On Friday, April 25, 2003, at 06:50 PM, Adam Back wrote:
On Fri, Apr 25, 2003 at 03:32:42PM -0700, Tim May wrote:
I have a _completely_ different impression of which model has been more prominent around Cypherpunks.
Most people I've noticed prefer to avoid the "and then he goes to jail" step because it invites regulation and government involvement, is expensive and unappealing. It also involves a identifying registration step to participate which is a barrier to entry.
For now, I only want to say something about this. Not _exactly_ about this, but about the desire some players have to do certain things. These players being: -- some implementors -- and ESPECIALLY some start-up companies working to deploy systems (I don't necessarily mean ZK, but if the shoe fits....) -- and EVEN MORE ESPECIALLY most banks and financial institutions connected to these efforts And here's what they want to do: -- make money (a noble goal, but sometimes not realizable directly with an idea) -- avoid prosecution under the Freedom from Traitors Act, the Anti-Money Laundering Act, RICO, etc. I think it may just not be possible for some bright programmer to develop a solid digital money (henceforth, DM) system and deploy it while still making money, avoiding some kind of prosecution or lawsuit (civil lawsuits for many different reasons). A solid DM system, which Adam more or less included in his taxonomy of DM proposals, is a substantial threat to many special interests, to many governments, to various crime families (Corleone, Bush families), and so on. We've discussed the implications so many times it hardly bears repeating for me to even start on a laundry list. In many ways, the situation is a bit analogous to the dawn of printing, or to the dawn of radio. Entrenched interests affected, societal changes triggered. And while we don't have the Church to worry about today, we have millions of lawyers and regulators, ready to pounce on anything that has not been done before, ready to file lawsuits and RICO prosecutions at anything that smacks of tax evasion, money laundering, illegal financial support for outlawed religions, child porn, and on and on. Again, I won't compile a laundry list. If one thinks of "acceptable use policies," or Ebay's neverending dance with prosecutors and investigators over things bought and sold on their system, or Napster, the nightmare of having several floors full of lawyers to deal with these suits and prosecutions must be daunting to any established business thinking about providing untraceable DM. (Real money, real cash, would never get approval were it being introduced today, just as aspirin would never get FDA approval...perhaps a slight exaggeration, but the basic point is valid.) OK, where is this going? To cut to the chase: * Real DM will likely be introduced in a guerilla fashion, much as Pr0duct Cypher anonymously released Magic Money a decade ago. To this day, the identity of PC is unknown (though some folks think it must be a person with the initials _ _ ...naw, I'll leave the guessing off of the archives here!). * Releasing a DM system anonymously means no credit for the developer, except whatever satisfaction he gains from the work, from seeing the foundations shaken, and perhaps from a small group of friends who suspect it was his work. And he may be able to eventually prove authorship, or carefully set the release up so that he escapes prosecution. (Recall that PRZ was hounded and almost indicted for export of PGP when quite clearly he was not involved in the export, when that person named by Jim Warren (with initials _ _ ) was the one who apparently was a key player in the export. Consider the various RICO and Terrorism implications of a DM system which makes tax evasion, purchase of child porn, etc. suddenly very possible.) * In my view, not necessarily the view of everyone in the DM community, the Big Win for solid DM is in illegal markets, e.g., buying and selling child porn, bestiality, snuff images, etc., and in untaxed betting, buying and selling corporate information, and all the things which untraceability of a very strong form is needed for. Again, this laundry list of applications has been around for a long time. (I was invited to address a group in Redwood CIty at the home of Phil Salin in the summer of 1988, and outlined BlackNet, escrow accounts, contract killing markets, data havens, etc. The stuff mentioned in my Crypto Anarchist Manifesto, issued that summer.) All well known, and very controversial, applications. Applications the Feds will expend great amounts of money to try to stop. But it is this kind of an application that someone will be motivated to set up an untraceable DM account for...casual users will not even bother with PGP, let alone DM. * These applications are different from the "low value - low transaction cost" section of the scatter plot of "value of the information being hidden vs. cost to hide it" graph. At the low end, what I have sometimes called the "millicent ghetto," we have anonymous payments for subway travel, where the value of untraceability is fairly low and where the costs of getting it must then of course be proportionately low. This is the area where work on PDAs and smartcards touches on DM. Not very Cypherpunkly interesting, in my view. Higher on the value-cost graph might be remailer uses. Or buying Web pages. (Where one is willing to pay a few pennies per article to ensure that Big Brother can't compile dossiers.) And of course far to the right on the value axis and up on the cost axis are the uses where the cost of getting caught buying child porn, for example, is a multi-year prison sentence. Those in pedophile and similar trading rings are likely to be willing to pay a lot for protection. (Note that encryption, which they often use, is only one part of the total solution: their VISA bills and money orders are usually where they get caught. An untraceable DM system is needed. And, as we have discussed many times, much more than Chaum's "buyer is untraceable" is needed, as the FBI can set up stings to find the _sellers_. (For those squeamish with my use of child porn as an example should construct their own examples. ONe wag refers to sellers of images of "Women Without Veils" as a Western-friendly example. I like to cite selling birth control information: illegal in most Islamic countries. A DM system for such uses must be both buyer- and seller-untraceable. And probably bank-untraceable, though that's for another discussion.) * Anyone releasing such a strong DM system should be targeting the high end applications, where the needs for untraceability are very high and the willingess to pay the costs (in training, in network resources) is also high. * In my view, most who have looked to enter the DM market (such as Digicash, Mark Twain Bank, etc.) have shied-away from precisely the areas where untraceability meets a real market need. Most people don't care much about untraceability of tiny transactions (examples abound--even in my own case, I use my bank cards for nearly any purchase that is not small change). * But to release a product which meets these needs is to invite real trouble! (I met with two of the founders of Zero Knowledge entering the "untraceable mail" business several years ago. I outlined cases including users threatening the PM of Canada and of extortionists threatening to blow up a plane. And child porn. I argued that a company with a readily identifiable nexus of operation in a major city could not survive such uses...the archives contain a discussion of what we talked about.) * Note that "acceptable use policies" and "account cancellation" don't work for untraceable mail systems (except maybe after the fact, where a nym can be cancelled...not a huge obstacle when nym reputations are transferrable and where nyms are purchasable for $10 each per year, or somesuch...note that I'm not saying I liked the account orientation of Freedom Net, but even with their system the threat of account cancellation for violations of acceptable use policy was not terribly useful in this context). A digital money system where the DM may be "cancelled" will not fly. For various reasons. (Imagine your bank telling you that if they think you are violating their use policies they may simply seize your money and you'll be out of luck.) OK, again, where is this going? * It may be that pioneers in this area just won't be able to make any money. This is not new. Many discoveries did not enrich the discoverer. Sometimes they were recognized in their lifetimes, sometimes not. James Watt did not hold back on revealing his steam engine until he was assured that he would dominate the market. (Actually, James Burke used to do a lot of episodes on guys like Watt. I've forgotten whether or not Watt ever made a lot of money off of his invention...but I do know that the major steamship and machinery companies of the 1800s were not named after James Watt.) I believe David Chaum probably should have skipped the idea of having a company of his own and developing products which used his blinding techniques. He was already wealthy (and self-financed much of Digicash, as I understand the story, losing a lot of his own money in the process) so he could simply have licensed the patents and watched the fireworks. For those who really want to be the next Bill Gates, look elsewhere. There may be some bucks to be made, but with many problems. Even with some as relatively straightforward as PK crypto, it was touch and go for many years with RSA Security (according to my talks with Bidzos, and discussed in Levy's book "Crypto"), and it was fortuitous that a) software patents had just gotten rolling in time for them to capitalize on the confusion, and b) the rise of the Web in the mid-90s and the dot com boom happened in time for them to get rolling. (I don't follow their finances at all, so I don't know how well their business is doing.) Maybe the dot com crash is the best thing to have happened to our little community. Several years ago it seemed that everyone at a CP meeting was talking about the latest start-up company, or joining one, or starting one themselves. Now, things have come back to reality. And the reality is that someone or some group will combine enough protocols and algorithms, whether they are patented or licensed or not, and release a working DM system. Perhaps tied to an offshore bank, perhaps to something like PayPal, for redemption. And if they are smart, they'll stay anonymous. They for sure will not be a U.S.-based company, not if they are doing the things we want to see done. --Tim May