AT011-2
September 1995
Copyright © 1994, 1995 Agorics, Inc.
All Rights Reserved.
—Alfred North Whitehead
Science and the Modern World
Existing and proposed mechanisms for digital money all require large overhead to transfer money between parties. This overhead makes them unsuitable for extremely low cost activities, such as delivering and routing packets. The digital silk road is a proposed money system with extremely low transaction cost built into the communication protocols. The money introduced by this system is much more like coins than like bank accounts; it supports only small transactions, requires limited trust among the participants, and requires no central bank. Upon this foundation, elements of an open system are described that fully support network resource management, routing, interconnection with the Internet, and other information services, across trust boundaries with competing providers for all services.
The protocol offers incentives for communication and information providers that avoid policy entanglements typical of subsidized systems — cash-and-carry for cyberspace.
Designed incentives are based on positive reputations and profits in real local currencies. The inspiration is taken from tales of the silk road, by which silk was brought from China to Europe through a series of traders who traveled only short distances.
The term node is used here to describe some assemblage of hardware and software operated by an individual or enterprise. No distinction is made between the entities within a node in this paper; their interests are assumed to be entirely aligned.
Communication is achieved by a network of nodes interoperating with this protocol. Some nodes specialize in moving data and others in switching, while many do both. Movers and switchers are called carriers here. One simple business for a node is forwarding datagrams. Such nodes make a living by accepting packets at an interface, moving them to another interface, deducting a small amount from the packets’ worth as toll and then delivering them across the new interface. Such packets include steering information in the packet—an indication for each node of the next interface to which the packet is to be delivered, with that indication removed from the packet as it is forwarded. This business ensures a net income for such a node at its collective interfaces. Delivery of datagrams requires no tables or records kept by each node. When someone sends a datagram through the network she includes more money than will likely be required. The excess will arrive with the packet at the destination, and can be returned with an acknowledgment. The amount returned is an immediate measure of the cost of the service.
At international interfaces a multiplication of packet wealth converts currency. Any node can set a money field any way it wants, but successful nodes are constrained as follows. Liabilities (obligations) arise as packets with worth are exported across an interface. The accumulator there records its obligation to the next node operator. The node will thus be careful not to set it higher than the situation warrants. If it sets the value too low it will soon damage its own reputation and lose business thereby. Prices are set by normal market mechanisms of supply and demand. They may be set for periods of time and advertised to aid planning, or they may be more volatile. The market will decide this too. Since you pay up front you incur no obligation beyond what you pay and you lose no more than what you pay.
Some circuits may provide flow-control or backpressure. Signals flowing between agents, through channels against the data flow indicate when more data can be accepted. Backpressure may arise at the destination or some intermediate point in the circuit. Circuits that do not provide backpressure discard data when unable to deliver it. Numerous other potential circuit qualities are mentioned in a later paper.
An agent holds some money to rent buffers and pay for transmission across interfaces. Occasional packets through the circuit carry money to replenish the agent’s money.
Note that it is possible to send a datagram using the circuit primitives: Send the needle, the data, then the destruct signal.
The scout’s data base is available to affiliated guide programs that advise how to travel between nodes. Naturally, guides deal in the reputations of the carriers that they select for their customers. Nodes that claim to move data but do so unreliably are not long recommended by guides.
A given name server can sell alphabetic names. A US name server might manage to convince most people in the US that his is the only important name server, and to register “L. Jones” there is to effectively own that name. One service of this server would be to map alphabetic names to public key names. It is interesting to imagine competing between name sellers. When this competition has been imagined to a few levels of gaming it seems stable. A possible plan is to sell name-key pairs at $1 each. A price of $10−n where n is the length of the name seems more appropriate. These numbers are only a crude estimate of the market price.
A person wants to integrate a function or factor a polynomial. She sends the problem to a Mathematica server together with $.05, and gets the response in a few seconds. She probably get the answer but the response may be that $.05 of computing yielded no answer, but more might do the trick. For a while it will preserve the state of the computation for resumption if she wishes to send more money. The response might alternatively be that it knows the answer but will only reveal it for $.25.
There may be an interface to a real bank through which a person can deposit and withdraw small sums of cash from his account; a CyberATM, or better, CyberTeller.
Someone has a document in TeX format but can only print Post Script files. A service will do the conversion for $.005 per page.
Anonymous Forwarders: Some nodes will advertise a public crypto. They will expect all or some of their input packets to be ciphered. If such ciphered packets request some delay before forwarding, the node serves as a mix. (David Chaum introduced the term mix to describe a network service that forwards mail after removing standard indications of the source, thus providing anonymous mail.) The amount of money allows statistical tracing, but this method may be alleviated by establishing a small account at the mix. (Anonymous mail is a complex social issue and the operator of such a mix may be subject to social pressures.)
Specialized computing facilities could sell their service this way. If a person has a computation that takes 109 bytes of real ram for 2x1010 operations, some Cray machine could run her code in 20 seconds for $3. If the Cray were kept busy with such business it would provide a 100% profit for the operator. Note that she need not be deemed a researcher by the government.
Even if 109 bytes of storage are not required, she may prefer to spend $50 for 30 seconds of the attention of a big Cray to do ray tracing rather than experience 3 hours of delay on her own CPU.
Guides may offer datagram forwarding service to avoid computing an optimal path from source to destination. Perhaps specialized forwarding services would make more sense in this case, but guides already have full time circuits to each node.
—Adam Smith
An Inquiry into the Nature and Causes of the Wealth of Nations, 1776
Communication links fail, which will cause interfaces to go down. A node may use a circuit as a detour for the interface. It might build the circuit in advance as a precaution. It might take a loss to maintain its reputation. Alternatively, it is remarkably inexpensive to build two circuits between the same two endpoints, the second to serve as a hot standby. Since no data moves over the standby the cost is probably negligible. Circuits with a standby could arrange for their node agents to return the buffered data at the several nodes to be retransmitted over the standby circuit.
When a neighboring node itself goes down it is harder to play fair. Only the failed node can properly interpret packets that were meant for it. It behooves a node X to arrange for at least one of its neighbors to notify routing services when X dies. This minimizes damage to X’s reputation. It is in the neighbors interest to do so because, to an extent, their reputations rise and fall together. The whole neighborhood’s reputation can suffer.
The concept of liability helps clarify how systems like these work. When a node accepts a packet requesting to be forwarded to another interface it has acquired a liability or obligation. If it loses the packet, it has defaulted but gains the amount of money in the lost packet. The node guards the packets to guard its reputation. We specifically reject mechanisms that would create an externally registered liability for each packet, as such a system would likely cost more than the transaction itself. In particular, there would be no legal liability. In the presence of real time automatic reputation systems, it is enough that reputations can be lost in minutes.
Reputation systems are in a natural position to provide Yellow Page service.
Reputation systems can evaluate and rate a service by anonymously subscribing to it. Usually, however, they must evaluate complaints that come from customers of the rated services, because the service is too expensive or it requires subjective judgment, or judgment by experts, who are, after all, the customers. The reputation service must thus judge the veracity and incentives of its reporters, namely the very customers of the reputation service. This judgment requires the difficult skills of a diplomat, but ultimately incentives pull in the right directions.
There is an economy of scale in reputation systems. A user learns of the reliability of a service from other users through reputation systems. He does business with many vendors according to their reputations as reported by the reputation system. He does business with only a few reputation systems and can thus directly judge these familiar systems.
A collect call service might be developed, where the bridge on its own speculative expense calls someone in CashNet in response to a query by an Internet citizen unknown to the bridge. The bridge asks if the CashNet citizen is willing to accept a collect call.
Calls from CashNet are easier. No account is needed for connection service to the Internet, which can be paid for immediately.
Many one person companies. Many people already make a living indirectly through the Internet. To do so requires being hired by some sponsor with a motivation to provide some information service for free. The sponsor may indirectly be some government with a charter to provide service, or it may be an enterprise that supports collaborative research. Most information commerce cannot conform to these patterns.
Wide variety of services. Most Internet services are currently free to the end user. This is changing, but the Internet provides no integrated way of charging for such service. It is thus infeasible to sell some service whose intrinsic worth is only a few cents. When a person wanders into a book store, chooses a book and pays for it with cash, she need not learn the name of the owner of the book store nor need he learn hers. This process is even easier when I buy something from a vending machine.
No Junk Mail! A person could significantly decrease unwanted mail by charging a set price for all incoming mail, and advertising this reading tariff along with her net-name; then at least she would be compensated for reading any such junk mail that did get through. Her mail daemon would be directed to discard mail with insufficient tariff; or, more politely, it could return the excess postage with a note that the message was automatically discarded, since the worth was insufficient to justify reading the mail. One would surely get off of most junk mail lists that way! People with 900 series phone numbers get few solicitations. Some “junk mail” may be desired by the recipient. She may want to see colloquium announcements or movie reviews. She instructs her daemon to watch for such announcements and return postage to the distributor sufficient to deliver the next package.
Availability of trivial services. I once got a total stranger to convert a TeX file to a PostScript file for me. The Internet is a friendly place, but I cannot continue to impose on strangers. If the converter were paid a penny a page he might find it worth his while to automate this service.
Communication systems have long been thought to be natural monopolies. To the technical obstacles to progress are thereby added bureaucratic and political obstacles. Technical progress has eliminated most of the original reasons for viewing the phone business as a natural monopoly, especially as cable companies install high bandwidth service to the home. When the government operates phone systems, as in many countries today, it has the political mandate, or feels it has, to establish policies that limit the uses to which lines may be put. Some of these policies are in fact to protect the established system from competition. Some countries were a decade or so late in digital communications because such service threatened conventional revenues. This behavior is characteristic of monopolies. Government regulation is set the difficult task of attempting to limit monopolistic manifestations.
The absence central administration gives more opportunity for substandard service. Indeed, no standards are centrally mandated. This system would naturally encourage voluntary and de facto standards. Reputation systems would report compliance with such standards. Mandated standards are often not achieved. Competition even solves the problem of what the standards should be — How good is good enough?
Without central administration greater opportunities exist for fraud. It will bother some that forwarding nodes have neither accountability nor legal liability. Operators of such nodes must plan to make their living from repeat business. Just as a restaurant must provide food acceptable to its customers to ever make a profit, so must such nodes play largely by the “rules”. One type of fraud is especially egregious — “losing” packets and pocketing the money. This is temptation is especially great since one may be able to blame the loss on ones neighbor. Indeed this aspect bars application of CyberCash from transfers of large sums. Just as one normally does not carry $10,000 as one wanders through strange neighborhoods, neither does one send $10,000 packets through most nodes. (This danger is another justification of the 32 bit money field denominated in $.00001 .) Repeated packets, with acknowledgments, could move large sums but this may run up against limits imposed at interface accumulators where the credit of one node operator may be insufficient in the eyes of the downstream operator. It all boils down to the fact that large value transactions are a big deal, even for banks! Incidentally, this problem with large value transactions are better handled with schemes such as Chaum’s digital money, which involves a bank and does provide accountability and, perhaps, legal liability.
Protection against gridlock may require some distributed logic. Gridlock occurs when some set of nodes are unable to accept new packets for lack of storage and all of the packets that they need to deliver (to relieve their congestion) are directed to members of the set, none of whom are receiving. No incentive based solution to this gridlock has been structured yet. Circuits alleviate but do not eliminate the problem. This difficult exercise is left for the reader.
If the credit of one of the node operators at an interface is insufficient for the other operator, then the latter may establish a limit on the accumulator, beyond which traffic is not accepted. This case would be likely to occur for end-users, which would limit the bills they could accumulate. The credit limit may be zero, thus requiring prepayment. Conversely, the same limit protects the user from running up unlimited bills through misunderstanding of the software that handles his cybercash.
Perhaps such interfaces would make EFT (Electronic Funds Transfer) arrangements with normal financial institutions when some economic amount of net money is involved or credit becomes stretched. This application may be ideal for Chaum’s DigiCash.