Smart contracts watch
As usual remember that any information recorded (here, where and when you park) "can and will be used against you." For example it can generally be subpoenad for use in court, as also occurs with credit card records, phone records, and automated toll systems. My old boss David Chaum, his student Stefan Brands, and others in the advanced cryptography community have designed many protocols that would preserve privacy in these scenarios, but the deployers of these technologies are usually not terribly interested in your privacy. Your recourse -- keep using physical cash, and take the trouble to go back to your car to check and stuff your parking meter.
In my original writing on smart contracts I talked about trading derivatives and constructing synthetic assets with low transaction costs:
Very complex term structures for payments (ie, what payments get made when, the rate of interest, etc.) can now be built into standardized contracts and traded with low transaction costs, due to computerized analysis of these complex term structures. Synthetic assets allow us to arbitrage the different term structures desired by different customers, and they allow us to construct contracts that mimic other contracts, minus certain liabilities. As an example of the latter, synthetic assets have been constructed that mimic the returns of stocks in German companies, without requiring payment of the tax foreigners must pay to the German government for capital gains in German stocks.A bit later I figured out that the primary barrier to such activity is mental transaction costs. These costs throw a monkey wrench into what is otherwise the very good idea of consumer derivatives. One can imagine a wide variety of consumer derivatives, such as buying insurance against air fare changes and the growing business of selling sports tickets based on personal seat licenses (PSLs). I have sketched some possible solutions to the mental transaction problem, such as the market translator. The main problem is designing an automated agent that can figure out user preferences without bothering the user -- usually by recording and analyzing the user's normal behavior. If this can be fully automated the bottom drops out, so to speak, and even nanobarter becomes possible.
Smart contracts, based on digital property, open up a vast new space of possibilities. Many of the digital machines you own can obtain good information about your usage and their own status, from which they could at least crudely estimate what you want to buy. Take parking, for example. A suitably smart car and parking meter system should be able to figure out where you want to park and how much you want to pay for it, with minimal user intervention. I'm not talking anything like "AI" here, just computerized cars and parking meters that have sufficient sensors, can communicate with each other, and use known algorithms. As you are driving down the street, you tell your car that you want to find a parking place. The price of open parking spots ahead starts popping up on your dashboard. You choose and agree to pay the fee by simply parking in the spot.
Along with this future urban lifesaver, parking spot derivatives would be very useful. For the same reasons as stadium owners sell PSLs -- to receive revenue up-front to help pay the cost of building the infrastructure -- owners of parking spaces could sell parking space licenses (PSL again, oops :-). The owner of the PSL, in turn -- or said owner's car acting as his agent -- could sell the hours or minutes that the car is not using. You could buy a PSL and thereby reserve that sweet spot right next to your downtown office for the year. Then sell off the parking rights for the weekends. You could reserve a spot next the your favorite club and sell off all the times except Thursday through Saturday night. And if you are away from the office or staying in for the evening, your car's market translator can price and offer the space and it will become open and start popping up on driver's dashboards.
This kind of thing is just the tip of the iceberg as far as the potential of smart contracts is concerned.
Finally I will report on a digital cash system from no less than our frequent commentor Daniel Nagy. Nagy makes the following observation:
While everyone with a cellular or a touch-tone telephone, a web-browser or email client in its readily available, out-of-box configuration is able to transmit short messages (up to a few hundred bits), performing complex calculations involving strong asymmetric cryptography requires additional tools which not everyone possesses or can afford to run. The fact that it is impossible to transact without performing complex calculations in real time is a far more serious obstacle than the need to contact the issuer for each transaction.This is an interesting approach, but I suspect may be correct only in the limited sense that these devices and software don't come built-in with the particular cryptographic protocols needed for strongly private cash (e.g. Chaumian blinding). But they don't come built-in with digital cash software either. Thus, the main advantage of Nagy's scheme, which may or may not make up for its reduced privacy features, comes from the ability to use it without having to install any extra software at all -- to just, for example, cut and paste the cash from an e-mail where you received it from one person to an e-mail where you pay it to another. Your word processor can be your wallet. If this is an important use-case, then Nagian cash may succeed where Chaumian cash failed.
Another payment system of note is WebMoney, which recently started up a gold-backed currency, a competitor to the troubled e-gold. (HT: Financial Cryptography)