I will describe our recent results on protocols that enable potentially profitable but risky interactions between two parties (the principal and the agent), in the absence of a direct trust relationship or common currency between the two parties. In such situations, it is possible to safely enable interactions mediated by a chain of credit or "trust" links. We introduce a model built on pairwise trust accounts that provides insight into a number of applications, including open currency systems, network trust aggregation systems, and manipulation-resistant recommender systems.

We show that with indirect trust exchange protocols, some friction is unavoidable: Any protocol that satisfies a natural strategic safety property that we call sum-sybilproofness can sometimes lead to a reduction in expected overall trust balances even on interactions that are profitable in expectation. Thus, for long-term growth of trust accounts, which are assets enabling risky but valuable interactions, it may be necessary to limit the use of indirect trust. We present transitive trust protocols that achieves the optimal rate of expected growth in trust accounts, among all protocols satisfying the sum-sybilproofness condition.

This talk covers joint work with Paul Resnick. The paper on which it is based is at: http://www.umich.edu/~rsami/papers/ec09-post.pdf