Tuesday, August 19, 2014

The Fundamental Paradox of Modern Payment Systems

Payment systems move money, and everyone wants a piece of the action. Motives differ; governments want to know geographic and demographic details; sellers want to know purchasing habits; buyers want anonymity and security; providers of payment systems infrastructure want to satisfy the demands of their users.

The paradox is easy to state. The design of a payment system structure without forces influencing specific contours of a payment pipes is impossible. The paradox (in a nutshell) is operation of payment systems demand security, and prevents description of the pipes’ contours; so customers do not fully understand the system they use and cannot demand (and pay for) the features they want.

Because the paradox exists we witness deformities in the systems that allow attacks to succeed and prevent architects from designing effective countermeasures. We witness the HAL 9000 logic and seem powerless to unplug a Schizophrenic machine. One such deformity is Bitcoins a fatally flawed payment system resulting from the demand for semi-anonymous payment structure regardless of settlement speed. Another such deformity is the EMV requirement for a chip to the detriment of preventing the higher percentage of attacks on international small value payments.

Observations are easy; overcoming defects funded by big money and unimaginative suits is not so easy.

Next Blog: Fluid dynamics and payment flow

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