[e-cvs] cvs commit: e/doc/talks/pisa/paper index.html
markm@eros.cs.jhu.edu
markm@eros.cs.jhu.edu
Fri, 28 Dec 2001 12:34:07 -0500
markm 01/12/28 12:34:07
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to speculate on the possible organization of the market for smart contract
creation.)</p>
<p>The "$-Issuer" and the "Stock-Issuer" transforms
- the movement of the pieces into a transfer of erights. A $-Issuer, or
- more conventionally a bank, is effectively a title company for money.
- For money on record at the bank, the rights to the money changes hands
- by the transfer of quantity between accounts -- shown above as <i>purses</i>
- within the issuers. When Alice places the gold bar on the board, her computer,
- the $-Issuer, and the contract host engage in a three-way cryptographic
- transaction that bring about the transfer of title, at the $-Issuer, of
- that much money from Alice to the contract host. An honest contract host
- would consider this money to be only a piece on the board, which can be
- picked up (transfered to the possession of a player) according to whatever
- may be the rules of the game. We refer to this as <i>oblivious escrow</i>
- -- the contract host, merely by running the contract, esures that goods
- in escrow can only be release under the agreed conditions, without needing
- to understand what those conditions mean.</p>
+ the movement of the pieces into a transfer of <i>third-party assayable
+ electronic rights</i>, or <i>erights</i>. A $-Issuer, or more conventionally
+ a bank, is effectively a title company for money. For money on record
+ at the bank, the rights to the money changes hands by the transfer of
+ quantity between accounts -- shown above as <i>purses</i> within the issuers.
+ When Alice places the gold bar on the board, her computer, the $-Issuer,
+ and the contract host engage in a three-way cryptographic transaction
+ that bring about the transfer of title, at the $-Issuer, of that much
+ money from Alice to the contract host. An honest contract host would consider
+ this money to be only a piece on the board, which can be picked up (transfered
+ to the possession of a player) according to whatever may be the rules
+ of the game. We refer to this as <i>oblivious escrow</i> -- the contract
+ host, merely by running the contract, esures that goods in escrow can
+ only be release under the agreed conditions, without needing to understand
+ what those conditions mean.</p>
<p>A dishonest contract host could abscond with the money instead, which
is why contract hosts needs to be widely trusted. A widely trusted contract
host presumably has a valuable reputation at stake, and this risk helps
@@ -512,15 +513,19 @@
possible which further limit the player's vulnerability to a dishonest
contract host or issuer, but these are beyond the scope of this paper.)
</p>
- <p>In the arrangement shown here, the $-Issuer, the Stock-Issuer, and the
- contract host need not have any prior knowledge or trust of any of the
- other four players. For the game to be meaningful, Alice and Bob must
- have prior knowledge and trust in both issuers and the contract host,
- but not in each other. Even if Alice and Bob are both use-once pseudonymous
- identities with no apparent physical location [<a href="#Vinge84">Vinge84</a>],
+ <p> The money is an eright in part because it is <i>third-party assayable.
+ </i>Bob, through the contract host, can issuer backing this eright, and
+ what the value of this eright is according to the issuer, even though
+ Bob does not currently possess this eright, and the contract host does
+ not understand this eright. With such assayability, the $-Issuer, the
+ Stock-Issuer, and the contract host need not have any prior knowledge
+ or trust of any of the other four players. For the game to be meaningful,
+ Alice and Bob must have prior knowledge and trust in both issuers and
+ the contract host, but not in each other. Even if Alice and Bob are both
+ use-once pseudonymous identities with no apparent physical location [<a href="#Vinge84">Vinge84</a>],
under these conditions, they can transact with each other <i>as if</i>
they fully trust each other.</p>
- <h3>Assets + Contracts x Time = Capital</h3>
+ <h3>Assets + Contracts x Time + ?? = Capital</h3>
<p><font color="#000000"><img src="images/6-option.gif" width="379" height="235" align="right">The
Smart Contracts explained so far, the vending machine and the exchange
game, cannot turn assets into capital. To do so requires contracts that
@@ -551,9 +556,9 @@
arrow, taking us to state C. After this move, the only remaining legal
moves are for Alice to pick up the stock, and for Bob to pick up the money.</p>
<p>What is so different about this contract? During the interval of time
- from the start of the game transitions until the game leaves state A (whether
- by expiration or exercise) Alice a something valuable. During this interval,
- Alice has the option to buy this stock for a given. This is a very different
+ from the start of the game until the game leaves state A (whether by expiration
+ or exercise) Alice a something valuable. During this interval, Alice has
+ the option to buy this stock for a given price. This is a very different
kind of value than having the stock or money themselves. The value of
this new right <i>derives</i> from the value of the stock and the money,
but whereas they are very simple literal kinds of rights, this new right
@@ -569,20 +574,21 @@
picture so far, Alice has no ability to trade this new right. This needs
to be repaired, in order for these new rights to truly be capital, and
in order for yet more abstract forms of capital to be derived from them.
- Capital is both itself abstract, and widely tradeable, enabling further
- abstraction. </p>
+ De Soto's <i>capital</i>, besides being an abstraction of widely tradeable
+ rights, is itself widely tradeable, enabling further abstraction -- the
+ creation of yet more forms of capital.</p>
<h3><img src="images/7-layering.gif" width="308" height="304" align="right">Networks
of Games</h3>
<p>What we need, quite simply, is an issuer of this new right Alice holds
- -- the right to sit in the left chair, in order to be able to play the
- left side of this on-going game. Since the contract host is already managing
+ -- the right to sit in the left chair, ie, the right to play the left
+ side of this on-going game. Since the contract host is already managing
access to this chair, it seems natural to have it double as the issuer
for the right to sit in this chair. Just as Alice could tell the $-Issuer
to transfer some of her money from her purse to some else's, we can enable
- Alice to tell the contract host to transfer her right to sit in this chair
- to someone else. The contract host would then revoke Alice's access to
- the chair, and issue fresh access to the new player, much as the $-Issuer
- does with Alice's money.</p>
+ Alice to tell the contract host to transfer her eright to sit in this
+ chair to someone else. The contract host would then revoke Alice's access
+ to the chair, and issue fresh access to the new player, much as the $-Issuer
+ would with Alice's money.</p>
<p>With this ability to compose networks of games, it seems we have the
ability to express the full range of contract layering used in modern
finance. Not that modern finance is directly relevant to the needs of
@@ -593,27 +599,32 @@
it runs, but does not understand. The contract host is not in a position
to vouch for any meaningful property of the rights it is issuing, so how
can widespread trust in the contract host translate into credible global
- transferability of derived rights? Let's walk through the example depicted
- in Figure 7.</p>
+ transferability of derived rights? How can this right be assayable if
+ even its issuer doesn't understand it? Let's walk through the example
+ depicted in Figure 7.</p>
<p>Alice starts out simply as a player of the original options game, hosted
by contract host #1. While Alice finds herself in the resulting valuable
- situation, she manages to find Fred, who would also find this position
- valuable. Fred, were he convinced that Alice's chair sitting rights mean
- what Alice says they mean, would be willing to play a game on contract
- host #3 in which this right, issued by contract host #1, appears as a
- movable piece. Unfortunately, having just met, Fred and Alice don't trust
- each any more than Alice and Bob do. Fortunately, Fred does have prior
- knowledge and trust of contract host #1. Unfortunately, contract host
- #1 has no idea if the right to sit in this chair of this game means what
- Alice claims it means, or anything else. </p>
+ situation -- while the options game is in state A -- she encounters Fred,
+ who would also find this position valuable. Fred, were he convinced that
+ Alice's chair sitting rights mean what Alice says they mean, would be
+ willing to play a different game on contract host #3, perhaps our original
+ negotiation game, in which this right, issued by contract host #1, would
+ appear as a movable piece. Unfortunately, having just met, Fred and Alice
+ don't trust each any more than Alice and Bob do. Fortunately, Fred does
+ have prior knowledge and trust of contract host #1. Unfortunately, contract
+ host #1 has no idea if the right to sit in this chair of this game means
+ what Alice claims it means, or anything else. </p>
<p>Fortunately, with Alice's consent, Fred can ask contract host #1 for
- the text of the contract/program and the current state of the board. In
- theory, this should be sufficient for Fred to figure out what these derived
- rights are. Alice, who presumably understands the game she's playing,
- can help Fred figure this out, and Fred can accept this help, with any
- trust required between Fred and Alice. Should the contract truly be idiosyncratic
- to local knowledge shared by Alice and Bob, knowledge to which Fred has
- no access, he may not find the derived rights comprehensible at reasonable
+ the text of the contract (the source code of the program) and the current
+ state of the board, and the assays of all the pieces presently on the
+ board (ie, escrowed by the game). In theory, this should be sufficient
+ for Fred to figure out what these derived rights are, so third party assayability
+ has been provided in theory, but not yet in practice.</p>
+ <p>Alice, who presumably understands the game she's playing, can help Fred
+ figure this out, and Fred can accept this help, without any trust required
+ between Fred and Alice. Should the contract truly be idiosyncratic to
+ local knowledge shared by Alice and Bob, knowledge to which Fred has no
+ access, he may not find the derived rights comprehensible at reasonable
cost and move on. More commonly, if the contract is understandable to
some number of others, including some Fred trusts, Fred may turn to them
for advice on the contract's meaning -- the computational analog of legal