From: Hal <hfinney@shell.portal.com>
Date: Thu, 25 Aug 94 09:48:03 PDT
To: cypherpunks@toad.com
Subject: Re: Is pay-per authentication possible absent trust?
In-Reply-To: <9408251545.AA22928@ua.MIT.EDU>
Message-ID: <199408251647.JAA24365@jobe.shell.portal.com>
MIME-Version: 1.0
Content-Type: text/plain


Jason W Solinsky <solman@MIT.EDU> writes:

>Enter Ingve the insurance salesman. Ingve will guarantee to others that you
>are certified by Charles by offering them bets. So suppose that Microsquish
>sends you its advertising agent and the agent is offering a 10 nano-slinkys
>[a cyberspatial monetary unit] bonus if you can produce one of Charles's
>certifications. Charles is charging 8 nano-slinkys. In steps Ingve. You've
>told Ingve that you are certified by Charles as a frequent purchaser of big
>brother inside computers. So Ingve says: "I'll convince Microsquish to accept
>my word that you have Charles's certification in exchange for just four
>nanoslinkys. But if at my request you ask for the certification and Charles's
>says you aren't certified then you owe me 64 nano-slinkys." Since you are sure
>that you are certified you accept the deal. Then Ingve goes to Microsquish
>and offers to insure your certification. Each time Microsquish accepts a
>certification from Ingve for you, Ingve will pay Microsquish 2 nano-slinkys
>but will be able to get your business (and thus offset that with the four
>nano-slinkys). But, if it turns whenever Microsquish wants to it can check
>up on your certification from Charles at cost (8 nano-slinkys). If Charles 
>certifies you all is well. Otherwise, you owe Ingve 64 nano-slinkys and
>Ingve has to pay up Microsquish's insurance claim (which could be quite large
>depending on the policy.

One thing I don't follow here is under what circumstances a "challenge"
will occur.  Presumably Microsquish will not blindly accept all of
Ingve's assurances since they are backed only by promises.  Can
Microsquish force Ingve to go to his clients and make them produce
certificates?  Who pays for that?  Maybe if you factor in that cost it
won't look so bad for Charles.

Also, just because Charles can't get what he wants for his certifications
doesn't mean he is being cheated.  It's a market, after all.  You could
just as well say that somebody else opens up a certification shop that
sells certifications just like Charles' for less.  It's not the fault of
the protocol that Charles' business dries up.  If the value of his
certifications drops (as in your scenario) then his business should decrease.

Last, I'd say your problem exists just as clearly without Ingve.  You
could make a deal with Microsquish promising that you would be able to
get certifications if asked, with some agreed-upon procedure by which
Microsquish could demand that you produce one, with appropriate
penalties.  In that case probably Microsquish would believe some
percentage of people and Charles' business would again fall off.  In
practice Ingve might be useful to help even up fluctuations but the
problem arises just as clearly without him.

You might look at it in terms of a priori vs a posteriori probabilities
that you do in fact have the ability to gain a certification.  If
Microsquish was inclined to believe you before (say, because you had
demonstrated good faith in the past), then the exhibition of an actual
certificate is less valuable to Microsquish because it adds less
information.  So it makes sense that certificate challenges, with their
associated costs to you and Microsquish, would occur less frequently in
that case.  Again, it appears that the situation is simply reflecting
market values of information.

Hal