November 2005 - cypherpunks-legacy

[murphy.audie@gmail.com: Re: Hacker strikes through student's router]
by Eugen Leitl 08 Nov '05

08 Nov '05

----- Forwarded message from Audie Murphy <murphy.audie(a)gmail.com> -----

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[dave@farber.net: [IP] National Security Letters]
by Eugen Leitl 08 Nov '05

08 Nov '05

----- Forwarded message from David Farber <dave(a)farber.net> -----

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RSA-640 Factored
by Eric Cordian 08 Nov '05

08 Nov '05

http://mathworld.wolfram.com/news/2005-11-08/rsa-640/ A team at the German Federal Agency for Information Technology Security (BSI) GNFS Reportedly 5 Months on 80 Opterons. Are 1024 bit RSA keys still safe? -- Eric Michael Cordian 0+ O:.T:.O:. Mathematical Munitions Division "Do What Thou Wilt Shall Be The Whole Of The Law"

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RSA-640 Factored
by Eric Cordian 08 Nov '05

08 Nov '05

http://mathworld.wolfram.com/news/2005-11-08/rsa-640/ A team at the German Federal Agency for Information Technology Security (BSI) GNFS Reportedly 5 Months on 80 Opterons. Are 1024 bit RSA keys still safe? -- Eric Michael Cordian 0+ O:.T:.O:. Mathematical Munitions Division "Do What Thou Wilt Shall Be The Whole Of The Law"

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Oops - Official Reveals Budget for U.S. Intelligence
by Bill Stewart 08 Nov '05

08 Nov '05

$44B, up from $26.8 in 1998. It's the usual NYTimes-registration-required article. http://www.nytimes.com/2005/11/08/politics/08budget.html November 8, 2005 Official Reveals Budget for U.S. Intelligence By SCOTT SHANE WASHINGTON, Nov. 7 - In an apparent slip, a top American intelligence official has revealed at a public conference what has long been secret: the amount of money the United States spends on its spy agencies. At an intelligence conference in San Antonio last week, Mary Margaret Graham, a 27-year veteran of the Central Intelligence Agency and now the deputy director of national intelligence for collection, said the annual intelligence budget was $44 billion. The number was reported Monday in U.S. News and World Report, whose national security reporter, Kevin Whitelaw, was among the hundreds of people in attendance during Ms. Graham's talk. "I thought, 'I can't believe she said that,' " Mr. Whitelaw said on Monday. "The government has spent so much time and energy arguing that it needs to remain classified." The figure itself comes as no great shock; most news reports in the last couple of years have estimated the budget at $40 billion. But the fact that Ms. Graham would say it in public is a surprise, because the government has repeatedly gone to court to keep the current intelligence budget and even past budgets as far back as the 1940's from being disclosed. Carl Kropf, a spokesman for the office of the director of national intelligence, John D. Negroponte, said Ms. Graham would not comment. Mr. Kropf declined to say whether the figure, which Ms. Graham gave last Monday at an annual conference on intelligence gathered from satellite and other photographs, was accurate, or whether her revelation was accidental. Steven Aftergood, director of the Project on Government Secrecy at the Federation of American Scientists, expressed amused satisfaction that the budget figure had slipped out. "It is ironic," Mr. Aftergood said. "We sued the C.I.A. four times for this kind of information and lost. You can't get it through legal channels." Only for a few past years has the budget been disclosed. After Mr. Aftergood's group first sued for the budget figure under the Freedom of Information Act in 1997, George J. Tenet, then the director of central intelligence, decided to make public that year's budget, $26.6 billion. The next year Mr. Tenet did the same, revealing that the 1998 fiscal year budget was $26.7 billion. But in 1999, Mr. Tenet reversed that policy, and budgets since then have remained classified with the support of the courts. Last year, a federal judge refused to order the C.I.A. to release its budget totals for 1947 to 1970 - except for the 1963 budget, which Mr. Aftergood showed had already been revealed elsewhere. In court and in response to inquiries, intelligence officials have argued that disclosing the total spying budget would create pressure to reveal more spending details, and that such revelations could aid the nation's adversaries. That argument has been rejected by many members of Congress and outside experts, who note that most of the Defense Department budget is published in exhaustive detail without evident harm. The national commission on the terrorist attacks of Sept. 11, 2001, recommended that both the overall intelligence budget and spending by individual agencies be made public "in order to combat the secrecy and complexity" it found was harming national security. "The taxpayers deserve to know what they're spending for intelligence," said Lee H. Hamilton, the former congressman who was vice chairman of the commission. Even more important, Mr. Hamilton said, public discussion of the total budgets of intelligence agencies would encourage Congress to exercise "robust oversight." The debate over whether the intelligence budget should be secret dates to at least the 1970's, said Loch K. Johnson, an intelligence historian who worked for the Church Committee investigation of the intelligence agencies by the Senate in the mid-1970's. Mr. Johnson said the real reason for secrecy might have less to do with protecting intelligence sources and methods than with protecting the bureaucracy. "Maybe there's a fear that if the American people knew what was being spent on intelligence, they'd be even more upset at intelligence failures," Mr. Johnson said.

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[hardmac@gmail.com: Hacker strikes through student's router]
by Eugen Leitl 08 Nov '05

08 Nov '05

----- Forwarded message from Thomas Hardly <hardmac(a)gmail.com> -----

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is it possible Andy?
by Tory Walker 08 Nov '05

08 Nov '05

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[Clips] Austrac runs eye over net payments
by R. A. Hettinga 08 Nov '05

08 Nov '05

--- begin forwarded text Delivered-To: clips(a)philodox.com Date: Tue, 8 Nov 2005 12:30:51 -0500 To: Philodox Clips List <clips(a)philodox.com> From: "R. A. Hettinga" <rah(a)shipwright.com> Subject: [Clips] Austrac runs eye over net payments Reply-To: rah(a)philodox.com Sender: clips-bounces(a)philodox.com <http://australianit.news.com.au/common/print/0,7208,17167384%5E15319%5E%5En…> Australian IT Austrac runs eye over net payments Simon Hayes NOVEMBER 08, 2005 PAYMENTS watchdog Austrac will continue to consider whether tighter regulation is needed for the growing internet payment systems sector in light of concerns that criminals could use the gateways to launder money. Austrac director Neil Jensen told Senate Estimates that Austrac would recommend changes to the Financial Transactions Reporting Act if it felt payment systems were being used to evade cash reporting requirements. The Attorney-General's Department is considering broader changes to bring the Act up to the requirements of the Financial Action Task Force. "We will look at payment systems to see what they are and if they are caught by the existing legislation," Mr Jensen said. "If they're not, is this an issue and do we need to refer it to the Attorney-General's Department for a policy decision?" Mr Jensen said Austrac examined each payment system separately to see if it was covered by the reporting requirements in the existing legislation. PayPal, the payment system owned by internet auction giant eBay, reports suspicious transactions to Austrac, but it is not required to report all transactions of $10,000 or more because it does not accept cash and does not operate accounts. "We only monitor the transactions they provide to us, and PayPal is a cash dealer under the legislation," Mr Jensen said. "Because of the way PayPal operates it generally reports only the suspicious transactions." Mr Jensen said Austrac was monitoring the internet payment sector to see if additional legislation was needed. "We have done monitoring of payment systems that may be used across the internet and we will be doing more work on that," he said. "It is part of an ongoing strategic approach to looking at alternative systems that may be eluding, or are not caught by, the current legislation. "If we found something that we believed should be caught by the legislation, we would refer that to the Attorney-General's Department." PayPal managing director Andrew Pipolo said the company had taken additional steps to prevent fraud. "PayPal imposes an internal limit of $US10,000 ($13,600) on transactions in the PayPal system," he said. PayPal had a 0.24 per cent fraud rate, Mr Pipolo said. "Importantly, PayPal is a safe way to pay online and has very few losses because of fraud." Earlier this year Austrac warned that criminals could be operating offshore bank accounts and using credit cards to pay for goods and services in Australia, escaping reporting requirements. -- ----------------- R. A. Hettinga <mailto: rah(a)ibuc.com> The Internet Bearer Underwriting Corporation <http://www.ibuc.com/> 44 Farquhar Street, Boston, MA 02131 USA "... however it may deserve respect for its usefulness and antiquity, [predicting the end of the world] has not been found agreeable to experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire' _______________________________________________ Clips mailing list Clips(a)philodox.com http://www.philodox.com/mailman/listinfo/clips --- end forwarded text -- ----------------- R. A. Hettinga <mailto: rah(a)ibuc.com> The Internet Bearer Underwriting Corporation <http://www.ibuc.com/> 44 Farquhar Street, Boston, MA 02131 USA "... however it may deserve respect for its usefulness and antiquity, [predicting the end of the world] has not been found agreeable to experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire'

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[Clips] The "Other" Ester: Anonymity-- Here Today, Gone Tomorrow
by R.A. Hettinga 08 Nov '05

08 Nov '05

--- begin forwarded text Delivered-To: clips(a)philodox.com Date: Mon, 7 Nov 2005 14:43:46 -0500 To: Philodox Clips List <clips(a)philodox.com> From: "R.A. Hettinga" <rah(a)shipwright.com> Subject: [Clips] The "Other" Ester: Anonymity-- Here Today, Gone Tomorrow Reply-To: rah(a)philodox.com Sender: clips-bounces(a)philodox.com <http://www.release1-0.com/freshproduce/article.cfm?serialnum=FRP200511042301> Anonymity: Here Today, Gone Tomorrow Esther Dyson It's ironic that the Web once seemed to promise individuals new opportunities to explore the world without showing their face. Instead, it is turning out to be a powerful force against anonymity. Most information about people's online actions is traceable - if someone with resources cares to go to the trouble. But there will be much more to this trend than the familiar fear of governments spying on innocent victims, or even they-asked-for-it dissidents. The bigger questions revolve around the tolerance of societies for diversity and recognition of the human capacity for change. A free membership to Release 1.0 is required to view this item. Login below or register to join our community. User name: Password: -- ----------------- R. A. Hettinga <mailto: rah(a)ibuc.com> The Internet Bearer Underwriting Corporation <http://www.ibuc.com/> 44 Farquhar Street, Boston, MA 02131 USA "... however it may deserve respect for its usefulness and antiquity, [predicting the end of the world] has not been found agreeable to experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire' _______________________________________________ Clips mailing list Clips(a)philodox.com http://www.philodox.com/mailman/listinfo/clips --- end forwarded text -- ----------------- R. A. Hettinga <mailto: rah(a)ibuc.com> The Internet Bearer Underwriting Corporation <http://www.ibuc.com/> 44 Farquhar Street, Boston, MA 02131 USA "... however it may deserve respect for its usefulness and antiquity, [predicting the end of the world] has not been found agreeable to experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire'

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[Clips] Whither Financial Markets on the Net?
by R. A. Hettinga 08 Nov '05

08 Nov '05

--- begin forwarded text Delivered-To: clips(a)philodox.com Date: Tue, 8 Nov 2005 11:59:29 -0500 To: Philodox Clips List <clips(a)philodox.com> From: "R. A. Hettinga" <rah(a)shipwright.com> Subject: [Clips] Whither Financial Markets on the Net? Reply-To: rah(a)philodox.com Sender: clips-bounces(a)philodox.com <http://www.ariadnecapital.com/journal/v5e3/outlook_whither.htm> Ariadne Capital Journal - Through the Maze Volume 5, Edition 3 Outlook Whither Financial Markets on the Net? by Duncan Goldie-Scot Introduction The economist Ronald Coase explained that firms, and banks, only exist because of what he called 'transaction costs'. All this really means is that firms have economies of scale. It is easier for a bank to match borrowers and lenders than it is for each of us to do it on our own. The optimum size of a bank, following Coase, is determined by those info rmation costs. Banks were at their biggest and most powerful when info rmation costs were very high. As the internet leads to plummeting info rmation costs, banks will get much smaller - and may even be completely unnecessary. It is not just the Zopa model (www.zopa.com) of matching borrowers and lenders via a website but something much more revolutionary that follows from this. But that is running ahead of the argument. What I will do first is give a brief overview of some of the issues in banking, look at what is on the technological horizon, draw some lessons from the history of banking and financial trading and then make a few predictions about where the new technology might lead. 1. Bank payments cartel I was chairing some e-finance conference a few years back when a director of one of the big clearing banks said that he didn't worry about the internet because it didn't impact on his core business - 'the management of the money transmission network' Payment systems are big business. According to the Boston Consulting Group banks around the world are taking out fees of some $228 billion dollars a year just for sending money from one database to another over their networks. In the US about 5% of the value of an average purchase is eaten up in payment costs. In the UK money transmission amounts to almost 1% of GDP or #4.5 billion. Don Cruickshank, in his report Competition in UK Banking, wrote: "Money transmission services are supplied through a series of unregulated networks, mostly controlled by the same few large banks who in turn dominate the markets for services to SMEs and personal customers. This market structure results in the creation of artificial barriers to entry, high costs to retailers for accepting credit and debit cards, charges for cash withdrawals up to six times their cost, and a cumbersome and inflexible payment system that is only slowly adapting to the demands of e-commerce." There is a reasonable defence of the payment systems cartel: the banks do need to co-operate to make the model work: those databases do have to talk to each other. But still, the cartel will protect its profits so don't expect any threatening innovation to come from the banks. Paypal caught the banks napping and they still don't know how to respond to that. It is not just Paypal and Zopa though: there are other options emerging. 2. Historical context If we take a very long term view, some of the underlying trends become clearer. Money At the turn of the first millennium, there were many private currencies but the quality of the coins varied enormously. For this reason coins tended to be used locally as exchange was difficult. Trade was limited. The commercial revolution that started round 1100 created a demand for reputable money. The more efficient mints exploited economies of scale and drove their less efficient competitors out of business. Governments were not slow to take advantage of the situation. States had economies of scale in enforcement and monitoring. They could demand payment of taxes in the coins the state issued. Doing so helped the state to maximise minting revenues, the tax base and its authority over local and feudal rivals. The dominance of state currencies took a couple of centuries to complete. When done, states had an effective monopoly of money. We can then roll the clock forward to, say, 1995, and contemplate the business case for launching a private currency in the UK - perhaps called Shillings . First one has to build enormous printing and minting plants. One needs an army to defy the High Court and Parliament. And then we need a huge marketing budget to persuade merchants and consumers to accept Shillings. It is clear that there are fairly substantial barriers to entry to the private currency market. But technology has struck back. Today there are various cryptographic protocols that, with the internet, mean that I can create a currency out of anything I like, largely for free. I can create a glob of bits that says that I, the issuer and underwriter, based somewhere on the net, promise to pay the bearer on demand x Shillings. The issue cost is close to zero. Of course, it is another matter to persuade you to accept it but the fact remains that I can create a currency, issue a currency, circulate a currency, offer a free and instant payment service and take $228 billion of COSTS out of the global economy. It is only a matter of time before someone does it. Private currencies are on their way - and it won't be the banks in the vanguard. Mobile phone minutes, air miles, loyalty points are all forms of money as soon as they are made fungible - transferable. Banking In his books on the history of banking, Ron Chernow illustrates the trends in banking by looking at the changing relative power of borrowers, lenders and middlemen. In the 18 th Century Wilhelm IX, the local nobleman and landgrave of Hesse was the heir to an enormous fortune. A certain Mayer Amschel Rothschild used to grovel in front of this man, to bow and to scrape. Ultimately, Rothschild was rewarded with a monopoly of negotiating the numerous and highly lucrative state loans issued by Wilhelm. In this case, the provider of capital was powerful. The banker was powerless as Wilhelm could have shut him down with a grunt or a nod. The consumers of capital, impoverished European noblemen, were also largely powerless. A hundred years later, in 1840, Chancellor Otto von Bismarck stayed at the Rothschild chateau at Ferrieres during the siege of Paris in the Franco-Prussian War. Even the Kaiser was dazzled by the wealth. Within a century, the Rothschilds, once the obsequious servants of monarchs, had grown to be their equal, able to thumb their noses at the Kaiser and other minor characters on the European scene. What happened was nationalism, the nation state. Governments have an insatiable appetite for money for wars, economic development and pandering to special interests. The histories of the great banking dynasties are full of episodes in which they daringly raised money for cash-strapped governments. There were just a handful of these great banking dynasties. Perhaps the greatest was J Pierpont Morgan. His forte was acting as a middleman between British investors and American borrowers. His power stemmed not from the millions he personally owned but from the billions he could command or lay his hands on. The pockets of capital were small, few and widely scattered and he became a crucial communications node matching the two sides of the banking equation. In the early 1900s, most US companies were small and local and were far less known than the giant Morgan. The main thing that a Morgan could confer on a fledgling company was not so much his capital as his cachet, his reputation - a signal to jittery investors that they could safely invest their money. He charged handsome fees for the privilege. This was a man for whom brand, above all reputation, really did matter. By 1960 the providers of capital were accumulating power over bankers in unit trusts, mutual funds and pension funds. Companies were relying less on the traditional banker and had a choice of different capital instruments. For the first time in the 20 th Century the banker middleman's power is dwarfed. It is that shift of power that explains why 100 years ago the image of a banker was of a rotund, grim, humourless man in late middle age with iron-grey hair, wire-rimmed spectacles and a permanent scowl. His role was to ration scarce credit and charge a hefty fee as the middleman. The banker today is slight by comparison - mere salesmen dispatched to scatter bountiful credit. As money and credit are banal commodities the role of the banker as the middleman between borrowers and lenders has become powerless: there are bountiful means of exchange in an interconnected world. Even hedgefunds are now dabbling in commercial lending. Capital markets The capital markets will change in a different way. Towards the end of the 18 th century, investors would sit under the buttonwood tree on Wall Street and gossip about the market. When it came to trading, when a price was agreed, trading, clearing and settlement all took place in one seamless, costless transaction. I would hand you a stock certificate and you would hand me cash. This model began to change when Samuel Morse perfected the telegraph in the mid-nineteenth century. Investors became enthusiastic adopters of the new technology, the Victorian internet, and used it to trade from afar on the most liquid market, Wall Street. Suddenly those quaint, cheap, instant and secure bearer transactions were open to delay, clearing and settlement risk, repudiation, dispute and simple fraud. The market's solution was to create an independent third party to arbitrate errors and disputes. Therefore, we established a rule-based clearing house, a regulatory system and a legal system to deal with mistakes and fraud. In the market today, the ultimate error handling routine is, 'And then you go to jail.' This made economic sense. The advantage of having an enormous pool of liquidity in New York or London more than outweighed the disadvantage of having settlement delays and regulation. It was also very good for brokers. Membership of the clearinghouse was restricted to market intermediaries and the club or cartel was able to agree on high fixed fees. So, the telegraph, and the telephone, caused a seismic change in the structure of the financial industry. Technically we can now trade person-to-person, digital cash for digital certificates in real time over the internet without the need for a clearing house, without the need for a central counterparty, and without the risk of repudiation or fraud and all achievable in a seamless, frictionless and costless way. Being able to do it technically doesn't mean that it will happen. But if, as many of us believe, it is massively cheaper to do it this way, then it almost certainly will happen. How long before someone has the courage to issue a digital bearer bond on the internet? Their reputation really will be on the line. So, I see four distinct phases of trading, clearing and settlement. The transition from each phase to the next has been caused by an order of magnitude or more reduction in the total cost of trading, clearing and settlement. In phase 1, the bearer phase, traders would sit under the buttonwood tree on Wall Street and swap bearer certificates for cash. Trading, clearing and settlement is a single and costless transaction. In phase 2, the advent of the telegraph means that Wall Street has to cope with long distance orders. A regulator/clearing house has to arbitrate disputes. Trading, clearing and settlement become three distinct operations. The cost of sending my Securicor van to your cage, and vice versa, is offset by the liquidity of the marketplace. In phase 3, the mainframe computer means that we can immobilise and then dematerialise stock into book entries in a database. Trading, clearing and settlement remain separate operations, partly out of habit and partly because the clunkiness of the bank payment mechanisms. Clearing and settlement in computerised databases is cheaper than physical delivery but is neither cheap nor simple: multiple message formats have to be processed in a steep hierarchy of connections between participating institutions. In phase 4, the invention of financial cryptography and the dominance of the internet, as a universal network, means that database entries, and immobilised documents, can be represented in digital bearer form on the internet. Digital cash can be exchanged for digital equity in real time in a costless transaction. The processing can be distributed on client devices meaning that there are very limited hardware overheads. Trading, clearing and settlement merge again into a single transaction. 3. Conclusions We have established that the banking cartel exercises its power today over the money transmission network - extracting $228 billion a year in fees. We can look forward to new models, such as Paypal, mobile phone payment methods and many others, killing the cartel. We have established that government control of money has slipped back to the market: the barriers to entry for private currencies are simply too low not to make it attractive. We have also established that the banker's role as the middleman matching up borrowers and lenders had its heyday perhaps 100 years ago and has been in continuous decline. Finally, I contend that we will return to bearer markets on the net - digital bearer markets overturning all of our financial structure. Because it can happen, because it will be massively cheaper, and because there is money to be made by making it happen, it is only a matter of time. If you would like to know HOW to issue a digital bearer instrument on to the internet, come along to a conference next February and learn all about it. It is called Financial Cryptography and the website is http://www.ifca.ai/ . Duncan Goldie-Scot is a director of the International Financial Cryptography Association. Duncan Goldie-Scot ) 2005 dgs(a)live.co.uk -- ----------------- R. A. Hettinga <mailto: rah(a)ibuc.com> The Internet Bearer Underwriting Corporation <http://www.ibuc.com/> 44 Farquhar Street, Boston, MA 02131 USA "... however it may deserve respect for its usefulness and antiquity, [predicting the end of the world] has not been found agreeable to experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire' _______________________________________________ Clips mailing list Clips(a)philodox.com http://www.philodox.com/mailman/listinfo/clips --- end forwarded text -- ----------------- R. A. Hettinga <mailto: rah(a)ibuc.com> The Internet Bearer Underwriting Corporation <http://www.ibuc.com/> 44 Farquhar Street, Boston, MA 02131 USA "... however it may deserve respect for its usefulness and antiquity, [predicting the end of the world] has not been found agreeable to experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire'

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