Why is Bitcoin Capped at 21M units?

I was asked this at Quora.com. But the query deserves a companion question, and so I approached the reply by answering two questions.


You might have asked “Why was Bitcoin designed to have a cap?” But, instead, you asked “Why is the cap set at 21 million bitcoins”. Let’s explore both questions starting with the choice of a circulation cap…

Why set the cap at 21 million BTC?

The choice of a cap number is arbitrary and in fact, it could be 1 or one hundred trillion. It makes no difference at all and it has no effect on the economy—even if Bitcoin wereStacks of Bitcoin to be adopted as a currency all over the world. If it were set to 1 BTC, we would simply discuss nano-BTC instead of 1 BTC for amounts of about $650.

In fact, we already do this today. For many purposes, people are concerned with very small payments. And to best discuss these payments, we have the Satoshi. There are 100,000 Satoshi to each bitcoin (BTC).

What is important, is that the total number of bitcoin (regardless of how many units there are) can be divided into very tiny fractions. That way, the total worldwide supply can be divided into smaller and smaller slivers as market adoption gains traction. Everyone needs to earn, save, spend or pay with a piece of the pie. All users need to know is what fraction of the pie do I control? and not how many ounces, pounds, Kg, or tons is the pie. That is just a number.

Incidentally, the same could be said of gold (it can be shaved very thin), but gold is not quite like computer bits. It has industrial and cosmetic value, and this intrinsic demand for gold (beyond it’s role as a pure monetary instrument) has an effect on supply and demand along with the influence of investment, circulation, savings and reserve.

Why is there a cap at all?

At the beginning of this answer, I suggested another question: Why is Bitcoin capped at all? After all, the monetary supply in every country grows. Even gold production is likely to continue for centuries to come. Why not Bitcoin?

Satoshi designed Bitcoin to eventually become a deflationary currency. I believe that he/she recognized inflation is an insipid tax that constitutes an involuntary redistribution of earned wealth. With a firm cap on the total number of units that exist, governments can still tax, spend and even enforce tax collection. They can go about business building bridges, waging war and providing assistance to the needy. But without a printing press in the hands of transient politicians, they can only spend money with the consent of their constituents and residents.

Of course, governments could borrow money by issuing bonds. But with a capped currency, they must convince creditors that the country has the will and the ability of to actually repay its debts from real dollars and not inflated dollars.

In effect, monetary policy is restricted to the business of the governed, but the money itself is not coined by a domestic treasury. It is the province of something that is far more certain than a human institution. It arises from pure math. It is open and transparent. Everyone is an auditor, because the bookkeeping is crowd sourced.

For prescient legislators and national treasurers, Bitcoin presents far more of an opportunity than a threat. It is good for government, business and consumers, because it forces an honest money supply. Ultimately, it builds trust in government, because no one can cook the books, water down wealth, or print their way out of debt.

What about recession. Isn’t it a result of deflation?

Deflation doesn’t lead to recession. Rather, it sometimes accompanies a recession. Recession is caused by an uncertain job market, war, a massive supply chain interruption or political upheaval. In one way or another, it boils down to a lack of confidence sparked by one of the economy’s core foundations: consumers, investors, business or creditors.

Bitcoin as currency removes a major impediment to confidence. By creating a system that cannot be rigged, it fosters trust in government along with an open and transparent treasury.

Ellery Davies co-chairs CRYPSA and was MC at The Bitcoin Event in New York. He writes for Quora, LinkedINWild Duck and Lifeboat Foundation, where he sits on the New Money Systems Board.

Can Bitcoin be defeated by legislation?

The question breaks down into two parts:

  1. For what public benefit?     —and—
  2. No, it cannot be achieved in this way

Governments are in the business of regulating certain activities—hopefully in an effort to serve the public good. In the case of business methods and activities, their goal is to maintain an orderly marketplace; one that is fair, safe and conducive to economic growth.

But regulation that lacks a clear purpose or a reasonable detection and enforcement mechanism is folly. Such regulation risks making government seem arbitrary, punitive or ineffective.

QR Code_CRYPSA-001«—  This is money. It is not a promissory note, a metaphor, an analogy or an abstract representation of money in some account. It is the money itself. Unlike your national currency, it does not require an underlying asset or redemption guarantee.

Bitcoin is remarkably resistant to effective regulation because it is a fully distributed, peer-to-peer mechanism. There is no central set of books, no bank to subpoena, and no central committee to pressure (at least not anyone who can put the genie back into the bottle). In essence, there is no choke point or accountable administrative party.

Sure—it is possible to trace some transactions and legislate against ‘mixers’ and other anonymization methods—but there is no way to prevent a transaction before it occurs or to know the current distribution of assets. Bitcoin can exist as a printed QR code and it can be transmitted from a jail cell with a blinking flashlight. Sending bitcoin from Alice to Bob has no intermediary. Settlement requires only that one of the parties eventually has access to the Internet. But, there is no credit authority or central asset verification.              [continue below image]…

feral_cat_mating-02-ts

If you are thinking of legislating against the use of Bitcoin, you might as well pass laws to ban the mating of feral cats or forbid water from seeping into underground basements. These things are beyond the domain of human geopolitics. You can try to shape the environment (e.g. offer incentives to cats and water levels), but you cannot stop sex or seepage.

Fortunately, Bitcoin is not a threat to governments—not even to spending or taxation. A gross misunderstanding of economics and sociology has led some nations to be suspicious of Bitcoin, but this improper perception is abating. Governments are gradually recognizing that Bitcoin presents more of an opportunity than a threat.

I have written more extensively on this issue:

Ellery Davies is co-chair of The Cryptocurrency Standards Association, MC for The Bitcoin Event in NY and monetary systems board member for Lifeboat Foundation. This fall, he will teach Cryptocurrency and The Blockchain in Massachusetts.

Privacy –vs– Anonymity

My friend and business partner, Manny Perez holds elective office. As New York State politicians go, he is an all around decent guy! The first things colleagues and constituents notice about him is that he is ethical, principled, has a backbone, and is compassionate for the causes he believes in.

Manny wears other hats. In one role, he guides an ocean freighter as  founder and co-director of CRYPSA, the Cryptocurrency Standards Association. Manny-guitar-sWith the possible exceptions of Satoshi Nakamoto and Andreas Antonopoulos, Manny knows more about Bitcoin than anyone.

But Manny and I differ on the role of privacy and anonymity in financial dealings. While he is a privacy advocate, Manny sees anonymity —and especially civilian tools of anonymity—as a separate and potentially illegal concept. He is uneasy about even discussing the use of intentionally architected anonymity in any financial or communications network. He fears that our phone conversation may be parsed (I agree) and trigger a human review (I agree) and that it could be construed as evidence of promoting illegal technology. This is where we differ… I agree, but I don’t care how anyone who is not party to a private conversation construes it! Yet, I see anonymity as either synonymous with privacy or at least a constituent component. You can’t have one without the other.

Manny was raised in Venezuela, where he was schooled and held is first jobs. He was involved in the energy industry. He acknowledges that experience with a repressive and graft-prone government, lead to a belief in a more open approach: free markets coupled with a democratic government.

Perhaps this is a key source of our different viewpoints. Manny comes from a repressive land and has come to respect the rules-based structure within his comfort zones of banking, energy and government. He is a certified AML expert (anti-money laundering) and believes strongly in other financial oversight rules, like KYC (Know Your Customer) and RICO (Racketeer Influenced and Corrupt Organizations Act).

Because Manny is appreciative of the opportunity and benefits conveyed by his adoptive country, he may overlook a fact that whispers in the minds of other privacy advocates: That is, we may one day need protection from our own government. After all, who but a conspiracy nut or white supremacist could imagine the US government suppressing its populace. Sure, they engage in a little domestic spying—but if you have nothing to hide, why hide at all?!

This week, Manny posted an open letter to the cryptocurrency community. His organization, CRYPSA is at the intersection of that community with law, technology and politics. His letter addresses privacy, anonymity and transparency, but the title is “How can you report a stolen bitcoin?” For me, the issue is a non-sequitur. You needn’t, you shouldn’t, the reporting superstructure shouldn’t exist, and in a well designed system, you can’t.* More to the point, the imposition of any centralized reporting or recording structure would violate the principles of a decentralized, p2p currency.

To be fair, Manny is not a sheep, blindly falling into line. He is shrewd, independent and very bright. But in response to my exaggerated and one-dimensional Manny, I have assembled some thoughts…

1. Privacy, Anonymity and Crime

Bitcoin pile-sThe debate about Bitcoin serving as a laundering mechanism for cyber-criminals is a red herring. Bitcoin does not significantly advance the art of obfuscation or anonymity. There have long been digital E-golds and stored value debit cards that offer immunity from tracking. They are just as easy to use over the Internet.

Moreover, it’s common for crime or vice to drive the early adoption of new technology, especially technology that ushers in a paradigm shift. The problem with linking Bitcoin to crime is that it drives a related debate on transparency, forensics and government oversight. This is a bad association. Transparency should be exclusively elective, being triggered only after a transaction—if and when one party seeks to prove that a payment was made or has a need to discuss a contractual term.

On the other hand, a good mechanism should render forensic analysis a futile effort if attempted by a 3rd party without consent of the parties to a transaction. We should always resist the temptation to build a “snitch” into our own tools. Such designs ultimately defeat their own purpose. They do not help to control crime—Rather, they encourage an invasive government with its fingers in too many people’s private affairs.

CRYPSA is building tools that allow Bitcoin users to ensure that both parties can uncover a transaction completely, but only a party to the transaction wishes to do so!. For example, a parent making a tuition payment to a college can prove the date, amount and courses associated with that payment; a trucker or salesman with a daily expense account can demonstrate to his employer that a purchase was associated with food and lodging and not with souvenirs. And, of course, a taxpayer under audit can demonstrate whatever he wishes about each receipt or payment.

But in every case, the transaction is opaque (and if properly secured, it is completely anonymous) until the sender or recipient chooses to expose details to scrutiny. I will never accept that anonymity is evil nor evidence of illicit intent. Privacy is a basic tenet of a democracy and a government responsible to its citizens. CRYPSA develops tools of transparency, because commerce, businesses and consumers often need to invoke transparency—and not because any entity demands it of them.

We are not required to place our telephone conversations on a public server for future analysis (even if our government saves the metadata or the complete conversation to its clandestine servers). Likewise, we should not expose our transactions to interlopers, no matter their interest or authority. The data should be private until the data generator decides to make it public.

2. Reporting a Transaction (Why not catalog tainted coins?)

Manny also wants to aid in the serialization and cataloging of tainted funds, much like governments do with mass movement of cash into and out of the banking network. This stems from an earnest desire is to help citizens, and not to spy. For example, it seems reasonable that a mechanism to report the theft of currency should be embedded into Bitcoin technology. Perhaps the stolen funds can be more easily identified if digital coins themselves (or their transaction descendants) are fingered as rogue.

The desire to imbue government with the ability to trace the movement of wealth or corporate assets is a natural one. It is an outgrowth of outdated monetary controls and our comfort with centralized trust-endowed. In fact, it is not even a necessary requirement in levying or enforcing taxes.

Look at it this way…

  1. Bitcoin transactions are irreversible without the identification and cooperation of the original payee (the one who received funds). Of course, identification is not a requisite for making a transaction, any more than identification is required for a cash purchase at a restaurant or a newsstand.
  2. There are all sorts of benefits of both anonymous transactions and secure, irrevocable transactions—or least those that cannot be reversed without the consent of the payee. This is one of the key reasons that Bitcoin is taking off despite the start-up fluctuations in exchange rate.
  3. Regarding the concern that senders occasionally wish to reverse a transaction (it was mistaken, unauthorized, or buyer’s remorse), the effort to report, reverse or rescind a transaction is very definitely barking up the wrong tree!

The solution to improper transactions is actually quite simple.

a) Unauthorized Transactions

Harden the system and educate users. Unauthorized transactions can be prevented BEFORE they happen. Even in the worst case, your money will be safer than paper bills in your back pocket, or even than an account balance at your local bank.

b) Buyer’s Remorse and Mistaken transactions

Buyer beware. Think before you reach for your wallet! Think about what you are buying, from whom, and how you came to know them. And here is something else to think about (issues that are being addressed by CRYPSA)…

i.   Do you trust that the product will be shipped?
ii.  Did you bind your purchase to verifiable terms or conditions?
iii. Is a third party guarantor involved (like Amazon or eBay)?

All of these things are available to Bitcoin buyers, if they only educate themselves. In conclusion, “reporting” transactions that you wish to rescind is a red herring. It goes against a key tenant of cryptocurrency. It is certainly possible that a distributed reverse revocation mechanism can be created and implemented. But if this happens, users will migrate to another platform (call it Bitcoin 2.0).

You cannot dictate oversight, rescission or rules to that which has come about from organic tenacity. Instead, we should focus on implementing tools that help buyers and businesses identify sellers who agree to these extensions up front. This, again, is what CRYPSA is doing. It is championing tools that link a transaction to business standards and to user selective transparency. That is, a transaction is transparent if—and only if— the parties to a transaction agree to play by these rules, and if one of them decides to trigger the transparency. For all other p2p transactions, there is no plan to tame the Wild West. It is what it is.

* When I say that you should not report a stolen coin, I really mean that you should not run to the authorities, because there is nothing that they can do. But this is not completely accurate.

20130529_102314a1. There are mechanisms that can announce your theft back into a web of trust. Such a mechanism is at the heart of the certificate revocation method used by the encryption tool, PGP (Pretty Good Privacy). CRYPSA plans to design a similar user-reporting mechanism to make the cryptocurrency community safer.

2. Authorities should still be alerted to theft or misuse of assets. They can still investigate a crime scene, and follow a money trail in the same way that they do with cash transactions, embezzlement or property theft. They can search for motive and opportunity. They have tools and resources and they are professionals at recovering assets.


 

Disclosure: Just like Manny, I am also a CRYPSA director and acting Co-Chairman. (Cryptocurrency Standards Association). This post reflects my personal opinion on the issue of “reporting” unintended, unauthorized or remorseful transactions. I do not speak for other officers or members.

Why are Governments Against Bitcoin?

bitcoin_accepted_here-aI contribute to LinkedIN community discussions on Bitcoin and other cryptocurrencies. That’s because in my day job, I am a principal at the standards organization that defines and promotes a framework of best practices and safety valves for this rapidly growing community.

You might think that a digital currency standards organization is comprised of Bitcoin miners, economic anarchists, Geeks and “bleeding-edge” adopters. If you do, then you would be mistaken. Our founders come from a background of compliance, anti-money laundering and Internet services. Interest from prospective members points to a broad cross section of government, academia, banks, brokers and exchanges.

Today, the event host for an industry forum posed this question (abbreviated version):

Why are regulators and governments afraid of Bitcoin?

Based on the elaboration, it seems that he is focused primarily on the US government.

I may be a minority voice in this particular discussion, but for what it is worth, I respectfully disagree with the fundamental assumption in the question…

Certainly, in some countries governments are concerned that Bitcoin presents a threat to banks, the reserve mechanism, commercial and consumer protection, and the centralized control of monetary policy & supply. But the US is not among these countries. The few official policies that have hit the streets advise caution (especially among banks and speculators), but recognize that Bitcoin is an asset—and in some states, even a currency. A few regulators have even suggested that in the long term, cryptocurrency may represent more of an opportunity than a threat.

Banks, card service collaboratives and regulators are warming up to Bitcoin. The evidence is legion. Influential individuals are tentatively embracing Bitcoin or waiting with an intent to jump in when they sense an alignment of interests, education, regulatory guidance and safety mechanisms.

These individuals are among the strongest voices calling for standards and well defined practices. Standards—even ones that are voluntary but verifiable—are the key to safety, and thereby to adoption and growth.

CRYPSA is an independent standards organization gaining attention within business and government. It is moving quickly on a plan that does not exclude anyone. In fact, the voluntary standards and applications that CRYPSA produce will not weaken the allure of Bitcoin to early adopters, including “Libertarians” or those who value privacy above the rule of law. That is, new standards and mechanisms do not force disclosure or impose rules on P2P transactions between trusted parties.

WildWest-3But what CRYPSA and other best-practices organizations hope to achieve is added trust, security, and even insurance—by demonstrating standards compliance in real time. Ultimately, they will make Bitcoin safe for the rest of us.

It’s not very different from the wild west. Gold, minerals, buffalo and opportunity abounded. But, in the early days, plucking this bounty was limited to the most strident thrill seeker. For all others, the risk of becoming a homesteader was too high. Threats came from all directions: Natives, rattlesnakes, gunslingers, stage coach gangs, and scam artists.

Gradually things change. The wild west was tamed.

The federal government deployed a network of sheriffs and marshals. Risk abated and productivity spread across the west. With Bitcoin, the solution won’t come from the federal government, because one of the key tenants of Bitcoin is a inherent decentralized and personally-empowering architecture. But the government is not blind to this, and a surprising number of politicians even recognize that an empowered consumer can be an asset to national financial health. For this reason, regulators are gradually moving from “wait-and-see” to “How can we help?”

WildWest-1For some, these observations defy the popular conception of government, because governments typically try to consolidate, regulate and enforce. But with Bitcoin, the CRYPSA staff is finding that representatives of government are generally receptive, and even acknowledging that the role of a Federal Reserve or of central banks may be greatly transformed in the next decade.

As with many of the members, I was surprised with the open and friendly nature of discussions. My conclusion is that a popular conception of government with its head it he sand—or one that is unwilling to work with “facts on the ground”—does not apply to US policy makers and regulators. The people in these roles are prepared to embrace change and they want to facilitate the process for everyone’s benefit.

So, the top-line question, “Why are governments (or regulators) against Bitcoin?” is a bit like asking “When will you stop beating your mother?” It is not possible to answer, because in my opinion, the question is based on a false assumption. Bitcoin is gaining steam, and legitimate objections are rapidly falling away.

WildWest-2

Trust a Bitcoin Exchange without Regulation

Yesterday, after the spectacular failure and bankruptcy filing of Mt. Gox, the world’s largest Bitcoin exchange, Peter Finn, an IBM architect, launched a survey within a LinkedIN discussion group. The single question and multiple choice options were:

“In Light of MTGOX what level of transparency should there be for Bitcoin Exchanges?”

1. None. Exchanges Can do as they please
2. All Public Keys Disclosed and Signed
3. Show Public Keys, Source Code, Processes
4. Fully Regulated, Monitored, Audited

One day after it was published, respondents were decidedly negative on the option #1 (no regulation). They responded like this: 1–14%, 2–28%, 3–28%, 4–28%. I am among the 14%: No regulation. But only because Peter failed to cover all the bases. There is a far better option than regulation. But I am getting ahead of myself…

Regulation in a Decentralized, P2P
market, with Open Source Tools 

Suggesting that Bitcoin be “fully regulated” is like demanding that feral cats be licensed to procreate. Perhaps the point can be better illustrated by a metaphor closer to home: Perhaps we should regulate the use of file encryption or bit torrent clients. After all, they can both be used for circumventing copyright law or transmitting illegal content.

Governments are inevitably weakened by legislating against what cannot be regulated. The US has already tried to regulate encryption (PGP/Zimermann and Clipper chip) and they tried to legislate against the use of torrents (Actually, it was a prelude to torrents. Who remembers Napster?)

You can enact laws and regulations, but when you ignore motives, access and facts in evidence, you promote bureaucracy with a head-in-the-sand morality. Feral cats don’t read edicts. Their compulsion to reproduce is strong and they possess the tools they need to procreate. The same is true for bit torrent, encryption and a fully-distributed, low-cost, p2p payment mechanism that is adding users like a wild fire.

Considered in another light, Bitcoin was created to circumvent—or at least—transcend regulation. For many legitimate users, the whole point of a distributed, p2p network built upon open source tools is to unfetter users and disentangle government.

So the real question is not whether we should engage in useless legislation that ignores the facts on the ground. A better question is “How can we make the Wild West a bit safer?” I understand the need for public trust. ! But trust comes from transparency, accountability and outside audits. It doesn’t come from government regulation. Peter alluded to this in the very last sentence the text accompanying his sruvey. He said:

Certified-01

“Will users decide through consensus that
exchange XYZ chooses to fully disclose?”

Bingo! Create standards and practices—especially for security and transparency. Then, make it simple for anyone choosing an exchange or entering into a transaction to determine if the organization complies with industry best practice. Finally, offer a modest level of consortium insurance (to the user, or at least compliant exchanges), so that public trust can be tied to something tangible.

On Feb 25, one day after championing a joint statement from the few credible Bitcoin exchanges, Coinbase took a big step toward this goal when then invited a research analyst from a competitor to audit their internal security practices and randomly compare a customer transaction log to the public blockchain. The report includes an explanation of the test conditions and the results.

Laws are meaningless in a market that cannot be regulated. But industry standards, audits and certification can certainly step up to the task. They can build trust, confidence and stability. Just as importantly, they won’t interfere with the fraction of users who demand personal, private, p2p transactions without auditing or oversight. After all, we must never forget that these individuals started the revolution from which we will all benefit… even the “legitimate” commercial transactions that require transparency, security and an audit trail.

So, let’s revisit Peter Finn’s survey: What level of regulation should be mandated for Bitcoin exchanges?…

I propose Option #5: None. Exchanges can do as they please. But establish an easily verified, independent certification of standards & practices that can be tested at the URL throughout user interaction. Users can avoid the tool, add the tool, or ignore its warning. The certification (and a gut-simple way to see it & test it), empowers the user instead of the government. It also avoids entangling a new technology with unimaginable potential in red tape.

Incidentally, a group of individuals from this discussion group is working toward this goal right now. Although they have barely completed introductions, the Virtual Currency Collaborative Cryptocurrency Standards Association [CRYPSA] has hammered out a charter that will lead to a set of voluntary standards and practices to facilitate open, transparent, safe and auditable transactions within a community that often takes pride in their inherent freedom from regulation. Taming the Wild West will not be too difficult. And it won’t even be necessary to restrict gunslingers from walking into the saloon at high noon.

Christmas Trees & Menorahs: No place on Public Property

In 1990 and 1991, an atheist organization filed suit against cities and towns in Illinois, including Rolling Meadows, Zion and Palatine. It argued that a religious symbol in the official city seal constituted government recognition of a religion and caused harm. A city seal appears everywhere that official business is conducted. It is emblazoned on permits, forms, stationery, recycle bins, police cars, and even street signs.

At first, the towns fought back, arguing that a Latin cross in the corner of a city seal, an angel or a reference to God represents an aspect of town heritage and history. In fact, some towns were settled for religious reasons during colonial times. They also pointed out that US currency displays the words “In God We Trust” and that religious motifs are enshrined in government documents, buildings, history and even cited by our founding fathers.

Although decisions were split, the plaintiffs won their case on most counts and in most cities. Religious icons were stripped from the seals and eventually the court houses of many towns. Some civic leaders considered appealing the decisions, but after losing hundreds of thousands of dollars fighting the initial action, most towns gave up the fight and agreed to remove religious symbols.

How is it that a religious symbol can cause harm? For an atheist, I am a bit puzzled. To them, I would think that it should be no different than an artifact of fables and legend. But for people of other faiths, I certainly understand the problem. In one case that gained brief, national attention, the wife of a Rabbi covered the seal on her recycling bin and on an automobile windshield sticker. But this small act of protest had repercussions. The municipal government blocked her trash pickup and fined her for not displaying (or perhaps defacing) a required vehicle permit.

Before this post attracts all sorts of rants from the right, please consider this. Asking a devout Jew to display a crucifix in front of her home, even if it is small, is no different than asking a devout Muslim to wear a Star of David for the purpose of gaining access to the town dump. Preposterous! Even if the effect is unintended, the incorporation of religion into government – even if symbolic – is not harmless. It is intimidating, unfair and a form of bullying. It says that the town recognizes and serves this citizen, but not that one.

Some will argue that in a democracy, “Majority rules”. But this cliché is a bastardization of democracy. This type of thinking leads to Fascism. A true democracy protects the rights of individuals and never forces citizens into acts that benefit no one and isolate individuals. Rather, democracies actively protect diversity. For this reason, I stand with the Rabbi’s wife.

But let’s move forward 20 years. It is now Christmas 2011. Why, today, do most towns still decorate Christmas Trees on public property? I have no idea! Christians should be even more outraged than atheists and people of other faiths. Having government usurp a matter of family and personal faith is trite, insulting and nauseating. It is far worse than the commercial exploitation of faith that we see in malls and on television.

The issue is reaching a boiling point in the town of Evergreen Colorado, in which I have a friend. The town offered local Jews “equal access” by placing a giant menorah next to the town Christmas tree. The pendulum is swinging wildly this week. Early this week, newspapers reported Evergreen Bans Menorah, Keeps Christmas Tree, but just as abruptly, the two sides reached an accommodation. Now they are again saying “Let’s drape our court house in both faiths.”  If I were a local Jewish leader in Evergreen, I certainly wouldn’t want a symbol of a minor children’s holiday placed next to a Christmas tree. For God’s sake, get rid of both!

Do you really want equal time and equal space for Jewish symbols amongst Christian symbols?! Doesn’t that open a can of worms? What about Hindu, Buddhist, Shinto and Wicca? Does each minority get a symbol on the front lawn of City Hall?

Rather than “Equal Time” for flaunting Jewish holidays & symbols. I would much prefer that governments get out of the religion business altogether! It’s trite, bigoted and incredibly insulting. I have never understood why governments like to erect Christmas trees. I would rather teach my children that faith is expressed by the faithful and within their respective communities. Let us please end state funding or any state recognition of religious holidays & events. Let the tree to Christ go up on private property and let the Menorah go up on Mr. Levine’s front lawn or in front of Weinstein’s Deli (I made up the names, but you get the point).

Why not display a religious alphabet soup to assuage all residents?

What about the The Salvation Army? Projects of missionaries, and some self-help groups. Should they be granted meeting rooms in schools or donation pots at the post office? Of course not! Let them find donors in a church parking or at the entrance of Wal-Mart. (I am not arguing against retailers making their own decision). But wait? Is the Salvation Army a religious organization? Many people believe that their motives are as benign as the Girl Scouts. I am not a conspiracy theorist, but it seems reasonable to ask what the “Salvation” Army is trying to save?!

Should there be exceptions to my rule?

Sure! Every restriction should accommodate facts on the ground and be applied within reason. Even though Hanukkah is a minor children’s holiday blown out of proportion because of proximity to Christmas,  I accept that our national holidays include Christmas, Easter and the Gregorian New Year (I won’t even call that last one ‘religious’). The plurality of Christians is a fact and it seems reasonable that major holidays convenience the largest group. Likewise, I appreciate the fact that towns with a large Jewish population (like Brookline and Sharon in Massachusetts) structure the school calendar to accommodate Passover and Yom Kippur. I wouldn’t demand that the holiday be recognized (not even locally), but on the other hand, I bet families in these towns appreciate that teachers accommodate individual students who cannot attend on those few days.

What about the Boy Scouts and Girl Scouts? Fortunately, the Girl Scouts are not religious at all (they are not affiliated with the Boy Scouts). However, the Boy Scouts credo and pledge includes an oath of anti-atheism, and of course, they tried hard to block gay scouts and leaders. Alas, this isn’t a perfect world. Personally, I overlook the subtle and non-pervasive remnants of intolerance and religion in the Boy Scouts as long as their regional outposts are inclusive and accommodating. Their record is mixed, but religion is certainly a very minor footnote in their activities.

I have no problem with a school giving after school meeting space to scouts, as long as the on-site affairs are completely nonreligious and as long as the donation of space and service is treated like any other non-profit (e.g. the Red Cross or a local food drive).

So Sayeth Ellery. Tell me what you think.

Big biz & Uncle Sam like Tor, sort of…

Oceans of Data
Try to visualize all the data about you that is recorded, stored or transmitted each day in one form or another. Consider every possible source, both public and private. What if it could all be put together, correlated with data about every other person on earth and sifted by detectives whose only task is to look for subtle patterns of behavior?

Let’s start with phone calls: In addition to the number dialed, the phone company knows your location, the caller of ID of incoming calls, and even has access to the actual conversation. (Believe it or not, your government is listening). Check the phone bill of both parties and we can figure out how often you call each other. If we then learn everything we can about the people that you talk to, we can probably learn a thing or two about you. And speaking about location, did you know that both iPhones and Android phones log your precise location every few seconds and then transmit your location history to Apple or Google several times each hour? An even more ominous program discovered this week is embedded in Android phones. It sends every keystroke to your carrier even if you opt out.

What about your health records, magazine subscriptions, tax filings, legal disputes, mortgage records, banking transactions including charge card purchases? Now add your internet use – not just the sites at which you are registered, but every site you have ever visited. Suppose we add videos from convenience stores, traffic enforcement cameras and every ATM that you pass. Don’t forget the snapshot at the toll booth. They have one camera pointed at your face and another at the license plate. Of course, there is also a log entry from the toll payment device on your windshield and the key chain FOB that you use when you buy gas.

What about the relationships that are revealed by your old high school yearbook, old newspaper articles or that 4th grade poetry contest your daughter was in. There was a handout that night and so it counts as information related to you. How about that camera in the elevator at work? Suppose that it could recognize your face immediately and match it up with your fingerprints from your last international flight and your phone calls, web visits, hotel reservations and TV viewing habits.

Whew! That’s a lot of information to recognize or sift through in any meaningful way. But for a moment, ask yourself “What If”… What if all that data from every transaction record, GPS device, tax return and historical log could all be accurately attributed, correlated, matched and analyzed. What could be accomplished with all of this? Who wants it and for what purpose? Would their goals align with yours?

Person of Interest
In the CBS Television series, Person of Interest, a government computer looks for clues to the next terrorist event by monitoring virtually everyone and everything. The project doesn’t require its creators to build a new surveillance network. Massive amounts of data are already floating around us every day.

Of course, the data is fragmented. It was gathered for different reasons – mostly for private commerce (banking, medicine, safety). Few people consider it to impact privacy or personal freedoms, because we assume that It is too disparate and unwieldy for analysis by any single entity. Yet, in Person of Interest, the computer taps into all of these sources and mines the data for suspicious patterns.

As patterns emerge from all of this data, the computer finds converging threads based on individual behavior. Taken alone, the data points are meaningless — someone in Oregon signs for a package; someone using a different name in Rhode Island makes a plane reservation; someone in Pakistan fitting both descriptions checks into a motel and visits a convicted arms smuggler. The mobile phone carried by the last person accepts a phone call at a number previously used by one of the other individuals. Normally, no one could have ever fit these pieces together.

Eventually, the computer begins to identify suspicious activity. Depending on the programming and based on past findings, it even predicts events. But wait! Many of the patterns it finds are unrelated to terrorism. It finds clues to likely mob hits, crimes of passion, kidnapping, guns at school, and regional crime. The results are irrelevant to the machine’s purpose and in this fictional drama, the government decide that analysis would constitute illegal domestic spying. So they order the programmer to purge “irrelevant data” by adding a software routine to periodically delete extraneous results.

Of course, if the “personal” results were deleted, we wouldn’t have a new and exciting television series (my personal favorite). So, the middle-age geek who gave life to the analytics, recasts himself as a vigilante. He teams up with a former special ops agent (in the mold of Harrison Ford) and together, they follow data-mined leads in hope of saving innocent individuals.

In the US, our government has such a program. In fact, there are many Total Information Awareness projects. Unlike the Hollywood version, there was never any intent to purge personal information. In fact, it’s collection and analysis is the whole point. Another difference with the television series is that our government is not satisfied to mine public data or even legally obtained data. Instead, The federal government adds new primary data mechanisms every month and builds enormous enterprises to spy on individuals. This results in voluminous information daily, all of it available for future data mining without anyone’s knowledge or consent.

Of course, information and videos of individuals are routinely recorded wherever we go. But typically, we assume that this information is not centrally gathered, compared or analyzed. Most people assume that they are “off the radar” if they are not being actively tracked as part of an investigation. But with data mining techniques, no one is really off the radar. Machines make decisions about patterns that should be flagged and escalated for additional scrutiny.

Mixmaster: An Innocent Tool or Antiforensics?
In the 1990’s, despite a background in cryptography and computer science, I wasn’t aware of these programs. In the fields of political science and sociology, I was a ninnyhammer. It is either coincidence or perhaps prescience that I proposed and then participated in a project called a Mixmaster more than a decade ago…

The idea was simple: As you surf the web or send mail, your digital footprints are randomized so that an interloper or investigator could not piece together the participants in an internet exchange, nor determine the habits of an individual user. Well, they’re not really random, but the IP address reported to the email service or web page you visit is substituted by one associated with another participant in the project. That’s because each data leaving your PC is relayed through internet services associated with the others. We added a few simple facets to further obscure tracks:

  • Recognizing that a rogue participant might keep a log on the individuals who hand off data through his own relay (or may be compelled to do so in the future), our code automatically increased the number of ‘hops’ in relationship to the number of available peers. Anonymity was enhanced, because an unfriendly investigator attempting to trace the source of a web visit or email would need cooperation from a larger pool of participants.
  • Data between participants ware encrypted and randomized in length and even timing, to thwart possible forensic analysis.
  • A backward channel was added, but with very tight rules on expiration and purging. This allowed packet acknowledgement, web site navigation, and even two-way dialogue while still preserving anonymity.

Privacy & Politics
For most of us involved in the project, we had no endgame or political agenda. We simply recognized that it is occasionally comforting to send email, browse the web or post to a public forum without leaving a traceable return address. To those who claimed that our work might aid money launderers, terrorists or child molesters, we explained that identification and authentication should be under control of parties involved in a conversation. The internet is a new communications medium. But it was not designed to undermine the privacy of every conversation for the purpose of facilitating future forensic investigation. Investigators – if their purpose is supported by judicial oversight –have many old school methods and tools to aid their detective work. The growth of a new communication medium must not become a key to suppression or compromised privacy.

Vacuum-cleaner surveillance

Anonymous, but authenticated
There is a big difference, between identification and authentication. In a democracy, citizens are authenticated at the polls. But they enter a private booth to cast their vote and they turn in a ballot without a signature. They are identified (or even better, authenticated without identification) for the purpose of verifying eligibility. But their identity is not carried over to their voting decision. The real business is effectively anonymous.

This isn’t to say that all authorized entry systems should allow anonymous access. Of course not! Access entry systems typically might asks “Who are you?” (your User ID) and then ask for proof (typically a password). Your identity is not always required, but proof of authorized access can come in 3 forms. Very secure systems (such as banks) require at least 2 of these before allowing access:

  • something you know: A password or challenge
  • something you have: Evidence that you have a token or card
  • something you are:    A fingerprint, recognizable face, or voice match

In each case, it is the person behind the door that needs your identity or authorization and not your government.

Anonymity and encryption go hand in hand. Both technologies are used to ensure that internet communication is private and does not become the affair of your friends, employer, former spouse, or government overseers. So where, exactly, does your government stand on the use of internet encryption or anonymity? In most of the world, the answer is clear. Governments stand for propaganda and crowd control. They are against any technology that enhances privacy. But this is not a universal axiom: In Germany, they stand on the side of citizens. Your data and your identity belong to you. Very little of your affairs are open to the government. But in the United States, the answer is very murky…

The NSA conducts vacuum-cleaner surveillance of all data crossing the Internet–email, web surfing… everything!  –Mark Klein

Under George W. Bush, every bit of information was Uncle Sam’s business. With oversight by Dick Cheney (and hidden from legislative or judicial oversights), the executive branch concocted mechanisms of blatant domestic spying. Of course, the ringleaders realized that each mechanism violated the US constitution protection from unreasonable search, and so it was ordered and implemented covertly until a technician working for AT&T blew the whistle. Suddenly stories were surfacing that Uncle Sam was implementing a Reagan era project that had been shelved during the Clinton era. This launched a scramble to win public support for The Patriot Act, an absurd euphemism which attempts to whitewash illegal snooping as the patriotic duty of each citizen (talk about ‘deceptive’! Our leaders must think that we are sheep. Not just your garden variety grass-eating sheep, but really, really dumb sheep that feed on bull chips!).

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… until  and  (including preemptive data mining with programs like Dick Cheney’s “total information awareness”), back doors built into encryption chips, “deep packet” data sniffing installed at  major switching center, satellite interception of phone calls, and national security letters (a euphemism for warrantless snooping).

Before the Obama administration, the answer was clear. These technologies are barely tolerated for banking, medicine and commerce. But they are to be weakened, subterfuged or thwarted when used by private citizens. In each case, the government sought to block the technology or insert a back door into the programming code (and into actual data centers) for use during any future investigation. Of course, in a bold era of predictive behavior modeling, authorized investigations often gives way to fishing expeditions for the sole purpose of information gathering.

But something has changed in the past 2 years. As news spread about Internet censorship in China, the Arab spring, and covert schools for girls in Taliban controlled regions of Afghanistan, the US government began to recognize that uncensored and even untraceable Internet use sometimes coincided with foreign policy objectives. Imagine the conundrum this revelation must have generated within the state department! On the one hand, the Patriot Act sanctions blatant acts of domestic spying (including preemptive data mining with programs like Dick Cheney’s “total information awareness”), back doors built into encryption chips, “deep packet” data sniffing installed at  major switching center, satellite interception of phone calls, and national security letters (a euphemism for warrantless snooping). Yet, they also support freedom of speech and privacy for anything that supports US policy amongst our friends.

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Today, this model has been widely adopted and greatly enhanced by an open source project called Tor. In this blog, I won’t try to justify the need for robust anonymous relays. Better writers and social philosophers than me have explained why free and anonymous communications channels are central to a free and democratic society. Better writers than me have chronicled the abuse of the Patriot Act, Echelon, TIA and numerous other abuses of government forms of overreach. Better writers than me have explained how open and free communication leads to increased safety even if it sometimes facilitates communications among terrorists, digital pirates or pornographers.

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Turn of Events: Government as Advocate

  • Obama lends support to Tor
  • Tor to users: Use Amazon Cloud as bridge to anonymity  (this section under development)

Additional Reading

  • Carrier IQ (CIQ): A secret routine is embedded in Android phones sends every user keystroke to the network carrier, even when you opt out of every single connectivity feature. It cannot be uninstalled and cannot be uninstalled nor even shut down!
  • Surrounded by Surveillance: Is Everything Spying On You?

    Pigeons aren’t the only ones listening. The light pole itself broadcasts conversations.

    Even municipal light posts send conversations to government agencies, supposedly to aid first responders in an emergency. But wait! The manufacturer “proudly contacted DARPA” to suggest a more sinister use for the data collected from hidden microphones?

  • Wikipedia entry: Information Awareness Office (introduction & overview)
  • Official DARPA site: Information Awareness Office
  • The Smoking Gun: Discovery of Massive “Vacuum Sweep” Domestic Spying
    Leads to Patriot Act (euphemism for act of Profound Anti-Americanism)