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Tue, 8 Jan 2002 11:31:53 -0500
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<p><font color="#000000"><img src="images/3-bootstrap.gif" width="366" height="214" align="right">Due
to the Net, purely electronic goods and services can now be purchased
from across the world as easily as from next door. Consumers of these
- goods and services have already escaped old limits of geography and jurisdiction.
- If the functions normally provided by trust hubs were offered by well-known
- first world trust hubs as purely electronic services, those in need of
- such widely trusted intermediary services could escape as well -- escape
- from the crushing assumption that such services can only be provided by
- institutions backed by their own governments. Instead, they could reach
- across the Net to use these services, and begin to bootstrap themselves
- out of their poverty by participating in the global networks of commerce.
- (Figure 3) </font></p>
+ goods and services have already escaped old limits of geography and jurisdiction
+ [<a href="#Johnson96">Johnson96</a>]. If the functions normally provided
+ by trust hubs were offered by well-known first world trust hubs as purely
+ electronic services, those in need of such widely trusted intermediary
+ services could escape as well -- escape from the crushing assumption that
+ such services can only be provided by institutions backed by their own
+ governments. Instead, they could reach across the Net to use these services,
+ and begin to bootstrap themselves out of their poverty by participating
+ in the global networks of commerce. (Figure 3) </font></p>
<p>Many first world trust hubs are already widely known and plausibly trusted
in the third world because of the pervasive spread of western media: shows
ranging from CNN to Dallas and Baywatch have granted name recognition
@@ -477,9 +477,9 @@
been engaging in rich and rapid experimentation with cooperative arrangements
that require no coercive recourse [<a href="#Krecke01">Krecke01</a>].
The most common arrangements involve not actual escrow, but reputation
- feedback and credit [<a href="#Steckbeck01">Steckbeck01</a>]. This has
- a similar logic, in that a participant effectively secures their good
- performance with the value of their reputation capital. Such arrangements
+ feedback and credit [<a href="#Friedman00">Friedman00</a>, <a href="#Steckbeck01">Steckbeck01</a>].
+ This has a similar logic, in that a participant effectively secures their
+ good performance with the value of their reputation capital. Such arrangements
are messier and less amenable to automation than escrow, but they do substantially
reduce capital costs. Both kinds of arrangements have their place and
will compete in the market. In this paper we explore escrow-based smart
@@ -786,12 +786,13 @@
transmits only information -- effectively speech -- but cannot transmit
force. Smart contracts can change their electronic representations about
the world -- such as title -- but they cannot force the world to come
- along. Unlike government-based title transfer, these changes of title
- are not <i>backed</i> by a coercive enforcement apparatus. How may we
- compensate for this lack? For concreteness, in order to establish possibility,
- we propose here two complementary techniques, but we do not presume to
- foresee what the actual outcome of the market discovery process will be.
- This should be an area ripe for entrepreneurial invention. </p>
+ along [<a href="#Friedman00">Friedman00</a>]. Unlike government-based
+ title transfer, these changes of title are not <i>backed</i> by a coercive
+ enforcement apparatus. How may we compensate for this lack? For concreteness,
+ in order to establish possibility, we propose here two complementary techniques,
+ but we do not presume to foresee what the actual outcome of the market
+ discovery process will be. This should be an area ripe for entrepreneurial
+ invention.</p>
<h3><a name="ratings"></a>Ratings</h3>
<p>The issue of credibility does not require <i>all</i> title listings to
have high credibility. Rather, it is adequate for distant traders, who
@@ -971,10 +972,11 @@
<p>This new world of Net-based jurisdiction-free coercionless smart contracting
-- the digital path -- is an option for the first world as well as the
third. Both groups stand to gain tremendously by this transition. Virtually
- all progress to date towards the digital path [<a href="#Lessig99">Lessig99</a>,
- <a href="#Krecke01">Krecke01</a>] has been in the first world. Nevertheless,
- once technology costs become inconsequential, we expect the third world
- to overtake and then lead the first in making this transition. Why?</p>
+ all progress to date towards the digital path <font color="#000000">[<a href="#Johnson96">Johnson96</a>,
+ </font><a href="#Lessig99">Lessig99</a>, <a href="#Krecke01">Krecke01</a>]
+ has been in the first world. Nevertheless, once technology costs become
+ inconsequential, we expect the third world to overtake and then lead the
+ first in making this transition. Why?</p>
<h3><a name="legitimacy"></a>Comparative Legitimacy</h3>
<p>Primarily because, once again, of the issue of legitimacy. The character
of legitimacy in the first world is quite different than the legitimacy
@@ -1058,7 +1060,7 @@
right of contract, where almost any mutually acceptable arrangement could
be made binding, with the law serving as the mutually trusted intermediary
for securing the arrangement. With smart contracts, the encoded rules
- themselves becomes the logic of their own enforcement, subject only to
+ themselves become the logic of their own enforcement, subject only to
the honesty, not the judgment or skill, of a diverse market of competing
contract hosts. This competition forms a vastly stronger and fully decentralized
system of checks and balances. </p>
@@ -1089,6 +1091,10 @@
<p><a name="Engelbart62"></a>[Engelbart62] Doug Engelbart "<b>Augmenting
Human Intellect: A Conceptual Framework</b>", SRI Project no. 3578,
October 1962.</p>
+ <p><a name="Friedman00"></a>[Friedman00] David Friedman, "<b>Contracts
+ in Cyberspace</b>", draft written to be presented at the American
+ Law and Economics Association meeting, May 6, 2000. Online at <a href="http://www.daviddfriedman.com/Academic/contracts_in_%20cyberspace/contracts_in_cyberspace.htm">http://www.daviddfriedman.com/Academic/contracts_in_%20cyberspace/contracts_in_cyberspace.htm</a>.
+ </p>
<p><a name="Fukuyama95"></a>[Fukuyama95] Francis Fukuyama, "<b>Trust:
The Social Virtues and the Creation of Prosperity</b>", Free Press
Paperbacks, 1995. </p>
@@ -1112,11 +1118,15 @@
Stieger, "<b>A Universal Modular Actor Formalism for Artificial Intelligence</b>",
Proceedings of the 1973 International Joint Conference on Artificial Intelligence,
pp. 235-246.</p>
+ <p><a name="Johnson96"></a>[Johnson96] David R. Johnson and David G. Post,
+ "<b>Law And Borders--The Rise of Law in Cyberspace</b>", in
+ Stanford Law Review, 1367,48, 1996. Online at <a href="http://www.temple.edu/lawschool/dpost/Borders.html">http://www.temple.edu/lawschool/dpost/Borders.html</a>.</p>
<p><a name="Kelsey99"></a>[Kelsey99] John Kelsey, Bruce Schneier, "<b>The
Street Performer Protocol and Digital Copyrights</b>", First Monday,
vol 4, no 6, 1999. Online at <a href="http://www.firstmonday.dk/issues/issue4_6/kelsey/index.html">http://www.firstmonday.dk/issues/issue4_6/kelsey/index.html</a>.</p>
- <p><a name="Krecke01"></a>[Krecke01] Elisabeth Krecke, "<font color="#FF0000">some
- title about law on the internet</font>" Proceedings of <i><a href="http://panoramix.univ-paris1.fr/AHTEA/colloques.html">Austrian
+ <p><a name="Krecke01"></a>[Krecke01] Elisabeth Krecke, "<b>The Emergence
+ of Private Lawmaking in the Internet: Implications for the Economic Analysis
+ of Law</b>" Proceedings of <i><a href="http://panoramix.univ-paris1.fr/AHTEA/colloques.html">Austrian
Perspectives on the New Economy</a></i>, 2001.</p>
<p></p>
<p><a name="Lavoie01"></a>[Lavoie01] Don Lavoie, "<b>Subjective Orientation