One of the last aspects we chose to look at in our attempt to visualize bitcoin was its relationship to governments. (if you want to read through the entire series here are the previous 1 2 3 4 articles).
In our data visualization, areas that relate loosely to regulation and governments come down to:
Bitcoin is often described as the result of combining several pre-existing technical concepts together to form something new, or as a solution to previously unsolvable problems (byzantine generals’ problem, double spend). However, these two explanations, while perfectly valid, do not necessarily do justice to what bitcoin is or fail to explain why some technical ideas find a use or a market when other perfectly viable technical novelties never seem to take on.
The reference document for bitcoin is Satoshi’s original whitepaper, bitcoin: a peer-to-peer electronic cash system. I say reference, because people keep coming back to it to explain what bitcoin is, what the objective behind bitcoin is and what Satoshi really envisioned when he created it. Now maybe one of the reasons for this constant need to go back to the white paper is that the motives behind the creation of bitcoin aren’t that detailed in the paper itself.
Removing the middle-man
Making payments, not having to use a middle-man in the form of financial institutions, enabling non-reversible transactions, limiting transaction costs, protecting participants from having to divulge more information than needed when transacting, limiting fraud. Such a summary of the key elements in the abstract & introduction of the white paper will give you a nice list of features, but it certainly isn’t a comprehensive philosophy or political program.
Now it seems it will be extremely difficult to know what Satoshi had in mind when creating bitcoin because, he, she or they have since disappeared, but maybe there are other places that we need to look at and maybe the story is bigger than bitcoin itself, or at least than its technical components.
Cryptographers & Cypherpunks
“Bitcoin’s earliest adopters were libertarians, cryptographers, and coders attracted by the idea of money that could operate without government oversight. They liked the idea that people could exchange bitcoins without knowing or trusting one another.”(MIT Technology Review article)
Looking at some of the emails that were exchanged around that time in the Cryptography Mailing List, or at the references in the bitcoin white paper, help us in understanding some of the ideas that were floating around when the source code was first produced.
Hal Finney — Recipient of the 1st bitcoin transaction — from the cryptography distribution list mail archive:
“Bitcoin seems to be a very promising idea. I like the idea of basing security on the assumption that the CPU power of honest participants outweighs that of the attacker. It is a very modern notion that exploits the power of the long tail. When Wikipedia started I never thought it would work, but it has proven to be a great success for some of the same reasons.
I also do think that there is potential value in a form of unforgeable token whose production rate is predictable and can’t be influenced by corrupt parties. This would be more analogous to gold than to fiat currencies. Nick Szabo wrote many years ago about what he called “bit gold” and this could be an implementation of that concept. There have also been proposals for building light-weight anonymous payment schemes on top of heavy-weight non-anonymous systems, so Bitcoin could be leveraged to allow for anonymity even beyond the mechanisms discussed in the paper.”
It is interesting to see that a few months before the first bitcoin transaction was ever conducted its contours were so vague for some of its first users. Bitcoin could be an implementation of concepts (here bit gold cited) that had already been written years ago. The bit gold idea came from the fact that trusted third parties were a problem.
Hal Finney was a well-known cypherpunk, the activists who were fervent advocates of cryptography as a way of establishing privacy. That name was given to them by Jude Milhon or St Jude, a senior editor for the Mondo 2000 magazine, when she put together the terms cipher (in cryptography the algorithm used for encrypting or decrypting information) and cyberpunk which was en vogue at the time.
Now cypherpunks were a little clearer about their beliefs and aspirations.
“Here we are faced with the problems of loss of privacy, creeping computerization, massive databases, more centralization — and Chaum offers a completely different direction to go in, one which puts power into the hands of individuals rather than governments and corporations. The computer can be used as a tool to liberate and protect people, rather than to control them.” — Finney would write on the Cypherpunks Mailing List in 1992. (From Finney’s Wikipedia page)
Cypherpunks were concerned about the evolution of the world, the lack of privacy, the centralization of state powers and mass surveillance, and were very influenced by libertarian concepts. All these beliefs are made abundantly clear in the manifests that defined what crypto anarchy and Cypherpunks are in the early 90s.
Indeed, in a matter of three years, came out Tim May’s Crypto Anarchy Manifesto (1992), Eric Hugues’ Cypherpunk’s Manifesto (1993) and the Cyphernomicon (1994) which is perhaps the best source of information on this movement and makes it abundantly clear where Cypherpunks were coming from: (Cyphernomicon is written as an FAQ)
“2.4.5 It’s very easy to get lost in the morass of detail here. Are there any ways to track what’s *really* important?
Second, read the sources. Read 1984, The Shockwave Rider, Atlas Shrugged, True Names. Read the Chaum article on making Big Brother obsolete.” (Cyphernomicon)
Some of the books listed in the Cyphernomicon seem to have been hugely influential or the cypherpunks, and overall on the larger tech scene. Ayn Rand’s Atlas Shrugged, or the Fountainhead have been cited by so many figures from the Silicon Valley for example. But some of the concepts that are so important for the cypherpunks are far from new.
“It is the highest impertinence and presumption… in kings and ministers, to pretend to watch over the economy of private people, and to restrain their expense… They are themselves always, and without any exception, the greatest spendthrifts in the society. Let them look well after their own expense, and they may safely trust private people with theirs. If their own extravagance does not ruin the state, that of their subjects never will.” (Adam Smith — The Wealth Of Nations, Book II, Chapter III, p.346, para. 36.)
What was a great source of hope however, was that anyone could now potentially have access to the tools necessary to empowerment.
“The technology for this revolution — and it surely will be both a social and economic revolution — has existed in theory for the past decade. The methods are based upon public-key encryption, zero-knowledge interactive proof systems, and various software protocols for interaction, authentication, and verification. (…) But only recently have computer networks and personal computers attained sufficient speed to make the ideas practically realizable. And the next ten years will bring enough additional speed to make the ideas economically feasible and essentially unstoppable.” (Crypto Anarchy Manifesto)
“Privacy is necessary for an open society in the electronic age. Privacy is not secrecy. (…) Privacy is the power to selectively reveal oneself to the world.”
“privacy in an open society requires anonymous transaction systems”
“Privacy in an open society also requires cryptography”
“We cannot expect governments, corporations, or other large, faceless organizations to grant us privacy out of their beneficence. It is to their advantage to speak of us, and we should expect that they will speak. To try to prevent their speech is to fight against the realities of information. Information does not just want to be free, it longs to be free. Information expands to fill the available storage space.”
“We must defend our own privacy if we expect to have any.”
“We the Cypherpunks are dedicated to building anonymous systems.”
“Cypherpunks write code.” (A Cypherpunk’s Manifesto)
What made the sometimes-old aspirations of the Cypherpunks possible, was the advent of cyberspace and the generalization of personal computer technologies and networks.
While the first description of cyberspace might have been given by Vernor Vinge in True Names, its most defining moment was surely A Declaration of the Independence of Cyberspace, which was written by John Perry Barlow in February 1996 in which cyberspace is defined as “the new home of Mind”, which “does not lie within your borders” (the traditional governmental borders) calling upon the “dreams of Jefferson, Washington, Mill, Madison, DeToqueville, and Brandeis. These dreams must now be born anew in us” in order to form “our own Social Contract”.
Brandeis, a lawyer and supreme court judge for example is widely known for developing the concept of “right to privacy” in an eponymous article he wrote with Samuel Warren for the Harvard Law Review.
“The right to privacy ceases upon the publication of the facts by the individual, or with his consent.” (…) Each man is responsible for his own acts and omissions only. If he condones what he reprobates, with a weapon at hand equal to his defence, he is responsible for the results. If he resists, public opinion will rally to his support. Has he then such a weapon ? It is believed that the common law provides him with one, forged in the slow fire of the centuries, and to-day fitly tempered to his hand. The common law has always recognized a man’s house as his castle, impregnable, often, even to its own officers engaged in the execution of its commands. Shall the courts thus close the front entrance to constituted authority, and open wide the back door to idle or prurient curiosity?” (S. Warren & L. Brandeis — The Right to Privacy)
Barlow, a founding member of the Electronic Frontier Foundation and of the Freedom of the Press Association was also a member of The WELL (The Whole Earth ‘Lectronic Link) the virtual community (the term virtual community was coined by Howard Rheingold in his book of the same title in 1993 in which he describes his activities in The WELL) created by Steward Brand, where he reportedly first met John Gilmore.
Helping it all come together
“I am fascinated by Tim May’s crypto-anarchy. Unlike the communities traditionally associated with the word “anarchy”, in a crypto-anarchy the government is not temporarily destroyed but permanently forbidden and permanently unnecessary. It’s a community where the threat of violence is impotent because violence is impossible, and violence is impossible because its participants cannot be linked to their true names or physical locations.”
“Until now it’s not clear, even theoretically, how such a community could operate. A community is defined by the cooperation of its participants, and efficient cooperation requires a medium of exchange (money) and a way to enforce contracts. Traditionally these services have been provided by the government or government sponsored institutions and only to legal entities. In this article I describe a protocol by which these services can be provided to and by untraceable entities.” (B-Money)
Wei Dai, in his 1998 white paper B-Money, clearly indicated that he believed some sort of electronic currency not minted by a government was necessary for the concrete realization of the Cypherpunks’ vision. B-Money isn’t the only project designed to build a working electronic currency, many have existed in the past, but none had managed to be successful until bitcoin appeared. As a matter of fact, in the introduction to the Bitcoin and Cryptocurrency Technologies book, the authors list almost a “hundred cryptographic payment systems, both e-cash and credit card based technologies, that are notable in some way” (book), although surely not all had the same motives behind their creation.
Governments will fight back
Bitcoin isn’t even ten years old. Yet it has risen from relative obscurity in its first years of existence to something that you will hear about daily if you pay attention. While definitely not mainstream, most people have heard the term and now it somehow relates to money.
Some believe that the rise of crypto anarchism is an enabler of citizen empowerment, through the tech that is being built, the concepts that are being invented or the fights that are being led.
“The rise of crypto-anarchism might be good news for individual users — and there are plenty working on ways of using this technology for decent social purposes — but it’s also bad news for governments. It’s not a direct path, but digital technology tends to empower the individual at the expense of the state.”
“Crypto-anarchists build software — think of it as political computer code — that can protect us online. Julian Assange is a crypto-anarchist (before WikiLeaks he was an active member of the movement’s most important mailing list), and so perhaps is Edward Snowden. Once the obsessive and nerdy kids in school, they are now the ones who fix your ransomware blunder or start up unicorn tech firms. They are the sort of people who run the technology that runs the world.” (The Guardian — forget far right populism — crypto-anarchists are the new masters)
Governments across the globe seem to have determined over the past few years that they can’t really ban bitcoin, as it would be extremely difficult to determine who holds bitcoin, and definitely too expensive to enforce. However, what they have been able to control so far was their own currency and all exchange platforms now must carry out AML/KYC checks which forces them to verify the identity of all individuals using their services. Bitcoin and all other crypto-currencies are also taxed, under different regimes depending on what country you live in or who you talk to.
However, much of the story remains to be written and technology has proven in the past to move at an extremely rapid pace. Where this leads at this stage is probably anyone’s guess, although the recent recognition of bitcoin as a legal payment method in Japan seems to open the door to other countries following that path. Knowing how important privacy is for the cypherpunk community though, you can only imagine that huge efforts will be undertaken to better protect the identity of users as well as any transactional information that would compromise privacy.
A story that remains to be written
All major technology changes are induced by the joint action of production-ready technology and the maturing of certain sociological conditions necessary for the technology to find its users.
Bitcoin, whether its creator intended it to or not (and that is not necessarily important to know) carries an important political project.
“How the tech vanguard turned public-key cryptography into one of the most potent political ideas of the 21st century.” (http://projects.csmonitor.com/cypherpunk)
If the terms political project bother you, call it a vision for society. Bitcoin carries a vision in which people are free to conduct their own business, with anyone who they might chose, whether they know that person or not, whether they trust that person or not and whether they live in the same city or at the other end of the world.
While the internet was built on the promise of distribution and peripheral intelligence, bitcoin (or eventually other crypto-currencies) seems to carry the promise of peripheral independence.
If Code is law and architecture is politics
Maybe coding is activism.
Cypherpunks write code. (A Cypherpunk’s Manifesto)
And they are fighting for your privacy.