1998-05-01 - db$: The Wright Brothers vs. Chixalub

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From: Robert Hettinga <rah@shipwright.com>
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From: Robert Hettinga <rah@shipwright.com>
Date: Fri, 1 May 1998 11:49:10 -0700 (PDT)
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Subject: db$: The Wright Brothers vs. Chixalub
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Date: Thu, 30 Apr 1998 15:26:30 -0400
To: Digital Bearer Settlement List <dbs@philodox.com>
From: Robert Hettinga <rah@shipwright.com>
Subject: db$: The Wright Brothers vs. Chixalub
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You might notice that the tag on this one says "db$". That's to
differentiate it from my "e$" rants, which might be more general than ones
like this one, which is on digital bearer settlement. I think there is lots
of talk about electronic commerce and e$ these days from whole bunches of
people, and, as a consequence, my interest in it has focused more onto the
issue of digital bearer settlement.  You'll probably be seeing more db$
tags than e$ tags on my rants going forward.

All of which brings me to some obversations I've been making in public
about blind signatures lately, and the excellent time I had at Ed Yeardon's
Cutter Consortium "Summit" conference the past few days.

Let's start with yet another aviation analogy about Digicash, shall we? :-).

Remember, I like to do that.

Once I compared privacy to flight, and said that, like flight, lots of
people had died getting strong cryptography to work, and that privacy
itself was an inherent good. The thing which actually got people to use the
technology, however, was its commercial value. It wasn't the joy of flight
or slipping the surly bounds of earth at Kitty Hawk that got people into
the air, it was coach fare to Dayton. It was digital commerce, and thus
financial cryptography, which created the most privacy. Digital Commerce is
financial cryptography, financial cryptography is strong cryptography, and
all that.

Then there's my analogy of book-entry settlement as Boyle's law (partial
pressure of gasses?) and strong crypto, particularly digital bearer
settlement, as Bernoulli's law, the law describing aerodynamic lift.
Essentially you can think of cryptography and bearer settlement as wings,
and book entries as, well, bags of gas. :-).

Thinking this way, with commerce on the internet as flight, First Virtual
becomes a tethered baloon. Encrypting your First Virtual transaction makes
it an aerodynamic barrage balloon. Encrypting a credit card in an SSL
web-form is flying around on a Zeppelin. And, David Chaum becomes the
Wright Brothers for inventing the airplane. I used to say "Or maybe Otto
Lillenthal" under my breath to get a laugh, but now, I know exactly why
David Chaum is the Wright Brothers.

That's because Digicash *is* The Wright Flying Machine Company, or whatever
the Wright's subsequent enterprise was called. It seems to me that
Digicash's strategy with the blind signature is a dead ringer for the
Wright Brothers' control of the airplane patent. Here's why:

1. In the beginning, nobody believed that the Wright brothers could fly,
and they had to take the airplane to Paris and demonstrate it there before
anyone in the US thought it was true.

Digicash did the same thing. Actually, the NSA created a positively hostile
environment here in the USA for cryptography, financial or otherwise, and
that forced David Chaum to go to the Netherlands, where there was a more
positive reception for his work.

2. Then, nobody could think about what you could do with airplanes, and the
Wrights foundered for a bit..

Same thing with Chaum, Digicash, and the blind signature patent. The
commercial internet didn't exist yet in 1986, and blind signatures were
conceived as useful only in smartcards, which were just being experimented
with. Digicash was going to be used in physical electronic wallets, and
maybe in transponders at the gates of toll roads. The CAFE project was an
example of this meat-space ecash strategy.

It wasn't that Chaum didn't think about the internet. Far from it. He
invented digital mixes, after all, which became the basis for anonymous
remailers, onion routers, CROWDS, and the like. He just didn't look at
blind signatures from the financial operations point of view and see
digital bearer settlement, that's all. He was thinking privacy, and not
financial operations, just like the Wrights were thinking flight, and not
high-speed transportation.

3. The entire time they held the patent, the Wrights only really wanted to
sell airplanes to governments, because they wanted to sell to a few large
stable customers instead of small entities who would probably go out of

Digicash, to this day, tries to sell to big institutions. Their now mostly
internet-driven digital cash stategy is to create the financial equivalent
of Alfred Nobel's dynamite cartel, where one bank in each country gets an
ecash license, hopefully the largest bank possible. Mark Twain in the US
was a proof of concept, if not an act of desperation on Digicash's part,
but it did lead to exclusive (I bet) country-wide licences with Nomura,
Deutchebank, the Swedish Post office, and others. There was talk at FC98
that Digicash received $1 million a month from Deutchebank just for the
*option* on a Germany-wide license. I think they've now exercised that
option. Frankly, I find this geographic, paint-by-the-nation-state approach
quaint in a world of ubiquitous geodesic internetworks, but there it is,
and it effectively prevents other people from doing anything innovative
with blind signatures in the meantime. Monopolies on information
technologies kind of work that way. Dogs and mangers come to mind, and not
for the first time.

4. The Wrights, when they thought about the transportation business at all,
thought about it in terms of "rides" instead of "trips".

Digicash isn't really looking at the applications of their technology to
anything except its original designed purpose, that is, cash. There are
some leaks around the edges, of course.

Nomura seems to be looking at blind signature digital bearer settlement as
a real-time gross-settlement technology, with some kind of private,
kiretsu-cash idea. Digicash people used to give you a shocked "how did you
know that already" look when you talked to them about the painfully obvious
potential use of blind signatures in the capital markets.

However, I'm certain that Digicash thinks that capital market use of blind
signature digital bearer settlement is a pipedream and that they'd better
focus on the main chance, which is ecash. Preferrably electronic
wallet-based ecash issued by a major bank. In competition with book-entry
settlement, in book-entry settlement's own turf. Go figure.

5. Finally, the only innovation in the American aircraft market in the age
of the Wright patent came from that famous airplane "infringer", Curtis,
who didn't give a damn about patents and built airplanes anyway. Much
better airplanes, in fact, which the Wrights eventually took him to court
for, forcing Curtis to merge with the Wrights. Fortunately, European
evolution in aviation continued apace, giving us the aviation equivalent of
the Pre-Cambrian explosion, culminating in the names we all remember from
World War I like Sopwith, Spad, Dornier, and, of course, Fokker.

The problem is that there's no Curtis to infringe on the blind signature
patent, because you can't hook up to the financial system from the internet
-- land yur plane in other words -- without clear rights to use it. The
banks where you move money on and off the net from would get sued. Unless
they're in places like South Africa, where software patents don't matter,
or Russia, where they're probably uninforceable. Places which have their
own problems, not the least of which is poor internet access, poor
financial network connectivity (something like Cirrus on the back end of a
trustee/custodian would be, um, NYCE :-)), and, not least, poor impulse
control by the local force merchants, monopolistic or otherwise. Tax havens
don't even count. The very definition of a tax haven is someplace with a
bandwidth and regulatory gravity well to keep it safe from any kind of
market efficiency.

A return to some kind of "Europe" for that hoped-for explosion of blind
signature evolution could still be happening on the internet anyway.
Certainly, with smart and tenacious people like Ian Goldberg designing
HINDE and Ryan Lackey bashing on a reference version of it, one could
certainly try to argue this, but there's no money doing this stuff right
now (unless you count first-class upgrades to Anguilla or free nights in
the InterIsland), much less something like the First World War to forge
that innovation into a robust replacement for the book-entry economy.

Which, thinking thinking of robustness, brings me to what I've been doing
the last few days. Pete Loshin, former editor at Byte, former writer of
various excellent how-to books on networking and one of the first surveys
of internet commerce (and one of the founding members of the Digital
Commerce Society of Boston, I might add, :-)), is now editor of Cutter
Publications' "Corporate Internet Strategies" newsletter, which used to be
edited by Ed Yourdon, of American Programmer, Y2K, and much other, fame.

So, when they needed someone on a panel about electronic commerce at
Cutter's "Summit" conference at the Boston Harbor Hotel's Wharf Room
facility this week, someone controversial, they said, Pete said he knew
exactly who to throw into the fray.

It was fun, too. There, in front of a room full of senior IT managers from
big companies and Famous Computer Guys, sitting on a panel on Internet
Commerce, was one of Fidelity's Famous Computer Guys himself, now running
their web technology department. And Pete. And Fidelity's retail
web-marketing guy, and me. Fidelity has 900 billion dollars under
management. 60% of their customer interaction now comes from the web. The
ganglia twitch.

Dropping that $100 billion 1997 internet transaction number, and saying
that it was three orders of magnitude over the estimate didn't faze these
guys. They had seen it happen.

In addition, all of the people with websites I talked to said that they
used SSL to interact with their customers. Almost all of them said that
they used 128 bit encryption. The Mssrs. Fidelity faintly crowed about the
fact. Digital Commerce is Financial Cryptography, so what else is new?

Then, of course, I threw the whole geodesic economy, digital bearer
settlement rant at them, right down to the picomoney as processor food,
micromoney mitochondria bit.

And, of course, they all stood up and threw their dinner rolls at me. It
was great.

That's because I'd been throwing my own dinner rolls, and I'd been been
hinting what I was going to say all week. They even encourage you to heckle
the speakers back with a liberal sprinkling of wireless mikes around the

So every once in a while, I'd pop off with comments like intellectual
property control was impossible, that watermarking only told you who the
code was stolen from not who stole it. Or, why not have cash auctions for
programming deliverables instead of top-down project management, Or,
emergent processes for software were always going to beat "controlled"
processes, Or, passing programmer certification laws in the wake of
whatever Y2K thing happened would be impossible to enforce in a world of
those same anonymous cash settled markets for programming talent. I even
pointed them to the forum-hackers list as proof.

One of my favorite gybes while I was up on the podium to the Fidelity
marketing guy -- who's a nice guy but who's also fighting like crazy right
now to drag Fidelity up the "quality service differentiation" ladder
because Fido can't play least-cost-producer anymore in an eTrade world --
was my claim that eventually most so-called "branded" products would be
reduced to graded fungible commodities, and that the more dependant a
business was on information technology, the faster it would happen to them.

Orthogonality is always more fun than the alternative. And you get lots of
free dinner rolls.

And, of course, after the digital commerce panel and lunch, Ed Yourdon
wrapped it all up with his scary Y2K rant, followed by an appropriately
scary bunch of panelists telling us just how scary all theis Y2K stuff
really was, that Ed had gotten himself on down to Taos, complete with his
own water supply, and that denial was when you lied to yourself and
believed it. Or something.

All of which I now believe more of, just because all these grey-haired
programming aristocrats were nodding sagely about this prospect of
impending doom for us all. Frankly, most of the people who've yammered at
*me* about Y2K were either loons who hoped it would All Fall Down Someday
Soon, or people like Vinnie, who think it's a good idea, if not fun, to
know what to do if it ever does all fall down, but that praying for it
wasn't going to make it so. I'd like to think I'm one of the latter. The
other problem is, I've seen the end of the world coming before. Even
predicted it myself on occasion. Haven't been able to reduce it to
practice, yet, though. That's the reason Gibbon's in my .sig these days.

So, let's get back to Digicash and the Wright Brothers. After hanging out
with a whole bunch of top-down monolithic-system gurus and Y2K folks
yesterday, it seems plausible. And, I'm certain there are lots of people
out there who know lots about both and who hope that Y2K will be the
Chixalub event that will burn off all the database-driven book-entry
dinosaur systems and clear the way for a digital bearer mammalian explosion.

Frankly, I think we're looking at a brushfire, if anything. The lawn will
grow back, but the house won't burn, even if the water does go out for a
bit. That's my story, and I'm sticking to it. Remembering, of course, the
above bit about denial.

But, suppose we *are* talking about the financial equivalent of that great
1970's 30-second short film epic, "Bambi vs. Godzilla", where Bambi is
squashed by a giant green foot (oops, I gave away the plot), and the whole
financial system goes away for a few days. Or a month.

Is there any way to step in with digital bearer settlement as a robust
alternative to book-entry funds transfer? Remember the great bank strike in
Ireland, where everyone just passed around nth-party endorsed checks like
they were money until it was all over? Could we do something like that?
Would David Chaum and company let us do that without suing someone for
infringement? Could they stop us, if the courts are full of Y2K liability
cases? Would the internet still be up? Could we pay our ISPs with digital
bearer certificates to keep them up? How about Iridium and Teledesic, which
are supposed to be up by then?

Once again, ganglia twitch. However, it might be fun to game the idea a
bit, just to scare the neighbors. You know, pay ya all back when the banks
come up?

Well, maybe not. Ed says that the banks, and particularly Wall Street, are
the most prepared of any of us. That makes sense. The half life of
financial software these days is measured in months. For instance, one of
NeXT's biggest markets was in the financial sectors, especially trading
rooms, where any prototype which worked was immediately production code.
They liked NeXT, despite all its other interesting charistics, because you
could do exactly that, and faster than any other development environment.
Of course, if anyone's a poster child for "sell Cadillacs, drive a Chevy,
sell Chevies, drive a Cadillac", it's Steve Jobs. Of course, he sold NeXTs
and got Apples, however that turns out...

Still, it might be worth thinking about, trying to route around the
book-entry financial settlement system as a pre-disaster exercise.

Wright Brothers versus Chixalub, and all that. No, I don't wanna see the

Bob Hettinga

Robert Hettinga (rah@shipwright.com), Philodox
e$, 44 Farquhar Street, Boston, MA 02131 USA
"... however it may deserve respect for its usefulness and antiquity,
[predicting the end of the world] has not been found agreeable to
experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire'
The e$ Home Page: http://www.shipwright.com/

--- end forwarded text

Robert Hettinga (rah@shipwright.com), Philodox
e$, 44 Farquhar Street, Boston, MA 02131 USA
"... however it may deserve respect for its usefulness and antiquity,
[predicting the end of the world] has not been found agreeable to
experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire'
The e$ Home Page: http://www.shipwright.com/

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For e$/e$pam sponsorship or donations, <mailto:rah@shipwright.com>

--- end forwarded text

Robert Hettinga (rah@shipwright.com), Philodox
e$, 44 Farquhar Street, Boston, MA 02131 USA
"... however it may deserve respect for its usefulness and antiquity,
[predicting the end of the world] has not been found agreeable to
experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire'
The e$ Home Page: http://www.shipwright.com/