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Cyphernomicon 16.29

Crypto Anarchy:
The Coming Phase Change


  16.29.1. "We'd better hope that strong cypto, cheap telecoms and free
            markets can provide the organizing basis for a workable
            society because it is clear that coercion as an organizing
            principle ain't what it used to be."    [Duncan Frissell, in
            his sig, 4-13-94]
  16.29.2. "What is the "inevitability" argument?"
           - Often made by me (Tim May), Duncan Frissell, Sandy
              Sandfort, and Perry Metzger (with some twists). And Hal
              Finney takes issue with certain aspects and contributes
              incisive critiques.
           + Reasons:
             - borders becoming more transparent to data flow
             - encryption is not detectable/stoppable
             - derivative financial instruments, money sloshing across
                borders
             - transnationalism
             - cash machines, wire transfers
             - "permanent tourists"
           - Borders are becoming utterly transparent to massive data
              flows. The rapid export of crypto is but an ironic example
              of this. Mosaid, ftp, gopher, lynx...all cross borders
              fluidly and nearly untraceably. It is probably too late to
              stop these systems, short of "pulling the plug" on the Net,
              and this pulling the plug is simply too expensive to
              consider. (If the Feds ever really figure out the long-
              range implications of this stuff, they may try it...but
              probably not.)
  16.29.3. "What is the "crypto phase change"?"
           - I'm normally skeptical of claims that a "singularity" is
              coming (nanotechnology being the usual place this is
              claimed, a la Vinge), but "phase changes" are more
              plausible. The effect of cheap printing was one such phase
              change, altering the connectivity of society and the
              dispersion of knowledge in a way that can best be described
              as a phase change. The effects of strong crypto, and the
              related ideas of digital cash, anonymous markets, etc., are
              likely to be similar.
           - transition
           - tipping factors, disgust by populace, runaway taxation
           + "leverage effect"
             - what Kelly called "the fax effect"
             - crypto use spreads, made more popular by common use
           - can nucleate in a small group...doesn't need mass
              acceptance
  16.29.4. "Can crypto anarchy be stopped?"
           + A goal is to get crypto widely enough deployed that it
              cannot then be stopped
             - to the point of no return, where the cost of withdrawing
                or banning a technology is simply too high (not always a
                guaranteee)
           - The only recourse is a police state in which homes and
              businesses are randomly entered and searched, in which
              cryptography is outlawed and vigorously prosecuted, in
              which wiretaps, video surveillance, and other forms of
              surveillance are used aggressively, and in which perhaps
              the very possession of computers and modems is restricted.
           - Anything short of these police state tactics will allow the
              development of the ideas discussed here. To some extent.
              But enough to trigger the transition to a mostly crypto
              anarchic situation.
           - (This doesn't mean everyone, or even most, will use crypto
              anarchy.)
  16.29.5. Need not be a universal or even popular trend
           - even if restricted to a minority, can be very influential
           - George Soros, Quantum fund, central banks, Spain, Britain,
              Germany
           - and a minority trend can affect others
  16.29.6. "National borders are just speedbumps on the digital
            superhighway."
  16.29.7. "Does crypto anarchy have to be a mass movement to succeed?"
           - Given that only a tiny fraction is now aware of the
              implications....
           + Precedents for "vanguard" movements
             + high finance in general is an elite thing
               - Eurodollars, interest rate swaps, etc....not exactly
                  Joe Average...and yet of incredible importance (George
                  Soros has affected European central bank policy)
             - smuggling is in general not a mass thing
             - etc.
           + Thus, the users of crypto anarchic tools and instruments
              can have an effect out of proportion to their numbers
             - others will start to use
             - resentment by the "suckers" will build
             - the services themselves--the data havens, the credit
                registries, the espionage markets--will of course have a
                real effect
  16.29.8. Strong crypto does not mean the end to law enforcement
           - "...cryptography is not by any means a magic shield for
              criminals.  It eliminates, perhaps, one avenue by which
              crimes might be discovered.  However, it is most certainly
              not the case that someone who places an open anonymous
              contract for a murder in an open forum is doing so "risk
              free".  There are *plenty* of ways she might be found out.
              Likewise, big secret societies that nefariously undermine
              the free world via cryptography are as vulnerable as ever
              to the motivations of their own members to expose the
              groups in a double-cross." [Mike McNally, 1994-09-09]


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