Self-Enforcing Protocols

http://www.schneier.com/blog/archives/2009/08/self-enforcing.html

by gthank • 17 years ago

156 56 17 years ago

ube2• 17 years ago

How can you not like an article that involves cake, pirates, and property taxes?

One thing that I wonder is how is a self reinforcing transaction affected when the third parties that used to mediate it are shut out. For example, certificate authority companies that are no longer needed.

Furthermore, the "all hands" in the room as opposed to secret ballot voting - while on the surface it is self reinforcing from a social perspective it wouldn't really work (i.e. the coercion he mentioned and also the lemming effect where someone votes with their crowd delaying raising their hand just enough to see what the consensus is).

Finally, the collusion and breakage of a self-reinforcing system like the pirate example shows that a self-reinforcing protocol is situationally dependent. What are the chances that at least one pirate will collude with the captain? (I bet the chance is quite high considering the nature of pirates) As opposed to the property tax example which seems to be a very good use of such a protocol.

pavel_lishin3• 17 years ago

Isn't the point of a self-reinforcing transaction that it doesn't need a third-party mediator?

jedi_stannis• 17 years ago

I think his point was that current third party mediators will not be happy to be cut out of the equation. Even though the system will be more efficient without them, they will try to do whatever they can to still get their share of the transaction.

niyazpk• 17 years ago

Instead of giving the amount to the captain, they could throw it away to the sea. Nobody would cheat then.

In real life situations, you may want to replace the sea by the government or some kind of common fund in the domain.

silentOpen2• 17 years ago

Interesting idea but no parties in the protocol would be motivated to do that. This might be useful in a situation where a group entity exists that is approximately the same size as the division group -- e.g. an endowment, shared property, common business, or co-op.

eru4• 17 years ago

> Nobody would cheat then.

Depends. Perhaps somebody would try to bully (i.e. play a game of chicken http://en.wikipedia.org/wiki/Chicken_(game)): "Either you lower your share in my favour, or I will claim too much and you get nothing."

donaldc2• 17 years ago

If I were a pirate who had little gold to lose, and a grudge against some of my fellow pirates, I could always play the spoiler and cause everyone's gold to go to the captain or into the sea...

bsaunder2• 17 years ago

I think the property tax example is just an inverse pirate scenario. (the landowner is the pirate needing the cooperation of the captain (the head of the land acquisition authority)). Granted a much weaker position to negotiate from.

bigwill• 17 years ago

Yeah, I like the comments in this sub-thread. These protocols can suffer from Maginot Line type of security. Also, they can provide an illusion of propriety that cheaters can point to when accused and use that to distract, say, a jury from however it is they really cheated. It's important to understand these protocols' failings.

Herring• 17 years ago

Anyone remember the protocols for 3+ people dividing the cake? I cant find the article I saw.

Edit: Still can't find the article, but wikipedia mentions the relevant research papers. http://en.wikipedia.org/wiki/Cake_cutting

sethg• 17 years ago

IIRC the protocol for a three-way split is: One party gradually moves the knife, pointing downward and poised to slice, over the surface of the cake, until either of the other two says "cut". The person who calls "cut" gets that slice. The remainder of the cake is divided according to the cut-and-choose protocol.

pavel_lishin3• 17 years ago

Wouldn't the two people not cutting wait 'til the knife was in the middle, and then try to yell 'cut!' as fast as they could? First person to yell "cut" would get half of the cake, and the other two would get a quarter apiece...

anamax2• 17 years ago

This assumes that the cake is uniform, and most cakes aren't.

If the cutter prefers frosting and knows that the other person doesn't, the cutter can arrange to get a larger share than she'd get if roles were reversed.

I think that the problem can be fixed by giving all participants knives so they're all cutters.

jcl• 17 years ago

These lecture notes give a decent description of several different ways for three people to share (including non-"moving knife" solutions):

http://www.cs.cmu.edu/afs/cs/academic/class/15451-f05/www/le...

chrisduesing2• 17 years ago

I would love to hear an idea for how this could be used in an online gaming situation.

1. Imagine a simple turn based rpg combat system where each side rolls a hit die and the other side a block die and then they compare. given this premise, what needs to be modified to prevent cheating?

2. Once 1 is solved, how much does a fps situation where network lag effects player's perception of each others location complicate the procedure?

te_platt• 17 years ago

You might want to check out Applied Cryptography by Bruce Schneier. It explains how to dice as well as cards over a network without being able to cheat. It also goes into many other areas in great detail.

chrisduesing2• 17 years ago

I just checked the book using Amazon's "look inside" feature. It appears that his example is how to use cryptography to hide what cards you have from the other player until it is time to reveal them. I am more interested in how to apply the ideas from this article to involve an open, self enforcing protocol rather than data hiding.

bockris2• 17 years ago

In the comments: http://www.schneier.com/blog/archives/2009/08/self-enforcing...

someone brings up the situation where there is only one item (Grandma's antique mirror) and how you can use the shotgun clause to determine who gets the item.

I'm reminded of the chapter (70) in Cryptonomicon where they were dividing the assets of an estate. All of the children got to rank items on 2 scales, emotional attachment and dollar value. The choices on both axes were scaled to between 0 and 1. Then they were going to use software to determine an equal split on both scales amongst all recipients.

pavel_lishin3• 17 years ago

And Stephenson then went on to mention, through Randy and his uncle (or was it his father?) that the problem itself was incredibly difficult, and they were going to borrow some time on a huge machine to solve it.

And then Randy cheated, anyway.

huhtenberg• 17 years ago

> The choices on both axes were scaled to between 0 and 1.

That I don't remember, but I do remember that they had sex on one of the furniture items in question :)

bockris2• 17 years ago

different chapter (41) and it was Tom Howard, not Randy who had sex on a Gomer Bolstrood dresser.

(The reason I can quote chapters is that I have an OCR'ed scan of the book that I found on the internet. a quick search on the word 'stockings' found the right chapter.)

codyrobbins4• 17 years ago

Here’s a self-enforcing protocol for determining property tax: the homeowner decides the value of the property and calculates the resultant tax, and the government can either accept the tax or buy the home for that price. Sounds unrealistic, but the Greek government implemented exactly that system for the taxation of antiquities. It was the easiest way to motivate people to accurately report the value of antiquities.

Yeah, it does sound unrealistic. What if the homeowner truthfully and in good faith reports an accurate value for their home, and the government decides to purchase it anyways? I would not like the government to have the ability to instantly render me homeless.

run4yourlives3• 17 years ago

What if the homeowner truthfully and in good faith reports an accurate value for their home, and the government decides to purchase it anyways?

That assumes that the government can't already do this. They most certainly can. Even better, they can do stupid things like build High-tension powerlines the next lot over, rezone your lot into industrial, etc, etc.

This doesn't really give the government any more power, but it removes a lot of red tape, plus it ensures you get fair market for your home.

Assuming you over-report the value, you'd be making a profit on the sale - enough that moving wouldn't be much of a issue for you.

It's actually quite brilliant as it has the effect of raising taxes! If my home is market valued at $500K, I'd probably suggest I pay taxes on $550K, just so that I'd have that extra $50K in pocket if I'm inconvieneced.

codyrobbins4• 17 years ago

Sure, the government can already do this, but certainly not so easily. Things like building high-tension powerlines or rezoning require many steps involving proposals, reviews, environmental impact studies, community input, etc. before final approval. There's also eminent domain, which I didn't mention, but again even that requires lots of review, justification, general consensus, and approval.

There is definitely a difference between those things and the government being able to arbitrarily seize your property with no justification at all, other than that you've arguably undervalued it, regardless of whether they pay you what you valued it at.

So, while this may not really give the government power that it doesn't already have per se, what it's doing is removing a ton of barriers.

Assuming you over-report the value, you'd be making a profit on the sale - enough that moving wouldn't be much of a issue for you.

This is assuming that all you care about is money. What if you don't want to give up your home regardless of how much they pay you for it? There are some things people are not willing to sell for any price. And being forced to relocate would be far more than an inconvenience to some people. In these cases, how much should you be forced to overvalue your home by as insurance that the government won't arbitrarily seize it if you get on someone's bad side? 25%? 50%? 200%?

frossie• 17 years ago

The property tax model is a deeply flawed idea because it is subject to a kind of DoS attack. If everybody valued their home at 50% of its FMV, the government would not be able to afford to buy everybody's home. Also, if everybody self-valued at say, 90% it would not be worth the government's hassle to buy everybody's home.

The pie model works because there are only 2 players.

The Greek antiquities thing works because there are probably only a few people that own priceless antiquities and the government is actually motivated to acquire more (because they would prefer they were in museums rather than private hands). So if everybody who owns antiquities self-priced them at 50% FMV, the government would probably be happy to snap them up.

The property tax application would not really work because there are 1-to-many players and the 1 player doesn't really want the item - repossession is only used as a threat/punishment.

jodrellblank• 17 years ago

"The Government XYZ" - what if Public Antique Evaluator Mr Corrup Tianou has a side business finding rare artworks, forcibly purchasing them for their declared value, then hooking them to the highest black-market bidder?

eru4• 17 years ago

That would make the market more efficient.

makmanalp• 17 years ago

Self-enforcing protocols are safer than other types because participants don't gain an advantage from cheating.

Barter is a self-enforcing protocol: nobody needs to facilitate the transaction or resolve disputes. It just works.

Except when bartering, participants do gain an advantage from cheating.

dbz• 17 years ago

I think the point was that it is hard for participants to cheat, the owner isn't going to go lower than a certain amount; thus, the owner is always going to break even or profit. If the owner puts the price too high then the buyer is no longer going to be a buyer, but a a person who is walking away from the deal. Kind of self-enforced because the person who is selling is not going to make money by putting too high a price on goods.

wwalker3• 17 years ago

And it's easy to cheat in bartering -- just don't tell the other party that your goods have some hidden flaw.

If I barter you my old laptop that crashes when you leave it on more than an hour, you're going to be mad later when you find out I didn't tell you, and you'll have to appeal to a third party for justice if I'm bigger or stronger than you.

bsaunder2• 17 years ago

Or just barter it away to someone else (with or without telling the truth). ;)

billswift2• 17 years ago

Bigger or stronger won't stop a bullet. Anyone who cheats in a way that seriously damages the other, in a world that has guns in it, is a f*cking idiot.

EDIT: This is known as "deterrence" if the potential malefactor is fairly bright and "evolution in action" if not.

silentOpen2• 17 years ago

This depends on the perfection of market information. If both participants can perfectly determine the value of their and their adversary's goods, no one can or will cheat.

So barter should work for metals traders but not cattle traders (but they have other problems...).

jorgeortiz854• 17 years ago

I had an idea a while ago about stopping domain name squatters by using a similar protocol to price and tax domain names. You'd be required to report the "fair value" of each domain you owned. All your domains (maybe there could be exceptions for trademarks) would be implicitly for sale at that fair price. To keep the reported price from being too high, you'd have to pay some fraction of that price as a yearly domain name tax. That way, if anyone has a better use for your domain than you do, they can just buy it from you. Of course, if you build a brand and a trademark, you should have some protection from competitors just buying your domain. Maybe only other similar trademark holders could compete for your domain (eg, Apple Computers and Apple Music could fight it out to see who gets more value out of apple.com).

Periodic• 17 years ago

I see domain names being too close to trademarks for this to be viable. For many companies the domain name came first, and the trademark came second (e.g. Flickr, bit.ly, del.icio.us). If others could somehow come in and buy your domain name it could really ruin your business. People think of many online businesses as synonymous with their URL, and there is a lot of work that goes into associating the two. The tax would really hurt small startups.

I think domain names should simply have more protections in a way similar to trademarks, and there should be a way to dispute domains as being trademark infringing.

jorgeortiz854• 17 years ago

Let's say you can pay your property tax in advance, so up to one or two years in advance. After that period, others can threaten to buy your domain. If you manage to build a viable business out of it within a year or two, you can trademark the name and hold on to it for as long as you're doing business under that trademark. If you haven't built a trademark around it, then you either continue paying your tax or risk getting bought out.

codyrobbins4• 17 years ago

I think this really perverts the concept of private property, though. In order to thwart domain squatters, you'd eliminate property rights and create a fluid pool of domain names that could be forcibly purchased by anyone else at any time. Domains would become like oiled pool balls so slick and slippery that no one would be able to keep ahold of them long enough to do anything useful with them. That is, without massively overpaying taxes on them to insure they couldn't be taken at any time.

I think one of the most important things about private property is not necessarily that you can demand its fair value when you sell it, but rather that you alone can decide whether it is for sale in the first place.

From my way of thinking, domain squatting certainly isn't a dignified way to make a living or something to be proud of, and it's certainly a pain in the ass to everyone else, but I think it certainly is within the rights of those who choose to do it. Who cares if someone has a better use for a domain name? If you bought it, it's yours whether anyone else like it or not.

You might argue that squatting is not within the rights of those who do it — according to ICANN regulations — but then I would say that there's already process in place to resolve those sort of disagreements. Whether there are issues with that process is another question. That process may be imperfect, but I think what you are proposing introduces many more problems than it solves.

jorgeortiz854• 17 years ago

Nonsense. Private property already has all kinds of restrictions. Try this: First, buy prime commercial real estate in a bustling pedestrian downtown area. Second, make sure to leave it abandoned, ugly, in a state of general decay, and plastered with ads just to make sure you make a little money off it it. (Assume no property taxes.) Third, watch the city council ordinance you into fixing up the place or leaving it altogether (under threat of fines).

The whole point of community rules on private property is that an ugly or rundown property will drive down the value of the properties around it. The same happens with domain names. The reason we have startups with ridiculous names like Meebo, Loopt, Reddit and Xobni are because all the reasonable names are taken by squatters who just plaster the domain with ads and make a tidy profit while they wait for a sucker to hand them over thousands of dollars.

I agree that people legitimately doing business on the web shouldn't face a constant, ominous threat of seizure. At the same time though, the web could use some communal standards to make the community better for everyone.

DanielStraight• 17 years ago

That's an awesome idea. I don't agree with it, but that doesn't change anything. The world needs more interesting ideas, and you have one. Kudos.

pkulak• 17 years ago

"an open show of hands in a room -- one that everyone in the room can count for himself -- is self-enforcing"

This is his second example (where you can complain to someone else if it's unfair) which he just got done saying _wasn't_ self-enforcing. Sure I can count for myself, but if the official number is not my own, I need a third party.

sketerpot• 17 years ago

Plus you can vote for more than one candidate. This is a good thing, I think -- approval voting is a very well-behaved voting system -- but perhaps not what people were trying to do.

http://en.wikipedia.org/wiki/Approval_voting

Locke• 17 years ago

Cut-and-choose is known as the "pie rule" in the abstract gaming world.

For games with a clear first move advantage the pie rule is sometimes applied to balance the game. The first player moves, and the second player then has a choice of continuing the game or switching sides. It is therefore in the best interests of the first player to choose a fair move.

Naturally, this only works if the first move possibilities include moves that range from good to bad.

Still, it's a nice example of a meta rule that can be applied to most games.

ionfish• 17 years ago

It's often cited in political philosophy as an example of a fair procedure.

Self-Enforcing Protocols

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