Licensing and Insurance for Distributed Services

"Real world" consumers rely in endorsements, licensing, liability insurance, and surety bonding to compensate them for lack of confidence in unknown merchants.

A "license" is a permit to do business of a certain kind, generally issued by a government entity. It is generally accepted that the business must have met certain criteria to obtain the license, and perhaps must maintain the license over time. Though fraud abounds, customers remain reassured by licenses.

An "endorsement" is merely a positive recommendation by a non-governmental entity - the Better Business Bureau, Good Housekeeping magazine, etc. - that has no teeth, but is generally considered reliable by the market.

Liability insurance (and surety bonds) have a practical aspect, in that it gives the consumer reassurance that any damages he suffers will be indemnified by a third party (insurer) in the case that a company's actions harm them. Just having such insurance is reassuring to the customer, in that an insurer was willing to underwrite the company's practices at all.

EN: The article provides a lot of information about how a "digital certificate" could be implemented and administered. It's really more of a technical article than an economic one, so I'm not taking notes on the rest.

Worth mentioning: the only such thing that ever got much traction is the security certificate used by e-commerce servers to assure customers their connection is "secure."

There are a number of other various endorsements, displayed as graphics on a merchant's site, that are intended to suggest trustworthiness, but most customers don't pay attention to them, and they are easily forged (just a graphic).