diff --git a/16-Crypto-Anarchy/16-Crypto-Anarchy.md b/16-Crypto-Anarchy/16-Crypto-Anarchy.md new file mode 100644 index 0000000..79f210e --- /dev/null +++ b/16-Crypto-Anarchy/16-Crypto-Anarchy.md @@ -0,0 +1,3762 @@ +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