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16. Crypto Anarchy
16.1. copyright
THE CYPHERNOMICON: Cypherpunks FAQ and More, Version 0.666,
1994-09-10, Copyright Timothy C. May. All rights reserved.
See the detailed disclaimer. Use short sections under "fair
use" provisions, with appropriate credit, but don't put your
name on my words.
16.2. SUMMARY: Crypto Anarchy
16.2.1. Main Points
- "...when you want to smash the State, everything looks like
a hammer."
- strong crypto as the "building material" for cyberspace
(making the walls, the support beams, the locks)
16.2.2. Connections to Other Sections
- this section ties all the other sections together
16.2.3. Where to Find Additional Information
- again, almost nothing written on this
- Vinge, Friedman, Rand, etc.
16.2.4. Miscellaneous Comments
- a very long section, possibly confusing to many
16.3. Introduction
16.3.1. "The revolution will not be televised. The revolution *will*,
however, be digitized." Welcome to the New Underworld Order!
(a term I have borrowed from writer Claire Sterling.)
16.3.2. "Do the views here express the views of the Cypherpunks as a
whole?"
- This section is controversial. Hence, even more warnings
than usual about being careful not to confuse these
comments with the beliefs of all or even most Cypherpunks.
- In fairness, libertarianism is undeniably the most
represented ideology on the list, as it is in so much of
the Net. The reasons for this have been extensively debated
over the years, but it's a fact. If other major ideologies
exists, they are fairly hidden on the Cypherpunks list.
- Yes, some quasi-socialist views are occasionally presented.
My friend Dave Mandl, for example, has at times argued for
a less-anarchocapitalist view (but I think our views are
actually fairly similar...he just has a different language
and thinks there's more of a difference than their actually
is--insert smiley here).
- And several Cypherpunks who've thought about the issues of
crypto anarchy have been disturbed by the conclusions that
seem inevitable (markets for corporate information,
assassianation made more liquid, data havens, espionage
made much easier, and other such implications to be
explored later in this section).
- So, take this section with these caveats.
- And some of the things I thing are inevitable, and in many
cases positive, will be repugnant to some. The end of
welfare, the end of subsidies of inner city breeders, for
example. The smashing of the national security state
through digital espionage, information markets, and
selective assassinations are not things that everyone will
take comfort in. Some may even call it illegal, seditious,
and dangerous. So be it.
16.3.3. "What are the Ideologies of Cyperpunks?"
+ I mentioned this in an earlier section, but now that I'm
discussing "crypto anarchy" in detail it's good to recap
some points about the ideology of Cypherpunks.
- an area fraught with dangers, as many Cypherpunks have
differing views of what's important
+ Two main foci for Cypherpunks:
- Personal privacy in an increasingly watchful society
- Undermining of states and governments
- Of those who speak up, most seem to lean toward the
libertarian position, often explicitly so (libertarians
often are to be found on the Internet, so this correlation
is not surprising)
+ Socialists and Communitarians
- Should speak up more than they have. Dave Mandl is the
only one I can recall who's given a coherent summary of
his views.
+ My Personal Outlook on Laws and Ideology:
- (Obviously also scattered thoughout this document.)
+ Non-coercion Principle
- avoid initiation of physical aggression
- "to each his own" (a "neo-Calvinist" perspective of
letting each person pick his path, and not interfering)
- I support no law which can easily be circumvented.
(Traffic laws are a counterexample...I generally agree
with basic traffic laws....)
- And I support no law I would not personally be willing to
enforce and punish. Murder, rape, theft, etc, but not
"victimless crimes, " not drug laws, and not 99.9998% of
the laws on the books.
- Crypto anarchy is in a sense a throwback to the pre-state
days of individual choice about which laws to follow. The
community exerted a strong force.
- With strong crypto ("fortress crypto," in law enforcement
terms), only an intrusive police state can stop people
from accessing "illegal" sites, from communicating with
others, from using "unapproved" services, and so on. To
pick one example, the "credit data haven" that keeps any
and all financial records--rent problems from 1975,
bankruptcy proceedings from 1983, divorce settlements,
results from private investigators, etc. In the U.S.,
many such records are "unusable": can't use credit data
older than 7 years (under the "Fair Credit Reporting
Act"), PI data, etc. But if I am thinking about lending
Joe Blow some money, how the hell can I be told I can't
"consider" the fact that he declared bankruptcy in 1980,
ran out on his debts in Haiti in 1989, and is being sued
for all his assets by two ex-wives? The answer is simple:
any law which says I am not allowed to take into account
information which comes my way is _flawed_ and should be
bypassed. Dialing in to a credit haven in Belize is one
approach--except wiretaps might still get me caught.
Cyberspace allows much more convenient and secure
bypasses of these laws.
- (For those of you who think such bypasses of laws are
immoral, tough. Strong crypto allows this. Get used to it.)
16.3.4. Early history of crypto anarchy
+ 1987-8, AMIX, Salin, Manifesto
- discussed crypto implications with Phil Salin and Gayle
Pergamit, in December of 1987
- with a larger group, including Marc Stiegler, Dave Ross,
Jim Bennett, Phil Salin, etc., in June 1988.
- released "The Crypto Anarchist Manifesto" in August 1988.
- Fen LaBalme had "Guerillan Information Net" (GIN), which he
and I discussed in 1988 at the Hackers Conference
+ "From Crossbows to Cryptography," 1987?
- made similar points, but some important differences
- TAZ also being written at this time
16.4. The Crypto Anarchist Manifesto
16.4.1. Unchanged since it's writing in mid-1988, except for my e-
mail address.
- There are some changes I'd make, but...
- It was written quickly, and in a style to deliberately
mimic what I remembered of the "Communist Manifesto." (for
ironic reasons)
- Still., I'm proud that more than six years ago I correctly
saw some major points which Cypherpunks have helped to make
happen: remailers, anonymous communictation, reputation-
based systems, etc.
- For history's sake, here it is:
16.4.2.
The Crypto Anarchist Manifesto
Timothy C. May
tcmay@netcom.com
A specter is haunting the modern world, the specter of crypto
anarchy.
Computer technology is on the verge of providing the ability
for individuals and groups to communicate and interact with
each other in a totally anonymous manner. Two persons may
exchange messages, conduct business, and negotiate electronic
contracts without ever knowing the True Name, or legal
identity, of the other. Interactions over networks will be
untraceable, via extensive re-routing of encrypted packets
and tamper-proof boxes which implement cryptographic
protocols with nearly perfect assurance against any
tampering. Reputations will be of central importance, far
more important in dealings than even the credit ratings of
today. These developments will alter completely the nature of
government regulation, the ability to tax and control
economic interactions, the ability to keep information
secret, and will even alter the nature of trust and
reputation.
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. The focus has until now been on academic
conferences in Europe and the U.S., conferences monitored
closely by the National Security Agency. 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. High-speed networks, ISDN, tamper-proof boxes,
smart cards, satellites, Ku-band transmitters, multi-MIPS
personal computers, and encryption chips now under
development will be some of the enabling technologies.
The State will of course try to slow or halt the spread of
this technology, citing national security concerns, use of
the technology by drug dealers and tax evaders, and fears of
societal disintegration. Many of these concerns will be
valid; crypto anarchy will allow national secrets to be trade
freely and will allow illicit and stolen materials to be
traded. An anonymous computerized market will even make
possible abhorrent markets for assassinations and extortion.
Various criminal and foreign elements will be active users of
CryptoNet. But this will not halt the spread of crypto
anarchy.
Just as the technology of printing altered and reduced the
power of medieval guilds and the social power structure, so
too will cryptologic methods fundamentally alter the nature
of corporations
and of government interference in economic transactions.
Combined with emerging information markets, crypto anarchy
will create a liquid market for any and all material which
can be put into words and pictures. And just as a seemingly
minor invention like barbed wire made possible the fencing-
off of vast ranches and farms, thus altering forever the
concepts of land and property rights in the frontier West, so
too will the seemingly minor discovery out of an
arcane branch of mathematics come to be the wire clippers
which dismantle the barbed wire around intellectual property.
Arise, you have nothing to lose but your barbed wire fences!
16.5. Changes are Coming
16.5.1. Technology is dramatically altering the nature of
governments.
- It may sound like newage trendiness, but strong crypto is
"technological empowerment." It literally gives power to
individuals. Like Sam Colt, it makes them equal.
- "Politics has never given anyone lasting freedom, and it
never will. Anything gained through politics will be lost
again as soon as the society feels threatened. If most
Americans have never been oppressed by the government
(aside from an annual mugging) it is because most of them
have never done anything to threaten the government's
interests." [Mike Ingle, 1994-01-01]
+ Thesis: Strong crypto is a good thing
- tool against governments of all flavors, left and right
- religious freedom
- personal choice
16.5.2. Dangers of democracy in general and electronic democracy in
particular
- mob rule, rights of minority ignored
- too many things get decided by vote that have no business
being voted on
- "don't tax me...", De Tocqueville's warning
+ electronic democracy is even worse
- moves further from republican, representative system to
electronc mob rule
- too rapid a system
- Detweiler's "electrocrasy" (spelling?)...brain-damaged,
poorly thought-out
16.5.3. The collapse of democracy is predicted by many
+ the "tipping factor" exceeded, with real taxation rates at
50% or more in most developed countries, with conditions of
"taxation without representation" far beyond anything in
American colonial times
- with professional politicians...and mostly millionaires
running for office
- the Cincinnatus (sp?) approach of going into government
just for a few years, then returning to the farm or
business, is a joke
+ rise of nominalism [argued by James Donald]
- "After Athenian democracy self destructed, the various
warring parties found that they could only have peace if
they disowned omnipotent government. They put together a
peace agreement that in part proclaimed limits to
government, in part acknowledged inherent limits to what
was proper for governments to do and in part guaranteed
that the government would not go beyond what it was
proper for government to do, that the majority could not
do as it pleased with the minority, that not any act of
power was a law, that law was not merely whatever the
government willed.
They did not agree on a constitution but agreed to
respect an unwritten constitution that already existed in
some sense.
A similar arrangement underlies the American constitution
(now defunct) and the English declaration of right (also
defunct)
The problem with such formal peace agreements is that
they can only be put together after government has
substantially collapsed. Some of us wish to try other
possibilities in the event of collapse.
The American constitution collapsed because of the rise
of nominalist theories "The constitution says whatever
the courts say that it says." [James Donald, 1994-08-31]
- War on Drugs, conspiracy charges, random searches,
emergency preparedness orders (Operation Vampire Killer,
Operation Night Train, REX-84). The killings of more than a
dozen reporters and tipsters over the past decade, many of
them covering the Iran-Contra story, the drug deals, the
CIA's dealings...the Farm appears to be "swamping" more and
more of these troublemakers in the headlong march toward
fascism.
+ De Tocqueville's warning that the American experiment in
democracy would last only until voters discovered they
could pick the pockets of others at the ballot box
- a point reached about 60 years ago
- (prior to the federal income tax and then the "New Deal,"
there were systemic limitations on this ability to the
pockets of others, despite populist yearnings by
some....after the New Deal, and the Great Society, the
modern era of runaway taxation commenced.)
16.5.4. Depredations of the State
+ "Discrimination laws"..choice no longer allowed
- the strip club in LA forced to install wheelchair access-
-for the dancers!
- age no longer allowed to be a factor...gag!
+ democracy run rampant....worst fears of Founders
- votes on everything...
- gun control, seizures, using zoning laws (with FFL
inspections as informants)
- welfare state,...Murray, inner cities made worse...theft
- "currency export" laws...how absurd that governments
attempt to control what folks do with their own money!
16.5.5. Things are likely to get worse, financially (a negative
view,though there are also reasons to be optimistic)
+ a welfare state that is careening toward the edge of a
cliff...escalating spending, constantly increasing national
debt (with no signs that it will ever be paid down)
- pension burdens are rising dramatically, according to
"Economist", 1994-08.
- the link to crypto is that folks had better find ways to
immunize themselves from the coming crunch
+ Social Security, other pension plans are set to take 30-40%
of all GDP
- too many promies, people living longer
- estimate: $20 trillion in "unfunded liabilities"
- health care expectations... growing national debt
16.5.6. Borders are becoming transparent to data...terabytes a day
are flowing across borders, with thousands of data formats
and virtually indistinguishable from other messages.
Compressed files, split files, images, sounds, proprietary
encryption formats, etc. Once can _almost_ pity the NSA in
the hopelessness of their job.
16.6. Free Speech and Liberty--The Effects of Crypto
16.6.1. "What freedom of speech is becoming."
+ An increased willingness to limit speech, by attaching
restrictions based on it being "commercial" or "hate
speech."
+ advertising laws being the obvious example: smoking,
alcohol, etc.
- doctors, lawyers, etc.
- sex, nudity
- even laws that say billboards can't show guns
- A chilling but all too common sentiment on the Net is shown
by this quote: "Is it freedom of speech to spew racism ,
and steriotypes, just because you lack the intellectual
capacity to comprehend that , perhaps, somewhere, there is
a different way of life, which is not congruent with your
pre-conceived notions?" [Andrew Beckwith, soc.culture.usa]
16.6.2. We don't really have free speech
- election laws
- advertising laws
+ "slander" and "libel"
- thankfully, anonymous systems will make this moot
+ permission needed...licensing, approval, certification
- "qualifications"
- granted, Supremes have made it clear that political
comments cannot be restricted, but many other areas have
- often the distinction involves 'for pay"
- Perhaps you are thinking that these are not really examples
of government censorship, just of _other crimes_ and
_other rights_ taking precedence. Thus, advertisers can't
make false or misleading claims, and can't advertise
dangerous or otherwise unapproved items. And I can't make
medical diagnoses, or give structural and geological
advice, and so on...a dozen good examples. But these
restrictions emasculate free speech, leaving only banal
expression of appropriately-hedged "personal opinions" as
the free speech that is allowed...and even that is ofen
subject to crazy lawsuits and threats of legal action.
16.7. The Nature of Anarchies
16.7.1. Anarchy doesn't mean chaos and killing
- As J. Bruce Dawson put it in a review of Linux in the
September, 1994 "Byte," "It's anarchy at its best."
+ Ironically, crypto anarchy does admit the possibility (and
hence probablility) of more contract killings as an
ultimate enforcement mechanism for contracts otherwise
unenforceable.
- which is what is occurring in drug and other crime
situaions: the parties cannot go to the police or courts
for righting of wrongs, so they need to have the ultimate
threat of death to enforce deals. It makes good sense
from a reputation/game theory point of view.
16.7.2. Leftists can be anarchists, too
- In fact, this tends to be the popular interpretation of
anarchy. (Besides the bomb-throwing, anti-Tsar anarchists
of the 19th century, and the bomb-throwing anarchists of
the U.S. early this century.)
+ "Temporary Autonomous Zones" (TAZ)
- Hakim Bey (pseudonym for )
- Mondo 2000, books, (check with Dave Mandl, who helps to
publish them)
16.7.3. Anarchic development
+ Markets and emergent behaviors vs. planned development
- principles of locality come into play (the local players
know what they want and how much they'll pay for it)
- central planners have "top-down" outlooks
- Kevin Kelley's "Out of Control" (1994). Also, David
Friedman's "Technologies of Freedom."
- An example I heard about recently was Carroll College, in
Wisconsin. Instead of building pathways and sidewalks
across the newly-constructed grounds, the ground was left
bare. After some time, the "emergent pathways" chosen by
students and faculty were then turned into paved pathways,
neatly solving the problem of people not using the
"planned" pathways. I submit that much of life works this
way. So does the Net (the "information footpaths"?).
- anarchies are much more common than most people
think...personal relationships, choices in life, etc.
16.7.4. The world financial system is a good example: beyond the
reach of any single government, even the U.S. New World
Order, money moves and flows as doubts and concerns appear.
Statist governments are powerless to stop the devaluation of
their currencies as investors move their assets (even slight
moves can have large marginal effects).
- "anarchy" is not a term most would apply, but it's an
anarchy in the sense of there being no rulers ("an arch"),
no central command structure.
16.8. The Nature of Crypto Anarchy
16.8.1. "What is Crypto Anarchy?"
+ "Why the name?"
+ a partial pun on several things"
- "crypto," meaning "hidden," as used in the term "crypto
fascist" (Gore Vidal called William F. Buckley this)
- "crypto anarchy" meaning the anarchy will be hidden,
not necessarily visible
- and of course cryptology is centrally invovled
+ Motivation
- Vernor Vinge's "True Names"
- Ayn Rand was one of the prime motivators of crypto
anarchy. What she wanted to do with material technology
(mirrors over Galt's Gulch) is _much_ more easily done
with mathematical technology.
16.8.2. "Anarchy turns people off...why not a more palatable name?"
- people don't understand the term; if people understood the
term, it might be more acceptable
- some have suggested I call it "digital liberty" or
somesuch, but I prefer to stick with the historical term
16.8.3. Voluntary interactions involve Schelling points, mutually-
agreed upon points of agreement
16.8.4. Crypto anarchy as an ideology rather than as a plan.
- Without false modesty, I think crypto anarchy is one of the
few real contributions to ideology in recent memory. The
notion of individuals becoming independent of states by
bypassing ordinary channels of control is a new one. While
there have been hints of this in the cyberpunk genre of
writing, and related areas (the works of Vinge especially),
the traditional libertarian and anarchist movements have
mostly been oblivious to the ramifications of strong
crypto.
- Interestingly, David Friedman, son of Milton and author of
"The Machinery of Freedom," became a convert to the ideas.
At least enough so as to give a talk in Los Angeles
entitles "Crypto Anarchy and the State."
- Conventional political ideology has failed to realize the
huge changes coming over the next several decades.
Focussing on unwinnable battles at the ballot box, they
fritter away their energies; they join the political
process, but they have nothing to "deal" with, so they
lose. The average American actually _wants_ to pick the
pockets of his neighbors (to pay for "free" health care, to
stop companies from laying-off unneeded workers, to bring
more pork back to the local enonomy), so the average voter
is highly unlikely to ever vote for a prinicpled
Libertarian candidate.
- Fortunately, how people vote has little effect on certain
"ground truths" that emerge out of new technologies and new
economic developments.
16.9. Uses of Crypto Anarchy
16.9.1. Markets unfettered by local laws (digital black markets, at
least for items that can be moved through cyberspace)
16.9.2. Espionage
16.10. The Implications-Negative and Positive-of Crypto Anarchy
16.10.1. "What are some implications of crypto anarchy?"
+ A return to contracts
- whiners can't go outside contracts and complain
- relates to: workers, terms of employment, actions, hurt
feelings
- with untraceable communication, virtual networks....
+ Espionage
+ Spying is already changing dramatically.
+ Steele's (or Steeler?) "open sources"
- collecting info from thousands of Internet sources
- Well, this cuts both ways..
+ Will allow:
- BlackNet-type solicitations for military secrets ("Will
pay $300,000 for xxxx")
+ Digital Dead Drops
- totally secure, untraceable (pools, BlackNet mode)
- no Coke cans near the base of oak trees out on Route
42
- no chalk marks on mailboxes to signal a message is
ready
- no "burning" of spies by following them to dead drops
- No wonder the spooks are freaked out!
- Strong crypto will also have a major effect on NSA, CIA,
and FBI abilities to wiretap, to conduct surveillance,
and to do domestic and foreign counterintelligence
- This is not altogether a great thing, as there may be
_some_ counterintelligence work that is useful (I'm
perhaps betraying my lingering biases), but there's
really only one thing to say about it: get used to it.
Nothing short of a totalitarian police state (and
probably not even that, given the spread of strong
crypto) can stop these trends.
-
+ Bypassing sanctions and boycotts
- Just because Bill Clinton doesn't like the rulers of
Haiti is no reason for me to honor his "sanctions"
- Individual choice, made possible by strong crypto
(untraceable transactions, pseudonyms, black markets)
+ Information Markets and Data Havens
- medical
- scientific
- corporate knowledge
- dossiers
+ credit reports
- without the absurd rules limiting what people can store
on their computers (e.g., if Alice keeps records going
back more than 7 years, blah blah, can be thrown in
jail for violating the "Fair Credit Reporting Act")
- bypassing such laws
- true, governments can attempt to force disclosure of
"reasons" for all decisions (a popular trend, where
even one's maid cannot be dismissed without the
"reasons" being called into question!); this means that
anyone accessing such offshore (or in cyberspace...same
difference) data bases must find some acceptable reason
for the actions they take...shouldn't be too hard
- (as with so many of these ideas, the beauty is that the
using of such services is voluntary....)
+ Consulting
- increased liquidity of information
+ illegal transactions
+ untraceability and digital money means many "dark"
possibilities
- markets for assassinations
- stolen property
- copyright infringement
+ Espionage
- information markets (a la AMIX)
- "digital dead drops"
- Offshore accounts
- Money-laundering
+ Markets for Assassinations
- This is one of the more disturbing implications of crypto
anarchy. Actually, it arises immediately out of strong,
unbreakable and untraceable communication and some form
of untraceable digital cash. Distrurbing it may be, but
the implications are also interesting to consider...and
inevitable.
- And not all of the implications are wholly negative.
+ should put the fear of God into politicians
- "Day of the Jackal" made electronic
- any interest group that can (anonymously) gather money
can have a politician zapped. Positive and negative
implications, of course.
- The fact is, some people simply need killing. Shocking as
that may sound to many, surely everyone would agree that
Hitler deserved killing. The "rule of law" sounds noble,
but when despicable people control the law, other
measures are called for.
- Personally, I hold that anyone who threatens what I think
of as basic rights may need killing. I am held back by
the repercussions, the dangers. With liquid markets for
liquidations, things may change dramatically.
16.10.2. The Negative Side of Crypto Anarchy
+ Comment:
- There are some very real negative implications;
outweighed on the whole by the benefits. After all, free
speech has negatives. Poronography has negatives. (This
may not be very convincing to many....I can't do it here-
-the gestalt has to be absorbed and considered.)
+ Abhorrent markets
- contract killings
- can collect money anonymously to have someone
whacked...nearly anyone who is controversial can generate
enough "contributions"
- kidnapping, extortion
+ Contracts and assassinations
- "Will kill for $5000"
+ provides a more "liquid" market (pun intended)
- sellers and buyers more efficiently matched
- FBI stings (which are common in hiring hit men) are
made almost impossible
- the canonical "dark side" example--Eric Drexler, when
told of this in 1988, was aghast and claimed I was
immoral to even continue working on the implications of
crypto anarchy!
- made much easier by the inability to trace payments, the
lack of physical meetings, etc.
+ Potential for lawlessness
- bribery, abuse, blackmail
- cynicism about who can manipulate the system
+ Solicitation of Crimes
- untraceably, as we have seen
+ Bribery of Officials and Influencing of Elections
- and direct contact with officials is not even
needed...what if someone "lets it be known" that a
council vote in favor of some desired project will result
in campaign contributions?
+ Child molestors, pederasts, and rapists
- encrypting their diaries with PGP (a real case, says the
FBI)
- this raises the privacy issue in all its glory...privacy
protects illegality...it always has and it always will
+ Espionage is much easier
- from the guy watching ships leave a harbor to the actual
theft of defense secrets
- job of defending against spies becomes much more
difficult: and end to microdots and invisible ink, what
with the LSB method and the like that even hides the very
existence of encrypted messages!
+ Theft of information
- from corporations and individuals
- corporations as we know them today will have to change
- liquidity of information
- selling of corporate secrets, or personal information
+ Digilantes and Star Chambers
- a risk of justice running amok?
+ Some killers are not rehabilitated and need to be
disposed of through more direct means
+ Price, Rhode Island, 21, 4 brutal killings
- stabbings of children, mother, another
+ for animals like this, vigilantism...discreet
execution...is justified...
- or, at least some of us will consider it justified
- which I consider to be a good thing
- this relates to an important theme: untraceable
communication and markets means the ability to "opt
out" of conventional morality
+ Loss of trust
+ even in families, especially if the government offers
bounties and rewards
- recall Pavel Morozov in USSR, DARE-type programs
(informing on parents)
- more than 50% of all IRS suits involve one spouse
informing to the IRS
+ how will taxes be affected by the increased black market?
- a kind of Laffer curve, in which some threshold of
taxation triggers disgust and efforts to evade the taxes
- not clear how large the current underground economy
is....authorities are motivated to misstate the size
(depending on their agenda)
+ Tax Evasion (I'm not defending taxation, just pointing out
what most would call a dark side of CA)
+ By conducting business secretly, using barter systems,
alternative currencies or credit systems, etc.
- a la the lawyers who use AMIX-like systems to avoid
being taxed on mutual consultations
+ By doing it offshore
- so that the "products" are all offshore, even though
many or most of the workers are telecommuting or using
CA schemes
- recall that many musicians left Europe to avoid 90% tax
rates
+ the "nest egg" scam: drawing on a lump sum not reported
+ Scenario: Alice sells something very valuable-perhaps
the specs on a new product-to Bob. She deposits the
fee, which is, say, a million dollars, in a series of
accounts. This fee is not reported to the IRS or anyone
else.
- the fee could be in cash or in a "promise"
- in multiple accounts, or just one
+ regardless, the idea is that she is now paid, say,
$70,000 a year for the next 20 years (what with
interest) as a "consultant" to the company which
represents her funds
- this of course does not CA of any form, merely some
discreet lawyers
- and of course Alice reports the income to the
IRS-they never challenge the taxpayer to "justify"
work done (and would be incapable of "disallowing"
the work, as Alice could call it a "retainer," or
as pay for Board of Directors duties, or
whatever...in practice, it's easiest to call it
consulting)
+ these scams are closely related to similar scams for
laundering money, e.g., by selling company assets at
artificially low (or high) prices
- an owner, Charles, could sell assets to a foreign
company at low prices and then be rewarded in tax-
free, under the table, cash deposited in a foreign
account, and we're back to the situation above
+ Collusion already is common; crypto methods will make some
such collusions easier
- antique dealers at an auction
+ espionage and trading of national secrets (this has
positive aspects as well)
- "information markets" and anonymous digital cash
- (This realization, in late 1987, was the inspiration for
the ideas behind crypto anarchy.)
- mistrust
- widening gap between rich and poor, or those who can use
the tools of the age and those who can't
16.10.3. The Positive Side of Crypto Anarchy
- (other positive reasons are implicitly scattered throughout
this outline)
+ a pure kind of libertarianism
- those who are afraid of CA can stay away (not strictly
true, as the effects will ripple)
- a way to bypass the erosion of morals, contracts, and
committments (via the central role of reputations and the
exclusion of distorting governments)
- individual responsibility
- protecting privacy when using hypertext and cyberspace
services (many issues here)
- "it's neat" (the imp of the perverse that likes to see
radical ideas)
+ A return to 4th Amendment protections (or better)
- Under the current system, if the government suspects a
person of hiding assets, of conspiracy, of illegal acts,
of tax evasion, etc., they can easily seize bank
accounts, stock accounts, boats, cars, ec. In particular,
the owner has little opportunity to protect these assets.
- increased liquidity in markets
+ undermining of central states
- loss of tax revenues
- reduction of control
- freedom, personal liberty
- data havens, to bypass local restrictive laws
+ Anonymous markets for assassinations will have some good
aspects
- the liquidation of politicians and other thieves, the
killing of those who have assisted in the communalization
of private property
- a terrible swift sword
16.10.4. Will I be sad if anonymous methods allow untraceable markets
for assassinations? It depends. In many cases, people deserve
death--those who have escaped justice, those who have broken
solemn commitments, etc. Gun grabbing politicians, for
example should be killed out of hand. Anonymous rodent
removal services will be a tool of liberty. The BATF agents
who murdered Randy Weaver's wife and son should be shot. If
the courts won't do it, a market for hits will do it.
- (Imagine for a moment an "anonymous fund" to collect the
money for such a hit. Interesting possibilities.)
- "Crypto Star Chambers," or what might be called
"digilantes," may be formed on-line, and untraceably, to
mete out justice to those let off on technicalities. Not
altogether a bad thing.
16.10.5. on interference in business as justified by "society supports
you" arguments (and "opting out)
+ It has been traditionally argued that society/government
has a right to regulate businesses, impose rules of
behavior, etc., for a couple of reasons:
- "to promote the general welfare" (a nebulous reason)
+ because government builds the infrastructure that makes
business possible
- the roads, transportation systems, etc. (actually, most
are privately built...only the roads and canal are
publically built, and they certainly don't _have_ to
be)
- the police forces, courts, enforcement of contracts,
disputes, etc.
- protection from foreign countries, tariff negotiations,
etc., even to the *physical* protection against
invading countries
+ But with crypto anarchy, *all* of these reasons vanish!
- society isn't "enabling" the business being transacted
(after all, the parties don't even necessarily know what
countries the other is in!)
- no national or local courts are being used, so this set
of reasons goes out the window
- no threat of invasion...or if there is, it isn't
something governments can address
+ So, in addition to the basic unenforceability of outlawing
crypto anarchy--short of outlawing encryption--there is
also no viable argument for having governments interfere on
these traditional grounds.
- (The reasons for them to interfere based on fears for
their own future and fears about unsavory and abominable
markets being developed (body parts, assassinations,
trade secrets, tax evasion, etc.) are of course still
"valid," viewed from their perspective, but the other
reasons just aren't.)
16.11. Ethics and Morality of Crypto Anarchy
16.11.1. "How do you square these ideas with democracy?"
- I don't; democracy has run amok, fulfilling de
Tocqueville's prediction that American democracy would last
only until Americans discovered they could pick the pockets
of their neighbors at the ballot box
- little chance of changing public opinion, of educating them
- crypto anarchy is a movement of individual opting out, not
of mass change and political action
16.11.2. "Is there a moral responsibility to ensure that the overall
effects of crypto anarchy are more favorable than unfavorable
before promoting it?"
- I don't think so, any more than Thomas Jefferson should
have analyzed the future implications of freedom before
pushing it so strongly.
- All decisions have implications. Some even cost lives. By
not becoming a doctor working in Sub-Saharan Africa, have I
"killed thousands"? Certainly I might have saved the lives
of thousands of villagers. But I did not kill them just
because I chose not to be a doctor. Likewise, by giving
money to starving peasants in Bangladesh, lives could
undeniably be "saved." But not giving the money does not
murder them.
- But such actions of omission are not the same, in my mind,
as acts of comission. My freedom, via crypto anarchy, is
not an act of force in and of itself.
- Developing an idea is not the same as aggression.
- Crypto anarchy is about personal withdrawal from the
system, the "technologies of disconnection," in Kevin
Kelly's words.
16.11.3. "Should individuals have the power to decide what they will
reveal to others, and to authorities?"
- For many or even most of us, this has an easy answer, and
is axiomatically true. But others have doubts, and more
people may have doubts as some easily anticipated
develpoments occur.
- (For example, pedophiles using the much-feared "fortress
crypto," terrorists communicating in unbreakable codes, tza
evaders, etc. Lots of examples.)
- But because some people use crypto to do putatively evil
things, should basic rights be given up? Closed doors can
hide criminal acts, but we don't ban closed doors.
16.11.4. "Aren't there some dangers and risks to letting people pick
and choose their moralities?"
- (Related to questions about group consensus, actions of the
state vs. actions of the individual, and the "herd.)
- Indeed, there are dangers and risks. In the privacy of his
home, my neighbor might be operating a torture dungeon for
young children he captures. But absent real evidence of
this, most nations have not sanctioned the random searches
of private dwellings (not even in the U.S.S.R., so far as I
know).
16.11.5. "As a member of a hated minority (crypto anarchists) I'd
rather take my chances on an open market than risk official
discrimination by the state.....Mercifully, the technology we
are developing will allow everyone who cares to to decline to
participate in this coercive allocation of power." [Duncan
Frissell, 1994-09-08]
16.11.6. "Are there technologies which should be "stopped" even before
they are deployed?"
- Pandora's Box, "things Man was not meant to know," etc.
- It used to be that my answer was mostly a clear "No," with
nuclear and biological weapons as the only clear exception.
But recent events involving key escrow have caused me to
rethink things.
- Imagine a company that's developing home surveillance
cameras...perhaps for burglar prevention, child safety,
etc. Parents can monitor Junior on ceiling-mounted cameras
that can't easily be tampered with or disconnected, without
sending out alarms. All well and good.
- Now imagine that hooks are put into these camera systems to
send the captured images to a central office. Again, not
necessarily a bad idea--vacationers may want their security
company to monitor their houses, etc.
- The danger is that a repressive government could make the
process mandatory....how else to catch sexual deviates,
child molestors, marijuana growers, counterfeiters, and the
like?
- Sound implausible, unacceptable, right? Well, key escrow is
a form of this.
- The Danger. That OS vendors will put these SKE systems in
place without adequate protections against key escrow being
made mandatory at some future date.
16.11.7. "Won't crypto anarchy allow some people to do bad things?"
- Sure, so what else is new? Private rooms allows plotters to
plot their plots. Etc.
- Not to sound too glib, but most of the things we think of
as basic rights allow various illegal, distasteful, or
crummy things to go on. Part of the bargain we make.
- "Of course you could prevent contract killings by requiring
everyone to carry government "escrowed" tape recordings to
record all their conversations and requiring them to keep a
diary at all times alibing their all their activities.
This would also make it much easier to stamp out child
pornography, plutonium smuggling, and social discrimination
against the politically correct." [James Donald, 1994-09-
09]
16.12. Practical Problems with Crypto Anarchy
16.12.1. "What if "bad guys" use unbreakable crypto?"
- What if potential criminals are allowed to have locks on
their doors? What if potential rapists can buy pornography?
What if....
- These are all straw men used in varous forms throughout
history by tyrants to control their populations. The
"sheepocracies" of the modern so-called democratic era are
voting away their former freedoms in favor of cradle to
grave safety and security.
- The latest tack is to propose limits on privacy to help
catch criminals, pedophile, terrorists, and father rapers.
God help us if this comes to pass. But Cypherpunks don't
wait for God, they write code!
16.12.2. Dealing with the "Abhorrent Markets"
- such as markets for assassinations and extortion
+ Possibilities:
+ physical protection, physical capure
- make it risky
- (on the other hand, sniping is easy)
+ "flooding" of offers
- "take a number" (meaning: get in line)
- attacking reputations
- I agree that more thought is needed, more thorough analysis
- Some people have even pointed out the benefits of killing
off tens of thousands of the corrupt politicians, narcs,
and cops which have implemented fascist, collectivist
policies for so long. Assassination markets may make this
much more practical.
16.12.3. "How is *fraud* dealt with in crypto anarchy?"
- When the perpetrators can't even be identified.
- One of the most interesting problems.
- First, reputations matter. Repeat business is not assured.
It is always best to not have too much at stake in any
single transaction.
16.12.4. "How do we know that crypto anarchy will work? How do we know
that it won't plunge the world into barbarism, nuclear war,
and terror?"
- We don't know, of course. We never can.
- However, things are already pretty bad. Look at Bosnia,
Ruanda, and a hundred other hellholes and flashpoints
around the world. Look at the nuclear arsenals of the
superpowers, and look at who starts the wars. In nearly all
cases, statism is to blame. States have killed a hundred
million or more people in this century alone--think of
Hitler, Stalin, Mao, and Pol Pot--through forced starvation
of entire provinces, liquidation of the peasantry, killing
of intellectuals, and mass exterminations of religious and
ethnic groups. It's hard to imagine crypto anarchy causing
anything that bad!
- Crypto anarchy is a cyberspatially-mediated personal course
of action; by itself it involves no actions such as
terrorism or nuclear blackmail. One could just as easily
ask, "Will freedom lead to nuclear blackmail, weapons
trading, and pedophilia?" The answer is the same: maybe,
but so what?
16.12.5. It is true that crypto anarchy is not for everyone. Some will
be too incompetent to prepare to protect themselves, and will
want a protector. Others will have poor business sense.
16.12.6. "But what will happen to the poor people and those on welfare
if crypto anarchy really succeeds?"
- "So?"
- Many of us would see this as a good thing. Not just for
Calvinist-Randite reasons, but also because it would break
the cycle of dependency which has actually made things
worse for the underclass in America (at least). See Charles
Murray's "Losing Ground" for more on this.
- And remember that a collapse of the tax system will mean
more money left in the hands of former taxpayers, and hence
more left over for true charity (for those who truly cannot
help themselves).
16.13. Black Markets
16.13.1. "Why would anyone use black markets?"
+ when the advantages of doing so outweigh the disadvantages
- including the chance of getting caught and the
consequences
- (As the chances decline, this suggests a rise in
punishment severity)
- businesses will tend to shy away from illegal markets,
unless...
+ Anonymous markets for medical products
- to reduce liability, local ethical and religious laws
- Example: Live AIDS vaccine...considered too risky for any
company to introduce, due to inability to get binding
waivers of liability (even for "fully informed" patients
who face likely death)
- markets in body parts...
16.13.2. Crypto anarchy opens up some exciting possibilities for
collusion in financial deals, for insider trading, etc.
- I'm not claiming that this will mean instant riches, as
markets are fairly efficient (*) and "insiders" often don't
do well in the market. (* Some argue that relaxing laws
against insider trading will make for an even fairer
market...I agree with this.)
- What I am claiming is the SEC and FinCEN computers will be
working overtime to try to keep up with the new
possibilities crypto anarchy opens up. Untraceable cash, as
in offshore bank accounts that one can send anonymous
trading instructions to (or for), means insider trading
simply can't be stopped...all that happens is that insiders
see their bank accounts increase (to the extent they win
because of the insider trading...like I said, a debatable
point).
- Price signalling, a la the airline case of a few years back
(which, you won't be surprised to hear, I have no problems
with), will be easier. Untraceable communications, virtual
meetings, etc.
16.13.3. Information Markets
- a la "information brokering," but mediated
cryptographically
- recall the 1981 market in Exocet missile codes (France,
Argentina--later of relevance when an Exocet sank a British
ship)
16.13.4. Black Markets, Informal Economies, Export Laws
+ Transborder data flow, legal issues
+ complex..laws, copyrights, "national sovereignty"
- e.g., Phillipines demanded in-the-clear transmissions
during bank loan renegotiations..and several Latin
American countries forbid encrypted transmissions.
+ Export, Technology Export, Export Control
- Export Control Act
- Office of Munitions (as in "Munitions Act", circa 1918)
+ export of some crypto gear shifted from Dept. of State,
Office of Munitions, to Dept. of Commerce
- Commodity Control List, allows s/w that is freely
available to the public to be exported without
additional paperwork
- Munitions used to be stickier about export (some would
say justifiably paranoid)
- Commodity Jurisdiction request, to see whether product
for export falls under State or Commerce regulations
- Trading with the Enemy Act
- Exocet codes--black market sales of emasculated chips
16.13.5. Smuggling and Black Markets
+ Black Markets in the USSR and Other Former East Bloc
Nations
+ a major issue, because the normal mechanisms for free
markets-property laws, shops, stock markets, hard
currencies, etc.-have not been in place
- in Russia, have never really existed
+ Role of "Mafia"
- various family-related groups (which is how trade
always starts, via contacts and connections and family
loyalty, until corporations and their own structures of
loyalty and trust can evolve)
+ how the Mafia in Russia works
- bribes to "lose" materials, even entire trainloads
- black market currency (dollars favored)
+ This could cause major discontent in Russia
- as the privileged, many of them ex-Communist officials,
are best prepared to make the transition to capitalism
+ those in factory jobs, on pensions, etc., will not
have the disposable income to take advantage of the new
opportunities
- America had the dual advantages of a frontier that
people wanted to move to (Turner, Protestant ethic,
etc.) and a high-growth era (industrialization)
- plus, there was no exposure to other countries at
vastly higher living standards
+ Smuggling in the EEC
+ the dream of tariff-free borders has given way to the
reality of a complex web of laws dictating what is
politically correct and what is not:
- animal growth hormones
- artificial sweeteners are limited after 1-93 to a small
list of approved foods: and the British are finding
that their cherished "prawn cocktail-flavored crisps"
are to be banned (for export to EEC or completely?)
because they're made with saccharin or aspartame
- "European content" in television and movies may limit
American productions...as with Canada, isn't this a
major abridgement of basic freedoms?
+ this may lead to a new kind of smuggling in "politically
incorrect" items
- could be argued that this is already the case with bans
on drugs, animal skins, ivory, etc. (so tediously
argued by Brin)
- recall Turgut Ozal's refreshing comments about loosening
up on border restrictions
+ as more items are declared bootleg, smuggling will
increase...politically incorrect contraband (fur, ivory,
racist and sexist literature)
+ the point about sexist and racist literature being
contraband is telling: such literature (books, magazines)
may not be formally banned, for that would violate the
First Amendment, but may still be imported anonymously
(smuggled) and distributed as if they were banned (!) for
the reason of avoiding the "damage claims" of people who
claim they were victimized, assaulted, etc. as a result
of the literature!
+ avoidance of prosecution or damage claims for writing,
editing, distributing, or selling "damaging" materials
is yet another reason for anonymous systems to emerge:
those involved in the process will seek to immunize
themselves from the various tort claims that are
clogging the courts
- producers, distributors, directors, writers, and even
actors of x-rated or otherwise "unacceptable"
material may have to have the protection of anonymous
systems
- imagine fiber optics and the proliferation of videos
and talk shows....bluenoses and prosecutors will use
"forum shopping" to block access, to prosecute the
producers, etc.
+ Third World countries may declare "national sovereignty
over genetic resources" and thus block the free export
and use of plant- and animal-derived drugs and other
products
- even when only a single plant is taken
- royalties, taxes, fees, licenses to be paid to local
gene banks
- these gene banks would be the only ones allowed to do
genetic cataloguing
- the problem is of course one of enforcement
+ technology, programs
- scenario: many useful programs are priced for
corporations (as with hotel rooms, airline tickets,
etc.), and price-sensitive consumers will not pay $800
for a program they'll use occasionally to grind out term
papers and church newsletters
+ Scenario: Anonymous organ donor banks
+ e.g., a way to "market" rare blood types, or whatever,
without exposing one's self to forced donation or other
sanctions
- "forced donation" involves the lawsuits filed by the
potential recipient
- at the time of offer, at least...what happens when the
deal is consummated is another domain
- and a way to avoid the growing number of government
stings
+ the abortion and women's rights underground...a hopeful
ally (amidst the generally antiliberty women's movement)
- RU-486, underground abortion clinics (because many
clinics have been firebombed, boycotted out of existence,
cut off from services and supplies)
+ Illegal aliens and immigration
- "The Boxer Barrier" used to seal barriers...Barbara Boxer
wants the military and national guard to control illegal
immigration, so it would be poetic justice indeed if this
program has her name on it
16.13.6. Organized Crime and Cryptoanarchy
+ How and Why
+ wherever money is to be made, some in the underworld will
naturally take an interest
- loan sharking, numbers games, etc.
+ they may get involved in the setup of underground banks,
using CA protocols
- shell games, anonymity
- such Mafia involvement in an underground monetary system
could really spread the techniques
+ but then both sides may be lobbying with the Mafia
- the CA advocates make a deal with the devil
- and the government wants the Mob to help eradicate the
methods
+ Specific Programs
+ False Identities
- in the computerized world of the 90s, even the Mob (who
usually avoid credit cards, social security numbers,
etc.) will have to deal with how easily their movements
can be traced
+ so the Mob will involve itself in false IDs
- as mentioned by Koontz
- Money Laundering, naturally
+ but some in the government see some major freelance
opportunities in CA and begin to use it (this undermines
the control of CA and actually spreads it, because the
government is working at cross purposes)
- analogous to the way the government's use of drug trade
systems spread the techniques
16.13.7. "Digital Escrow" accounts for mutually suspicious parties,
especially in illegal transactions
- drug deals, information brokering, inside information, etc.
+ But why will the escrow entity be trusted?
+ reputations
- their business is being a reliable escrow holder, not
it destroying their reputation for a bribe or a threat
+ anonymity means the escrow company won't know who it's
"burning," should it try to do so
- they never know when they themselves are being tested
by some service
- and potential bribers will not know who to contact,
although mail could be addressed to the escrow company
easily enough
16.13.8. Private companies are often allies of the government with
regards to black markets (or grey markets)
- they see uncontrolled trade as undercutting their monopoly
powers
- a way to limit competition
16.14. Money Laundering and Tax Avoidance
16.14.1. Hopelessness of controlling money laundering
+ I see all this rise in moneylaundering as an incredibly
hopeful trend, one that will mesh nicely with the use of
cryptography
- why should export of currency be limited?
- what's wrong with tax evasion, anyway?
- corrupting, affects all transactions
- vast amounts of money flowing
- 2000 banks in Russia, mostly money-laundering
+ people and countries are so starved for hard currency that
most banks outside the U.S. will happily take this money
- no natural resources in many of these countries
- hopeless to control
- being presented as "profits vs. principals," but I think
this is grossly misguided
+ Jeffery Robinson, "The Landrymen," interviewed on CNN, 6-24-
94
- "closer to anarchy" (yeah!)
- hopeless to control
- dozens of new countries, starved for hard currency, have
autonomy to set banking policies (and most European
countries turn a blind eye toward most of the anti-
laundering provisions)
16.14.2. Taxes and Crypto
- besides avoidance, there are also issues of tax records,
sales tax, receipts, etc.
+ this is another reason government may demand access to
cyberspace:
- to ensure compliance, a la a tamper-resistant cash
register
- to avoid under-the-table transactions
- bribery, side payments, etc.
- Note: It is unlikely that such access to records would stop
all fraud or tax evasion. I'm just citing reasons for them
to try to have access.
- I have never claimed the tax system will collapse totally,
or overnight, or without a fight. Things take time.
+ tax compliance rates dropping
+ the fabric has already unraveled in many countries, where
the official standard of living is below the _apparent_
standard of living (e.g., Italy).
- tax evasion a major thing
- money runs across the border into Switzerland and
Austria
- Frissell's figures
- media reports
+ Tax issues, and how strong crypto makes it harder and
harder to enforce
- hiding income, international markets, consultants,
complexly structured transactions
16.14.3. Capital Flight
- "The important issue for Cypherpunks is how we should
respond to this seemingly inevitable increased mobility of
capital. Does it pose a threat to privacy? If so, let's
write code to thwart the threat. Does it offer us any
tools we can use to fight the efforts of nation-states to
take away our privacy? If so, let's write code to take
advantage of those tools." [ Sandy Sandfort, Decline and
Fall, 1994--06-19]
16.14.4. Money Laundering and Underground Banks
+ a vast amount of money is becoming available under the
table: from skimming, from tax avoidance, and from illegal
activities of all kinds
- can be viewed as part of the internationalization of all
enterprises: for example, the Pakistani worker who might
have put his few rupees into some local bank now deposits
it with the BCCI in Karachi, gaining a higher yield and
also increasing the "multiplier" (as these rupees get
lent out many times)
- is what happened in the U.S. many years ago
- this will accelerate as governments try to get more taxes
from their most sophisticated and technical taxpayers,
i.e., clever ways to hide income will be sought
+ BCCI, Money-Laundering, Front Banks, CIA, Organized Crime
+ Money Laundering
- New York City is the main clearinghouse, Federal
Reserve of New York oversees this
- Fedwire system
- trillions of dollars pass through this system, daily
+ How money laundering can work (a maze of techniques)
- a million dollars to be laundered
- agent wires it, perhaps along with other funds, to
Panama or to some other country
- bank in Panama can issue it to anyone who presents
the proper letter
- various ways for it to move to Europe, be issued as
bearer stock, etc.
- 1968, offshore mutual funds, Bernie Kornfield
+ CIA often prefers banks with Mob connections
- because Mob banks already have the necessary security
and anonymity
- and are willing to work with the Company in ways that
conventional banks may not be
+ links go back to OSS and Mafia in Italy and Sicily, and
to heroin trade in SE Asia
- Naval Intelligence struck a deal in WW2 with Mafia,
wherby Meyer Lansky would protect the docks against
strikes (presumably in exchange for a "cut"), if
Lucky Luciano would be released at the end of the war
(he was)
- Operation Underworld: Mafia assisted Allied troops in
Sicily
- "the Corse"
+ Luciano helped in 1947 to reopen Marseilles when
Communist strikers had shut it down
- continuing the pattern of cooperation begun during
the war
- thus establishing the French Connection!
- Nugan Hand Bank
+ BCCI and Bank of America favored by CIA
- Russbacher says B of A a favored cover
+ we will almost certainly discover that BCCI was the
main bank used, with the ties to Bank of America
offices in Vienna
+ Bank of America has admitted to having had early
ties with BCCI in the early 1970s, but claims to
have severed those ties
- however, Russbacher says that CIA used B of A as
their preferred bank in Europe, especially since
it had ties to companies like IBM that were used
as covers for their covert ops
- Vienna was a favored money-laundering center for CIA,
especially using Bank of America
+ a swirl of paper fronts, hiding the flows from regulators
and investors
- "nominees" used to hide true owners and true activities
- various nations have banking secrecy laws, creating the
"veil" that cannot be pierced
+ CIA knew about all of the flights to South America (and
probably elsewhere, too)
- admitted Thomas Polgar, a senior ex-CIA official, in
testimony on 9-19-91
- this indicates that CIA knew about the arms deals, the
drug deals, and the various other schemes and scams
+ Earlier CIA-Bank Scandals (Nugan Hand and Castle Bank)
+ Nugan Hand Bank, Australia
+ Frank Nugan, Sydney, Australia, died in 1980
+ apparent suicide, but clearly rigged
- Mercedes, rifle with no fingerprints, position
all wrong
- evidence that he'd had a change of heart-was
praying daily, a la Charles Colson-and was
thinking about getting out of the business
+ set up Nugan Hand Bank in 1973
- private banking services, tax-free deposits in
Caymans
+ used by CIA agents, both for Agency operations and
for their own private slush/retirement funds
- several CIA types on the payroll (listed their
addresses as same as Air America)
- William Colby on Board, and was their lawyer
+ links to organized crime, e.g., Santo Trafficante,
Jr.
- Florida, heroin, links to JFK assassination
- trafficante was known as "the Cobra" and handled
many transactions for the CIA
+ money-laundering for Asian drug dealers
+ Golden Triangle: N-H even had branches in GT
- and branch in Chiang Mai, in Thailand
- links to arms dealers, like Edwin P. Wilson
+ U.S. authorites refused to cooperate with
investigations
- and when info was released, it was blacked out with
a "B-1" note, implying national security
implications
+ investigations by Australian Federal Bureau of
Narcotics were thwarted-agents transferred and
Bureau disbanded shortly thereafter
- similar to "Don't fuck with us" message sent to
FBI and DEA by CIA
+ N-H Bank had close working relation with Australian
Security Intelligence Organization (ASIO)
- NSA tapped phone conversations (speculative) of
Nugan that indicated ASIO collusion with N-H Bank
in the drug trade
+ Pine Gap facility, near Alice Springs (NSA, NRO)
- P.M. Gough Whitlam's criticism of Pine Gap led to
CIA-ASIO plot to destroy the Whitlam gov't.
- November 1975 fall instigated with wiretaps and
forgeries
+ Nugan Hand Bank was also involved with "Task Force
157," a Naval Intelligence covert operation, given
the cover name "Pierce Morgan" (a good name?)
- reported to Henry Kissinger
- recall minor point that Navy is often the preferred
service for the ruling elite (the real preppies)
+ and George Bush's son, George W. Bush, was involved
with Nugan Hand:
- linked to William Quasha, who handled N-H deals in
Phillipines
+ owners of Harken Energy Corp. a Texas-based company
that bought G.W. Bush's oil company "Spectrum 7" in
1986
- later got offshore drilling rights to Bahrain's
oil-with G.W. Bush on the Board of Directors
- could this be another link to Gulf Crisis?
+ Castle Bank, Bahamas, Paul E. Helliwell
+ OSS (China). CIA
- Mitch WerBell, White Russian specialist in
assassination, silencers, worked for him in China
- Howard Hunt worked for him
- after WW2, set up Sea Supply Inc., CIA front in Miami
+ linked to Resorts International
- law firm of Helliwell, Melrose and DeWolf
- lent money to Bahamian P.M. Lynden Pindling in
exchange for extension of gambling license
+ Robert Vesco, Bebe Rebozo, and Howard Hughes
- in contrast to the "Eastern Establishment," these
were Nixon's insiders
- links with ex-CIA agent Robert Maheu (who worked
for Hughes); onvolved withTrafficante, CIA plot to
kill Castro, and possible links to JFK
assassination
- Vesco active in drug trade
+ also involved in purchase of land for Walt Disney
World
- 27,000 acres near Orlando
- Castle Bank was a CIA conduit
+ Operation Tradewinds, IRS probe of bank money flows
- late 60s
- investigation of "brass plate" companies in Caymans,
Bahamas
+ Plot Scenario: Operation Tradewinds uncovered many
UltraBlack operations, forcing them to retrench and
dig in deeper, sacrificing several hundred million
- circa 1977 (Castle Bank shut down)
+ World Finance Corporation (WFC)
+ started in 1971 in Coral Gables
- first known as Republic National Corporation
- Walter Surrey, ex-OSS, like Helliwell of Castle
Bank, helped incorporate it
+ Business
- exploited cash flows in Florida
- dealt with CIA, Vesco, Santo Trafficante, Jr.
- also got loan deposits from Arabs
- links to Narodny Bank, the Soviet bank that also
pay agents
+ a related company was Dominion Mortgage Company,
located at same address as WFC
- linked to narcotics flow into Las Vegas
- and to Trafficante, Jr.
- suitcases of cash laundered from Las Vegas to
Miami
- Jefferson Savings and Loan Association, Texas
+ Guilermo Hern‡ndez Cartaya, ex-Havana banker, Cuban
exile, was chief figure
- veteran of Bay of Pigs (likely CIA contacts)
- investigated by R. Jerome Sanford, Miami assistant
U.S. attorney
- Dade County Organized Crime Bureau also involved in
the 1978 investigation
- Rewald and his banking deals
- BCCI was a successor to this bank
+ CIA and DEA Links to Drug Trade
- former agents and drug traffickers were frequently
recruited by DEA and CIA to run their own drug
operation, sometimes with political motivations
- Carlos Hern‡ndez recruited by BNDD (Bureau of Narcotics
and Dangerous drugs, predecessor to DEA) to form a
death squad to assassinate other drug traffickers
+ possible links of the drug dealers to
UltraBlack/Witness Security Program
- agents in Florida, the stock broker killing in 1987
- Seal was betrayed by the DEA and CIA, allowed to be
killed by the Columbians
+ Afghan Rebels, Arms to Iran (and Iraq), CIA, Pakistan
- there was a banking and arms-running network centered
in Karachi, home of BCCI, for the various arms deals
involving Afghan rebels
- Karachi, Islamabad, other cities
+ Influence Peddling, Agents
- a la the many senior lawyers hired by BCCI (Clark
Clifford, Frank Manckiewicz [spelling?]
+ illustrates again the basic corruptability of a
centralized command economy, where regulators and
lawmakers are often in the pockets of corrupt
enterprises
- clearly some scandals and losses will occur in free
markets, but at least the free markets will not be
backed up with government coercion
+ Why CIA is Involved in So Many Shady Deals?
+ ideal cover for covert operations
- outside audit channels
- links to underworld
+ agents providing for their own retirements, their own
private deals, and feathering their own nests
- freedom from interferance
- greed
+ deals like that of Noriega, in which CIA-supported
dictators and agents provided for their own lavish
lifestyles\
- and the BCCI-Noriega links are believed to have
contributed to the CIA's unwillingness to question
the activities of the BCCI (actually, the Justice
Department)
+ Role of Banks in Iraq and Gulf War, Iraq-Gate, Scandals
- Export Import Bank (Ex-Im), CCC
- implicated in the arming of Iraq
- Banco Lavorzo Nazionale [spelling?]
+ CIA was using BNL to arrange $5B in transfers, to arm
Iraq, to ensure equality with Iran
- because BNL wouldn't ask where it came from
- federally guaranteed loans used to finance covert ops
+ the privatizing of covert ops by the CIA and NSA
- deniability
- they subcontracted the law-breaking
- the darker side of capitalism did the real work
- but the crooks learned quickly just how much they
could steal...probably 75% of stolen money
- insurance fraud...planes allowed to be stolen, then
shipped to Contras, with Ollie North arguing that
nobody was really hurt by this whole process
+ ironically, wealthy Kuwaitis were active in financing
"instant banks" for money laundering and arms
transactions, e.g., several in Channel Islands
- Ahmad Al Babtain Group of Companies, Ltd., a
Netherlands Antilles corporation
- Inslaw case fits in with this picture
+ Federal Reserve and SEC Lack the Power to "Peirce the
Veil" on Foreign Banks
- as the Morgenthau case in Manhattan develops
- a well-known issue
+ But should we be so surprised?
- haven't banks always funded wars and arms merchants?
- and haven't some of them failed?
- look at the Rothschilds
- what is surprising is that so many people knew what it
was doing, what its business was, and that it was even
nicknamed "Banks of Crooks and Criminals International"
+ Using software agents for money laundering and other
illegal acts
+ these agents act as semi-autonomous programs that are a
few steps beyond simple algortihms
- it is not at all clear that these agents could do
very much to run portfolio, because nothing really
works
- real use could be as "digital cutouts": transferring
wealth to other agents (also controlled from afar, like
marionettes)
- advantage is that they can be programmed to perform
operations that are perhaps illegal, but without
traceability
+ Information brokers as money launderers (the two are
closely related)
- the rise of AMIX-style information markets and Sterling-
style "data havens" will provide new avenues for money
laundering and asset-hiding
+ information is intrinsically hard to value, hard to put
a price tag on (it varies according to the needs of the
buyers)
- meaning that transnational flows of inforamation
cannot be accurately valued (assigned a cash value)
- is closely related to the idea of informal
consulting and the nontaxable nature of it
- cardboard boxes filled with cash, taped and strapped, but
still bursting open
- gym bags carrying relatively tiny amounts of the skim: a
mere hundred thousand in $100s
+ L.A. becoming a focus for much of this cash
- nearness to Mexico, large immigrant communities
- freeways and easy access
+ hundreds of airstrips, dozens of harbors
- though East Coast seems to have even more, so this
doesn't seem like a compelling reason
- Ventura County and Santa Barbara
16.14.5. Private Currencies, Denationalization of Money
- Lysander Spooner advocated these private currencies
- and "denationalization of money" is a hot topic
+ is effect, alternatives to normal currency already exist
- coupons, frequent flier coupons, etc.
+ telephone cards and coupons (widely used in Asia and
parts of Europe)
- ironically, U.S. had mostly opted for credit cards,
which are fully traceable and offer minimal privacy,
while other nations have embraced the anonymity of
their kind of cards...and this seems to be carrying
over to the toll booth systems being planned
- barter networks
- chop marks (in Asia)
+ "reputations" and favors
- if Al gives Bob some advice, is this taxable? (do
lawyers who talk amongst themselves report the
transactions/ od course not, and yet this is
effectively either a barter transaction or an outright
gift)
+ sophisticated financial alternatives to the dollar
- various instruments
- futures, forward contracts, etc.
- "information" (more than just favors)
+ art works and similar physical items
- not a liquid market, but for high rollers, an easy way
to transfer hundreds of millions of dollars (even with
the discounted values of a stolen item, and not all the
items will be stolen...many people will be very careful
to never travel with stolen art)
- diamonds, gems have long been a form of transportable
wealth
+ art works need not be declared at most (?) borders
- this may change with time
16.14.6. Tax Evasion Schemes
- unreported income, e.g., banks like the BCCI obviously did
not report what they or their customers were doing to the
various tax authorities (or anyone else)
- deferred income, via the kind of trust funds discussed here
(wherein payment is deferred and some kind of trust is used
to pay smaller amounts per year)
+ Asset-Hiding, Illegal Payments, Bribes, and Tax Evasion
Funds Can Be Protected in a "Retirement Fund"
+ e.g., a politician or information thief-perhaps an Intel
employee who sells something for $1M-can buy shares in a
crypto-fund that then ensures he is hired by a succession
of consulting firms for yearly consulting...or even just
placed on a "retainer" of, say, $100K a year
+ IRS may come to have doubts about such services, but
unless the government steps in and demands detailed
inspection of actual work done-and even then I think
this would be impossible and/or illegal-such
arrangements would seem to be foolproof
+ why can't government demand proof of work done?
- who judges the value of an employee?
- of advice given, of reports generated, or of the
value of having a consultant "on retainer"?
- such interference would devastate many vested
interests
+ tax and other advantages of these "crypto annuities"
- tax only paid on the yearly income, not on the lump
sum
- authorities are not alerted to the sudden receipt of
a lump sum (an ex-intelligence official who receives
a payement of $1 M will come under suspicion, exactly
as would a politician)
- and a lump sum payment might well arouse suspicions
and be considered evidence of some criminal activity
+ the original lump sum is protected from confiscation
by governments, by consideration in alimony or
bankruptcy cases, etc.
- such "consulting annuities" may be purchased just
so as to insulate earnings from alimony,
bankruptcy, etc.
- as usual, I'm not defending these steps as moral or
as good for the business climate of the world, just
as inevitable consequences of many current trends
and technical developments
+ the "shell game" is used to protect the funds
- with periodic withdrawals or transfers
- note that this whole scheme can pretty much be done by
attorneys and agents today, though they may be subpoenaed
or otherwise encouraged to blab
+ it may not even be illegal for a consultant to take his
fee over a period of many years
+ the IRS may claim the "discounted present value" as a
lump sum, but other folks already do things like this
- royalty streams (and nobody claims an author must
agree with the IRS to some estimated value of this
stream)
- percentages of the gross (and the like)
- engineers and other professionals are often kept on
payrolls not so much for their instantaneous
achievements as for their past and projected
achievements-are we to treat future accomplishments
in a lump sum way?
+ IRS and others may try to inspect the terms of the
employment or consulting agreement, but these seems too
invasive and cumbersome
+ it makes the government a third party in all
negotiations, requiring agents to be present in all
talks or at least to read and understand all
paperwork
- and even then, there could be claims that the
government didn't follow the deals
- not enough time or manpower to handle all these
things
- and the invasion of privacy is extreme!
+ Scenario: the Fincen-type agencies may deal with the
growing threat of CA-type systems (and encryption in
general) by involving the government in ostensibly
private deals
- analogous to the sales tax and bookkeeping
arrangements (where gov't. is a third party to all
transactions)
+ or EEOC, race and sex discimination cases
- will transcripts and recordings of all job
interviews come to be required?
- "laying track"
- OSHA, pollution, etc.
+ software copying laws (more to the point):
government seems to have the power to enter a
business to see if illegal copies are in use; this
may first require a warrant
+ how long before various kinds of software are
banned?
- with the argument being that some kinds of
software are analogous to lockpicks and other
banned burglar tools
- "used to facillitate the illegal copying of
protected software"
+ the threat of encryption for national security as
well as for the money-laundering and illegal
payments possibilities may cause the government
to place restrictions on the use of crypto
software for anything except approved uses
(external e-mail, etc.)
- and even these uses can of course be subverted
- and crypto techniques are not actually necessary: lawyers
and other discreet agents will suffice
+ furthermore, corporations have a fair amount of lattitude
in setting retirement policies and benefits, and so the
methods I've described to shelter current income may
become more widespread
+ though there may be some proviso that if benefits
exceeed some percentage of yearly income, factoring in
years on the job, that these benefits are taxed in some
punative way
- e.g.., a corporation that pays $100K a year to a
critical technical person for a year of work and then
pays him $60K a year for the next ten years could
reasonably be believed to have set up a system to
help him avoid taxes on a large lump sum payment
+ Asset-hiding, to avoid seizure in bankruptcies, lawsuits
+ e.g., funds placed in accounts which are secret, or in
systems/schemes over which the asset-hider has control
of some kind (voting, consulting, etc.)
- this is obscure: what I'm thinking of is some kind of
deal in which Albert is hired by Bob as an "advisor"
on financial matters: but Bob's money comes from
Albert and so the quid pro quo is that Bob will take
Albert's advice....hence the effective laundering and
protection
+ May also be used to create "multi-tier" currency systems,
e.g., where reported transactions are some fraction of
actuals
- suppose we agree to deal at some artificially low
value: electricians and plumbers may barter with each
other at a reported $5 an hour, while using underground
accounts to actually trade at more realistic levels
+ government (IRS) has laws about "fair value"-but how
could these laws be enforced for such intangibles as
software?
- if I sell a software program for $5000, can the
government declare this to be over or underpriced?
- likewise, if a plumber charges $5 an hour, can the
government, suspecting tax evasion, force him to
charge more?
- once again, the nature of taxation in our increasingly
many-dimensioned economy seems to necessitate major
invasions of privacy
16.14.7. "Denationalization of Money"
- as with the old SF standby of "credits"
+ cf. the books on denationalization of money, and the idea
of competing currencies
- digital cash can be denominated in these various
currencies, so it makes the idea of competing currencies
more practical
- to some extent, it already exists
+ the hard money advocates (gold bugs) are losing their
faith, as they see money moving around and never really
landing in any "hard" form
- of course, it is essential that governments and groups
not have the ability to print more money
- international networks will probably denominate
transactions in whatever currencies are the most stable and
least inflationary (or least unpredictably inflationary)
16.15. Intellectual Property
16.15.1. Concepts of property will have to change
- intellectual property; enforcement is becoming problematic
- when thieves cannot be caught
16.15.2. Intellectual property debate
- include my comment about airwaves
+ work on payment for items...Brad Cox, Peter Sprague, etc.
- Superdistribution, metered usage
- propertarian
- many issues
16.16. Markets for Contract Killings, Extortion, etc.
16.16.1. Note: This is a sufficiently important topic that it deserves
its own heading. There's material on this scattered around
this document, material I'll collect together when I get a
chance.
16.16.2. This topic came up several times on then Extropians mailing
list, where David Friedman (author of "The Machinery of
Freedom" and son of Nobel Prize winner Milton Friedman) and
Robin Hanson debated this with me.
16.16.3. Doug Cutrell summarized the concerns of many when he wrote:
- "...the availability of truly secure anonymity, strong
encryption, and untraceable digital cash could allow
contract killing to be an openly conducted business. For
example, an anonymous news post announces a public key
which is to be used to encode a contract kill order, along
with a digital cash payment. The person placing the
contract need only anonymously place the encrypted message
in alt.test. Perhaps it is even possible to make it
impossible to tell that the message was encrypted with the
contract killer's public key (the killer would have to
attempt decryption of all similarly encoded messages on
alt.test, but that might be quite feasible). Thus it could
be completely risk free for anyone to place a contract on
anyone else." [Doug Cutrell, 1994-09-09]
16.16.4. Abhorrent markets
- contract killings
- can collect money anonymously to have someone
whacked...nearly anyone who is controversial can generate
enough "contributions"
- kidnapping, extortion
16.16.5. Dealing with Such Things:
+ never link physical ID with pseudonyms! (they won't kill
you if they don't know who you are)
- and even if one pseudonym is linked, make sure your
financial records are not linkable
- trust no one
- increased physical security...make the effort of killing
much more potentially dangerous
- flooding attacks..tell extortionists to "get in line"
behind all the other extortionists
+ announce to world that one does not pay extortionists...set
up protocol to ensure this
- yes, some will die as a result of this
- console yourself with the fact that though some may die,
fewer are dying as a result of state-sponsored wars and
terrorism (historically a bigger killer than contract
killings!)
16.17. Persistent Institutions
16.17.1. Strong crypto makes possible the creation of institutions
which can persist for very long periods of time, perhaps for
centuries.
- such institutions already exist: churches (Catholics of
several orders), universities, etc.
16.17.2. all of these "persistent" services (digital banks, escrow
services, reputation servers, etc.) require much better
protections against service outages, seizures by governments,
natural disasters, and even financial collapse than do most
existing computer services-an opportunity for offshore escrow-
like services
- to maintain a distributed database, with unconditional
privacy, etc.
+ again, it is imperative that escrow companies require all
material placed in it to be encrypted
- to protect them against lawsuits and claims by
authorities (that they stole information, that they
censored material, that they are an espionage conduit,
etc.)
16.17.3. Escrow Services
+ "Digital Escrow" accounts for mutually suspicious parties,
especially in illegal transactions
- drug deals, information brokering, inside information,
etc.
+ But why will the escrow entity be trusted?
+ reputations
- their business is being a reliable escrow holder, not
it destroying their reputation for a bribe or a
threat
+ anonymity means the escrow company won't know who it's
"burning," should it try to do so
- they never know when they themselves are being tested
by some service
- and potential bribers will not know who to contact,
although mail could be addressed to the escrow company
easily enough
- like bonding agencies
- key is that these entities stand to gain very little by
stealing from their customers, and much to lose (hinges on
ratio of any single transaction to size of total market)
- useful for black markets and illegal transactions (a
reliable third party that both sides can trust, albeit not
completely)
16.17.4. Reputation-Based Systems
+ Credit Rating Services that are Immune from Meddling and
Lawsuits
+ with digital pseudonyms, true credit rating data bases
can be developed
- with none of the "5 year expirations" (I mean, who are
you to tell me I must not hold it against a person that
records show he's declares Chapter 7 every 5 years or
so?...such information is information, and cannot be
declared illegal, despite the policy issues that are
involved)
+ this could probably be done today, using offshore data
banks, but then there might develop injunctions against
use by Stateside companies
- how could this be enforced? stings? entrapment?
+ it may be that credit-granting entities will be
forced to use rigid formulas for their decisions,
with a complete audit trail available to the
applicant
- if any "discretion" or judgment is allowed, then
these extralegal or offshore inputs can be used
- related to "redlining" and other informal
signalling mechanisms
- remember that Prop. 103 attempted to bypass normal
laws of economics
+ AMIX-like services will offer multiple approaches here
+ ranging from conventional credit data bases, albeit
with lower costs of entry (e.g., a private citizen
could launch a "bankruptcy filings" data base, using
public records, with no expiration-they're just
reporting the truth, e.g., that Joe Blow filed for
personal bankruptcy in 1987
- this gets into some of the strange ideas involving
mandatory rewriting of the truth, as when "credit
records are expunged" (expunged from what? from my
personal data bases? from records that were public
and that I am now selling access to?)
+ there may be arguments that the "public records" are
copyrighted or otherwise owned by someone and hence
cannot be sold
- telephone book case (however, the Supremes held
that the "creative act" was the specific
arrangement)
- one ploy may be a Habitat-like system, where some of
the records are "historical"
- to offshore data bases
+ Book Reviews, Music Reviews
- sometimes with pseudonyms to protect the authors from
retaliation or even lawsuits
+ "What should I buy?" services, a la Consumer Reports
- again, protection from lawsuits
16.17.5. Crypto Banks and the "Shell Game" as a Central Metaphor
+ Central metaphor: the Shell Game
- description of conventional shell game (and some
allusions to con artists on a street corner-the hand is
quicker than the eye)
+ like entering a room filled with safe deposit boxes, with
no surveillance and no way to monitor activity in the
boxes....and user can buy new boxes anonymously,
transferring contents amongst the boxes
- only shutting down the entire system and forcing all
the boxes open would do anything-and this would "pool"
all of the contents (unless a law was passed saying
people could "declare" the contents before some
day....)
+ the shell game system can be "tested"-by testing
services, by suspicious individuals, whatever-at very low
cost by dividing some sum amongst many accounts and
verifying that the money is still there (by retrieving or
cashing them in)
- and remember that the accounts are anonymous and are
indistinguishable, so that the money cannot be seized
without repercussions
+ this is of course the way banks and similar reputation-
based institutions have always (or mostly) worked
- people trusted the banks not to steal their money by
verifying over some period of time that their money was
not vanishing
- and by relying upon some common sense ideas of what the
bank's basic business was (the notion that a bank
exists to continue in business and will make more money
over some long run period by being trustworthy than it
would make in a one-shot ripoff)
+ Numbered accounts
- recall that Switzerland has bowed to international
pressure and is now limiting (or eliminating) numbered
accounts (though other countries are still allowing some
form of such accounts, especially Lichtenstein and
Luxembourg)
+ with crypto numbers, even more security
- "you lose your number, tough"
- but the money must exist in some form at some time?
+ options for the physical form of the money
+ accounts are shares in a fund that is publicly invested
- shares act as "votes" for the distribution of
proceeds
- dividends are paid to the account (and sent wherever)
- an abstract, unformed idea: multiple tiers of money,
like unequal voting rights of stock...
+ could even be physical deposits
- perhaps even manipulated by automatic handling
systems (though this is very insecure)
- the Bennett-Ross proposal for Global Data Services is
essentially the early form of this
16.17.6. cryonicists will seek "crypto-trusts" to protect their assets
+ again, the "crypto" part is not really necessary, given
trustworthy lawyers and similar systems
- but the crypto part-digital money-further automates the
system, allowing smaller and more secure transactions
(overhead is lower, allowing more dispersions and
diffusion)
- and eliminates the human link
- thus protecting better against subpoenas, threats, etc.
+ and to help fund "persistent institutions" that will fund
research and protect them in suspension
- they may also place their funds in "politically correct"
longterm funds-which may or may not exert a postive
ifluence in the direction they wish, what with the law of
unintended consequences and all
opl
+ many avenues for laundering money for persistent
institutions
+ dummy corporations (or even real corporations)
- with longterm consulting arrangements
- "shell game" voting
+ as people begin to believe that they may just possibly be
revived at some future time, they will begin to worry about
protecting their current assets
+ recollections of "Why Call Them Back from Heaven?"
- worries about financial stability, about confiscation
of wealth, etc.
- no longer will ersatz forms of immortality-endowments fo
museums, universities, etc.-be as acceptable...people
will want the real thing
+ Investments that may outlive current institutions
- purchases of art works (a la Bill Gates, who is in fact a
possibel model for this kind of behavior)
- rights to famous works, with provision for the copyright
expirations, etc. (which is why physical possession is
preferable)
- shell games, of course (networks of reputation-based
accounts)
- Jim Bennett reports that Saul Kent is setting up such
things in Lichtenstein for Alcor (which is what I suggested
to Keith Henson several years ago)
16.18. Organized Crime: Triads, Yakuza, Mafia, etc.
16.18.1. "The New Underworld Order"
+ Claire Sterling's "Thieve's World"
- (Sterling is well-known for her conservative views on
political matters, having written the controversial "The
Terror Connection," which basically dismissed the role of
the CIA and other U.S. agencies in promoting terrorism.
"Thieve's World" continues the alarmist stance, but has
some juicy details anyway.)
- she argues for more law enforcement
+ but it was the corrupt police states of Nazi Germany,
Sovet Russia, etc., that gave so many opportunities for
modern corruption
- and the CIA-etc. drug trade, Cold War excuses, and
national security state waivers
+ in the FSU, the Russian Mafia is the chief beneficiary
of privatization...only they had the cash and the
connections to make the purchases (by threatening non-
Mob bidders, by killing them, etc.)
- as someone put in, the world's first complete
criminal state
16.18.2. "Is the criminal world interested in crypto? Could they be
early adopters of these advanced techniques?"
- early use: BBS/Compuserve messages, digital flash paper,
codes
- money-laundering, anstalts, banks
- Triads, chop marks
- Even though this use seem inevitable, we should probably be
careful here. Both because the clientele for our advice may
be violent, and ditto for law enforcement. The conspiracy
and RICO laws may be enough to get anyone who advises such
folks into major trouble. (Of course, advice and consulting
may happen throught the very same untraceable technology!)
16.18.3. crypto provides some schemes for more secure drug
distribution
- cells, dead drops, secure transfers to foreign accounts
- communication via pools, or remailers
- too much cash is usually the problem...
- "follow the money" (FinCEN)
- no moral qualms...nearly all drugs are less dangerous than
alcohol is...that drug was just too popular to outlaw
- this drug scenario is consistent with the Triad/Mob
scenario
16.19. Privately Produced Law, Polycentric Law, Anarcho-Capitalism
16.19.1. "my house, my rules"
16.19.2. a la David Friedman
16.19.3. markets for laws, Law Merchant
- corporations, other organizations have their own local
legal rules
- Extropians had much debate on this, and various competing
legal codes (as an experiment...not very sucessful, for
various reasons)
- "Snow Crash"
16.19.4. the Cypherpunks group is itself a good example:
- a few local rules (local to the group)
- a few constraints by the host machine environment (toad,
soda)
+ but is the list run on "United States law"?
- with members in dozens of countries?
- only when the external laws are involved (if one of us
threatened another, and even then this is iffy) could the
external laws....
- benign neglect, by necessity
16.19.5. I have absolutely no faith in the law when it comes to
cyberspatial matters (other matters, too).
- especially vis-a-vis things like remote access to files, a
la the AA BBS case
- "the law is an ass"
- patch one area, another breaks
- What then? Technology. Remailers, encryption
16.19.6. Contracts and Cryptography
+ "How can contracts be enforced in crypto anarchy
situations?"
- A key question, and one which causes many people to
question whether crypto anarchy can work at all.
+ First, think of how many situations are _already_
essentially outside the scope of the law...and yet in
which something akin to "contracts" are enforceable,
albeit not via the legal process.
- friends, relationships
+ personal preferences in food, books, movies, etc.
- what "recourse" does one have in cases where a meal
is unsatisfactory? Not going back to the restaurant
is usually the best recourse (this is also a hint
about the importance of "future expectation of
business" as a means of dealing with such things).
- In these cases, the law is not directly involved. In
fact, the law is not involved in _most_ human (and
nonhuman!) interactions.
+ The Main Approaches:
+ Reputations.
- reputations are important, are not lightly to be
regarded
- Repeat Business.
- Escrow Services.
+ The "right of contract" (and the duty to adhere to them, to
not try to change the contract after the facts) is a
crucial building block.
- Imagine a society in which contracts are valid. This
allows those willing to sign contracts setting limits on
malpractice to get cheaper health care, while those who
won't sign such contracts are free to sue--but will of
course have to pay more for health care. Nothing is free,
and frivolous malpractice lawsuits have increased
operating costs. (Recall the "psychic" who alleged that
her psychic powers were lost after a CAT scan. A jury
awarded her millions of dollars. Cf. Peter Huber's books
on liability laws.)
- Now imagine a society in which it is never clear if a
contract is valid, or whether courts will overturn or
amend a contract. This distorts the above analysis, and
so hospitals, for example, have to build in safety
margins and cushions.
+ Crypto can help by creating escrow or bonding accounts held
by third parties--untraceable to the other parties--which
act as bonding agents for completion of contracts.
- Such arrangements may not be allowed. For example, a
hospital which attempted to deal with such a bonding
agency, and which asked customers to also deal with them,
could face sanctions.
- "Secured credit cards" are a current example: a person pays
a reserve amount greater than the card limits (maybe 110%).
The reason for doing this is not to obtain "credit,"
obviously, but to be able to order items over the phone, or
to avoid carrying cash. (The benefit is thus in the
_channel_ of commerce).
16.19.7. Ostracism, Banishment in Privately Produced Law
+ Voluntary and discretionary electronic communities also
admit the easy possibility of banishment or ostracism
(group-selected kill files). Of course, enforcement is
generally difficult, e.g., there is nothing to stop
individuals from continuing to communicate with the
ostracized individual using secure methods.
- I can imagine schemes in which software key escrow is
used, but these seem overly complicated and intrusive.
- The ability of individuals, and even subgroups, to thwart
the ostracism is not at all a bad thing.
-
- "In an on-line world it would be much easier to enforce
banishment or selective ostracism than in real life.
Filtering agents could look for certificates from accepted
enforcement agencies before letting messages through. Each
user could have a set of agencies which were compatible
with his principles, and another set of "outlaws". You
could even end up with the effect of multiple "logical
subnets" of people who communicate with each other but not
outside their subnet. Some nets might respect intellectual
property, others not, and so on." [Hal Finney, 1994-08-21]
16.19.8. Governments, Cyberspaces, PPLs
- Debate periodically flares up on the List about this topic.
- Can't be convered here in sufficient detail.
- Friedman, Benson, Stephenson's "Snow Crash," etc.
16.19.9. No recourse in the courts with crypto-mediated systems
- insulated from the courts
- PPLs are essential
- reputations, escrow, mediation (crypto-mediated mediation?)
16.19.10. Fraud
- not exactly rare in the non-crypto world!
- new flavors of cons will likely arise
- anonymous escrow accounts, debate with Hal Finney on this
issue, etc.
16.19.11. PPLs, polycentric law
16.20. Libertaria in Cyberspace
16.20.1. what it is
16.20.2. parallels to Oceania, Galt's Gulch
16.20.3. Privacy in communications alters the nature of connectivity
- virtual communities, invisible to outsiders
- truly a crypto cabal
- this is what frightens the lawmakers the most...people can
opt out of the mainstream governmental system, at least
partly (and probably increasingly)
16.21. Cyberspace, private spaces, enforcement of rules, and technology
16.21.1. Consider the "law" based approach
- a discussion group that wants no men involved ("a protected
space for womyn")
- so they demand the civil law system enforce their rules
- practical example: sysadmins yank accounts when
"inappropriate posts" are made
- the C&S case of spamming is an example
- Note: The Net as currently constituted is fraught with
confusion about who owns what, about what are public and
what are private resources, and about what things are
allowed. If Joe Blow sends Suzy Creamcheese an "unwanted"
letter, is this "abuse" or "harassement"? Is it stealing
Suzy's resources? (In my opinion, of course not, but I
agree that things are confusing.)
16.21.2. The technological approach:
- spaces created by crypto...unbreachable walls
+ example: a mailing list with controls on membership
- could require nomination and vouching for by others
- presentation of some credential (signed by someone), e.g.
of femaleness
- pay as you go stops spamming
16.21.3. This is a concrete example of how crypto acts as a kind of
building material
- and why government limitations on crypto hurt those who
wish to protect their own spaces
- a private mailing list is a private space, inaccessible to
those outside
- "There are good engineering approaches which can force data
to behave itself. Many of them involve cryptography. Our
government's restrictions on crypto limit our ability to
build reliable computer systems. We need strong crypto for
basic engineering reasons." [Kent Borg, "Arguing Crypto:
The Engineering Approach," 1994-06-29]
16.21.4. Virtual Communities-the Use of Virtual Networks to Avoid
Government
- that is, alternatives to creating new countries (like the
Minerva project)
- the Assassin cult/sect in the mountains of Syria, Iraq,
Afghanistan, etc. had a network of couriers in the mountain
fastnessess
- pirate communities, networks of trading posts and watering
holes, exempt-if only for a few years-from the laws of the
imperial powers
16.21.5. These private spaces will, as technology makes them more
"livable" (I don't mean in a full sense, so don't send me
notes about how "you can't eat cyberspace"), become full-
functioned "spaces" that are outside the reach of
governments. A new frontier, untouchable by outside, coercive
governments.
- Vinge's "True Names" made real
16.21.6. "Can things really develop in this "cyberspace" that so many
of us talk about?"
- "You can't eat cyberspace!' is the usual point made. I
argue, however, that abstract worlds have always been with
us, in the forms of commerce, reputations, friends, etc.
And this will continue.
- Some people have objected to the sometimes over-
enthusiastic claims that economies and socities will
flourish in computer-mediated cyberspaces. The short form
of the objection is: "You can't eat cyberspace." Meaning,
that profits and gains made in cyberspace must be converted
to real world profits and gains.
- In "Snow Crash," this was made out to be difficult...Hiro
Protagonist was vastly wealthy in the Multiverse, but lived
in a cargo container at LAX in the "real world." A fine
novel, but this idea is screwy.
+ There are many ways to transfer wealth into the "real"
world:
+ all the various money-laundering schemes
- money in offshore accounts, accessible for vacations,
visits, etc.
- phony purchase orders
- my favorite: Cyberspace, Inc. hires one as a
"consultant" (IRS cannot and does not demand proof of
work being done, the nature of the work, one's
qualifications to perform the work, etc....In fact,
many consultants are hired "on retainer," merely to be
available should a need arise.)
- information-selling
- investments
-
16.21.7. Protocols for this are far from complete
- money, identity, walls, structures
- a lot of basic work is needed (though people will pursue it
locally, not after the work is done...so solutions will
likely be emergent)
16.22. Data Havens
16.22.1. "What are data havens?"
+ Places where data can be hidden or protected against legal
action.
- Sterling, "Islands in the Net," 1988
+ Medical experiments, legal advice, pornography, weapons
- reputations, lists of doctors, lawyers, rent deadbeats,
credit records, private eyes
- What to do about the mounting pressure to ban certain kinds
of research?
- One of the powerful uses of strong crypto is the creation
of journals, web sites, mailing lists, etc., that are
"untraceable." These are sometimes called "data havens,"
though that term, as used by Bruce Sterling in "Islands in
the Net" (1988), tends to suggest specific places like the
Cayman Islands that corporations might use to store data. I
prefer the emphasis on "cypherspace."
- "It is worth noting that private "data havens" of all sorts
abound, especially for financial matters, and most are not
subject to governmental regulation....Some banks have
research departments that are older and morecomprehensive
than credit reporting agencies. Favored customers can use
them for evaluation of private deals....Large law firms
maintain data banks that approach those of banks, and they
grow with each case, through additions of private
investigators paid for by successive clients....Security
professionals, like Wackenhut and Kroll, also market the
fruits of substantial data collections....To these add
those of insurance, bonding, investment, financial firms
and the like which help make or break business deals."
[John Young, 1994-09-07]
16.22.2. "Can there be laws about what can be done with data?"
- Normative laws ("they shouldn't keep such records and hence
we'll outlaw them") won't work in an era of strong crypto
and privacy. In fact, some of us support data havens
precisely to have records of, say, terminal diseases so
we'll not lend money to Joe-who-has-AIDS. It may not be
"fair" to Joe, but it's my money. (Same idea as in using
offshore or cryptospatial data havens to bypass the
nonsense in the "Fair Credit Reporting Act" that outlaws
the keeping of certain kinds of facts about credit
applicants, such as that they declared bankruptcy 10 years
ago or that they left a string of bad debts in Germany in
the 1970s, etc.)
16.22.3. Underground Networks, Bootleg Research, and Information
Smuggling
+ The Sharing of Forbidden Knowledge
- even if the knowledge is not actually forbidden, many
people relish the idea of trafficking in the forbidden
+ Some modern examples
+ drugs and marijuana cultivation
- drugs for life extension, AIDS treatments
- illegal drugs for recreational use
+ bootleg medical research, AIDS and cancer treatments,
etc.
- for example, self-help user groups that advise on
treatments, alternatives, etc.
+ lockpicking and similar security circumvention
techniques
- recall that possession of lockpicks may be illegal
- what about manuals? (note that most catalogs have a
disclaimer: "These materials are for educational
purposes only, ...")
- defense-related issues: limitations on debate on
national security matters may result in "anonymous
forums"
+ BTW, recent work on crab shells and other hard shells
has produced even stronger armor!
- this might be some of the genetic research that is
highly classified and is sold on the anonymous nets
+ Alchemists and the search for immortality
+ theory that the "Grandfather of all cults" (my term)
started around 4500 B.C.
- in both Egypt and Babylonia/Sumeria
+ ancestor of Gnostics, Sufis, Illuminati, etc.
- The Sufi mystic Gurdjieff claimed he was a member
of a mystical cult formed in Babylon about 4500
B.C.
- spider venom?
+ Speculation: a group or cult oriented toward life
extension, toward the search for immortality-perhaps
a link to The Epic of Gilgamesh.
+ The Gilgamesh legend
- Gilgamesh, Akkadian language stone tablets in
Nineveh
- made a journey to find Utnapishtim, survivor of
Babylonian flood and possessor of secret of
immortality (a plant that would renew youth)
- but Gilgamesh lost the plant to a serpent
+ Egyptians
- obviously the Egyptians had a major interest in
life extension and/or immortality
+ Osiris, God of Resurrection and Eternal Life
- also the Dark Companion of Serius (believed to
be a neutron star?)
- they devoted huge fraction of wealth to pyramids,
embalming, etc. (myrhh or frankincense from
desert city in modern Oman, discovered with
shuttle imaging radar)
+ "pyramid power": role on Great Seal, as sign of
Illuminati, and of theories about cosmic energy,
geometrical shapes, etc.
- and recall work on numerological significance
of Great Pyramid dimensions
-
+ Early Christianity
- focus on resurrection of Jesus Christ
+ Quest for immortality is a major character
motivation or theme
+ arguably for all people: via children,
achievements, lasting actions, or even "a good
life"
- "Living a good life is no substitute for living
forever"
- but some seek it explicitly
- "Million alive today will never die." (echoes of
past religious cults....Jehovah's Witnesses?)
- banned by the Church (the Inquisition)
+ research, such as it was, was kept alive by secret
orders that communicated secretly and in code and that
were very selective about membership
- classes of membership to protect against discovery
(the modern spy cell system)
- red herrings designed to divert attention away
+ all of this fits the structure of such groups as the
Masons, Freemason, Illuminati, Rosicrucians, and other
mystical groups
- with members like John Dee, court astrologer to Queen
Elizabeth
+ a genius writer-scientist like Goethe was probably a
member of this group
- Faust was his message of the struggle
- with the Age of Rationalism, the mystical, mumbo-jumbo
aspects of alchemical research were seen to be passŽ,
and groups like Crowleys O.T.O. became purely mystical
showmanship
+ but the need for secrecy was now in the financial
arena, with vast resources, corporate R & D labs, and
banks needed
- hence the role of the Morgans, Rothschilds, etc. in
these conspiracies
+ and modern computer networks will provide the next
step, the next system of research
- funded anonymously
- anonymous systems mean that researchers can publish
results in controversial areas (recall that
cryobiologists dare not mention cryonics, lest they
be expelled from American Cryobiology xxx)
+ Bootleg Medical Research (and Cryonics)
+ Cryonics Research and Anti-aging Treatments
+ Use of Nazi Data
- hypothermia experiments at Dachau
+ Anti-aging drugs and treatments
- fountain of youth, etc.
- many FDA restrictions, of course
- Mexico
+ Switzerland
- foetal calf cells?
- blood changing or recycling?
+ Illegal Experiments
- reports that hyperbaric oxygen may help revival of
patients from neat-death in freezing accidents
+ Black Markets in Drugs, Medical Treatments
+ RU-486, bans on it
- anti-abortion foes
- easy to synthesize
- NOW has indicated plans to distribute this drug
themselves, to create networks (thus creating de
facto allies of the libertarian-oriented users)
+ Organ Banks
+ establishing a profit motive for organ donors
- may be the only way to generate enough donations,
even from the dead
- some plans are being made for such motives,
especially to motivate the families of dying
patients
- ethical issues
+ what about harvesting from the still-living?
- libertarians would say: OK, if informed consent was
given
- the rich can go to overseas clinics
+ AIDS patients uniting via bulletin boards to share
treatment ideas, self-help, etc.
- with buying trips to Mexico and elsewhere
- authorities will try to halt such BBSs (on what
grounds, if no money is changing hands?)
+ Doctors may participate in underground research networks
to protect their own reputations and professional status
- to evade AMA or other professional organizations and
their restrictive codes of ethics
+ or lawsuits and bad publicity
- some groups, the "Guardian Angels" of the future,
seek to expose those who they think are committing
crimes: abortionists (even though legal), etc.
- "politically incorrect" research, such as vitamin
therapy, longevity research, cryonics
- breast implant surgery may be forced into black markets
(and perhaps doctors who later discover evidence of such
operations may be forced to report such operations)
+ Back Issues of Tests and Libraries of Term Papers
- already extant, but imagine with an AMIX-like frontend?
+ Different kinds of networks will emerge, not all of them
equally accessible
+ the equivalent of the arms and drug networks-one does not
gain entree merely by asking around a bit
- credibility, reputation, "making your bones"
- these networks are not open to the casual person
+ Some Networks May Be For the Support of Overseas
Researchers
+ who face restrictions on their research
- e.g., countries that ban birth control may forbid
researchers from communication with other researchers
+ suppose U.S. researchers are threatened with
sanctions-loss of their licenses, censure, even
prosecution-if they participate in RU-486 experiments?
- recall the AIDS drug bootleg trials in SF, c. 1990
- or to bypass export restrictions
- scenario: several anonymous bulletin boards are set
up-and then closed down by the authorities-to facillitate
anonymous hookups (much like "anonymous FTP")
+ Groups faced with debilitating lawsuits will "go
underground"
- Act Up! and Earth First! have no identifiable central
office that can be sued, shut down, etc.
- and Operation Rescue has done the same thing
16.22.4. Illegal Data
- credit histories that violate some current law about
records
- bootleg medical research
- stolen data (e.g., from competitors....a GDS system could
allow remote queries of a database, almost "oracular,"
without the stolen data being in a U.S. jurisdiction)
- customers in the U.K or Sweden that are forbidden to
compile data bases on individuals may choose to store the
data offshore and then access it discreetly (another reason
encryption and ZKIPS must be offered)
16.22.5. "the Switzerland of data"
- Brussells supposedly raises fewer eyebrows than
Lichtenstein, Luxembourg, Switzerland, etc.
- Cayman Islands, other small nations see possibilities
16.22.6. Information markets may have to move offshore, due to
licensing and other restrictions
- just as stock brokers and insurance brokers are licensed,
the government may insist that information resellers be
licensed (pass exams, be subject to audits and regulations)
16.23. Undermining Governments--Collapse of the State
16.23.1. "Is it legal to advocate the overthrow of governments or the
breaking of laws?"
- Although many Cypherpunks are not radicals, many others of
us are, and we often advocate "collapse of governments" and
other such things as money laundering schemes, tax evasion,
new methods for espionage, information markets, data
havens, etc. This rasises obvious concerns about legality.
- First off, I have to speak mainly of U.S. issues...the laws
of Russia or Japan or whatever may be completely different.
Sorry for the U.S.-centric focus of this FAQ, but that's
the way it is. The Net started here, and still is
dominantly here, and the laws of the U.S. are being
propagated around the world as part of the New World Order
and the collapse of the other superpower.
- Is it legal to advocate the replacement of a government? In
the U.S., it's the basic political process (though cynics
might argue that both parties represent the same governing
philosophy). Advocating the *violent overthrow* of the U.S.
government is apparently illegal, though I lack a cite on
this.
+ Is it legal to advocate illegal acts in general? Certainly
much of free speech is precisely this: arguing for drug
use, for boycotts, etc.
+ The EFF gopher site has this on "Advocating Lawbreaking,
Brandenburg v. Ohio. ":
- "In the 1969 case of Brandenburg v. Ohio, the Supreme
Court struck down the conviction of a Ku Klux Klan
member under a criminal syndicalism law and established
a new standard: Speech may not be suppressed or
punished unless it is intended to produce 'imminent
lawless action' and it is 'likely to produce such
action.' Otherwise, the First Amendment protects even
speech that advocates violence. The Brandenburg test is
the law today. "
16.23.2. Espionage and Subversion of Governments Will be
Revolutionized by Strong Crypto
- (I think they see what we see, too, and this is a
motivation for the attempts to limit the use of strong
crypto. Besides some of the more conventional reasons.)
+ Digital dead drops will revolutionize espionage
+ spies and their controllers can communicate securely,
relatively quickly, without fear of being watched, their
drops compromised, etc.
- no more nooks of trees, no more chalk marks on
mailboxes to signal a drop to be made
+ this must be freaking out the intelligence community!
- more insights into why the opposition to crypto is so
strong
+ Cell-Based Systems and Conventional Protection Systems
+ Cells are a standard way to limit the damage of exposure
- the standard is the 3-person cell so common in the
early days of Soviet espionage in the U.S.
- but computer systems may allow new kinds of cells, with
more complicated protocols and more security
+ Keeping files for protection is another standard
protection method
+ and with strong crypto, these files can be kept
encrypted and in locations not apparent (e.g., posted
on bulletin boards or other such places, with only the
key needed at a later time to open them)
- a la the "binary files" idea, wherein encrypted files
are widely available for some time before the key is
distributed (thus making it very hard for governments
to halt the distribution of the raw files)
16.23.3. "Xth Column" (X = encrypted)
- The possible need to use strong cryptography as a tool to
fight the state.
+ helping to undermine the state by using whistleblowers and
anonymous information markets to leak information
- the 63,451 people given false identities in the WitSec
program...leak their names, watch them be zapped by
vengeful enemies, and watch the government squirm
- auction off the details of the 1967 Inspector General's
report on CIA assassinations
16.23.4. use of clandestine, cell-based systems may allow a small
group to use "termite" methods to undermine a society, to
destroy a state that has become too repressive (sounds like
the U.S. to me)
- encrypted systems, anonymous pools, etc., allow truly
secure cell-based systems (this is, by the way, one of the
concerns many countries have about "allowing" cryptography
to be used...and they're right abou the danger!)
- subversion of fascist or socialist governments, undermining
the so-called democratic governments
16.23.5. "Why won't government simply ban such encryption methods?"
+ This has always been the Number One Issue!
- raised by Stiegler, Drexler, Salin, and several others
(and in fact raised by some as an objection to my even
discussing these issues, namely, that action may then be
taken to head off the world I describe)
+ Types of Bans on Encryption and Secrecy
- Ban on Private Use of Encryption
- Ban on Store-and-Forward Nodes
- Ban on Tokens and ZKIPS Authentication
- Requirement for public disclosure of all transactions
+ Recent news (3-6-92, same day as Michaelangelo and
Lawnmower Man) that government is proposing a surcharge
on telcos and long distance services to pay for new
equipment needed to tap phones!
- S.266 and related bills
- this was argued in terms of stopping drug dealers and
other criminals
- but how does the government intend to deal with the
various forms fo end-user encryption or "confusion"
(the confusion that will come from compression,
packetizing, simple file encryption, etc.)
+ Types of Arguments Against Such Bans
- The "Constitutional Rights" Arguments
+ The "It's Too Late" Arguments
- PCs are already widely scattered, running dozens of
compression and encryption programs...it is far too
late to insist on "in the clear" broadcasts, whatever
those may be (is program code distinguishable from
encrypted messages? No.)
- encrypted faxes, modem scramblers (albeit with some
restrictions)
- wireless LANs, packets, radio, IR, compressed text and
images, etc....all will defeat any efforts short of
police state intervention (which may still happen)
+ The "Feud Within the NSA" Arguments
- COMSEC vs. PROD
+ Will affect the privacy rights of corporations
- and there is much evidence that corporations are in
fact being spied upon, by foreign governments, by the
NSA, etc.
+ They Will Try to Ban Such Encryption Techniques
+ Stings (perhaps using viruses and logic bombs)
- or "barium," to trace the code
+ Legal liability for companies that allow employees to use
such methods
- perhaps even in their own time, via the assumption that
employees who use illegal software methods in their own
time are perhaps couriers or agents for their
corporations (a tenuous point)
16.23.6. "How will the masses be converted?"
- Probably they won't. Things will just happen, just as the
masses were not converted on issues of world financial
markets, derivative instruments, and a lot of similar
things.
- Crypto anarchy is largely a personal approach of
withdrawal, of avoidance. Mass consensus is not needed
(unless the police state option is tried).
- Don't think in terms of selling crypto anarchy to Joe
Average. Just use it.
16.23.7. As things seem to be getting worse, vis-a-vis the creation of
a police state in the U.S.--it may be a good thing that
anonymous assassination markets will be possible. It may
help to level the playing field, as the Feds have had their
hit teams for many years (along with their safe houses,
forged credentials, accommodation addresses, cut-outs, and
other accouterments of the intelligence state).
- (I won't get into conspiracies here, but the following
terms may trigger some memories: Gehlen Org, Wackenhut,
McKee Team, Danny Casolaro, Cabazon Indians, Gander crash,
Iraq arms deals, Pan Am 103, Bridegrooms of Death, French
Connection, Fascist Third Position, Phoenix Program, Bebe
Rebozo, Marex, Otto Skorzeny, Nixon, P-2, Klaus Barbie,
etc.)
- Plenty of evidence of misbehavior on a massive scales by
the intelligence agencies, the police forces, and states in
general. Absolute power has corrupted absolutely.
- I'm certainly not advocating the killing of Congressrodents
and other bureaucrats, just noting that this cloud may have
a silver lining.
16.24. Escrow Agents and Reputations
16.24.1. Escrow Agents as a way to deal with contract renegging
- On-line clearing has the possible danger implicit in all
trades that Alice will hand over the money, Bob will verify
that it has cleared into hisaccount (in older terms, Bob
would await word that his Swiss bank account has just been
credited), and then Bob will fail to complete his end of
the bargain. If the transaction is truly anonymous, over
computer lines, then of course Bob just hangs up his modem
and the connection is broken. This situation is as old as
time, and has always involved protcols in which trust,
repeat business, etc., are factors. Or escrow agents.
- Long before the "key escrow" of Clipper, true escrow was
planned. Escrow as in escrow agents. Or bonding agents.
- Alice and Bob want to conduct a transaction. Neither trusts
the other;
indeed, they are unknown to each other. In steps "Esther's
Escrow Service." She is _also utraceable_, but has
established a digitally-signed presence and a good
reputation for fairness. Her business is in being an escrow
agent, like a bonding agency, not in "burning" either
party. (The math of this is interesting: as long as the
profits to be gained from any small set of transactions is
less than her "reputation capital," it is in her interest
to forego the profits from burning and be honest. It is
also possible to arrange that Esther cannot profit from
burning either Alice or Bob or both of them, e.g., by
suitably encrypting the escrowed stuff.)
- Alice can put her part of the transaction into escrow with
Esther, Bob can do the same, and then Esther can release
the items to the parties when conditions are met, when both
parties agree, when adjudication of some sort occurs, etc.
(There a dozen issues here, of course, about how disputes
are settled, about how parties satisfy themselves that
Esther has the items she says she has, etc.)
16.24.2. Use of escrow services as a substute for government
+ as in underworld deals, international deals, etc.
- "Machinery of Freedom" (Friedman), "The Enterprise of
Law" (Benson)
- "It is important to note in any case that the use of third-
party escrow as a substitute for Government regulation was
a feature of the Northern European semi-anarchies of
Iceland and Ireland that have informed modern libertarian
thought." [Duncan Frissell, 1994-08-30]
16.24.3. Several people have raised the issue of someone in an
anonymous transaction simply taking the money and not
performing the service (or the flip side). This is where
_intermediaries_ come into the picture, just as in the real
worl (bonds, escrow agents, etc.).
16.24.4. Alice and Bob wish to conduct an anonymous transaction; each
is unknown to the other (no physical knowledge, no pseudonym
reputation knowledge). These "mutually suspicious agents," in
1960s- and 70s-era computer science lingo, must arrange
methods to conduct business while not trusting the other.
16.24.5. Various cryptographic protocols have been developed for such
things as "bit commitment" (useful in playing poker over the
phone, for example). I don't know of progress made at the
granularity of anonymous transactions, though. (Though the
cryptographic protocol building blocks at lower levels--such
as bit commitment and blobs--will presumably be used
eventually at higher levels, in markets.)
16.24.6. I believe there is evidence we can shorten the cycle by
borrowing noncryptographic protocols (heresy to purists!) and
adapting them. Reputations, for example. And escrow agents (a
form of reputation, in that the "value" of a bonding entity
or escrow agent lies in reputation capital).
16.24.7. if a single escrow agent is suspected of being untrustworthy
(in a reputation capital sense), then can use _multiple_
escrows
- with various protocols, caveat emptor
- n-out-of-m voting schemes, where n escrow agents out of m
are required to complete a transaction
- hard to compromise them all, especially if they have no
idea whether they are being "legitimately bribed" or merely
pinged by a reputation-rating service
- Hunch: the work of Chaum, Bos, and the Pfaltzmanns on DC-
nets may be direcly applicable here...issues of collusion,
sets of colluders, detection of collusion, etc.
16.25. Predictions vs. Implications
16.25.1. "How do we know that crypto anarchy will 'work,' that the
right institutions will emerge, that wrongs will be righted,
etc.?"
- We don't know. Few things are certain. Only time will tell.
These are emergent situations, where evolution will
determine the outcome. As in other areas, the forms of
solutions will take time to evolve.
- (The Founders could not have predicted the form corporate
law would take, as but one example.)
16.25.2. My thinking on crypto anarchy is not so much _prediction_ as
examination of trends and the implications of certain things.
Just as steel girders mean certain things for the design of
buildings, so too does unbreakable crypto mean certain things
for the design of social and economic systems.
16.25.3. Several technologies are involved:
- Unbreakable crypto
- Untraceable communication
- Unforgeable signatures
16.25.4. (Note: Yes, it's sometimes dangerous to say "unbreakable,"
"untraceable," and "unforgeable." Purists eschew such terms.
All crypto is economics, even information-theoretically
secure crypto (e.g., bribe someone to give you the key, break
in and steal it, etc.). And computationally-secure crypto--
such as RSA, IDEA, etc.--can in *principle* be brute-forced.
In reality, the costs may well be exhorbitantly
high...perhaps more energy than is available in the entire
universe would be needed. Essentially, these things are about
as unbreakable, untraceable, and unforgeable as one can
imagine.)
16.25.5. "Strong building materials" implies certain things. Highways,
bridges, jet engines, etc. Likewise for strong crypto, though
the exact form of the things that get built is still unknown.
But pretty clearly some amazing new structures will be built
this way.
16.25.6. Cyberspace, walls, bricks and mortar...
16.25.7. "Will strong crypto have the main effect of securing current
freedoms, or will it create new freedoms and new situations?"
- There's a camp that believe mainly that strong crypto will
ensure that current freedoms are preserved, but that this
will not change things materially, Communications can be
private, diaries can be secured, computer security will be
enhanced, etc.
- Another camp--of which I am a vocal spokesman--believes
that qualitatively different types of transactions will be
made possible. In addition, of course, to the securing of
liberties that the first camp things is the main effect.
+ These effects are specultative, but probably include:
- increased hiding of assets through untraceable banking
systems
- markets in illegal services
- increased espionage
- data havens
16.25.8. "Will all crypto-anarchic transactions be anonymous?"
- No, various parties will negotiate different arrangements.
All a matter of economics, of enforcement of terms, etc.
Some will, some won't. The key thing is that the decision
to reveal identity will be just another mutually negotiated
matter. (Think of spending cash in a store. The store owner
may _want_ to know who his customers are, but he'll still
take cash and remain ignorant in most cases. Unless a
government steps in and distorts the market by requiring
approvals for purchases and records of identities--think of
guns here.)
- For example, the local Mob may not lend me money if I am
anonymous to them, but they have a "hook" in me if they
know who I am. (Aspects of anonymity may still be used,
such as systems that leave no paper or computer trail
pointing to them or to me, to avoid stings.)
- "Enforcement" in underground markets, for which the
conventional legal remedies are impossible, is often by
means of physical force: breaking legs and even killing
welshers.
- (Personally, I have no problems with this. The Mob cannot
turn to the local police, so it has to enforce deals its
own way. If you can't pay, don't play.)
16.26. How Crypto Anarchy Will Be Fought
16.26.1. The Direct Attack: Restrictions on Encryption
+ "Why won't government simply ban such encryption methods?"
+ This has always been the Number One Issue!
- raised by Stiegler, Drexler, Salin, and several others
(and in fact raised by some as an objection to my even
discussing these issues, namely, that action may then
be taken to head off the world I describe)
+ Types of Bans on Encryption and Secrecy
- Ban on Private Use of Encryption
- Ban on Store-and-Forward Nodes
- Ban on Tokens and ZKIPS Authentication
- Requirement for public disclosure of all transactions
+ Recent news (3-6-92, same day as Michaelangelo and
Lawnmower Man) that government is proposing a surcharge
on telcos and long distance services to pay for new
equipment needed to tap phones!
- S.266 and related bills
- this was argued in terms of stopping drug dealers and
other criminals
- but how does the government intend to deal with the
various forms fo end-user encryption or "confusion"
(the confusion that will come from compression,
packetizing, simple file encryption, etc.)
+ Types of Arguments Against Such Bans
- The "Constitutional Rights" Arguments
+ The "It's Too Late" Arguments
- PCs are already widely scattered, running dozens of
compression and encryption programs...it is far too
late to insist on "in the clear" broadcasts, whatever
those may be (is program code distinguishable from
encrypted messages? No.)
- encrypted faxes, modem scramblers (albeit with some
restrictions)
- wireless LANs, packets, radio, IR, compressed text
and images, etc....all will defeat any efforts short
of police state intervention (which may still happen)
+ The "Feud Within the NSA" Arguments
- COMSEC vs. PROD
+ Will affect the privacy rights of corporations
- and there is much evidence that corporations are in
fact being spied upon, by foreign governments, by the
NSA, etc.
+ They Will Try to Ban Such Encryption Techniques
+ Stings (perhaps using viruses and logic bombs)
- or "barium," to trace the code
+ Legal liability for companies that allow employees to
use such methods
- perhaps even in their own time, via the assumption
that employees who use illegal software methods in
their own time are perhaps couriers or agents for
their corporations (a tenuous point)
- restrictions on: use of codes and ciphers
+ there have long been certain restrictions on the use of
encryption
- encryption over radio waves is illegal (unless the key is
provided to the government, as with Morse code)
+ in war time, many restrictions (by all governments)
- those who encrypt are ipso facto guilty and are shot
summarily, in many places
- even today, use of encryption near a military base or
within a defense contractor could violate laws
+ S.266 and similar bills to mandate "trapdoors"
+ except that this will be difficult to police and even to
detect
- so many ways to hide messages
- so much ordinary compression, checksumming, etc.
+ Key Registration Trail Balloon
- cite Denning's proposal, and my own postings
16.26.2. Another Direct Attack: Elimination of Cash
+ the idea being that elimination of cash, with credit cards
replacing cash, will reduce black markets
- "one person, one ID" (goal of many international
standards organizations)
- this elimination of cash may ultimately be tied in to the
key registration ideas...government becomes a third party
in all transactions
+ a favorite of conspiracy theorists
- in extreme form: the number of the Beast tattooed on us
(credit numbers, etc.)
- currency exchanges (rumors on the Nets about the imminent
recall of banknotes, ostensibly to flush out ill-gotten
gains and make counterfeiting easier)
+ but also something governments like to do at times, sort
of to remind us who's really in charge
- Germany, a couple of times
- France, in the late 1950s
- various other devaluations and currency reforms
+ Partial steps have already been made
- cash transactions greater than some value-$10,000 at this
time, though "suspicious" sub-$10K transactions must be
reported-are banned
+ large denomination bills have been withdrawn from
circulation
- used in drug deals, the argument goes
- Massachussetts has demanded that banks turn over all
account records, SS numbers, balances, etc.
+ "If what you're doing is legal, why do you need cash for
it?"
- part of the old American dichotomy: privacy versus "What
have you got to hide?"
+ But why the outlawing of cash won't work
+ if a need exists, black markets will arise
- i.e., the normal tradeoff between risk and reward:
there may be some "discounts" on the value, but cah
will still circulate
+ too many other channels exist: securities, secrets, goods
+ from trading in gold or silver, neither of which are
outlawed any longer, to trading in secrets, how can the
government stop this?
- art being used to transfer money across international
borders (avoids Customs)
- "consideration" given, a la the scam to hide income
+ total surveillance?
- it doesn't even work in Russia
- on the other hand, Russia lacks the "point of sale"
infrastructure to enforce a cashless system
16.26.3. Another Direct Attack: Government Control of Encryption,
Networks, and Net Access
- a la the old Bell System monopoly, which limited what could
be hooked up to a phone line
+ the government may take control of the networks in several
ways:
+ FCC-type restrictions, though it is hard to see how a
private network, on private property, could be restricted
- as it is not using part of the "public spectrum"
- but it is hard to build a very interesting network that
stays on private property....and as soon as it crosses
public property, BINGO!
+ "National Data Highway" could be so heavily subsidized
that alternatives will languish (for a while)
- the Al Gore proposals for a federally funded system
(and his wife, Tipper, is of course a leader of the
censorship wing)
- and then the government can claim the right and duty to
set the "traffic" laws: protocols, types of encryption
allowed, etc.
- key patents, a la RSA (if in fact gov't. is a silent
partner in RSA Data Security)
16.26.4. An Indirect Attack: Insisting that all economic transactions
be "disclosed" (the "Full Disclosure Society" scenario)
+ this sounds Orwellian, but the obvious precedent is that
businesses must keep records of all financial transactions
(and even some other records, to see if they're colluding
or manipulating something)
- for income and sales tax reasons
- and OSHA inspections, INS raids, etc.
+ there is currently no requirement that all transactions
be fully documented with the identies of all parties,
except in some cases like firearms purchases, but this
could change
- especially as electronic transactions become more
common: the IRS may someday insist on such records,
perhaps even insisting on escrowing of such records, or
time-stamping
+ this will hurt small businesses, due to the entry cost
and overhead of such systems, but big businesses will
probably support it (after some grumbling)
- big business always sees bureaucracy as one of their
competitive advantages
+ and individuals have not been hassled by the IRS on minor
personal transactions, though the web is tightening:
1099s are often required (when payments exceed some
amount, such as $500)
- small scale barter transactions
+ but the nature of CA is that many transactions can be
financial while appearing to be something else (like the
transfer of music or images, or even the writing of
letters)
- which is why a cusp is coming: full disclosure is one
route, protection of privacy is another
+ the government may cite the dangers of a "good old boy
network" (literally) that promulgates racist, sexist, and
ableist discrimination via computer networks
- i.e., that the new networks are "under-representing
people of color"
- and how can quotas be enforced in an anonymous system?
- proposals in California (7-92) that consultants file
monthly tax statements, have tax witheld, etc.
- a strategy for the IRS: require all computer network users
to have a "taxpayer ID number" for all transactions, so
that tax evasion can be checked
16.26.5. Attempts to discredit reputation-based systems by deceit,
fraud, nonpayment, etc.
- deliberate attacks on the reputation of services the
government doesn't want to see
- there may be government operations to sabotage businesses,
to undermine such efforts before they get started
- analogous to "mail-bombing" an anonymous remailer
16.26.6. Licensing of software developers may be one method used to
try to control the spread of anonymous systems and
information markets
- by requiring a "business license" attached to any and all
chunks of code
+ implemented via digital signatures, a la the code signing
protocols mentioned by Bob Baldwin as a means of reducing
trapdoors, sabotage, and other modifications by spies,
hackers, etc.
- proposals to require all chunks of code to be signed,
after the Sililcon Valley case in mid-80s, where
spy/saboteur went to several s/w companies and meddled
with code
- "seals" from some group such as "Software Writers
Laboratories," with formal specs required, source code
provided to a trusted keeper, etc.
+ such licensing and inspection will also serve to lock-in
the current players (Microsoft will love it) and make
foreign competition in software more difficult
- unless the foreign competition is "sanctioned," e.g.,
Microsoft opens a code facility in India
16.26.7. RICO-like seizures of computers and bulletin board systems
- sting operations and setups
- Steve Jackson Games is obvious example
- for illegal material (porno, drug advocacy, electronic
money, etc.) flowing through their systems
- even when sysop can prove he did not know illegal acts were
being committed on his system (precedents are the yachts
seized because a roach was found)
+ these seizures can occur even when a trial is never held
- e.g., the "administrative seizure" of cars in Portland in
prostitution cases
- and the seizures are on civil penalties, where the
standards of proof are much lower
+ in some cases a mere FBI investigation is enough to get
employees fired, renters kicked out, IRS audits started
+ reports that a woman in Georgia who posted some "ULs"
(unlisted numbers?) was fired by her company after the
FBI got involved, told by her landlord that her lease was
not being extended, and so forth
- "We don't truck with no spies"
- the IRS audit would not ostensibly be for harassment, but
for "probable cause" (or whatever term they use) that tax
avoidance, under-reporting, even money-laundering might
be involved
16.26.8. Outlawing of Digital Pseudonyms and Credentialling
+ may echoe the misguided controversy over Caller ID
- misguided because the free market solution is clear: let
those who wish to hide their numbers-rape and battering
support numbers, police, detectives, or even just
citizens requesting services or whatever-do so
- and let those who refuse to deal with these anonymous
callers also do so (a simple enough programming of
answering machines and telephones)
- for example, to prevent minors and felons from using the
systems, "true names" may be required, with heavy fines and
forfeitures of equipment and assets for anybody that fails
to comply (or is caught in stings and setups)
+ minors may get screened out of parts of cyberspace by
mandatory "age credentialing" ("carding")
- this could be a major threat to such free and open
systems, as with the various flaps over minors logging on
to the Internet and seeing X-rated images (however poorly
rendered) or reading salacious material in alt.sex
- there may be some government mood to insist that only
"true names" be used, to facillitate such age screening
(Fiat-Shamir passports, papers, number of the Beast?)
+ the government may argue that digital pseudonyms are
presumptively considered to be part of a conspiracy, a
criminal enterprise, tax evasion, etc.
- the old "what have you got to hide" theory
- closely related to the issue of whether false IDs can be
used even when no crimes are being committed (that is,
can Joe Average represent himself by other than his True
Name?)
- civil libertarians may fight this ban, arguing that
Americans are not required to present "papers" to
authorities unless under direct suspicion for a crime
(never mind the loitering laws, which take the other view)
16.26.9. Anonymous systems may be restricted on the grounds that they
constitute a public nuisance
- or that they promote crime, espionage, etc.
+ especially after a few well-publicized abuses
- possibly instigated by the government?
- operators may have to post bonds that effectively drive
them out of business
16.26.10. Corporations may be effectively forbidden to hire consultants
or subcontractors as individuals
+ the practical issue: the welter of tax and benefit laws
make individuals unable to cope with the mountains of forms
that have to be filed
- thus effectively pricing individuals out of this market
+ the tax law side: recall the change in status of
consultants a few years back...this may be extended further
- a strategy for the IRS: require all computer network
users to have a "taxpayer ID number" for all
transactions, so that tax evasion can be checked
- not clear how this differs from the point above, but I
feel certain more such pressures will be applied (after
all, most corporations tend to see independent
contractors as more of a negative than a positive)
- this may be an agenda of the already established companies:
they see consultants and free lancers as thieves and
knaves, stealing their secrets and disseminating the crown
jewels (to punningly mix some metaphors)
- and since the networks discussed here facilitate the use of
consultants, more grounds to limit them
16.26.11. There may be calls for U.N. control of the world banking
system in the wake of the BCCI and similar scandals
- to "peirce the veil" on transnationals
- calls for an end to banking secrecy
- talk about denying access to the money centers of New York
(but will this push the business offshore, in parallel to
the Eurodollar market?)
+ motivations and methods
- recall the UNESCO attempt a few years back to credential
reporters, ostensibly to prevent chaos and "unfair"
reporting...well, the BCCI and nuclear arms deals
surfacing may reinvigorate the efforts of
"credentiallers"
+ the USSR and other countries entering the world community
may sense an opportunity to get in on the formation of
"boards of directors" of these kinds of banks and
corporations and so may push the idea in the U.N.
- sort of like a World Bank or IMF with even more power
to step in and take control of other banks, and with
the East Bloc and USSR having seats!
16.26.12. "National security"
- if the situation gets serious enough, a la a full-blown
crypto anarchy system, mightn't the government take the
step of declaring a kind of national emergency?
- provisions exist: "401 Emergency" and FEMA plans
- of course, the USSR tried to intitiate emergency measures
and failed
- recall that a major goal of crypto anarchy is that the
systems described here will be so widely deployed as to be
essential or critical to the overall economy...any attempt
to "pull the plug" will also kill the economy
16.26.13. Can authorities force the disclosure of a key?
+ on the "Yes" side:
+ is same, some say, as forcing combination to a safe
containing information or stolen goods
- but some say-and a court may have ruled on this-that
the safe can always be cut open and so the issue is
mostly moot
- while forcing key disclosure is compelled testimony
- and one can always claim to have forgotten the key
- i.e., what happens when a suspect simply clams up?
- but authorities can routinely demand cooperation in
investigations, can seize records, etc.
+ on the "No" side:
- can't force a suspect to talk, whether about where he hid
the loot or where his kidnap victim is hidden
- practically speaking, someone under indictment cannot be
forced to reveal Swiss bank accounts....this would seem
to be directly analogous to a cryptographic key
- thus, the key to open an account would seem to be the
same thing
- a memorized key cannot be forced, says someone with EFF
or CPSR
- on balance, it seems clear that the disclosure of
cryptographic keys cannot be forced (though the practical
penalty for nondisclosure could be severe)
- but this has not really been tested, so far as I know
- and many people say that such cooperation can be
demanded...
16.27. How Crypto Anarchy Advocates Will Fight Back
16.27.1. Bypassing restrictions on commercial encryption packages by
not making them "commercial"
- public domain
- freely distributed
- after all, the basic algorithms are simple and don't really
deserve patent protection: money will not be made by the
originators of the code, but by the actual providers of
services (for transmission and storage of packets)
16.27.2. Noise and signals are often indistinguishable
- as with the LSB audio signal approach...unless the
government outlaws live recordings or dubs on digital
systems...
16.27.3. Timed-release files (using encryption) will be used to hide
files, to ensure that governments cannot remove material they
don't like
- easier said than done
16.27.4. Legal approaches will also be taken: fundamental
constitutional issues
- privacy, free speech, free association
16.27.5. The Master Plan to Fight Restrictions on Encryption
+ "Genie out of the bottle" strategy: deploy crypto widely
- intertwined with religions, games, whistleblower groups,
and other uses that cannot easily just be shut down
- scattered in amongst many other activities
- Media attention: get media to report on value of
encryption, privacy, etc.
+ Diffusion, confusion, and refusion
- Diffuse the use by scattering it around
- Confuse the issue by fake religions, games, other uses
- Refuse to cooperate with the government
- Free speech arguments: calling the discussions free speech
and forcing the government to prove that the free speech is
actually an economic transaction
+ links with religions, corporations, etc.
- private meetings protected
- voting systems
16.28. Things that May Hide the Existence of Crypto Anarchy
16.28.1. first and foremost, the incredible bandwidth, the bits
sloshing around the world's networks...tapes being exchanged,
PCs calling other PCs, a variety of data and compression
formats, ISDN, wireless transmission, etc.
16.28.2. in the coming years, network traffic will jump a thousand-
fold, what with digital fax, cellular phones and computers,
ISDN, fiber optics, and higher-speed modems
- and these links will be of all kinds: local, private,
corporate, business, commercial, bootleg (unrecorded),
cellular radio, etc.
16.28.3. corporations and small groups will have their own private
LANs and networks, with massive bandwidth, and with little
prospects that the government can police them-there can be no
law requiring that internal communications be readable by the
government!
- and the revelations that Ultra Black has been used to read
messages and use the information will be further proof to
corporations that they need to adopt very strong security
measures
+ and "partnerships" can be scattered across the country, and
even internationally, and have great lattitude in setting
up their own communication and encryption systems
- recall Cargill case
- and also remember that the government may crack down on
these systems
16.28.4. AMIX-like services, new services, virtual reality (for games,
entertainment, or just as a place of doing business) etc.
+ many users will encrypt their links to VR servers, with a
decryption agent at the other end, so that their activities
(characters, fantasies, purchases, etc.) cannot be
monitored and logged
+ this will further increase the bandwidth of encrypted
data and will complicate further the work of the NSA and
similar agencies
- attempts to force "in the clear" links will be doomed
by the welter of PC standards, compression utilities,
cellular modems, and the like...there will be no
"cleartext" that can be mandated
16.28.5. steganography
+ in general, impossible to know that a message contains
other encypted messages
- except in stings and setups, which may be ruled illegal
+ the LSB method, and variants
+ LSB of DAT, DCC, MD, etc., or even sound bites (chunks of
sampled sounds traded on bulletin boards)
- especially of live or analog-dubbed copies (the noise
floor of a typical consumer-grade mike is much higher
than the LSB of DAT)
+ of images, Adobe Photoshop images, artwork, etc.
+ imagine an "Online Art Gallery" that is used to store
messages, or a "Photo Gallery" that participants post
their best photos to, offering them for sale
- Sturges case
- LSB method
+ gets into some theoretical nitpicking about the true
nature of noise, especially if the entire LSB channel is
uncharacteristic of "real noise"
- but by reducing the bandwidth somewhat, the noise
profile can be made essentially undistinguishable from
real noise
- and a 2 GB DAT produces 130 MB of LSB, which is a lot
of margin!
+ what could the government do?
- stings and setups to catch and scare off potential
users
- an attempt to limit the wide use of digital
data-hopeless!
+ a requirement for government-approved "dithering"?
- this would be an enforcement nightmare
+ and would only cause the system to be moved into
higher bits
- and with enough error correction, even audible
dithering of the signal would not wipe out the
encrypted signal
+ variants: text justification, word selection
- bandwidth tends to be low
- but used in Three Days of the Condor
+ virtual reality art may further enable private
communications
- think of what can be encrypted into such digital images!
- and user has total privacy and is able to manipulate the
images and databases locally
16.28.6. in the sense that these other things, such as the governments
own networks of safe houses, false identities, and bootleg
payoffs, will tend to hide any other such systems that emerge
+ because investigators may think they've stumbled onto yet
another intelligence operation, or sting, or whatever
- this routinely cripples undercover investigations
- scenario: criminals even float rumors that another agency
is doing an operation....?
16.28.7. Government Operations that Resemble Cryptoanarchy will
Confuse the Issues
- various confidential networks already exist, operated by
State, DoD, the services, etc.
+ Witness Protection Program (or Witness Relocation Program)
- false IDs, papers, transcripts
- even money given to them (and the amounts seem to be
downplayed in the press and on t.v., with a sudden spate
of shows about how poorly they do in the middle of middle
America-sounds like a planted story to me)
- cooperation with certain companies and schools to assist
in this aspect
+ Payoffs of informants, unofficial agents
- like agents in place inside defense contractors
- vast amount of tips from freelancers, foreign citizens,
etc.
- operators of safe houses (like Mrs. Furbershaw)
+ Networks of CIA-funded banks, for various purposes
- a la the Nugan-Hand Bank, BCCI, etc.
- First American, Bank of Atlanta, Centrust Savings, etc.
- these banks and S&Ls act as conduits for controversial or
secret operations, for temporary parking of funds, for
the banking of profits, and even for the private
retirement funds of agents (a winked-at practice)
+ Confidential networks over computer lines
- e.g., encrypted teleconferencing of Jasons, PFIAB, etc.
+ these will increase, for many reasons
- concerns over terrorism
- demands on time will limit travel (especially for
groups of non-fulltime committee members)
- these suspected government operations will deter
investigation
16.28.8. Encrypted Traffic Will Increase Dramatically
- of all kinds
- mail, images, proposals, faxes, etc.
- acceptance of a P-K mail system will make wide use of
encryption nearly automatic (though some fraction, perhaps
the majority, will not even bother)
+ there may even be legal reasons for encryption to increase:
- requirements that employee records be protected, that
medical records be protected, etc.
- "prudent man" rules about the theft of information (could
mean that files are to be encrypted except when being
worked on)
- digital signatures
- echoes of the COMSEC vs. SIGINT (or PROD) debate, where
COMSEC wants to see more encryption (to protect American
industry against Soviet and commercial espionage)
+ Selling of "Anonymous Mailers"?
- using RSA
+ avoiding RSA and the P-K patent morass
- could sell packets of one-time pads
+ no effective guarantee of security, but adequate for
many simple purposes
+ especially if buyers swap them with others
- but how to ensure that copies are not kept?
- idea is to enable a kind of "Democracy Wall"
+ prepaid "coins," purchased anonymously
- as with the Japanese phone cards
- or the various toll booth electronic tokens being
developed
16.28.9. Games, Religions, Legal Consultation, and Other "Covers" for
the Introduction and Proliferation of Crypto Anarchy
- won't be clear what is real encryption and what is game-
playing
- imagine a game called "Cryptoanarchy"!
+ Comment on these "Covers"
- some of these will be quite legitimate, others will be
deliberately set up as covers for the spread of CA
methods
- perhaps subsidized just to increase traffic (and
encrypted traffic is already expected to increase for a
variety of reasons)
- people will have various reasons for wanting anonymity
+ Games
+ "Habitat"-style games and systems
- with "handles" that are much more secure than at
present (recall Chip's comments)
+ behaviors that are closely akin to real-world illegal
behaviors:
- a thieves area
- an espionage game
- a "democracy wall" in which anything can be posted
anonymously, and read by all
+ MUDs (Multi-user Domains, Multi-User Dungeons)
- lots of interest here
- topic of discussion at a special Cypherpunks meeting,
early 1994.
+ interactive role-playing games will provide cover for the
spread of systems: pseudonyms will have much more
protection than they now have
- though various methods may exist to "tag" a transaction
(a la barium), especially when lots of bandwidth is
involved, for analysis (e.g., "Dark Dante" is
identified by attaching specific bits to stream)
+ Dealing with Barium Tracers
- code is allowed to simmer in an offsite machine for
some time (and with twiddling of system clock)
- mutations added
+ Shared Worlds
- authors, artists, game-players, etc. may add to these
worlds
- hypertext links, reputation-based systems
+ hypothesize a "True Names" game on the nets, based
_explicitly_ on Vinge's work
- perhaps from an outfit like Steve Jackson Games, maker
of similar role-playing games
- with variable-resolution graphics (a la Habitat)
- virtual reality capabilities
+ a game like "Habitat" can be used as a virtual Labyrinth,
further confusing the line between reality and fantasy
- and this could provide a lot of bandwidth for cover
- the Smalltalk "Cryptoids" idea is related to this...it
looks like a simulation or a game, but can be used by
"outsiders"
+ Religions
+ a nearly ironclad system of liberties, though _some_
limits exist
- e.g., a church that uses its organization to transport
drugs or run a gambling operation would be shut down
quickly (recall the drug church?)
- and calls for tax-break limitations (which Bill of
Rights says nothing about)
- still, it will be _very_ difficult for the U.S.
government to interfere with the communications of a
"religion."
+ "ConfessionNet"
+ a hypothetical anonymous system that allows confessions
to be heard, with all of the privileges of privacy that
normal confessions have
- successors to 900 numbers?
+ virtually ironclad protections against government
interference
- "Congress shall make no law..."
+ but governments may try to restrict who can do this, a
la the restrictions in the 70s and 80s on "instant
Reverends"
- Kirby J. Hensley's Univeral Life Church
- various IRS restrictions, effectively establishing
two classes of religions: those grandfathered in and
given tax breaks and the like, and those that were
deemed invalid in some way
+ Scenario: A Scientology-like cult using CA as its chief
communications system?
- levels of initiation same as a cell system
- "clearing"
- New Age garbage: Ascended Masters, cells, money flowing
back and forth
- blackballing
+ Digital Personals
- the "personals" section of newspapers currently requires
the newspaper to provide the anonymity (until the parties
mutually agree to meet)
- what about on AMIX or similar services?
- a fully digital system could allow self-arranging systems
+ here's how it could work:
- Alice wants to meet a man. She writes up a typical ad,
"SWF seeks SWM for fun and walks on the beach..."
- Alice encloses her specially-selected public key, which
is effectively her only name. This is probably a one-
time deal, unlinkable to her in any way.
- She encrypts the entire package and sends it through a
remailing chain (or DC-Net) for eventual posting in a
public place.
- Everyone can download the relevant area (messages can
be sorted by type, or organized in interest groups),
with nobody else knowing which messages they're
reading.
- Bob reads her message and decides to repond. He
digitizes a photo of himself and includes some other
info, but not his real name. He also picks a public key
for Alice to communicate with him.
- Bob encrypts all of this with the public key of Alice
(though remember that he has no way of knowing who she
really is).
- Bob sends this message through a remailing chain and it
gets posted as an encrypted message addressed to the
public key of Alice. Again, some organization can
reduce the total bandwidth (e.g., an area for
"Replies").
- Alice scans the replies and downloads a group of
messages that includes the one she can see-and only she
can see!-is addressed to her.
- This has established a two-way communication path
between Alice and Bob without either of them knowing
who the other one is or where they live. (The business
about the photos is of course not conducive to
anonymity, but is consistent with the "Personals"
mode.)
- If Alice and Bob wish to meet in person it is then easy
for them to communicate real phone numbers and the
like.
+ Why is this interesting?
- it establishes a role for anonymous systems
- it could increase the bandwidth of such messages
+ Legal Services (Legitimate, i.e., not even the bootleg
stuff)
+ protected by attorney-client privileges, but various Bar
Associations may place limits on the use of networks
- but if viewed the way phones are, seems unlikely that
Bars could do much to limit the use of computer
networks
- and suppose a Nolo Press-type publishing venture started
up on the Nets? (publishing self-help info under
pseudonyms)
- or the scam to avoid taxes by incorporating as a
corporation or nonprofit?
+ Voting Systems
- with and without anonymity
+ Board of Directors-type voting
- with credentials, passwords, and (maybe) anonymity
(under certain conditions)
+ Blackballing and Memberships
- generally anonymous
- blackballing may be illegal these days (concerns about
racism, sexism, etc.)
- cf. Salomaa for discussion of indistinguishability of
blackballing from majority voting
+ Consumer Ratings and Evaluations
- e.g., there may be "guaranteed anonymous" evalution
systems for software and other high-tech items (Joe
Bluecollar won't mess with computers and complicated
voting systems)
+ Politically Active Groups May Have Anonymous Voting
- to vote on group policies, procedures, leadership
- or on boycott lists (recall the idea of the PC-Card
that doesn't allow politically incorrect purchases)
+ this may be to protect themselves from lawsuits (SLAPP)
and government harassment
- they fear government infiltrators will get the names
of voters and how they voted
+ Official Elections
- though this is unlikely for the barely-literate
majority
- the inevitable fraud cases will get wide exposure and
scare people and politicians off even more
- unlikely in next decade
+ Journal Refereeing
- some journals, such as Journal of Cryptology,
appropriately enough, are already using paper-based
versions of this
+ Xanadu-like systems may be early adopters
- there are of course reasons for just the opposite:
enhanced used of reputations
- but in some cases anonymity may be preferred
+ Groupware
- anonymous comment systems (picture a digital blackboard
with anonymous remarks showing up)
- these systems are promoted to encourage the quiet to have
an equal voice
- but they also provide another path to anonymous and/or
reputation-based systems
+ Psychological Consultations
- will require the licensing of counselors, of course
(under U.S. laws)
- what if people call offshore counselors?
+ and various limitations on privacy of records exist
- Tarisoff [spelling?]
- subpoenas
- record-keeping required
+ may be used by various "politically correct" groups
- battered women
- abused children
- perhaps in conjunction with the RU-486-type issues,
some common ground can be established (a new kind of
Underground Railroad)
+ Advice on Medicine (a la AIDS, RU 486)
- anonymity needed to protect against lawsuits and seizure
- NOW and other feminist groups could use crypto anarchy
methods to reduce the risks to their organizations
+ Anonymous Tip Lines, Whistleblower Services
+ for example, a newspaper might set up a reward system,
using the crypto equivalent of the "torn paper" key
- where informant holds onto the torn off "key"
- even something like the James Randi/Yuri Geller case
reveals that "anonymous critics" may become more common
+ corporate and defense contractor whistleblowers may seek
protection through crypto methods
- a "Deep Throat" who uses bulletin boards to communicate
with DS?
+ this presumes much wider use of computers and modems by
"average" people...and I doubt "Prodigy"-type systems
will support these activities!
- but there may be cheap systems based on video game
machines, a la the proposed Nintendo computers
- environmentalists set up these whistleblower lines, for
people to report illegal logging, spraying, etc.
+ Online, "Instant" Corporations
+ shell companies, duly incorporated in Delaware or
wherever (perhaps even foreign sites) are "sold" to
participants who wish to create a corporate cover for
their activities
- so that AMIX-like fees are part of the "internal
accounting"
+ Anonymous collaborative writing and criticism
- similar to anonymous voting
16.28.10. Compressed traffic will similarly increase
- and many compression algortithms will offer some form of
encryption as a freebie
- and will be difficult to decypher, based just on sheer
volume
- files will have to at least be decompressed before key word
searches can be done (though there may be shortcuts)
16.29. The Coming Phase Change
16.29.1. "We'd better hope that strong cypto, cheap telecoms and free
markets can provide the organizing basis for a workable
society because it is clear that coercion as an organizing
principle ain't what it used to be." [Duncan Frissell, in
his sig, 4-13-94]
16.29.2. "What is the "inevitability" argument?"
- Often made by me (Tim May), Duncan Frissell, Sandy
Sandfort, and Perry Metzger (with some twists). And Hal
Finney takes issue with certain aspects and contributes
incisive critiques.
+ Reasons:
- borders becoming more transparent to data flow
- encryption is not detectable/stoppable
- derivative financial instruments, money sloshing across
borders
- transnationalism
- cash machines, wire transfers
- "permanent tourists"
- Borders are becoming utterly transparent to massive data
flows. The rapid export of crypto is but an ironic example
of this. Mosaid, ftp, gopher, lynx...all cross borders
fluidly and nearly untraceably. It is probably too late to
stop these systems, short of "pulling the plug" on the Net,
and this pulling the plug is simply too expensive to
consider. (If the Feds ever really figure out the long-
range implications of this stuff, they may try it...but
probably not.)
16.29.3. "What is the "crypto phase change"?"
- I'm normally skeptical of claims that a "singularity" is
coming (nanotechnology being the usual place this is
claimed, a la Vinge), but "phase changes" are more
plausible. The effect of cheap printing was one such phase
change, altering the connectivity of society and the
dispersion of knowledge in a way that can best be described
as a phase change. The effects of strong crypto, and the
related ideas of digital cash, anonymous markets, etc., are
likely to be similar.
- transition
- tipping factors, disgust by populace, runaway taxation
+ "leverage effect"
- what Kelly called "the fax effect"
- crypto use spreads, made more popular by common use
- can nucleate in a small group...doesn't need mass
acceptance
16.29.4. "Can crypto anarchy be stopped?"
+ A goal is to get crypto widely enough deployed that it
cannot then be stopped
- to the point of no return, where the cost of withdrawing
or banning a technology is simply too high (not always a
guaranteee)
- The only recourse is a police state in which homes and
businesses are randomly entered and searched, in which
cryptography is outlawed and vigorously prosecuted, in
which wiretaps, video surveillance, and other forms of
surveillance are used aggressively, and in which perhaps
the very possession of computers and modems is restricted.
- Anything short of these police state tactics will allow the
development of the ideas discussed here. To some extent.
But enough to trigger the transition to a mostly crypto
anarchic situation.
- (This doesn't mean everyone, or even most, will use crypto
anarchy.)
16.29.5. Need not be a universal or even popular trend
- even if restricted to a minority, can be very influential
- George Soros, Quantum fund, central banks, Spain, Britain,
Germany
- and a minority trend can affect others
16.29.6. "National borders are just speedbumps on the digital
superhighway."
16.29.7. "Does crypto anarchy have to be a mass movement to succeed?"
- Given that only a tiny fraction is now aware of the
implications....
+ Precedents for "vanguard" movements
+ high finance in general is an elite thing
- Eurodollars, interest rate swaps, etc....not exactly
Joe Average...and yet of incredible importance (George
Soros has affected European central bank policy)
- smuggling is in general not a mass thing
- etc.
+ Thus, the users of crypto anarchic tools and instruments
can have an effect out of proportion to their numbers
- others will start to use
- resentment by the "suckers" will build
- the services themselves--the data havens, the credit
registries, the espionage markets--will of course have a
real effect
16.29.8. Strong crypto does not mean the end to law enforcement
- "...cryptography is not by any means a magic shield for
criminals. It eliminates, perhaps, one avenue by which
crimes might be discovered. However, it is most certainly
not the case that someone who places an open anonymous
contract for a murder in an open forum is doing so "risk
free". There are *plenty* of ways she might be found out.
Likewise, big secret societies that nefariously undermine
the free world via cryptography are as vulnerable as ever
to the motivations of their own members to expose the
groups in a double-cross." [Mike McNally, 1994-09-09]
16.30. Loose Ends
16.30.1. governments may try to ban the use of encryption in any
broadcast system, no matter how low the power, because of a
realization that all of them can be used for crypto anarchy
and espionage
- a losing battle, of course, what with wireless LANs of
several flavors, cellular modems, the ability to hide
information, and just the huge increase in bandwidth
16.30.2. "tontines"
- Eric Hughes wrote up some stuff on this in 1992 [try to get
it]
- Italian pseudo-insurance arrangements
- "digital tontines"?
16.30.3. Even in market anarchies, there are times when a top-down,
enforced set of behaviors is desirable. However, instead of
being enforced by threat of violence, the market itself
enforces a standard.
- For example, the Macintosh OS, with standardized commands
that program developers are "encouraged" to use. Deviations
are obviously allowed, but the market tends to punish such
deviations. (This has been useful in avoiding modal
software, where the same keystroke sequence might save a
file in one program and erase it in another. Sadly, the
complexity of modern software has outpaced the Mac OS
system, so that Command-Option Y often does different
things in different programs.)
- Market standards are a noncoercive counter to total chaos.
16.30.4. Of course, nothing stops people from hiring financial
advisors, lawyers, and even "Protectors" to shield them from
the predations of others. Widows and orphans could choose
conservative conservators, while young turks could choose to
go it alone.
16.30.5. on who can tolerate crypto anarchy
- Not much different here from how things have been in the
past. Caveat emptor. Look out for Number One. Beware of
snake oil.
16.30.6. Local enforcement of rules rather than global rules
+ e.g., flooding of Usenet with advertising and chain letters
+ two main approaches
- ban such things, or set quotas, global acceptable use
policies, etc. (or use tort law to prosecute & collect
damages)
- local carrriers decide what they will and will not
carry, and how much they'll charge
- it's the old rationing vs. market pricing argument
16.30.7. Locality is a powerful concept
- self-responsibility
- who better to make decisions than those affected?
- tighter feedback loops
- avoids large-scale governments
+ Nonlocally-arranged systems often result in calls to stop
"hogging" of resources, and general rancor and envy
+ water consumption is the best example: anybody seen
"wasting" water, regardless of their conservations
elsewhere or there priorities, is chastised and rebuked.
Sometimes the water police are called.
- the costs involved (perhaps a few pennies worth of
water, to wash a car or water some roses) are often
trivial...meanwhile, billions of acre-feet of water are
sold far below cost to farmers who grow monsoon crops
like rice in the California desert
- this hypocrisy is high on my list of reasons why free
markets are morally preferable to rationing-based
systems
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