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A recent product review of this idea moving into mass production.
http://dexus.amaze.nl/~rfidweblog/docs/Newsletters/July2006v2.pdf

You get more than "kill and revive". You are also able to communicate with your RFID while it is in "Privacy Mode" without leaking information.

This is compliant with the proposed RFID regulation.

You can find a comprehensive list of scientific papers dealing with the issue of RFID Security and Privacy here.
http://lasecwww.epfl.ch/~gavoine/rfid/

There is a very simple test. Who control the key? You (the citizen) or someone else?

The challenge is in the balance, i.e. to ensure that when you loan a book, you also get control of the RFID in the book. But the book still belongs to the Library, so you need multiple keys.

The problem is similar to the point-of-sales issue except more complex because you need to be able to return the book to the state it had.

David Molnar et al have already done some work on this. See: Killing, Recoding, and Beyond
David Molnar, Ross Stapleton-Gray, and David Wagner. Chapter 23 of RFID Applications, Security and Privacy, Addison Wesley Professional, July 6, 2005.
http://www.cs.berkeley.edu/~daw/papers/rfid-book.pdf

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