Distributed Counsel 13: Censorship-Resistance Special Edition

Blog Posts

What does “censorship-resistance” mean?  You can say whatever you want and we can’t censor you?  Hardly revolutionary in a Western society at this point.  So why do we hear so much about the topic? I think it is this: when we talk about “censorship-resistance” in Bitcoin, we really mean the ability to participate in a network in any way, at any time, and in any manner (i.e., anonymously or identified).  So Bitcoin is special because it allows us to transfer value without an intermediary and most of us have had an experience where a bank has told us “no.”  Suddenly, there is nobody there to stop us.  

This is part of the reason it took hold the way it did in late 2017 (the other being steroidal FOMO). Banks and restrictions on your money are quotidian.  It may be a declined charge in a foreign country or because we are tying to play internet poker.  It may be a withdrawal limit, or an overcharge penalty. There are lots of ways to experience this, but for most of us the negative impact of an intermediary has been real at one time or another, and the concept of avoiding such a constraint is especially powerful because we have experienced it.

The other half of the story is of course anonymity, and the Bitcoin corollary: the ability to buy or sell anonymously.  The Federalist papers were published anonymously because censorship-resistance wasn’t a thing back in the day and if Madison, Jay and Hamilton wrote down their real names they would have been hung for treason, immediately.  

The ability to buy without credentials feels like a freedom too.  Perhaps really it is the ability to buy safely without credentials. There was always cash, but carrying cash has its own hazards (it can be found or stolen or . . . ahem . . . seized) and once folks moved to easy debit card transactions they never looked back.  Remember when ATM fees were a thing? I do, it was 10 years ago. Now nobody cares because they use their cards everything. Sweden is basically cashless.

Is this a good thing?  Every so often, somebody buried deep in a state organ will float the idea of a cashless society (see here, here).  Forgive the wild-eyed tinfoilhatrant, but if we got the state really drunk one night, it would tell us that it hates cash and wants to stop usage entirely. Think about all the data that is lost to cash. Not just what you bought. Where you bought it, from whom, when, for how much. Think about all the behavior that would stop, right now, if the identity of the payor could always be established.  

Ask yourself, would you agree to go totally cashless for, say, 2% less in taxes per year?  Would you still buy drugs?  I know, I know, you’ve never used drugs.  After all, I can’t prove otherwise can I?

As it stands, a balance must be struck.  There are KYC/AML laws because, well, you cannot enforce Iranian sanctions without them. This is why Coinbase takes so much heat for stating the obvious in a powerpoint. States want to track the flow of value and attribute it to a sender, especially big value.  But the smaller stuff is not tracked. It is illegal to bring more than $10,000 across the US border without declaring it.  $9,000? No problem. The line has to be drawn somewhere. Until now, the government was the drawer.

Bitcoin changes this.  There is no cap on value in Bitcoin.  No more scrutiny is paid to a $20 dollar transaction than a $20,000,000 dollar transaction, and here’s the really important thing: nobody can stop either.

Understand that I’m not taking a side here.  There are lots of good arguments for tracking payments and there are good arguments against the practice.  All sorts of horrible conduct is a lot easier if anonymity and a dependable and anonymous payment system is guaranteed (see below regarding assassination markets), but tracking and assigning all transfers of value is a totalitarian wet dream.  And even the most democratic nations have, thus far, proven unable to resist temptation.

Ultimately, however you feel, this looks like a future battlefield because there is so much tension in the positions.  It is about the power to tax and the freedom to transact, the globalisation of value and the ability of nations to affect (or effect) monetary policy.  It is about the consequences of censorship-resistant systems, and specifically this: if in the final analysis the state can’t censor or scrutinize transactions in a network, can it allow the network to survive?  

Sirius is Back

Everyone knows who Satoshi Nakamoto is (haha, I’m here all week).  Very few know who Sirius is, but he was the second Bitcoin developer.  According to Coindesk, “most of Bitcoin’s second code release has been attributed to him.”  Now he is back and working on a decentralized internet. Isn’t the internet already sort of decentralized? Well, no, and Sirius makes some excellent points, specifically:

“Most of the giant online businesses, such as Google, Facebook, eBay or Airbnb are basically centralized indexes – searchable lists of stuff. If we want to disrupt them, we need decentralized indexing . . .”

This makes sense to me.  Google at least is about the organization of information and you can be sure the organization will favor Google’s agenda and its advertising partners.  But is there a real need for totally unflitered, censorship-resistant indexes?

Google/China

In totally unrelated news, Google is working on a censored internet project for China.  According to the Grey Lady, the service has already been demo’d for Chinese officials.  There is speculation that China may be using Google as a chip in the ongoing trade war. For my part, the best paragraph in the article is the last one:

“We welcome a normal Google but not a neutered Google,” said Liu Xingliang, head of research at Beijing-based analytics firm Data Center of the China Internet. “We don’t need a second Baidu.”

Madonna Plus Bill Clinton

Ripple once traded over $3.00 and its CEO was theoretically richer than Mark Zuckerberg.  As of this writing, it is trading around $0.43. And the news of late has been more about competitors and lawsuits than users of the RippleNet service or Ripple’s other offerings. But this is changing in a big way.  Two words: Bill Clinton. One more word: Madonna.  That’s right folks! Ripple is going full establishment with an upper six-figure speaking fee to President Clinton and charitable work with Madonna.  And they are being represented in their California litigation by no less than Skadden Arps. Everything must be ok.

Assassination Markets

A while ago, I tweeted that you haven’t really made it in the cryptoworld until you have been impersonated by a scammer offering free Ether on Twitter.  Regrettably, none of the 10 lazy bastards that call themselves my followers have seen fit to do so.

It now appears there is a pathetic real world corollary–the assassination markets on Augur.  You read that right, you can bet on a famous person’s assassination now. This is the sort of astonishingly idiotic crap that puts a blight on the whole project.  

And what a stupid thing to bet on anyway.  Let’s bet on something reasonable, like the color of the Queen’s hat.

Perspective

I never write about price, because, well, I have no idea what is going to happen.  So I’m leaving this here without further comment.  As always, thank you for reading.

 

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