16.24.1. 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.) 16.24.2. Use of escrow services as a substute for government + as in underworld deals, international deals, etc. - "Machinery of Freedom" (Friedman), "The Enterprise of Law" (Benson) - "It is important to note in any case that the use of third- party escrow as a substitute for Government regulation was a feature of the Northern European semi-anarchies of Iceland and Ireland that have informed modern libertarian thought." [Duncan Frissell, 1994-08-30] 16.24.3. Several people have raised the issue of someone in an anonymous transaction simply taking the money and not performing the service (or the flip side). This is where _intermediaries_ come into the picture, just as in the real worl (bonds, escrow agents, etc.). 16.24.4. Alice and Bob wish to conduct an anonymous transaction; each is unknown to the other (no physical knowledge, no pseudonym reputation knowledge). These "mutually suspicious agents," in 1960s- and 70s-era computer science lingo, must arrange methods to conduct business while not trusting the other. 16.24.5. Various cryptographic protocols have been developed for such things as "bit commitment" (useful in playing poker over the phone, for example). I don't know of progress made at the granularity of anonymous transactions, though. (Though the cryptographic protocol building blocks at lower levels--such as bit commitment and blobs--will presumably be used eventually at higher levels, in markets.) 16.24.6. I believe there is evidence we can shorten the cycle by borrowing noncryptographic protocols (heresy to purists!) and adapting them. Reputations, for example. And escrow agents (a form of reputation, in that the "value" of a bonding entity or escrow agent lies in reputation capital). 16.24.7. if a single escrow agent is suspected of being untrustworthy (in a reputation capital sense), then can use _multiple_ escrows - with various protocols, caveat emptor - n-out-of-m voting schemes, where n escrow agents out of m are required to complete a transaction - hard to compromise them all, especially if they have no idea whether they are being "legitimately bribed" or merely pinged by a reputation-rating service - Hunch: the work of Chaum, Bos, and the Pfaltzmanns on DC- nets may be direcly applicable here...issues of collusion, sets of colluders, detection of collusion, etc.
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