Cryptocurrency: Early Game Theory

[grarpamp]

For those missed it all...


https://bitcoinmagazine.com/culture/bitcoin-is-teaching-realism-to-libertarians-an-interview-with-old-school-cypherpunk-vinay-gupta-1415220752

   Bitcoin is Teaching Realism to Libertarians:
   An Interview With Old-School Cypherpunk Vinay Gupta

     * Author: Aaron van Wirdum
     * Publish date: Nov 5, 2014

   As an old-school cypherpunk in the 1990s and one of the most active
   members of the E-gold community before this centralized precursor of
   Bitcoin got shot down, futurologist Vinay Gupta has been involved with
   digital currency for over fifteen years. He has also worked with the
   United States Departement of Defence on disaster relief and state failure
   issues, and helped develop CheapID, a genocide resistant biometric ID card
   for the NSA. He later turned his attention to global disaster prevention,
   and invented the Hexayurt: an open source dirt-cheap disaster relief
   shelter design which is used today in refugee camps and at festivals like
   Burning Man. Gupta has been appointed as the strategic advisor of the
   Ethereum communications team shortly before the publication of this
   interview, but he is probably best known within the Bitcoin-community for
   his interview-snippet from the upcoming IamSatoshi documentary, in which
   he discusses the politics of Bitcoin...

   Vinay, first of all, you describe yourself as a "global resilience guru".
   How resilient is Bitcoin?

   Well, if the Internet goes away, Bitcoin goes away, right? So it's
   vulnerable in the same way that civilization itself is vulnerable.

   But if civilization breaks down, almost any store of value becomes useless
   very quickly. It's not really clear that large piles of wealth sitting
   there actually exist without the state to protect them. That's easy to see
   for copyright and patent, but the same is true for most other passive
   types of ownership, such as stocks, bonds or futures. And we could go
   further. I own the house I live in, but that house next door that I'm
   renting to you? The reason it's mine, is because the state says it is. The
   ability to do large scale capital accumulation without having to need a
   private army is basically an artefact of pre-existing law.

   Some people prefer gold over Bitcoin, but even if you own a lot of gold,
   and civilization breaks down, you'll need people to guard your gold. And
   in all probability the people guarding your gold will end up owning your
   gold. Either a little bit at the time by guarding it, or all at once by
   dis-intermediating you from the gold shed. So because of the need of
   physical force to protect it, you could argue that gold is actually more
   vulnerable than Bitcoin. Because if the Internet goes down and stays down,
   something so bad has happened that it's probably gonna be machine guns on
   street corners.

   What about Bitcoin's resilience in regard to the state itself?

   Right, resistance to state interference... That's a really bold claim. I
   sort of need to see extraordinary evidence for things like that, because
   bluntly, the security state invented this stuff. It's fundamentally their
   kit. Most of the mathematics, most of the algorithms, most of the
   hardware, the internet itself, all these things are spin-outs of defence
   projects.

   And remember, we really tangled with these guys in the 90's. Public key
   cryptography was regarded a weapon of war back then. The American
   government was really friggin' pissed off at us, and did as much damage as
   they could within the law. Constant harassment, legal pressure, people
   lost their jobs... the whole thing was constantly on the verge of
   everybody ending up in jail as far as we could tell.

   Note that that is no longer true...

   Are you suggesting the cryptography underlying Bitcoin is compromised?

   Making the jump to saying Bitcoin is compromised is too far. But if you
   don't think of this within the very narrow parameters of cypherpunk
   history, if you put it in the larger scale of political struggle, then
   what did the US government do to every substantial opposition group? The
   American Indian movement: smashed with a hammer, you've probably never
   even heard of it. Black Panthers: smashed with a hammer, all that's left
   are the Crips and the Bloods. US peace movement: people will tell stories
   about going to meetings, and a third of the attendees were spies from
   different agencies. State, federal, local, FBI, CIA, DEA...

   You don't need to be a rocket scientist to figure out that the government
   has the vast majority of the cards on the table when it comes to force,
   and they're choosing to lay absolutely none of them on the
   crypto-community right now. Silk Road and all of the other drug trade
   sites that use Bitcoin would absolutely, without any shadow of a doubt,
   provide the legal reason for killing the Bitcoin-network and arresting
   everybody involved. Do everybody for drug trafficking, money laundering,
   all the rest of that stuff. But they've decided to better leave it up than
   to take it down.

   So you've got to ask yourself: why?

   Well... why?

   I don't know.

   But the idea that we right now have a relatively small group of
   crypto-Jedi, that are so much better at this stuff than the people who
   invented it, and as a result are gonna bring peace and liberty for all on
   earth... Really?! I'm not buying it.

   I don't think Bitcoin is necessarily the existential threat to the
   existence of the state as Tim May's old Cyphernomicon would have you
   believe it is. It is likely, however, that government without Bitcoin
   could very easily slide all the way into the establishment of total
   control over transactions by getting rid of cash and everything else.

   The ecological function of dissent inside a complex society is not that
   the dissent immediately takes over. It's that the dissent stabilizes the
   core within safe temperature parameters. With Bitcoin in the system,
   there's every chance that if you really try and clamp down on society,
   more and more and more of the stuff will resort to Bitcoin, and it becomes
   harder and harder and harder to credibly lock the doors. You can imagine,
   for instance, how Bitcoin might have accelerated the fall of the Soviet
   Union if it had existed in the 1980s, just because it would have made the
   black market so much more powerful than the government in all kinds of
   ways.

   So Bitcoin serves a protective function, a balancing function that didn't
   exist before. And that does not require any extraordinary claims about its
   security against the NSA.

   And the US government will be alright with this kind of re-balancing?

   Well... Wall Street's arrived. Wall Street on one side, Silk Road on the
   other. It's the 1980's all over again!

   We need Wall Street?

   I'm not saying we need Wall Street, but what I am saying is that the
   financial markets and the drugs guys have been in bed together for a very
   long time. And the fact that the current venue for that kind of thing
   actually happens to be Bitcoin, you know... the US government did not go
   around shooting everybody from Wall Street in the 1980s when it was
   cocaine and suitcases full of cash used to finance leveraged buyouts, now
   did it?

   My suggestion for Bitcoin would be to integrate Wall Street as fast as
   humanly possible. Teach the Wall Street guys how to use proper
   cryptography, teach them how to use blockchains, teach them that the state
   is not always their friend, and teach them that they should be thinking
   about engineering around it. If Bitcoin is gonna drift into Wall Street,
   let's teach them some of our bad habits. Let us make them like us, rather
   than us becoming like them.

   Many bitcoiners would rather not see Wall Street involved at all, in order
   to preserve Bitcoin's promise of freedom...

   Well, that kind of utopian vision, unfortunately, is total horseshit for
   Bitcoin. There are three problems: natural monopolies, cartels, and power
   law distributions of wealth.

   Bitcoin-mining is specialized by groups with heavy technological
   capability and enough financial strength to get custom hardware made.
   These miners have now pooled their computing power together because it
   evens out their earnings, effectively minimizing their risk. In the case
   of Ghash, this even puts them perilously close to the 51 point for control
   of the blockchain. This is cartel power.

   Meanwhile, the distribution of bitcoins seems to replicate the current
   situation where 300 billionaires control the same amount of wealth as
   three billion poor people. This is partly because of early adopter
   dynamics and the increasing hardship of the mining process, but there's
   also some evidence that power law distributions of wealth is just what
   happens in unregulated economies. This is a point many libertarians would
   argue against... but we're doing the experiment right now, and there's
   every indication that the basic structures of libertarian economics do
   push into that direction.

   And then you have the Bitcoin Foundation, which is emerging naturally from
   the Bitcoin environment simply because it has established an economically
   efficient configuration. By paying the technical priesthood of Bitcoin
   known as the Core developers, the Foundation has created a huge amount of
   centralized power within a system that didn't really start with any, which
   has now effectively turned it into a natural monopoly. And once you have a
   monopoly, it looks like a state. No wonder that the Bitcoin Foundation
   looks so frightening.

   If you don't like the Bitcoin Foundation, you could start a new one, right?

   Sure, absolutely. Just like you could start a new river Thames. Have a
   shovel. Start digging.

   Look, every type of complex system needs indexing, and while
   decentralization is very resilient, it is also very expensive and
   inefficient. So indexes tend towards being singular. A single Yellow
   Pages, a single phone book... Two is much less useful than one, because
   with one it's either in the book or it's not.

   Plus, complex systems often require centralized accountability in order to
   function properly. Get fifty people in a room, get them to organize some
   sort of task, somebody will wind up acting as a routing hub, that person
   now turns into a de facto leader.

   "Natural" in natural monopoly doesn't mean good, it just means that it's
   an economically efficient configuration.

   But we could start a new Bitcoin Foundation...

   We could. But even if it is efficient, we'll have replaced one corruptible
   structure with another corruptible structure.

   "We've picked a new set of bureaucrats, and we've done so very carefully,
   they work for us. Today. Tick... tick... tick... Wow these guys are kind
   of jerks... Tick... tick... tick... Can we get rid of them? Maybe we
   should start a third Foundation!"

   Right? No progress. Doesn't work.

   How about a "one bitcoin one vote" arrangement for Bitcoin-development,
   like you've suggested before, or a crowdfunding platform such as Mike
   Hearn's Lighthouse?

   "One bitcoin one vote" arrangements for Bitcoin could certainly dilute the
   natural monopoly of the Bitcoin Foundation, and a bounty-based scheme such
   as Lighthouse probably has similar dynamics in practice. These are both
   definitely better solutions than an unaccountable natural monopoly running
   the development process.

   But they do make Bitcoin a society in which the rich can use their
   accumulated wealth to pay the costs of changing the rules of the game to
   favour them even further. That's a problem if you want freedom.
   Winner-keeps-winning games eventually result in misery all the way along
   the long tail of poverty. Reify property as the core of politics, and
   you'll eventually wind up as slaves again.

   So you don't really consider these solutions fair either?

   What I'm saying is that we can't even really define fair. So if we can't
   define fair, and we've got a pretty hard time defining free, all that
   happens is that every time we build systems they run off the rails.

   What a lot of these Bitcoin-kids don't realize, is that they're playing
   with nuclear weapons. They're taking the full force of this creation, this
   mathematical lightsaber, and they're swinging it around in a small room
   filled with young children. If you wind up in a situation where these guys
   win, where Bitcoin actually displaces the dollar and becomes the global
   reserve currency, every cut corner and every political error in their deep
   thinking will become the new chains that bind humanity. And the existing
   chains are only made out of the will of the state. These new chains are
   made out of mathematics, and they are a hell of a lot harder to break.

   You sound pessimistic.

   The primary function of Bitcoin, the long-term political value of this
   experiment more than any other single factor I can identify, is that it's
   teaching realism to libertarians.

   Libertarianism simply does not prevent the establishment of monopolies,
   cartels, or power-law distributions of wealth. Never has, never will.
   Libertarians needed to see that happen in order to understand that their
   ideology is actually not going to protect them against centralized power.

   Now they will need to decide: did they want libertarianism, where property
   is used to divide everything? Or did they want anarchy, where it's our
   inherent human nature that gives us freedom, not our property rights.

   If these libertarians would be good enough to grow the hell up and become
   anarchists like normal people, then perhaps they would start to get
   serious about controlling centralized authorities rather than fantasizing
   that they will cease to exist.

   How would you suggest we move forward?

   First of all, what I would like to see, is a very serious, large scale,
   political analysis project, to really try and figure out what the hell is
   going on. We need to start out-thinking states and government agencies
   rather than just outbuilding them. We've gotten pretty good at this idea
   that with enough eyes all bugs are shallow - that's the classic saying
   about open source security. But we now have a new set of security
   problems, which is not about finding bugs, but about analysing motives. So
   we need lots of eyes analysing motives, finding out whether or not we're
   basically shooting ourselves in the foot here. I don't see any reason why
   that shouldn't be another large scale open source project, like Wikipedia.
   An open intelligence agency, that publicly does the risk and threat
   analysis, publishes the results, is open to feedback, and builds a
   realistic study of what kind of exposure we have to these bastards. Very
   much like STRATFOR, but for the open source community.

   And the second priority - after integrating Wall Street - is taking all of
   the money that people are making in the Bitcoin system, and using it to
   build the friggin' successor. Everybody thought Bitcoin was gonna bring
   them freedom and liberty, but what it has brought them are three different
   kinds of entrapment. Let's take these lessons, and make a Bitcoin that is
   useless to Wall Street, that doesn't automatically create a cartel of
   miners, and that doesn't leave a power vacuum for development which some
   Foundation will fill.

   And I want to emphasize: this is super clearly a social problem. Not a
   technical one. You need to build a social understanding that can finance
   the technical development in order to deliver the software you want. And
   make no mistake: a system that solves this problem effectively is a
   government.

   I do believe this is entirely possible. In the same way that you've got
   the eBay mafia - a bunch of guys that got rich off inventing eBay and went
   on to build new amazing things - and the PayPal mafia - a bunch of guys
   that got rich of inventing PayPal and went on to build new amazing things
   - we've now got a huge Bitcoin mafia that's got buckets full of money...
   So where are my amazing things? Go forth! Conquer! Go out and make the
   world amazing!


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Interview: Teaching Bitcoin With @AnilSaidSo

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https://bitcoinmagazine.com/articles/bitcoin-millionaire-announces-winner-100k-bounty-1404348036
https://bitcoinmagazine.com/tags/interview
https://en.wikipedia.org/wiki/E-gold
https://guptaoption.com/cheapid/
https://hexayurt.com/
https://www.cypherpunks.to/faq/cyphernomicron/cyphernomicon.html
https://www.youtube.com/watch?v=FHFSvttMg6E
https://www.youtube.com/watch?v=sX-9Cyk1nkM