From: "E. ALLEN SMITH" <EALLENSMITH@mbcl.rutgers.edu>
Date: Wed, 6 Dec 95 11:24:02 PST
To: nsb+limbo@nsb.fv.com
Subject: Re: Geodesic Payment Systems? (was Re: Meeting notes from ANSI X.9Meeting on Electronic Payment)
Message-ID: <01HYHNP19ND89S3REI@mbcl.rutgers.edu>
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From:	IN%"nsb+limbo@nsb.fv.com"  "Nathaniel Borenstein"  6-DEC-1995 07:21:19.03

I had assumed that there was a market discount, but it's still not quite
that simple.  It's very hard for markets to deal with *unbounded* risk. 
The biggest problem I see with most of the crypto-cash schemes is that
there is a legitimate scenario -- however low-probability you might
assess it to be -- of break-the-bank catastrophic failure, i.e. in which
someone gains the keys that allow him to essentially print money.  This
kind of low-probability, infinite-cost risk is the kind of thing that
gives underwriters the heebie jeebies.  There's a good reason that most
companies have "Ltd" after their name instead of "Unlimited", in those
countries where that's the naming convention.
--------------------------
	The risk in question is not infinite-cost. If the person who gets
ahold of the keys starts simply making lots and lots of money, in a free
market the prices in digital cash for everything will start going up. This
phenomenon will be spotted, and those taking the particular variety in
question will stop accepting it. Losses are limited to however much was out
there at a given time, and if there are multiple systems with free-market
interconversion between them, that may not be very much. People will move
out of a decaying monetary system if: A. the new system is as easy to get
as the old; and B. the new system is as easy to spend as the old.
	If the person who gets the keys simply uses them on a small scale,
then the resulting inflation and loss of value can simply be dealt with
using the discount mechanism. It's no longer infinite risk.
	-Allen