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Cyphernomicon 10.20

Legal Issues:
Escrow Agents

  10.20.1. (the main discussion of this is under Crypto Anarchy)
  10.20.2. Escrow Agents as a way to deal with contract renegging
           - On-line clearing has the possible danger implicit in all
              trades that Alice will hand over the money, Bob will verify
              that it has cleared into hisaccount (in older terms, Bob
              would await word that his Swiss bank account has just been
              credited), and then Bob will fail to complete his end of
              the bargain. If the transaction is truly anonymous, over
              computer lines, then of course Bob just hangs up his modem
              and the connection is broken. This situation is as old as
              time, and has always involved protcols in which trust,
              repeat business, etc., are factors. Or escrow agents.
           - Long before the "key escrow" of Clipper, true escrow was
              planned. Escrow as in escrow agents. Or bonding agents.
           - Alice and Bob want to conduct a transaction. Neither trusts
              the other;
              indeed, they are unknown to each other. In steps "Esther's
              Escrow Service." She is _also utraceable_, but has
              established a digitally-signed presence and a good
              reputation for fairness. Her business is in being an escrow
              agent, like a bonding agency, not in "burning" either
              party. (The math of this is interesting: as long as the
              profits to be gained from any small set of transactions is
              less than her "reputation capital," it is in her interest
              to forego the profits from burning and be honest. It is
              also possible to arrange that Esther cannot profit from
              burning either Alice or Bob or both of them, e.g., by
              suitably encrypting the escrowed stuff.)
           - Alice can put her part of the transaction into escrow with
              Esther, Bob can do the same, and then Esther can release
              the items to the parties when conditions are met, when both
              parties agree, when adjudication of some sort occurs, etc.
              (There a dozen issues here, of course, about how disputes
              are settled, about how parties satisfy themselves that
              Esther has the items she says she has, etc.)

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