Commerce and Society in Cyberspace

An Electric Communities White Paper

Widespread computer networking is revolutionizing both business and personal life throughout the world, but realizing the full benefits will require a system that encompasses the full richness of human interaction. New protocols enable a secure network with global scale.

Copyright 1995 Electric Communities. All Rights Reserved World Wide.


The recent proliferation of online services and explosive growth in computer network connectivity, most notably manifested by the global Internet, has raised a number of important issues, including concerns about privacy, scale, and the suitability of the Net as a medium for commerce.

Online services and wide area computer networks are becoming everyday features of business and professional life. As the population of the network has boomed, it has attracted many businesses not traditionally associated with high-tech, such as publishers, retailers, and financial services organizations. These newcomers are drawn by two factors. First, widespread connectivity is itself a valuable asset. The bigger the Net becomes, the greater the odds that you can reach people you want to reach through it. The proliferation of fax machines in the late 1980s was caused by a similar motivation to become connected. Second, the growing network population represents a lucrative potential market for products and services. Access to customers is an attraction, but most businesses fail to grasp the essential nature of an electronic marketplace.

The Net is home to many virtual communities. These communities are based on commercial, professional, and social ties rather than geographic proximity. While professional societies have been around for as long as there have been professions, the Net lets these groups become more tightly knit, as it facilitates easy and rapid many-to-many communication. It is not uncommon for someone to be a member of many different Net groups. Since no two people will have an identical set of interests, these virtual communities interlock and interpenetrate in complex ways. The rapid growth of the Net has been accompanied by a corresponding growth in the number and diversity of Net communities. This expansion is due in part to the novelty of the Net, but it also reflects the real desire of people to interact and share their experiences, knowledge, and company.

The social and commercial aspects of the Net are intimately related and inseparable. Look at how society and commerce interact in the real world:

  • Entertainment and socializing often involve the exchange of goods or services.
  • Business is often a social experience.

System developers in the social arena are oblivious and often hostile to commerce in social Net environments. And system developers in the business arena ignore the social dimensions of Net commerce. Existing online systems, as well as those expected to come online in the next few years, reflect these biases, and therefore fail to support the range of human interactions necessary to fully realize the electronic marketplace.

The Net is the network of all networks, the ultimate form of the Internet. It is the digital network that will reach everyone on Earth.

Before Cyberspace

Current systems share the following problems:

  • They do not provide a robust environment for business.
  • They do not provide a compelling environment for socializing and entertainment.
  • They are unable to react to the growth and diversity of the Net population.

The lack of commercial and social infrastructure in the Internet inhibits its functionality to an extraordinary degree.

An environment for business

Cyberspace is a telecommunications framework with a sense of place as its most critical component.
Electronic commerce via the Net is often conceived in terms of providing a way for a customer to pay a vendor through the Net. This approach usually entails encrypting a credit card number to protect it from computer criminals as it travels across the Net. A robust payment system is essential, but that's just the tip of the iceberg, and one of the least challenging technical issues to address. Banks have been doing business electronically among themselves for years and so a consumer payment solution could be adapted from the banking system. But commerce requires more than just protecting a credit card number.

In the real world, commerce takes place within social and legal institutions for which few analogs exist in the digital world. Real world commerce depends on constraints imposed by the physical world-such constraints do not exist in cyberspace.

The real world has real places. So when a customer buys a pair of pants at Macy's which turn out to be defective, he can return them. This is because Macy's has a return policy, and also because Macy's has a persistent presence and a persistent identity. Macy's will be in the same place next week as it was today. The customer knows that he can go back, and Macy's knows he knows. When he goes to the store he will find clerks to whom he can talk, and there's a manager to enforce Macy's policies if there is a dispute. Macy's also exists within a legal and governmental framework. Macy's can also have court judgements enforced against it by the police power of the State. Macy's also has relationships with suppliers, banks, other customers, consumer organizations, and labor unions, relationships that also serve to validate its credibility and anchor its presence in reality.

The Net is different. Business on the Net today takes place between two electronic addresses. An electronic address is designed to route messages for delivery to computers. An address is fed to a machine and the message disappears into the Net, beyond anyone's ability to control or even know where it actually goes. Later a message may come back from somewhere out there, coming, again, from places unknown. This is the way the Net works. To have the same confidence in the Net that we have with Macy's will require new mechanisms in the Net that provide persistent place, reputation verification, and dispute resolution.

Privacy and confidence

Much of the privacy that people take for granted in the real world is protected mainly by the logistical inconvenience of bringing someoneĀ¹s records, from different companies and organizations, together in one place so that they may be examined for patterns. Any single piece of information about someone may be innocuous, but when multiple sets of records from several sources are combined they may reveal a picture that is much more invasive. Intelligence agencies have known this for years, but as long as the practice was expensive and time consuming, abuse was limited. But now that these analysis capabilities are becoming inexpensive and widely available, any interaction can reveal a great deal of personal information.

Encryption is the process of scrambling a message in order to hide its contents.
The problem is worse on the Net because all information on the Net is in digital form. People using the Net can't control how personal information about them is used. Tendering credentials between parties is a key feature of commerce, but the Net lacks a mechanism for verifying reputation without revealing more than is necessary.

Commerce requires a secure, reliable financial model with the means to authenticate the origin of the information exchanged. There needs to be a method for accumulating reputation information so that the contacts and relationships on which all business depends can be established and maintained. There needs to be a contractual and legal framework for doing business, and there must be a framework for the resolution of disputes. All of this is completely lacking in the present batch of online commerce systems.

The Net as a social environment

Efforts to treat the Net as a social space have been more successful than efforts to establish it as a commercial space. The Internet's booming population confirms this. But the Internet was created by nerds for nerds. It is relatively well adapted to the needs of its creators, but these people are not representative of the rest of society. Developments on the Net have raced ahead without taking the time to get it right. The Net's frivolous complexity, technical obscurity, and general unreliability must be eliminated if there is to be a worldwide online society.

Digital information can easily be copied, stored, sorted, processed, and manipulated.
A sense of community is profoundly enhanced if the members of a group are able to assemble in a way that gives them a sense of place. Online technologies which allow people to interact in a shared, persistent place foster the strongest social bonds. Online chat systems with everyone chatting at the same time, in the same space, are a poor model for social interaction. Telephone conference calls are even more ephemeral; it would not occur to anyone to label them "a community." But Usenet newsgroups develop a sense of community, even though they are basically just topic headings. This sense of community arises because newsgroups have persistence, and because the group of people who participate in a newsgroup changes much more slowly than the content of the discussion. Similar observations apply to forums on online services, such as CompuServe or America Online, or to the many community bulletin board services. Usenet is a large set of discussion groups which are composed of the collected contributions of its readers. It includes a huge variety of topics.
MUDs, built around a spatial metaphor, are even more community-like, inspiring deep emotional attachments among participants. Habitats go beyond MUDs by presenting a graphical view of the places they represent, and inspire even stronger feelings of belonging.

In these virtual worlds, anything which enhances people's sense that they are in some place with other people also tends to promote social bonding and shared interests. Real-time interaction helps promote a visceral sense of reality. Existing systems tend to provide either real-time interaction (online chat, telephones) or persistence (newsgroups, forums, bulletin boards) but not both. Habitats and MUDs are notable exceptions to this, and draw much of their power from the synergy between real-time interaction and persistence.

An interface which provides strong visualization of what is happening also enhances the sense of "being there". Note that this does not necessarily mean real-time 3D graphics, though these may well prove useful as graphics technology matures. More important is the degree of emotional content that can be communicated through the system from one person to another.

Even the best existing social environments, however, still fall far short of the ideal. Club Caribe and the other habitats do a fairly good job of visual presentation, but need more sophisticated display technology. What's more, Club Caribe did not allow its inhabitants to extend their world at all. They could manipulate the existing objects, but adding new places and new kinds of objects was a complex technical undertaking which could only be done by the system operators. MUDs, on the other hand, while they provide essentially no visualization capability at all (they are text based), do put the power of extensibility into the hands of their inhabitants. However, exercising this power requires a high degree of technical sophistication. The vast bulk of world building in the MUD community is limited to those who are able to program. What's more, the operational semantics of the MUD environment are deeply flawed, so much so that a MUD programmer has essentially godlike powers over the system he or she is modifying. This means that anything that requires a measure of privacy or security is basically impossible in the MUD environment.

Scaling problems

Network implementors are continually forced to deal with the problems arising from the rapid growth rate of the Internet. Much of the effort is expended coping with the Crisis Of The Week, rather than on the architectural underpinnings from which the problems stem. Additionally, the network implementors consistently underestimate the speed and extent of future growth. This failure is due to institutional factors, lack of vision and imagination, and the wishful thinking, optimism and the resultant self-deception to which engineers are prone.

MUD: Multi User Dungeon

MUDs are text-based multi-person online gaming or social environments.

Habitats are online worlds that use graphical representations of the persons and places that populate them. The first of these, called Club Caribe (also known as Lucasfilm's Habitat), was developed for the Commodore 64 almost a decade ago.

The solution to the problems of growth is a software architecture that scales well. In principle, this is simply a matter of systematically requiring that designs not contain intrinsic bottlenecks. A bottleneck-free design is every engineer's ideal. In practice, however, implementation is extremely difficult. It is easier to centralize functions because this makes analysis of the system more approachable. Engineers typically estimate some upper limit past which the system is not expected to grow, and ignore potential bottlenecks which arise only beyond this limit. This practice is effective as long as the growth estimates are accurate and the margins for error in the design are conservative. But this sort of planning process has difficulty on the Net. The expanding user population constantly comes up with new and unexpected ways to push the outside of the envelope. As the number of unanticipated applications grows, the overall utility of the Internet grows, therefore attracting more users. Since the whole process is pumped by innovation, it is impossible to forecast the direction of growth. A more effective design principle is to assume unbounded growth. But incorporating the expectation of unbounded growth is a very difficult intellectual task. Architects of the current Internet infrastructure merely settle for half measures and tolerate the enormous expense and inconvenience inherent in a series of escalating crises, rather than confronting the real problem. Bottlenecks are resource or performance constraints that limit the growth of some aspect of the network.
For example, the crisis of the moment on the Internet is that InterNIC, which coordinates the allocation of IP addresses and domain names, is drowning under a torrent of applications for IP address space. This single small organization has become a bottleneck in the growth of the worldwide Internet because a critical administrative function was centralized back in the days when the entire job could be handled by one secretary. The days when the task was small and easily managed are long gone, but the function itself remains stuck in a centralized design.

There are organizations which have taken scaling problems seriously. Most notable are the telephone companies. They deal in infrastructure whose size scales with the population as a whole. Although they tend to be large, highly centralized organizations, the technical systems which they maintain are decentralized and redundant.

A New Architecture for Cyberspace

What is needed is a new architecture for the Net that enables social and commercial interaction and can serve the needs of the entire population of the planet. The new architecture must be:


Decentralization is the best solution to problems of global scale. The Internet is a good example of technical decentralization. In order to adequately serve everyone on the planet, the Net must also be decentralized administratively, creatively, and entrepreneurially.


The Net must be an open system free of proprietary restrictions. This allows anyone able to work within the open and published software specification to provide new services. This is the surest way to encourage creative innovation in the Net.


The service should work over virtually all network configurations and all hardware platforms. This would include everything from supercomputers and massive servers to PDAs, Cable TV set top boxes, and game machines.


Security mechanisms are required to provide protection against fraud and abuse, and add robustness to the decentralized architecture. Security is not a feature, it is a design requirement.

A new open standard

Placing the fundamental Net protocols into the public domain is the best way to create an open standard. And wide adoption of an open standard requires that the standards review be public. The adoption of new standards is a bottom-up process, which means that the architecture must be compatible with and should build on top of the existing standards.

The components of the new architecture must be software which can be adopted incrementally, so that the whole world need not convert to these standards before they do any good.

A new commercial infrastructure

To support a commercial environment requires that we incorporate the elements of the real commercial world-not only money and financial services, but the entire commercial infrastructure. This requires an electronic credentials mechanism and a way of handling reputation information, as well as mechanisms for contract negotiation, contract enforcement, and dispute adjudication. Directory services are also required so that people and companies can find one another in the first place.

A new social environment

A social environment recognizes that the inhabitants of cyberspace are human beings and provides them with the means to interact with each other, rather than just with machines or with data. The key to this is to provide a sense of place: a persistent environment which can be shaped by its inhabitants. We also need to recognize that people speak different languages and provide support for this, both for the encoding of different languages and for services which translate between them.

We should maintain continuity with the real-world legal and ethical traditions which allow civil society to exist, acknowledging the principles which have driven the evolution of civilization. In particular, many of the ideals embodied in various bills of rights and other statements of principle can be embodied in the very technological fabric of the Net, lending them a solidity comparable to physical law.

Law and order in cyberspace

Both the commercial and the social features of the Net require that it be secure. In part, this means that communications should be proof against both tampering and eavesdropping. This requires end-to-end encryption of communications links and cryptographic authentication of messages and data. To be truly secure, however, does not just mean layering a veneer of cryptography on top of an otherwise ordinary communications architecture. Security is a characteristic that must be designed into the foundation level semantics of the system.

Meeting these goals in a way that preserves the sort of flexibility needed to allow future growth is a significant challenge.

IP: Internet Protocol

A new object model

These goals can be met by building on top of an open, dynamically extensible system of communicating objects. These objects must be persistent, distributed, and transportable.

Persistence allows places in the Net to have an objective existence independent of its inhabitants and allows long-term relationships to flourish.

Distribution allows multiple participants to influence the behavior of an object shared across the Net.

Transportability allows information to be communicated in the form of active objects rather than mere passive data. This is important when objects embody relationships between, for example, parties to a commercial transaction. For communication to be possible, there must be a common set of primitive data formats which are universally understood. To do this securely requires that these objects be represented in a form that allows their important security properties to be proven automatically, and which allows their other important properties to be certified by independent validation services. If objects embodying executable software are to be moved from one place to another in the Net, there must be assurance that there is no threat from viruses or hostile programs.

No dependence on hardware

The implementation must be independent of the technical details of the underlying transport media and relatively independent of the applications to which it is being applied. There should not be requirements for particular types of transmission technology, bandwidth, latency, or other characteristics of the communications medium. All that should be required is that, within some tolerable bounds of reliability, the underlying medium gets the bits from one place to another and back again. Similarly, we should not establish any requirements regarding user interface. No one interface is likely to be ideal for all applications, nor is any interface today able to anticipate future developments in interface or application design.

How To Do It

Much of what is required to achieve this vision of the Net exists today, or is quickly coming into existence. What is lacking is software, the computer programs that will create the secure and open network marketplace. The necessary software is called a Cyberspace Operating System. It realizes a suite of Cyberspace Protocols, which provide conventions for communicating through the Net.

A Cyberspace Operating System implements an object model based on unums. Unums are objects which are shared by many computers across the network. It is not necessary for any one computer to know or understand the complete state or behavior of a unum. This makes it possible to think of the unum as existing in the Net. The unum is the building block used to construct shared persistent places.

Unums are programmed, so there can be a large variety of them, specialized to satisfy specific purposes. The Cyberspace Protocols predefine special sets of unums that are essential to the operation of the marketplace. These include

Basic Set - defines a set of standard, essential, general-use unum classes for structuring a virtual world and navigating within it.

The Basic Set could be used to create a representation of a bank.

Certificate Set - defines certificate unums, which contain a cryptographically authenticated binding between some information and some certifying identity.

A Certificate, issued by a chartering institution, would identify the bank.

Directory Set - specifies unums for directory services, so that services in the Net that wish to make themselves known can do so and so that customers searching for services can find them.

A bank could be located in the Net by a Directory service.

Financial Set - specifies unums for financial activity, enabling the creation of a variety of digital financial instruments. In particular, it will directly provide for digital money in a number of forms.

The bank's customers could write electronic checks.

Credentials Set - specifies unums for dealing with digital credentials and other forms of reputation information.

Customers can check the bank's credentials.

Unum Validation Set - specifies unums, protocols and procedures for validation services that independently certify the trustworthiness of unums.

Critical software can be delivered through the Net without exposing the recipient to the threat of digital viruses.

Contract Set - specifies unums for the negotiation and management of contractual relationships.

An important class of contracts can be negotiated and enforced electronically and inexpensively.

Juridical Set - specifies unums for the adjudication of disputes between parties in the Net, especially with regard to commitments and actions associated with contracts.

Disputes can be resolved inexpensively, almost automatically.

Linguistic Set - specifies unums for the provision and use of language translation services.

The Net is global. It should be easy to locate and contract for translation services.

Unums are made from communicating objects, much as molecules are made from atoms. Communicating objects provide secure semantics which allow transmitting chucks of program matter all over the Net without exposing people to the threat of viruses and other dangers.

The Cyberspace Protocols, including the specifications for the Unum and Communicating Object Models, will be placed into the public domain in order to encourage rapid independent implementation and adoption of the Protocols.

Commerce in the Net

There is tremendous interest in public digital networks. There is justifiable confidence that it will quickly mature into a significant medium for commerce. In order for the Net to achieve its potential, the commercial foundation of the Net must provide more than just a payment system. It so requires support of necessary services such as software validation, contracts, and dispute resolution, and most importantly, the Net needs support for social interaction and community formation. Most commerce in the real world depends on relationships between people. In this respect, the Net is no different.

The Cyberspace Protocols augment the communications infrastructure, adding the capabilities which transform the Net from a network of networks into a network of marketplaces and communities. The Protocols are designed to serve the needs of large businesses, small businesses, and individuals.

Objects are a computer programming convention which combines a closely related set of data with the programmatic behaviors which act on those data.

Copyright 1995 Electric Communities. All Rights Reserved Worldwide.

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