Intro: Pavol Lupták is an Ethical Hacker and CEO of Nethemba — an IT Security company. Apart from that, he is also a perpetual traveler and founder of Paralelni Polis in Prague and Bratislava. He has been an early Bitcoin adopter, a long time privacy advocate, and a prominent cryptocurrency evangelist spreading the message of Cypherpunk around the world. In this interview, Pavol shares his view and insights on the crypto space — how it all started for him and how it has developed over time. You can follow Pavol at Twitter or LinkedIn
DS: You have been in the space very long, do you remember how did you find about Bitcoin for the first time and what was your reaction?
I remember it well. Together with Juraj Bednár in our Bratislava’s hackerspace Progressbar we have just found we had multiple opening presentations. We were enthusiastic about the first dark market’s place — The silk road market. Juraj had his fist presentation about Bitcoin, and I had my first presentation about crypto-anarchy and its consequences to our society.
To be sincere, Bitcoin fascinated us, and it was also a reason we visited probably the first Bitcoin conference in Prague in 2010 and then the second one in London organized by Amir Taaki. A few months after, we invited there a very young Bitcoin enthusiast — Vitalik Buterin, who had a small presentation there about Bitcoin multi-sig.
DS: How have your opinion and view of Bitcoin evolved since then?
In Bitcoin, I especially appreciated full decentralization, impossibility to shut down by the government, and practically immediate dark market adoption. It was the main reason for the global dark market boost.
I was enthusiastic about the fact that thanks to portals like the Silk Road market, almost a million people could do business entirely out of the government’s control. I consider this to be the greatest challenge of Bitcoin in its beginning.
Unfortunately, I have never perceived Bitcoin as an investment, but always as a liberation tool. Ignoring the Bitcoin network effect, after shutdowns of many dark-markets, because of the lack of enough privacy, as Bitcoin is a pseudo-anonymous, not a truly anonymous crypto-currency, I sold all my Bitcoins for a ridiculous price. I started to focus on more privacy-aware crypto-currencies like Monero.
If I regret something in my life, then this decision.
I am still using Bitcoin as an operation currency because it has the most significant liquidity.
Privacy wallets like Wasabi or Samurai, onion routing in Bitcoin Lightning, increase Bitcoin privacy a lot. However, I still perceive these attempts to be temporary workarounds and hope Bitcoin will be more private crypto-currency. So I can use it more often.
DS: What was your view on the block-size debate?
Do we want a smaller block size with better decentralization and security? Or do we want the opposite, less decentralization, but better throughput?
I don’t know, people have different preferences, and they matter.
I believe it’s only a question of time when a competitive market answers this question.
DS: You are a Cryptoanarchist by heart. What does it mean to be a Cryptoanarchist for you?
Privacy is an inevitable part of my life.
I think everybody can ask for more privacy, refusing any third party interventions at the same time. I have a mental issue with the state’s populist propaganda that it is necessary to exchange our privacy with more security. Unfortunately, we are witnesses of cutting our freedom and privacy all the time, citing fictional terrorist threats. For nothing, we are becoming victims of global financed surveillance.
I live the life of a crypto-anarchist. I stopped using personal bank accounts, transferred my savings to Monero, invented a lot of ways how to bypass KYC/AML Draconian regulations, spent the last few years to find out how it is possible to opt-out of the system.
I still believe that crypto technology — including crypto-currencies — can provide us more personal and economic freedom we have never imagined. Although all the states try to kill our financial privacy by massive global financial surveillance and banning cash.
DS: How do you explain that the Cypherpunks movement perished — do you see any successor of it?
Cypherpunk movement rose from the enthusiasm of some individual geeks who realized an enormous impact of crypto technologies on our society e.g. the first implementation of asymmetric encryption called PGP was a big thing. Especially Timothy C. May was very visionary, describing his cypherpunk dreams in Cyphernomicon and the Cryptoanarchist manifesto.
And as any enthusiasm also this one disappeared after few years when many cypherpunks got a good job and became older.
But it didn’t disappear completely. The release of Bitcoin was a special gift to the old cypherpunk community, which boosted new related movements around the globe — in Central Europe, it was Parallel Polis.
DS: How do you see a perhaps inevitable clash between Cryptoanarchy and Nation States?
I perceive it as a paradigm clash. In recent years we can observe a significant conflict of a centralized paradigm — the governments, the states, the central banks — with the decentralized one — the Internet, cryptocurrencies, and decentralized technologies.
Central institutions like governments and banks are trying to enforce their rules to decentralized technologies. Not only does this not work, but it always cripples a new technology.
Unfortunately, this already happened many times in our history, e.g., red flag traffic laws — a need for a red flag waving person everywhere the car went. They warned the public that vehicles are unsafe. The same as obsessive regulations showing that drug dealers, terrorists, and scammers use crypto-currencies.
Do you consider Red flag traffic laws to be obsolete? Then supporting any compliance of a decentralized paradigm with the centralized paradigm, the state, makes little sense too. As well as you could never breed and improve horses to compete with cars, you could never regulate centrally any technologies designed to be decentralized, anonymous, and therefore un-regulatable.
DS: Cryptocurrencies created a parallel financial system — Do you think we will reach a point where Govts will say they give up, admitting that they can’t fight it? Or can they?
Governments will never give up admitting their fails — that’s why they are governments. I don’t know any government in the world that has ever publicly disclosed they lie about anything.
The more likely scenario is that in a complex peer-to-peer high tech society after some time, we will not need them anymore, and they will become obsolete like most technologies in the following years we are using now.
I think something like ‘decentralized Uber for everything’ can be a big game-changer.
If one’s ‘perfect’ app can fulfill almost all desires of all people and connect all people according to their needs allowing anyone to offer anything, then we will not need the central government anymore.
A peer-to-peer digital decentralized economy with minimal transaction costs will replace inefficient gigantic monopoly from the last millennium.
DS: Are you optimistic in the sense that people will be able to protect their liberties and privacy in the digital space?
I am very pessimistic about upcoming worldwide dictatorship regulations like comprehensive financial surveillance, a scoring system we can see in China now.
A few months ago, with Juraj Bednár, we wrote an article about how Slovakia is preparing for a new Chinese model’s totality describing that all partial elements of dictatorship framework already exist. And we are just waiting for a new government which will combine them to together establishing a new scoring system.
And I am very optimistic about new liberation technologies that do not ask permission — like Bitcoin — and their impact on our life.
Governments continuously take us freedom.Liberation technologies open us entirely new horizons we couldn’t imagine before.
And this is happening at the same time.
DS: What is the worst-case scenario that you can imagine when it comes to government tackling and censoring crypto? How likely you think it is in percentage?
I think governments can do practically anything. In the worst case, they can ban cryptocurrencies and criminalize all people trading or involve with crypto-currencies. Don’t forget this already happened with the gold a few decades ago with the gold in the ‘most free’ country — USA.
But of course, the critical question is how effectively they would be able to enforce this ban. Without complete surveillance of all people, it won’t be possible.
Will we sacrifice our last remains of privacy for finally ‘secure’ society with no terrorists, criminals, kidnappers, pedophiles, drug dealers…
Will it be fulfilled the worst vision of Timothy C May about the four horses of digital info-apocalypse?
I have no idea how likely is this scenario — the digital dictatorship is already here; it is just not evenly distributed.
DS: How can we avoid nation-states surveillance? What are the best tools?
Use truly anonymous cryptocurrencies like Monero, of course!
Encrypt all our communication using f.e Signal, follow rules of operation security (f.e. Smuggler’s OPSEC guide), build the parallel societies like Parallel Polis.
But firstly, realize that national surveillance is the real problem!
DS: You are a big proponent of privacy coins, specifically Monero? How do you evaluate other privacy coins — ZCash, Grin, Beam? Maybe ZK on Ethereum like Tornado.cash?
Monero is not perfect at all, but I like the community behind, stable history, and their privacy approach. I even personally met with Fluffyponny (Ricardo Spagni of Monero), and he seems to be a nice guy.
ZK snarks — used in Zcash — are still experimental; I don’t like the trusted setup and memory requirements of Zcash for encrypted transactions. That is the reason it is yet not supported by hardware wallets like Trezor. I think it is strange that privacy is optional, but not mandatory for all transactions.
Grin and Beam Privacy are impressive, but unfortunately, they miss a network effect and big enough community.
If you want to be the top cryptocurrency leader these days, you need not be just better than Bitcoin or Monero; you have to be significantly better; you have to be the best. Or have a few billion potential users as Libra has.
A few days ago, I also tested Tornado Cash for mixing my ETH and DAI, but it’s still quite expensive for extensive use.
Scrit is not a decentralized cryptocurrency; it is a distributed anonymous voucher system that can be backed by practically anything. We would like to use it in all our Parallel Polises.
Elixxir— I am still looking for a ready-to-use version to test it.
DS: Do you think that privacy coins have the chance to be “integrated” into the legacy financial system or do you think they may be declared illegal?
I think it’s more likely privacy coins become illegal than legacy financial systems will integrate them, as many crypto exchanges have already delisted privacy coins.
I don’t see any demand in the legacy financial systems for more privacy. I see the complete opposite — thanks to KYC / AML / CRS. There is a need to be transparent as much as possible.
Unfortunately, the demand for privacy coins is and will be from a small minority of users only. Most people do not care about their privacy and do not strive for more freedom.
And thanks to government propaganda, it won’t be changed in the future. We should expect the complete opposite.
DS: Do you consider their legal status relevant perhaps for the adoption of cryptocurrencies by the public? Do you think it is important that the public adopts crypto?
Sometimes I think the legal status of privacy coins is irrelevant. Sometimes I think it has an opposite effect — do you think people smoke less marijuana because it’s illegal in most countries? We can see the complete opposite — e.g., in the Netherlands, there are the least weed smokers in western Europe, except tourists.
Know that the omnipresent availability of crypto-currencies to most people is even higher than the availability of the weed. And now a considerable amount of people already know the great benefits of cryptocurrencies, if they are banned. It is a similar situation with the Uber ban, you can do that, but educated and intelligent people will keep thinking it is a terrible idea.
Regarding public adoption, most people do not care if some privacy coins are legal or illegal. I think it is an unjustified concern.
The public adoption of cryptocurrencies will happen when most people see a significant competitive advantage of crypto-currencies compared to the legacy financial system. For example, as a store of value in case of global hyperinflation. Or if they could save a lot of money.
The public adoption will not happen because people care about privacy, because most do not and probably will not.
I do not think we should try to create or change any cryptocurrency legislation for the massive adoption. Outstanding technology does not need a law to be widely adopted.
If it is not widely adopted yet, it just means it is not good enough for most people. And in this situation, we should improve technology, not the legislation!
DS: Are you satisfied with the level of adoption?
I am satisfied with the level of cryptocurrency adoption in the Czech Republic. I would appreciate the same level in other countries. To achieve it, we need to improve the technology and build the community. That is what we are trying to do in Parallel Polis.
I do not believe in politicians. The best thing that the government can do about crypto-currencies is precisely nothing. I mean, it should not create any obstacles.
DS: Businesses and Governments usually want to implement Blockchain in order to achieve greater transparency and immutability of data, you are now a fan of this approach What do you usually recommend to use instead?
Using the blockchain for better transparency and immutability may sound like a good idea. But there are some technical and moral implications:
- Do not expect any decentralization of this blockchain — the government will always monopolize its control. So the question is — does it make sense to use blockchain in this situation instead of massively fail-proof redundant database cluster? It will be faster and more economical than the blockchain.
- Will have the government a moral right to enforce transparency to all citizens?
I am not willing to share any of my details with the government.
Will the government have a moral right to build such a system from the involuntary money of taxpayers?
I have an issue with all these implications, and therefore I think it is not a good idea.
So first, I recommend not to gather any sensitive information from citizens that should be transparent against their will.
And second, if it is indispensable, then use a distributed redundant database cluster instead of the slow and inefficient blockchain.
DS: How have your views on the utilization of blockchain evolved over time? I remember a long time ago when we first met you were much more excited about using blockchain in the public sector than you are now. What has changed?
Yes, many years ago, I was optimistic about using the blockchain in the public sector.
Then I saw the presentation from my friend Frank Braun, where he explained that we should not try to improve the existing system by using crypto technologies to be even more totalitarian — that's what is happening now.
I believe this approach is also against the principles of Satoshi Nakomoto, who created Bitcoin as an alternative to the corrupt legacy financial system. He did not want to fix this legacy system by Bitcoin. He created the Bitcoin as an alternative to the existing legacy system.
And I perceive it in the same way. We should not try to fix the existing monopolized legacy system by crypto-technology.
We should embrace crypto-technology to create new parallel systems.
So I have changed my mind. Instead of helping the governments, I started to focus on building a parallel society.
DS: Do you agree that blockchain can be used also for consortia use cases?
I can imagine using blockchain by any industry and many companies as an immutable tool of the truth (e.g., tracking packages around the globe by multiple couriers, the development process in which it involves many companies, etc.).
I am skeptical about using the blockchain as a national cryptocurrency. It does not have a significant advantage over the current status quo, and it may lead to the national surveillance.
DS: What will be the role of Bitcoin protocol in 10 years from now?
I have no idea. I would like, but I cannot predict the future. But it’s likely that Bitcoin will remain the store value.
DS: Thank you!
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