See No Evil, Hear No Evil, Surf No Evil: Creating Accountability in Fraudulent Anonymous Online Transactions

-- By EricWest - 16 Jan 2015

Section I Introduction

You pay forty bucks for a Rolex on a street corner; what do you know? First, you certainly did not get a Rolex, but at least no one knows what an idiot you are: you paid cash. Second, there are legal protections to this transaction. Just as many consumers would sometimes prefer to pay cash in reality, many would prefer to maintain anonymity online as well. Although international organizations like the United Nations have openly admitted that a goal of “cyber law” is to reflect real world principles and rule of law, online transactions can potentially be more anonymous than those that occur in reality: they are faceless, nameless, and with the advent of electronic currency and anonymizing operating systems, they can be completely untraceable. This essay seeks to discuss two of many possible solutions to unchecked fraud that can occur in truly anonymous online transactions: a total ban on anonymous web usage, and engineering a reputational market.

Section II Banning Anonymous Transactions

The first solution would be to ban all forms of anonymizing software and hardware. Admittedly, this creates a “line-drawing problem,” as to what is anonymizing, but let us assume a ban would be extreme enough that whomever was using the internet could have their real name and location discerned by enforcement agencies. A ban would have the benefit of deterring fraudulent behavior, as well as criminal transactions. It would also aid in standardization efforts of electronic commercial laws. However, a ban would infringe on fundamental rights, such as a right to privacy and freedom of expression. The right to privacy is not a universally held right, however, and in the U.S. alone the right to privacy is balanced against other factors. As for freedom of expression, admittedly a ban on anonymity would decrease the amount of free thought on the internet, however it would do this by creating accountability. Although one might think that accountability would lead to mere sensitive discourse and fewer threats, it would also lead to many being too afraid to say things that society would deem important to know, out of fear of the consequences. For example, Edward Snowden used Tails to discuss with the press the information he knew. A ban on anonymous transactions also would not be completely effective. Likely, anonymous markets will find a way to exist, and much like the hydra, when you destroy one, two more will take its place. People would still create ways to generate anonymous profiles and false identities. Therefore, instead of having a legal, openly anonymous markets with some protections (like reputation), a ban creates an illegal market with no protection since going to such a market in the first place is a crime. Moreover, you weed out the technologically incompetent defrauders to the benefit of the savvier and more competent defrauders, which presents a greater danger to the user of such a market. As a penultimate point, a ban on anonymous transactions would kill economic opportunity. Those who were embarrassed to make a purchase, or those who wanted to make controversial purchases simply will not make those purchases anymore. This arbitrarily removes the ability of people to purchase goods, which decreases market efficiency for the sake of fraud protection. Finally, this would be imposing a mandatory rule in a world – commercial law – where we do not care for mandatory rules. That is to say, in the absence of evidence, we consider it best to let people do what they want, and anonymous online transactions not only comply with this, but are in the spirit of it. Even if fraud was unanimously agreed to be the greatest threat on the internet to date, it would be a challenge to justify a total ban on anonymous internet use when considering fundamental rights, and the social and economic benefits of anonymous transactions.

Section III A Market-Based ALternative

Although it would abandon “traditional legal protections,” intergovernmental organizations or private parties could establish reputational markets for anonymous transactions that lets consumers price out the risk of fraud. This could be done with freely purchasable reputation cards (akin to bitcoin wallets). The cards need not be tied to any personal information, but instead just relay transactional history (for sellers: quantity of goods sold, date shipped, product qualities, customer reviews; for buyers: issues with payment). The cards can allow a person to collect value on his anonymous online transactional presence via reputational markets, while remaining anonymous by diversifying his identity as it relates to different kinds of purchases and sales. Of course, this is very similar to the existence of online avatars today. The cards, however, would be a standardization of avatars (which deters copycatting while still allowing non-standardized online personas to exit), and therefore trustworthy across a number of fora. The cards would also increase the number of embarrassing and controversial transactions while decreasing illegal transactions. Anonymity still exists, but a reputational card that was linked to selling, for example child pornography, could be “shut down” by law enforcement agencies, forcing those who wanted to buy and sell such nefarious goods to do so only at their own risk, increasing the cost of entry and participation in such a market. Still, reputation cards have the problem of creating entry-costs. That is, because “bad” reputation cards will be abandoned, and only “good” and “new” reputation cards will be in play, “new” reputation cards will be trusted less. To an extent, this can be mitigated with middlemen: reputation cards that are trustworthy and willing to assume the risk of a new card.

Section IV Conclusion

Thus presented are two extremes solutions, one relying on the intelligence of markets, another on strict administrative oversight. As the U.S. government cracks down on black markets, a ban seems uncalled for. Instead, a market that empowers users to reliably assess the risk of fraud in a transaction seems sufficient and maintains the personal freedoms we cherish: property, privacy, and expression.

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