PoliticsSecond SectionTechnology

The Conversations that Cryptocurrency Killed

Doran / Flickr (Photograph) Skullphone (Art)

Have you ever been in an abusive relationship? All you can do is get the hell out, because convincing your abuser to treat you well is a lost cause. They are a predator who feeds on your despair: Relinquishing power is not within their repertoire, no matter how much you plead. So you have to leave.

But leaving isn’t easy. You must extricate yourself emotionally, and a successful escape requires preparation. Wandering into the street with nothing? That’s not a winning strategy. Even if your abuser isn’t able to track you down, or doesn’t bother to try, you’ll still be destitute and miserable.

So you wait. You get your hands on some funds or find people who can help you. You learn about operational security. You use the acting skills that any abuse survivor has developed by necessity. And then, when you’re equipped to break free and take ownership of your life again, you do it.

What I’m describing is exit. In a coercive situation, there are two options: voice and exit. Voice means agitating for change from within. Voice is advocating, bargaining, lobbying, or begging. Exit, on the other hand, means leaving to do your own thing. Building alternatives. (The third component is loyalty, which is what constrains people from choosing exit when voice is futile… as voice often is. “Mommy always apologizes the next day, she really does love us!”)

With savvy, chutzpah, and help, many abuse survivors are able to emerge and reclaim normal levels of autonomy and independence. But there are some coercive entities even more tenacious than a motivated abuser, and better-resourced than any individual. Let’s say your adversary has a monopoly on violence in a given territory, and the war chest to back it up.

In the physical realm that we tend to call “the real world” — occasionally “meatspace” — it’s nigh-impossible to meaningfully exit from state control. The land has all been parceled out, and good luck overthrowing your local zoning board. Seasteading is a fun thought, but impractical for the time being. Emigration? Canada doesn’t want you anyway, and [insert any country] comes with its own demanding and capricious regime.

Jacobite editor Robert Mariani pointed out to me that “it’s totally possible to build and swim within parallel institutions,” displaying defiance “in ways that are more subtle than secession.” That reminds me of Michael Idov’s observations on how cosmopolitan Russian liberals coped with their government:

[T]he Muscovites around me were furiously building as many intermediaries between themselves and the state as they could, effectively privatizing government functions but only for their own benefit. Media managers established private medical clinics; frustrated university students, disgusted with ever-worsening “official” education, organized private student circles, online lecture courses, and educational start-ups. Tidy, modern, for-profit “document centers” proliferated, offering the functions of, say, the DMV without the rudeness and corruption (though, ironically, the only way they could function was by moving this corruption up a few levels). I was beginning to understand why so many Russians who called themselves “liberal” were, in fact, anarcho-libertarians in the Western sense, distrusting the government to perform even the simplest jobs.

Idov’s Russian friends pursued a limited exit buttressed by voice, and it had its downsides. The voice strategy can work — with a sufficiently charismatic avatar and a sufficiently popular cause. But other people’s preferences and incentives severely limit the outcomes that you can even hope to achieve.

Here’s the optimistic part. We’re lucky enough that meatspace isn’t the only venue for human flourishing. Online you are able to opt out of patrolled spaces. Don’t like the content-moderation policies of Twitter or Facebook? Start a Mastodon or Pleroma instance. On the internet, you can shop at what is half-jokingly referred to as “the libertarian store”: it’s called Dream Market, and it sells dangerous substances.

Consider the recent case of Cody Wilson, who pursued exit by making home gunsmithing a little easier with his Ghost Gunner machines, while simultaneously fighting the State Department in court until they conceded his right to freely distribute weapons blueprints on the internet. Wilson’s victory was not just a free speech win, but a demonstration of the divide between voice-centric activism and building alternatives: “I barely put a million bucks into this and I got you the Second Amendment forever,” he told the Daily Wire in an interview, referring to the legal battle. “What has the NRA done for you lately?”

Wilson had earlier told Wired that, had he lost the lawsuit, he would have called an armed militia to defend his servers in a Bundy-style standoff while he dumped everything onto the internet. The internet has namespaces instead of territory, and its constraints are therefore something entirely different. Cypherpunks were among the first people to figure this out, and cypherpunk is the ultimate exit movement.

“We don’t much care if you don’t approve of the software we write,” Eric Hughes wrote in his 1993 A Cypherpunk’s Manifesto. “We know that software can’t be destroyed and that a widely dispersed system can’t be shut down.” He added, “Even laws against cryptography reach only so far as a nation’s border and the arm of its violence. Cryptography will ineluctably spread over the whole globe, and with it the anonymous transactions systems that it makes possible.” Amazingly, this turned out to be correct.

Timothy C. May was another cypherpunk visionary who saw how encryption could be a radical liberator. “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,” May wrote in his own manifesto. (Cypherpunks were endearingly prolific when it came to manifestos.)

Encryption is the core cypherpunk technology on which all others are built. My friend John Backus phrased it like this, “Second amendment advocates gesture towards their guns and say ‘come and take it.’ Cypherpunks gesture towards cryptography and say ‘try and break it.’” In both cases, the government still has options for squashing you, but you’ve raised the hassle threshold very high.

Cryptocurrencies port that defiant “come and take it” attitude over to money, in the form of scarce digital tokens. The incentive structure that Satoshi Nakamoto designed makes it extraordinarily hard to corrupt a cryptocurrency network (once it has scaled enough). By contrast to the traditional banking system, in the cryptocurrency world the government can’t lean on third parties to prevent you from transacting however you wish. Third parties themselves may still refuse to serve you, but decentralized alternatives exist.

“We must declare our virtual selves immune to your sovereignty, even as we continue to consent to your rule over our bodies,” as EFF cofounder John Perry Barlow announced at Davos in 1996. “We will spread ourselves across the Planet so that no one can arrest our thoughts.”

Encryption offers an asymmetric advantage to defenders — that is, those with a secret to conceal. It’s easy and cheap to protect a given bit of information, but tricky and expensive to extract that same information without access to the private key. Theoretically, if you memorized your private key and then destroyed any physical record of it, your adversaries would have to resort to torture. The better your opsec, the closer you are to untouchable — by virtue of being unfindable. Ross Ulbricht got popped eventually, but it’s amazing how much time and effort the feds had to put in.

“Crypto-anarchism is a bargaining strategy,” as Nic Carter of Coinmetrics put it. “If you make it functionally impossible to comply with regulations, either the state mobilizes significant resources to stamp you out, or they change the rules. The trick is to make the crackdown prohibitively expensive.” Carter continued: “Think of a world with mesh networks, default i2p/tor, dandelion protocols, MW, CT, schnorr, off-chain txns, ring sigs with 1000 mixins, zk-snarks, other privacy tech I haven’t even thought of yet. That is probably overwhelming for all but the best-equipped nation states.”

SEC director of corporate finance William Hinman tacitly ceded this point in a June speech. He said that even a cryptocurrency with an initial release that constituted a securities offering could eventually become decentralized enough to outrun the Howey test.

Bitcoin was in the clear, Hinman explained, and he added: “Putting aside the fundraising that accompanied the creation of Ether, based on my understanding of the present state of Ether, the Ethereum network and its decentralized structure, current offers and sales of Ether are not securities transactions. And, as with Bitcoin, applying the disclosure regime of the federal securities laws to current transactions in Ether would seem to add little value.”

Although one bureaucrat’s declarations are not equivalent to official SEC policy, Hinman’s comments are an extraordinary indication of the agency’s mindset. Even if the SEC decided to pursue enforcement against the creators of Ethereum, attempting to destroy it would be futile. Could the project’s momentum be damaged? Of course. But halted? By its very nature, no.

In an excellent essay on the evolution of “minimum viable decentralization,” John Backus noted, “Decentralization helps to the extent that it exploits the letter of the law or evades the enforcement of the law.” His research on P2P file-sharing indicates that an exit technology’s ability to survive depends on a combination of clever design and true-believer activism. Ideologues are not enough, but they are necessary.

I suppose you can count me among them. Encryption is a tool of autonomy and consent; its application to money reduces the degree to which governments can arbitrarily compel economic obedience, or even detect the absence of compliance. I have no illusions that we’re on the brink of ancap paradise, nor that such a thing will ever be feasible. And I still pay my taxes. But I am happy to see this shift in the balance of power. Exit technologies improve a population’s BATNA. Members of the cypherpunk movement, after decades of collective effort, have made it possible to opt in to the monetary policy of your choice rather than bowing to whatever level of inflation the Fed prefers. Monetary policy was the libertarian issue as recently as 2012, but Bitcoin has made things peculiarly quiet on that front. I’m eager to see the results of a little competitive pressure.

Sonya Mann works for the Zcash Foundation and is a former tech journalist. Follow her on Twitter.