May 2012 - cypherpunks-legacy

The Liberty Dollar
by Gary Jeffers 06 Jul '18

06 Jul '18

My fellow Cypherpunks, The Liberty Dollar My fellow Cypherpunks, I think I may have some really great news here, but you all can check it out to be sure. I found an alternative money on the Internet. It is called the Liberty Dollar. The Internet site is: http://www.norfed.org NORFED is The National Organization for the Repeal of the Federal Reserve Act and the Internal Revenue Code. The money is backed by silver and gold and can be redeemed widely in America. As many of you know, the $US is a corrupt, proprietary, debt issued, fait, fractional reserved,illegal, unconstituional, U. S. State enforced monopoly currency. As corrupt as it is I don't know why it hasn't already collasped and dragged us down with it! If the Liberty Dollar is honest and robust, then it may be the vehical to beat the elite bankers tyranny and give us an honest wealth produced money. Yours Truly, Gary Jeffers BEAT STATE !!!!

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RE: Cypherpunks IQ Test
by Aimee Farr 06 Jul '18

06 Jul '18

Mike: Are you often the victim of mercenary females? > -----Original Message----- > From: mmotyka(a)lsil.com [mailto:mmotyka@lsil.com] > Sent: Monday, March 05, 2001 3:28 PM > To: aimee.farr(a)pobox.com > Subject: Cypherpunks IQ Test > > > It's an obvious setup. The woods are part of a defense installation, > apple is filled with coke, the girl is underage, the woods are full of > trigger happy fibbies. > > You hit the ground and roll into the brush, drawing on the way. You > attempt to locate opponents and identify the safest route away from the > situation. > > Mike > > > >CYPHERPUNKS IQ TEST > > > >QUESTION #1. > > > >You are walking through the woods alone. A beautiful unclothed woman > >magically appears in front of you. She holds out an apple. > > > >1. Please darken in the correct choice using a Number Two pencil: > > > >(a) you bite the apple. > >(b) you take the woman. > >(c) you run away. > >(d) a and b, but not c. > >(e) b and c only. > >(f) all of the above. > >(g) none of the above. > > > >2. Please justify your answer: > > > > > >___________________________________________________________________. > > > > > >Just curious.... > > > > -Aimee

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More on "new physics"
by Tim May 06 Jul '18

06 Jul '18

Someone sent me a private note. I have deleted his name for this public reply. > Tim May wrote: > > >> The "new physics" stuff is quite different. It is scorned in a way >> that plate tectonics was not, and for good reason. Folks should visit >> Bearden's site. http://www.cheniere.org/correspondence/index.html > > I did. Oh, dear. > > Not sure what is supposed to be denoted by "Tesla physics", but Tesla's > work with power transmission via HF is fascinating, even if there was > apparently no practical or safe use for it. No one disputes the outstanding work Tesla did on a.c. transmission. And anyone who has seen or used a Tesla coil knows how real it is. "Tesla physics" is all the cruft that has developed around some of his more obscure (and late) writings, usually mixed together with stuff Tesla could not have known about at the time of his death. To wit, the stuff about zero point energy and perpetual motion machines. And, sometimes, mixed together with the usual nutcase stuff about the Hollow Earth theory (zeta reticulans colonizing the hollow earth, Greys, underground UFO bases, secret Nazi weapons, etc.). Tesla is a hero to these "new physics" nuts, even though nothing Tesla ever worked on or built contradicts in the slightest way the predictions of Maxwell's theories. They take Tesla's very real contributions and some of his weirder theories (though none of them so weird as the Hollow Earth/antigravity/time reversal theories of modern nutters) and say that this means "They laughed at Tesla, they laugh at me!" BTW, I was/am an early ("angel") investor in a company doing work on ultrawideband transmissions. Some of the works Bearden cites, like those of Barrett, are familiar to me and others with this company. Saying that there is a role for ultrawideband pulse technology, a la spread spectrum and beyond SS, is NOT the same as saying there are confirmed "problems" with electromagnetic theory. There may be, and there are a handful of folks doing "foundational" work in E&M, but, so far, there are no indications that their foundational work is changing any engineering calculations. Quite the contrary, in my view. Electromagnetic theory basically "works"--to many decimal places of accuracy. Circuits work as expected, antennas work as expected, and there are no "unexplained observations" (as usually exist before a new theory arrives). There may be some _semantic_ issues, e.g., does a square wave or impulse "really" have components that were sent out _before_ the square wave or impulse? (A Fourier decomposition of a square wave starting at time t = 0 has "sine wave components" spread out over time and adding up in such a way as to give the square wave, or the impulse, or any other signal. Some think this means deep and mysterious things are happening, something having to do with time travel and reversing the aging process, blah blah blah. Henning Harmuth may write fairly eloquently about the "dogma of the circle" and how the Fourier decomposition of a signal into (allegedly) a near-infinite series of sine waves is "not real," but for all intents and purposes it all works. And the "new physics" people like Bearden go way beyond what Harmuth and Barrett are talking about: they bring in "curved space-time" and gravitation and antigravity and the ultra-weird notion that aging can be reversed by "pumping the conjugate time-axis of the Minkowski manifold" (OK, I made this up...don't have time to lift one of Bearden's direct quotes...and this will help train me in the jargon if I ever become a "new physicist."). Nut cases like Bearden have the patter of physics down. Very few actual physicists waste their time dissecting and refuting Bearden for obvious reasons. I urge readers of this list not to waste time on this stuff. --Tim May, Citizen-unit of of the once free United States " The tree of liberty must be refreshed from time to time with the blood of patriots & tyrants. "--Thomas Jefferson, 1787

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Re: A Trial Balloon to Ban Email?
by Declan McCullagh 06 Jul '18

06 Jul '18

At 09:57 AM 5/14/2003 -0400, Sunder wrote: >Yes, but how will you stop the spammer from double spending the same $0.25 >micropayment on all of his 170,000 email addresses? Depending on whether >you check that there is a payment attached or not, and also check it with >the bank before delivering it, you'd have already wasted your bandwith and >possibly have accepted a spam into your mail spool. It is true that the notions of micropayments as applied to spam (that I'm familiar with, at least) would require that the email recipient check with the bank to detect doublespending. This would introduce an additional delay before delivery from unknown senders, yes, but I fail to see how it would impose an unacceptable cost in bandwidth or CPU usage. Spammers could still try the same-micropayment-a-million-times route, just as they could try to spam without micropayments, but if their email is rejected in sufficient quantities, the cost to the spammer would outweigh the benefits. The key is achieving sufficient quantities. -Declan

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Re: AP Al Qaeda
by mattd 06 Jul '18

06 Jul '18

>>No, no. AP is funny because it's impracticeable. One does not find an assassin exclusively by tracing who paid him to kill. One can (and often does) find him because he makes a mistake in the act of commiting the crime. Which, if I'm >>reading my history right, is what's hampered the noisy proponents of AP up to this point already. Crime? Wot crime,guvnor? Jim and CJ were not 'noisy'.imo. Im a bit noisy cos Im pushing the 'let it all hang out' version. >The point is that Bell's theory does a really good job of sorting out the business end of assassination,...< Oh THATS funny.I get it. HAHAHA! >>Killing one person, especially a public official, pisses a whole bunch of people off. Those people have a tendency to come find their buddy's killer. Mmm,where do we start,lets get some firebrands and go up to the proffrs? Look at sites with no logs for quad anon 'predictors' who may be overseas briefly visiting cybercafes,Good luck china.(you just contradicted yrself btw.) Oh,unless you mean the torture/french village reprisal thang.Win friends and influence people. The one person killed will have had to have done a lot of evil shit to get enough pooled (presumably) to tempt a seasoned pro.Unless some professional killer turns all altruistic,stranger things have happened.The killer could be suicidal.another possibility.Lots of scenarios possible here,movie scripts,even.Pop songs,video games.DoCoMo assasinphones. Someone like a torturer,murderer,terrorist,pedophile is a logical candidate.(stephen roach?)Sometimes these happen to be public officials.Theres one here where I live named dennis Tanner.(vic.au) Those killers by remote control like arbusto might be be made more accountable. What better way than...Bell's theory, "a really good job of sorting out the business end of assassination"according to you. KILL THE PRESIDENT! "Id buy that for a dollar!" >>No kind of real or threatened assassination can weaken a government in which a majority of the governed people >believe. It can only make it seem more righteous and be more strong. Thats true,roll over and go back to sleep,if you live under that govt you have nothing to worry about. More righteous and more smug.

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Оптимизация налогообложения в холдинговых структурах
by Виртуальный холдинг 31 May '12

31 May '12

06 июня 2012г. Оптимизация налогообложения в холдинговых структурах: как снизить расходы и увеличить прибыль 8 (499) 4Ч5_4О\95 и Московский код; 792-21-2\2 Цель: На занятиях будут рассмотрены организационно-правовые, экономико-правовые аспекты создания и деятельности холдингов; вопросы управления холдингом, взаимодействие с дочерними и зависимыми компаниями Программа: 1. Понятие и принципы налогового планирования: платить налоги, но не переплачивать. Как можно и как нельзя оптимизировать налоги с учетом изменений законодательства, судебной практики и тенденций развития правоприменения. "Черные", "серые" и "белые" схемы. "Метод холдинга" в налоговом планировании. Понятие виртуального холдинга как средства налогового планирования. Рациональное построение финансовых потоков и договорных отношений в холдинге через разделение оборотов, капитала (прибыли), активов, персонала, отношений с контрагентами и рисков. Элементы холдинга √ Операционные компании, Управляющая или финансирующая компания (Казначейство), Хранитель активов, Торговый дом (Снабжающая или закупочная организация), Центры обслуживания (Кадровые центры), риск-структуры и их роли в налоговом планировании. 2. Методы планирования налога на прибыль и НДС в холдингах Низконалоговые субъекты (ННС): * субъекты специальных налоговых режимов √ ЕНВД и УСН, в т.ч. патентная система, а также субъекты УСН из "низконалоговых" регионов, где введена минимальная ставка единого налога при объекте "доходы минус расходы" (5-10%) на все или почти на все виды деятельности, а также простое товарищество с их участием, * зарубежные офшоры или связанные с ними компании-нерезиденты из респектабельных юрисдикций, * экзотические варианты: ИП на общей системе, физлица (при условии несистематичности извлечения дохода), "инвалидные" структуры, убыточные предприятия и фирмы, имеющие переплату НДС, "Недобросовестные налогоплательщики" и контактирующие с ними риск-структуры: как нельзя "оптимизировать". Принципиальная невозможность экономии НДС "белыми" схемами и случаи, когда это все же возможно. Способы переноса налогооблагаемой базы по налогу на прибыль на низконалоговых субъектов: * нефиктивные услуги, работы, * выплата процентов по долговым обязательствам. Включение процентов в расходы в любом размере, * платежи за использование и обслуживание объектов основных средств и нематериальных активов, в т.ч. франчайзинговые, * штрафные санкции, возмещение убытков, включая демередж и прочий простой, * платежи за увеличенный срок и/или объем гарантийных обязательств, * плата за залог или поручительство, делькредере. * механизм трансфертных цен, Условия их применения: Непритворный характер заключаемых сделок. Экономическая целесообразность расходов ("деловая цель", "легенда", отсутствие дублирующихся функций). Грамотное обоснование трансфертных цен. Неаффилированность, прямые и косвенные признаки аффилированности, ее негативные последствия и когда она допустима; "искусственное дробление бизнеса с целью уклонения от уплаты налогов" (подход "как к ЮКОСу"); "деловые цели", обосновывающие деление бизнеса. Самостоятельность низконалоговых субъектов. Безналоговые способы передачи денежных средств в холдинге. Займы и аналогичные им договоры как способ возвратного рефинансирования √ преимущества и недостатки, риск ведения незаконной банковской деятельности. Рефинансирование и капитализация прибыли предприятия (холдинга) через уставной капитал, безвозмездную передачу имущества или добавочный капитал. Ст. 27 Закона "Об ООО". Другие способы безвозвратного рефинансирования. Простое товарищество субъектов упрощенной системы налогообложения, в т.ч. из "низконалоговых" регионов. Нужно или нет платить НДС? Перенос прибыли товарищества на низконалоговых субъектов (УСН 6%, ЕНВД, офшор и др.). Отсрочка уплаты налога при непередаче прибыли на счета товарищей. Возможен ли обход с помощью простого товарищества правил налогового учета (гл. 25 НК) и ограничений гл. 26.2 НК РФ в части перечня затрат? Экономия НДС в производстве, выполнении работ, оказании услуг через разделение финансовых потоков "с НДС" и "без НДС". Ограничение использования: покупатели/заказчики, не нуждающиеся в вычете НДС, как их выявить или создать искусственно. 3. Создание рациональной финансовой и организационной холдинговой структуры, схемы товарно-финансовых потоков и договорных отношений холдинга. Оперативное распределение налоговой нагрузки между участниками холдинга. Реальный пример комплексного налогового планирования в холдингах. 4. Принципы налогового планирования использования основных средств. Формирование холдинговой структуры для целей минимизации налогообложения имущества. "Хранитель активов" (лицо √ собственник имущественного комплекса). Низконалоговые и безналоговые способы передачи имущества "Хранителю активов". 5. Принципы налогового планирования (оптимизации) выплаты заработной платы в холдинге Дивидендные схемы √ замена выплаты зарплате на "упрощенке"? Договоры с предпринимателем: возмездного оказания услуг, выполнения работ, агентский, транспортные услуги, механизм трансфертных цен, штрафные санкции, аренда и пр. Расчеты эффективности. Краткий обзор других (компенсационных, процентных и прочих) схем выплаты низконалогового дохода. 6. Встраивание иностранных (в т.ч. низконалоговых) компаний в структуру российских холдингов. Защита владения и скрытие собственника, уход от аффилированности, использование для оптимизации налога на прибыль: традиционные (торговля, проценты, дивиденды, роялти, услуги, и т.п.) и нетрадиционные схемы (простое товарищество, агентские). Выбор юрисдикций. 7. Обзор планируемых изменений налогового законодательства, как они повлияютs на налоговые схемы. Ответы на вопросы. По вопpоcам pегucтаpацuu обpащайтеcь по тел: 8 Моск. код: 79221.22 **** 8 (499) 445\4О-95

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Уменьшение расходов. Создание холдинга
by Прибыль холдингов 31 May '12

31 May '12

06 июня 2012г. Оптимизация налогообложения в холдинговых структурах: как снизить расходы и увеличить прибыль 8 (499) ЧЧ5*4О\95 \\\/// (код Москвы) 7Ч2\91.98 Цель: На занятиях будут рассмотрены организационно-правовые, экономико-правовые аспекты создания и деятельности холдингов; вопросы управления холдингом, взаимодействие с дочерними и зависимыми компаниями Программа: 1. Понятие и принципы налогового планирования: платить налоги, но не переплачивать. Как можно и как нельзя оптимизировать налоги с учетом изменений законодательства, судебной практики и тенденций развития правоприменения. "Черные", "серые" и "белые" схемы. "Метод холдинга" в налоговом планировании. Понятие виртуального холдинга как средства налогового планирования. Рациональное построение финансовых потоков и договорных отношений в холдинге через разделение оборотов, капитала (прибыли), активов, персонала, отношений с контрагентами и рисков. Элементы холдинга – Операционные компании, Управляющая или финансирующая компания (Казначейство), Хранитель активов, Торговый дом (Снабжающая или закупочная организация), Центры обслуживания (Кадровые центры), риск-структуры и их роли в налоговом планировании. 2. Методы планирования налога на прибыль и НДС в холдингах. Низконалоговые субъекты (ННС): * субъекты специальных налоговых режимов – ЕНВД и УСН, в т.ч. патентная система, а также субъекты УСН из "низконалоговых" регионов, где введена минимальная ставка единого налога при объекте "доходы минус расходы" (5-10%) на все или почти на все виды деятельности, а также простое товарищество с их участием, * зарубежные офшоры или связанные с ними компании-нерезиденты из респектабельных юрисдикций, * экзотические варианты: ИП на общей системе, физлица (при условии несистематичности извлечения дохода), "инвалидные" структуры, убыточные предприятия и фирмы, имеющие переплату НДС, "Недобросовестные налогоплательщики" и контактирующие с ними риск-структуры: как нельзя "оптимизировать". Принципиальная невозможность экономии НДС "белыми" схемами и случаи, когда это все же возможно. Способы переноса налогооблагаемой базы по налогу на прибыль на низконалоговых субъектов: * нефиктивные услуги, работы, * выплата процентов по долговым обязательствам. Включение процентов в расходы в любом размере, * платежи за использование и обслуживание объектов основных средств и нематериальных активов, в т.ч. франчайзинговые, * штрафные санкции, возмещение убытков, включая демередж и прочий простой, * платежи за увеличенный срок и/или объем гарантийных обязательств, * плата за залог или поручительство, делькредере. * механизм трансфертных цен, Условия их применения: Непритворный характер заключаемых сделок. Экономическая целесообразность расходов ("деловая цель", "легенда", отсутствие дублирующихся функций). Грамотное обоснование трансфертных цен. Неаффилированность, прямые и косвенные признаки аффилированности, ее негативные последствия и когда она допустима; "искусственное дробление бизнеса с целью уклонения от уплаты налогов" (подход "как к ЮКОСу"); "деловые цели", обосновывающие деление бизнеса. Самостоятельность низконалоговых субъектов. Безналоговые способы передачи денежных средств в холдинге. Займы и аналогичные им договоры как способ возвратного рефинансирования – преимущества и недостатки, риск ведения незаконной банковской деятельности. Рефинансирование и капитализация прибыли предприятия (холдинга) через уставной капитал, безвозмездную передачу имущества или добавочный капитал. Ст. 27 Закона "Об ООО". Другие способы безвозвратного рефинансирования. Простое товарищество субъектов упрощенной системы налогообложения, в т.ч. из "низконалоговых" регионов. Нужно или нет платить НДС? Перенос прибыли товарищества на низконалоговых субъектов (УСН 6%, ЕНВД, офшор и др.). Отсрочка уплаты налога при непередаче прибыли на счета товарищей. Возможен ли обход с помощью простого товарищества правил налогового учета (гл. 25 НК) и ограничений гл. 26.2 НК РФ в части перечня затрат? Экономия НДС в производстве, выполнении работ, оказании услуг через разделение финансовых потоков "с НДС" и "без НДС". Ограничение использования: покупатели/заказчики, не нуждающиеся в вычете НДС, как их выявить или создать искусственно. 3. Создание рациональной финансовой и организационной холдинговой структуры, схемы товарно-финансовых потоков и договорных отношений холдинга. Оперативное распределение налоговой нагрузки между участниками холдинга. Реальный пример комплексного налогового планирования в холдингах. 4. Принципы налогового планирования использования основных средств. Формирование холдинговой структуры для целей минимизации налогообложения имущества. "Хранитель активов" (лицо – собственник имущественного комплекса). Низконалоговые и безналоговые способы передачи имущества "Хранителю активов". 5. Принципы налогового планирования (оптимизации) выплаты заработной платы в холдинге. Дивидендные схемы – замена выплаты зарплате на "упрощенке"? Договоры с предпринимателем: возмездного оказания услуг, выполнения работ, агентский, транспортные услуги, механизм трансфертных цен, штрафные санкции, аренда и пр. Расчеты эффективности. Краткий обзор других (компенсационных, процентных и прочих) схем выплаты низконалогового дохода. 6. Встраивание иностранных (в т.ч. низконалоговых) компаний в структуру российских холдингов. Защита владения и скрытие собственника, уход от аффилированности, использование для оптимизации налога на прибыль: традиционные (торговля, проценты, дивиденды, роялти, услуги, и т.п.) и нетрадиционные схемы (простое товарищество, агентские). Выбор юрисдикций. 7. Обзор планируемых изменений налогового законодательства, как они повлияютs на налоговые схемы. Ответы на вопросы. Вся информация по тел: 8 (499) Ч45_4О-95 или код (499) - 445-Ч095

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Re: [liberationtech] Syria blackout?
by Eugen Leitl 31 May '12

31 May '12

----- Forwarded message from Andrew <andrew(a)pdqvpn.com> -----

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Syria blackout?
by Eugen Leitl 31 May '12

31 May '12

----- Forwarded message from Rafael Cresci <rafael(a)cresci.org> -----

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Bitcoin: The Cryptoanarchists’ Answer to Cash
by Eugen Leitl 31 May '12

31 May '12

http://spectrum.ieee.org/computing/software/bitcoin-the-cryptoanarchists-an… FEATURE Bitcoin: The Cryptoanarchistsb Answer to Cash How Bitcoin brought privacy to electronic transactions By Morgen E. Peck / June 2012 Bitcoin Opener Illustration: Harry Campbell There's nothing like a dollar bill for paying a stripper. Anonymous, yet highly personalbwherever you use it, that dollar will fit the occasion. Purveyors of Internet smut, after years of hiding charges on credit cards, or just giving it away for free, recently found their own version of the dollarba new digital currency called Bitcoin. b) Youbll know it when you see it (strippers who accept tips in bitcoins advertise their account addresses right on their bodies). And more important, if you pay with it, no one needs to know. Bitcoin balances can flow between accounts without a bank, credit card company, or any other central authority knowing who is paying whom. Instead, Bitcoin relies on a peer-to-peer network, and it doesnbt care who you are or what youbre buying. b) In the long run, a system like this, which restores privacy to electronic payments, could do more than just put the sneak back into the peek. If enough people take part, Bitcoin or another system like it will give political dissidents a new way to collect donations and criminals a new way to launder their moneybwhile causing headaches for traditional financial gatekeepers.b) graphic link to future of money landing page You may have heard about Bitcoin last year, when the digital currency was briefly a major media story and speculators rushed to cash in on the rising value of bitcoins. Or perhaps you heard about hackers raiding the coffers of the largest online bitcoin exchanges, which coincided with the price of bitcoins plunging. Since January Bitcoin has stabilized. Itbs been holding an exchange rate of about US $5. b) The dream of an anonymous, independent digital currencybone where privacy is maintained for buyers and sellersblong predates Bitcoin. Despite obituaries in magazine articles from Forbes, Wired, and The Atlantic, the dream is far from dead.b) The pursuit of an independent digital currency really got started in 1992, when Timothy May, a retired Intel physicist, invited a group of friends over to his house outside Santa Cruz, Calif., to discuss privacy and the nascent Internet. In the prior decade, cryptographic tools, like Whitfield Diffiebs public-key encryption and Phil Zimmermannbs Pretty Good Privacy, had proven useful for controlling who could access digital messages. Fearing a sudden shift in power and information control, governments around the world had begun threatening to restrict access to such cryptographic protocols.b) May and his guests looked forward to everything those governments feared. b Just as the technology of printing altered and reduced the power of medieval guilds and the social power structure, so too will cryptologic methods fundamentally alter the nature of corporations and of government interference in economic transactions,b he said. By the end of the meeting, the group had given themselves a namebb cypherpunksbband the superhero-like task of defending privacy across the digital world. In just a week, cofounder Eric Hughes wrote a program that could receive encrypted e-mails, scrub away all identifying marks, and send them back out to a list of subscribers. When you signed up, you got a message from Hughes: b) Cypherpunks assume privacy is a good thing and wish there were more of it. Cypherpunks acknowledge that those who want privacy must create it for themselves and not expect governments, corporations, or other large, faceless organizations to grant them privacy out of beneficence.b) Hughes and May were deeply aware that financial behavior communicates as much about you as words canbif not more. But outside of cash transactions or barter, therebs no such thing as a private transaction. We rely on banks, credit card companies, and other intermediaries to keep our financial system running. Will those corporations save and even share a dossier of your spending habits? Even using cash requires trust that the bill will maintain its worth. Will governments print too much currency or too little? Many cypherpunks would say that the only way to answer these questions is to build an entirely new system.b) Gradually, their mistrust germinated into an anarchist philosophy. Most simply wanted to be able to buy things without someone looking over their shoulders. But others on the mailing list imagined liberating currency from governmental control and then using it to lash back at their perceived oppressors. b) Jim Bell, a onetime Intel engineer, took these fancies further than anyone, introducing the world to an odious thought experiment called an assassination market. Citizens needed an effective way to punish politicians who acted against the wishes of their constituents, he reasoned, and what better punishment than murder? With an anonymous digital coin, argued Bell, you could pool donations from disgruntled citizens into what amounts to bounties. If a politician made enough people angry, it would only be a matter of time before the price pushed him out of office or cost him his life. Bellbs essay, b Assassination Politics,b eventually attracted the attention of federal agents. His spiral through the U.S. court system started with an IRS raid in 1997 and ended this March with his release from prison. b) While cypherpunks like Bell were dreaming up potential uses for digital currencies, others were more focused on working out the technical problems. Wei Dai had just graduated from the University of Washington with a degree in computer science when he created b-money in 1998. b My motivation for b-money was to enable online economies that are purely voluntary,b says Dai, b ones that couldnbt be taxed or regulated through the threat of force.b But b-money was a purely personal project, more conceptual than practical.b) Around the same time, Nick Szabo, a computer scientist who now blogs about law and the history of money, was one of the first to imagine a new digital currency from the ground up. Although many consider his scheme, which he calls b bit gold,b to be a precursor to Bitcoin, privacy was not foremost on his mind. His primary goal was to turn ones and zeros into something people valued. b I started thinking about the analogy between difficult-to-solve problems and the difficulty of mining gold,b he says. If a puzzle took time and energy to solve, then it could be considered to have value, reasoned Szabo. The solution could then be given to someone as a digital coin. b) In Szabobs bit gold scheme, a participant would dedicate computer power to solving cryptographic equations assigned by the system. b Anything that works well as a proof-of-work function, producing a specific binary string such that it can be proved that generating that string was computationally costly, will work,b says Szabo. In a bit gold network, solved equations would be sent to the community, and if accepted, the work would be credited to the person who had done it. Each solution would become part of the next challenge, creating a growing chain of new property. This aspect of the system provided a clever way for the network to verify and time-stamp new coins, because unless a majority of the parties agreed to accept new solutions, they couldnbt start on the next equation. b) When attempting to design transactions with a digital coin, you run into the b double-spending problem.b Once data have been created, reproducing them is a simple matter of copying and pasting. Most e-cash scenarios solve the problem by relinquishing some control to a central authority, which keeps track of each accountbs balance. DigiCash, an early form of digital money based on the pioneering cryptography of David Chaum, handed this oversight to banks. This was an unacceptable solution for Szabo. b I was trying to mimic as closely as possible in cyberspace the security and trust characteristics of gold, and chief among those is that it doesnbt depend on a trusted central authority,b he says. b) Bit gold proved that it was possible to turn solutions to difficult computations into property in a decentralized fashion. But property is not quite cash, and the proposal left many problems unsolved. How do you assign proper value to different strings of data if they are not equally difficult to make? How do you encourage people to recognize this value and adopt the currency? And what system controls the transfer of currency between people?b) After b-money and bit gold failed to garner widespread support, the e-money scene got pretty quiet. And then, in 2008, along came a mysterious figure who wrote under the name b Satoshi Nakamoto,b with a proposal for something called Bitcoin. As is fitting for the creator of a private digital currency, Nakamotobs true identity remains a secret. b Ibve never heard of anybody who knew about that name earlier,b says Szabo. b And Ibm not going to speculate on who he may or may not be.bb) To create a working system, Nakamoto started with the idea of a chain of data, similar to bit gold. But rather than creating a chain of digital property, Bitcoin records a chain of transactions. b) The simplest way to understand Bitcoin is to think of it as a digital ledger book. Imagine a bunch of people at a table who all have real-time access to the same financial ledger on laptops in front of them. The ledger records how many bitcoins each person at the table has at a given time. By necessity, the balance of each account is public information, and if one person wants to transfer funds to the person sitting across from him, he has to announce that transaction to everyone at the table. The entire group then appends the transaction to the ledger, which they all need to agree on. In a system like this, money never has to exist in a physical form, and yet it canbt be spent twice. b) This is basically how Bitcoin works, except that the participants are spread across a global peer-to-peer network, and all transactions take place between addresses on the network rather than individuals. Address ownership is verified through public-key cryptography, without revealing who the owner is. b) The system turns traditional banking privacy on its head: All transactions are made in public, but theybre difficult to link up with a human identity. Maintaining the dissociation takes vigilance on the part of the Bitcoin user and careful decisions about which outside applications and exchange methods to use, but it can be done. b Anonymity is typically compromised by means outside of Bitcoinbs control, in other words,b says Jeff Garzik, who is on the team of programmers now responsible for developing the Bitcoin software. Bitcoin is often described as providing pseudoanonymity, by creating enough obfuscation to provide users with plausible deniability.b) People who own bitcoins have a programbcalled the Bitcoin clientbinstalled on their computers to manage their accounts. When they want to access their funds, they use the client to send a transaction request. The innovation of Bitcoin is to use the processing of these transaction requests as the mechanism for creating new currency.b) As requests pile up in the system, individual computers, running b miningb programs, bundle them into chunks called transaction blocks. Before each block of transactions becomes part of the accepted Bitcoin ledger, or block chain, the mining software must transform the data using cryptographic hash equations. The Bitcoin client accepts the resulting hash values only if they meet strict criteria, so miners typically need to compute many hash values before stumbling upon one that meets the requirements. That process costs a lot of computing powerbso much that it would be prohibitively difficult for anyone to come along and redo the work. Each new block that gets added and sealed strengthens all the previous blocks on the chain. b) The b minerb whose computer first finds an acceptable hash value is rewarded with newly minted bitcoins. The Bitcoin system adjusts the difficulty of the hashing requirements to control the minting rate. To its proponents, this is one of Bitcoinbs biggest attractions: Unlike the printing of b fiatb currency, which can be done on demand, the creation of Bitcoins will gradually taper until it reaches a limit of 21 million coins. b) As more and more miners compete to process transactions, mining requires more computing power. Brock Tice, who mines bitcoins in St. Paul, Minn., has a whole room stuffed full of enough mining computers to heat his office in the winter. But Tice first became interested in the network for a different reason. He thought it would be a better way to accept money from customers online. b) In 2009, he began selling little blue canary-shaped night-lights from his home in New Mexico. He quickly lost patience with all the standard payment options. b I had been thinking for a while that something like Bitcoin was needed,b he says. b I run a couple of small businesses, and taking or making payments is just such a huge pain.b Every time a customer pays with PayPal, for instance, Tice hands over 2.9 percent of what he charges plus a small fee. For international sales, he pays even more. The rates for Google Checkout and credit cards are about the same, and for each one he has to open an account with the company processing the transaction, and then trust that it will eventually hand over the money. After reading about how Bitcoin works, Tice decided to include it as a payment method on his website.b) For merchants like Tice, the benefits are obvious. In addition to relieving him of fees (at least for nowbBitcoin has an optional mechanism in place for miners to collect fees in the future), Bitcoin transactions wonbt open him up to claims of credit card fraud. In Bitcoin, all transactions are irreversible. On the other hand, unlike credit card users, consumers paying with bitcoins have no way to get their money back if Tice never ships the item. But as with any financial transaction, some level of trust is still required. And some customers would prefer to trust a merchant to make good on a sale than trust them to protect sensitive data. Last spring, hackers broke into the Sony PlayStation Network and swiped a trove of private account detailsbcredit card numbers, birthdays, log-ins, passwords, home addresses, and all the names associated with them. Just days later, it happened again, and within a week the security of more than 100 million Sony accounts was at risk. b I think Bitcoin really has the potential to change our expectations about what information we give merchants,b says Gavin Andresen, Bitcoinbs project leader. The Bitcoin system has had its own hacking problems. Other than a few die-hard miners, most people buy bitcoins at an exchange where you pay dollars, euros, or whatever and get bitcoins in return. These exchanges also allow merchants to convert their bitcoin collections into other currencies. Unfortunately, the security of the exchanges hasnbt been as good as the Bitcoin client itself. The largest online exchange, Mt. Gox, lost 500 000 bitcoins to hackers in June 2011, which sent the price barreling down. Anyone who invests in a bitcoin better understand that itbs going to be more volatile than the dollar, says Michael Kagan, the managing director at ClearBridge Advisors, an investment firm in New York City.b) Even with the ups and downs, many of Bitcoinbs early adopters amassed their virtual fortunes when mining was easy, so they have an incentive to keep the system going (assuming they didnbt cash out at the peak of the bubble). Itbs possible they are hoarding the currency, as the economist Paul Krugman speculated they would, waiting for the price to rise again as mining becomes more competitive and expensive. And while Bitcoinbs fixed minting rate helped attract its most fervent early adopters, it also made the barrier to entry much higher for people who want to join now. b If anything is the Achillesb heel of Bitcoin, that probably is it,b Szabo says.b) If Bitcoin does fail, it may die in an act of cannibalism. Nakamoto introduced the block chain, but cryptographers are now already working on improvements. The minting rate is only one of many things that could be tweaked. b Bitcoin is the first of a new breed,b says Garzik. b People will learn from Bitcoin and build something better, or Bitcoinbs critical mass will force it to evolve and learn from its own mistakes.bb) This article originally appeared in print as "The Cryptoanarchists Answer to Cash." About the Author Morgen E. Peck never saw the point in writing about money or finance. Then she attended a conference on the cryptocurrency Bitcoin and talked to anarchists, programmers, bankers, cryptographers, libertarians, finance lawyers, and a game show host. From this crucible of ideas, she emerged quite altered. b Ibd like to personally thank Satoshi Nakamoto [Bitcoinbs supposed creator] for finally making money interesting enough to write about,b she says. TAGS: Bitcoin // Internet // cryptocurrency // cryptography // encryption // hash functions // peer-to-peer networks // privacy

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