Coin Perspective #4 — Smuggler

David Stancel
Mar 4 · 19 min read

“What we want to do, is to create better systems and better systems usually are not patches to old systems, but they’re completely new systems.”

As it is already a custom, in early October, Bitcoiners, Cypherpunks, Crypto-anarchists, and tech aficionados get together at Hackers Congress at Paralelní Polis in Prague to discuss cryptocurrencies, privacy & technology. I had a great privilege to be there and sit down with one of the most prolific thinkers and vocal personas within the Cypherpunk movement — Smuggler — to talk about his views on the cryptocurrency space and its evolution as well as various aspects of crypto-anarchy and the Cypherpunk movement. He also hosts, together with Frank Braun, a great podcast Cypherpunk Bitstream. The two are also behind a recently published idea of a post-blockchain digital currency called Scrit. You can follow Smuggler on Twitter.

What does it mean to be a Cryptoanarchist for you?

Cryptoanarchy for me is a strategy for getting more liberty. And specifically getting that by undermining the whole observation, getting evidence, and attribution aspect of the interaction with rulers. And so that is the theoretical part. And then there’s an emotional/spiritual part for me at least, at that is, I believe in secrets. And I believe in keeping secrets.

I believe that it is secrets that make humans individuals. It is only because there are secrets, that we have to communicate, it’s only because there are secrets that we have different levels of intimacy.

So, in a way, there’s a non-political part to the whole thing, and that has to do with being aware that we, and what we know, and what we do, is actually valuable. I think that people that have no secrets are unaware that they have value. I think that that is a huge part.

And then, of course, there’s an economic part and social part, it’s good for competition, you have to be able to protect your trade secrets. It is good for the social, because if everything is out in open, everything is judged and everybody is just trying to conform, which is really bad because there’s no innovation and there’s no diversity in opinion then. Which is something, I think, something that is nicely visible in politics these days. That you kinda have to subtract to certain opinions here or there, so that is the intellectual aspect of it.

The practical aspect of being a Cryptoanarchist, for me, is almost 18 years when I made my money exclusively by working in computer security and information management, which is not always tied only with computers. For me, it’s also the social aspect of my life, because I have a lot of friends that are Cryptoanarchists, some more than the other. And there’s also some activism going on, so that’s what I think about relatively a lot. So that is what it means.

Paralelni Polis
Paralelni Polis

We are here in Paralelna Polis, which is focusing on building a parallel society, from your point of view as a Cryptoanarchist, is it acceptable also to kind of not only build new parallel solutions but also to try to change the old solutions?

I think that as Cryptoanarchists, building parallel systems is always great. Changing what is out there is not the Cryptoanarchist question for me. I have my other opinions, and nobody is just Cryptoanarchist, right? So there are more opinions than that people have.

And for me, politics in the sense of changing what there is, is a questionable endeavor. Because the system that exists out there is there because of a choice, or to be exact, because of millions of accumulated choices, and if the changes there we want to introduce, are too radical, too seldom, too quick, too whatever, they are indistinguishable from exercising rulership.

I think that if you tell the masses how they should live, you become a ruler. And that is not cool. So, I am a fan of the approach of saying ‘we build parallel systems and we invite people into them”, but not a fan of “we destroy what’s already there” — no matter how stupid it is.

I mean, there are of course things that are inherently evil, like deeply evil, and going against them — yes, no problem. But a lot of things are not that evil they’re choices for people and people rely on certain kinds of system, they think in a certain system and they want that system. And it’s not up to us to decide for them what their world should look like. And I think we have a lot of work already with building parallel systems.

I think that trying to change the world, the big system, patching it, is actually a waste of time in most cases. I think it’s far more efficient to spend and save energy into building parallel structures and then grow them.

Most changes, most right ideas are not spread by people being convinced, but by the old believers dying and the new believers becoming the majority. Like in the natural cycle. So there’s not much convincing going on.

How have your personal views of the cryptoanarchy movement evolved over time?

Yeah, they have. I think for me, the main evolution has been that in the beginning, it was a purely emotional and aesthetic endeavor for me. I had issues with authority. But for me, it was a highly interesting field of work, it was interesting people, it was fascinating stories, it was, you know, an adventure for a big part.

I would say that one of the things that really changed for me was becoming much more reflective of what I’m doing. Thinking much more about what it means in the long run, how to systematize thoughts about it, whatever.

So that is the big thing for me. When it comes to how the experience has changed, my first encounter with the Cryptoanarchist scene was contact with Cypherpunk manuals in the mid-90s or something like that. And knowing a few people that were involved with stuff and dealing with them, helping them, whatever.

So it was an online endeavor completely. And then, in the early 2000s, I ran my first Cryptoanarchist business basically, just to be shut down in the days after 9/11. And then getting involved in the Invisible IRC project and the digital currency environment.

That’s when I started to focus on new things. Before my focus was on very secure data storage and anonymous messaging. And then in 2003–2005 I started working in the digital currency scene. So Bitcoin wasn’t a thing back then.

And what happened also in that time is that I became a full-time Cryptoanarchist because I could actually live off work that I did in Cryptoanarchist projects, so I ran a hosting company, I ran digital currency projects — and I made my money there. And the connections I had with people became much stronger and in a way, the scene became my people. And so it became much more personal, I began to meet people in person, in real life, and stuff like that.

And then there’s this thing I kinda call the Cryptoanarchist winter, where the numbers didn’t grow, but shrank. For me that was most visible when the invisible RC project kinda shut down, there weren’t any public servers and that was bad for my little part of the community.

And then, what happened during that time as well was that I set out either the first or one of the first privacy-oriented VPN services. That was in 2004–2005, and for a long time most of what we did was just about online privacy at that point, because all the other aspects were kinda, there was no interest. There’s this joke, it’s of course not true, but there was this joke internally with us, Paul Rosenberg and me, we were working together, and there was this joke where we said: we’re the only two Cryptoanarchists left on the planet.

And then Bitcoin came along. And Bitcoin had the effect that a lot of people started to call themselves Cryptoanarchists, whatever they meant with that. I don’t think that what people today mean with the term has anything to do with what we meant with the term back then.

Or maybe it’s changing again, but in the beginning, it was not, and then yeah, the whole ride again — of new people, new conferences, new places, you know, all that. In parallel to all that, there was always a crew in Berlin — I think it started in 2011, where people like Frank Braun and me got together with about 10 other people and we began to work at a more like integrating the big Cryptoanarchist ideas also in a more physical way. That is where the Berlin Container TAZ (Tempoary Autonomous Zone) began.

Do you see now, the Bitcoin community as a successor of the Cypherpunk heritage?

No. I think that it can only be a successor in small parts. I think one of the things in which it is a successor, is that there is a certain enthusiasm to do things outside of state control. Which only applies to a small part of the Bitcoin community.

There are quite a lot of people within that community that want to have Bitcoin within the context of the state. There’s also the issue that the Cryptoanarchist ideas are much bigger than just Bitcoin or payment systems. And to be exact, I actually think that the early standards of the Cryptoanarchist ideas, when it came to payments, were different in a way it was higher in privacy and it was lower in the aspect of issuer risk.

So there has been a change in what is important. So, for example, one of the things that only really came from the cryptocurrency field was that everything has to be decentralized and a lot of people use decentralization as a synonym for Cryptoanarchy, but I think it has actually very little to do with each other.

If a system is centralized or decentralized has not that many effects as we believe it does. It’s mostly a technical question and it’s a question on how good you are in modeling risks and governance.

And I think that during my high time, I think that the whole thinking about modeling risks and how to deal with central parties has been more advanced and today decentralization has become this magical word, and I deeply doubt that we actually understand what we’re doing there and how to do it right.

I think that just slapping decentralization on something doesn’t make it good, it often makes it far more complicated, far more brittle. So, yeah, that’s not a success at all.

As you mentioned, there is a part of the Bitcoin community that wants to interact more also with governments, and I wonder — what is your stance on that? Because also within the Cypherpunk community we saw essentially this clash — John Gilmore founded the Electronic Frontier Foundation — which was kind of a more diplomatic way of delivering that message and there were internal fights within the Cypherpunk about how to move forward — “Do we just write the code or do we also do some legal battles and things like that?” So what is your take on this?

There is value in a legal battle, campaigning and so on. There’s value. I think that without a lot of the campaigning and cases of early Cypherpunks, we would be in a really bad place right now. Because the fact that cryptography is wildly spread is not just because people wrote code. It’s a big part of that, you know, without people writing code nothing happens, but without, for example without the court cases around PGP, I doubt that we would have a good crypto policy at all or at least had a good crypto policy.

So I think that as a stalling tactic, that is really valuable. I do think, however, that it’s not strategically effective. What it means is that I don’t think that you can change the system with that. You’ll be limited to successes that only wait until the next election to be rolled back.

That is how our political system works — is highly dynamic — and it is also a negotiation between a lot of interests that are widely on different sides of the spectrum. And a lot of those interests are 100 percent different from what we want and offer a compromise that is never enough. But that is how politics works. At least with democracies.

So, I think that one has to keep that in mind. One has to keep in mind that any involvement in politics will lead to a compromise that will not be enough. But, I also think that it’s also important to keep the channels open, to have something like diplomacy and to help the state and the media and the population to understand what’s going on. Simply because it can soften the blows.

But I think that it is extremely limited if we don’t find a way to actually separate, let’s call it our world from their world. I think that it is very justified on their side to be afraid and work against us. Because we’re messing with their systems; we’re messing with their money, we are messing with everything they have. And we are introducing harm and danger and risk into their systems.

And of course, they have to deal with that, and of course, they’re going to deal with that with their interests in mind. So it will always be a standoff. And I think that one of the issues we have is that there is no border between their systems and our systems. I think it would be so much easier to say ‘you’re doing your shit over there, we’re doing our shit over here’ but we don’t interact.

If you were really a parallel system, then the areas of conflict would be so much better to describe and to contain and to actually have negotiations over them. But we’re not doing that.

I think actually that is one of the things we have to work on, we have to work on the ‘how can we, on one hand, isolate us, and on the other hand, still stay effective and meaningful, and how can we think for both sides, because in a way, we have to think for the statists as well, we have to think for the normal society as well.’

And we have to keep in mind, that the grandpa’s and whoever, they are people, too. And we may not just rule over them. If we do, we’re just creating conflict and backlash and whatever. We shouldn’t do that. We should be much smarter in how we build our stuff.

So do you consider essentially this campaigning and awareness activities to be kinda complementary to the writing code?

It can be complementary, but so for example, in the context of cryptocurrencies, I think it’s bullshit. I think that without campaigning, cryptocurrencies would do their, one of the functions very well — that is move value between people.

But what campaigning is really about is getting more people into the system, which is mostly about increasing the value of people that already have BTC or whatever. So, I actually think that it is at least the mixture between bolstering up your investment and political vote. I don’t think that political goals are necessary.

I think that the pure existence of cryptocurrencies with the slow spread by interest is far enough to change everything we have to change. Because we have to do changes for us. We don’t have to change it for everybody else. We have to change it for us.

A lot of troubles that you have right now, are because of campaigning. Without campaigning, there wouldn’t be KYC. There wouldn’t be AML. There wouldn’t be a problem with over the counter transfers and so on.

In a way it’s the campaigning that puts such a spotlight on that — and then what do politicians do? They get afraid and they exploit the situation. And essentially all of these conflicts that we have in that area is the price of people increasing their BTC value. That is the price we pay.

So all the attacks we have on one side are the costs to other people getting richer by doing nothing. You know, sometimes I have hard feelings about that. I have hard feelings when people say, ok we have to talk with the central banks and we have to get regulation so that institutional investors come in.

I don’t give a fuck about institutional investors. I mean, institutional investors, just to spell that out, are all the big insurance companies, pension funds and banks that we hate all the rest of the day, and we want to be attractive for them? Let them die.

I see your point, but I guess all of this is happening usually on behalf of boosting the crypto adoption. So from your point of view, it is not really necessary for the BTC community to foster the adoption and onboard more people and merchants?

No, no. So, it really has to do with a very different perspective of where I want to go. For me, cryptocurrencies are just a tool. And they’re a tool for people to send money from A to B without permission, and ideally with a little bit more privacy. And they’re an enabler for a different kind of system. But, the moment we go out and we say ‘oh, we’re going to spread cryptocurrencies everywhere’, what that is, is just economic activism.

In my opinion, that is not where you want to go. Because in the end, what we want to do, is to create better systems and better systems usually are not patches to old systems, but they’re completely new systems.

Introducing cryptocurrencies into the masses is just muddying the water. What we find for those people who want to live outside of the state system, to use cryptocurrencies, that worked great. It’s the economic activism, it’s like, yeah, we need to get rid of the FED, we have to get rid of whatever and so on. They’re making it complicated, you know?

Before that, there was no problem to send BTC from A to B. We were able to do that, it worked. But why should I now go into the world and make my grandma use that? My grandma doesn’t give a shit about the FED. Why make her use that? There’s no reason for that, with one exception — that it increases the value of our assets. That is the exception.

And maybe decreases the volatility? Maybe eventually at some point?

You know, it doesn’t. Because the higher the attention and speculative horizon is, the higher the volatility is. I’m not saying that we shouldn’t have cryptocurrencies wherever we can, I’m just saying it’s a really complicated focus and it introduces a lot of side effects that a lot of people have warned of.

Everybody said ‘fuck it, it won’t happen, they can’t do anything, whatever’. I’m just saying, a lot of the problems we have right now are of our own making because we were so focused on making sure that BTC goes to the moon.

Okey. How do you see the whole Cryptoanarchist movement moving forward? How much, you think, will Cryptoaranchy be able to penetrate the old system?

I think it would be negative if any Cryptoanarchism penetrates the old system. Cryptoanarchism has to penetrate the people. So I don’t think that mixing all of those systems with cryptoanarchy is a great idea, it doesn’t work. But you want to reach people.

How do you think the Cryptoanarchist movement will be actually able to create a relevant parallel world?

We have that parallel world. Let’s just take really bland and crass example — Darknet markets — are probably closer to Cryptoanarchy than Bitcoin ATMs. That’s actually probably a bad example because most drug dealers use them, but anyway, it is much closer than Lightning.

We already have parallel systems. They often don’t look the way we’d like them to, because a lot of people calling themselves Cryptoanarchists today run around in suits. And they have an issue with people trading guns and drugs and whatever.

But in an extreme, that parallel thing already exists. Now the thing is, this extreme should become less extreme and involve more people. I don’t want people to start becoming drug dealers, but I want them to use the same technologies, methods, whatever, to deal with their, much less problematic goods.

So is that happening? Yeah, that is already happening. And will it reach the masses? No, it won’t. And that’s the difference. I don’t believe and I don’t target the masses. I don’t think that the masses are a good goal.

We should fix our own problems. We as a community, have enough problems we’re really bad in dealing with, for example, conflict. That is something we could change. We suck when it comes to offset. That is something we really should change. There are so many things. We can deal with ourselves.

Ok, within the Cypherpunk movement, there were lots of quite controversial ideas such as Jim Bell’s ‘assassination politics’ and stuff like that. Why do you think these ideas have not caught on, and would you want them to happen?

First, the general thing. There were lots of controversial ideas and that is good. So in a way, I am actually really happy for Jim Bell having crazy ideas. But I think that the specific ideas of Assassination Politics are really bad in so many aspects. It is deeply immoral, I mean, just think about that. You kill people that you don’t like. That is exactly what the state does. That’s basically the DNA of the state.

Why should I now distribute the immoral acts of the state over more people? I don’t think that’s a good idea, like from an ethical perspective, the killing people that you don’t like doesn’t fly — that’s not cool. That’s number one. Number two is I actually think it doesn’t work. I think the implementation of Assassination Politics would quickly turn into the end of the Cryptoanarchist movement.

If you ever got behind that, we’d be dead. And the state would be much more powerful and much more justified because randomly killing people is something most people think is a really evil thing. So if you’re talking bad PR, Assassination Politics is the incarnation of bad PR for Cryptoanarchy.

Plus it’s stupid and I don’t think that the game theory makes any sense and so on. And I actually think that is the reason it got never actually implemented because the number of people that are crazy and immoral and technically skilled is not very high.

And there’s also something like an actual immune system against those people, sometimes if you know somebody that’s too crazy and too skilled to take care of him himself. You know, point him into more productive areas of life. So, I think that there are reasons.

In general, how have your views on cryptocurrencies have changed over the last 10 years, maybe in terms of technology — do you think we need more fungibility — on the Bitcoin core level — or scaling is more important, or what do you consider to be the lessons learned from us as a community in our BTC endeavor in the last 10 years?

Ok, I have to warn you, I have extremely controversial opinions about cryptocurrencies. The original Bitcoin, let’s say the first 3 or 4 years of BTC, have been exactly what I wanted and saw as good.

Because I saw BTC having most of its potential as being the backing currency for independent layers. And with independent layers, I don’t mean something like Lightning, which falls back on the chain. But something that doesn’t have to interact with the backing at all.

And because it would’ve allowed us to create systems that are more innovative and anonymous enough that they have less government risk. And the main missing aspect for that has been and still is, the ability to have multi-signature transactions with thousands of signers. And we don’t have that. Instead, we tried to put all our layer 2–3–4–5–6 solutions into the concept of the blockchain, which inherently limits what we can do.

I think that we have made a few bad choices. One choice is, everything has to be trustless; I don’t think that trustlessness, or zero trust, is a major factor that we should strive for. As soon as you have one zero trust system with which you can quickly interact, all your other systems don’t have to be. So that’s my opinion on it.

Based on all the things you’ve been saying about regulations and crypto — do you think there are some areas in which it’s good to have ‘good regulation’ so it may kinda help the whole cryptocurrency ecosystem to thrive, or not?

That really depends on what your goals are. If your goal is that your BTC is going to increase in price, you need more regulations, because you have to interact with more capital.

From your view?

In my view, I’m not a speculator and I’m not an investor. So for me, I want a free, as in free speech, payment infrastructure. For that, I don’t need regulation. No, I abhor regulation. There’s no reason to have any regulation there, you know? Just do it.

What do you think will be the role of Bitcoin as a protocol, ten years from now, in our society?

I don’t know… It’s one of those questions nobody can answer. Because there are thoughts you can have like objectively it should go this or that direction, but in the end it’s a market. And markets have this irrational aspect to them, and so I have no clue.

I think that blockchain-based cryptocurrencies are here to stay and very likely BTC is going to be a part of that. I think that it should be slimmer, but I also think it will disappear into the background more. I think that the good way to move is to have it as a foundation in the background. I don’t want to have a BTC wallet in 10 years on my phone. (laughs)

What about other altcoins? Do you give them some relevance? Or do you think it’s actually good that we have so many coins, that people attempt to do some innovation?

Oh, I love it. I love that there are so many coins. Because I love when people try things out. I mean, I am a hater when it comes to Bitcoin maximalists. Personally, for me, Bitcoin maximalists belong to the realm of the state, not into the realm of anarchism.

Seriously… Anyways, I love that there are people doing stuff. Even if it’s stupid, what you do. Actually, the whole doing stupid things is one of the things we need anarchy for, you know?

So no, I even love shit like Dogecoin. Just because of the lols, but I don’t think we’ll ever have the one cryptocurrency that does it right — and we shouldn’t have it.

It might be a bad idea, trying to put all the right properties that anybody could be looking for into one system, that usually doesn’t work. It’s called futarchy, and the end result is something like Microsoft Windows. So let’s not do that.

We’ll have quite a few of them, we’ll have altcoins, we might have something that could be called ‘BTC for boring people’, which will be a much stupider BTC and even much stupider than Bitcoin Cash.

Ok, thank you very much!

Coin Story brings you in-depth interviews with the brightest minds in the crypto space. If you like this interview, be sure to check out our past ones too, and Sign up to not miss out on the future ones, and to get a regular digest of news and trends in the crypto world. Explore more interviews and educational resources on cryptocurrencies at coinstory.tech

Coin Story

Cryptocurrency Chronicles. Past. Present. Future.

David Stancel

Written by

Researching Cryptocurrencies since 2012 @CoinStory

Coin Story

Cryptocurrency Chronicles. Past. Present. Future.

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