A few days ago, I had the pleasure of speaking on a panel at the 2014 Liberty League Freedom Forum with City AM's Marc Sidwell, Big Brother Watch's Nick Pickles, and the authors Daniel Ben-Ami and Nick Harkaway; we discussed the implications of advanced technology for liberty. Seeing as most people are not obsessed with blockchain-based technologies as I, before the talk began I asked the attendees how many of them used cryptography - such as PGP/GPG or cryptocurrency - in day-to-day life.
Of 100-odd individuals present (perhaps fifty more stumbled in later, having overindulged during the previous night's festivities), perhaps six hands went up, underscoring a significant problem with technology-as-liberator: adoption. In a room full of activists who oppose state surveillance, only a handful had taken measures to protect themselves from it - measures which, it should be said, may be taken at nil cost. Just as we criticise our philosophical opponents on the political left for denying individual agency in favour of political action, which is rightly viewed as a "convoluted and roundabout" method of accomplishing individual goals, so too should we criticise our own continuing behaviour which makes this surveillance easier to conduct. Though as the panel discussed, there is a general perception of a "technological arms race" between individuals on the one hand and states on the other, the best technology in the world is utterly useless if it is not employed.
We should nonetheless be grateful that the technology is there, developed and promoted by a handful of brilliant mathematical and political minds. One of these minds belongs to Cody Wilson, designer of the 'Liberator,' the world's first fully-3D printed firearm (as well as designer of a number of 3D-printed components for the AR-15). More recently, Wilson has been working as a spokesperson for the "Dark Wallet" project, a collaboration of some of the world's leading cryptocurrency developers aimed at augmenting the functionality and independence of the Bitcoin blockchain, as well as adding trustless privacy features. The problem they seek to solve arises from a fundamental aspect of Bitcoin's design, viewed by some as a weakness: each bitcoin (or part thereof) is a chain of digital signatures and though in aggregate the network behaves like a ledger, this particular feature renders all transactions public - and thus perfectly traceable back in time, all the way to an individual bitcoin's first creation. Because of this, a number of lawyers have crassly taken to calling bitcoins "prosecution futures," and indeed law enforcement has been able to make a number of arrests in the United States based on analyses of these records.
Wilson will be speaking to the ASI this evening. Although I do not know exactly what he will say, I think it is fair to presume he will not endorse the expansion of industry cooperation with regulatory authorities. Indeed, "if Bitcoin represents anything to us," he has said, "it’s the ability to forbid the government." The unSystem group of which he is a member has expressed similar sentiments to that of the Freedom Forum panellists, referring also to the idea of an arms race, and arguing their work can "gain a new territory of freedom for several years." "We don't need to cooperate with control freaks," they add; "disobedience is the only way." It is a view with which I sympathise but, despite considerable admiration for their work, respectfully disagree.
When I was younger, it was all too easy to become frustrated with the intransigence of social democracy and the seemingly endless trampling of individual endeavour in the name of collective welfare this system legitimises. Given the widely-publicised abuses of state security apparatuses in democracies everywhere, it is perhaps easier still to look to technology to secure an advantage for liberty outside of legally permissible channels - even if that victory will be fleeting at best.
That notwithstanding, implementation of this technology in full compliance with the law, not civil disobedience, is the way forward. This is not to say that anonymity and privacy are unimportant. Clearly they are, and men like Cody Wilson draw much-needed attention to questions of state overreach at great personal risk to themselves. Where we diverge is that I am of the view that the proper means of accomplishing this change is through democratic consensus.
Bitcoin and its derivations are already challenge enough to state institutions, with its strong cryptography and decentralised character confounding all efforts at state control. No Act of Parliament, no court order, no standing army and arguably not even vast amounts of state-backed computing power are presently thought capable of taking the network offline on their own (at least, not for long).
While Bitcoin is the first cryptocurrency protocol, it will not be the last. Commercially, its most significant achievement is in outsourcing the element of discretion from the unilateral act of payment to an algorithm; industry cooperation with state authorities in respect of this aspect of the technology has resulted in favourable regulatory outcomes in the UK and the United States, with the consequence that hundreds of millions of dollars are flowing into the sector, and mainstream businesses large and small are beginning to enter it.
Successor platforms close to release will extend this functionality in respect of multilateral, two-way instructions, importing the cryptographic security of Bitcoin into self-regulating agreements and other communications. In theory, the range of proposed uses for these second-generation platforms is limitless: decentralised crowdfunding, frictionless microfinance, autonomous peer-to-peer banks, and even decentralised social networks have been proposed, all of which would be run by decentralised mining from which virtually anyone can profit.
Prudence demands restraint when extolling the potential of these platforms. However, the degree of investor and developer attention upon them suggests they may be deployed in practical roles rather sooner than we think; and just like Bitcoin, I suspect they will take many people by surprise.
This will have implications for conceptions of liberty. What could promote a culture of privacy more efficiently than incentivising households to put the world's most advanced cryptographic technology in their living rooms? What better way could there be to convince a man of the value of free enterprise than to allow him to hold his own commercial bank in the palm of his hand? What kind of world will we live in where a shopkeeper in Kibera can safely invest in a property development in Kensington at the push of a button, while paying no fees?
How then, with deployable personal capital at their very fingertips, will people view state interference in markets and human interactions in which, perhaps for the first time in human history, they have a stake of their own? I suspect they will view it very differently, and in a manner which has the potential to give rise to enduring societal change. But the technology must first get to this point, and prove useful, before any of this change will be realised.
I am grateful Mr. Wilson has agreed to speak to the Institute this evening; the world needs more people like him. But so too does it need transactional technology which empowers individuals, rich and poor alike, to easily deploy and accumulate capital, legally, safely, and internationally, so that they might use it in order to improve the quality of their lives.
Men have been campaigning for liberty, however they define it, within the confines of the law for hundreds of years. I for one am happy to continue doing so for at least a few more, and encourage the attendees of tonight's event to do the same.
Mikko Arevuo, a senior lecturer in strategic management and Adam Smith Institute fellow, explains the moral foundations of capitalism and what is causing the current crisis of confidence in it.
This report reviews the evidence around plain packaging for cigarettes from Australia, the only country to have tried the policy so far. It finds that plain packaging has not had a noticeable impact on smoking rates, but has led to a significant rise in counterfeits, which are more easily available for underage smokers.
Commercial lawyer and ASI Fellow Preston J. Byrne continues to explain why, despite the cries of his inner libertarian, more government involvement in Bitcoin would be a step forward for the cryptocurrency-cum-payment-system, rather than its end.
I should begin by thanking the numerous individuals who privately provided feedback on my proposition that cryptoledgers need law, and therefore the state.
I am pleased to report that the proposition was overwhelmingly opposed, with a few exceptions.
My position, however, remains unchanged. To set the scene for later discussions, I will provide the primary objections and my responses in outline:
1) Crypto-currency was designed to distribute power from the state and resources from the banks to individuals – what you propose undermines that idea.
I get this. Libertarians started cryptocurrency; this is our party. If this technology was created to get around the state, why invite it back in? Hell, why acknowledge the state at all?
The answer, of course, is a situation with which most libertarians will be familiar: other people have arrived at the party, and – not being nerdy as we – they don’t want to talk about politics. Early adopters thus need to start getting comfortable with some uncomfortable facts:
(a) The technology is open-source and the genie is out of the bottle. Anyone can use it and advance it for any purpose.
(b) Bigger players are exploring its potential. One cannot seriously expect banks and payment processors to roll over, surrender, and sacrifice their firstborn at the altar of Ludwig von Mises once a cryptoprotocol presents a threat to their business. Instead – if the technology is as good as its proponents claim – they will integrate cryptoledgers into their operations and leverage their own resources against whatever “free,” distributed banking system rises to compete with them, as I suggest in Chapter 2 of Tim Swanson’s Great Chain of Numbers. Consumers will benefit as a result.
(c) The lack of a comprehensive legal framework is currently preventing these new actors – and the innovations they might create – from entering the ecosystem. Consequently, the law is coming for cryptocurrency; the technology may be said to be a victim of its own success. While we remain free to flout this process,* we are powerless to stop it.
Whether we like it or not.
This is a thoroughly Austrian state of affairs; it is therefore in our interests to exercise influence rather than deny it is taking place. Plus, if Bitcoin does everything some say it can this shouldn’t be a problem for those who want to get around the law – it’s distributed and pseudonymous, right?
Maybe.** Without a doubt, Bitcoin – used as intended – doesn’t need the law to be economically effective as a mechanism to store and transfer value. The experience of the last year proves it. Whether this position is commercially practicable is another matter; whether the same will be applicable to Bitcoin’s cryptoledger successors is another still. The law will be written for them. Of necessity, though, it will apply to all.
2) Corporate blockchains? GOVERNMENT blockchains!?!!11one? That’s insane. You’re deliberately crippling the technology!
Correct. This is no bad thing. To say reining in a powerful technology for commercial applications is “crippling” is like suggesting that we’re “crippling” America’s strategic nuclear arsenal by using fissionable isotopes for radiotherapy. Derivative products will change the commercial landscape, for sure, but will do nothing to dilute the potency of the original. They may even improve it, such as the MasterCoin and Colored Coins projects propose to do.
A distributed, pseudonymous/anonymous, public blockchain is fantastic for a revolution but useless to a corporation. The active cryptocurrency development community is miniscule, with individuals numbering in the hundreds, if that. If we are right about crypto’s potential, a future is coming where many blockchains – private, public, regulated, unregulated, or even state-sponsored, all serving different functions – will exist.
To a small extent, that future is already here: there are hundreds, if not thousands, of scrypt blockchains in existence thanks to automated crypto generators (my old university dinner club has even mooted creating one to reward the numerous heroic deeds its members regularly perform). A good friend of mine argues that most of these are Bitcoin/Litecoin clones, and do not represent a genuine improvement of the technology (arguing that in some cases, e.g. with Dogecoin’s one-minute confirmation/block time, these “improvements” present significant security risks). I agree with this view.
He argues, however, that this means it would be prudent to unite behind one market-leading technology – Bitcoin – and take it from there. I do not agree with this view, for both political and practical reasons. The Bitcoin protocol has only been in existence for four years, has a number of non-fatal flaws, and only for twelve months has anything approaching serious attention been paid to it.
Innovation is coming; there will be market demand for regulation to provide additional stability for these new products. The more expeditiously the UK establishes a legal framework for cryptoledgers’ use, the faster UK businesses will be able to benefit from them, and outcompete businesses in other jurisdictions. Additionally, more this technology enters the mainstream, I have to imagine the more legitimate its unregulated applications will appear to the general public – and the greater its potential will be for changing their views on how government should function.
Plus, we’re libertarians. Who are we to say anyone can’t use this technology, in any way they wish, to any end they can imagine?
3)There can be only one!
Don’t get me started.
4) “‘What I’ll be discussing in coming months.’ Hitchcockian master of suspense, you are!”
Writing for the Adam Smith Institute does not put a roof over my head – it’s a ‘nights and weekends’ thing and I have to prioritise. To ease your anxiety, my next post will deal with the practical benefits of a polycentric, rather than fully decentralised, blockchain for smart property transfers.
* This is not, in my view, a good idea. I’m reminded of Hobbes – “Fear and liberty are consistent: as when a man throweth his goods into the sea for fear the ship should sink, he doth it nevertheless very willingly.” The technology has the potential to change how people calculate these potential risks, but as recent criminal prosecutions initiated in the United States show, Leviathan’s reach is long indeed – and cryptocurrency transactions are no exception. Those who flout the law do so at their peril, as ever.
Ben Southwood reviews the evidence around the incidence of the corporation tax, finding that more than half appears to come out of workers' wages, with the remainder coming as an economically harmful capital tax.
Commercial lawyer and ASI Fellow Preston J. Byrne explains why, despite the cries of his inner libertarian, more government involvement in Bitcoin would be a step forward for the cryptocurrency-cum-payment-system, rather than its end.
ASI fellow Preston Byrne explains why bitcoin's recent problems do not mean the cryptocurrency-cum-payments-system is over. In fact, the promise of cryptography in payments and contracts is as exciting as ever.
Marcus Buist argues that Scottish business rates distort economic activity by reducing incentives to improve properties and due to the lengthy gaps between revaluations and proposes abolishing the system, considering a number of alternatives.
Prediction lists for the coming year are always revealing, though perhaps more of the current public mood than the future. A write-up of the tech trends for 2014 by Fast Company's design blog is hardly controversial, but what is interesting is how the areas they’ve chosen highlight the existence of two wider and seemingly divergent technological trends. This apparent conflict in the way technology is heading is far from problematic. On the contrary, it shows our success in adapting and experimenting with new ideas and in response to shifts in the social and political context, without the need for any central guidance.
One thing clear from Fast Company's list is that 2014 will bring a continued increase in the volume and depth of the personal data we create. Things like Google Glass, the ‘quantified self’, hyperpersonalised online experiences and the interconnectivity of the Internet of Things all create new reasons and mechanisms for data capture. This in turn increases the value of our data to ourselves, the companies with access to it and, in some situations, the state.
However, the article also predicts that 2014 will see increasing concerns over cyber-privacy and a movement towards greater digital anonymity. Users will increasingly chose to control their own data and how this is profited from, whilst we will begin to discover the joy of ‘disconnecting’ from the digital world and see the creation of intentional blackspots.
The fact that we seem to be embracing deeper technological integration yet simultaneously finding ways to mitigate and avoid its consequences is certainly interesting. Does this show that we’ve raced forward too fast and are trying to claw back a space we’re realising we’ve lost? It’s perhaps possible that this is the case, but far from giving us cause for concern the two-track path we’re seeing shows the ability of consumers and the tech sector to adapt over time, and in turn gives some hints on the optimal tech policy.
Reservations about an increasingly digitized and tech-heavy world are common, be it concerns over ‘hyper-stimulation’, the aggressive monetization of our digital footprint or wide-scale data collection and its abuse by unscrupulous firms and governments. Concerns often partner with conservatism; a desire to slow down the pace of technological rollout and impose prior restrictions on how things may be used. More often then not, government regulations and restrictions are cited as the way to hold a check on technology and keep us safe.
For example, Google's announcement to purchase the home thermostat company Nest was met with calls for a "much-needed conversation about data privacy and security for the internet of things". However, despite the fact this conversation hasn’t actually taken place yet, the same article expresses dismay and concern that the US government has been reluctant to legislate in this fledgling area.
Clearly, security breaches and the abuse of sensitive information are unwanted, and the more data collected the larger a slip-up could be. However, as Adam Thierer points out “conjectural fears and hypothetical harms should not drive regulation”.
Even when a problem can be identified, it’s unlikely that a committee of concerned yet under-informed policy makers are best placed to deal with it. A case in point is the EU’s Privacy Directive, the progress of which has been continually stalled by conflicting interests and general confusion. Moreover the pace of government action often runs way behind business and societal developments, and policies forged to address a pressing issue today may be redundant in five years’ time.
Worse still, restrictions dampen innovation and risk choking off the next big breakthrough – clearly advances are less likely to come about if we can’t use our resources creatively. This is particularly true in fast-moving and dynamic technology sectors. It’s hard to imagine the success of the internet if companies and experiments had been subject to governmental approval and top-down control.
Ultimately, however, we should be reluctant to adopt state-imposed ‘solutions’ to technological problems is because the market is actually incredibly good at dealing with these issues itself.
This is exactly what the two sides to 2014’s tech trends show. 2013 gave us reasons to be more wary about what we give away about ourselves & put online – and developers have taken note. If we feel at the mercy of data-sucking giants we can begin to avoid them. As the public tires of Facebook, alternative social networks centred upon privacy and control continue to emerge. Hate search engines knowing what you’re looking for? Try out DuckDuckGo . Want greater control over your data? Look out for indiePhone and OS. This new wave of open-source and privacy-conscious technologies is marked by an increasingly sleek user experience as it moves out of the realm of geeks and into the mainstream.
Of course, not everybody will care about these things, and neither should they have to. The beauty of a world where experimentation is encouraged is that people can pick and choose what things (anonymity, relevant ads, seamlessly connected devices and so forth) are important to them, and make their tech usage decisions accordingly. In contrast, government restrictions impose a cost on the whole of society and assume that we hold the same preferences and level of risk aversion. When faced with new dimensions to questions like ‘How should companies use my data?’ and ‘Is it wise to let technology to do x?’, we’re more likely to find answers we’re happy with through personal experimentation and adaption than taking the word of interest groups and politicians.
We might get things wrong along the way and maybe even double-back on ourselves, but its clear that so long as we continue to innovate, we’re likely to solve our own problems and satisfy a range of preferences.
Image source: XKCD Comics
It's good that Business for Britain is looking at the cost of regulation to small business, says Tim Ambler, but by focusing on devolution they push in precisely the wrong direction—more unified markets are lower regulation markets.