Wendy McElroy: The Jiu-Jitsu of Crypto – Personal Freedom vs Social Change

The Jiu-Jitsu of Crypto - Personal Freedom vs Social Change

The Satoshi Revolution: A Revolution of Rising Expectations
Section 4: State Versus Society
Chapter 9, Part 7
The Jiu-Jitsu of Crypto: Personal Freedom vs Social Change.

It is often assumed that power derives from violence and can be controlled only by greater violence. Actually, power derives from sources in the society which may be restricted or severed by withdrawal of cooperation by the populace. The political power of governments may in fact be very fragile. Even the power of dictators may be destroyed by withdrawal of the human assistance which made the regime possible.

–Gene Sharp, The Politics of Nonviolent Action

Cryptocurrencies withdraw assistance from the state’s engine of power: the financial system. But they do more. They create a parallel payment and monetary system that draws upon the state’s own energy to defeat it.

The Japanese martial art of jiu-jitsu is a method of defeating an armed opponent in close combat, even though the defender is unarmed. The attacker’s force and power are used against him. The defender never directly confronts the attacker with opposing force. Jiu-jitsu is an art of self-defense in which the attacker is not the opponent; his movements are.

Bitcoin defeats the central banking system even though crypto has no force of law or standing military with which to directly confront the attacking banks. Instead, crypto feeds off the backlash of discontent created within society by the corruption of the financial system. Crypto’s strength as a freedom tool lies in its role as a parallel system, which revolutionizes payment and monetary systems to eliminate the state and banks as trusted third parties. It recognizes these parties as armed opponents in close combat. In short, crypto uses the arrogance of the central banking system to good advantage by attracting the rebellious and disillusioned within society to engage in financial self-defense.

This current strategy of jiu-jitsu confronts two obstacles, however.

One is the state. Or, rather, it is users and institutions who view crypto as a type of new fiat, not as a vehicle for freedom. They view exchanges as a new type of traditional bank that is geared to handle an innovative specie, in much the same manner as credit card companies handle a different type of transaction. These users want state involvement because it brings “respectability” and the safety they believe a trusted third party can provide. To them, those who prattle on about freedom are irritants or troublemakers who hinder the true future of crypto.

The second obstacle to a jiu-jitsu strategy is an alternate manner of addressing the state: confrontation. This strategy has its time and place-generally as a last option-but it is in conflict with the self-defense tactic of waiting for an opponent’s movement and drawing upon it for strength. Direct confrontation relinquishes the jiu-jitsu advantage. Julian Assange and Satoshi Nakamoto clashed about their attitudes toward bitcoin when Assange flaunted the crypto as a donation method to the otherwise financially embargoed Wikileaks. Theirs was a clash of strategies for freedom: confrontation versus low-profile growth. Assange crowed, “Bring it on!” to government officials; Satoshi recoiled because the prominent bravado endangered the quiet paradigm that was replacing the dominant one by exploiting the latter’s weaknesses.

A fist of defiance thrust into the air is emotionally satisfying, to be sure, and it may be appropriate in some circumstances. But those who want crypto to become a part of daily life should ask: is the goal to be free, or is it to vent? Is it to construct a different society, or is it to rail against the current one? There can be real tension between these goals. Crypto is not big enough or powerful enough to win in a face-to-face conflict with the state, especially if the battleground and weapons are of the state’s choosing. The state excels at brute confrontation. Crypto’s advantages differ: it is fast on its feet; it is incredibly inventive; and, it draws on the state’s weaknesses as well as on its power.  By commandeering the animosity and corruptions that banking creates, a David and Goliath scenario plays out in which a diminutive but nimble challenger defeats a lumbering giant.


What Strategy is Optimal? Personal Freedom vs Social Change

The “best” strategy-if only one exists-depends on the goal being pursued.

Those who view crypto as an investment or as a paternal twin of fiat will embrace the state. Those who view crypto as a path to personal freedom will avoid the state whenever possible. The situation becomes more complex if the goal of social change is added to the mix. Although personal freedom and social change are intimately-related concepts, they are also separable. Those who seek social change may well engage in the high-profile rebellion that can be anathema to personal freedom.

Personal Freedom. Bitcoin was designed to free individuals. Its emphasis on privacy and pseudonymity allows people to navigate the financial world with unprecedented autonomy. Governments may loudly announce that they can crack transactions wide open, but they are scrambling, with no clear idea of how to handle mixers, tumblers and the other privacy innovations. Crypto advances more quickly than repression can, and governments—like bullies—are often loudest when they are impotent. If governments could kill the independence of crypto, they would have done so already. As it is, they fall back upon a standard method of enforcement: intimidation. The next step is open violence, the last resort of the state, which prefers to operate as though consent were present. Open violence means social control has failed, and no other alternative is available.

Social Change. Traditionally, social change involves an entirely different dynamic than personal freedom. The reform-minded individual does not seek privacy or avoid the state because the established strategies of social reform require visibility and confrontation. Public speeches, protest marches, petitions, guerrilla theater, editorials, sit-ins, boycotts, buycotts, pamphlets and books, civil disobedience…these strategies aim at raising a social issue to such prominence that it can’t be ignored but must be addressed.

Catching the state’s attention is dangerous. Its first reaction to an effective challenge is usually repression. That’s why those who engage in nonviolent action often go through training on how not to react to a backlash-how not to react to police attacks, for example. Social reform can be a dangerous business.

Cryptocurrencies have a valuable edge over traditional social-change approaches.  Instead of being convinced to confront and resist the state by raised their political awareness, people use crypto out of rational self-interest; they avoid the state for the same reason. Traditionally, social reform seeks to change the hearts and minds of people, one by one, until there are enough people to create a tipping point at which society itself is altered. Crypto seeks to change people’s perceived self-interest, one by one; self-interest is a far more prevalent and accessible motivation than social consciousness. (The preceding statement is cynical only to those who hold a negative view of self-interest.) When a sufficient number of people prefer crypto over banks, and crypto over fiat, then society will have changed…without violence, without martyrdom, and without courting danger.

How many individuals must be “converted” before a society is reformed? No one knows. But the success of freedom or of repression does not seem to require large numbers. The Christian anarchist Leo Tolstoy observed,

“A commercial company enslaved a nation comprising two hundred millions. Tell this to a man free from superstition and he will fail to grasp what these words mean. What does it mean that thirty thousand men…have subdued two million…? Do not the figures make it clear that it is not the English who have enslaved the Indians, but the Indians who have enslaved themselves?”

Equally, many revolutions have been led by a handful of believers who tapped into strong emotional currents of the people, such as the hatred of corruption and a desire for a better life.

A tipping point is not a measurable dynamic. This may be especially true of crypto because so much of the activity and so many of the people are low profile.  Typically, activists look over their shoulders and notice that a significant change has occurred. Then they say to themselves, “That was it—three months ago.” Radicals have debated what the “tipping-point” is for centuries. Ninetenth-century individualist anarchists in America believed that laws became unenforceable if ten percent of the people refused to obey them; that is, the laws became “dead letter,” which is just as effective as repealing them. An entire system can also become unenforceable.

At that point, of course, the topic is no longer social change. The topic is revolution.

[To be continued next week.]

Reprints of this article should credit bitcoin.com and include a link back to the original links to all previous chapters


Wendy McElroy has agreed to ”live-publish” her new book The Satoshi Revolution exclusively with Bitcoin.com. Every Saturday you’ll find another installment in a series of posts planned to conclude after about 18 months. Altogether they’ll make up her new book ”The Satoshi Revolution”. Read it here first.

The post Wendy McElroy: The Jiu-Jitsu of Crypto – Personal Freedom vs Social Change appeared first on Bitcoin News.

Wendy McElroy: Other Than the Black Market, a Last Stand for Economic Freedom

Other Than the Black Market, a Last Stand for Economic Freedom

The Satoshi Revolution: A Revolution of Rising Expectations
Section 4: State Versus Society
Chapter 9, Part 5
Crypto: Other Than The Black Market, A Last Stand For Economic Freedom?

Money…is the economic area most encrusted and entangled with centuries of government meddling. Many people, many economists, usually devoted to the free market stop short at money. Money, they insist, is different; it must be supplied by government and regulated by government. They never think of state control of money as interference in the free market; a free market in money is unthinkable to them. Historically, money was one of the first things controlled by government, and the free market “revolution” of the eighteenth and nineteenth centuries made very little dent in the monetary sphere. So it is high time that we turn fundamental attention to the life-blood of our economy—money.

-Murray Rothbard, “What Has Government Done to Our Money?

Envisioning free-market crypto should be easy because cryptocurrency was created on the free market, and it remains unregulated in many places. How difficult is it for a person to envision what is standing in front of his or her own eyes? Coins like Bitcoin or Bitcoin Cash are success stories for all to see.

Unfortunately, governments also see it. They recognize crypto as a fierce competitor to their own fiat monopolies, their tax systems, and a relatively untapped source of wealth. To control crypto, however, government cannot praise the phenomenon; government needs to demonize crypto by creating public hysteria over problems both real (fraud) and manufactured (links to terrorism). Rest assured, if crypto was an economic Satan rather than a business sensation, governments around the world would not be salivating and scheming about how to co-opt the industry. To do so, they paint crypto as a ‘good’ that is currently rife with abuses, which only governments can solve. The free market has failed, they claim.

Pressure from government is increasing. As cryptocurrency becomes more accepted as money, the cry for regulation grows. A recent report from the trading giant eToro and the Imperial College London claimed, “Cryptocurrencies like Bitcoin offer a viable evolutionary ‘next step’ for money and have the potential to become a mainstream form of payment within the next decade.” The report stated that regulation was a necessary prerequisite for such an evolution.

And most people will listen to the call for regulation because they believe a government monopoly makes money safer for them to use—at least, safer than free-market money, which they do not understand. Of course, the opposite is true. Government money gives those in power an iron control of the economy, and that arrangement never ends well for the average person. By contrast, the free market panders to customers who are the source of profit. How many government restaurants would allow people to send meals back to the kitchen for a replacement? How many have a “no questions asked” return policy on goods or services?

The free market also provides goods and services, including money, more efficiently than government. For one thing, competition forces companies to be efficient in order to achieve the low prices that attract customers. The free market also expresses far greater morality because it is based on voluntary exchanges, while the government consists of coercion.

Nevertheless, money is considered to be a “special” case that requires government intervention because money is essential to the functioning of a healthy society. But so is food. And, yet, the free market provides a cornucopia of groceries from around the world at affordable prices. Most people can walk to stores with a bounty for sale. It is difficult to imagine a government managing a similar food chain; indeed, the governments that have tried have produced rationing, famines, black markets, and soaring prices on the essentials of life.

Hysteria is a standard fall-back position for those who wish to obscure reality. And hysteria against crypto is underway because it is the best strategy to convince people that government is an instrument of crypto justice, not a crypto-criminal wannabe.


Respectability=the Need for an Injustice to Remedy=Regulation

Governments are playing a multi-leveled shell game with crypto, which is likely to play out as follows.

First and wherever necessary, crypto will be redefined as money rather than as an asset, because central banks, government agencies, and traditional financial institutions have no proper authority to regulate privately-held assets that are legally acquired and held. Governments can tax and confiscate, to be sure, but that level of control is modest compared with the monopoly power to issue and/or to define what is legal money.

Next, crypto will be conflated with crypto-asset markets, such as exchanges and businesses that issue ICOs (Initial Coin Offerings). Although the two are separate, most people make little to no distinction between them; the concepts become jumbled together. Those who want to regulate crypto itself find the jumble to be useful because it facilitates broad legislation that covers the entire sphere of crypto and its many manifestations.

The blueprint for crypto control is predictable; it is also global. Last week, for example, the Financial Stability Board delivered a report to a G20 meeting of Finance Ministers and Central Bank Governors, which discussed a framework for setting standards on crypto-asset markets.

A few months earlier, the International Monetary Fund’s (IMF) Managing Director Christine Lagarde indicated how global bodies would proceed. There were familiar references to crypto’s alleged role in terrorism and money laundering. But the emphasis differed. On the IMF blog, Lagarde called for crypto-asset markets to protect consumers in the same manner as traditional financial markets do. Know Your Customer policies and global coordination were stressed.

The call for consumer protection is echoing. At a June 25th conference, for example, the Federal Trade Commission’s Bureau of Consumer Protection Director Andrew Smith, explained, “With the rise of cryptocurrencies we’ve seen many signs, from public sources to law enforcement actions brought by us…that scammers are using the lure of cryptocurrencies to rip off consumers.”

“People need protection from the new money!” is ascending as the argument for regulating crypto. The argument not only appeals to an ingrained bias against free-market money, it also plays on people’s fear. Popular support makes it much easier for government agencies and central banks to succeed in their global grab at crypto. And, so, the word “fraud” is becoming more common whenever crypto is discussed, even though crypto-asset markets are usually the focus. (Note: the fact that fiat currencies are total frauds, along with many penny and over-the-counter stocks, does not arise.)


The Most Damnable Aspect of the Widespread Fraud Claim

There is real truth to the accusation of fraud. Crypto, like every other investment, is a “caveat emptor” situation due to the risk of fraud and other forms of theft. “Caveat emptor” is usually translated as “Buyer Beware,” and it means that a buyer or customer is responsible for checking goods and services before purchasing them. The principle is valid, but it is unsatisfying and an incomplete answer when confronted with fraud, which is a crime—the crime on which government pins its dreams of usurping crypto.

How massive is the problem of fraud? A recent study prepared by the Satis Group found that, as a percentage of the ICOs it examined, “approximately 78% of ICOs were Identified Scams, 4% Failed, 3% had Gone Dead, and 15% went on to trade on an exchange.”
It is not clear if the findings are valid, especially since expert reports have become a stock aspect of any push for legislation; many of them are sloppy and politically motivated. Frankly, the figures seem exaggerated. On the other hand, many ICOs have been revealed as corrupt, and the existence of fraud is undeniable, especially in crypto-asset markets.

Admitting a problem, however, does not validate a particular solution, such as government intervention. For one thing, government has proven itself to be unwilling to prevent fraud in the monetary system it already commands: central banking. Satoshi Nakamoto explained,

“The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust. Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve. We have to trust them with our privacy, trust them not to let identity thieves drain our accounts. Their massive overhead costs make micropayments impossible.”  

The debasement of currency is also known as inflation, which becomes inevitable because inflation is a prime source of revenue for the government and for the groups it favors. But the damage of government money extends beyond the degradation of value. Rothbard explained,

“It has fragmented the peaceful, productive world market and shattered it into a thousand pieces, with trade and investment hobbled and hampered by myriad restrictions, controls, artificial rates, currency breakdowns, etc. It has helped bring about wars by transforming a world of peaceful intercourse into a jungle of warring currency blocs. In short, we find that coercion, in money as in other matters, brings, not order, but conflict and chaos.”

And, yet, one of the main arguments against free-market money is that the marketplace is too chaotic and corrupt. Nonsense.

 There Oughta Be a Law

Fraud requires a legal response because a crime has occurred. But, again, admitting a need does not validate a particular solution. This is especially true of the legal solutions offered by government.

Generally speaking, there are four types of laws that function in society, and they sometimes overlap.

  • Ones that impose a specific vision of the world or of morality. These include laws against alleged vices, such as alcohol or drug use, as well as laws requiring alleged virtues, such as voting or paying taxes. The goal is to mandate a code of behavior, thus erasing the boundary between the legal and (someone’s vision of) the moral. Typically, the laws are enforced on everyone, except those with power seem to be exempt.
  • Ones that regulate a targeted segment of society. These include laws about who may conduct a specific business and how it must operate, as well as laws that discriminate between people based on factors such as race. The goal is economic and social control, with enforcement focusing on designated people.
  • Ones that protect against physical harm and property damage, including theft. These include laws against assault and vandalism. Rather than mandate a behavior, they prohibit one–namely, violence, which includes fraud. The goal is to provide the safety that allows a healthy society to thrive, with enforcement applying to everyone.
  • Ones that are created by contract. These include laws that allow creditors to seize assets in arrears, such as a repossessed car, and laws aimed at enforcing behavior, such as the performance of work for which payment has been rendered. A contract can always be breached, but there is a penalty for doing so: for example, a repossessed car, a refund of fees. The goal is to establish enforceable contracts, which are nothing more than enforceable consent between individuals. Again, it provides a safety that allows a healthy society to thrive and which discourages violence as the only way to resolve a dispute. The law applies only to those who contract.

On crypto, the government flexes only the first two forms of law: a specific vision imposed on the world; and, the regulation of a targeted sector. The laws do not protect people and property, as evidenced by the fact that recovered funds are not returned to those who have been defrauded. Fines, fees and recovered wealth go into the government’s coffers. In short, the laws serve government; they do not protect consumers.

The last two forms of law protect individuals, including consumers, and not government. They are laws that would exist in the free market because they fulfill human requirements. But what exactly would they look like? And how would they be enforced?

[To be continued next week.]

Reprints of this article should credit bitcoin.com and include a link back to the original links to all previous chapters


Wendy McElroy has agreed to ”live-publish” her new book The Satoshi Revolution exclusively with Bitcoin.com. Every Saturday you’ll find another installment in a series of posts planned to conclude after about 18 months. Altogether they’ll make up her new book ”The Satoshi Revolution”. Read it here first.

The post Wendy McElroy: Other Than the Black Market, a Last Stand for Economic Freedom appeared first on Bitcoin News.

Wendy McElroy: Does Your Money Serve the State or You?

Does Your Money Serve the State or You?

The Satoshi Revolution: A Revolution of Rising Expectations
Section 4: State Versus Society
Chapter 9, Part 4
Does Your Money Serve the State or You?

The State, in short, subjects people, whereas Society associates them voluntarily.

– Felix Morley

Two simple litmus tests determine whether money serves the state (organized force) or whether it serves society (voluntary exchanges).

  • Who issues it? State money is issued either by the state or by an authority controlled by it, who claims a monopoly.
  • Can people choose to use it or not? State money is established by requiring people to accept it as legal tender.

Cryptocurrency is privately issued, and no one is forced to use or to accept it. Crypto is a pure money of society—a public money, not one that serves rulers and elites. Indeed, many people use it to escape the corrupt central banking system and its domination of the global economy through fiat money. Control of the economy is the basis of social control.

The state lives or dies through its ability to regulate the flow of wealth within society. This makes cryptocurrency, even in its infancy, a threat to established power that the state addresses by dominating crypto through regulation, through its own monopoly issuance, or through banning it. Each step requires law. And, except for dictatorships, law requires public justification. Even with dictatorships, public justification is usually offered in order to avoid public resistance. The state needs law to destroy crypto, which means it needs justification. If there is not a real need, then a false one must be created.

The appeal to law reveals another and more fundamental difference between state money and that of society. Namely, what is the purpose of law regarding each one?


What is the Purpose of State Law Regarding Crypto?

The alleged illegality of crypto and of those who use it is, again, divided by the state into two clear categories.

First and foremost to the state are violations of its own self-declared jurisdiction. Given that the state produces no wealth, its claimed jurisdiction amounts to the rules by which wealth is confiscated and redistributed. Crypto violates these rules. Some uses do so directly. For example, it is sometimes used for tax evasion, money laundering, black-market activities, and other functions that compromise the state.

Of course, people who use fiat also commit such ‘crimes.’ In those cases, however, there is a remarkable difference in how the law approaches the offenses. Namely, objectionable individuals are demonized, often in a high-profile manner that intimidates those in the shadows. But the money itself is accused of no crime, and bears no liability. With cryptocurrency, both individuals and the money are demonized. The money is the true target, with individuals being the means by which to attack its legitimacy. Prosecutions springboard quickly into calls for monetary control.

Crypto also violates rules of the state in a more profound manner. It renders trusted third parties irrelevant, and there is no more massive third party than the state. The state created the central banking system as an omnipresent regulator of money and as a choke point for information. It wove an iron web of laws to monitor money and require its ounce of flesh from every transaction. If no one needs central banks, if they can easily avoid the strangling laws, then the power of the state dramatically diminishes. Some crypto zealots argue that the power is or will be destroyed. In either case, crypto constitutes a threat as muscular as any other revolution. Perhaps more so. No wonder, the loudest cry of “there ought to be a law” revolves around the preservation of state privileges.

The second round of the state’s cry for law is the claim that crypto violates the person and property of individuals. The line of attack is secondary, by far, and often sounds like an afterthought. But it is also the most dangerous claim to the continued freedom of crypto users because the accusation is valid, and it resonates with decent people. Most people hate taxes, and many would avoid them if it were safe to do so. But the same people hate fraud, theft, and violence.


Fraud, Theft, and Violence

Some uses of cryptocurrency are fraudulent. A March 2018 article in bitcoin.com opened,

“In the time it takes you to read this sentence, $850 will have been lost to cryptocurrency scams. In the time it takes to complete this article, that figure will have risen to $17,000. Phishing; fraud; theft; hacking; it’s all rife. In the first two months of 2018, there were 22 separate scams involving thefts of $400,000 or more. Put it all together and that equates to an average of $9.1 million a day. Oh, and that doesn’t include 2018’s outliers – Coincheck, Bitconnect, and Bitgrail. Otherwise, the total would actually stand at $23 million a day.”

There are thieves who prey upon the crypto community. An April 2018 article in bitcoin.com explained,

“Hardware wallets are regarded as one of the safest means of storing bitcoin and other cryptocurrencies. Each device grants the holder possession of their private keys and adds a PIN code plus other tamer-proof [sic] tech for enhanced security. Hardware wallets are not impregnable, however, as one British man found to his peril after purchasing the device on Ebay. Redditor moodyrocket is coming to terms with having his “life savings” wiped out this week, after $34,000 of crypto was stolen from his newly acquired Nano Ledger hardware wallet. The device was compromised, not due to any flaws in its design, but thanks to a man in the middle attack that saw the reseller insert their own recovery seed.”

Crypto allegedly cloaks acts of violence. This is the shakiest claim, because it is based on reports from state officials, or experts who are often in their pay. The “10 of the Biggest Lies Told About Bitcoin” (December 2017) addressed the claim that crypto is the finance of choice for terrorists.

“If you want to blame a currency, try the U.S. dollar which has been used to fund more wars, proxy wars, bombings, hijackings, and insurgencies than any other. Europol found no evidence that terrorists were using cryptocurrencies to fund their activities. That’s not to say it hasn’t happened and won’t happen. It’s telling however that the only people linking bitcoin with terrorism are governments seeking to crackdown on digital currencies.”

For the sake of argument, assume every accusation leveled at cryptocurrency is true. But it is also true of fiat. Fraud, theft, and violence has been associated with every means of exchange that has ever existed. Again, only crypto is discredited. Not barter. Not gold. Not fiat, against which no one shakes their fist due to fraud. It is telling that cryptocurrency is blamed for the actions of individuals, in much the same manner that guns are blamed for crimes.

Law will be imposed upon crypto. The state needs to reassert control. The free market needs to do what it does best: provide a solution to a need. State versus society. It will play out before our eyes.  I have a good idea of what it will look like, on both sides.

[To be continued next week.]

Reprints of this article should credit bitcoin.com and include a link back to the original links to all previous chapters


Wendy McElroy has agreed to ”live-publish” her new book The Satoshi Revolution exclusively with Bitcoin.com. Every Saturday you’ll find another installment in a series of posts planned to conclude after about 18 months. Altogether they’ll make up her new book ”The Satoshi Revolution”. Read it here first.

The post Wendy McElroy: Does Your Money Serve the State or You? appeared first on Bitcoin News.

Wendy McElroy: Crypto and the Structure of Class Warfare

Crypto and the Structure of Class Warfare

The Satoshi Revolution: A Revolution of Rising Expectations
Section 4: State Versus Society
Chapter 9, Part 2
Crypto, and the Structure of Class Warfare

The wall separating state and society is crumbling. Or, rather, the state is taking a jackhammer to it in an aggressive attempt to control every aspect of productive and cooperative life…The people you deal with on a daily basis are ceasing to be good neighbors, honest merchants, and disinterested strangers. They are becoming state informants who monitor your expression, your money, your behavior and attitude in order to report you to the authorities. They are ceasing to be “society” and becoming instead “the state.”

Murray Rothbard

Cryptocurrency has an advantage that almost every other alternative money in the past has lacked. It does not mimic state-issued currency or state-controlled transfer systems, such as banks. Its revolutionary structure and function are as uniquely compatible with society as they are antagonistic to the state.

State versus society: Libertarian class analysis is based on the interaction of the two categories, which are in irresolvable conflict with each other. The structure of each class–the arrangement of their parts according to a unifying theme—are also antagonistic. Into this analysis, crypto enters with a framework that rebukes the state and provides society with what it has sadly lacked: a free-market money for the average person. The compatibility of crypto and the free market and crypto is born out by their remarkably similar structures. (“Society” and “the free market are used as synonyms here because, in its broadest definition, the free market” is more than an economic dynamic; for example, there can be a free market of ideas. Broadly defined, the term refers to any free exchange.)


The Structure of State, Society, and Crypto

“Form follows function” means that the basic shape of a thing is determined by its purpose. For Frank Lloyd Wright, the two were inseparable. “Form follows function-that has been misunderstood,” Wright observed. “Form and function should be one, joined in a spiritual union.”
This is true of government or the state; it is also true of society.

The function of a state is to regulate society in a manner that maintains its own existence and privileges. The state uses force or the threat of force to impose its policies; behind every law is a gun and its intimidation value. The purpose of the state defines its form; coercive agencies, such as law enforcement and the military, abound. Intrusive practices, such as the widespread collection of personal data, are the norm. In turn, the agencies and practices require intense centralization and bureaucracy.

The function of society is as a venue where individuals interact peacefully for mutual benefit, whether that benefit is defined in economic, spiritual, or other terms. Society is voluntary, with legal obligations arising only from contract and consent. Because individuals are diverse and unpredictable, the form of society is fluid, quick to respond, and highly decentralized.

The two classes are at war because the state produces no wealth of its own; it takes what is needed from society through taxation in its various manifestations, including inflation. To do so, the state asserts its authority over the peaceful behavior of others, which the others resent.

The state does more than loot society, however. It usurps the functions of society—the interactions that should occur on the free market–such as road construction and financial institutions. Over time, segments of society are reshaped to resemble arms of the state. Banks are a prime example. Free-market banks would serve the needs of customers, including privacy. Current banks are information gathering centers for the state, with customer requirements being secondary.

In the past, the state’s encroachment upon society enjoyed a huge advantage; the state controls the legal definition of money, its issuance and much of its flow. Society had to accept fiat, to tolerate monetary policies, and to live with banking rules. At least, society had no real choice until the explosion of cryptocurrency. Suddenly, individuals became their own banks, and they made their own exchanges…all without the state.

Crypto is the money of society, the money of people. This status is not negated by the fact that some people become ridiculously wealthy through crypto; the free market has always rewarded successful innovators and early adopters. The status is not damaged by crypto experiments that fail; the free market is a brutal laboratory, with many dead ends. Imprudent people, who lose money through foolish acts, discover that the free market is also a corrective mechanism, without compassion. Even fraud does not cast a shadow on crypto as the money of society. Fraud haunts all human activities, especially lucrative ones. And those who appeal to the state for a remedy should remember that the state is institutionalized fraud and theft. Over time, the free market tends toward self-regulation.

What can threaten crypto’s role as the money of society? The greatest danger is the drive to change the function and form crypto from being an expression of society into an expression of the state. The drive for so-called “respectability” involves regulation, state-issuance, and other measures that would reduce crypto to another form of fiat, another form of central banking.


Crypto and Society Share the Same Basic Form

One indication of crypto being the money of society is that the two have the same basic function and form. The function is to empower the individual; form follows. It is no wonder that crypto’s structure parallels that of society itself. The parallels include,

  • A hard structure underlies them both. For crypto, it is the immutable blockchain that is remarkably immune to manipulation or exploitation; for society, it is the inviolable principle of non-aggression.
  • The frameworks do not inhibit diversity. Their security and freedom encourage almost infinite innovations. A major reason: Adopting the underlying structure is not a matter of law but of choice, which is unrestricted thereafter.
  • Third parties are not necessary for many of the transactions. For a complicated exchange, such as one that demands escrow, a third party is useful. Even then, however, the amount of trust required can be limited by strategies like getting in and out quickly.
  • There is no barrier to entry. No state license, no permission, no legal forms.
  • Both crypto and society are decentralized. Among the many advantages of this is that neither has a single point of failure where the entire system is vulnerable to bad actors.
  • The individual is the locus of power. As long as a person retains his or her keys, that person controls their use. The parallel in society is the individual’s right to say “no.”
  • Transactions can be pseudonymous or announced to the world, depending on individual preferences. Crypto purchased with a faux identity, which uses a different wallet for each transaction, can be almost as anonymous as cash.
  • Exchanges are not ideological or political. Crypto and the free market are great levelers of traditional social distinctions, such as the race or religion of a buyer or seller.
  • Crypto and society are both worlds in which wealth is based on merit, including the profits that properly come from taking risks that succeed.

By contrast, the structure of the state is antithetical to that of crypto and the free market. It is based on coercion rather than consent; it is centralized rather decentralized; its wealth comes from confiscation rather than merit. Form follows function.


Conclusion

There is a popular myth about crypto. Namely, that free and state-controlled crypto can co-exist. In theory, it is possible. In practice, it will not happen because state-issued or state-controlled crypto does not merely differ in terms of its origin but also in terms of its form. Crypto cannot serve both state and society; it cannot express both centralized control and decentralized choice. The two may exist in parallel for a time but, inevitably, the state will reach for a monopoly.

Crypto is becoming a new frontier in class warfare between the state and society. The state will try to reshape crypto in order to serve its own purposes. Instead of privacy and individual choice, state crypto will involve total disclosure and regulation. Instead of accessibility for all and the absence of trusted third parties, there will be licenses or bank-like exchanges becoming an unavoidable third party. The incredible benefit of crypto to society will be turned upside down, and it will become a benefit to the state.

State-issued or controlled crypto will be a bitter mockery of the original vision, but it is coming. And one of the major impacts of the Brave New money will be almost invisible; the basic form of crypto will become the opposite of what it was created to express. This goes with the function of crypto changing.

The best hope for free-market crypto is that concepts, such as decentralization, are so deeply embedded into its structure that a state-issue is doomed to fail. As a next resort, of course, the state will regulate what it cannot create. Society’s money will become a bit riskier and more difficult to use.

[To be continued next week.]

Reprints of this article should credit bitcoin.com and include a link back to the original links to all previous chapters


Wendy McElroy has agreed to ”live-publish” her new book The Satoshi Revolution exclusively with Bitcoin.com. Every Saturday you’ll find another installment in a series of posts planned to conclude after about 18 months. Altogether they’ll make up her new book ”The Satoshi Revolution”. Read it here first.

The post Wendy McElroy: Crypto and the Structure of Class Warfare appeared first on Bitcoin News.

Wendy McElroy: Crypto as Class Warfare

Crypto as Class Warfare

The Satoshi Revolution: A Revolution of Rising Expectations
Section 4: State Versus Society
Chapter 9, Part 1
Crypto as Class Warfare

“Antagonism between the classes will be removed. I do not envisage a dead and artificial level among the people. There will be a variety among them as there is among the leaves of a tree. There will certainly be no have-nots, no unemployment, and no disparity between classes and masses such as we see to-day. I have no doubt whatsoever that if non-violence in its full measure becomes the policy of the State, we shall reach essential equality without strife.”

-Mahatma Gandhi

Cryptocurrency is the realization of an anarchist dream that dates back centuries:  a free currency and a free banking system. Crypto is in its infancy, which means  its future applications are electrifyingly unpredictable, except in one regard: any successful application will fill a human need. No human needs are as acute as food and shelter, which require money and exchange. To control the flow of money and exchange, therefore, is to control life itself. And the financial flow is often captured by one word: banking.

In their quest for free banking, social reformers of the past made a distinction that is often lost today. Namely, banking is at the core of class warfare. The ramifications of that insight rests upon the definition of “class” being used: capitalist v. worker, nobles v. peasants, the political v. the productive. Crypto departs sharply from the meaning imposed by socialists centuries ago–capitalists v. workers–and expresses a 21st century form of financial class warfare: the political v. the productive.

The extraordinary crypto network is not a banking system, as traditionally conceived, but it can replace most banking functions. And future evolution within crypto applications may wipe out any remaining need for central banks.


Past Banking Experiments

19th century anarchists knew that freedom hinged upon what French radical Pierre Joseph Proudhon called a Bank of the People—a bank that served the financial interests of workers, not of the elite. Proudhon’s vision was a cooperative bank that provided low-interest credit and which issued notes based on labor instead of money based on gold.

The many attempts at free banking usually had a theme in common; they failed. Three factors played a significant role.

Ideology. Early anarchists accepted the socialist concept of a “Labor Theory of Value.” That is, the just economic price of a good or service is determined by the labor needed to produce it. The theory forms the linchpin of socialism’s condemnation of “the capitalist,” who steals the wealth earned by “the worker” when he charges and pockets more than the cost of production for a good. In short, socialists believe embedded labor, not subjective value or supply and demand, determine a just price. Banking experiments of the past tended to stumble and fall over this deeply flawed economic model. Not until Murray Rothbard fused individualist anarchism with Austrian economics, and popularized them both, did free-market anarchism emerge.

Structure. Many alternate institutions depended on the system against which they rebelled. Proudhon’s proposed Exchange Bank, which was intended to be an umbrella structure for smaller Banks of the People, is an example. The Exchange was meant to replace France’s central bank and to obsolete the financiers who preyed on workers. In his periodical Liberty, the iconic 19th century American anarchist Benjamin Tucker explained, “The Bank of Exchange was to be simply the Bank of France transformed on the mutual principle.” Thus, it was a vision of reform—radical reform, to be sure—but not a vision of revolution.

The alternate institutions that fared better tended to be part of a broader support system for a specific community, such as the social agencies operated by early labor organizations in America for their members. Those organizations exemplified the class awareness; for example, the Knights of Labor refused membership only to bankers, lawyers, gamblers, and saloon-keepers, who were viewed as the bane of working people.

Legal Opposition. Two circumstances that invited a backlash from authorities were intersection and visibility.

Intersection: In 1848, Proudhon approached Louis Blanc, a minister in the French Provisional Government, for assistance in transforming the Bank of France into an Exchange Bank. Proudhon was unsuccessful. But because his bank was partially based on government approval, it floundered. Today, so-called alternative financial institutions apply for licenses or otherwise comply with regulations. In doing so, they either go out of business or  cease to be alternatives; they become part of the problem.

Visibility: When an alternative financial institution threatens the status quo, and is seen to do so, it is dismantled. Transparency is not its friend.

A case on point is the massive network of voluntary labor unions in 19th century North America, which provided millions of workers with everything from credit to life insurance. The voluntary labor unions were also hotbeds of political dissent. President Franklin D. Roosevelt all but eliminated them by establishing a monolithic Big Union that enjoyed government privileges through legislation such the Wagner Act (1935); the fact that modern unions were backed by Big Business should have been a red flag. An article entitled “The Great Lie of the Modern Union,” explained, “The modern union that arose…” was “the opposite of what it claimed to be. It did not voice workers’ rights. It silenced them.” The decline of voluntary labor unions meant their financial safety nets evaporated.

Revolutionizing Class Definition

Cryptocurrency is not “new under the sun” in providing an alternative to government banking. It is not even new in providing a free-market one. But the dynamics of crypto are stunningly unique. The algorithms and blockchain are able to blow past three of the main pitfalls of previous alternatives—ideology, structure, and legal opposition.

Satoshi Nakamoto designed bitcoin and the blockchain to bypass a central banking system that served the status quo, not the individual. Given that the central banking system is not capitalistic but exists in communist societies, as well, the capitalist v. worker class analysis does not apply to crypto. Another form of class analysis fits perfectly.

Before discussing class analysis, however, it is necessary to define the word “class.” A class is a group of people or things with common characteristics. The grouping occurs because it is useful to whoever is defining the category. A researcher of financial habits might break his subjects into credit card users and non. A doctor studying drug addiction might split his patients into cocaine users and meth addicts. A classification can be defined by almost any shared characteristic: hair color, sexual orientation, preference in deodorant…

But if capitalists v. workers does not work well with crypto, what is the basis of crypto class analysis? It is the state v. society.

In his classic work, The State, the German sociologist Franz Oppenheimer spearheaded an analysis of these key terms.

Oppenheimer defined the state as “that summation of privileges and dominating positions which are brought into being by extra-economic power [force].” As well as the visible structure of politicians and bureaucrats, the state includes all agents (such as the military and law enforcement), affiliates (such as banks), and cronies (such as corporations and the mainstream media). Rothbard expounded on the concept. “I define the state as that institution which possesses one or both (almost always both) of the following properties: (1) it acquires its income by the physical coercion known as ‘taxation’; and (2) it asserts and usually obtains a coerced monopoly of the provision of defense service (police and courts) over a given territorial area.”

Oppenheimer defined society as “the totality of concepts of all purely natural relations and institutions between man and man.” Rothbard explained that a free society was “one where there is no legal possibility for coercive aggression against the person or property of an individual.” Society was the total of human interaction that occurred in the absence of institutionalized force.

Force and the threat of force are necessary to the state because it produces nothing. Its only source of “income” is the wealth it grabs from others, including through taxation, confiscation, fines, fees, tariffs, inflation, bribes… To exist, the state must steal. By contrast, society consists of voluntary exchanges that produce wealth, whether in terms of money, culture, family, spirituality, and other human values. An exchange occurs only when all parties to a transaction agree to its terms, which means all parties benefit.  occur. Rothbard highlighted the difference between state and society. “If I cease or refrain from purchasing Wheaties on the market, the Wheaties producers do not come after me with a gun or the threat of imprisonment to force me to purchase; if I fail to join the American Philosophical Association, the association may not force me to join or prevent me from giving up my membership. Only the state can do so; only the state can confiscate my property or put me in jail if I do not pay its tax tribute.”

Individuals who interact through force and privilege—“extra-economic power”– are the political class. Individuals who interact voluntarily are the productive class. The dynamic is political v. productive. The two are antagonistic because the political class is a parasite on the productive class, and it cannot exist otherwise.

Before crypto, even people who saw this class divide clearly were forced to use the state because so much of modern life was monopolized by it. Banking and the issuance of currency are fine examples. This essential realm of human interaction became a state monopoly. Little could be done about it; a bank account was almost a requirement of daily life, and it was extremely difficult to send money overseas without involving banks or other authorized institutions. No more. Crypto upends the state’s monopoly.

As with ideology, crypto is also able to answer the issues of structure and legal opposition that plagued prior financial alternatives to the state.

[To be continued next week.]

Reprints of this article should credit bitcoin.com and include a link back to the original links to all previous chapters


Wendy McElroy has agreed to ”live-publish” her new book The Satoshi Revolution exclusively with Bitcoin.com. Every Saturday you’ll find another installment in a series of posts planned to conclude after about 18 months. Altogether they’ll make up her new book ”The Satoshi Revolution”. Read it here first.

The post Wendy McElroy: Crypto as Class Warfare appeared first on Bitcoin News.

Wendy McElroy: Crypto Can Create a “Perfect” Political System

Crypto Can Create a “Perfect” Political System

The Satoshi Revolution: A Revolution of Rising Expectations
Section 3: Decentralization
Chapter 8, Part 6
Crypto Can Create a “Perfect” Political System

The anarchists…work not for a perfect social state, but for a perfect political system. A perfect social state is…totally free from sin or crime or folly; a perfect political system is merely a system in which justice is observed, in which nothing is punished but crime and nobody coerced but the invader.

-Victor Yarros, American anarchist, lawyer, and author

The perfect society is embodied by the institutions that individuals create and through which they function. The same is true of a dystopian society. That’s why institutional analysis is essential to understand how freedom and totalitarianism work. One institution is cryptocurrency, which profoundly affects other institutions of society, and reaches far beyond the financial ones.


What is an Institution?

The Random House dictionary defines an institution as “a well-established and structured pattern of behavior or of relationships that is accepted as a fundamental part of a culture, such as marriage,” voting, or bankruptcy. An institution is any stable and widely-accepted mechanism for achieving goals within society. The term applies to wide-ranging and complex concepts, such as “family,” “the free market,” “common law,” “religion,” and “the state.”

Not all institutions are compatible, however, because some pursue antithetical ends; free-market crypto and the central banking system are a stark example. Crypto is a spontaneous and decentralized empowerment of individuals; the banking system is a centrally-planned and unified expression of government control. As a practical matter, a society often contains the two institutions in uneasy parallel, but their antagonistic goals lead to inevitable conflict. Government will attempt to regulate or ban free-market crypto because, otherwise, the free market will do what it does when left unfettered: prevail.

Modern society is a political war zone: the culture war, a race war, weaponized media, class warfare against the 1%, the drug war, a war for democracy, militarized police, the new Cold War, a war on terrorism… One battle provides a common theme for them all. It is a warfare over the structure and goals of competing institutions. Every social conflict involves a clash of institutions that express different ideologies, including cryptocurrency. Created by anarchists using break through technology, it is at war with governments’ desire to regulate and to own it. Technology versus government. Freedom versus control.

Generally speaking, there are two types of institutions: spontaneous, and designed. An example of a spontaneous institution is the family. In Western culture, at least, no one predetermines who will marry and produce children; those decisions are left to the individuals involved. All spontaneous and non-violent institutions express freedom in how they function. By contrast, an example of a designed institution is the public-school system, which is created by authorities and experts who impose their vision upon children at tax-payer expense.

Not all designed systems are equal, however, and some can also be vehicles of freedom. These are voluntarily-designed free-market systems, such as a car factory or a tuna fish cannery. Factories may impose rigid rules, because producing a specific product requires them, but everyone who “obeys” does so willingly and from self-interest, which usually comes in the form of a paycheck. The pivotal question for a designed institution is whether it is coerced or voluntary. All coercive institutions express government or violence in how they function. Everyone who “obeys” does so without the option of saying “no.”

Free-market cryptocurrency is highly-designed and entirely voluntary. Central banks may offer a veneer of being voluntary–for example, people are not compelled to become customers—but the entire economy is regulated so as to prohibit alternatives that refuse to act as an arm of government. The same arguments are deployed against them as against crypto. Free-market financial institutions are said to be scams for tax evaders and other so-called criminals, such as drug dealers. They defraud honest people, who foolishly trust them with money. The true motivation of suppression is unspoken: alternative financial institutions threat the government’s monopoly on money and commerce. And, so, Institutionalized violence—that is, law enforcement—is used against the competition; it is justified as protection against occasional crime and against the poor judgment of individuals left to decide for themselves. 


What is Institutional Analysis?

Institutional analysis examines the dynamics by which institutions of society express and define laws, customs, and culture. It asks: What is an institution’s purpose, the rules by which it functions, its impact?

Parallel institutions that purport to serve the same purpose are often compared through a process called “comparative institutional analysis.” An example is to compare how the Federal Reserve creates currency with how an alternative system, such as cryptocurrency, does so. A good starting point of analysis is the competing assumptions upon which a centrally-designed institution and a free-market one rest. The first system uses mathematical representations, historical precedent, and market manipulations to produce currency, because it believes an economy can be scientifically engineered by authorities and experts. The second system realizes that human beings are fallible, driven by fluid preferences, by self-interest, and other factors that cannot be predicted, only analyzed in retrospect. Central banking grounds itself in mathematical models, which can be jiggered or false, and in central authority, which can lie or be badly mistaken. Free-market alternatives ground themselves in human behavior that faces the quick feedback of consequences, and which may be unwise, but not false.

Comparative analysis looks at the structures and procedures of competing institutions, which will determine what they produce. It does not consider motivations. In other words, as long as specific procedures are followed, the motivations are irrelevant. A worker in a hat factory may intend to produce wedding gowns. As long as he follows the workplace rules, however, the result will be a hat. A police officer may believe in Murray Rothbard’s free-market-anarchist model of justice, but as long as he follows police procedure, he will enforce laws that punish peaceful behavior. Only by breaking the rules can the hat maker and honest officer achieve their personal goals.

Comparative analysis also considers the differing impact of parallel institutions. For example, what can appear to be the ‘chaotic’ nature of spontaneous institutions provides a huge benefit to society—innovation, which cannot be centrally designed. Its powerhouse is the ability of creative people to adapt to changing circumstances. The adaptation can be lightning-fast, as with crypto, and successful adapters are richly rewarded by fortune that favors the first to arrive. Late arrivers are also rewarded, however, because an innovation will survive only if it provides value.

In 300 BD, the Chinese Taoist philosopher Chuang-tzu wrote, there has been such a thing as letting mankind alone; there has never been such a thing as governing mankind with success. Good order results spontaneously when things are let alone.”

By contrast, centrally-engineered institutions stifle innovation because their structures and procedures resist all feedback, their flaws are embedded and protected. The institutions serve the interests of an elite class, not of individuals or society.


The Institutional Ripple-On Effect of Free-Market Crypto

The effect of crypto on authorized financial institutions is well-known. But such a massive door to freedom does not merely crack open; it bursts all its hinges, and shakes up other institutions of society. To touch upon several, in passing:

Foreign Policy. Food is frequently used as a weapon of foreign policy. A recent article in Free Thought Project describes how blockchain is bypassing the weaponization of food: “Revolutionary Blockchain Tech is Helping Disaster Victims & Feeding the Hungry Without Government.” Crypto allows needy nations and individuals to skirt economic sanctions imposed upon them by the powerful. It makes it more difficult to starve people for political advantage.

Domestic Policy. When Venezuela’s government devalued the Bolivar by removing three zeros from the currency, citizens flocked to the free-market alternative of bitcoin, with which they were already familiar. Crypto rescues businesses; it saves lives; it can topple governments.

The Social Control of ‘Vice’. “Operation Chokepoint” was an Obama-era banking policy that attacked allegedly undesirable but legal businesses, such as selling medical marijuana. The banking system closed accounts, canceled credit cards, and refused all services to miscreant customers. The practice is being revived. Banks are targeting marijuana outlets, sex workers (legal or not), and gun businesses. Increasingly, these sellers are turning to crypto to sustain their livelihoods.

Protection of Free Speech. After circulating documents that embarrassed governments, Wikileaks faced a banking blockade that killed its access to donations, which were its life-blood. Wikileaks opened donations to bitcoin, and wealth poured in. Censorship was sidestepped.

The Free Flow of Information. Intellectual property (IP) prosecutions are usually based on following the money and uncovering the individual at the other end. Since crypto can be close to anonymous, that strategy is gutted. For those who reject the validity of IP, as I do, this is an amazing ‘good’ for the global flow of information.

Immigration Policy. Immigration and temporary migration are often based on the possibility of sending money back home. But migrants are often “unbanked” or pay huge fees to do so, with their families waiting days for the transfers. Trump has threatened to cut off this incentive for migration by closing down channels of transmission. Fast, cheap transfers of crypto will be incredibly difficult to control.

The Strangle-Hold of Lawyers and Courts. Smart contracts are legally binding agreements that use software to execute themselves. Smart contracts are on the path to becoming ubiquitous, from real estate deals to insurance claims, which dramatically reduces the need for lawyers.

The Autonomy of the Family. Inheritance taxes are heinous because they are double taxation; family wealth that has already been taxed is relooted by governments. Crypto can invisibly divide assets among loved ones.


Conclusion

The preceding is a passing taste of how profoundly cryptocurrencies are redefining the institutions of society.

To grasp the scope of the institutional revolution, however, it is necessary to focus contrast more intensely on the two fundamental human institutions. In his classic work, the German sociologist Franz Oppenheimer identified one of them in his book The State (1914). The other is Society.

[To be continued next week.]

Reprints of this article should credit bitcoin.com and include a link back to the original links to all previous chapters


Wendy McElroy has agreed to ”live-publish” her new book The Satoshi Revolution exclusively with Bitcoin.com. Every Saturday you’ll find another installment in a series of posts planned to conclude after about 18 months. Altogether they’ll make up her new book ”The Satoshi Revolution”. Read it here first.

The post Wendy McElroy: Crypto Can Create a “Perfect” Political System appeared first on Bitcoin News.

Wendy McElroy: A Dazzling Explosion of Spontaneous Order

A Dazzling Explosion of Spontaneous Order

The Satoshi Revolution: A Revolution of Rising Expectations
Section 3: Decentralization
Chapter 8, Part 5
Crypto: A Dazzling Explosion of Spontaneous Order

“Our civilization depends, not only for its origin but also for its preservation, on what can be precisely described only as the extended order of human cooperation, an order more commonly, if somewhat misleadingly, known as Capitalism.”

Friedrich Hayek, The Fatal Conceit

Cryptocurrency brings order to the monetary realm. It may seem like chaos because the word “order” is often used as a synonym for “uniformity.” Lines of military march in tandem across a parade field, or an entire industry runs by the same mandated standards and practices. By contrast, crypto seems like the Wild West, largely due to three factors: crypto embodies the polar opposite of military unity, spontaneous order; crypto is in its evolving infancy, still struggling to find equilibrium in institutions, customs, and price; and government regulation and restrictions hinder its innovative development by trying to enforce conformity.

Government argues that it needs to intervene because the market place in crypto cannot regulate itself.


The Almost Unadulterated Good of Civilization

Civilization is an amazing benefit to mankind. It provides “goods” such as knowledge, prosperity, culture, progress, and emotional self-fulfillment in a manner impossible to man in isolation. Retreating to isolation becomes preferable only when a “civilization” is so totalitarian that it strips away all freedom and becomes a danger to life itself. Then, antebellum slaves flee North with hounds on their heels. Then, desperate youths climb a barbed-wired wall in East Berlin, despite guns trained on their backs. They escape a savagery that passes for civilization, and risk death to do so.

A pivotal question for free crypto is whether the free market can establish monetary civilization. This question breaks down: how does order arise, and how does it decline? The questions are pivotal because, if freedom cannot provide a healthy society, then a central authority will fill the void. Murray Rothbard famously cast the political struggle throughout history as Power versus Liberty. If civilization requires central planning, then Power wins. If a sound currency requires a central authority, then Power wins.

Liberty more than holds its own in this contest. Civilization not only emerges without government, the presence of authority is its greatest obstacle. The genesis of civilization is spontaneous order.


Spontaneous Order

A common illustration of spontaneous order is the forging of a path through a pasture of tall grass. The first person to cross the field makes a crude trail, lined by broken stalks. Acting separately, ten more people choose to follow the crude path. A clear-cut trail begins to emerge, and it becomes the standard way for to cross the field. To use a famous phrase, the path is a “result of human action but not of human design.”

The path example is a stripped-down version of spontaneous order. It conveys the basic idea, but the example is less than satisfying. For one thing, to replace the central-planning model of civilization, it is necessary to explain much more than how a trail is created. How does an immensely sophisticated, global network of interactions between strangers create civilizations? How do strangers form a seamless web that becomes a thriving economy and society?

Crypto provides the answer: cooperation, whether that goal is intentional or not. Some cooperation is intentional. Farmers sell produce to local markets; a team of programmers design the latest, greatest app; a hospital coordinates staff schedules, and the doctors consult on patients; truck drivers deliver goods to a given address; a start-up business contracts with a marketing expert; an international firm cements relations with its foreign counterparts. The cooperation is not aimed at creating civilization or society, however. It is motivated by self-interest, whether that concept is defined as profit, satisfaction, or some other form of payment.

“I, Pencil” (1958) is a brief essay by Leonard Read, founder of the Foundation for Economic Education. It tells a story from the perspective of a pencil, which chronicles its own creation. The saga begins with the harvesting, mining, and forming of raw materials, including cedar, glue, wax, graphite, lacquer and pumice. Crews of foreign ships transport the materials to where dock workers unload the containers, and truckers convey them to pencil-making factories. Up to this point, almost everyone involved in the manufacture of the pencil cares nothing about doing so; they probably do not even know the part they play. They are making a living, pure and simple.

The factory is where self-conscious cooperation toward creating the pencil begins. Whether automated or not, the factory requires investors, oversight, repairmen, a janitor and an array of other people to manufacture one instrument. Of course, the profit lies in manufacturing millions and millions of them.

In his introduction to “I, Pencil,” the Nobel-winning economist Milton Friedman wrote,

“None of the thousands of persons involved in producing the pencil performed his task because he wanted a pencil. Some among them never saw a pencil and would not know what it is for. Each saw his work as a way to get the goods and services he wanted—goods and services we produced in order to get the pencil we wanted. Every time we go to the store and buy a pencil, we are exchanging a little bit of our services for the infinitesimal amount of services that each of the thousands contributed toward producing the pencil.

“It is even more astounding that the pencil was ever produced. No one sitting in a central office gave orders to these thousands of people. No military police enforced the orders that were not given. These people live in many lands, speak different languages, practice different religions, may even hate one another—yet none of these differences prevented them from cooperating to produce a pencil. How did it happen? Adam Smith gave us the answer two hundred years ago.”

Smith’s answer was the “invisible hand.” The term was introduced in the book Smith considered to be his masterpiece, The Theory of Moral Sentiments (1759), and it reappeared in his subsequent work, Wealth of Nations (1776). The invisible hand refers to the unintended but immense benefits to society that flow from people who act in their own self-interests, especially economic self-interest, in the manner described by “I, Pencil.”

Those at the factory have no grand social scheme beyond the efficient and profitable manufacture of pencils. And, yet, society benefits. Children have pencils to use in art class, workers can feed their families, and a useful product is available inexpensively. All prosper. But for the free market to provide social benefits, government regulations and restraints must be eliminated.

This answers the questions posed earlier: order arises out of the self-serving actions of individuals who cooperate with others, whether intentionally or not. Order declines when self-interest and voluntary interaction are hindered by government interference. In short, Liberty brings order and civilization; Power produces disharmony and conflict.

“I, Pencil” and the “invisible hand” clarify another confusion that can come from the path example; namely, the definition of spontaneous order as the “result of human action but not of human design” is ambiguous. Clearly, the order within the pencil-making factory is designed by humans. The phrase does not deny that reality. “Not of human design” means that no central planner organizes all beyond those who design, own and manage the factory.

“Not of human design” refers to the army of strangers whose actions deliver a stunning array of products and services, even though there is no grand scheme or conscious intent to do so. They merely act in their own self-interest. As a result,  the average person enjoys a higher living standard today than nobles in the past. The cooperation also binds people together in peace because they have a vested interest in continuing to profit from each other. Multiply this cooperation by millions of interactions which create millions of products and services, and the dynamic becomes a glue that holds society together and allows civilization to emerge.

In other words, “not of human design” does not preclude active cooperation between individuals. Quite the contrary. It rejects any attempt by central authority to insert itself between cooperating individuals, such as regulating the free flow of crypto between individuals. The phrase seeks to explain how complex networks can arise out of the seemingly random and unintentional cooperation upon which modern society depends.

Arguably, one man designed Bitcoin, the first viable cryptocurrency. But a long chain of theorists and crypto-anarchists forged the path for Satoshi Nakamoto. Almost all of them did so without appeal to government or tax-paid salaries. Cryptocurrency survives because an immense number of strangers control nodes, do transfers, specialize blockchains, invent better software, and cooperate for their own selfish gain, which results in gains for others. Bitcoin exploded on the monetary scene and changed the economic dynamic forever precisely because it obeyed no central authority. It had the wildness and innovation of freedom.

Cryptocurrencies may resemble chaos because they do not express military order; they are still in the early stages of development; and there is a surging war between Liberty and Power that distorts their functioning. Moreover, Power is on a propaganda campaign. Power wants the extreme advantage of people believing crypto is chaos, and it is the remedy. It is not. Or, rather, it is a “remedy” that would have failed either to create a pencil or have created one so expensive as to be a luxury item.


Conclusion

So far, this article has applied spontaneous order only to economics, which is the bedrock of society. But human beings have other needs, as well: law, spirituality, culture, education, family…these are some of the institutions by which civilization is defined. With the bedrock in place, it is time to explore how spontaneous order establishes the other institutions of civilization. They, too, are not the result of human design—that is, not the result of central planning. And cryptocurrency is redefining these institutions in the image of Liberty.

[To be continued next week.]

Reprints of this article should credit bitcoin.com and include a link back to the original links to all previous chapters


Wendy McElroy has agreed to ”live-publish” her new book The Satoshi Revolution exclusively with Bitcoin.com. Every Saturday you’ll find another installment in a series of posts planned to conclude after about 18 months. Altogether they’ll make up her new book ”The Satoshi Revolution”. Read it here first.

The post Wendy McElroy: A Dazzling Explosion of Spontaneous Order appeared first on Bitcoin News.

Wendy McElroy: Crypto and the Impossibility of Knowledge in Planning

Crypto and the Impossibility of Knowledge in Planning

The Satoshi Revolution: A Revolution of Rising Expectations
Section 3: Decentralization
Chapter 8, Part 4
Crypto and the Impossibility of Knowledge in Planning

Bitcoin…is better understood using the conceptual lens of the Catallaxy: participants in Bitcoin spontaneously form a decentralized monetary and financial ecosystem, collectively choosing Bitcoin as a medium of exchange and store of value. Bitcoin is…an irrefutable demonstration of spontaneous order in action.

Francis Pouliot

Cryptocurrency is a perfect example of catallaxy and of a remedy for its polar opposite: central planning. The opposites are at war, of course.

The concept of “catallaxy” is similar to that of “spontaneous order,” but the latter concept can be broadly applied to most areas of life. Catallaxy applies specifically to how economic order emerges in a system through the uncoordinated and diverse actions of individuals who pursue their own self-interests. The social theorist Friedrich Hayek defined it as “the order brought about by the mutual adjustment of many individual economies in a market”.

The obscure term captures a dynamic that is essential to the creation of civilization: cooperation. If human beings are to rise above the level of Robinson Crusoe or savagery, then they must interact to mutual advantage. Historically, the “cooperation” is usually orchestrated by a central authority-a government, a tribal leader, a religion-that negates the voice of the individual. One reason people agree to be silenced is because they worship the authority, which makes them willingly or unthinkingly sabotage their individualism.

And yet, human beings are conflicted. Most hope to be the type of person who would stand between a lynch mob and the black man it is hunting. There is a yearning to be heroic and unique, even if it is expressed by standing in a crowd in which everyone yells, “I am unique!” This is not always hypocrisy. It is often a conflicted but honest response to two antagonistic urges: worship of authority; and, the need to feel real as an individual.

Recent centuries have given us a new paradigm of how cooperation creates civilization-a paradigm other than control from on high. Civilization rises from the grassroots. It arises through the uncoordinated and voluntary association of individuals and groups. It comes from catallaxy, which is sometimes called “catallactics.” The concept was a long-sought-after intellectual breakthrough that allowed free-market advocates to explain the evolution of society without a central authority.

In his masterpiece Human Action, Ludwig von Mises attributed the concept’s origin to the 19th century economist and academic Richard Whately who wrote, “A[dam] Smith, indeed, has designated his work a treatise on the Wealth of Nations; but this supplies a name only for the subject-matter, not for the science itself. The name I should have preferred as the most descriptive, and on the whole least objectionable, is that of catallactics, or the ‘Science of Exchanges’.” Whately sought what Mises called praxeology-the science of human action-but he focused on economics.

Digital currencies are the most fascinating example of economic spontaneous order that has occurred in decades. It may not seem to be grassroots economics because it is so technologically sophisticated, but it is as grassroots as it gets. As a practical matter, however, free-market crypto stumbles over an obstacle. Users still buy into the trickle-down version of organization, and they tend to surrender their independence to centralized exchanges that function as central banks. Like banks, the exchanges maintain control of deposits, which is de facto ownership, and they report all transactions to the government. People are free to choose for themselves, of course, but central powers inevitably violate the principle of free choice by banning anything that competes with them for power or money.

Thus, the ideological struggle within crypto is between centralization and decentralization. Governments need the first to control the economy; individuals need the second to achieve financial independence. There can be no compromise between the two because they are antithetical. But, as a matter of brute reality, both operate side by side within most societies because they each satisfy a competing urge within many human beings: a desire for authority, and a desire to be free. Authorities benefit tremendously, of course, and their motives are clear. But they could not prevail if a sufficient percentage of the population did not agree enough to go along.

Both government and the free market provide conflicting models for social order and civilization.

No one championed the free-market dynamic more vigorously than Hayek. He  argued persistently against what he called “constructive rationalism”-the belief that social order should be constructed by a central authority. He argued that it should not be but also that it could not be constructed. All that could emerge was government-imposed order, which was the opposite of social order. Hayek’s definition from The Constitution of Liberty: “Order with reference to society thus means essentially that individual action is guided by successful forethought, that people not only make effective use of their knowledge but can also foresee with a high degree of confidence what collaboration they can expect from others.”

Hayek’s arguments differ from the usual crypto critique of trusted third parties because he does not dwell on the corruption of the system. He focuses on its disutility. Satoshi Nakamoto’s White Paper also touches on the practical flaws of the central banking system, but Hayek differs from Satoshi as well. Satoshi offers precise critiques of real practices; Hayek offers fundamental critiques of the inherent inability of the system to provide what it claims. Another way to state this: conceivably, the faults addressed by Satoshi could be corrected because they are practices. The faults attacked by Hayek are insurmountable because they form the ideological foundation of central planning. 


Centralization Versus Decentralization

He knew first-hand the consequences of central planning, which he called rational constructivism. Hayek had witnessed the devastation of classical liberalism by two world wars, but especially by World War I, which broke the mold of the free market. Wartime governments clamped centralized control over the private sector to ensure the flow of armaments and other “necessary” goods. Governments inflated their monies to pay for massive military build-ups. And war strangled the flow of free trade that classical liberals considered to be a prerequisite to peace, prosperity, and freedom. In short, Hayek had watched as 20th century statism replaced 19th century classical liberalism. Central planning was the mechanism through which freedom had been destroyed.

In response, Hayek developed a sophisticated system of social theory to explain how the institutions of society naturally evolved from the bottom up, which meant they could evolve once more. He maintained that the natural institutions of society were the collective and unintended results of human action. Even complex social phenomena-such as religion, language, or money-were the unintended consequences of individual interactions. For example, no central authority decided to invent human speech, let alone to design a language as specific as English. Acting solely to achieve their own ends, individuals began making sounds to facilitate getting what they wanted from others, whether the goal was economic or more personal. Speech resulted from human action but not from human design, and it naturally evolved into language. The evolution may not have proceeded with scientific efficiency, but it was efficient enough to speed along the development of civilization. The efficiency of government programs suffer by comparison, to say the least.

Yet constructivists claimed that an unplanned society is chaos. With sufficient knowledge and a scientific approach, a perfectly efficient society could be engineered. No surpluses, no scarcities, no waste. Stock markets would not crash, and currencies would not fluctuate. Society could be designed so that its members walked in unison toward the same desirable social goals, just as they marched toward victory in war.

Hayek bluntly stated that the knowledge constructivists sought is unattainable. It is not possible to plan the dynamics of tomorrow based on yesterday; predictions may be possible but knowledge is not. It is impossible because people and circumstances are erratic. Even a small thing, like the price of bread yesterday, does not give knowledge of the price tomorrow or what a person will be willing to pay. The price of bread might skyrocket due to a shortage, or the person might value the loaf differently. Using yesterday to engineer tomorrow goes against a fundamental tenet of human action: the principle of inevitable change. Human beings are fundamentally different from the physical objects examined by the hard sciences. A scientist can learn everything he needs to know about the behavior of an object, and the information might not change over time. But human beings act on psychological factors and motivations that are hidden, often from themselves. Society does not consist of objects that can be neatly categorized and made to obey the laws of science. Society consists of unpredictable individuals who react to changing circumstances.

In Human Action, Mises commented, “Human action originates change. As far as there is human action there is no stability, but ceaseless alteration…The prices of the market are historical facts expressive of a state of affairs that prevailed at a definite instant of the irreversible historical process….In the imaginary-and, of course, unrealizable-state of rigidity and stability there are no changes to be measured. In the actual world of permanent change there are no fixed points…”


Conclusion

Throughout the work of Hayek and Mises, two closely related concepts emerge again and again: methodological individualism, and spontaneous order. The two concepts are an essential part of the ideological backbone that forms the structure of cryptocurrency. They also explain why the explosion of freedom brought by crypto was so unexpected. It sprang from individuals and from freedom of action.

Cryptocurrency resembles the lone-gunman theory. History stumbles along a fairly steady, though not necessarily salutary path. Then a lone gunman jumps out of nowhere and shoots Archduke Franz Ferdinand of Austria, or some other prominent figure. In the case of Franz, the assassination sparked WWI. History changed forever.

The centralized financial world was stumbling along a path until crypto jumped out of the bushes and assassinated the banking system. Economic history changed forever, and it cannot be undone. But, to understand the power and potential of crypto, a clear sense of spontaneous order is necessary. The free-market model of freedom and the institutions it requires depend upon it.

[To be continued next week.]

Reprints of this article should credit bitcoin.com and include a link back to the original links to all previous chapters

Wendy McElroy has agreed to ”live-publish” her new book The Satoshi Revolution exclusively with Bitcoin.com. Every Saturday you’ll find another installment in a series of posts planned to conclude after about 18 months. Altogether they’ll make up her new book ”The Satoshi Revolution”. Read it here first.

 

The post Wendy McElroy: Crypto and the Impossibility of Knowledge in Planning appeared first on Bitcoin News.

Wendy McElroy: The Centralization of Crypto and the Banality of Evil

The Centralization of Crypto and the Banality of Evil

The Satoshi Revolution: A Revolution of Rising Expectations
Section 3: Decentralization
Chapter 8, Part 3
The Centralization of Crypto and the Banality of Evil

First we must realize that all actions are performed by individuals… If we scrutinize the meaning of the various actions performed by individuals we must necessarily learn everything about the actions of the collective whole. For a social collective has no existence and reality outside of the individual members’ actions.

–Ludwig von Mises

In 1963, the political philosopher Hannah Arendt wrote a book Eichmann in Jerusalem, about “the banality of evil,” which redefined that concept forever. Evil is not usually committed by sadistic monsters, she argued, but by ordinary people who relinquish personal responsibility for their actions and obey the orders or rules of a corrupt system. (Here, evil is defined as deliberately and callously inflicting great harm on innocent people.)

Arendt reached this conclusion while reporting for The New Yorker on the trial of high-ranking Nazi Adolf Eichmann, which occurred in Israel. As a German Jew who fled the rise of Hitler, she should have been appalled to be in the same room with Eichmann. Instead, Arendt was fascinated by him. There was no guilt, no rage, no sense of responsibility, nothing exceptional. As her book explained, Eichmann kept repeating that, “He did his duty…; he not only obeyed orders, he also obeyed the law.” He was also assisted by a vast network of average people—clerks, railroad workers, low-ranking soldiers—who sent innocent others off to prison or worse fates, without a second thought. It was the law.

Cryptocurrency confronts the banality of an economic system for which the word “evil” is not too strong a word. Opening with Arendt may seem like hyperbole, but it captures something important. The central banking system and the other economic controls imposed by government seem benign because they are so familiar; people grew up with them. And bank clerks can be very pleasant as they demand Know Your Customer data; if the customer objects, they answer “I am doing my job, and it is the law.” Nothing benign occurs in the system. Hard-working people are robbed of their wealth through measures like inflation and the monopoly of fiat currency; food is taken from the mouths of children; innovators who could produce a better world are shackled; in some nations, people die for want of nourishment or medical care.

Venezuela is an extreme example of economic evil, as well as an example of the remedy. When the economy collapsed in 2014, many people’s lives were ruined while many others survived by using the only alternative they had to worthless fiat: cryptocurrency. President Nicolas Maduro was well aware of the dynamic. That’s why he issued the first-official state crypto—the Petro—which was announced last December (2017). The Petro is doomed,  of course. When centralized in Maduro’s hands, it will become just another form of fiat. But the Petro indicates one of the main ways the economic system will try to defuse the threat of crypto—namely, centralize crypto by either issuing coins or regulating a few institutions approved to handle it, such as exchanges.

Two main factors in how long the Petro will last are the centralization of power, and how many average people will accept the official status quo because it is (or will become) the law. These are the people who will work in the financial system, or turn in a neighbor for mining, or vote to ask for regulation. They are the banality of economic evil, without which the system could not exist.


Methodological Individualism

The harm done to freedom by those who act against decentralized-market crypto is more than just a denial of financial independence to others. Free-market crypto  fortifies some of the most important concepts of liberty. One of them is “methodological individualism,” which is the exact opposite of what Arendt called “the banality of evil.” Instead of individuals relinquishing their responsibility for actions to an institution, like central banking or the military, individuals are entirely accountable for their own behavior.

The Austrian economist Ludwig von Mises rested much of his philosophy on methodological individualism. He declared that, ultimately, only individuals exist; only individuals act. Even within the dynamics of a collective, such as the state or society, it is individuals who comprise the structure and carry out all actions. Mises famously stated, “The Hangman, not the state, executes a criminal.” Individuals who look at the hangman [and] see the state in action do so only because they have created an abstraction known as ‘the state’ in order to provide a context. The hangman may be pressured to perform his job, but the performance is ultimately his choice. Equally, people never truly see or hear a group conversation. All they see or hear are individuals speaking, and then they label the sum of the exchange as ‘a group conversation’.”

Mises argued that collectives-such as family or society–were valuable abstractions that people used to describe their interactions with others within a specific context. He did not deny the worth of many collectives. Quite the contrary. He explained, “Methodological individualism, far from contesting the significance of such collective wholes, considers it as one of its main tasks to describe and to analyze their becoming and their disappearing, their changing structures, and their operation. And it chooses the only method fitted to solve this problem satisfactorily.” Individualism was the key to understanding collectives.

What does this have to do with cryptocurrency?

The most difficult area in which to implement methodological individualism is  finance, which is one of the most powerful collectives in existence. Central banks, tax agencies, and reporting forms are ubiquitous types of evil. Governments do not produce any wealth. And, yet, they need vast amounts of it to finance bureaucracy, the military, and the other centralized trappings of power. This means governments need to steal vast amounts of wealth. But to do so directly would cause resistance. So they issue fiat and bonds, and force all finance to go through institutions they control. For a long time, for most people, there was no viable path around the centralization.

And, Then: Cryptocurrency

Free-market crypto is methodological individualism writ large in an essential area of life. Methodological individualism is an incredibly powerful challenge to the centralized control of economics. It was designed to be so.

The concept arose in response to the theory of social holism that became popular in the early twentieth century. Social holism claims that systems must be viewed as wholes rather than as collections of their parts. It maintains that a collective has a dynamic that differs from the sum of its parts. In short, the collective is greater than the individuals who comprise it.

Marxists often accuse those who espouse methodological individualism of being atomistic, or unable to bow to the greater social good. Some go so far as to assert that the individual, and not society, is the true abstraction. That is, individuals do not exist without society. As Mises observed, “The notion of an individual, say the critics, is an empty abstraction. Real man is necessarily always a member of a social whole.”

Karl Marx argued this point by using a Robinson Crusoe example. An individual who had been born and immediately abandoned on a desert island, he contended,  would not be a human being at all. His point was that human beings are social organisms-social constructs, if you will-who cannot be lifted from their defining context and still remain human. Reversing Misesian logic, Marx claimed that society created its individual members. To create the “right” type of people, all social institutions had to be thoroughly regulated for the social good, however that was defined. The brutal conformity of communism is an example of centralization. So is the expression, “I was only following orders.”

Classical liberals argued that a person raised in utter isolation would still be a human being with human characteristics. For example, he would have a scale of preferences, and he would act to achieve the highest one first. Without social interaction, of course, huge parts of the person’s humanity would never develop. But this would not make the individual less human. Collectives do not define humanity. Human beings define collectives.


Conclusion

Coerced centralization is so inculcated into the culture that it is considered to be normal and healthy. Public schools, central banks, public works, tariffs, …many people cannot envision society through any other lens. But coerced centralization demands that people surrender their moral compass to a collective authority. It is the source of Arendt’s banality of evil.

Methodological individualism is the cure, especially through the dynamics of a  free crypto, which is implemented through decentralization. But how does a decentralized society create the free-market institutions valued by Mises? The answer is another key concept of liberty: spontaneous order.

[To be continued next week.]

Reprints of this article should credit bitcoin.com and include a link back to the original links to all previous chapters


Wendy McElroy has agreed to ”live-publish” her new book The Satoshi Revolution exclusively with Bitcoin.com. Every Saturday you’ll find another installment in a series of posts planned to conclude after about 18 months. Altogether they’ll make up her new book ”The Satoshi Revolution”. Read it here first.

The post Wendy McElroy: The Centralization of Crypto and the Banality of Evil appeared first on Bitcoin News.

Wendy McElroy: Crypto – Civil Law Versus Common Law

Crypto - Civil Law Versus Common Law

The Satoshi Revolution: A Revolution of Rising Expectations
Section 3: Decentralization
Chapter 8, Part 1.
Crypto: Civil Law Versus Common Law

2018 is the year in which cryptocurrency will be regulated. The questions are by whom and how? The two traditional answers have been civil law or common law. But there is a third alternative. Namely, preventive self-regulation, which can also be called simple decency. This is not a matter of law enforcement but of personal responsibility for your own behavior. It means being the adult in a room of children who are acting out.

Regulation is coming because crypto is being defined as much by its abuses as by the benefits it provides. The problems are real. And that’s a problem because it provides a plausible doorway through which government can walk. The “abuses” to which I refer do not include drug deals or the private stashing of personal cash. Those are not the abuses of crypto; they are benefits. Cryptocurrency allows people to control their own bodies and wealth in a peaceful manner that harms no one else. That is its power and true beauty.

The abuses are the rampant number of scams and hustlers who prey on average people; predators are robbing honest folk who are simply trying to avoid a corrupt financial system in order to leave an inheritance for their children and keep food on the table. The predators convert a vehicle of freedom into a path for theft.

Part of the problem is that too many honest people are standing by, watching it happen. The Irish statesman and philosopher Edmund Burke is credited with saying, “The only thing necessary for the triumph of evil is that good men do nothing.” I’ve never liked that quote; it places responsibility for the triumph of evil on the shoulders of good people who are simply minding their own business. That’s wrong. But there is a point at which focusing on the business of personal life becomes dangerous because there are politicians and other criminals who circle and await the chance to attack those who are not paying attention. Pay attention now.

Crypto will be shoved up against a brick wall of regulation in 2018, and it will occur with the applause of the public. They will applaud for good and bad reasons. One bad reason is that crypto is still an arcane mystery to most people, and they mistrust it. They say “it is vaporware that is based on nothing” as though the pieces of paper they spend every day are somehow different. One good reason for the urge to regulate crypto is that so many people have been fooled and burned by incompetent or unethical parts of the community.

Cynical commentators can yell “caveat emptor!”—let the buyer beware!—all they want. That’s a way of blaming the victims, who certainly bear some responsibility. The words “due diligence” come to mind.  But there is something badly wrong with a system in which honest people are being robbed and scammed on a regular basis. It is wrong when government does it to people, and it is wrong when a financial network does it. Cryptocurrency was designed to empower people, not to impoverish them.

The current abuses mean that the application of law to crypto is inevitable. The pivotal question is whether cryptocurrency will be regulated under civil law or common law. Or a third alternative. The choice is between government control or the private policing of behavior. Which will it be? Government or self-regulation? Of course, government will impose itself to the extent possible. But private actions are giving it the justification to do so.

The ideal solution is common law but the ideal rarely has a clean victory. The reality will probably be a mixture of both.

Civil Law Versus Common Law

Civil law is political law. This is civil law:

“We feel very strongly that we need to have this kind of regulation [on the trading of cryptocurrency] all over the world…The EU, I understand, is moving very quickly in that direction and we think it’s very important that similar regulations are happening in a number of other countries.”

Sigal Mandelker, the U.S. Treasury undersecretary for terrorism and financial intelligence

Civil law is what most people wake up to every morning. It is distinct from criminal law in that it addresses contracts, business arrangements, inheritance, and the other legal matters that average people confront on a daily basis. Civil law is passed by legislatures, and it is codified into established rules that dictate people’s lives. Much of it is valid. It answers real questions–like how do I resolve a property dispute with my neighbor or divide up property in a divorce? But it also expresses the interests of third parties, especially government, in matters that enrich them at the expense of average people. The more law becomes “statute,” the less it reflects the daily needs of people.

Common law offers an alternative legal blueprint. Rooted deeply in the English tradition, it is a body of law that develops from the grassroots upward. It involves  no presence of Parliament. It comes from the decentralized judicial decisions that arise from real legal disputes. Someone did not pay for a chicken he “purchased”; the seller asks a court…how do I receive fair payment? A business deal dissolves; how can the investors fairly split up the remaining assets? These are real-people problems. The answers offered by judges may be right or wrong, but they do not benefit the privileged. This is common law, and it is so named because it benefits the common person.

Happily, average people usually want to live in peace, pure and simple. That makes common law a relatively straightforward thing. Almost every common law and its associated judicial proceedings advance the non-initiation of force, for example. They all embrace standards of evidence, such as published transcripts,  that make people accept the system as just.

Common law is far preferable to civil law. But common law is imperfect. It can substitute the arbitrary opinions of judges for the self-interested opinions of politicians. The best solution for cryptocurrencies is no law at all. It is self-regulation. Don’t allow foreseeable problems of fraud or theft to arise in the first place. As with every healthy community, the standards of conduct are set by normal people who are trying to function and feed their children. The crypto community is no different.

Yes, cryptocurrency needs to be regulated. But it should be private regulation that responds to a fast-moving world of real people, not the needs of bureaucrats. That’s common law. Ideally, it is the private policy of the decent human beings who have always dominated crypto but who need to stand up and shout “ENOUGH!” at those who are treating freedom as a free pass to crime.

[To be continued next week.]

Reprints of this article should credit bitcoin.com and include a link back to the original links to all previous chapters


Wendy McElroy has agreed to ”live-publish” her new book The Satoshi Revolution exclusively with Bitcoin.com. Every Saturday you’ll find another installment in a series of posts planned to conclude after about 18 months. Altogether they’ll make up her new book ”The Satoshi Revolution”. Read it here first.

The post Wendy McElroy: Crypto – Civil Law Versus Common Law appeared first on Bitcoin News.

Wendy McElroy: Are You Part of the Revolution or Part of the War?

Are You Part of the Revolution or Part of the War?

The Satoshi Revolution: A Revolution of Rising Expectations
Section 3: Decentralization
Chapter 7, Part 3. Are You Part of the Revolution or Part of the War?
by Wendy McElroy

What do We mean by the [American] Revolution? The War? That was no part of the Revolution. It was only an Effect and Consequence of it. The Revolution was in the Minds of the People, and this was effected, from 1760 to 1775, in the course of fifteen Years before a drop of blood was drawn at Lexington.

John Adams to Thomas Jefferson

Revolution and war are polar opposites. Revolution is the decentralization of power from a concentrated authority down to the level of individuals who demand control of their own lives. War is the centralization of power into a coerced and coordinated effort by elites who hold individuals in such contempt as to call them cannon fodder.

A war on cryptocurrency has been declared. It comes from government and from those who believe crypto must be made “respectable,” which always translates to regulation, which always translates to people going to prison for making decisions about their own lives. Authorities and those who believe in authority want to control the wealth of other people.

EU Parliament Votes for Closer Regulation of Cryptocurrencies.”

Australian Cryptocurrency Exchanges are Under Regulation, Starting Today.”

South Africa Central Bank Wants to Regulate Cryptocurrency.”

The war is afoot. But the revolution continues. Cryptocurrency, like the printing press, has been a social and political game-changer. A huge window of freedom has opened for the average person who can now avoid the central banking system and the government’s grab for wealth and social control.

A lot of confusion surrounds the issue of revolution because it has been so badly portrayed. Barricaded streets, people rampaging, cars on fire, conflict with the military…that is not revolution. The violence may be the effects and consequences of revolution, but change comes from the hearts and minds of people when they embrace a new idea. Revolution is not rage and despair; it is hope and realization. The decentralization cannot be handed down, like a pretty gift, from those in political power to those who produce and engage in daily life. The power of decentralization rises up from people who understand that basic human rights are never something for which you say “thanks!” They are a birthright.

John Adams explained where the American Revolution could be found. “The Records of thirteen [Colonial] Legislatures, the Pamphlets, Newspapers in all the Colonies ought be consulted, during that Period…” The violence that erupted in 1776 could well be described as a Civil War because about a third of the colonial population backed the British. The War itself was not the revolution; indeed, the War interrupted an intellectual revolution that was slowly winning the loyalty of average people, and might have produced a non-violent societal overthrow. What would America now look like if it had not been born in blood? Fortunately, it was born in newsprint far more than in violence.

The quiet explosion caused by Satoshi in 2008 was every bit as much “a revolution.” Those who call it so are often dismissed as hyperbolic because the cryptocurrency eruption does not conform to the images of barricaded streets and people screaming “Pig of a Government!” The social changes in crypto are largely silent. “Pig of a Government!” remarks are hurled at a computer screen in the wee hours of the morning. The pioneers of cryptocurrency are far from traditional bombastic revolutionaries, like Che Guevara, whose portraits are plastered on the walls of post-revolutionary nations. Satoshi himself remains anonymous. It is an unassuming, unpretentious revolution.

Besides which, the subject in contention is finance—also known as “filthy lucre”–and since when is that idealistic enough to deserve a revolution? Shouldn’t the banner read “FREEDOM, JUSTICE”?

It does. Financial independence is freedom and justice. The ability of people to make and keep the wealth they earn is how people feed their children; it is how they rise from starvation to well-being; wealth allows people to own the land they walk upon; filthy lucre turns an assembly of strangers into a civil society that trades rather than makes war. Money is the engine of civilization itself because there is nothing more important than people being able to feed themselves. Freedom of speech, art, literature and the other amazing human accomplishments follow.

The revolution of cryptocurrency takes the custody and management of wealth away from central authorities, like central banks, and returns it to individuals. This is the return of freedom itself. The revolution is all the more remarkable because it has been so peaceful. Alas, the war is beginning.


Revolution is Decentralization

Satoshi does not mention decentralization in his White Paper, which was pivotal in launching the crypto revolution. That’s odd. Decentralization through the distribution of information over nodes is the key to the freedom offered by cryptocurrency. Gandhi said, “the means are the ends in progress.” Decentralization is the freedom in progress. Decentralization is the revolution.

Every successful revolution must answer, “What is the end point?” If there is no good answer, then a bad system will just be replaced by another bad system. The French Revolution that overturned a corrupt monarchy was replaced by a “Committee of Public Safety” that instituted what was called the “Reign of Terror.” The Satoshi revolution of decentralized personal finance must answer, “What is the end point?”

The question becomes a problem when people try to give one answer. That is, when they try to centralize the answer into a single statement. The key: there is no one answer, and there should be no one answer. Every human being must decide for him or herself. In his magnum opus “Human Action”, Ludwig von Mises described the principle of Methodological Individualism to which all supposed collectives dissolve: “First we must realize that all actions are performed by individuals. A collective operates always through the intermediary of one or several individuals whose actions are related to the collective as the secondary source…The hangman, not the state, executes a criminal. It is the meaning of those concerned that discerns in the hangman’s action an action of the state… If we scrutinize the meaning of the various actions performed by individuals we must necessarily learn everything about the actions of the collective whole. For a social collective has no existence and reality outside of the individual members’ actions.”

Ultimately, revolutions are not a collective. They can and should be reduced to their most basic unit: the individual. Every individual who refuses to obey must provide his or her own answer as to “why?” and “for what?” The answers cannot be collectivized without destroying the revolution itself. Including cryptocurrency.


The War is Coming

Cryptocurrency reverses the political trend that centralizes financial power over the lives of average people into the hands of the elite. The centralization of power literally kills the average person, for example, through war.

The famed Austrian economist Murray Rothbard depicted the struggle for freedom as being Power versus Liberty. It can be rephrased as a struggle between centralization versus decentralization. It is King versus Commoner.

To some, cryptocurrencies are nothing more than a profit-making scheme. So be it for them. But everyone who values the political aspect of cryptocurrency should ask themselves: are you part of the revolution or part of the war?

[To be continued next week.]

Reprints of this article should credit bitcoin.com and include a link back to the original links to all previous chapters


Wendy McElroy has agreed to ”live-publish” her new book The Satoshi Revolution exclusively with Bitcoin.com. Every Saturday you’ll find another installment in a series of posts planned to conclude after about 18 months. Altogether they’ll make up her new book ”The Satoshi Revolution”. Read it here first.

The post Wendy McElroy: Are You Part of the Revolution or Part of the War? appeared first on Bitcoin News.

Wendy McElroy: Here, There Is No State

Wendy McElroy: Here, There Is No State

The Satoshi Revolution: A Revolution of Rising Expectations
Section 3: Decentralization
Chapter 7, Part 2. Here, there is no State.

The core innovation of cryptocurrency is decentralization—the diffusion of functions or power across a broad network. The decentralization of crypto is what yanked financial control away from concentrated authorities, like central banks, and into the hands of individuals.

Yet some people argue that decentralization does not exist in crypto. The argument comes from a tension between the original vision of Bitcoin and the hundreds of cryptocurrencies, the hundreds of communities that have arisen. On one hand, currencies like Bitcoin have no coordinated authority, no central management, and there is no one point at which they can fail. On the other hand, many vehicles of crypto are businesses run by a small number of people in a specific location, which bow to government dictates. In short, the technology is decentralized but many expressions of it are not. Adding to the confusion: some of the most prominent actors are centralized exchanges, like Coinbase, that resemble nothing so much as regular financial institutions in their reporting requirements and other demands. They are the type of institution that crypto was designed to avoid.

Which is true of crypto?–is it decentralized, a new form of centralized fiat and banking, or a hybrid?

The answer is “yes.” Cryptocurrencies are dividing into two broad camps, which are politically antagonistic. Things are centralizing in the sense that “mom-and-pop” shops for crypto are less frquent; corporations and government involvement are more common. The dividing line between the two camps is whether the centralization is government-mandated or the free market variety. The first is coercive and the death of crypto as a freedom tool. The second is voluntary, and it is usually a matter of nothing but convenience or efficiency. Free market centralization may well be a poor choice—I suspect it is–but it is a choice. This distinction becomes increasingly important as governments attempt to impose their control on crypto and to paint the free market as an enemy of common decency and the average user.

 

Radical individualism and Civil Society.

Two concepts are often depicted as incompatible: rugged individualism, and civil society. The rugged individualist, it is said, is uncooperative, whereas society is nothing more than a swirl of cooperation. In reality, the two concepts require each other.

Individualism is the right of people to say “yes” or “no” to every peaceful decision over their own lives; it is self-determination. “Civil society” is a community of individuals who voluntarily associate with each other for the remarkable advantages that society offers. Civil society is the natural community that evolves when people meet to trade, consume, form personal relationships, and otherwise benefit from the presence of others. It is often contrasted with political structures that are imposed on civil society in the form of regulations and power hierarchies. In short, government. These structures strip away the voluntary aspect of civil society and impose the will of those in power on those who are not. They slowly remove the benefits of society from the individual.

The key to retaining those benefits is not merely voluntaryism but also decentralization. Decentralization occurs when power disperses from a central authority down to a more local level. The most local level possible to power is the individual, from whom all rights derive. Every human being, simply by being human, has proper jurisdiction over his or her own body. Every right that exists—freedom of speech, freedom of religion, freedom of conscience—belong exclusively to individuals. It does not even make sense for a committee or an elected body to have freedom of religion. What would that mean? Would they hold a vote on whether God exists? Would a minority who voted “yes” need to become atheists after the committee adjourned?

The decentralization of power means that everyone decides such peaceful matters for themselves, according to their own conscience and their own perceived self-interest.

The brilliance of Satoshi Nakamoto was to reweave the fabric of financial freedom by offering a decentralized means by which individuals could control their own wealth, the product of their own labor. This means control of their own lives. They had the choice to submit to centralized banking or to avoid it.

Financial well-being is too quickly dismissed or disdained as people “wanting to make a buck” or putting money before morals. The opposite is true. Earned wealth is independence, self-respect, the ability to feed families, and the means by which people advance on merit. The free exchange of wealth, including trade and charity, holds civil society together. Bitcoin was not perfect, but it was an incredibly impressive and successful attempt to decentralize financial power down to the level of individuals.

Those in power are pushing for one thing: the coercive centralization of cryptocurrency—under their own fingers, of course. They want centralized exchanges, government-issued crypto, management by central banks, regulated procedures, tax laws, and the prosecution of rebels. Whether they succeed depends on how strong the spirit of individualism is within crypto; how strong is it within individual users?

 

A Nod to Henry David Thoreau

How does an individual deal with morally intrusive government? The solution is quite simple: throw government out of your life. That’s what Thoreau did.

Thoreau’s most famous political tract is Civil Disobedience. It was his response to a 1846 imprisonment for refusing to pay a tax that violated his conscience. Not that Thoreau was embittered by his brief imprisonment. Near the end of his life, he was asked, “Have you made your peace with God?” Thoreau replied, “I have never quarreled with him.” For him, that would have been the real cost of paying the objectionable tax; it would have meant quarreling with his own conscience, which was akin to quarreling with God.

Civil Disobedience ends on a happy note. After Thoreau’s release, the children of his hometown urged him to join a hunt for huckleberries. Huckleberrying was one of Thoreau’s valued pastimes, and his skill at locating fruit-laden bushes made him a favorite with children. He ended his chronicle of imprisonment with the words, “[I] joined a huckleberry party, who were impatient to put themselves under my conduct; and in half an hour…was in the midst of a huckleberry field, on one of our highest hills, two miles off, and then the State was nowhere to be seen.”

The State was nowhere to be seen. This is the legacy of Thoreau and Satoshi for those who wish to grasp it: the State is nowhere to be seen if you are willing to cast it off. Thoreau, in his joy of running with all the other children, knew that his imprisonment was not real. The huckleberry hunting was real. Indeed, he referred to the joy of everyday life as “the business of living.”

Cryptocurrency is profoundly anarchistic because it allows users not to see the State, if they so wish. Although the preceding may sound like an unacceptably radical statement, most people reading this article already have a deep commitment to anarchism.

 

The Anarchism of Everyday Life

An easy way to grasp how anarchism functions is to realize that it is the principle upon which most people conduct their daily lives. Without realizing it, they live without the state.

When a person wakes up in the morning, it is not the law that makes him feed his children rather than allowing them starve to death. No bureaucrat makes him kiss his wife rather than beat her to a bloody pulp. When he carpools with friends, it is not the presence of a policeman that restrains him from picking their pockets; the theft does not occur to him. As he moves through the day, no regulation is required for him to pay for the cup of coffee he orders. As he walks down the street, he doesn’t punch or rape random strangers. When he drives his car, it is not fear of the State that prevents him from veering onto the sidewalk to mow down children under his wheels.

Two things prevent him from doing so. First and foremost is personal responsiblity, the natural bonds of humanity, and a moral conscience. A strong second reason is the presence of civil society, which offers a daily incentive to act well. It is from civil society that men acquire habits that come from the rewards of cooperation. In short, most people already deal with each other as though they live under anarchy.

 

Conclusion

Cryptocurrency is not an ideal vehicle. It is an evolving tool and the very best currency available for freedom.

Whenever someone uses crypto in a private, decentralized manner, they are saying the same thing as Thoreau: here, there is no state. Here, there is only the personal.

[To be continued next week.]

Reprints of this article should credit bitcoin.com and include a link back to the original links to all previous chapters


Wendy McElroy has agreed to ”live-publish” her new book The Satoshi Revolution exclusively with Bitcoin.com. Every Saturday you’ll find another installment in a series of posts planned to conclude after about 18 months. Altogether they’ll make up her new book ”The Satoshi Revolution”. Read it here first.

The post Wendy McElroy: Here, There Is No State appeared first on Bitcoin News.

Bitcoin in Brief Monday: A Panther’s Moonshot Bet

Bitcoin in Brief Monday: A Panther’s Moonshot Bet

Bitcoin in Brief today is slanted toward a crypto winter slowly thawing, as Pantera Capital bets on a moonshot price point. Also, the world’s most popular decentralized digital asset has been forked more than a plate of good pasta; there’s a growing list of countries who’re less likely to nab your crypto profits; Yahoo! smashes rumors; and a good-hearted wager between bitcoin core and bitcoin cash partisans exemplifies how ecosystem actors should treat one another.

Also read: Bitcoin in Brief Saturday: Hide Your Seed

A Panther’s Moonshot

Bulls have a panther as their advocate to help thaw this crypto winter. We reported this week, “Pantera Capital, an investment firm exclusively operating in the cryptocurrency and distributed ledger technology sectors, has published a letter predicting that bitcoin has established the low for its current bear market. Pantera cites a number of factors as informing its market outlook.”

Bitcoin in Brief Monday: A Panther’s Moonshot Bet

Among those factors are taxes on capital gains, where estimates are in the many, many billions expected from enthusiasts. That in turn, the fund theorizes, dragged prices down, and bitcoin core has found a bottom at $6,500, as holders were forced to sell in order to pay government bills. We continue, “Pantera also states that ‘It’s highly likely’ for the price of bitcoin to exceed its previous record highs of $20,000 ‘within a year,’ asserting that ‘A wall of institutional money will drive’ the growth in price.”

Speaking of Taxes

Until that prediction comes true, readers should pack their bags to save money from the tax man! Start looking for places to stay in Germany, Slovenia, Denmark, Belarus, South Korea, Singapore, as they’re some of the most advantageous.

Bitcoin in Brief Monday: A Panther’s Moonshot Bet

We stressed how many “jurisdictions have yet to update their tax laws to encompass cryptocurrencies. Rules governing taxation are often incoherent and very different even in countries that are part of a common space. In the European Union, for instance, tax rates in member-states vary between 0 and 50%.”

Forking Crazy

Be honest. You’ve never heard of Bitcoin Minor, Bitcoin King, nor Bitcoin Boy. How many times would you guess the Bitcoin network has been forked? During an extensive and really interesting investigation, we revealed nearly 70 times. That’s right, 70.

We summarized findings as how forking “bitcoin used to be a rarity. Then it became the norm. And then it became a meme, with anyone and everyone forking bitcoin on a weekly basis. There have now been a total of 69 bitcoin forks plus another 18 altcoin forks. Holders of bitcoin, monero, ethereum, and litecoin can claim almost 80 additional coins for free. Whether it’s worth their time to do so, however, is another matter.”

The Fork of All Forks Remains a Solid Option

The most famous of forks is, of course, bitcoin cash (BCH). Its being faster, sleeker, younger, and bigger (block wise) has lead those on the bitcoin core (BTC) side to take a stance on BCH’s long term viability. And while each side feels passionate about its coin, and the future that it entails, debate often become rancorous, turning everyone off.

Bitcoin in Brief Monday: A Panther’s Moonshot Bet
A reader responds to a hilarious bet.

We reported how two well-known advocates joked and ribbed one another about Core’s anticipated Lightning Network solution. They bet bragging rights if a demonstration of the solution failed a basic transaction. Loser would have to wear a t-shirt of the winner’s coin. Regardless of which won, the import is how the two men exchanged laughs and good humor, and the ecosystem needs more of both.

Japan Continues to Lead

No laughing matter is how the crypto winter continues its thaw as “Yahoo! Japan has confirmed that it is entering the crypto space by acquiring a stake in a Japanese cryptocurrency exchange that is already licensed by the country’s financial regulator. The company plans to launch a crypto exchange in the fall of this year,” we explained.

Bitcoin in Brief Monday: A Panther’s Moonshot Bet

We Have the Best Readers in All of Crypto

Thanks to our readers liking and sharing, our post on aspects of Islam possibly opening to cryptocurrency was picked up and republished and referenced around the world. Some contend it was the root cause of bitcoin’s recent price rebound. Great job, gang.

The crazy good book by Wendy McElroy we continue to serialize brings in wonderful reader comments and observations. To wit:

Bitcoin in Brief Monday: A Panther’s Moonshot Bet

Do you think bitcoin will continue to rise or to fall to new lows? Let us know in the comments section below.


Images courtesy of Shutterstock.


Need to calculate your bitcoin holdings? Check our tools section.

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Wendy McElroy on Decentralization: “Give Power Back to the Individual”

Wendy McElroy on Decentralization – "Give Power Back to the Individual"

The Satoshi Revolution: A Revolution of Rising Expectations.
Section 2 : The Moral Imperative of Privacy
Chapter 7: Decentralization

Decentralization (Chapter 7, Part 1)

A lot of people automatically dismiss e-currency as a lost cause because of all the companies that failed since the 1990’s. I hope it’s obvious it was only the centrally controlled nature of those systems that doomed them. I think this is the first time we’re trying a decentralized, non-trust-based system.

–Satoshi Nakamoto

(Note: This article consciously side-steps the question of how decentralized various cryptocurrencies, such as bitcoin and ether, truly are. It assumes as a given that crypto is a paradise of decentralization compared to the central banking system.)

In 2009, Satoshi Nakamoto offered the first digital, decentralized currency that was based on algorithms rather than trust. The decentralization is key. No one person controls the operation of bitcoin; everyone can participate on an equal peer-to-peer basis. The system uses a distributed network of nodes to verify transactions that are publicly visible in an open ledger. It was something new under the sun.

The “non-trust-based system” that Satoshi described has obvious advantages. For one, people do not get screwed over by unscrupulous third parties, such as lawyers, former spouses, or banks. But the advantages of decentralization are less obvious. Centralization can be a purely practical matter, and it can be a good strategy. A business, for example, may be more efficient and profitable if decision making is controlled by one person. There is nothing intrinsically wrong with centralization. Except….

In the political sense. Centralization is disastrous to freedom because it strips choice from individuals and converts personal rights into decisions made by committees. Another term for centralized control is “social engineering.”

Through most of history, society has been viewed as the result of someone’s design. The design may be ascribed to God, a monarch, or a group of people called government. Society as a construct is taken for granted.

In his three-volume work Law, Legislation and Liberty (1973), economist and social theorist Friedrich A. Hayek referred to this position as “constructivist rationalism.” He argued vigorously against it. In a 1974 Nobel Memorial Lecture, entitled “The Pretence of Knowledge“, Hayek expressed a key objection: namely, no committee could predict the evolving needs of the interacting masses of human beings.

“The recognition of the insuperable limits to his knowledge ought indeed to teach the student of society a lesson in humility which should guard him against becoming an accomplice in men’s fatal striving to control society–a striving which makes him not only a tyrant over his fellows, but which may well make him the destroyer of a civilization which no brain has designed but which has grown from the free efforts of millions of individuals.”

Decentralization means the diffusion of power away from a central authority, down to its constituent units. Politically speaking, this usually means passing control from a national unit down to a local one. Instead of Congress or Parliament issuing law, a state or provincial government does so. Or a local council decides what a resident may or may not do with his own property, wealth and body. Local councils may be preferable to more remote authorities because they are susceptible to local influence; that is, the voice of individual constituents who live next door are far more influential than anonymous ballots that are cast in the millions.

But, even at the local level, the essential element of decentralization is lost. The essential element is not a committee or a collective decision. It is the individual. The individual is not only the basic building block of society but also the only source of rights, the only source who can say “yes” or “no” over their own lives. The logical and moral landing point for decentralization is every human being who is responsible for making peaceful choices for themselves.

In his magnum opus Human Action, the Austrian economist Ludwig von Mises described the principle of Methodological Individualism: “First we must realize that all actions are performed by individuals… If we scrutinize the meaning of the various actions performed by individuals we must necessarily learn everything about the actions of the collective whole. A social collective has no existence or reality outside of the individual members’ actions. For example, the individuals who comprised a family interacted with each other within a specific context and sum of those individual interactions was what constituted the abstraction ‘family'”.

Mises used this approach in analyzing that most complex of collective wholes–the state. Everything the state did or was could be reduced to individual actions. Mises explained, “The hangman, not the state, executes a criminal. It is the meaning of those concerned that discerns in the hangman’s action an action of the state.” Individuals who look at the hangman see the state in action only because they have created an abstraction known as ‘the state’ to provide a context for what is an individual’s action.

And yet, if only individuals act, how can collective institutions such as ‘the state’ or any co-operative venture be established within society? Easily. Consider how language evolved through human action but not through human design: this is the concept of ‘spontaneous order.’ One of Mises’ earliest works, Nation, State and Economy (1919), analyzed how complex social phenomena–such as language–were the unintended consequences of individual interactions. No committee or central authority decided to invent human speech and publish a dictionary, let alone to design a specific language like English. Individuals began communicating in order to get what they wanted from each other.

This is decentralization at work. Another classic example is how a path is forged through a forest. Twenty people each decide to take the shortest route from A to B. In doing so, each one contributes to the creation of a crude path that benefits everyone else who uses it afterward. The path becomes less crude as more people use it. They do not walk from A to B as public good; it is in their own self-interest. Yet forging the path benefits everyone else who walks it thereafter. The path is decentralization in action.

The decentralization offered by Satoshi goes farther. It does not envision individual actions that happenstantially benefit the whole. Or, rather, it envisions a decentralization that becomes an integral part of a community in which everything is transparent.

Part of the Satoshi revolution is that it turns the freedom strategy of decentralization on its head. Traditionally, decentralization has given individuals freedom by allowing them to secede from society. That is, people withdraw from the political system by refusing to pay taxes, by declining to provide personal information to the government or by otherwise saying “no.” In the ’80s, this strategy was called Browning-out because many practitioners followed the privacy and freedom recommendations of Harry Browne’s best-selling book How I Found Freedom in an Unfree World: A Handbook for Personal Freedom. Chapter 7, entitled “The Government Traps,” states, “But who is ‘society’ if not the same people who are already expressing their needs and preferences in the marketplace? If they aren’t willing to pay for the service in the free market…, who can say they’re willing to pay for it through government?…. All government actions depend upon one-sided transactions, in which an individual is forced to choose between paying for what he doesn’t want and going to jail.” Those who Browned-out from the Government Trap decentralized the power in their lives down to the personal level where the only authority over their own choices was themselves.

Satoshi’s approach to decentralization offers the solution. Like Hayek, he opposed the centralization of power, which is the theft of power from individuals. Social engineering destroys society, rather than creates it. Both Hayek and Mises witnessed the devastation of classical liberalism that resulted from two world wars, but most particularly by World War I. They watched as the promise of nineteenth century classical liberalism was confiscated by the centralizing machine of statism.

Enough. Cryptocurrency says “enough.” Give power back to the individual. And decentralization is where it all begins.

[To be continued next week.]

Reprints of this article should credit bitcoin.com and include a link back to the original links to all previous chapters


Wendy McElroy has agreed to ”live-publish” her new book The Satoshi Revolution exclusively with Bitcoin.com. Every Saturday you’ll find another installment in a series of posts planned to conclude after about 18 months. Altogether they’ll make up her new book ”The Satoshi Revolution”. Read it here first.

The post Wendy McElroy on Decentralization: “Give Power Back to the Individual” appeared first on Bitcoin News.

Wendy McElroy: Do Not Passively Nationalize Your Privacy

Wendy McElroy: Do Not Passively Nationalize Your Privacy

The Satoshi Revolution: A Revolution of Rising Expectations
Section 2: The Moral Imperative of Privacy
Chapter 6: Privacy is a Prerequisite for Human Rights

Do Not Passively Nationalize Your Privacy. Chapter 6, Part 7

“If I had a world of my own, everything would be nonsense. Nothing would be what it is, because everything would be what it isn’t. And contrary wise, what is, it wouldn’t be. And what it wouldn’t be, it would. You see?”

–Lewis Carroll, Alice in Wonderland

Lewis Carroll’s world is government, where words express the opposite of their meaning. War brings peace. Diversity means conformity to PC demands. Security requires the rape of privacy and due process, which provide true security for individuals. Subservience is freedom.

Government ‘reality’ inverts the truth. Privacy is dead, government declares with the certainty of a slamming door. Only, it isn’t. Privacy is entering a golden age—or it is for individuals who privatize their own data instead of allowing their identities to be nationalized. Nationalization of identity occurs when the government claims the ownership and use of everyone’s personal information, which individuals have no right to withhold. The government owns birth certificates, medical records, school transcripts, surveillance reports, police and court files, financial  information…It possesses data that individuals themselves cannot access.

The fact that privacy is alive and kicking is demonstrated by the adamance with which bureaucrats and their allies try to convince people of the contrary. Government wants to quash the very possibility of discussion because individuals could realize how much control they have over their own information. Individuals might start privatizing their privacy through the glut of technology that allows individuals to use encryption, pseudonymity, polynymity, anonymous cryptocurrency, decentralized exchanges, scrambling software, and an evolving array of digital tactics.

But what technology gives, technology can take away. Tomorrow, some privacy strategies could be obsolete. Game changers are on the horizon. If quantum computing pans out, for example, then encryption could crack like a walnut. “The quantum computer, following the laws of quantum physics, would gain enormous processing power through the ability to be in multiple states, and to perform tasks using all possible permutations simultaneously.” The out-of-the-box approach to data processing could revolutionize operating protocol and speed.

But what technology takes, technology can give. It is a race between those who use computers for social control and those who use them for freedom. Whatever master technology serves, however, the background politics are remarkably the same.


A Step-to-Step Guide to Nationalizing Privacy

There is a common pattern to how governments nationalize identities and privacy.

A crisis is declared, whether it is real or created. A real crisis may be a war or a foreign attack, like 9/11; a created one may be a school shooting that gins up hysteria, even though school shootings are incredibly rare and infrequent. Sometimes government policies create the crisis, such as the implosion of the Bolivar in Venezuela. Whatever the cause, a message is drummed into the public: it is not the government’s fault. Who is to blame? Hostile nations, deranged individuals, evil groups, the free market run amok—the usual suspects are rounded up. Then government presents itself as the solution.

This is the point at which rights are displaced by privileges.

What is a right? A natural right, like freedom of speech, is an extension of the jurisdiction that individuals have over their own bodies, which they are free to use in any peaceful manner. A right is not earned or granted; it exists because the owner is a human being with the same claim to personal freedom as any one else. Another approach to the same concept: there are only three possibilities on who owns an individual’s body: the individual himself, which is self-ownership; someone else, which is slavery; or, the body is unclaimed property, like luggage in a lost-and-found. The choice that makes sense is self-ownership.

What is a privilege? A privilege is an advantage or immunity that is granted to a particular person or to a group of people, usually small in number, which does not apply to others. Governments confer privileges upon those it favors due to their loyalty, service, or some other trait that authorities find useful. These are the two main differences between a right and a privilege: Rights are universal, whereas privileges are targeted; rights do not require permission to exercise, whereas privileges hinge upon permission.

Gradually, an individual’s use of his or her own body becomes a matter of government privilege and not a matter of rights. The harvesting of personal data is essential to this transition. A database does not matter to individuals who exercise their rights because the individuals decide for themselves how to act. But a database is essential to granting or denying privileges. Government needs to know who to reward for ‘good’ behavior and who to punish for ‘bad’. Who owns guns and may be dangerous? Who sends money abroad or doesn’t report an income stream? Where do these people live? A massive amount of information is required for government to target specific individuals or categories of people to either privilege or punish. Privacy must be taken away from individuals and nationalized.

The adrenaline of a crisis is useful to government in this endeavor because the public becomes receptive to heightened security, including surveillance. When the adrenaline recedes, however, the push for security is often replaced by boiling-frog tactics.

The boiling frog is a false fable that has a valuable lesson attached. A frog is boiled to death because the temperature of water in the pan where it sits is raised so gradually that it does not notice the lethal process; it does not jump out. The boiling frog is a metaphor for people who blithely tolerate a series of incremental changes until the end result becomes deadly.  The process is also called “creeping normality”; a major shift is accepted as “the norm” because it is introduced in small steps, each of which is sanctioned or, at least, not opposed. The end result may be widely viewed as objectionable—or, rather, it would be if it arrived in a single leap—but it comes inch-by-inch. The slow erosion of freedom becomes an everyday event. There is one more blank to fill out on a form; boarding a plane  requires a standardized state-issued card; police stop random cars or pedestrians to demand ID.

And, to make sure as much data as possible is raked in, government recruits crony corporations—such as central banks—that act as centralized points of data collection. Then government eliminates free-market competitors who do not act as bureaucracies. The loop is closed. Anyone who uses a government service, from schools to social security, must give up their data to do so. Anyone who uses a faux free-market service, from air travel  to banking, must give up their data to do so. What the loop closes around is the individual.

When a distorted normality has been established and accepted, the government gloves come off. Society is micromanaged. In China, the process of micromanagement is called the “social credit system” by which citizens are assigned a rating by the state. Those who score high are allowed to access privileges, such as travel and good restaurants. Those who score low, perhaps due to jaywalking or a rebellious attitude, become second-class citizens.

The financial and social commentator Doug Casey calls the system “fiendishly clever” because…”a high social score gives a citizen lots of benefits and privileges. A low score penalizes you in many ways. People will start competing to be good little lambs.” Otherwise stated, this form of social control is “fiendishly clever” because average people become enforcers of government policy out of their own self-interest. High scorers are more desirable employees, spouses, family members, friends, clients, neighbors, university students, and associates. Low scorers are stigmatized and limited in prospects. In short, people will control and censor themselves in order to achieve the high score that leads to status and opportunity. They will shun those with low scores, who are consigned to lower economic rungs.

Western nations are adopting their own rating systems, and the trend will accelerate. Casey predicts, “The TSA will likely subject you to…screening based on your score [or red flags in your file]. The IRS…[will scrutinize] your finances. The same with the police, prosecutors, and what-have-you, right down to your local DMV…It’s the best idea since everyone got a Social Security number—for them.” [Italics added.] Whether in China or the U.S., the total state rests on total access to personal information, especially digital footprints.

Into the walls of this Brave New World, Satoshi Nakamoto carved an EXIT door for those who want to privatize their own data and to decline the nationalization of their identities. It opens to a path around government, central banks, and crony corporations—a path around trusted third parties—because no one should be trusted with the custody of human rights.

It is impossible to predict the future of crypto because the future evolves quickly and in unexpected directions. But, wherever it goes, the principles of the Satoshi vision remain true North: individual control of privacy; peer-to-peer exchanges (or as close as possible on exchanges); and, decentralization.

Conclusion

“When I use a word,’ Humpty Dumpty said in rather a scornful tone, ‘it means just what I choose it to mean — neither more nor less.’
’The question is,’ said Alice, ‘whether you can make words mean so many different things.’
’The question is,’ said Humpty Dumpty, ‘which is to be master — that’s all.”

―Lewis Carroll, Alice Through the Looking Glass

Privacy is not dead; it is enjoying a revival. Governments know this. That’s why they choke off discussion by claiming privacy no longer exists. Nothing to see here, folks. Move along. Believing authorities means allowing your identity to be nationalized and accepting your fate as a number to be ranked by bureaucrats.

Or you can take the EXIT.

[To be continued next week.]

Reprints of this article should credit bitcoin.com and include a link back to the original links to all previous chapters


Wendy McElroy has agreed to ”live-publish” her new book The Satoshi Revolution exclusively with Bitcoin.com. Every Saturday you’ll find another installment in a series of posts planned to conclude after about 18 months. Altogether they’ll make up her new book ”The Satoshi Revolution”. Read it here first.

The post Wendy McElroy: Do Not Passively Nationalize Your Privacy appeared first on Bitcoin News.

Wendy McElroy: How Centralized Exchanges Intend to Devastate You

How Centralized Exchanges Intend to Devastate You

The Satoshi Revolution: A Revolution of Rising Expectations
Section 2: The Moral Imperative of Privacy
Chapter 6: Privacy is a Prerequisite for Human Rights

How Centralized Exchanges Intend to Devastate You. Chapter 6, Part 6.

The root problem with conventional currency is all the trust that’s required to make it work…We have to trust them [third parties] with our privacy, trust them not to let identity thieves [including government] drain our accounts.
Satoshi Nakamoto

Satoshi never envisioned centralized exchanges. The spectacle would have appalled him. Bitcoin was forged to avoid centralized third parties, such as banks and centralized exchanges, that require users to trust them with wealth and privacy. Peer-to-peer transfers based on cryptographic proof were supposed to replace the need for a middleman who demanded trust. They were designed to give financial power back to the individual.

The problem: there is a market demand to speculate, to trade in currencies, and to perform sophisticated financial transactions for which peer-to-peer (as it currently exists) can be ill-equipped. There is also a demand for convenience and access that does not require technical knowledge or effort. Centralized exchanges may be the polar opposite of what Satoshi envisioned, but centralized exchanges fill a niche, or else they would not be popular. They currently dominate much of the crypto world, with a majority of users entrusting exchanges with their wealth and privacy.

The niche of centralized exchanges comes from blending the functions of a stock market and a bank. A centralized exchange is a marketplace for trading or converting assets through a single location or service. In many ways, it is similar to the New York Stock Exchange. Currencies can be traded and shorted, for example; margin trading, stop loss, and lending are also available. Satoshi did not address the stock-market functions of crypto, which he probably did not foresee. In fairness, Satoshi explicitly referred to Bitcoin as a developing and evolving technology, which was in its infancy.

In other ways, centralized exchanges resemble banks. After purchasing crypto from an exchange, many customers choose to leave their coins in an account rather than transfer them to a private wallet on their own hard drive. The reasons vary: convenience, the comforting similarity to a bank, the ease of converting to fiat, quick trading, and discomfort with the technology required to set up a private wallet. Whatever the reason, centralized exchanges become trusted third parties that endanger the wealth and well-being of individuals. Consider one aspect of the problem. Private keys are the crypto. The coins have no physical presence, only algorithmic ones. When an exchange controls the keys, it owns the coins; the customer has nothing more than a promise of access to them upon demand.

Reality often breaks promises. Hackers use software vulnerabilities and human error to loot accounts that are advertised as secure. High volume causes downtime, during which traders lose opportunities and prices can plummet. Then, there are calculated denials of access. Outstanding orders may be canceled, especially if rates disadvantage the exchange; withdrawals and deposits can be halted without notice; exchanges vanish, along with accounts; owners commit fraud or steal from accounts. This returns people to the pre-Bitcoin days, in which trust and betrayal are defining factors of wealth management.

Recently, the risks associated with centralized exchanges have increased exponentially, and for one reason.

A Forbes article (Feb. 28, 2018) announced the inevitable.

“It’s finally happening: The much-ballyhooed turnover of documents in the battle between the Internal Revenue Service (IRS) and Coinbase, a company which facilitates transactions of digital currencies like Bitcoin and Ethereum, is moving ahead. Coinbase has announced that it has notified affected customers that it will comply with a court order regarding the release of specific data.”

2018 is the year in which tax agencies get serious about cryptocurrency profits and holdings. Governments around the world are watching as Coinbase turns in data on its customers, which will almost certainly lead to audits and high-profile prosecutions. Specifically, Coinbase is reporting all customers with transactions of $20,000 or more in a single year between 2013 and 2015. Taxpayer IDs, real names, dates of birth, street addresses, and all transaction records from whichever period is in question will be delivered. The wealth of data is available because Coinbase, like every other licensed centralized exchange, complies with Know Your Customer and Anti-Money Laundering laws, which destroy financial privacy.

Beyond such requirements, Coinbase is extremely aggressive about gathering information and verifying identities. The exchange uses facial-recognition technology, for example, to compare a real-time face shot from a webcam or smart phone with whatever ID an applicant submits. Coinbase UK adds, “we may collect personal information disclosed by you on our message boards, chat features, blogs and our other services to which you are able to post information and materials.”

Expect such intrusion to become the norm for centralized exchanges that prize their licenses and relationships with government. Expect them to act as data-gathering arms of government. The danger is not only the freezing and confiscation of accounts, but also legal proceedings against and imprisonment of account holders. The IRS states that “anyone convicted of tax evasion is subject to a prison term of up to five years and a fine of up to $250,000. Anyone convicted of filing a false return is subject to a prison term of up to three years and a fine of up to $250,000.”

Fortunately, the market demand for stock market and banking functions can be satisfied (or soon will be) without sacrificing the privacy and safety.

Decentralize for Privacy

A decentralized exchange is a marketplace that does not rely on third party services. Trades are peer-to-peer; they are direct transfers between people who use an automated process to facilitate the exchange. They are trustless. They are transparent, with software and transactions being open source. They are Satoshi. A decentralized exchange allows individuals to hold their own private keys, which makes it a less attractive target for hackers. It also requires a minimal amount of personal or financial data to establish an account and to conduct commerce. Often, only an email address is requested, and it can be one that is generated specifically to register, with no connection to a real identity, to a True Name.

Decentralized exchanges employ a wide variety of strategies to facilitate peer-to-peer transfers. Some create proxy tokens; others employ a multi-signature escrow. Peer-to-peer banking uses an auction-type dynamic to facilitate loans between members of a specific amount and at an agreed-upon rate. Smart contracts can assume the traditional functions of banks. Technology Review (Dec. 7, 2017) explained,

“Switching back and forth between fiat money and cryptocurrency will require a traditional point of exchange for the foreseeable future. But some technologists say an alternative model for trading cryptocurrencies that would give people more control over their wealth is possible. It’s meta: exchanges can be decentralized, they say, using a blockchain. The idea hinges specifically on so-called smart contracts, software code that can be stored in a blockchain and set up to programmatically govern transactions. Imagine, for example, you want to send your friend some cryptocurrency automatically at a specific date and time. You could use a smart contract to do that.”

The point here is not to advocate a particular decentralizing strategy. It is to offer a sense of the rich and evolving alternatives to centralized exchanges.

Many people will still choose a centralized exchange because the platforms are easy to access and use; they are sanctioned by government; and they offer familiar, advanced functions of a stock market. For those who prize privacy, however, this is a poor choice. An analogy illustrates the stark difference in how privacy fares under a decentralized and a centralized system.

The Cautionary Tale of Social Media

’Want To Freak Yourself Out?’ Here Is All The Personal Data That Facebook/Google Collect.” That was a headline in Zero Hedge on March 28, 2018. The types of data collected are too extensive to enumerate. An indication: Android cellphone users who downloaded specific Facebook apps have had data on their personal calls logged by Facebook, sometimes for years.

A relatively undiscussed cause of social media’s privacy hemorrhage, along with its abridgment of free speech, is the centralization of information and discussion that accompany corporate behemoths, like Facebook and Google. An intriguing article in The Federalist (March 28, 2018) asked, “Was Social Media A Mistake?” The author, Robert Tracinski, harkened back to the 2000s-the golden age of blogs, when everyone and their grandmothers expressed themselves through blogging.

Tracinski wrote, “It felt like liberation. The era of blogging offered the promise of a decentralized media. Anybody could publish and comment on the news and find an audience. …We were bypassing the old media gatekeepers. And we had control over it! We posted on our own sites. We had good discussions in our own comment fields, which we moderated.” It was a whirlwind of free speech, but it was also a bastion of privacy because individuals retained control.

Then social media arrived like a juggernaut, and the mom-and-pop blogs migrated their insights and information to Facebook, Google, Twitter and other trusted third parties. Like centralized exchanges, the social media giants were relatively easy to access and use; they offered sophisticated software and functions that individual bloggers lacked the technical knowledge or money to implement; social media also slid seamlessly onto cell phones via apps that seemed to open up the world.

Tracinski noted the result. “A few of the best and most interesting blogs became full-fledged online publications, but a lot of the small, quirky, one-person amateur bloggers moved onto social media. That turned out to be a big mistake, because the era of social media has recentralized the media. Instead of a million blogs—what Glenn Reynolds of Instapundit fame called an “Army of Davids” — we now have a social media economy mostly controlled by three big companies: Twitter, Facebook, and Google.”

Lately, the price tag of centralizing insights and information has become apparent. The left-leaning politics of social media meant they purged (suspended) or punished (throttled) the “wrong” views; this is akin to banks and other financial institutions refusing to deal with porn, pot, or gun industries due to political pressure from government. “The old media gatekeepers” were replaced by the equally intrusive Silicon Valley Puritans. Although both are preferable to direct government intervention, their quasi-monopolies are bolstered by tax privileges, by favorable regulation, and, sometimes, by direct tax funding. Individuals lost control. Perhaps it is more accurate to say they relinquished it.

Nowhere is this more apparent than with personal data. In return for offering convenience, all social media wanted was to know and to market every detail of customers’ lives. The role of centralization in this rape of privacy should not be ignored. It was key to the effectiveness. This is equally true of the centralization of financial data-only with an important difference. The destination of the financial information is a government file, especially a tax one. Social media cooperates with government, to be sure, but its ultimate purpose was and is making a profit.

Conclusion

Privacy is a front-line defense of individual freedom and well-being. Decentralization is the social condition under which privacy thrives. No one can or should tell individuals which strategy to use. But, if you value privacy and safety, decentralize.

[To be continued next week.]

Reprints of this article should credit bitcoin.com and include a link back to the original links to all previous chapters


Wendy McElroy has agreed to ”live-publish” her new book The Satoshi Revolution exclusively with Bitcoin.com. Every Saturday you’ll find another installment in a series of posts planned to conclude after about 18 months. Altogether they’ll make up her new book ”The Satoshi Revolution”. Read it here first.

The post Wendy McElroy: How Centralized Exchanges Intend to Devastate You appeared first on Bitcoin News.

Wendy McElroy: The Satoshi Approach to Privacy

The Satoshi Approach to Privacy

The Satoshi Revolution: A Revolution of Rising Expectations
Section 2: The Moral Imperative of Privacy
Chapter 6: Privacy is a Prerequisite for Human Rights

The Satoshi Approach to Privacy. (Chapter 6, Segment 5)

The traditional banking model achieves a level of privacy by limiting access to information to the parties involved and the trusted third party. The necessity to announce all transactions publicly [the blockchain] precludes this method, but privacy can still be maintained by breaking the flow of information in another place: by keeping public keys anonymous. The public can see that someone is sending an amount to someone else, but without information linking the transaction to anyone. This is similar to the level of information released by stock exchanges, where the time and size of individual trades, the “tape”, is made public, but without telling who the parties were.

Satoshi Nakamoto

The Case For Privacy” is an excellent essay by the Austrian economist and legal scholar David D. Friedman. It opens: “An old science fiction novel features a device that surrounds its bearer with an impenetrable bubble of force.” The novel is Shield (1963) by Poul Anderson. It presents a dystopian world in which a neoconservative, militaristic, and repressive United States dominates the globe, with the exception of China.

Then a game changer occurs. An idealistic astronaut, Peter Koskinen, returns from Mars, with a new technology that has been developed in tandem with indigenous Martians. A portable force field protects the wearer from almost every attack, but it allows light to penetrate freely. It is the ultimate defensive device for individuals. Koskinen wrestles with himself about which political faction to gift with the force field. After a murder attempt, he realizes that no one should have a monopoly on the technology. Friedman sketched Koskinen’s solution. “He writes out an explanation of how the shield works and spends two days distributing the information to people all over the world. By the time Military Security-the most formidable of his pursuers-catches up with him, it is too late. The cat is out of the bag.”

Friedman’s brilliance is to draw an immediate parallel between the force field and privacy. Anderson’s brilliance was to foreshadow Satoshi’s strategy regarding release of the blockchain.

Satoshi’s Solution to the Privacy Problem

The transparency of online communication, according to some, is the death knell of privacy because unwanted others can easily eavesdrop. The government is the biggest snoop of all, of course, especially when it comes to the most demonized personal information of all–financial data.

With apologies to Mark Twain, reports of privacy’s death have been greatly exaggerated. With the possible exception of science designed for global warfare, technology always benefits individuals as much as or more than it benefits government. Digital technology has enhanced the individual’s ability to control his own life, including the flow of information and how to protect sensitive data that could be used against him.

Privacy is stepping into new territory. This is predictable. The concept of privacy exists only because of social relationships, only because people connect with others. Dangers are hidden among the vast advantages of participating in society. One of the dangers is that government or other criminals will use information to harm the person or property of participants. Social interaction has shifted dramatically due to online communication, and it would be amazing if privacy had not done the same.

There is no one path to privacy. The strategies employed depend on variables such as an individual’s personality and the circumstances. But the Satoshi approach should be considered seriously, if not preferred. For Satoshi, the transparency of the blockchain was not only salutary but it also allowed for genuine privacy—a privacy that rested on keeping the public key anonymous and never linking it to a true identity. In other words, protecting a True Name was the privacy. And the first line of protection for a True Name was the use of anonymity, pseudonymity, or polynymity (multiple personas). Past that point, there were and are constantly evolving tools to separate an identity from a transaction, without compromising the transparency of the latter.

Why is transparency salutary? A visible timeline and a public ledger promotes confidence in the honesty of transactions; it provides an immutable reference to arbitrate disputes. But the main reason to value transparency is also the reason it was built into the blockchain to begin with. An open ledger solves the problem of double spending and fraud. Double spending refers to paying for more than one transaction with the same coin, often by using the same coin in rapid succession for different transactions. “Bitcoin Whitepaper: A Beginner’s Guide” observed,

A timeline and public history of all transactions prevents double-spending because later transactions would be considered an invalid, or perhaps fraudulent, payment from the same coin. Each coin has a unique timestamp and the earlier transaction would be accepted as the legitimate payment. One coin, one payment…Here we see the emerging structure of the blockchain. The timestamps are key to preventing double-spending and fraud. It’d be virtually impossible to send duplicate coins because each coin contains different, chronologically-ordered timestamps.

That’s the main advantage of transparency, just as the main advantage of the properly-administered public key is privacy, especially in the face of government. Friedman commented:

Privacy includes the ability to keep things secret from the government….I might be keeping secret my weakness for alcohol, or heroin, or gambling or pornography and so preventing the government from stepping in to protect me from myself….If you view government as a benevolent super being watching over you-a wise and kindly uncle with a long white beard-you will and should reject much of what I am saying. But government is not Uncle Sam or a philosopher king. Government is a set of institutions through which human beings act for human purposes. Its special feature-what differentiates political action from the other ways in which we try to get what we want-is that government is permitted to use force to make people do things.

The human purposes served through government institutions include power-seeking, greed, status, and the imposition of moralistic rules. Crypto users have reason to be particularly private. A recent news story declared, “NSA Has Been Tracking Bitcoin Users Since 2013, New Snowden Documents Reveal.”

An abundance of caution is not paranoia. It is never paranoia when they actually are out to get you.

Data Evolves as a Weapon of Oppression

Governments are developing new ways of using databases to repress average people. A headline in Reuters (March 16, 2018) read, “China to bar people with bad ‘social credit’ from planes, trains.”

Social credit (xinyong) is a long-standing moral concept within the Chinese tradition, which indicates the level of a person’s honesty and trustworthiness. The Chinese government now extends the moral concept to include loyalty to the state and social honesty; it proceeds to assign an official rank to each person. Then, social control is imposed on those with low scores by denying them privileges, such as traveling by plane or train. Other social-credit offenses include using expired tickets to board a train or smoking while on it, buying “too much” alcohol, watching porn, returning a rented bike in a tardy manner, “not showing up to a restaurant without having cancelled the reservation, cheating in online games, leaving false product reviews, and jaywalking.”

The trivial offenses may seem puzzling or even funny. But they serve an important and frightening purpose. The Chinese government is able to isolate anyone it wishes by barring them from travel. The trivial offenses hand the government a blank check.

Social credit is not a uniquely Chinese phenomenon. Governments around the world impose their own forms of it on citizens and foreigners alike. In the U.S., passports are denied to those who are sufficiently behind in child support or tax payments; former felons find it difficult to travel abroad. Foreigners who tell a U.S. border guard that they have smoked marijuana, whether the occasion was legal or not, will be refused entry. Global News, a Canadian outlet, explained, “they’re…told to go back to Canada, and told they are inadmissible for life. This is a lifetime ban.”

In the UK, three activists were recently denied entry, allegedly due to their anti-Islamic views.

Increasingly, social credit is used to deny basic rights to “low scorers,” with the ability to travel being only one example. Government’s voracious appetite for data is growing. For example, the 2,232-page ‘‘Consolidated Appropriations Act, 2018,’’ which is now before the US Congress, contains many “poisoned riders.” On page 2201, there is the Cloud Act, which allows police access to online data without a warrant. Such access happens now in a covert manner, but the bill allows visible and aggressive intrusions as standard and sanctioned procedure. It means the data would be admissible in court.

Many of the reasons used to deny basic rights are financial, such as back taxes, back child support, expired train tickets, unpaid debts, or such “incorrect” purchases as porn and alcohol. No wonder people want to cloak their online financial transactions. Shielding the transactions themselves can be difficult or impossible, however. Once information is released to the wind of the Internet, it becomes vulnerable. Even encrypted data can be broken open, and encryption  draws the suspicion of law enforcement whenever it is used. Various projects are in progress to cloak transactions in an effective manner. They should be applauded as another privacy option, but it is far from clear that they will succeed.

It is far more practical to cloak privacy at the source of the transactions, to break the connection between a True Name and an exchange, however transparent the latter may be. The participant has much more control over his public key than he has over transmitted financial data.

Conclusion: Choose Your Privacy Strategies Wisely

People should choose the approach to privacy with which they are comfortable, and their approach will hinge on circumstances.

A key circumstance: all information is not equal; some information is more equal than others. Everyone has at least three kinds of personal data, each of which demands different treatment. First, there are facts that people want to broadcast widely, such as a new novel or an employment resume. This data requires the opposite of privacy: marketing. Second, there are facts that are harmless to disclose, such as a favorite color or a preference in potato chips. The disclosure may draw unwanted solicitations, but these are minor annoyances that do not jeopardize rights. Third, there are facts that can be vectors of oppression, such as financial data. They can be used to harm people’s rights, wealth, and well-being.

Each type of information may require a different privacy strategy, including the strategy of doing nothing at all. Whenever privacy needs to be shielded, however, the Satoshi solution should be seriously considered.

[To be continued next week.]

Reprints of this article should credit bitcoin.com and include a link back to the original links to all previous chapters


Wendy McElroy has agreed to ”live-publish” her new book The Satoshi Revolution exclusively with Bitcoin.com. Every Saturday you’ll find another installment in a series of posts planned to conclude after about 18 months. Altogether they’ll make up her new book ”The Satoshi Revolution”. Read it here first.

The post Wendy McElroy: The Satoshi Approach to Privacy appeared first on Bitcoin News.

Wendy McElroy: Privacy Is the Virtue That Sparked the American Revolution

Privacy Is the Virtue That Sparked the American Revolution

The Satoshi Revolution: A Revolution of Rising Expectations.
Section 2: The Moral Imperative of Privacy
Chapter 6: Privacy is a Prerequisite of Human Rights

Privacy is the Virtue that Sparked the American Revolution, Chapter 6, Segment 2

A general dissolution of principles and manners will more surely overthrow the liberties of America than the whole force of the common enemy. While the people are virtuous they cannot be subdued; but when once they lose their virtue then will be ready to surrender their liberties to the first external or internal invader.

— Samuel Adams

Many people are under attack from an internal invader: their government. Fortunately, history reveals a powerful weapon against the invasion.

Privacy is the revolutionary virtue that caused American colonists to slam the door in the face of British officials, both literally and figuratively. The Third Amendment of the U.S. Constitution prohibits the then-widespread practice of quartering soldiers in private homes, even during peace time, without the consent of owners. The Amendment sounds antiquated to modern ears. But correction of this travesty’s violation of privacy and property was important enough for revolutionaries to rank third in the list of liberties declared by the Bill of Rights. It follows the First Amendment (freedom of speech and religion) and the Second Amendment (the right to bear arms.)

Why? Because the Third Amendment asserted the right of domestic privacy against government intrusion into the most personal of realms – the home. It is the only language in the Constitution that addresses the relationship of the individual to the military, in both war and peace, and it gives priority to the individual. As outmoded as the Amendment may seem, it takes no great leap to apply its underlying principle to the current wars conducted by militarized law enforcement against terrorism and on “treasonous” crimes, such as money laundering. The individual comes first.

The Fourth Amendment also champions privacy. It opens by defending “[t]he right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures.” In terms of crypto-privacy, the important word is “papers.” The reference can be easily extrapolated into the 21st century to cover emails and other computer data. Moreover, the disparate history of how the law has treated “papers” and “effects” reiterates the message of the Third Amendment. When it comes to “papers,” individual privacy prevails. That is, it has until recently.

The Fifth Amendment also asserts the right to privacy by delineating the right of an individual not to bear “witness against himself” in criminal cases.

Fifty-six colonists signed the Declaration of Independence. They knew it was an act of treason, which was punishable by death. If the revolution failed, they would lose their lives, their fortunes, and endanger their families. Even when it succeeded, some paid a terrible price. “Five signers were captured by the British and brutally tortured as traitors. Nine fought in the War for Independence and died from wounds or from hardships they suffered. Two lost their sons in the Continental Army. Another two had sons captured. At least a dozen of the fifty-six had their homes pillaged and burned.” That’s how important the signatories–now called Founding Fathers–viewed the principles of the revolution, including the virtue of privacy.

Privacy was a revolutionary virtue worth dying for.

[Note: this discussion focuses on the U.S., but the principles expressed easily cross national borders and cultures. Also, I do not whitewash the many abuses of the American Revolution; I do not dispute that Loyalists were also colonists; I mean merely to highlight the pivotal role of privacy in the Revolution’s dynamic.]

What a Difference a Word Makes

When government confiscates or surveils smart phones and computers, the purpose is to snatch private information from those devices. In 18th-century parlance, the government seizes your “papers.” Compliant citizens obediently surrender the information on those devices; some even defend the intrusion on the grounds of “security.” Such people have every right to do so; it is their personal information to share or not. But they have no right whatsoever to require anyone else to comply with invasive laws and bureaucrats; they are morally wrong to demonize those who choose not to share. Yet those who say “no” to the gang rape of their privacy are literally treated as criminals.

Happily, history exists. Its invaluable lesson: things were not always this way, and it does not have to be this way now.

The world is experiencing what has been called a “technological crisis in modern legal doctrine.” Namely, the old rules do not always fit the new situation.  Physical-evidence rules do not cleanly apply to digital evidence, and inconsistent rulings by the courts on cryptocurrency further confuse the situation. No one definitively knows the legal status of your crypto-wallet or your private keys. A solution to the growing legal mess may lie in a word within the Constitution, upon which few people remark — “papers.”

Listen to history.

Again, the Fourth Amendment states, “The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no Warrants shall issue, but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.”

Aspects of the Amendment are clear. The government assumes the burden of proof before it can legally violate an individual’s privacy and property, for example. One aspect is commonly overlooked, however. It is the deliberate distinction between “papers” and “effects,” between personal information/expression and personal goods. The common law, upon which Western jurisprudence is based, has traditionally granted far greater protection to “papers.”

Law professor Donald A. Dripps opens his pioneering 2013 essay, “Dearest Property”: Digital Evidence and the History of Private “Papers” as Special Objects of Search and Seizure , with two  questions. “Why does the Fourth Amendment distinctly refer to ‘papers’ prior to ‘effects’? Why should we care?”

Dripps asks because he wishes “to ground special Fourth Amendment rules for digital evidence” within statute law in order to protect “the volume of innocent and intimate information that must be exposed [or demanded] before the criminal material is discovered.” Fortunately, a path forward can be found in the past. In the 1760s, the American colonies reflected “a great controversy over general warrants, libels, and seizure of papers that erupted in England.” The controversy resulted in a complex analysis of privacy.

Returning to the Revolutionary Role of “Papers” in America’s Birth

In 1761, the lawyer James Otis Jr. represented several dozen colonial merchants before the Massachusetts Superior Court. The case challenged the Writs of Assistance used by customs officials. The hated Writs were indiscriminate search and seizure warrants that instructed all local law enforcement to assist customs officials in searching private property for contraband or smuggled goods. The warrants expired only upon the death of the issuing authority, and they were often transferrable.

Otis took the case pro bono. Before a packed crowd, he rose in the Massachussetts State Court House to denounce King George III, the British parliament, and the entire English nation for oppressing American colonists. An impressionable young man in the audience was galvanized by Otis’ five-hour oration and by its passionate message. According to future President John Adams, Otis’ courtroom performance sparked the American Revolution:

“Otis was a flame of Fire!….American Independance was then and there born…. Every man of [the]…crowded Audience appeared to me to go away, as I did, ready to take up Arms against Writts of Assistants [sic]. Then and there was the first scene of the first Act of Opposition to the arbitrary Claims of Great Britain. Then and there the child Independance [SIC] was born. In fifteen years, i.e. in 1776, he grew up  to manhood, declared himself free.”

But colonial politics did not focus upon “papers”–letters, diaries, business records–which were not taxable items under customs law. English politics did.

In the 1760s, warrants for “papers” began to issue in Britain against authors and publishers who were suspected of “libel”–that is, sedition. Entick v. Carrington (1765) was, perhaps, the most influential legal case of the day. The presiding judge, Lord Camden, offered the famous dictim: “If it is law, it will be found in our books. If it is not to be found there, it is not law.” The government’s “right” to seize papers was not in the statutes. Therefore, it was not law.

The bare facts of the case: John Entick was the publisher of a paper that vigorously opposed the Crown. In 1762, the King’s Chief Messenger, Nathan Carrington, and three other officers broke into Entick’s home. They stole hundreds of papers in a search for evidence of sedition. Entick sued. Entick won.

Subsequent analysis of the Entick case revealed four aspects of the government’s action to be legally obnoxious. The warrant was indiscriminate, both in terms of the premises to be searched and the papers to be seized; the seizure expropriated the papers and denied use of them to the plaintiff; the warrant was unregulated because there was no neutral oversight or avenue of appeal; the seizure was inquisitorial because it gave the government information about the private workings of Entick’s mind. The latter point had special weight. Serjeant Glynn, counsel for Entick, declared: “[N]o power can lawfully break into a man’s house and study to search for evidence against him; this would be worse than the Spanish inquisition; for ransacking a man’s secret drawers and boxes to come at evidence against him, is like racking his body to come at his secret thoughts.”

American colonists paid close attention to Entick and to similar lawsuits in Britian. Penning the Fourth Amendment was not far behind.

“Papers” Versus “Effects” Plays Out in Law

Dripps explains, “Although the reception of English law in the newly independent American states was not automatic or uniform, a basic pattern emerged. The Americans adopted the English common law together with statutes in force at the time of Independence, unless the English rule conflicted with a natural right or a state constitution’s declaration of rights.” In short, any judge who considered issuing a warrant for papers ran up against the previously quoted principle of Entick‘s presiding judge; if it wasn’t in the statute books, it didn’t exist under law. Moreover, warrants on “papers” ran afoul of an increasing number of state constitutions.

Dripps continues, “America inherited the common law ban on searches for papers, adopted constitutional provisions that mentioned papers distinctly, and refused to modify the common law ban by statute until the Civil War.” The Civil War cost money, and the excise tax became the federal government’s major source of funding; tax evasion ran rampant. A unique statute was passed. An  opinion in the ensuing Boyd v. United States lawsuit stated, “[This] act of 1863 was the first act in this country, and we might say, either in this country or in England, so far as we have been able to ascertain, which authorized the search and seizure of a man’s private papers, or the compulsory production of them, for the purpose of using them in evidence against him in a criminal case, or in a proceeding to enforce the forfeiture of his property.” Seizure of “papers,” or compelled discovery, was now embedded in statute law.  Apparently, war was not the proper time to debate Constitutional protections.

The issue of “papers” versus “effects” legally zigzagged since the end of the Civil War. Arguably, the most important zig came in 1886, when Boyd was decided by the United States Supreme Court. “The story of the Boyd case,” Drips writes, “properly begins with a statute authorizing customs officers to seize the books and papers of importers suspected of evading taxes.”

Fast forward to an incident at the Port of New York. Customs officials seized 35 cases of plate glass for non-payment of import tax. The government required E.A. Boyd & Sons to produce the relevant invoice in order to fortify its case against the company. Boyd did so under protest, saying the involuntary disclosure was a form of self-incrimination that was prohibited by the Constitution; it also constituted unreasonable search and seizure. In short, the violation of “papers” denied due process. When a lower court backed the government, the case went to the Supreme Court.

The Supreme Court ruled in Boyd’s favor. It stated:

“The principles laid down in this opinion affect the very essence of constitutional liberty and security. They reach farther than the concrete form of the case then before the court…; they apply to all invasions on the part of the government and its employees of the sanctity of a man’s home and the privacies of life. It is not the breaking of his doors and the rummaging of his drawers that constitutes the essence of the offense; but it is the invasion of his indefeasible right of personal security, personal liberty, and private property, where that right has never been forfeited by his conviction of some public offense, it is the invasion of this sacred right which underlies and constitutes the essence of Lord Camden’s  judgment.”

The Boyd ruling reinstated greater Constitutional protection to “papers” than to “effects.” It also bears directly upon digital “papers” or information. The protection was never absolute, however, and it has been severely eroded in the last several decades.  Dripps explains, “[D]uring the last quarter of the twentieth century, the Supreme Court began effectively to equate ‘papers’ and ‘effects’. Another line of modern cases established ‘bright-line rules’ that  gave the same constitutional treatment to all ‘effects’.” In short, “papers” not only lost their special status under common and Constitutional law, they also became legally interchangeable with every other “effects.” Nevertheless, the precedent of Boyd prevailed for almost a century, and it is not toothless now.

Conclusion

Digital information was born into a new age of inquisition, in which privacy is viewed as guilt. Dripps observes, “Today, federal agents may obtain warrants to seize and carry away entire troves of digitally stored private papers and peruse those files at remote locations, one by one….[What] the common law condemned as a relic of the Star Chamber, and what no American legislature authorized for the first eighty years of Independence, has become standard law enforcement procedure.” Extracting private information used to require torture or other flexing of muscle. Today, the violation is so politically sanitized that it can be invisible and easy to ignore.

Don’t.

It has not always been this way, and it does not have to be this way.

Government wants people to believe that privacy is the antechamber of crime, a refuge for miscreants, and a danger to the innocent. The opposite is true. Privacy is a virtue upon which due process, freedom, and personal lives are built. Privacy is at the core of what it means to be human, because the essence of privacy is the individual mind as it assesses and experiences life.

The surest protection of privacy is to do exactly what government fears. Assert it; celebrate it; understand its pivotal importance to freedom. Do not respond to the spine-chilling demand — “Your papers!”

[To be continued next week.]

Reprints of this article should credit bitcoin.com and include a link back to the original links to all previous chapters


Wendy McElroy has agreed to ”live-publish” her new book The Satoshi Revolution exclusively with Bitcoin.com. Every Saturday you’ll find another installment in a series of posts planned to conclude after about 18 months. Altogether they’ll make up her new book ”The Satoshi Revolution”. Read it here first.

The post Wendy McElroy: Privacy Is the Virtue That Sparked the American Revolution appeared first on Bitcoin News.

Wendy McElroy: Privacy Prevents Violence and Crime

(Crypto) Privacy Prevents Violence and Crime

The Satoshi Revolution: A Revolution of Rising Expectations.
Section 2 : The Moral Imperative of Privacy
Chapter 6: Privacy is a Prerequisite of Human Rights
by Wendy McElroy

(Crypto) Privacy Prevents Violence and Crime (Chapter 6, Segment 1)

Unlike the communities traditionally associated with the word “anarchy”, in a crypto-anarchy the government is not temporarily destroyed but permanently forbidden and permanently unnecessary. It’s a community where the threat of violence is impotent because violence is impossible, and violence is impossible because its participants cannot be linked to their true names or physical locations.

Wei Dai

A February 6, 2018 headline in Reason magazine warned, “Governments Hate Bitcoin and Cash for the Same Reason: They Protect People’s Privacy.” The ensuing article spun off a quote from U.S. Treasury Secretary, Steve Mnuchin, “One of the things we will be working very closely with the G-20 on is making sure that this doesn’t become the Swiss numbered bank accounts.” Mnuchin rejects decentralized crypto as payment, investment, or savings systems because it cannot be easily tracked by government.

Privacy is the battleground upon which cryptocurrency will ultimately rise or fall.  The engine of crypto, the blockchain, is founded on the premise of anonymity or pseudonymity. The blockchain was specifically designed to obsolete “trusted third parties,” such as central banks, which act as data-collection centers for government.

Wei Dai and Mnuchin may seem to be polar opposites on privacy, but they are saying much the same thing, although their conclusions are antithetical. Privacy prevents violence.

For Wei Dai, this is a good thing. Privacy is overwhelmingly positive for individuals because it empowers and protects them against government. Privacy can cloak genuine acts of violence or fraud, of course, just as free speech can promote lies; every tool can be a weapon. More often than not, however, the violence prevented is wielded by government against those who flaunt authority: tax evaders, dissenters, regulation breakers, gray or black marketeers, drug dealers and users. Government punishes scofflaws, whether or not the laws are just or despite the fact that participants consented. To cryptoanarchists, like Wei Dai, no crime has occurred unless a person is injured or property is damaged. The violence occurs when a third party forcibly intervenes between consenting adults or people minding their own business.

For Mnuchin, privacy’s role in preventing violence is a bad thing because he administers government coercion against peaceful individuals. Of course, he does not call it violence; he calls it law enforcement. That doesn’t change the fact that government agents are pointing guns at peaceful scofflaws, not at the behest of any participant, but over their objections.

Otherwise stated: Wei Dai praises privacy for promoting a society of “anything that’s peaceful.” Mnuchin excoriates privacy for the same reason.

The ongoing crack-down on privacy is legitimized to the public by the faux claim that only criminals want “concealment.” (The Satoshi Revolution debunks this claim in the segment entitled “What Do You Have to Hide? Everything!”

Defenders of privacy usually give weak-tea arguments. Instead, they should straighten their spines, stand tall, and argue from high ground. The high ground: privacy and human rights are, and always have been, intimately connected concepts that enable individual freedom. Government wants people to abandon privacy because they would be abandoning a powerful threat to its authority.

Privacy, qua privacy, is so essential to human rights that it is indistinguishable from them.

The History of Privacy and Rights

(Here, privacy means “an individual’s right to control unrevealed personal data.” If someone voluntarily fills out a government form or otherwise broadcasts personal information, then he loses the right and the power to control its future distribution. But unrevealed data can be externally demanded only through violence; people can be coerced into revealing the contents of their mind; homes can be ransacked and computers can be hacked. Crypto-privacy, as epitomized by private keys, is unrevealed information, after which the government hungers.)

History can be viewed as a long social and intellectual experiment.

Pretend you are God. You perch attentively above the time-space continuum in order to watch the flow and impact of concepts upon human development through the centuries. The American Revolution feeds into and inspires the French one. The British Empire begins in the 16th century as Britain establishes its first colonies that, in turn, encourage mercantilism; after World War II, what remains of the Empire collapses in the face of independence movements based on an anti-colonialism that favors communism. From the mid-16th century, the British drove the Transatlantic Slave Trade until confronted by anti-slavery voices that said “every human being is a self-owner.” History is a laboratory in which the social and political affect of concepts can be charted, including the effect of privacy. Admittedly, the results are not as measurable as those produced by science, but broad outlines and conclusions are clear.

Arguing from history provides powerful advantages. To those who value facts, concrete examples can be compelling and persuasive. Moreover, drawing on history allows the cryptocurrency community to correct a fatal mistake; namely, it is defensive about privacy, when it should be on the offense because crypto stands on the moral high ground.

Financial independence is not the place to begin to demonstrate the link between privacy and human rights because anything to do with money arouses immediate cynicism. Money produced by work and through merit is the root of all good; it feeds families, fuels invention, and raises prosperity for all. Wealth from honest effort is to be celebrated, emulated, and protected from looters.

But money has been demonized as “the root of all evil” by those who never seem reluctant to accept it as donations, payment, taxes, or other forms of theft. The pervasiveness of plunder is a testament to the incredible power of wealth. But  plunder must be justified, or else it will be seen to be the outright money-grab it is. Thus, money and anyone who resists the theft of it are demonized as criminals or otherwise morally corrupt.

A better place to begin to link privacy and human rights is freedom of religion and due process. A pivotal insurrection in the 16th century defined the evolution of both within Western society. It revolved around a person’s right to keep his religious beliefs private so they could not be used against him in a court of law. A current version of this right is called “taking the fifth” — invoking the due process right against self-incrimination. Although this mainstay of due process is often portrayed as the last legal recourse of a guilty man, the intended and overwhelming beneficiary is the man in the street who, whether he realizes it or not, is protected against the exercise of arbitrary power.

The insurrection has background. In 1534, Henry VIII denied papal authority and established the Church of England, which maintained most of the traditional Catholic rites. Thus Protestants, called dissenters, were often tried for heresy; torture commonly accompanied trial. In the late 1530s the Protestant John Lambert was burnt alive for heresy. During his trial Lambert became the first known Englishman to proclaim it was illegal under God and the common law to compel a man to accuse himself. He appealed to the privacy of conscience.

The right to not bear witness against oneself had precedent in common law, but it was not enforced in English courts until in the late sixteenth and early seventeenth century. Its roots are deep in the history of religious persecution. Courts of the day required a defendant to answer a barrage of questions based on evidence gleaned from witnesses or informants, without informing the accused of the charges being brought. The interrogation aimed at trapping a defendant into a confession. People were tried on mere suspicion and, if found guilty, they were required to name other heretics. Silence was deemed a confession.

In 1563, John Foxe published the immensely influential Book of Martyrs, which has been called a “libertarian primer” on procedural rights. He argued for the right to remain silent. The right to keep personal information private.

Famously, the Leveller and libertarian John Lilburne employed Foxe’s procedures in 1637, when he was brought before the Court of Star Chamber for circulating Puritan books. Rather than being charged, Lilburne was asked how he pled. Refusing to take the customary oath, he declined to answer questions that bore witness against himself. Lilburne was fined, whipped, pilloried, and sentenced to prison until he complied. While in prison he penned an account of his brutal treatment entitled The Work of the Beast. In 1641, when the much-hated Star Chamber was abolished and the right to remain silent established in religious courts, Lilburne was widely credited.

Puritans who escaped religious prosecution to the New World carried Lilburne’s ideals, even though various colonial courts used torture to elicit confessions and required defendants to testify against themselves. By the time the colonies were states, however, six had clauses in their Constitutions against self-incrimination, and several others verged on including them. The right of a defendant against physical compulsion to speak was established at the national level in the Bill of Rights’ Fifth Amendment: “No person … shall be compelled in any criminal case to be a witness against himself….”

The right against self-incrimination – the privacy of personal information —  lies at the core of due process. It is historically anchored in the quest for religious freedom. It served as the strongest single protection against the use of torture by state authorities.

Privacy Under Attack Means Rights Are Under Attack

The human right against self-incrimination is currently under concerted attack by those who pit it against “security” or other governement interests, such as preventing tax evasion. The shrill demand for encryption keys and private crypto keys are two examples of government’s onslaught against privacy.

Privacy – the right to shut your front door, the right to be silent — has been protected for so long that it is taken for granted. People forget; privacy was established by those willing to be tortured and killed rather than to surrender  intimate information to enemies. The great wrongs of past governments were corrected and prevented by the blood of stubborn dissenters. The great wrongs are destined to be repeated unless privacy, like wealth, is celebrated, not demonized.

[To be continued next week, with how privacy was a core concept of the American Revolution.]

Reprints of this article should credit bitcoin.com and include a link back to the original.


Wendy McElroy has agreed to ”live-publish” her new book The Satoshi Revolution exclusively with Bitcoin.com. Every Saturday you’ll find another installment in a series of posts planned to conclude after about 18 months. Altogether they’ll make up her new book ”The Satoshi Revolution”. Read it here first.

The post Wendy McElroy: Privacy Prevents Violence and Crime appeared first on Bitcoin News.

The Satoshi Revolution – Chapter 5: Privacy, Anonymity, and Pseudonymity (Part 1)

Privacy, Anonymity, and Pseudonymity

The Satoshi Revolution: A Revolution of Rising Expectations.
Section 2 : The Moral Imperative of Privacy
Chapter 5: Implementing Crypto Privacy
by Wendy McElroy

Privacy, Anonymity, and Pseudonymity (Chapter 5, Part 1)

It is often said that there is a tradeoff between privacy and security…. Security is defined as the state of being free from danger or threat. One threat is assault. How is one made free from assault by being assaulted at an airport?…. How is one made free from the threat of being harassed or charged with a crime by the State by the State’s knowing every move you make, every statement you make, and every financial transaction you make? I say that your security is going DOWN, not up. The State can fend off terrorists by the ordinary methods of policing if it had a mind to. It doesn’t. It prefers to expand into a totalitarian monster.
Mike Rozeff

Privacy will determine the future of cryptocurrencies. Will they continue to enhance individual freedom, or will they become a government tool of social control?

Privacy is a human need, which is why the battle over its control is so intense. Constant surveillance makes it difficult or impossible for individuals to forge intimate family and romantic bonds, to create, to vote their conscience, to sexually explore, to discover who they are politically and religiously, to experiment with drugs, or to dissent without danger. Personal privacy is also the greatest barrier to government power, which rests on government knowledge.

“Only criminals need to fear government surveillance” is a common response to the defense of privacy. But every peaceful person is a criminal with something to hide. Why? They have exceeded the speed limit, taken an illegal drug, smuggled cheap booze or cigarettes across a border, made “unauthorized” additions to a house, fibbed to a customs official, understated their income on a tax form, or violated one of the tens of thousands of other laws that criminalize harmless behavior. Government makes criminals of us all. As Ayn Rand explained, “The only power any government has is the power to crack down on criminals. Well, when there aren’t enough criminals, one makes them. One declares so many things to be a crime that it becomes impossible for men to live without breaking laws.” Thus, all individuals are under control.

The assault on privacy also harms society as a whole. Consider freedom of speech. I remember being in a restaurant when a relative went on a post-9/11 rant about how the U.S. was beginning to feel like Cuba, from which he escaped. His wife tried to silence him, declaring in an adamant whisper, “You can’t say those things in public.” She was nervous as she glanced around to see who could have heard. Surveillance and informants make people reluctant to express opinions that could be used against them in a legal or political manner. Property can be seized, families destroyed, and prison ensue. Why would anyone speak out if his children could lose a parent as a result?

The killing of free speech is one of many political repercussions of destroying privacy. Privacy is a key characteristic that distinguishes a totalitarian, Kafka-esque society from a free one. Can you shut your front door and be safe from invasion? Everyone agrees that criminals should not break through your locks and treat your body and possessions as their own. Why are government agents entitled to do the same thing? They are nothing more than the for-hire workers of an employer whose authority comes because enough people give the employer a thumbs up to invade and steal. They are criminals sanctioned by consensus.

Until recently, many incursions on privacy have been prevented for no other reason than they were difficult to enforce. And, then, technology arrived. Even with its notorious incompetence, government is now able to surveil as never before, and many people have grown afraid or complacent, as the mass frisking at airports proves.

The government assault on privacy benefits from a Big Lie: namely, privacy is now impossible because government surveillance is omnipotent, omniscient. Resistance is futile. Privacy is so last century. Balderdash. First of all, technology has always empowered the individual more than it has the government. Second, there is a world of difference between “difficult” and “impossible.” Privacy is  certainly more difficult in the 21st century, which only means it takes work. Individuals need to assert actively what they once could take for granted in order to end the ongoing rape of their data.


What Should You Do?

No one answer exists. How to handle personal information is up to the lifestyle and goals of each individual.

Before answering, however, some distinctions are useful: privacy versus anonymity, for example. Privacy is the ability to keep personal data or activities to yourself; you close the door while using the washroom, for example; the activity is not shameful but neither is it for the world to see. Anonymity is when your activities are transparent to the world but the fact that you are the one acting is not. Rick Falkvinge, founder of the first Pirate Party, elaborated, “The typical example would be if you want to blow the whistle on abuse of power or other forms of crime in your organization without risking career and social standing in that group, which is why we typically have strong laws that protect sources of the free press. You could also post such data anonymously online through a VPN, the TOR anonymizing network, or both. This is the analog equivalent of the anonymous tip-off letter, which has been seen as a staple diet in our checks and balances.”

Another distinction: there are two types of data — private and public. If data is private – for example, if it is kept behind closed doors or within a limited circle of personal transmissions–then it can remain private. If data is publicly displayed, however, the practical ability to control it is lost. If I discuss my sex life on a public bus, for example, I have no business denouncing a blabby eavesdropper who passes on my experiences. Unfortunately, a great deal of personal data becomes public through no fault of the person it describes. Government vigorously mines information on everyone from birth, and well-meaning parents register children for everything from medical care to government entitlements.

Happily, cryptocurrency transfers are the data under discussion; they combine the best aspects of private and public data. They are protected by encryption and anonymity or pseudonymity, while remaining transparent. This is a new expression of data that needs to be protected in new ways, both from government and from malicious hackers.

The most effective tactics may well be technological, but this article does not address them. The tactics change constantly and quickly in response to government or hacking threats. And, frankly, although some tactics are simple, like spreading assets over a number of wallets, understanding other tactics requires a technological sophistication that I do not possess.

Instead, the article points to variations on privacy strategies that have been used for decades, if not for centuries. Pick and choose, but it may be best to use them all because the regulatory wolves are circling. Here is a sampling:

Obfuscate or “hide in plain sight.” One way for a person to preserve privacy is to be so inconspicuous or subtle that he is almost unnoticeable. Blend in, or become invisible. Sometimes obfuscation involves participating in so much noise that an eavesdropper cannot distinguish your signal from any other. An example might be sending only modest payments across the blockchain so the transactions join with hundreds of thousands of similar others, all of which are of scant interest because of the small amounts. Other times, obfuscation means masking activity through mixers or tumblers that further anonymize transactions. The anonymization carries a risk, however. It can constitute a red flag to eavesdroppers.

Avoid Centralized Exchanges and Other Data Sharing Centers. If a person wants government to have his financial data, then he should just mail it in an envelope to the government. Of course, signing up with an exchange, like Coinbase, saves a stamp. Centralized exchanges are now an arm of the government. Moreover, they carry their own risks, including bankruptcy or other reasons for withholding funds. Nevertheless, there are good reasons for using exchanges; they permit futures trading and other Wall Street niceties, for example. But decentralized exchanges are preferable; exchanges outside the U.S. or other crypto-hostile nations are preferable, as are ones that do claim jurisdiction over private keys. Even then, wealth should be moved in and out as quickly as possible, without allowing the third party to control it for longer than necessary.

Find Discreet Ways to Cash Out. The crypto veteran Kai Sedgwick wrote,

“Bitcoin transactions are semi-anonymous: every transaction on the blockchain is broadcast publicly and visible for all eternity, but the owner of each wallet is unknown. Tying addresses to real-world identities is now relatively easy for the powers-that-be, because everyone has to cash out somewhere, and that usually involves linking bitcoin addresses to bank accounts.” Don’t. As much as possible, deal with people one-on-one. Seek venues that exchange crypto for gift cards to stores you regularly use, such as grocery stores. Be inventive in avoiding the banks and centralized exchanges; they are the “trusted third parties” that Bitcoin was designed to obsolete.

Use a Privacy Currency. Dozens and dozens of private currencies exist, with several being solid. Although most of them use different techniques to preserve privacy, anonymity is a theme. The founder of Zcash explained the philosophy behind that particular privacy currency. “We believe that privacy strengthens social ties and social institutions, protects societies against their enemies, and helps societies to be more peaceful and more prosperous…. A robust tradition of privacy is a common feature in rich and peaceful societies, and a lack of privacy is often found in struggling and failing societies.”

Zip It on Public Forums. Public forums, like Facebook or Twitter, are monitored and mined by government and corporations. They are collection points for data, even if a person tries to post anonymously. If social media is necessary for professional reasons, then use it to the bare minimum. Never post anything on social media that you wouldn’t put on the front page of the New York Times, and that includes crypto forums.

Be Careful in Writing Down Information. Do not write down your private keys, for example, without having a secure, undisclosed place to store them.

Conclusion

The government is coming for crypto, which means it is coming for users. Its front line attack will be an attempt to eliminate privacy; it realizes privacy is the backbone of cryptocurrency as a freedom tool, even when users do not. Now it the time for heightened vigilance. To paraphrase the comedienne Lily Tomlin, “No matter how paranoid I get, it is never enough to keep up.”

[To be continued next week.]

Reprints of this article should credit bitcoin.com and include a link back to the original links to all previous chapters


Wendy McElroy has agreed to ”live-publish” her new book The Satoshi Revolution exclusively with Bitcoin.com. Every Saturday you’ll find another installment in a series of posts planned to conclude after about 18 months. Altogether they’ll make up her new book ”The Satoshi Revolution”. Read it here first.

The post The Satoshi Revolution – Chapter 5: Privacy, Anonymity, and Pseudonymity (Part 1) appeared first on Bitcoin News.