Bitcoin can arbitrage Netflix VPN workaround

I almost overlooked This Forbes article. It was published in June 2016. It is not about Bitcoin. Rather, it discusses the Netflix effort to thwart forbes-logoVirtual Private Networks (VPNs), which had been used to circumvent geographic content restrictions.

The  author describes a fascinating work-around. It probably doesn’t break any government law—although it most certainly violates the Terms of Service which users acknowledge when they sign up or log into their Netflix account.

The workaround begins in paragraph 4, with the title: “The Solution”. It describes a self-balancing market for p2p use of desirable residential IP addresses. For example: USA has the largest number of movie and TV titles. The author proposes an automated process of bidding for temporary remote control of USA Netflix subscriptions, using the subscriber’s internet connection as a gateway, while content is delivered to Beijing, Dubai or Fiji.

Effectively, Bitcoin is used as the backbone of a clever negotiating, bidding and settling mechanism. Since USA IP addresses have a premium value to foreign netflix-logo-01Netflix subscribers, it enales USA members to auction the temporary use of their Internet connections.

Of course, using Bitcoin to arbitrage the disparate value of residential Internet connections doesn’t explain the technical process of relaying movies through remote user gateways. That part is achieved by adding an arbitrage-activated VPN proxy into members who choose to bid or auction regional access. Netflix is looking for the IP addresses of commercial VPN gateways and not the IP addresses of its own individual members. Although, I have not yet tested the work-around described, it should be transparent to both users.

For me, this is a particularly elegant application of capitalist economics. In fact, I recently sold my patent on a similar bid-for-attention mechanism that stops Spam without blocking anything that each individual user would find desirable, even if it is unsolicited, commercial or sent in bulk.

The key information [excerpt from linked article]:

“Basically, the number of users trying to watch U.S. Netflix would vastly outnumber the users trying to watch Australia Netflix so U.S. connections would be oversubscribed. This can be resolved with a balancing mechanism with financial incentives, such as Uber surge pricing,” Yen told Forbes.

Bitcoin pile-s“When U.S. connections become oversubscribed, U.S. users would be able to make money by making their connections available while foreign users would have to pay more to access U.S. connections. Bitcoin could be used to facilitate these payments since it is anonymous, decentralized and has a low transaction cost.”

What makes this proposal so attractive, is that it thumbs a nose at any vendor that thinks that it can control the individual use or application of its product in the field for no good reason. (I consider geographic content restrictions to be  “No good reason”!). Regardless of EULAs and even national laws, in the end, it’s very hard to argue with grassroots phenomena and facts on the ground.

Hey! You’ll get no dog whistles here.

Ellery Davies is a frequent contributor to Quora. He is also co-chair of
Cryptocurrency Standards Association and chief editor at A Wild Duck

Chicago taxes Netflix—Why not!

Service taxChicago is my birthplace and my favorite place to visit family. Unfortunately, it is also a city guided by morons.

Chicago politicians think that they can tax cloud and streaming services that sell to their residents, including Netflix, Spotify, Pandora, XBox Live—and even premium email services.

They can enact a cloud tax, of course. But can it be applied fairly? Can it be enforced? —At what cost? It certainly can’t be enforced at a cost that is less than many times the anticipated revenue. But who cares? This is Chicago!

More likely, any attempt to enforce such a screwy tax would simply move the providers further away from Chicago jurisdiction. If the entire country is compelled to honor and collect taxes on behalf of every other municipality, then the service will simply be moved to another country. After all, we are talking about virtual services, aren’t we?!

Can you imagine the Chutzpah? As if there is something local about internet content.

  • The broadband service itself?
    Sure. It fits within a framework of municipal services. These can be taxed as telecommunication services—at least if they have a fixed delivery address.
  • internet-tax-increaseBut a service that originates out of town and is designed for users on the go? Not a chance!

Can Chicago tax at the source? Good luck. Can they tax at the consumption point? (i.e. tax anyone using a service within their jurisdiction). Let’s think it through. The dim bulbs who enacted this tax, haven’t tried thinking, so we will pose the easy questions…

Will they tax tourists passing through airports and checking email or watching Netflix in the waiting area? What about a Chicago resident who watches TV primarily at his child’s home in the suburbs? Does he pay the tax to Chicago? Perhaps the city will create a bureaucracy of exemptions for tourists and residents who consume entertainment while traveling. Why not? Whatever tax is ultimately collected could be used to employ more Internet Savvy politicians! Then it becomes a jobs bill!

Here’s another good scenario: What about an XBox account that was purchased as a gift by an out of state Grandpa. He used his own address so that he can pay the bills. Is Grandpa now an illegal tax delinquent? chicagoWill there be a warrant for his arrest when he visits little Billy? Or will Chicago perform deep-packet inspection to ensure that Billy is lawfully using the Internet and is not using an out of town XBox account?

Perhaps, the tax is simply levied on a subscriber’s billing address. That would be real smart, Mr. legislator! What about a Chicago residence who is traveling far from home? I occasionally use a VPN relay to get around Netflix geographic restrictions. Does a Chicago resident traveling or living in Germany pay a tax to Chicago for viewing Netflix?

This is not a minor land grab. It is a serious attempt to tax the flow of bits.

wing_nuts

Chicago City Council meeting

It is doomed to failure, of course. Perhaps city council overlooked the fact that the state recently struck down the Amazon tax. Florida even backed down from taxing real-world services such as dental cleaning, Federal Express, fitness membership and private school tuition. If they found it difficult to tax these businesses with Florida addresses and direct customer contact, just how far do they think a tax on cloud services will fly?

Wild Ducks know that I am given to sarcasm. I promised a few readers that I would tone it down just a scooch. But when wing nuts enact wacky legislation in the name of helping constituents (or in the name of religious freedom), avoiding sarcasm is an unreasonable expectation. Their actions beg to be put into perspective. Not one of these idiots sat down to consider whether a cloud tax is reasonable, fair or enforceable.

Ellery responds. Speak your opinion here.