(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@delphi.com> Subject: Crypto & Taxes To: cypherpunks@toad.com Message-Id: <01H7M5G3SZHU99DOWQ@delphi.com> X-Vms-To: INTERNET"cypherpunks@toad.com" Mime-Version: 1.0 Content-Type: TEXT/PLAIN; CHARSET=US-ASCII Content-Transfer-Encoding: 7BIT ssandfort@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@toaster.SFSU.EDU (Frode Odegard) Message-Id: <9401130805.AA21044@toaster.SFSU.EDU> To: cypherpunks@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@shell.portal.com> Message-Id: <199401131717.JAA18739@jobe.shell.portal.com> To: cypherpunks@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@ah.com (Eric Hughes) Message-Id: <9401131741.AA20358@ah.com> To: cypherpunks@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@chaos.bsu.edu> From: Anonymous <remailer-admin@chaos.bsu.edu> To: cypherpunks@toad.com X-Remailed-By: Anonymous <remailer-admin@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@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@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@andrew.cmu.edu> Date: Thu, 13 Jan 1994 14:08:06 -0500 (EST) From: Matthew J Ghio <mg5n+@andrew.cmu.edu> To: cypherpunks@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.