Building Galt’s Gulch

Astonished. That was the overwhelming thought I was left with after listening to a 73 minute podcast between the brash, sexually liberated, libertarian American, ‘King of the Nerds’, Brian Sovryn and a mild mannered, boat loving, free thinking futurist and software engineer from Scotland named David Irvine.

The latter has spent the last 8 years designing and coding nothing less than a solution for a decentralised internet named Maidsafe. Users of the open source system share resources from their computer, such as hard drive space and processing power, and in return for this ‘work’ can use the combined resources of the network for data storage, website hosting and computing power. The system backs up data into encrypted ‘shards’ that are duplicated and stored on multiple computers in the system, such that only those with the keys to decrypt the data will be able to reassemble and interpret these shards. The network adjusts dynamically so that if resources are being used more frequently they become more accessible to all participants. Data can be shared and websites or web assets can be hosted on the system, without the need to store any data in corporate data centres or servers.

Maidsafe promotional video

Maidsafe promotional video

The power of this technology is phenomenal, particularly when combined with the ability to transfer value over the internet via cryptocurrencies. For the first time in human history we now have a true extra-national alternative venue for the expression and trade of the work of the mind. Individuals can interact and trade value regardless free of interference from national governments and established transnational corporations.

‘But not all work is done on the internet – factories still exist!’ one might say. This is true, but consider the lever of competition on governments and markets if a proportion of the productive population embrace an alternative economy. The wealth and value incentives created would surely move the bricks and mortar world towards individual liberty and away from central control. For having tasted the benefits of liberty, or seen it in the success of one’s neighbour, why would anyone chose the state?

Silent Circle

“We feel that every citizen has a right to communicate,” Janke says, “the right to send data without the fear of it being grabbed out of the air and used by criminals, stored by governments, and aggregated by companies that sell it.”

– Slate

Bravo to Janke for standing up for users – i.e citizens – rights to freedom of speech. This is certainly an interesting product from a usability perspective and the fact that Slate and Engadget are both excited about speaks well of it.

© dbking

© dbking

Someone else who speaks well of it is the slightly strange fellow on the train a few days ago.  This chap was showing off about his knowledge of train ettiquette and asking if the train had Wifi (main line trains in London do not have Wifi) and then took the opportunity to proselytise about his “favourite application” (which relies on Wifi, or so I hear) while I politely studied my phone. That kind of marketing, where fans throw away the train etiquette rule book to not only speak but sell your product for you, that is worth a fortune.

There is a downside hidden in all the hype. The applications is hosted under the direct jurisdiction of the US Federal Government in Washington DC.

Slate writes:

The company, which is headquartered in Washington, D.C., doesn’t retain metadata (such as times and dates calls are made using Silent Circle), and IP server logs showing who is visiting the Silent Circle website are currently held for only seven days. The same privacy-by-design approach will be adopted to protect the security of users’ encrypted files. When a user sends a picture or document, it will be encrypted, digitally “shredded” into thousands of pieces, and temporarily stored in a “Secure Cloud Broker” until it is transmitted to the recipient. Silent Circle, which charges $20 a month for its service, has no way of accessing the encrypted files because the “key” to open them is held on the users’ devices and then deleted after it has been used to open the files.

Two problems there, the company is right under the nose of Uncle Sam and the “cloud broker” shouts “single point of failure”.

According to Engadget:

the company’s also pledged to not cooperate with surveillance requests from law enforcement, nor will it compromise the service’s integrity by introducing a “backdoor” for the FBI

Not much use when you are shut down, but it’s very encouraging that people are seeing profit in secure communications. Now all we need is an inventor with an idea that the Government cannot attack. If you feel you might one day be that inventor then you may like to come to the Libertarian Home meetup in April where Adrianna Lukas will be talking on the properties of resilient heterogenous systems.

Bitcoin 2012

One further detail courtesy of Frank Braun. The 2012 Bitcoin conference is coming to London, the world’s premier finance hub (for the time being):

We plan this conference to be the hub for bitcoiners wishing to learn, meet, do business and expand their minds. This will bring bitcoin to a global financial centre, and be a turning point bringing bitcoin to the fore of the mainstream. It is here that bitcoin will leave its perilous infancy, as the new world briefly meets the old before displacing it.

Ticket’s cost 70 euros, payable in Bitcoin, and for your money you get acces to talks by Richard Stallman, Max Keiser and others.

The conference takes place on the 15th and 16th of September at the Imperial, Russell Square.

Bitcoin: a protocol for the distributed maintenance of a ledger?

When I finally found my way to Brian Micklethwait’s Pimlico pad on Friday evening I was in for a few surprises. The biggest visual surprise was Brian’s amazing collection of books and CD’s. The amount knowledge there, in one home, is staggering. I enjoyed running my eyes over the titles and trying to notice whole areas of expertise I might have missed out on. The real surprise was that I had arrived thinking I was to hear about a revolutionary communications protocol for the distribution of digital money. I was going to get a talk about the minutiae of digital accounting.

I was also pleasantly surprised to be joined by several of Brian’s Samizdata colleagues, who’s excellent work over many years got me, and no doubt countless others, into libertarianism and so it was an honour to meet them. Brian’s chief guest, Frank Braun was an IT security professional with an interest, and a small income stream, in Bitcoin and was there to explain how it worked and what the advantages were for freedom loving libertarians. Frank explained that he is a fan of “freedom technology” because rather than changing a culture to value and understand freedom, a difficult and uncertain process, building a new peice of technology is a smaller problem with a faster and more certain pay off. If you are reading this thinking you have found the software hacker you are looking for, move along, but Frank was merely an admirer of the work of pseodonymous Satoshi Nakamoto, the inventor of Bitcoin.

The following explaination is based on my notes and is therefore mostly pointless, I’m sure better explanations exist, but I am interested in sharing it as a snapshot of my understanding. If I’m seriously wrong, it would help if you left a comment. If I’m right then hopefully there is some value in the way I explain it.

The major feature of the Bitcoin protocol is to effect transfers of wealth, but it’s primary domain object – the primary noun of importance in the system – is not coins or vouchers but an accounting ledger. The maintenance of that shared public record is the primary task and the competitive challenge addressed by the participating nodes, the computer systems owned by users and service providers who take part. It’s like one big trackerless BitTorrent, a network with no centre and no boundaries, co-operating to store copies of some data to which new blocks are conststantly added. The content of these blocks, the ledger, is not something you would be familiar with. I understood it by analogy: if the Dollar were only handled by a single Federal bank, and there was no cash, then the Fed would need to record the transactions of every US citizen and every other user of the currency in perfect detail. As Frank put it, trying to do something illicit in such as system would be “dumb”. This perfect transparency was the opposite of what I had understood to be the point of digital money and of Bitcoin.

Of course, a degree of privacy is acheived by the use of pseudonymous cryptographic identities, and your privacy is dependant on how much personal data gets linked your digital fingerprint. Your public key is your bank account and your bank balance is merely the sum of the values of every transaction involving that public key. As you might have computed, your private key is your means of accessing your money.

In economic terms Bitcoin is non-State fiat money, and the unit for numeric values in the ledger. From the users perspective, the advantages were given as:

  • The system is able to clear transactions (store them in a ledger-block) within 20 to 30 minutes
  • Transactions are reliable, businesses do not suffer the expense or risk of payments being charged back by the credit card company.
  • It is not possible to have your account frozen.
  • Possible to work under a pseudonym.

The disadvantages, as I touched on above are:

  • No anonymity, flows of money can be traced and tracked.
  • (I got the impression later that in order to take part, you are forced to download enough data to calculate every participants bank balance, illustrating how little privacy there is)
  • Very few tax implications, that is, you should expect to be taxed.
  • Somewhat smaller risks for people who want to protect their earnings from tax enforcement, since there is no current enforcement.
  • Needing to hold state fiat money to pay state taxes mean you cannot trade soley in Bitcoin.

Despite the high degree of transparency the “eBay for drugs” known as Silk Road appears to be the killer app. Bitcoin reached notoriety when a US senator triggered the Streisland effect for Slik Road by talking to the media about shutting Silk Road down. Silk Road was an existing site for traders that lacked a payment system, and whcih adopted Bitcoin.

The combination of Silk Road and Bitcoin has already made drug users safer and more free. Allowing them to easily purchase drugs and have them shipped in the mail rather than visiting dark urban corners.

Braun spoke about how the Governemnt might choose to attack Bitcoin:

  • Attacking the exchanges affecting people’s ability to buy into and out of Bitcoin. This is important as the price of Bitcoins is very unstable and holding Bitcoins long term amounts to currency speculation.
  • Attacking the pricing, so that people loose faith in the currency, e.g. by conducting a pump and dump in which large volumes are bought until the exchange rates rise then are sold again forcing a sudden price drop.
  • Braun provided an anecdote regarding the analogous EGold system which had a central technical and legal point of failure. The EGold system was prosecuted and shut down.
  • Similarly, IceGold the eGold broker shut down when threats of prosecution were made against the founder, essentially extending “Process as punishment” to “Process as threat”.
  • Technical attacks could be addressed at the “Bootstrapping” phase or via deep packet inspection, though these were not covered in depth as the main threat is clearly to exchanges.

Frank identified some important lessons for the development of future freedom technologies:

  • People will be less obedient of Government when they have practical options available that flout authority.
  • The technology’s originator stayed anonymous which was a smart move for him and for the network. Counter example: Julian Assange.
  • Very few people were needed to affect change, in this case they created a $60m economy.

© IK

We went on to discuss market opportunities for Bitcoin in replacing Hawala and Western Union money transfer systems and whether Bitcoin might remain a “wholesale” form of money with retail users accessing it via human contact points. We also identified potential business opportunities for individuals setting themselves up as Bureau de Change in retail settings e.g. at the shop where you get phones unlocked.

I want to end with Bitcoin’s monetary policy. Large chunks of the libertarian community are motivated by one primary economic problem caused by the states domination of currency: inflation. Currently hovering around 5%, depending on your definition, inflation is the process of granting invented “fiat” money to banks and other major instutions and deliberately increasing the number of units in circulation and devaluing the currency. The effect on savers, which I don’t need to explain here, is that they are ripped off at a rate of 5% per year, and the effect over time is compounded year on year in a sick mockery of compound interest. That this deliberate policy is morally repugnant is an excercise in subtle understatement.

Bitcoin is a new system, and it is a type of fiat money whose value, like state fiat money, does not relate to anything real. It could collapse tomorrow. But it is a currency that directly protects people from inflation – in fact Bitcoin is limited by a resilient technical and democratic cap of just 21 million units – ever.