(The list was broken last night, here are the 6 postings that ended
up on the floor before I fixed it. --||ugh Daniel)
Date: Thu, 13 Jan 1994 00:45:04 -0400 (EDT)
From: Mike Ingle <MIKEINGLE(a)delphi.com>
Subject: Crypto & Taxes
To: cypherpunks(a)toad.com
Message-Id: <01H7M5G3SZHU99DOWQ(a)delphi.com>
X-Vms-To: INTERNET"cypherpunks(a)toad.com"
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ssandfort(a)attmail.com wrote:
>Government tax policies are extremely susceptible to the "tipping
>factor." Initially, non-compliance is addressed by simply hiking
>up collections across the boards. When non-compliance reaches
>some critical factor, however, such techniques become counter-
>productive. Previously compliant taxpayers begin to chaff at
>higher taxes and more aggressive collection. More and more
>become non-compliant as taxes go higher and higher. Eventually,
>the runaway chain reaction either causes the government to cut
>back or the system undergoes a core melt-down. Non-crypto
>versions of this scenario have occurred repeatedly in countries
>around the world.
This is true of government in general. As it gets bigger, government
becomes more oppressive and hostile to the people. It also becomes
more hypocritical, ignoring its own laws and violating its own ideals.
The people then become less obedient, as they realize that the
government is taking advantage of them, and does not care about their
interests. The government becomes more and more oppressive in an
effort to force the people to obey. It soon turns into a police state,
and if the people can become organized enough, they will all refuse to
obey, and there will be a revolution. Communism is the best example.
Most people in those countries did not pick up guns and fight. They
just stopped obeying the government.
Computers, networks, and encryption are powerful organizing tools.
The Chinese have been known to put guards in front of fax machines
in government offices, because dissidents outside the country fax in
political information and news.
--- Mike
From: frode(a)toaster.SFSU.EDU (Frode Odegard)
Message-Id: <9401130805.AA21044(a)toaster.SFSU.EDU>
To: cypherpunks(a)toad.com
Subject: Re: Crypto & Taxes
Mike Ingle writes about the government growing bigger and more
oppressive.
Has anyone given any thought to why this happens? Any ideas?
Is it related to the ethics of the people in a country? And
if yes, how? And where does ethics come from anyway?
From: Hal <hfinney(a)shell.portal.com>
Message-Id: <199401131717.JAA18739(a)jobe.shell.portal.com>
To: cypherpunks(a)toad.com
Subject: Court decision re 'willfulness'
A few months ago I posted some information on the statutes criminalizing
unauthorized export of cryptographic software. (As far as I know, an
investigation into the export of PGP is still being carried on by a
federal grand jury in northern California.) One of the key aspects of
the law, IMO, is that it states that it is illegal to "willfully" violate
the restrictions. Several courts have held that this word means that the
government has to prove that the accused knew that his action was illegal.
Contrary to the general rule, this would be a case where ignorance of the
law actually is an excuse.
Tuesday, the Supreme Court overturned a conviction based on the same
principle: the use of the word "willfully" to mean that there had to be
proven knowledge that the action was illegal. In this case, the accused
had paid a debt using a series of just-under-$10,000 payments, each of which
is small enough to avoid triggering reporting requirements. "Structuring"
payments in this way to avoid reporting is illegal. In this case, there
was no question that the accused was trying to violate the requirements, and
he was convicted on that basis. But the Supreme Court overturned the
conviction because the statute requires "willfully" violating the law, and
in this case the government had not proven that the accused knew that his
actions were illegal.
This is promising with regard to any attempts to crack down on naive crypto
users who, say, put PGP up on the local BBS or FTP site. As long as they
don't know that what they are doing is illegal (assuming it is), they are
not violating the law.
Here is a summary of the Supreme Court decision from usenet:
NOTE: Where it is feasible, a syllabus (headnote) will be released, as is
being done in connection with this case, at the time the opinion is issued.
The syllabus constitutes no part of the opinion of the Court but has been
prepared by the Reporter of Decisions for the convenience of the reader.
See United States v. Detroit Lumber Co., 200 U. S. 321, 337.
SUPREME COURT OF THE UNITED STATES
Syllabus
RATZLAF v. UNITED STATES
certiorari to the united states court of appeals for
the ninth circuit
No. 92-1196. Argued November 1, 1993-Decided January 11, 1994
As here relevant, federal law requires a domestic bank involved in
a cash transaction exceeding $10,000 to file a report with the
Secretary of the Treasury, 31 U. S. C. 5313(a), 31 CFR
103.22(a); makes it illegal to ``structure'' a transaction-i.e., to
break up a single transaction above the reporting threshold into
two or more separate transactions-``for the purpose of evading the
reporting requiremen[t],'' 31 U. S. C. 5324(3); and sets out crimi-
nal penalties for ``[a] person willfully violating'' the antistructuring
provision, 5322(a). After the judge at petitioner Waldemar
Ratzlaf's trial on charges of violating 5322(a) and 5324(3) in-
structed the jury that the Government had to prove both that the
defendant knew of the 5313(a) reporting obligation and that he
attempted to evade that obligation, but did not have to prove that
he knew the structuring in which he engaged was unlawful,
Ratzlaf was convicted, fined, and sentenced to prison. In affirm-
ing, the Court of Appeals upheld the trial court's construction of
the legislation.
Held: To give effect to 5322(a)'s ``willfulness'' requirement, the
Government must prove that the defendant acted with knowledge
that the structuring he or she undertook was unlawful, not simply
that the defendant's purpose was to circumvent a bank's reporting
obligation. Section 5324 itself forbids structuring with a ``purpose
of evading the [5313(a)] reporting requirements,'' and the lower
courts erred in treating the ``willfulness'' requirement essentially
as words of no consequence. Viewing 5322(a) and 5324(3) in
light of the complex of provisions in which they are embedded, it
is significant that the omnibus ``willfulness'' requirement, when
applied to other provisions in the same statutory subchapter,
consistently has been read by the Courts of Appeals to require
both knowledge of the reporting requirement and a specific intent
to commit the crime or to disobey the law. The ``willfulness''
requirement must be construed the same way each time it is called
into play. Because currency structuring is not inevitably nefari-
ous, this Court is unpersuaded by the United States' argument
that structuring is so obviously ``evil'' or inherently ``bad'' that the
``willfulness'' requirement is satisfied irrespective of the defendant's
knowledge of the illegality of structuring. The interpretation
adopted in this case does not dishonor the venerable principle that
ignorance of the law generally is no defense to a criminal charge,
for Congress may decree otherwise in particular contexts, and has
done so in the present instance. Pp. 5-15.
976 F. 2d 1280, reversed and remanded.
Ginsburg, J., delivered the opinion of the Court, in which
Stevens, Scalia, Kennedy, and Souter, JJ., joined. Blackmun, J.,
filed a dissenting opinion, in which Rehnquist, C. J., and O'Connor
and Thomas, JJ., joined.
Date: Thu, 13 Jan 94 09:41:08 -0800
From: hughes(a)ah.com (Eric Hughes)
Message-Id: <9401131741.AA20358(a)ah.com>
To: cypherpunks(a)toad.com
Subject: crypto point of sale
Sandy hinted that I should explain my 'crypto point-of-sale' idea. So
I will.
The idea is a mostly a social structure, adjoining existing (or
soon-to-be) pieces of technology and setting them in a particular
environment. The technological pieces are
1. the Newton -- one for the buyer, one for the seller
2. one radio data link for the seller's machine, either
a. a cell phone, cellular modem, and a corresponding host
b. a cellular data service
3. the Internet
4. packet forwarding services
5. an online bank
6. public keys
7. authenticated Diffie-Hellman key exchange
Or, to be short, "two Newtons, one radio".
Preparations in the form of assertions about the time of transaction:
1. The seller has an account at the online bank. This entails that
the bank and the customers have each other's public keys.
2. The buyer has an account at the online bank with funds sufficient
for purchase.
3. The seller has an arrangement with a packet forwarding service.
This may not need to be instantiated before transaction (i.e.
software vending machine), although it will likely be cheaper to do
so.
4. Software as described below is installed on all the machines
mentioned.
Steps in the transaction:
1. The Newton has an infrared interface with a range of about three
feet. The buyer and the seller start an infrared connection between
their two Newtons. A Diffie-Hellman key exchange protocol over that
link is the first step in securing the link against eavesdropping.
Regular D-H is good enough in this case because there is no way to
put a machine in the middle of the infrared link. I suppose someone
with a very powerful IR beacon could spoof one of the machines, but
likely not both. Regular D-H also means that there is no need for
the buyer and the seller to have each other's public keys at
transaction time.
2. The seller establishes a data connection with his packet forwarder
on the Internet. This allows the seller to (at minimum) instantiate
multiple outgoing TCP connections from the forwarding machine.
3. If necessary, the seller allows the buyer to go online by allowing
the seller's Newton to forward packets for the buyer's Newton. The
buyer, if not in possession of enough digital notes, can go online
with the bank and purchase notes now. The flow of data is buyer's
Newton -> seller's Newton -> forwarding machine -> bank.
The buyer goes online by instantiating outgoing TCP connections from
the forwarding service hired by the seller. The buyer connects to
the bank. This secure connection uses an authenticated D-H key
exchange, which prevents the interposition attack. Public keys are
necessary for this protocol, but the bank and its customers have
already exchanged them.
4. The buyer, now with digital notes in hand, so to speak, offers them
to the seller for payment. The seller, as part of this protocol,
goes online with the bank to check the validity of the notes. The
seller also uses the authenticated D-H key exchange. The bank OK's
the notes (presumably) and credit is made to the seller's account.
Advantages, or, why should I use this?
1. The radio means that business need not be conducted indoors, where
the telephones are usually wired. Of course, if you have a wired
telephone, you can also use the basic schema of the system, allowing
the same software on the buyer's machine to be used for a wide variety
of transactions.
2. Only one party to the transaction needs the relatively expensive
radio link but that both parties, if necessary, can use it. Since the
seller is in business, the cost of the radio link is just a cost of
business.
3. The buyer, on the other hand, has not bought a single-purpose machine.
Many existing projects have created single purpose computers which
purpose is to do money transactions. A single purpose machine is too
expensive to use for just transactions, especially when its so easy to
use the manufacturing for general purposes.
4. In situations where paper cash in not convenient, this protocol
allows for the instantaneity and anonymity of cash without its
physicality. Signals cost a lot less to move than paper, in several
different ways.
Comments are welcome.
Eric
Date: Thu, 13 Jan 1994 12:48:38 -0600
Message-Id: <199401131848.MAA17541(a)chaos.bsu.edu>
From: Anonymous <remailer-admin(a)chaos.bsu.edu>
To: cypherpunks(a)toad.com
X-Remailed-By: Anonymous <remailer-admin(a)chaos.bsu.edu>
X-Ttl: 0
X-Notice: This message was forwarded by a software-
automated anonymous remailing service.
Everyone who is unaware of it should know that an12070(a)anon.penet.fi,
regardless of what he set his "name" field to for the day, is
"L.Detweiler", whos first name is apparently "Lance" or "Lawrence"
depending on whom you ask. He's a psychotic or a good mimic of one --
I say that not to slander him but as a simple statement of fact. He's
been filling every cryptography mailing list and newsgroup with rants,
and I suppose he has now decided to disrupt this mailing list too.
He has mailed death threats in anonymous mail. He forges mail, spreads
rumors, rants, makes paranoid claims (i.e. he believes lots of people
are the same person all trying to plot against him; he believes there
is a nationwide conspiracy attempting to sully his name, etc.), posts
dozens of messages at a time to lists in order to disrupt them, and
overall behaves far worse than his alleged "CRYPTOANARCHIST
CONSPIRACY" does.
I would ask in the interest of sanity that people not reply to his
messages. Obviously there is little that I can do beside request
people's cooperation, but if we spend time discussing Mr. Detweiler,
there will be no time to discuss internet mercantile protocols.
--
Perry Metzger pmetzger(a)lehman.com
--
"I can't go out and save every undercapitalized entrepreneur in America."
-- Hillary Clinton, when asked about the impact of her health care
"plan" on small business (Wall Street Journal, 9/24/93, pg A10, col. 3)
Message-Id: <4hBNkKi00WAyMWWkdS(a)andrew.cmu.edu>
Date: Thu, 13 Jan 1994 14:08:06 -0500 (EST)
From: Matthew J Ghio <mg5n+(a)andrew.cmu.edu>
To: cypherpunks(a)toad.com
Subject: Re: Non-techie Crypto book?
Awhile back I wrote a little FAQ for cypherpunks that I hadn't posted.
After the current discussions, I figured some of you might be
interested. It is designed to be a non-technical introduction to
cryptography as well as a FAQ for cypherpunks. It's not really
completely finished, so comments or suggestions in email are welcomed.
------------------------------
Who are the cypherpunks?
As the name might imply, the cypherpunks are cyberpunks interested in
ciphers, or encryption technology. Cypherpunks seek to develop new
encryption techiques, and to find new methods of utilizing existing
technology to ensure privacy and honesty in the computer age.
Cypherpunks want to make cryptographic technology to be availiable to
everyone. This is reflected in our motto: "Cypherpunks write code."
Why encryption?
In the past, encryption was only needed and used by very few people.
People didn't have any need to be so secretive. If something was
private, it was kept sealed or locked. It wasn't easy to steal
information, because it could be kept physically secure. But the
computer age has changed that. Now, information travels all over the
world at the speed of light. No more is there localized physical
security. A hacker could potentially invade a computer system halfway
around the world and steal proprietary information. Volumes of private
data can be copied in seconds. Worse, the victim might not even know
that the data had been copied. No longer with physical security to
protect privacy, we must use mathematical security: Cryptography.
I don't have anything to hide, why should I use encryption?
Something doesn't have to be a big secret for you to want to keep it
private. You don't send all your mail on postcards. You certainly
wouldn't want someone at the post office to be able to read your monthly
financial statements. An envelope provides a barrier which allows you
to maintain your privacy. If you put your postal mail in a paper
envelope, why not put electronic mail in a cryptographic envelope?
Many people fear cryptography because it conjures up images of
espionage, secrecy, and the CIA and KGB. Cypherpunks want to encourage
public awareness of cryptography and the benefits thereof. People need
to realize that using encryption should be as commonplace and natural as
putting a letter into an envelope before mailing it. It's not that
everything has to be a secret, but that people are just more comfortable
keeping certain things private.
What are the basic types of ciphers?
Traditional ciphers consisted of rearranging and substituting letters,
words and numbers for other letters or symbols, so as to make the
message unintelligible. A secret key was necessary to decode the
message With the use of computers, this process is can be improved,
allowing stronger ciphers, and new types of ciphers, such as public-key
cryptography.
What is a strong cipher?
A good cipher should meet two main criteria. First, after the data is
encrypted, it should not "leak" information which would give clues as to
what the decrypted message was. For example, simply flipping bits (XOR)
or replacing letters in an ascii text file is not a good cipher because,
although the words are scrambled, the spacing and formatting information
is still clearly visible, giving an attacker clues about what was
encoded, which would enable them to break the cipher more easily. A
good cipher should impart a randomness upon the data to defeat such
cryptanalysis. Second, looking at an encrypted and decrypted version of
the same data should not reveal what key or method was used to encrypt
the data. That way, if the security of one peice of data is
compromised, it can't be used to reveal the rest of the data.
Cypherpunks want to make people aware that just because a program
encrypts data, it isn't necessarily a good encryption program. Many
programs which offer data encryption can actually be broken easily
because they leave too many clues in the encrypted data. Know the
source of your software, and know what kind of encryption it uses.
Cypherpunks know that a good encryption algorithm can be described
openly without compromising its security. If a software author claims
they can't reveal their encryption method, it's probably because it's
weak and they're afraid someone might break it, so look somewhere else.
What is public-key cryptography?
In a traditional cryptosystem, the people communicating must keep the
key to the cipher secret. If someone gets the key, they can decode the
message. Public key cryptography is a new method of cryptography which
uses pairs of two keys, one for encryption, and one for decryption. To
generate a keypair, someone picks a random number or numbers, and uses a
mathematical formula to generate two numeric cryptographic keys from the
random numbers. One of these keys is the used as the encryption key,
and the other is the decryption key. After the keys have been created,
the numbers used to create them can be discarded. The formula works one
way only- one key can not be used to find the other. Therefore, someone
can generate a pair of keys, and give someone (or everyone) the
encryption key, while keeping the decryption key to himself. That way,
anyone can send him an encrypted message, and only the holder of the
private key can decode it. In this way, someone can communicate
securely with someone they've never met to exchange keys with, and know
that nobody else could be intercepting the message.
What are other uses of cryptographic technologies?
The mathematics of cryptography have many other uses besides secrecy and
privacy. One development is the one-way hash or digest. In a one-way
hash, a data file or message is scrambled and reduced to a small numeric
identification string. Such hash functions are designed such that the
output from the hash can not be used to reconstruct the original
message, and it is virtually impossible to find another message which
matches the same hash value. Therefore, data can be tagged with an
identification string which is unique to that file. If the data file is
altered, the hash will produce a different value. In this way,
sensitive data can be protected from tampering, because any alterations
to the file would affect the hash. (For technical description, see
RFC1186.)
Another possibility is to use public-key cryptography in reverse; that
is, the decode key is made public and the encode key is kept private.
(Each key in a P-K pair can be used for encryption or decryption, with
the other key necessary for the reverse operation.) This doesn't hide
anything, since anyone could decode the message; however, although
anyone can read the message, only the holder of the secret key could
create it. Therefore, anything encrypted in this manner is
authenticated, since there is only one person, the holder of the secret
key, who could have encrypted the message.
By combining a message digest with public-key authentication, it is
possible to create a unforgeable digital signature identifying the
sender of the message. (PGP does this.) This makes it possible to
combat electronic forgery and unauthorized access into remotely accessed
databases. You can keep your secret key secure on your machine, but
anyone in the world could verify that you have it, since only you, the
holder of the secret key, could be signing or encrypting the messages
the messages you send.
What is the cypherpunks political agenda?
Although cypherpunks is not really a political group, cryptography can
be a hotly debated political issue. Frankly, cryptography scares
governments. The thought that an international criminal orginazation
could use advanced encryption to communicate secretly and securely,
scares many people. As a result, many governments want to ban or
restrict use of encryption. But, as the saying goes, when encryption is
outlawed, only outlaws will have encryption. Banning encryption will
not stop criminals from using it. Therefore, cypherpunks want to make
encryption availiable to everyone, so that we can concentrate on the
positive aspects of encryption, to promote privacy and to prevent crime.
Cryptography can prevent much more crime than it can conceal. By using
cryptography, we can create secure databases and prevent digital forgery
and theft.
What do people mean when they talk about "cryptoanarchy"?
Cryptographers scare governments, so governments scare cryptographers.
For this reason, many cypherpunks favor more libertarian governments.
Cypherpunks would rather rely on cryptography for protection, instead of
men with guns from some government agency. It's much better to deter or
prevent a crime than to try to clean up after the fact. And, after all,
people make mistakes and computers don't, and the police are people.
Some believe that one day everyone will or will be able to handle all
their business, finances, and communication needs online, and protect
them with strong cryptography, virtually eliminating criminals and the
need for police to chase them. The belief in this state of affairs is
known as cryptoanarchy - the elimination of the need for cyberspacial
government through cryptography.
What are some of the other goals of the Cypherpunks?
Cypherpunks would like to further their pursuit of privacy by setting up
anonymous remailers (see listing by Karl Lui Barrus), by writing and
distributing cryptographic software (such as PGP), by setting up secure,
encrypted communications channels, and by working to create a secure
digital cash system, based on cryptography, instead of current credit
card systems which use insecure methods, and are easy to defraud.
