From: Hal Finney <hal@rain.org>
Date: Mon, 5 May 1997 02:41:52 +0800
To: cypherpunks@cyberpass.net
Subject: Re: Bypassing the Digicash Patents
Message-ID: <199705041819.LAA00411@crypt.hfinney.com>
MIME-Version: 1.0
Content-Type: text/plain


It is hard to understand why a system where it is impossible to track
payments (Chaumian anonymity) is cheaper than one where it is possible
to do so, but we choose not to.  If avoiding tracking payments is cheaper
than tracking them, why wouldn't participants just not bother to track
them even when they theoretically could?

Granted, there are situations where taking away someone's options can make
him better off.  The classic example would be the Prisoner's Dilemma, which
I will assume people here are familiar with.  Given the choice to cooperate
or defect, standard analysis predicts that both players will defect.  Remove
that option, and they will be forced to cooperate, leading to a better
("lower cost") outcome for both.  The structure of the game forced them to
take advantage of an option which has the net result of costing them more.

The question is whether this kind of reasoning would apply financial
transactions.  Is it really true that taking away the option of tracking
transactions is going to save money overall?  Sure, not keeping records
is a priori going to be cheaper than keeping them, but the question is
how much the loss of those records is going to hurt you.

Presumably records are kept to protect against various risks.  Without
that protection, you need other means to control the risk.  But if those
means exist and they are cheaper than record-keeping, then again even
without anonymity it should be cheaper to use those methods in place of
the records.

I think we would need to see a more detailed explanation of exactly why
it is that people can't save money today by avoiding keeping records,
when they could do so if it were impossible to keep records.

(One possible explanation is that it would be a regulatory effect.
People are forced by the government to keep records, to their detriment,
that they would prefer not to keep.  With anonymous bearer certificates
it would not be possible to keep the records so people might hope to
escape the regulations.  However the problem with this reasoning is that
the same forces which require the record-keeping would be likely to ban
the use of instruments which prevent keeping records.)

Hal