From: mpd@netcom.com (Mike Duvos)
Date: Tue, 16 Aug 94 09:21:44 PDT
To: cypherpunks@toad.com
Subject: Re: In Search of Genuine DigiCash
Message-ID: <199408161621.JAA06129@netcom5.netcom.com>
MIME-Version: 1.0
Content-Type: text/plain


Robert Hettinga (rah@shipwright.com) writes:

[Nice discussion of portfolio management elided]

 >> It is also unlikely that faith of financial institutions in
 >> supposedly unbreakable mathematics has been enhanced by the
 >> recent one-line fix announced for the DSS.

 > I don't think this is really a problem. It's just as if
 > somebody had figured out how to counterfeit money cheaper.
 > Countermeasures are taken and it isn't cheap anymore. The
 > neat thing about strong crypto is that it's strong in spite
 > of public algorithms. People who crack those algorithms
 > publish their results, or someone else will. The half-life
 > of a hidden innovation in that kind of environment is pretty
 > small.

Ordinary counterfeiting is analog.  Close inspection will always
reveal differences which can be used to distinguish fake money.

Counterfeit anonymous DigiCash, on the other hand, is
indistinguishable from the real thing.  If a bank is signing
blinded notes for customers and has underwritten to exchange for
cash any note bearing a verifiable signature, a cracked signature
algorithm is a very serious matter indeed.

The half-life of such an innovation could be practically forever,
as long as the discoverer does not get greedy and his siphoning
off of value remains hidden in the daily float.  By the time the
bank realizes that there seems to be much more ecash in
circulation than they have issued, the perpetrator is likely to
be long gone and the bank is likely to be kaput.

If I cracked such an algorithm, publishing would be just about
the last thing on my mind.

Worst case scenario:

        Chemical bank announces "ChemCash", anonymous untracable
        Internet currency.  Within 5 years, billions are in
        circulation, and all good citizen-units buy everything
        through the Web Shopping Network.  Chaum wins the Nobel
        Prize in Economics.

        Chemical Bank Auditors notice that the books are looking
        funny, or at the very least, statistically strange.  It
        is estimated that there are several tens of billions of
        dollars more ecash around than the bank has issued.  Bank
        is insolvent.

        Congressional hearings.  Government bailouts.  Ecash
        falls from grace.  Chaum joins inventor of lobotomy
        in Nobel Prize "Hall of Shame".

        Billionaire hacker Emmanuel Goldstein publishes his
        long-awaited memoirs from his estate in Argentina.  He
        titles the book "How I Proved NP=P and Kept My Mouth
        Shut".

"Hey - It could happen!"

-- 
     Mike Duvos         $    PGP 2.6 Public Key available     $
     mpd@netcom.com     $    via Finger.                      $