@toad.com
Subject: Re: backing?
Message-ID: <9310191819.AA03556@banff.procase.com>
MIME-Version: 1.0
Content-Type: text/plain



>From: pmetzger@lehman.com

>In every time and place that [gold backing] was eliminated, the currency 
>eventually collapsed

Non-gold backed currency is reputation based.  The debasement of a reputation
based currency looks a lot like the game theory strategy of "tit for tat, but
if you can get away with tricking them, go for it"; the tit for tat is needed
to keep the reputation and works both ways: (1) if a currency issuer debases 
value relative to another currency issuer, people will switch money to the better
currency (switching to a better reputation issuer, if possible), (2) counterfeiters
are tracked down and stopped to uphold the reputation.  

The "if you can get away with tricking them, go for it" can be easily be performed
when major currency issuers work together to debase all at the same time.
Luckily, this kind of collusion doesn't hold together well (like OPEC).

So we already have reputation based currency as represented by hard to reproduce
paper.  Similarly, a reputation based digital deposit could be built that is
based on ordinary currency.  (I view anonymous transaction as being completely
orthogonal to this.)


Paul E. Baclace
peb@procase.com