From: terrell@sam.neosoft.com (Buford Terrell)
Date: Sat, 2 Sep 95 07:42:13 PDT
To: cypherpunks@toad.com
Subject: Re: A problem with anonymity
Message-ID: <199509021451.JAA14144@sam.neosoft.com>
MIME-Version: 1.0
Content-Type: text/plain


>
>Subject: Re: A problem with anonymity
>From: monty.harder@famend.com (MONTY HARDER)
>
>TC> This is one thing that _bonding_ is designed to partially ameliorate. One
>TC> posts a bond which is greater than the amount being carried, or at least is
>
>  A variation of a bond is an escrow agent....
>
>     Overload Alert: I use "escrow" here in the more mundane sense of
>     the folks who collect your real estate taxes and homeowners'
>     insurance from you 1/12th at a time along with your mortgage
>     payment, for instance.
>
>  If the buyer has a =nonymous= agent to recieve the payment, which is
>only released to the seller upon proof(s) of performance (whether in
>lump sum or on a schedule of staged payments tied to specific milestones
>in a long-term project) then the buyer has someone to go after in the
>event of such shenannigans.
>
>TC> There are still scams and manouvers to thwart this reputation capital
>TC> scheme. The agent planning to "defect" (default, split, abscond, renege,
>TC> etc.) can try to pile up as many pending transactions as possible,
>TC> anticipating that the various transactees will be unaware of each other.
>
>  And the escrow method dynamically scales to meet this threat, whereas
>the bond is static.
>
>  Of course, the escrow agent will extract his pound of flesh, just as
>any other form of insurance. Such is the nature of life.
>
Actually, you guys are trying to repeat the whole history of the
law merchant (today's commercial law).  The basic problem was how
can a buyer in one city acquire goods from a seller in another
through agents acting at a distance when neither knows the other
and neither is willing to risk loss on the transaction.

The use of bankers, as either trusted or bonded third parties,
acting as escrowees under the control of a letter of credit was
the result.

Buyer, B, deposits money with the bank, E, with insructions
to release the money on proof of receipt of the goods.  E gives
B a receipt and a written promise to pay.  B trades the promise
to pay to Seller, S, in exchange for the goods.  S, who either
trusts E or has access to his bond, is willing to accept E's
promise to pay, which he then negotiates.  The result is that
B and S have a secure transaction without trusting each other,
and E gets rich.

Notice, we don't care about the reputation or identity of either
B or S, and a very few trusted or bonded Es can facilitate
many many transacrions.

Incidentially, you all are using the word "escrow" correctly.
An escrow is an arrangement in which property is deposited with
an escrowee to hold until the happening or failure of a
contingency, at which time he delivers the property according to
the escrow instructions.  House sales, in which the seller deposits
a deed and the buyer deposits the purchase price pending proof of title
is only one kind of escrow.

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Buford C. Terrell
South Texas College of Law
1303 San Jacinto, Houston, TX 77002
(713)646-1857    terrell@sam.neosoft.com
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