The Coming Digital Anarchy

Daniel Larimer, who is working on a tool called Bitshares to apply blockchain technology to banking, insurance and company shareholding, believes that this new breed of technologies will ultimately render government entirely obsolete.

“If you think about it, what is the reason for government? It’s a way of reaching global consensus over the theory of right and wrong, global consensus over who’s guilty and who’s innocent, over who owns what.

“They’re going to be losing legitimacy as more open, transparent systems are able to provide that function without having to rely on force. That’s my mission in life.”

– From the excellent article published in The Telegraph yesterday, The Coming Digital Anarchy

Many of you may have already read this article considering it generated quite a bit of buzz yesterday when it was published. For those who haven’t, I highly recommend it.

While those of us who have been interested in Bitcoin for years may not learn anything “new,” it’s a great piece to send to friends and family members who have yet to make the plunge.

For those who haven’t been a fan of Bitcoin due to natural skepticism, confusion or any other ailment, this article presents in an easy to understand manner the inherently revolutionary characteristics embedded within Blockchain technology.

We have a chance to truly decentralize power for the first time in human history. We must not let this amazing opportunity slip away.

Here are some of my favorite excerpts. From the Telegraph:

In short, Bitcoin could be the gateway to a coming digital anarchy – “a catalyst for change that creates a new and different world,” to quote Jeff Garzik, one of Bitcoin’s most prolific developers.

It’s already beginning. We used to need banks to keep track of who owned what. Not any more. Bitcoin and its rivals have proved that banks can be replaced with software and clever mathematics.

Until recently, we’ve needed central bodies – banks, stock markets, governments, police forces – to settle vital questions. Who owns this money? Who controls this company? Who has the right to vote in this election?

Now we have a small piece of pure, incorruptible mathematics enshrined in computer code that will allow people to solve the thorniest problems without reference to “the authorities”.

The benefits of decentralised systems will be huge: slashed overheads, improved security and (in many circumstances) the removal of the weakest link of all – greedy, corruptible, fallible humans.

But how far will disruptive effects reach? Are we rapidly approaching a singularity where, thanks to Bitcoin-like tools, centralized power of any kind will seem as archaic as the feudal system?

Neither are credit-fuelled binges possible. The smoke-and-mirrors system that banks use to magic money into existence when they create loans is not possible in a Bitcoin world.

It is perhaps no coincidence that Bitcoin emerged from the ashes of a savage recession. Although it is radical in many ways, it is also strictly conservative: no debt is possible, no complex derivatives, no untrustworthy middlemen. You either have coins, or you don’t.

The timing was impeccable, the perfect antidote to a financial system which can’t be trusted not to lead us into another round of boom and bust.

The hidden power of the Facebooks, Twitters and Googles of this world is inspiring digital anarchists to destroy the smug, jargon-infested giants of Silicon Valley. But who are these hackers? They’re unlikely to be career criminals who identify themselves by their black hats. On the contrary, they may well have picked up their techniques while working in Palo Alto.

In some cases, the very same people who helped create these mega-corporations are now working on “disruptive technologies” to replace them.

We think of Silicon Valley as peopled by “liberals”. But that’s misleading. They may be socially liberal, but their “libertarianism” is often predicated on very low taxes funding a very small government. They have a soft spot for the anti-tax Republican Rand Paul and the kill-or-be-killed ethos of the paranoid libertarian capitalist Ayn Rand (whom Mr Paul was not named after, though he’s had to spend his whole life denying it).

Jeff Garzik, the Bitcoin developer, tells me that the blockchain technology is “the biggest thing since the internet – a catalyst for change in all areas of our lives”.

How the Blockchain can impact the internet and domain name registration in particular:

ICANN’s vice-like grip on domain names is now looking more tenuous than ever before. Currently the group decides which top-level domains can exist (.co.uk for example) and hands out a licence to sell addresses underneath them (such as telegraph.co.uk) to commercial registrars. You pay an annual fee to “own” a domain name.

ICANN then runs a system called DNS which maps these easily remembered domain names to the IP addresses where websites actually reside. Unless your users are willing to remember a long string of numbers such as 93.184.216.119, you have to buy into the domain name system.

Until Namecoin.

This crypto-currency is based on Bitcoin, but instead of acting like money it acts like internet addresses. It has claimed the .bit domain as its own and anybody with Namecoin can use it to reserve an address.

Now let’s make a leap of imagination. It turns out that whole companies are also vulnerable to being replaced by Bitcoin offshoots.

What about the impact on social media?

A project called Twister is attempting to replace Twitter with a peer-to-peer tool based on the blockchain, with messages instead of coins. Unlike Twitter, there is no central company to subpoena or coerce into handing out details of users. If you’re an activist in the Middle East posting messages critical of the government, you may feel safer on Twister than Twitter.

Now for email.

Bitmessage aims to do the same thing for email. It’s entirely safe, secure and anonymous, with no central point for storage for snooping agencies to target. Downloads of the program increased fivefold during June 2013 after news of email surveillance by the NSA emerged. Companies like Google, Yahoo! and Microsoft which offer webmail should be very worried indeed that there is a free, secure system on the horizon. And they are.

Venture capitalist Fred Wilson, who spotted firms such as Twitter, Tumblr and Foursquare early, recently wrote in a blog post: “Our 2004 fund was built during social. Our 2008 fund was built during social and the emergence of mobile. Our 2012 fund was built during the mobile downturn. And our 2014 fund will be built during the blockchain cycle. I am looking forward to it.”

Atlanta-based Shawn Wilkinson is already famous in crypto-currency circles for creating Coingen, a simple service that builds clones of Bitcoin. Want to launch a new currency named after yourself? For just a few pounds Shawn can make it happen.

The Blockchain and data storage services:

Now he’s launching an online data storage service called Storj that will sit atop the Bitcoin network. Thanks to the thousands of miners, the currency is the largest computing network in the world, says Wilkinson. “Why just use that for money? We want to take the Bitcoin model and apply it to other systems.”

And people would switch in their droves, he claims, as the price would be orders of magnitude lower than the current offerings.

“Were approaching a completely different economic model here. Now that we have these decentralised technologies, now that we’ve reduced the cost, what can we do with that? Bitcoin is the largest supercomputing network in the world – it outclasses the top 500 supercomputers by several orders of magnitude and has done since last year.”

So what is this Ethereum everyone is so giddy about?

Bitcoin is a decentralised network designed to replace the financial system. Ethereum is a decentralized network designed to replace absolutely anything that can be described in code: business contracts, the legal system or, as some of Ethereum’s more evangelical backers believe, entire states.

Primavera De Filippi, a postdoctoral resreacher at CERSA/CNRS/Université Paris II, is one of Europe’s most intellectually dazzling experts on digital and civil rights in cyberspace. She’s currently at Harvard, exploring the legal challenges of decentralised digital architectures.

Ethereum, she says, is “really sophisticated, and if any of these platforms are going to take off, I believe it’s the one.

“It becomes a completely self-sufficient system, impossible to corrupt. It’s a disruptive technology, and society will adapt to it, but it will be a slow process.”

What about the Blockchain for retail purchases of…anything:

Amir Taaki is one of a group that recently walked away with the $20,000 first prize in a Toronto Bitcoin hackathon for a proof-of-concept demonstration called DarkMarket. Their idea was to create a fully decentralized shopping service, complete with transaction reviews, a safe escrow service to prevent fraud and user profiles. All of this hangs off Bitcoin’s blockchain. There is no server for the FBI to seize, no owner to interrogate and no ISP to demand records from; it’s the Hydra of online drug retail.

Mike Hearn, a former Google employee who left to work on Bitcoin, described in a recent lecture how the blockchain could be used to form bizarre new autonomous systems that would radically change our daily lives.

He imagined iswarms of drones that could deliver small packages from A to B in an entirely secret and untraceable manner. This would present a huge opportunity for enterprising criminals, but also an enormous threat to the newly privatised Royal Mail and countless other courier companies.

What about transportation?

Hearns described another scenario, set 50 years from now. A fictional character called Jen wants a taxi. She tells her smartphone where she’s heading and it immediately starts gathering bids from nearby taxis and ranking them based on price and user reviews. This system on which requests and offers bounce around is called TradeNet, and it would be based on blockchain technology.

The strange thing about these vehicles is not that nobody drives them, as self-driving cars will have become commonplace decades before, but that nobody even owns them. They are what Hearn calls “autonomous agents”, independent machines which earn their own money through fares, pays for their own fuel and repair and operates utterly without outside control.

All of this is made possible by Bitcoin. The B-word really is inescapable: it may be only one application of the blockchain but it has proved its power quite amazingly.

“All you need to instantiate a Bitcoin wallet is generate a large random number, and pretty much anything can do that. So these devices, they actually earn money and they pay their own costs. And this makes them the first form of artificial life truly worthy of the name.”

Now for the holy grail of decentralization: Government.

If you are looking to undermine centralised power, the biggest, most tempting target is government itself.

There are lots of people trying to make inroads into the currency of democratic systems – dollars, sterling, euros, whatever – with the blockchain. Others want to replace state currencies entirely.

The blockchain makes perfect sense for this application because all transactions (they can be thought of as votes in this scenario) are recorded in perpetuity for reference. It also provides transparency so that a person can check that his or her vote was actually counted. Otherwise, how can you ever really be sure that your paper ballot made it to the final count?

The ultimate aim is “liquid democracy”: not to just elect representatives and let them get on with it, and not necessarily to have direct referenda on each tiny issue, but to offer a system so flexible that a happy medium can be struck for every citizen.

And control could be infinitely fine: say you’re a cyclist, you could hand over voting power on all road safety matters to a cycling charity that pushes for better infrastructure, but retain votes on economic matters and leave everything else in the hands of your local Liberal Democrat office.

“The idea behind liquid democracy is not to remove representative democracy with direct democracy, but to let you choose your means of democracy. You don’t use an airplane to get to the street corner, and you don’t walk from London to Tokyo: depending on what you want to do, you choose the means of transport,” Robles told me.

It sounds appealing. But how does the blockchain record votes? In basic terms, with Agora, each voter gets some coins (in this case Zerocoins, an add-on to Bitcoin which shrouds transactions in anonymity) and they pay them into an account representing a choice. Imagine a yes/no referendum where the winning option is simply the account with the highest balance.

Andreas Antonopoulos is chief security officer at UK-basedBlockchain.info, the world’s largest Bitcoin wallet provider with over 1.1m registered users. Unlike many of the startups here, the company is several years old and already well respected in the Bitcoin community for building useful, reliable tools.

“This technology makes it largely unnecessary. The end result is that you’re going to see some pretty big changes. Those changes will be because there are now better ways of doing things, and people will choose those better ways. There’s nothing particularly libertarian about that. It’s simply a recognition that you can achieve in software what regulation has failed to achieve.”

“It’s ironic how what terrifies the banks today is actual free market capitalism. They don’t like that. They don’t like competition. Actually having to compete with smaller competitors that are more nimble and less costly is something that they’ve been able to prevent for years with the use of regulation as a barrier to entry.”

“We can’t even imagine what things people are going to build. But just in the last year, from watching the startups in the space, I’ve been amazed at the range of innovation that occurs when you combine internet, the sharing economy and crypto-currencies.

“This allows forms of self-organisation that don’t depend on parties or representative government at all. Representative democracy was a solution to a scaling problem. The fact that you couldn’t get a message across Europe in anything less than a couple of weeks.

“Well, that issue of scale has now been solved. So the question is, why do you need representatives? If you ask people who were born with the internet they can’t understand why we need them. To a whole generation of people [the phasing out of represnetative democracy] this is already a normal and natural progression. And now we have the tools to do that.

“Decentralised institutions are far more resilient to that: there is no centre, they do not afford opportunities for corruption. I think that’s a natural progression of humanity.

“It’s an idea that has existed for centuries and has progressively become more and more prevalent. The essential basics of going from monarchies to democracies, from distributing information, knowledge, education and wealth to the middle class, and power to simple people, has been a trend that has lasted now for millennia.”

“This is not some kind of libertarian manifesto, or anarchist manifesto, saying that we don’t need mechanisms for achieving social cohesion. It’s simply recognising that we can create better mechanisms as we solve problems of scale. That’s all. It’s not some kind of crazy ‘we don’t need governments’ manifesto. It’s simply that we can make better governments when we don’t concentrate power as much in the hands of a few people.”

“As my ancestors in Greece figured out more than three thousand years ago, power corrupts. You can read about that in the writings of the ancient greek philosophers, and nothing really has changed – only that scale of power, and the scale of misery that can be created when that power is wielded to do bad things.”

Daniel Larimer, who is working on a tool called Bitshares to apply blockchain technology to banking, insurance and company shareholding, believes that this new breed of technologies will ultimately render government entirely obsolete.

“If you think about it, what is the reason for government? It’s a way of reaching global consensus over the theory of right and wrong, global consensus over who’s guilty and who’s innocent, over who owns what.

“They’re going to be losing legitimacy as more open, transparent systems are able to provide that function without having to rely on force. That’s my mission in life.”

What is clear is that the reactionary image of Bitcoin as a volatile, fragile currency for paedophiles and drug dealers is far off the mark. Just as the British pound, US dollar and euro, Bitcoin will be used for all manner of nefarious activities, but will also open up a world of opportunity.

As the first cryptocurrency, it may not last forever. But the blockchain technology which underpins it cannot be uninvented. It has already begun to worm its way into every aspect of our lives, swallowing up authority and distributing it to us via computer programs.

The big problem – and in the world of computers this has been solved so many times before – is that blockchain systems are complicated to use. But soon, they won’t be. And then the masses will swarm towards them, creating a world we barely recognize.

If this doesn’t convince skeptics that Bitcoin isn’t a “scam” or “ponzi scheme” I don’t know what will.

In Liberty,
Michael Krieger

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3 thoughts on “The Coming Digital Anarchy”

  1. Not going to happen. The internet is not going to last much longer as a public utility. Too much energy needed to power it and keep it running. When the financial system goes, which will be soon, so goes the internet. Wait and see.

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