From: Robert Hettinga <rah@shipwright.com>
Date: Tue, 29 Apr 1997 16:36:05 -0700 (PDT)
To: cypherpunks@toad.com
Subject: Re: Bypassing the Digicash Patents
In-Reply-To: <v0302093eaf8be0697540@[139.167.130.246]>
Message-ID: <v03020974af8c24a07c52@[139.167.130.246]>
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At 5:35 pm -0400 on 4/29/97, Tim May wrote:

> This is  really for patent lawyers to argue,

Indeed, which is my point. If the patent lawyers are arguing, life is hard
for anyone trying to make  money with the technology the patents allegedly
cover.

Kind of like those "SLAPP" suits companies like to throw at "activists".
Remember PRZ? Same shit, different day. Economically, anyway.

> "Contributory infringement" is one possible avenue of going after such
> systems which bypass Chaum's patents, but this is a complicated issue.

See above. :-).

> I would guess that Chaum is also planning to try to get more comprehensive
> patents covering the "entire system" of using digital cash in financial
> transactions. Bad as software patents usually are, this trend is even worse.

Say amen, somebody. I personally think software patents are useless in the
long run, but they're still bad for business in the meantime. In which
meantime, until we can nonrepudiably pay people who invent financial crypto
protocols without the intervention of the nation-state, we need to live
with said patents.

> For the desired market for digital cash, that of black market and
> anarchistic transactions, ignoring the patents seems an obvious choice. For
> the hoity-toity bankers, they'll probably avoid such things completely.

There are lots of other "desired" transactions for digital bearer
certificates besides digital cash for black markets. Everything from
"collectables" (no accounting for taste, I suppose), to any current
financial instrument (and a few we haven't dreamed up yet), to micromoney
for those micromoney "mitochondria" I rant so much about. All of them will
be extremely economical because they're untraceable and still negotiable.
Nonrepudiable without the "assistance" of a nation-state.

Remember, proto-wings were evolved by pond-skimming insects so they could
skim across ponds faster. Eventually, when those proto-wings evolved into
actual wings, flying insects didn't need ponds anymore. With that idea in
mind, digital bearer certificates are going to have to interface with the
book entry world of meatspace for a while, in order to be convertable into
other assets. Eventually, at some point, those assets won't be book-entries
anymore.

<sfx: "slap!"> > I know which side I'm on, but I'm not sure which side Bob
is on. </sfx>

Bob just wants to make a buck. Something you don't have to worry about any
more about, anymore, Tim.
<he said, rubbing the red spot on his cheek...>

The point is, if it makes money it'll happen. If it doesn't make money, it
won't. Reality is not optional. Nation states are so powerful, requiring
the invention of strong cryptography to save us from their totalarian
excressance, because they can take our money at gunpoint. The reason they
can is because money can be traced, either in physical form, or lately, in
electronic book-entry form. The reason it can be traced is because our
economic system physically requires a nation state to enforce any
repudiation of its transaction protocols.  To punish fraud, in other words.

Financial cryptography saves us from the nation state not just because it
hides information about ourselves, but because it out-competes the old book
entry transaction system, especially in terms of non-repudiation. It
outcompetes the old system on it's own turf. Which means, of course, in
banks. "Hoity-toity" or otherwise.

Think about it this way. Personal computers didn't really start to kill
mainframes until they were networked into mainframes and could hoover data
out of them with impunity, and out-process the information. Excel killed
123 that much quicker because it could read .WK1 files transparently,
macros and all, and then do much more with it. Soon, this upcoming
"protocol conversion", between the net world of bearer certificates and the
meatspace world of book-entries, will be done by a financial trustee.

A trustee which will be, for all intents an purposes, and certainly in the
earlest stages of a digital bearer certificate infrastructure, a bank. The
hoity-toitier, the better, because they have the best reputation to rent to
transactions on the net. So, that means avoiding unpleasantneess, like
"cutting out" transactions on the net from a bank's shareholders by having
a bunch of separate entities, underwriters in other words, marketing and
validating the actual certificate transactions. That keeps Mrs. Grundy from
standing up in the bank's boardroom one afternoon and cancelling all the
net.porno operators' accounts, because they don't have accounts in the
bank. The underwriters do, and they underwrite certificates for thousands
of customers apiece, customers the underwriters don't even have know,
because the trustee is blindly passing those ATM and wire transactions to
the right banking correspondents on those networks, who in turn validate
their customers against their account base.


Anyway, getting back to the point, "avoiding unpleasantness" also means not
having patent lawyers sue those very essential "hoity-toity" trustee banks
for rediculous reasons, like patent infringement, actual or not.


Cheers,
Bob Hettinga

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