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Better Science At Less Cost

Type: ReportsWritten by Tim Ambler | Saturday 22 November 2003

Tim Ambler of the London Business School says that up to £1b a year is being wasted on unnecessary bureaucracy in the research councils - and that we would get better science at less cost by allocating the research budget directly to the universities.

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Beyond Pension Plus: Developing the fortune account

Type: ReportsWritten by Dr Eamonn Butler | Wednesday 26 November 1997

The future of the welfare state is now firmly at the centre of public debate. Its seeming inability to conquer poverty,despite an annual budget of £100 billion, provokes many to question whether a system designed in the 1940's is up to the challenges of today. The Adam Smith Institute argues that we need a completely different approach - replacing our collectivized state pensions and national insurance scheme with a system of personal lifetime fortune accounts, competitively provided.

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Bitcoin and the English legal system, part I

Type: Think PiecesWritten by Preston Byrne | Wednesday 05 March 2014

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.


Bitcoin and the English legal system, part II

Type: Think PiecesWritten by Preston Byrne | Monday 17 March 2014

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.

** Ibid. 

Bitcoin and the English Legal System, part III: a warm welcome to Cody Wilson

Type: Think PiecesWritten by Preston Byrne | Monday 14 April 2014

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.

Bitcoin is poised to shake the world: are you paying attention?

Type: Think PiecesWritten by Michael Taylor | Thursday 07 November 2013

Michael Taylor discusses the potential for Bitcoin to change the world as we know it.


Blame bailouts for huge budget deficits

Type: Think PiecesWritten by Vuk Vukovic | Friday 08 February 2013

Bailouts of banks are to blame for the huge budget deficits of Western nations, says Vuk Vukovic.


Blame politicians, not managers, for productivity gap

Type: Think PiecesWritten by Dr Eamonn Butler | Sunday 03 October 2004

Dr Eamonn Butler investigates the productivity report which argues the productivity in Britain is 20 % that of France of Germany. He points out what he feels the reason for this may be and looks to the poor education system and the increasing public sector as major issues.

Blueprint for a Revolution

Type: ReportsWritten by Dr Madsen Pirie | Monday 23 November 1992

A complete guide through the theory, strategy, and record of rolling back the state in the UK - privatization, internal markets in health education, making executive agencies more independent, and the Citizen's Charter.

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Britain and the EU: a negotiator's guide

Type: ReportsWritten by Miles Saltiel | Monday 14 January 2013

As Britain prepares to re-negotiate its position in the European Union, with the possibility of a full withdrawal if negotiations are unsuccessful, we outline some of the key points for negotiators to focus on. Paradoxically, the UK might well end up with a better deal if it is willing to contemplate life ‘out’, as EU negotiators are likely to stick to their guns if the UK is determined to stay ‘in’.


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The Adam Smith Institute is the UK’s leading libertarian think tank...

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