Underestimating long-term consequences of cryptoanarchy

[Tim May]

On Friday, May 2, 2003, at 07:05  PM, Steve Furlong wrote:
> I'm not as confident of crypto's chances of destroying the state and
> leaving the parasites out in the cold.

I don't recall many discussions here about _timetables_ for such 
developments. Certainly I don't think _I_ have been so foolish as to 
say "Real Soon Now" or "Surely by the Year 2010!"

Recall that Vinge's "True Names" was set at some indeterminate time in 
the future. Judging by the power of the computers, and modulo the fact 
that he wrote it in the 1970s, probably no earlier than 2030. But he 
was also careful not to specify the time.

Likewise, "Ender's Game" took place far into the future.

Which is not to say that science fiction novels determine the schedule! 
But it lends support to my claim that few, if any, of us would be so 
foolish as to predict when the full implications of strong crypto would 
have a major effect on governments.

Arguably, some effects have been felt for years. And just as arguably, 
some other effects (notably digital money) seem to be further off now 
than they seemed to be when Digicash was still in existence.

The nice thing for libertarians and anarchocapitalists about working on 
these sorts of ideas is that it beats the alternative: going to 
Libertarian Party conventions and trying to convince neighbors to vote 
for more liberty.  Or, as too many good technical people have done, 
becoming lawyers. (Some of the skills are the same: the ability to 
absorb a lot of seemingly-unrelated facts, the ability to argue 
logically, and sometimes even an ideological edge. But since most 
lawyers don't end up working on cutting-edge constitutional issues, and 
since the constitutional issues are generally not moving in a 
libertarian direction despite the efforts of cypherpunks-friendly 
lawyers and scholars, I personally see going into "the law" as throwing 
one's life away.)

I believe the great social and economic changes in history, affecting 
people and government and nations, have been largely technological. 
Geography is important, of course, too. But technology is something we 
can change, so this is what humans should focus on.

These technological changes are obvious: metal-working, writing, 
weaponry, plumbing, the printing press, the steam engine, 
interchangeable parts, electrification, and all of the various 
technologies of the 20th century, including the telephone, television, 
birth control pills, and so on.

The printing press is one of my favorite examples, as it illustrates 
how the "triad" of technology, law, and culture (similar to Larry 
Lessig's triad...I think we developed these ideas independently, but I 
haven't chased down who wrote what first) is "tipped" by major changes. 
The Church and State, circa pre-Gutenberg, "owned" certain types of 
knowledge, blessed by the medieval guilds: silversmithing, 
leathermaking, etc. The royal patents were conferred based on 
kickbacks, tithing, family connections, etc. Those who violated the 
patents of the guilds faced various kinds of punishment, I suppose up 
to and including death. Sort of like the Mafia stopping independent 
producers of porn from producing movies (a friend in LA had this happen 
to him).

Now the "lawyers" of that age might have argued in courts (such as they 
were) that the power of the guilds should be broken, that greater 
economic prosperity would result from breaking the guilds.

But little changed.

Then came printing (movable type). While the first books printed were 
the obvious ones: hymnals, bibles, and other religious tracts, the 
printers began to print "how to" books. Not consciously "Toolmaking for 
Dummies" books, and not consciously "How to Undermine the Power of the 
State by Building Your Own Waterwheel," these books were nonetheless 
early how-to guides. Booklets on technology, on minerals, on all sorts 
of things a farmer might want to know. For the first time, knowing how 
to read was a useful skill.

Perhaps someone predicted the long-term implications of what this 
spread of knowledge would mean. (Maybe Nostradamus was influenced this 
way...I haven't looked for evidence.)

Someone trying to set a timetable for the sweeping changes would likely 
have not gotten it right.

As someone wise once said, we tend to overestimate the short-term 
consequences and underestimate the long-term consequences.

In the case of printing, the result over the following century or two 
was a rise in literacy rates (in the common languages, and this is when 
German, French, and English, for example, largely solidified into their 
current forms, viz. the Luther Bible, the King James Version, etc.). 
And the Protestant Reformation was built on printed words and on the 
people's ability to directly read the religious texts.

A technology undermined the state and the church.

This was repeated several more times, with samizdats undermining the 
power of the state in the USSR, with cassette tapes circulating in 
Shah-led Iran, with videotapes widely available even where banned in 
Islamic nations.

And e-mail, of course. E-mails to and from the dissidents in Beijing. 
Repeated around the world.

Strong crypto, of course, offers the opportunity for a complete 
bypassing of controls (more than just ciphers are needed, of course, as 
stego must be strong, as remailers must be compensated, and so on).

Will the effects be that corner grocery stores are converted into 
cryptoanarchist data havens? Of course not.

People will continue to buy and sell goods in their physical world, and 
this will continue to be a nexus of control and taxation. (Just as 
taxing land became more important after taxing knowledge, via the no 
longer all-powerful guilds, became less important. Land remained a 
nexus of control and taxation, as it does today. My property taxes 
attest to that, and will not be going down in my lifetime!)

So, what changes may happen? Will enough tax evasion happen via 
cryptoanarchy to make the people fed up and thus give rise to a 
"tipping point"? (As the Reformation arguably was, with enough people 
fed up with the selling of indulgences and having the ability to read 
the religious words themselves.)

And so on. I could ask about a dozen speculations of what might happen.

But the point is not to predict some withering away of the state. The 
point is that unfettered communication, with the already-extant ability 
to use all sorts of alternative financial instruments (offshore 
accounts, PayPal, E-gold, etc.), is already producing interesting 
changes in the way the world works.

More such changes are likely. When, I don't know.

It could be that 5 years from now we'll be looking back a year or two 
to the rise of a digital cash company which is having the same success 
E-Bay had and saying "We knew it was coming."

(In fact, friends of mine, the late Phil Salin and his colleagues at 
AMiX, had essentially identical plans for an auction service. And this 
was as early as 1987, as I did some consulting for Phil in late '87 and 
into '88. Their company was funded by Autodesk and they rolled out a 
version of their auction service in 1990-91. This was before Net 
connections were widely available--and commercial use of the Internet 
was still problematic--and their system had some problems, like glacial 
slowness. Also, instead of concentrating on a pure classified ads 
model, with people selling their used ski equipment and Pez dispensers, 
they concentrated on people selling their knowledge, their consulting 
expertise. This was a mistake. But had Autodesk not decided to disband 
both Xanadu (hypertext) and AMiX, they had a reasonable shot at being 
the company E-Bay became several years later.)

But, getting back to this 5-year "prediction," I don't expect any 
widespread digital money system in the next few years. Too many 
regulatory hurdles (and regulators can slow things down, even if the 
long-term trends are not in their favor). The current police state, the 
U.S. sitting astride the world, giving orders. The money laundering, 
terrorism, treason focus of prosecutors.

As you say:

> It's just as likely that the
> government(s) will declare all crypto illegal, except that necessary
> for the protection of their own secrets. Digital money is right out, of
> course. All in the name of anti-terrorism, or the War on Some Drugs, or
> for the chiiiiildren. Powerful computers, strong crypto, and big
> databases can lead either to anarchy or to an unstoppable Big Brother.
> Too close to call, right now.

The important thing is to not become so attached to a specific 
prediction, or, worse, to a timetable, that one becomes discouraged.

Oh, and to repeat something I have said many times, I think starting a 
company based on some imagined schedule for adoption of digital money 
is a disaster. I could be wrong on this, and I even hope someone proves 
me wrong, but I don't think I am.

("And in Year 3 of our business plan, the world converts to Digital 
Anonibucks (TM) and we all become wealthy.")

Better to view digital money technologies as bits and pieces of 
technology which will be gradually adopted and used by others. The 
money will probably be made by folks who are qualified to work as 
engineers and programmers in other companies.

Which is not to say people should not be thinking about forming small 
companies to do interesting things. Whether in digital money or data 
havens or timestamping, niches will exist. (But most of the people in  
the world don't see any particular need for these technologies--the 
technologies don't _yet_ do anything for them, and people don't usually 
make huge efforts purely for ideological reasons...especially when the 
ideology is not even theirs.)

I expect early adopters to be in the "illegal" markets: pornography of 
various kinds (the most illegal kinds), on-line betting, information 
selling (a la BlackNet), and tax evasion. For mundane uses, people are 
happy giving credit card numbers and using relatively weak protocols 
like PayPal (for convenience, not security).

But I've written about this in other articles, so no need to get into 
it here.

The bottom line is this: we tend to overestimate short-term 
consequences and underestimate long-term consequences. So don't give up.


--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