Re: [fc-discuss] Financial Cryptography Update: On Digital Cash-like Payment Systems
On 10/28/05, Daniel A. Nagy [EMAIL PROTECTED] wrote: Irreversibility of transactions hinges on two features of the proposed systetm: the fundamentally irreversible nature of publishing information in the public records and the fact that in order to invalidate a secret, one needs to know it; the issuer does not learn the secret at all in some implementnations and only learns it when it is spent in others. In both cases, reversal is impossible, albeit for different reasons. Let's say, Alice made a payment to Bob, and Ivan wishes to reverse it with the possible cooperation of Alice, but definitely without Bob's help. Alice's secret is Da, Bob's secret is Db, the corresponding challenges are, respectively, Ca and Cb, and the S message containing the exchange request Da-Cb has already been published. In the first case, when the secret is not revealed, there is simply no way to express reverslas. There is no S message with suitable semantics semantics, making it impossible to invalidate Db if Bob refuses to reveal it. The issuer can still invalidate it even though you have not explicitly defined such an operation. If Alice paid Bob and then convinces the issuer that Bob cheated her, the issuer could refuse to honor the Db deposit or exchange operation. From the recipient's perspective, his cash is at risk at least until he has spent it or exchanged it out of the system. The fact that you don't have an issuer invalidates cash operation in your system doesn't mean it couldn't happen. Alice could get a court order forcing the issuer to do this. The point is that reversal is technically possible, and you can't define it away just by saying that the issuer won't do that. If the issuer has the power to reverse transactions, the system does not have full ireversibility, even though the issuer hopes never to exercise his power. In the second case, Db is revealed when Bob tries to spend it, so Ivan can, in principle, steal (confiscate) it, instead of processing, but at that point Da has already been revealed to the public and Alice has no means to prove that she was in excusive possession of Da before it became public information. That is an interesting possibility, but I can think of a way around it. Alice could embed a secret within her secret. She could base part of her secret on a hash of an even-more-secret value which she would not reveal when spending/exchanging. Then if it came to where she had to prove that she was the proper beneficiary of a reversed transaction, she could reveal the inner secret to justify her claim. Now, one can extend the list of possible S messages to allow for reversals in the first scenario, but even in that case Ivan cannot hide the fact of reversal from the public after it happened and the fact that he is prepared to reverse payments even before he actually does so, because the users and auditors need to know the syntax and the semantics of the additional S messages in order to be able to use Ivan's services. That's true, the public visibility of the system makes secret reversals impossible. That's very good - one of the problems with e-gold was that it was never clear when they were reversing and freezing accounts. Visibility is a great feature. But it doesn't keep reversals from happening, and it still leaves doubt about how final transactions will be in this system. CP
Re: [fc-discuss] Financial Cryptography Update: On Digital Cash-like Payment Systems
One other point with regard to Daniel Nagy's paper at http://www.epointsystem.org/~nagydani/ICETE2005.pdf A good way to organize papers like this is to first present the desired properties of systems like yours (and optionally show that other systems fail to meet one or more of these properties); then to present your system; and finally to go back through and show how your system meets each of the properties, perhaps better than any others. This paper is lacking that last step. It would be helpful to see the epoint system evaluated with regard to each of the listed properties. In particular I have concerns about the finality and irreversibility of payments, given that the issuer keeps track of each token as it progresses through the system. Whenever one token is exchanged for a new one, the issuer records and publishes the linkage between the new token and the old one. This public record is what lets people know that the issuer is not forging tokens at will, but it does let the issuer, and possibly others, track payments as they flow through the system. This could be grounds for reversibility in some cases, although the details depend on how the system is implemented. It would be good to see a critical analysis of how epoints would maintain irreversibility, as part of the paper. CP
Re: [fc-discuss] Financial Cryptography Update: On Digital Cash-like Payment Systems
On Fri, Oct 28, 2005 at 02:18:43PM -0700, cyphrpunk wrote: In particular I have concerns about the finality and irreversibility of payments, given that the issuer keeps track of each token as it progresses through the system. Whenever one token is exchanged for a new one, the issuer records and publishes the linkage between the new token and the old one. This public record is what lets people know that the issuer is not forging tokens at will, but it does let the issuer, and possibly others, track payments as they flow through the system. This could be grounds for reversibility in some cases, although the details depend on how the system is implemented. It would be good to see a critical analysis of how epoints would maintain irreversibility, as part of the paper. I agree, this discussion is missing, indeed. I will definitely include it, should I write another paper on the subject. Irreversibility of transactions hinges on two features of the proposed systetm: the fundamentally irreversible nature of publishing information in the public records and the fact that in order to invalidate a secret, one needs to know it; the issuer does not learn the secret at all in some implementnations and only learns it when it is spent in others. In both cases, reversal is impossible, albeit for different reasons. Let's say, Alice made a payment to Bob, and Ivan wishes to reverse it with the possible cooperation of Alice, but definitely without Bob's help. Alice's secret is Da, Bob's secret is Db, the corresponding challenges are, respectively, Ca and Cb, and the S message containing the exchange request Da-Cb has already been published. In the first case, when the secret is not revealed, there is simply no way to express reverslas. There is no S message with suitable semantics semantics, making it impossible to invalidate Db if Bob refuses to reveal it. In the second case, Db is revealed when Bob tries to spend it, so Ivan can, in principle, steal (confiscate) it, instead of processing, but at that point Da has already been revealed to the public and Alice has no means to prove that she was in excusive possession of Da before it became public information. Now, one can extend the list of possible S messages to allow for reversals in the first scenario, but even in that case Ivan cannot hide the fact of reversal from the public after it happened and the fact that he is prepared to reverse payments even before he actually does so, because the users and auditors need to know the syntax and the semantics of the additional S messages in order to be able to use Ivan's services. -- Daniel
Re: [fc-discuss] Financial Cryptography Update: On Digital Cash-like Payment Systems
On 10/25/05, Travis H. [EMAIL PROTECTED] wrote: More on topic, I recently heard about a scam involving differential reversibility between two remote payment systems. The fraudster sends you an email asking you to make a Western Union payment to a third party, and deposits the requested amount plus a bonus for you using paypal. The victim makes the irreversible payment using Western Union, and later finds out the credit card used to make the paypal payment was stolen when paypal reverses the transaction, leaving the victim short. This is why you can't buy ecash with your credit card. Too easy to reverse the transaction, and by then the ecash has been blinded away. If paypal can be reversed just as easily that won't work either. This illustrates a general problem with these irreversible payment schemes, it is very hard to simply acquire the currency. Any time you go from a reversible payment system (as all the popular ones are) to an irreversible one you have an impedence mismatch and the transfer reflects rather than going through (so to speak). CP
Re: [fc-discuss] Financial Cryptography Update: On Digital Cash-like Payment Systems
If you have to be that confident in your computer security to use the payment system, it's not going to have many clients. Maybe the trusted computing platform (palladium) may have something to offer after all, namely enabling naive users to use services that require confidence in their own security. One could argue it's like going to a Vegas casino; software vendors (MS *cough* MS) probably won't cheat you in such a system because they don't have to; the odds are in their favor already. The whole system is designed to assure they get paid, and they have a lot to lose (confidence in the platform) by cheating you (at least in ways that can be detected). And since you won't be able to do anything to compromise the security, you can't screw it up. While I wouldn't see an advantage in that, I might recommend it for my grandmother. More on topic, I recently heard about a scam involving differential reversibility between two remote payment systems. The fraudster sends you an email asking you to make a Western Union payment to a third party, and deposits the requested amount plus a bonus for you using paypal. The victim makes the irreversible payment using Western Union, and later finds out the credit card used to make the paypal payment was stolen when paypal reverses the transaction, leaving the victim short. -- http://www.lightconsulting.com/~travis/ -- We already have enough fast, insecure systems. -- Schneier Ferguson GPG fingerprint: 50A1 15C5 A9DE 23B9 ED98 C93E 38E9 204A 94C2 641B
Re: [fc-discuss] Financial Cryptography Update: On Digital Cash-like Payment Systems
John Kelsey wrote: From: cyphrpunk [EMAIL PROTECTED] Digital wallets will require real security in user PCs. Still I don't see why we don't already have this problem with online banking and similar financial services. Couldn't a virus today steal people's passwords and command their banks to transfer funds, just as easily as the fraud described above? To the extent that this is not happening, the threat against ecash may not happen either. Well, one difference is that those transactions can often be undone, if imperfectly at times. The whole set of transactions is logged in many different places, and if there's an attack, there's some reasonable hope of getting the money back. And that said, there have been reports of spyware stealing passwords for online banking systems, and of course, there are tons of phishing and pharming schemes to get the account passwords in a more straightforward way. Right, the Microsoft operating system as host for virus / malware attack for stealing bank and payment systems value has been going on for a couple of years or so in a serious (industrial) way. The payment system operators will surely be sued for this, because they're the only ones who will be reachable. They will go broke, and the users will be out their money, and nobody will be silly enough to make their mistake again. They might be sued but they won't necessarily go broke. It depends on how deep the pockets are suing them compared to their own, and most especially it depends on whether they win or lose the lawsuit. I don't think so. Suppose there's a widespread attack that steals money from tens of thousands of users of this payment technology. That sounds like a version of phishing, 'cept for being 2 orders of magnitude too small. There seem to be two choices: a. The payment system somehow makes good on their losses. b. Everyone who isn't dead or insane pulls every dime left in that system out, knowing that they could be next. Er, no, that doesn't sound like any finance system I know. See that post to the Register which I think RAH forwarded, with 2000 in the class. That's just this week's news. As per my observations, all FC systems bubble along with something about 1% fraud plus/minus an order of magnitude. The credit card people currently report about 0.1-0.2 % although I think that might be under- reporting on their part. Out of that, some people might get recovered, but enough do not that we wouldn't be able to push proposition b. with any strength. We know for example that even though the banks might recover any direct losses, they won't accept liability for any other costs including where their fault caused problems elsewhere. iang
Re: [fc-discuss] Financial Cryptography Update: On Digital Cash-like Payment Systems
-- Steve Schear [EMAIL PROTECTED] Yes, but unfortunately it is not clear at all that courts would find the opposite, either. If a lawsuit names the currency issuer as a defendant, which it almost certainly would, a judge might order the issuer's finances frozen or impose other measures which would impair its business survival while trying to sort out who is at fault. It would take someone with real cojones to go forward with a business venture of this type in such uncharted waters. Anyone can sue for anything. Paypal is entirely located in the US, making it easy to sue, has done numerous bad things, but no court orders have been issued to put it out of business. If a business's main assets are gold located in offshore banks, courts are apt to be quite reluctant to attempt to shut it down, as issuing ineffectual or difficult to enforce orders makes a judge look stupid. People fuss too much about what courts might do. Courts are as apt, perhaps more apt, to issue outrageous orders if you are as innocent. as the dawn. Courts are like terrorists in that there is no point in worrying what might offend the terrorists, because they are just as likely to target you no matter what you do. Government regulators are a bigger problem, since they are apt to forbid any business model they do not understand, but they tend to be more predictable than courts. --digsig James A. Donald 6YeGpsZR+nOTh/cGwvITnSR3TdzclVpR0+pr3YYQdkG CY46prGSdN80nLrJL5G79zdH2Uu2lRjQHD9mlSsf 4JTEpYw1dnco9AMX6Fvv3Uce0bPsG1TJYg+qpwG5n
Re: [fc-discuss] Financial Cryptography Update: On Digital Cash-like Payment Systems
One intresting security measure protecting valuable digital assets (WM protects private keys this way) is inflating them before encryption. While it does not protect agains trojan applications, it does a surprisingly good job at reducing attacks following the key logging + file theft pattern. This security measure depends on two facts: storage being much cheaper than bandwidth and transmission of long files being detectable, allowing for detecting and thwarting an attack in progress. -- Daniel
Re: [fc-discuss] Financial Cryptography Update: On Digital Cash-like Payment Systems
On 10/24/05, Steve Schear [EMAIL PROTECTED] wrote: I don't think E-gold ever held out its system as non-reversible with proper court order. All reverses I am aware happened either due to some technical problem with their system or an order from a court of competence in the matter at hand. Back in the days of such companies as emutualfun.com and stockgeneration.com there were cases where e-gold froze accounts without waiting for court orders. I was involved with the discussion on the e-gold mailing lists back then and it caused considerable hard feeling among the users. E-gold was struggling to deal with the onslaught of criminal activity (Ian Grigg described the prevailing mood as one of 'angst') and they were thrown into a reactive mode. Eventually I think they got their house in order and established policies that were more reasonable. Its not clear at all that courts will find engineering a system for irreversibility is illegal or contributory if there was good justification for legal business purposes, which of course there are. Yes, but unfortunately it is not clear at all that courts would find the opposite, either. If a lawsuit names the currency issuer as a defendant, which it almost certainly would, a judge might order the issuer's finances frozen or impose other measures which would impair its business survival while trying to sort out who is at fault. It would take someone with real cojones to go forward with a business venture of this type in such uncharted waters. CP
Re: [fc-discuss] Financial Cryptography Update: On Digital Cash-like Payment Systems
From: cyphrpunk [EMAIL PROTECTED] Sent: Oct 24, 2005 5:58 PM To: John Kelsey [EMAIL PROTECTED] Subject: Re: [fc-discuss] Financial Cryptography Update: On Digital Cash-like Payment Systems .. Digital wallets will require real security in user PCs. Still I don't see why we don't already have this problem with online banking and similar financial services. Couldn't a virus today steal people's passwords and command their banks to transfer funds, just as easily as the fraud described above? To the extent that this is not happening, the threat against ecash may not happen either. Well, one difference is that those transactions can often be undone, if imperfectly at times. The whole set of transactions is logged in many different places, and if there's an attack, there's some reasonable hope of getting the money back. And that said, there have been reports of spyware stealing passwords for online banking systems, and of course, there are tons of phishing and pharming schemes to get the account passwords in a more straightforward way. The point is, if you're ripped off in this way, there's a reasonable chance you can get your money back, because the bank has a complete record of the transactions that were done. There's no chance of this happening when there's no record of the transaction anywhere. The payment system operators will surely be sued for this, because they're the only ones who will be reachable. They will go broke, and the users will be out their money, and nobody will be silly enough to make their mistake again. They might be sued but they won't necessarily go broke. It depends on how deep the pockets are suing them compared to their own, and most especially it depends on whether they win or lose the lawsuit. I don't think so. Suppose there's a widespread attack that steals money from tens of thousands of users of this payment technology. There seem to be two choices: a. The payment system somehow makes good on their losses. b. Everyone who isn't dead or insane pulls every dime left in that system out, knowing that they could be next. It's not even clear that these are mutually exclusive, but if (a) doesn't happen, (b) surely will. Nobody wants their money stolen, and I don't think many people are so confident of their computer security that they're willing to bet huge amounts of money on it. If you have to be that confident in your computer security to use the payment system, it's not going to have many clients. CP --John
Re: [fc-discuss] Financial Cryptography Update: On Digital Cash-like Payment Systems
On Mon, Oct 24, 2005 at 02:58:32PM -0700, cyphrpunk wrote: Digital wallets will require real security in user PCs. Still I don't see why we don't already have this problem with online banking and similar financial services. Couldn't a virus today steal people's passwords and command their banks to transfer funds, just as easily as the fraud described above? To the extent that this is not happening, the threat against ecash may not happen either. Well, there have been several attacks of this kind against Russia's WebMoney system. One of the founders and first arbiters, Nikita Sechenko, wrote up the following text on his advocacy webpage owebmoney.ru (my translation): https://www.financialcryptography.com/mt/archives/000492.html It also contains somre relevant bits about governing an payment system based on pseudonymous accounts. I think, theirs is the most sophisticated account-based payment system in active use, complete with arbitration, messaging, billing, key certification, credit operations and credit history, and a lot more. -- Daniel
Re: [fc-discuss] Financial Cryptography Update: On Digital Cash-like Payment Systems
At 11:17 AM -0700 10/21/05, someone who can't afford a vowel, Alex, ;-) expressed his anal glands thusly in my general direction: You're such an asshole. My, my. Tetchy, this morning, oh vowelless one... At 11:17 AM -0700 10/21/05, cyphrpunk wrote: This is what you characterized as a unitary global claim. Aside from the fact that unitary is meaningless in this context, his claim was far from global. That's One size fits all, for those of you in Rio Linda. A little bit of an Irwin Corey joke for the apparently humor-impaired. Be careful now, I'll start on the Norm Crosby stuff soon, and you might get an aneurysm, or something. While Daniel Nagy has been a model of politeness and modesty in his claims here, you have reverted to your usual role as an arrogant bully. Moi? I kick sand in your face on a beach somewhere I don't remember about? Seriously, I tell him who did an exchange protocol, Silvio Micali, and that they're a dime a dozen, second only to Mo' An' Better Auction Protocols, and he wants me to go out on google, same as *he* can do, and do his work for him. Feh. At 11:17 AM -0700 10/21/05, cyphrpunk wrote: I would encourage Daniel not to waste any more time interacting with Hettinga. Indeed. Especially when he makes with the wet-fish slapping-sounds you do when actual words are supposed to come out of your mouth. Okay, maybe it's another orifice. At any rate, you are lacking some, shall we say, ability to express yourself, on the subject. Be careful, though. Burroughs has this great cautionary tale about teaching your asshole to talk, speaking of the, heh, devil... Cheers, RAH Who'll start in on insulting his mother soon, unless Mr. cyphrpunk has taken that Charles Atlas course he send out for. Hint: Be grateful you don't have any nipple-hair to get caught in the NEW IMPROVED Charles Atlas Chest Expander's springs. Hurts like hell, I hear, and deadlifts work *much* better... -- - R. A. Hettinga mailto: [EMAIL PROTECTED] The Internet Bearer Underwriting Corporation http://www.ibuc.com/ 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'
Re: [fc-discuss] Financial Cryptography Update: On Digital Cash-like Payment Systems
On 10/22/05, Ian G [EMAIL PROTECTED] wrote: R. Hirschfeld wrote: This is not strictly correct. The payer can reveal the blinding factor, making the payment traceable. I believe Chaum deliberately chose for one-way untraceability (untraceable by the payee but not by the payer) in order to address concerns such as blackmailing, extortion, etc. The protocol can be modified to make it fully untraceable, but that's not how it is designed. Huh - first I've heard of that, would be encouraging if that worked. How does it handle an intermediary fall guy? Say Bad Guy Bob extorts Alice, and organises the payoff to Freddy Fall Guy. This would mean that Alice can strip her blinding factors and reveal that she paid to Freddy, but as Freddy is not to be found, he can't be encouraged to reveal his blinding factors so as to reveal that Bob bolted with the dosh. Right, that is one of the kinds of modifications that Ray referred to. If the mint allows (de-facto) anonymous exchanges then a blackmailer can simply do an exchange of his ecash before spending it and he will be home free. Another mod is for the blackmailer to supply the proto-coin to be signed, in blinded form. One property of Daniel Nagy's epoint system is that it creates chains where each token that gets created is linked to the one it came from. This could be sold as an anti-abuse feature, that blackmailers and extortionists would have a harder time avoiding being caught. In general it is an anti-laundering feature since you can't wash your money clean, it always links back to when it was dirty. U.S. law generally requires that stolen goods be returned to the original owner without compensation to the current holder, even if they had been purchased legitimately (from the thief or his agent) by an innocent third party. Likewise a payment system with traceable money might find itself subject to legal orders to reverse subsequent transactions, confiscate value held by third parties and return the ill-gotten gains to the victim of theft or fraud. Depending on the full operational details of the system, Daniel Nagy's epoints might be vulnerable to such legal actions. Note that e-gold, which originally sold non-reversibility as a key benefit of the system, found that this feature attracted Ponzi schemes and fraudsters of all stripes, and eventually it was forced to reverse transactions and freeze accounts. It's not clear that any payment system which keeps information around to allow for potential reversibility can avoid eventually succumbing to pressure to reverse transactions. Only a Chaumian type system, whose technology makes reversibility fundamentally impossible, is guaranteed to allow for final clearing. And even then, it might just be that the operators themselves will be targeted for liability since they have engineered a system that makes it impossible to go after the fruits of criminal actions. CP
Re: [fc-discuss] Financial Cryptography Update: On Digital Cash-like Payment Systems
From: cyphrpunk [EMAIL PROTECTED] Sent: Oct 24, 2005 2:14 PM Subject: Re: [fc-discuss] Financial Cryptography Update: On Digital Cash-like Payment Systems On 10/22/05, Ian G [EMAIL PROTECTED] wrote: Note that e-gold, which originally sold non-reversibility as a key benefit of the system, found that this feature attracted Ponzi schemes and fraudsters of all stripes, and eventually it was forced to reverse transactions and freeze accounts. It's not clear that any payment system which keeps information around to allow for potential reversibility can avoid eventually succumbing to pressure to reverse transactions. Only a Chaumian type system, whose technology makes reversibility fundamentally impossible, is guaranteed to allow for final clearing. And even then, it might just be that the operators themselves will be targeted for liability since they have engineered a system that makes it impossible to go after the fruits of criminal actions. More to the point, an irreversible payment system raises big practical problems in a world full of very hard-to-secure PCs running the relevant software. One exploitable software bug, properly used, can steal an enormous amount of money in an irreversible way. And if your goal is to sow chaos, you don't even need to put most of the stolen money in your own account--just randomly move it around in irreversible, untraceable ways, making sure that your accounts are among the ones that benefit from the random generosity of the attack. The payment system operators will surely be sued for this, because they're the only ones who will be reachable. They will go broke, and the users will be out their money, and nobody will be silly enough to make their mistake again. CP --John
Re: [fc-discuss] Financial Cryptography Update: On Digital Cash-like Payment Systems
At 11:14 AM 10/24/2005, cyphrpunk wrote: Note that e-gold, which originally sold non-reversibility as a key benefit of the system, found that this feature attracted Ponzi schemes and fraudsters of all stripes, and eventually it was forced to reverse transactions and freeze accounts. It's not clear that any payment system which keeps information around to allow for potential reversibility can avoid eventually succumbing to pressure to reverse transactions. I don't think E-gold ever held out its system as non-reversible with proper court order. All reverses I am aware happened either due to some technical problem with their system or an order from a court of competence in the matter at hand. Only a Chaumian type system, whose technology makes reversibility fundamentally impossible, is guaranteed to allow for final clearing. And even then, it might just be that the operators themselves will be targeted for liability since they have engineered a system that makes it impossible to go after the fruits of criminal actions. Its not clear at all that courts will find engineering a system for irreversibility is illegal or contributory if there was good justification for legal business purposes, which of course there are. Steve
Re: [fc-discuss] Financial Cryptography Update: On Digital Cash-like Payment Systems
At 10:23 PM +0200 10/20/05, Daniel A. Nagy wrote: The referred 1988 paper proposes an off-line system Please. You can just as easily do an on-line system, and still have blind signatures, including m=m=2 shared secret signature hiding to prevent double spending. In fact, the *only* viable way to do blind signatures with any security is to have an *on-line* system, with redemption and reissue of certificates on every step, and the underwriter not honoring any double spent transaction. So, you still get the benefits of non-repudiation, you get functional anonymity (because audit trails become a completely superfluous cost -- all you need to keep is a single-field database of spent notes against a possible second spend, deletable on an agreed-upon date), and (I claim :-)) you get the resulting transaction cost benefit versus book-entry transactions as well. Sigh. I really wish people would actually read what people have written about these things for the last, what, 20 years now... BTW, you can exchange cash for goods, or other chaumian bearer certificates -- or receipts, for that matter, with a simple exchange protocol. Micali did one for email ten years ago, for instance. Cheers, RAH -- - R. A. Hettinga mailto: [EMAIL PROTECTED] The Internet Bearer Underwriting Corporation http://www.ibuc.com/ 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'
Re: [fc-discuss] Financial Cryptography Update: On Digital Cash-like Payment Systems
On Thu, Oct 20, 2005 at 07:34:34PM -0400, R.A. Hettinga wrote: At 12:32 AM +0200 10/21/05, Daniel A. Nagy wrote: Could you give us a reference to this one, please? Google is your friend, dude. Before making unitary global claims like you just did, you might consider consulting the literature. It's out there. With all due respect, this was unnecessarily rude, unfair and unwarranted. Silvio Micali is a very prolific author and he published more than one paper on more than one exchange protocol. I am actually familiar with some of his work on the subject. I was, however, specifically interested in which particular one did you have in mind. I can think of several exchange protocols that would do the job, though I don't particularly like them, because the infrastructure for carrying them out is not in place and they require more communication than is strictly necessary for obtaining a receipt. In general, I think that one should be very careful with piling up cryptographic operations and additional back-and-forth communication steps in a payment protocol, because it may easily render it unpractical. There are reasons why there are no cash-like digital payment systems, and it's not for the lack of trying (you know that better than anybody else in the world, I guess) or the lack of demand. Making it sufficiently simple is one of the most difficult challenges. -- Daniel
Re: [fc-discuss] Financial Cryptography Update: On Digital Cash-like Payment Systems
At 2:36 AM +0200 10/21/05, Daniel A. Nagy wrote: With all due respect, this was unnecessarily rude, unfair and unwarranted. This is the *cypherpunks* list, guy... :-) Silvio Micali is a very prolific author and he published more than one paper on more than one exchange protocol And I just got through saying that there are *lots* of exchange protocols. You're the guy who said he couldn't figure out how to do a receipts. I toss one, out of probably hundreds out there in the last 30 years, off the top of my head, and *you* go all canonical on me here. Again. Repeat. Google is your friend. Thank you for playing. Cheers, RAH -- - R. A. Hettinga mailto: [EMAIL PROTECTED] The Internet Bearer Underwriting Corporation http://www.ibuc.com/ 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'
Re: [fc-discuss] Financial Cryptography Update: On Digital Cash-like Payment Systems
At 12:32 AM +0200 10/21/05, Daniel A. Nagy wrote: Could you give us a reference to this one, please? Google is your friend, dude. Before making unitary global claims like you just did, you might consider consulting the literature. It's out there. Cheers, RAH -- - R. A. Hettinga mailto: [EMAIL PROTECTED] The Internet Bearer Underwriting Corporation http://www.ibuc.com/ 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'
Re: [fc-discuss] Financial Cryptography Update: On Digital Cash-like Payment Systems
On Thu, Oct 20, 2005 at 05:19:49PM -0400, R.A. Hettinga wrote: BTW, you can exchange cash for goods, or other chaumian bearer certificates -- or receipts, for that matter, with a simple exchange protocol. Micali did one for email ten years ago, for instance. Could you give us a reference to this one, please? Thank you in advancne! -- Daniel
Re: [fc-discuss] Financial Cryptography Update: On Digital Cash-like Payment Systems
As far as the issue of receipts in Chaumian ecash, there have been a couple of approaches discussed. The simplest goes like this. If Alice will pay Bob, Bob supplies Alice with a blinded proto-coin, along with a signed statement, I will perform service X if Alice supplies me with a mint signature on this value Y. Alice pays to get the blinded proto-coin Y signed by the mint. Now she can give it to Bob and show the signature on Y in the future to prove that she upheld her end. A slightly more complicated one starts again with Bob supplying Alice with a blinded proto-coin, which Alice signs. Now she and Bob do a simultaneous exchange of secrets protocol to exchange their two signatures. This can be done for example using the commitment scheme of Damgard from Eurocrypt 93. Bob gets the signature necessary to create his coin, and Alice gets the signed receipt (or even better, perhaps Bob's signature could even constitute the service Alice is buying). I would be very interested to hear about a practical application which combines the need for non-reversibility (which requires a degree of anonymity) with the need to be able to prove that payment was made (which seems to imply access to a legal system to force performance, an institution which generally will require identification). CP
Re: [fc-discuss] Financial Cryptography Update: On Digital Cash-like Payment Systems
Date: Thu, 20 Oct 2005 11:31:39 -0700 From: cyphrpunk [EMAIL PROTECTED] 2. Cash payments are final. After the fact, the paying party has no means to reverse the payment. We call this property of cash transactions _irreversibility_. Certainly Chaum ecash has this property. Because deposits are unlinkable to withdrawals, there is no way even in principle to reverse a transaction. This is not strictly correct. The payer can reveal the blinding factor, making the payment traceable. I believe Chaum deliberately chose for one-way untraceability (untraceable by the payee but not by the payer) in order to address concerns such as blackmailing, extortion, etc. The protocol can be modified to make it fully untraceable, but that's not how it is designed. 3. Cash payments are _peer-to-peer_. There is no distinction between merchants and customers; anyone can pay anyone. In particular, anybody can receive cash payments without contracts with third parties. Again this is precisely how Chaum ecash works. Everyone can receive ecash and everyone can spend it. There is no distinction between buyers and vendors. Of course, transactions do need the aid of the issuer, but that is true of all online payment systems including Daniel's. Apart from the transferability issue, I think there are some systems that do not rely on an issuer at all (in effect any payee is an issuer). Manasse's Millicent comes to mind, but I confess that I don't fully remember the details. Ray
Re: [fc-discuss] Financial Cryptography Update: On Digital Cash-like Payment Systems
On Thu, Oct 20, 2005 at 03:36:54PM -0700, cyphrpunk wrote: As far as the issue of receipts in Chaumian ecash, there have been a couple of approaches discussed. The simplest goes like this. If Alice will pay Bob, Bob supplies Alice with a blinded proto-coin, along with a signed statement, I will perform service X if Alice supplies me with a mint signature on this value Y. Alice pays to get the blinded proto-coin Y signed by the mint. Now she can give it to Bob and show the signature on Y in the future to prove that she upheld her end. I like this one, though there might be a problem if Alice does everything, except giving Bob the signed version of Y in the end. I can imagine scenarios where this might be a problem. However, it can be relatively easily solved if the mint publishes every signed proto-coin (instead of being handed to the payer, it goes to the public records, from where the payer can retrieve it). There's no reason not to. A slightly more complicated one starts again with Bob supplying Alice with a blinded proto-coin, which Alice signs. Now she and Bob do a simultaneous exchange of secrets protocol to exchange their two signatures. This can be done for example using the commitment scheme of Damgard from Eurocrypt 93. Bob gets the signature necessary to create his coin, and Alice gets the signed receipt (or even better, perhaps Bob's signature could even constitute the service Alice is buying). This one requires additional infrastructure which needs to be rolled out, which is expensive. Simultaneous exchange of secrets is an elegant cryptographic feat, but the required tools are not available to the general public right now and the motivation to obtain them are insufficient. Thus, a system relying on this cannot be phased in cheaply. I would be very interested to hear about a practical application which combines the need for non-reversibility (which requires a degree of anonymity) with the need to be able to prove that payment was made (which seems to imply access to a legal system to force performance, an institution which generally will require identification). I claim that a system that provides both features will be prefered by users to one that provides only one or neither. The desirability of a payment vehicle depends on the assortment of goods and services available for it. Now, the lack of non-reversibility might be either a show-stopper or a significant additional cost in the case of some goods and services, while receipts are required in the case of others. Both might be required for transactions in the $100 ... $1000 range between a power-seller and one-time buyers in a low-trust environment. From the seller's point of view, the risk of a reversal might not be acceptable (basically, he cannot assess the probability of it, while the cost is substantial), because the value is too high, so he needs irreversibility. From the buyer's point of view, the risk of losing the money is not catastrophic, but highly undesirable; he wants to be able to name-and-shame the fraud. This would provide the seller with enough incentives to deliver and enough security to go ahead with the deal. The legal system in this case is just provable reputation-tracking, which in case of non-performance deprives the seller of future custom. -- Daniel
Re: [fc-discuss] Financial Cryptography Update: On Digital Cash-like Payment Systems
On 10/20/05, Daniel A. Nagy [EMAIL PROTECTED] wrote: On Thu, Oct 20, 2005 at 03:36:54PM -0700, cyphrpunk wrote: As far as the issue of receipts in Chaumian ecash, there have been a couple of approaches discussed. The simplest goes like this. If Alice will pay Bob, Bob supplies Alice with a blinded proto-coin, along with a signed statement, I will perform service X if Alice supplies me with a mint signature on this value Y. Alice pays to get the blinded proto-coin Y signed by the mint. Now she can give it to Bob and show the signature on Y in the future to prove that she upheld her end. I like this one, though there might be a problem if Alice does everything, except giving Bob the signed version of Y in the end. I can imagine scenarios where this might be a problem. However, it can be relatively easily solved if the mint publishes every signed proto-coin (instead of being handed to the payer, it goes to the public records, from where the payer can retrieve it). There's no reason not to. Good idea! Even without this, if there is a problem then everything will come out in the dispute resolution phase, where Alice will be forced to reveal the mint's signature. Bob may claim at that time never to have seen it before, while Alice may claim that she had sent it earlier, but once they get this far both sides will be forced to agree that Bob has now been paid so the contract can be completed. So this method would be OK for contracts where timeliness is not an important issue. But your idea of having the mint publish its signatures could help even more. A slightly more complicated one starts again with Bob supplying Alice with a blinded proto-coin, which Alice signs. Now she and Bob do a simultaneous exchange of secrets protocol to exchange their two signatures. This can be done for example using the commitment scheme of Damgard from Eurocrypt 93. Bob gets the signature necessary to create his coin, and Alice gets the signed receipt (or even better, perhaps Bob's signature could even constitute the service Alice is buying). This one requires additional infrastructure which needs to be rolled out, which is expensive. Simultaneous exchange of secrets is an elegant cryptographic feat, but the required tools are not available to the general public right now and the motivation to obtain them are insufficient. Thus, a system relying on this cannot be phased in cheaply. I'm not sure what costs you see here. There are two main technologies I am familiar with for signature (or general secret) exchange. One is purely local and involves bit by bit release of the signatures. Both parties first commit to their signatures and use ZK proofs to show that the committed values are in fact signatures over the required data. They then release their sigs a bit at a time, taking turns. If one party aborts prematurely he has at most a factor of 2 advantage over the other in a brute force search to find the missing bits of the signature. While this takes many rounds, it is still pretty fast. Of course the users don't manually initiate each round, it all happens automatically under control of the software. I saw some code to implement this a couple of years ago somewhere on Sourceforge. It actually exchanged PGP signatures, of all things. It does not take any new infrastructure. The other technology is so-called optimistic exchange, where the signatures are provably encrypted to the public key of a trusted third party. The two parties each exchange such encryptions and prove they are valid. Then they exchange the actual signatures in the straighforward manner. If one party does not send his sig, the other can go to the TTP and get it. Since this option exists, there is no incentive for the parties not to complete the transaction and hence the TTP will in practice almost never be used. This one does require the TTP to exist and his public key to be available, but that should be no more new infrastructure than is required for the cash issuer and his key to be distributed. In fact the issuer could be the TTP for dispute resolution if desired. The desirability of a payment vehicle depends on the assortment of goods and services available for it. Now, the lack of non-reversibility might be either a show-stopper or a significant additional cost in the case of some goods and services, while receipts are required in the case of others. Both might be required for transactions in the $100 ... $1000 range between a power-seller and one-time buyers in a low-trust environment. From the seller's point of view, the risk of a reversal might not be acceptable (basically, he cannot assess the probability of it, while the cost is substantial), because the value is too high, so he needs irreversibility. From the buyer's point of view, the risk of losing the money is not catastrophic, but highly undesirable; he wants to be able to name-and-shame the fraud. This would provide the seller with
Re: [fc-discuss] Financial Cryptography Update: On Digital Cash-like Payment Systems
On 10/20/05, R.A. Hettinga [EMAIL PROTECTED] wrote: At 12:32 AM +0200 10/21/05, Daniel A. Nagy wrote: Could you give us a reference to this one, please? Google is your friend, dude. Before making unitary global claims like you just did, you might consider consulting the literature. It's out there. You're such an asshole. Daniel's actual statement was simply: I know of no protocol for transfering blinded tokens with a receipt, but I do not rule out the possibility of its existence. This is what you characterized as a unitary global claim. Aside from the fact that unitary is meaningless in this context, his claim was far from global. Instead it was a very modest statement about what aspects of the technology he was familiar with, and explicitly admitted the possibility that he might be mistaken. I don't think you could ask for anything more in a world where no one has perfect knowledge about any topic. While Daniel Nagy has been a model of politeness and modesty in his claims here, you have reverted to your usual role as an arrogant bully. If Daniel's project should be successful then you will undoubtedly switch over to your other mode of communication, obsequious ass-kissing. I have experienced both from you, in my many names and roles, and I have no taste for either one. I would encourage Daniel not to waste any more time interacting with Hettinga. CP
Re: [fc-discuss] Financial Cryptography Update: On Digital Cash-like Payment Systems
On 10/19/05, Daniel A. Nagy [EMAIL PROTECTED] wrote: http://www.epointsystem.org/~nagydani/ICETE2005.pdf Note that nowhere in my paper did I imply that the issuer is a bank (the only mentioning of a bank in the paper is in an analogy). This is because I am strongly convinced that banks cannot, will not and should not be the principal issuers of digital cash-like payment vehicles. If you need explaination, I'm willing to provide it. I do not expect payment tokens to originate from withdrawals and end their life cycles being deposited to users' bank accounts. Suppose we consider your concept of a transaction chain, which is formed when a token is created based on some payment from outside the system, is maintained through exchanges of one token for another (we will ignore split and combine operations for now), and terminates when the token is redeemed for some outside-the-system value. Isn't it likely in practice that such transaction chains will be paid for and redeemed via existing financial systems, which are fully identified? A user will buy a token using an online check or credit card or some other non-anonymous mechanism. He passes it to someone else as a cash-like payment. Optionally it passes through more hands. Ultimately it is redeemed by someone who exchanges it for a check or deposit into a bank or credit card account. If you don't see this as the typical usage model, I'd like to hear your ideas. If this is the model, my concern is that in practice it will often be the case that there will be few intermediate exchanges. Particularly in the early stages of the system, there won't be that much to buy. Someone may accept epoints for payment but the first thing he will do is convert them to real money. A typical transaction will start with someone buying epoints from the issuer using some identified payment system, spending them online, and then the recipient redeems them using an identified payment system. The issuer sees exactly who spent, how much they spent and where they spent it. The result is that in practice the system has no anonymity whatsoever. It is just another way of transferring value online. Using currency is, essentially, a credit operation, splitting barter into the separate acts of selling and buying, thus making the promise to reciprocate (that is the eligibility to buy something of equal value from the buyer) a tradeable asset itself. It is the trading of this asset that needs to be anonymous, and the proposed system does a good enough job of protecting the anonymity of those in the middle of the transaction chains. The hard part is getting into the middle of those transaction chains. Until we reach the point where people receive their salaries in epoints, they will have little choice but to buy epoints for real money. That puts them at the beginning of a transaction chain and not in the middle. Sellers will tend to be at the end. The only people who could be in the middle would be those who sell substantially online for epoints and who also find things online that they can buy for epoints. But that will be a small fraction of users. For the rest of them, anonymity is not a sellling point of this system. If you take away the anonymity, is this technology still valuable? Does it have advantages over other online payment systems, like egold, credit cards or paypal? CP
Re: [fc-discuss] Financial Cryptography Update: On Digital Cash-like Payment Systems
cyphrpunk wrote: If this is the model, my concern is that in practice it will often be the case that there will be few intermediate exchanges. Particularly in the early stages of the system, there won't be that much to buy. Someone may accept epoints for payment but the first thing he will do is convert them to real money. A typical transaction will start with someone buying epoints from the issuer using some identified payment system, spending them online, and then the recipient redeems them using an identified payment system. The issuer sees exactly who spent, how much they spent and where they spent it. The result is that in practice the system has no anonymity whatsoever. It is just another way of transferring value online. That's a merchant business model. Typically, that's not how payment systems emerge. Mostly, they emerge by a p2p model, and then migrate to a merchant model over time. How they start is generally a varied question, and somewhat a part of the inspiration of the Issuer. According to the Issuer's design, he may try and force that migration faster or slower. In a more forced system, there is typically only one or a few exchange points and that is probably the Issuer himself. If the Issuer also pushes a merchant design, and a triangular flow evolves, the tracing of transactions is relatively easy regardless of the system because time and amount give it away. But, typically, if the Issuer has designs on merchant business, he generally doesn't care about the hyphed non-tracking capabilities of the software, and also prefer the tracking to be easy for support and segmentation purposes. A game that Issuers often play is to pretend or market a system as privacy protecting, but if their intention is the merchant model then that game stops when the numbers get serious. (I gather they discuss that in the Paypal book if you want a written example.) Either way, it is kind of tough to criticise a software system for that. It's the Issuer and the market that sets the tune there; not the software system. The ideal software system allows the Issuer to decide these paramaters, but it is also kind of tough to provide all such paramaters in a big dial, and keep the system small and tight. (I suppose on this note, this is a big difference between Daniel's system and mine. His is small and tight and he talks about being able to audit the 5 page long central server ... mine is relatively large and complex, but it can do bearer and it can do fully traceable, as well as be passably extended to imitate of his design.) Meanwhile, the Issuers who want to provide privacy with a bog standard double entry online accounts system still have a better record of doing that than any other Issuers that might have boasted mathematical blah blah, they just run theirs privately. e.g., your average Swiss bank. iang
Re: [fc-discuss] Financial Cryptography Update: On Digital Cash-like Payment Systems
I will provide a detailed answer a bit later, but the short answer is that anonymity and untraceability are not major selling points, as experience shows. After all, ATMs could easily record and match to the user the serial numbers of each banknote they hand out, yet, there seems to be no preference to coins vs. banknotes. The major selling point, as noted in the paper and in the presentation is that the security (and hence the transaction cost manifesting itself in the effort required for each transaction) scales with transaction value. For paying pennies, you just type, say, 12-character codes. Yet, if the transaction value warrants it, you can have a full-fledged, digitally signed audit trail within the same system. And it's completely up to the users to decide what security measures to take. Another important issue is that you never risk more than the transaction value. There is no identity to be stolen. So, in short, the selling point is flexible and potentially very high security against all sorts of threats. Someone finding out who you might be is not, by far, the most serious threat in a payment system. -- Daniel
Re: [fc-discuss] Financial Cryptography Update: On Digital Cash-like Payment Systems
Let's take a look at Daniel Nagy's list of desirable features for an ecash system and see how simple, on-line Chaum ecash fares. http://www.epointsystem.org/~nagydani/ICETE2005.pdf One of the reasons, in the author s opinion, is that payment systems based on similar schemes lack some key characteristics of paper-based cash, rendering them economically infeasible. Let us quickly enumerate the most important properties of cash: 1. Money doesn't smell. Cash payments are -- potentially -- _anonymous_ and untraceable by third parties (including the issuer). This is of course the main selling point of Chaum's system, where it excels. I will point out that defining cash as merely potentially anonymous leaves a loophole whereby fully non-anonymous systems get to call themselves cash. This underplays the strength of Chaum's system. It is not just potentially anonymous, it has a strong degree of anonymity. 2. Cash payments are final. After the fact, the paying party has no means to reverse the payment. We call this property of cash transactions _irreversibility_. Certainly Chaum ecash has this property. Because deposits are unlinkable to withdrawals, there is no way even in principle to reverse a transaction. 3. Cash payments are _peer-to-peer_. There is no distinction between merchants and customers; anyone can pay anyone. In particular, anybody can receive cash payments without contracts with third parties. Again this is precisely how Chaum ecash works. Everyone can receive ecash and everyone can spend it. There is no distinction between buyers and vendors. Of course, transactions do need the aid of the issuer, but that is true of all online payment systems including Daniel's. 4. Cash allows for acts of faith or _naive transactions_. Those who are not familiar with all the antiforgery measures of a particular banknote or do not have the necessary equipment to verify them, can still transact with cash relying on the fact that what they do not verify is nonetheless verifiable in principle. I have to admit, I don't understand this point, so I can't say to what extent Chaum ecash meets it. In most cases users will simply use their software to perform transactions and no familiarity is necessary with any antiforgery or other technical measures in the payment system. In this sense all users are naive and no one is expected to be a technical expert. Chaum ecash works just fine in this model. 5. The amount of cash issued by the issuing authority is public information that can be verified through an auditing process. This is the one aspect where Chaum ecash fails. It is a significant strength of Daniel Nagy's system that it allows public audits of the amount of cash outstanding. However note that if the ecash issuer stands ready to buy and sell ecash for real money then he has an incentive not to excessively inflate his currency as it would create liabilities which exceed his assets. Similarly, in a state of competition between multiple such ecash issuers, any currency which over-inflates will be at a disadvantage relative to others, as discussed in Dan Selgin's works on free banking. Daniel Nagy also raised a related point about insider malfeasance, which is also a potential problem with Chaum ecash, but there do exist technologies such as hardware security modules which can protect keys in a highly secure manner and make sure they are used only via authorized protocols. Again, the operators of the ecash system have strong incentives to protect their keys against insider attacks. The payment system proposed in (D. Chaum, 1988) focuses on the first characteristic while partially or totally lacking all the others. In summary, I don't think this is true at all. At least the first three characteristics are met perfectly by Chaumian ecash, and possibly the fourth is met in practice as naive users can access the system without excessive complications. Only the fifth point, the ability for outsiders to monitor the amount of cash in circulation, is not satisfied. But even then, the ecash mint software, and procedures and controls followed by the issuer, could be designed to allow third party audits similarly to how paper money cash issuers might be audited today. There do exist technical proposals for ecash systems such as that from Sander and Ta-Shma which allow monitoring the amount of cash which has been issued and redeemed while retaining anonymity and unlinkability, but those are of questionable efficiency with current technology. Perhaps improved versions of such protocols could provide a payment system which would satisfy all of Daniel Nagy's desiderata while retaining the important feature of strong anonymity. CP
Re: [fc-discuss] Financial Cryptography Update: On Digital Cash-like Payment Systems
Thank you for the detailed critique! I think, we're not talking about the same Chaumian cash. The referred 1988 paper proposes an off-line system, where double spending compromises anonymity and results in transaction reversal. I agree with you that it was a mistake on my part to deny its peer-to-peer nature; should be more careful in the future. I strongly disagree that potentially anonymous systems do not deserve to be called cash. For the past approx. 100 years, banknotes have been used as cash and there seems to be no preference on the market for coins, even though banknotes have unique serial numbers and are, therefore, traceable. I maintain, that anonymity and untraceability are primarily not privacy concerns but -- to some extent -- necessary conditions for irreversibility, which is the ture reason why cash is such a mainstay in commerce and why I would expect its electronic equivalent would be a desirable financial instrument in the world of electronic commerce. In a low-trust environment, irreversible payments are preferable to reversible ones. Simple on-line Chaumian blinded tokens, where the value is determined by the public key and the signed content is unimportant, as long as it is unique, are more like coins. And the most serious problem with them is that of transparent governance. Unfortunately, those hyperinflating their currency are not caught early enough. One way to handle this problem is by expiring tokens. For example, for each value, keys can be introduced in a brick-wall pattern: keys are replaced in regular intervals with two keys being valid at all times, with one expiring in the middle of the lifetime of the other. Tokens signed by the old key are always excahnged for those signed by the new one. This would allow a regular re-count of all tokens in circulation (by the time a key expires, at most as many tokens would have been exchanged for the next key as have been issued), but it raises other concerns. With simple blinded tokens, naive transactions are possible only with the already unblinded ones. One can accept them on faith, and pass on without exchanging. This does not require additional equipment/software. I know of no protocol for transfering blinded tokens with a receipt, but I do not rule out the possibility of its existence. Without it, however, the blinded tokens are useful for a very narrow range of transaction values. Namely, those small enough not to be bothered about receipts, but large enough so that the effort of making a payment does not exceed the transaction value. This confines their usability to part of the micropayment market. To reiterate, the main advantage of the proposed system is that it allows for a very large range of transaction values by providing adequate security for high-value ones, while requiring extremely little effort for low-value ones. And all that at the sole discretion of the users. Regards, -- Daninel
Re: [fc-discuss] Financial Cryptography Update: On Digital Cash-like Payment Systems
On Thu, 20 Oct 2005, cyphrpunk wrote: system without excessive complications. Only the fifth point, the ability for outsiders to monitor the amount of cash in circulation, is not satisfied. But even then, the ecash mint software, and procedures and controls followed by the issuer, could be designed to allow third party audits similarly to how paper money cash issuers might be audited today. One approach, investigated by Hal Finney, is to run the mint on a platform that allows remote attestation. Check out rpow.net - he has a working implementation of a proof of work payment system hosted on an IBM 4758. -David Molnar
Re: [fc-discuss] Financial Cryptography Update: On Digital Cash-like Payment Systems
Just presented at ICETE2005 by Daniel Nagy: http://www.epointsystem.org/~nagydani/ICETE2005.pdf Abstract. In present paper a novel approach to on-line payment is presented that tackles some issues of digital cash that have, in the author s opinion, contributed to the fact that despite the availability of the technology for more than a decade, it has not achieved even a fraction of the anticipated popularity. The basic assumptions and requirements for such a system are revisited, clear (economic) objectives are formulated and cryptographic techniques to achieve them are proposed. This is a thorough and careful paper but the system has no blinding and so payments are traceable and linkable. The standard technique of inserting dummy transfers is proposed, but it is not clear that this adds real privacy. Worse, it appears that the database showing which coins were exchanged for which is supposed to be public, making this linkage information available to everyone, not just banking insiders. Some aspects are similar to Dan Simon's proposed ecash system from Crypto 96, in particular using knowledge of a secret such as a hash pre-image to represent possession of the cash. Simon's system is covered by patent number 5768385 and the ePoint system may need to step carefully around that patent. See http://www.mail-archive.com/cpunks@einstein.ssz.com/msg04483.html for further critique of Simon's approach. CP
Re: [fc-discuss] Financial Cryptography Update: On Digital Cash-like Payment Systems
On Tue, Oct 18, 2005 at 11:27:53PM -0700, cyphrpunk wrote: Just presented at ICETE2005 by Daniel Nagy: http://www.epointsystem.org/~nagydani/ICETE2005.pdf This is a thorough and careful paper but the system has no blinding and so payments are traceable and linkable. The standard technique of inserting dummy transfers is proposed, but it is not clear that this adds real privacy. Worse, it appears that the database showing which coins were exchanged for which is supposed to be public, making this linkage information available to everyone, not just banking insiders. Some aspects are similar to Dan Simon's proposed ecash system from Crypto 96, in particular using knowledge of a secret such as a hash pre-image to represent possession of the cash. Simon's system is covered by patent number 5768385 and the ePoint system may need to step carefully around that patent. See http://www.mail-archive.com/cpunks@einstein.ssz.com/msg04483.html for further critique of Simon's approach. At the time of writing, I was already familiar with Simon's proposal and its above mentioned critique (I learnt about them from Stefan Brands' blog). At that time, the design and the implementation were already complete and the process of writing up the paper was also well advanced. Wishing to postpone the discussion of patents for as long as possible, I decided against citing Dan Simon's work in references, which may be regarded as an act of academic dishonesty on my part. Mea culpa. I am reasonably confident that I can legally defend the point that there are sufficient differences between my proposal and Simon's, but I might not be ready to fight off a legal assault from Microsoft (lack of time and money) right now. Leaving the patent issue at that, let us proceed to the substance. I will probably need to write another paper, clarifiing some of these issues. Let me, however, re-emphasize some of the points already present in the paper and perhaps cast them in a slightly different light. In my paper, I am explicitly and implicitly challenging Chaum's assumptions about the very problem of digital cash-like payment. One can, of course, criticize my proposal under chaumian assumptions, but that would miss the point entirely. I think, a decade of consistent failure at introducing chaumian digital cash to the market is good enough a reason to re-think the problem from the very basics. Note that nowhere in my paper did I imply that the issuer is a bank (the only mentioning of a bank in the paper is in an analogy). This is because I am strongly convinced that banks cannot, will not and should not be the principal issuers of digital cash-like payment vehicles. If you need explaination, I'm willing to provide it. I do not expect payment tokens to originate from withdrawals and end their life cycles being deposited to users' bank accounts. Insider fraud is a very serious risk in financial matters. A system that provides no safeguards against a fraudulent issuer will sooner or later be exploited that way. Financial systems (not just electronic ones) often fall to insider attacks. They must be addressed in a successful system. All chaumian systems are hopelessly vulnerable to insider fraud. And now some points missing from the paper: Having a long-term global secret, whose disclosure leads to immediate, catastrophic failure of the whole system is to be avoided in security engineering (using Schneier's terminology, it makes a hard system brittle). The private key of a blinding-based system is exactly such a component. Note that in the proposed system, the digital signature of the issuer is just a fancy integrity protection mechanism for public records, which can be supplemented and even temporarily substituted (while a new key is phased in in the case of compromise) by other mechanisms of integrity protection. It is the public audit trail that provides most of the security. Using currency is, essentially, a credit operation, splitting barter into the separate acts of selling and buying, thus making the promise to reciprocate (that is the eligibility to buy something of equal value from the buyer) a tradeable asset itself. It is the trading of this asset that needs to be anonymous, and the proposed system does a good enough job of protecting the anonymity of those in the middle of the transaction chains. Hope, this helps. -- Daniel
