Stored Hashcash

2014-03-14

One of the greatest inventions in the history of computer security is Hashcash. Internet blights like spam and denial-of-service attacks are what economists call "tragedy of the commons" problems. They exploit the fact that it's free to send email and make web requests. At zero cost, you can have a profitable business even at extremely low success rates.

One way to fix these problems is to impose tariffs that hurt bad actors without hurting good actors. For example, you could impose "postage fees" on every email and web request. Unfortunately, in practice, this is impossible, because you'd have to set up billing relationships between every computer that wants to communicate.

The brilliant idea behind Hashcash is to replace a monetary postage fee with a computational postage fee. In order to send an email, the sender first has to solve a math problem. Legitimate activities suffer an indiscernible delay, but illegitimate activities that require massive volume are hobbled.

Hashcash is a great idea, but cumbersome in practice. For example, the cost imposed on senders varies widely depending on the performance of their email servers. It also hinders legitimate bulk emails like clubs and retailers sending updates to their mailing lists.

The offline analogy to Hashcash is a postal system where senders are required to perform some work every time they want to send something. If you're a lawyer, you need to practice some law before you send mail. If you're a doctor, you need to cure something before you send mail. Etc. This of course would be a preposterous postal system.

Adam Smith called money "stored labor". You do your work and then store your labor as money, which you can later exchange for labor stored by other people. Storing labor in the form of money turns out to be a very flexible system for trading labor, and far superior to the barter system of performing work whenever your counterparty performs work.

So Adam Smith's version of Hashcash is a system where you get credits for doing computation. You store your computational credits and spend them at your leisure. If you want to send an email, you can spend a little stored Hashcash. If I send you an email and you reply, we're even. If you send out a billion spam emails, it costs you a lot and undermines your spammy business model.

There are other important problems that stored Hashcash could solve. Denial-of-service attacks are spam attacks except they happen on HTTP instead of SMTP and the payoff is ransom instead of spam offers. Computer scientists have long believed that pricing schemes could dramatically reduce network congestion. Like every large-scale distributed system, the Internet benefits when scarce resources are efficiently allocated.

It seems plausible that if a system like stored Hashcash were developed, some people would prefer to purchase stored Hashcash directly instead of generating it themselves. A market for stored Hashcash would emerge, with the value being some function of the supply and demand of scarce Internet resources.

So here's my question: suppose someone invented a way to store Hashcash. It could dramatically reduce spam and denial-of-service attacks, and more efficiently allocate network bandwidth and other Internet resources. How valuable would stored Hashcash be?

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