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Date: Tue, 16 Nov 93
From: Timothy C. May

Greg Downing writes:

> I have been reading this list for some time now. I have noticed in the
> conversations that we all pretty much agree that (any?) government intervention
> is undesireable. I have seen no dicusion of what we as Extropians should do
> about this. What is our role in dealing with the problem of government? How
> far should we go? I don't want to argue the basics, this is just a gap in my
> knowledge of Extropians.
> Greg Downing

Some of us believe various forms of strong cryptography will cause the power of the state to decline, perhaps even collapse fairly abruptly. We believe the expansion into cyberspace, with secure communications, digital money, anonymity and pseudonymity, and other crypto-mediated interactions, will profoundly change the nature of economies and social interactions.

Governments will have a hard time collecting taxes, regulating the behavior of individuals and corporations (small ones at least), and generally coercing folks when it can't even tell what _continent_ folks are on!

Read Vinge's "True Names" and Card's "Ender's Game" for some fictional inspirations. "Galt's Gulch" in cyberspace, what the Net is rapidly becoming already.

I call this set of ideas "crypto anarchy" (or "crypto-anarchy," as you wish) and have written about this extensively. The magazines Wired (issue 1.2), "Whole Earth Review" (Summer, 1993), and "The Village Voice" (Aug. 6th, 1993) have all carried good articles on this.

Look at my .sig (attached, at the end, where all sigs belong) for a highly condensed summary of crypto anarchy.

A short summary, written in 1988, is also contained below. I dashed this off in an hour, and a few things could stand to be changed or updated, but I've been leaving it as it is for historical reasons.

If this approach to the problem interests newcomers to the Extropians list, they should be aware that a mailing list, the "Cypherpunks" list, exists to discuss these and related points. (Though not all on the Cypherpunks list are anarchocapitalist libertarians. Many are just interested in privacy, others want to see power taken away from multinational corporations, and so on.) You can subscribe to the list by sending a request to "".

Here's the promised manifesto:

The Crypto Anarchist Manifesto

Timothy C. May

A specter is haunting the modern world, the specter of crypto anarchy.

Computer technology is on the verge of providing the ability for individuals and groups to communicate and interact with each other in a totally anonymous manner. Two persons may exchange messages, conduct business, and negotiate electronic contracts without ever knowing the True Name, or legal identity, of the other. Interactions over networks will be untraceable, via extensive re- routing of encrypted packets and tamper-proof boxes which implement cryptographic protocols with nearly perfect assurance against any tampering. Reputations will be of central importance, far more important in dealings than even the credit ratings of today. These developments will alter completely the nature of government regulation, the ability to tax and control economic interactions, the ability to keep information secret, and will even alter the nature of trust and reputation.

The technology for this revolution--and it surely will be both a social and economic revolution--has existed in theory for the past decade. The methods are based upon public-key encryption, zero-knowledge interactive proof systems, and various software protocols for interaction, authentication, and verification. The focus has until now been on academic conferences in Europe and the U.S., conferences monitored closely by the National Security Agency. But only recently have computer networks and personal computers attained sufficient speed to make the ideas practically realizable. And the next ten years will bring enough additional speed to make the ideas economically feasible and essentially unstoppable. High-speed networks, ISDN, tamper-proof boxes, smart cards, satellites, Ku-band transmitters, multi-MIPS personal computers, and encryption chips now under development will be some of the enabling technologies.

The State will of course try to slow or halt the spread of this technology, citing national security concerns, use of the technology by drug dealers and tax evaders, and fears of societal disintegration. Many of these concerns will be valid; crypto anarchy will allow national secrets to be trade freely and will allow illicit and stolen materials to be traded. An anonymous computerized market will even make possible abhorrent markets for assassinations and extortion. Various criminal and foreign elements will be active users of CryptoNet. But this will not halt the spread of crypto anarchy.

Just as the technology of printing altered and reduced the power of medieval guilds and the social power structure, so too will cryptologic methods fundamentally alter the nature of corporations and of government interference in economic transactions. Combined with emerging information markets, crypto anarchy will create a liquid market for any and all material which can be put into words and pictures. And just as a seemingly minor invention like barbed wire made possible the fencing-off of vast ranches and farms, thus altering forever the concepts of land and property rights in the frontier West, so too will the seemingly minor discovery out of an arcane branch of mathematics come to be the wire clippers which dismantle the barbed wire around intellectual property.

Arise, you have nothing to lose but your barbed wire fences!

Date: Tue, 16 Nov 93
From: Timothy C. May

I want to elaborate on some comments I made earlier about anarchy and crypto-anarchy and tie them to the "Oceania" ocean colonization thread.

I wrote:

> Some of us believe various forms of strong cryptography will cause the
> power of the state to decline, perhaps even collapse fairly abruptly.
> We believe the expansion into cyberspace, with secure communications,
> digital money, anonymity and pseudonymity, and other crypto-mediated
> interactions, will profoundly change the nature of economies and
> social interactions.
> Governments will have a hard time collecting taxes, regulating the
> behavior of individuals and corporations (small ones at least), and
> generally coercing folks when it can't even tell what _continent_
> folks are on!

The "crypto phase change" is the transition to wide use of private communications to conduct business, to arrange deals, to meet other people, and so on. I contrast it with the idea of a "singularity," so often associated with nanotechnology (cf. Vinge, Stiegler, et. al.), because nothing is ever truly a "singularity." Discontinuities, yes. Phase changes, yes. Singularities, in the sense of infinite spikes, no.

Crypto and related cyberspace methods have the potential for causing a fairly rapid transition to a new sort of society. Just as printing presses did. Just as radio, television, and new media did.

And this phase change could involve--likely _will_ involve--many people, perhaps the majority of the population in America and Europe, at the least.

Some scenarios:

- people hear about widespread tax evasion by crypto-anarchists, and they get interested (for various reasons, including jealousy, anger, greed, desire for freedom). "Crypto lasing."

- consultants discover they can consult on projects from other countries, from jurisdictions that might ban their invovlement if they knew about it, and so on.

- the "permanent tourists" in the world-spanning economy.

- black markets in credit information, dossiers, insurance fraud cases, medical malpractice, etc.

A simple example that will reach many people: You're thinking of hiring a lawyer. Under U.S. law, records of "bad lawyers" are hard for outsiders to keep, to gain access to, etc. The Bar Associations, like the American Medical Association, like other officially sanctioned "guilds," prefers to keep outsiders in the dark. So what happens when "Reputations R Us" sets up shop in cypherspace--or, more mundanely, on an island in the Caribbean that has no such laws? What happens when for the price of an offshore phone call or Net query the parochial and paternalistic U.S. laws can be trivially bypassed? It'll be a whole new world.

Ditto for gambling, escrow services to hold money (think of the reduction in violence when "reputable" digital banks will hold the drugs _and_ the money), information markets, private investigation services, rent deadbeat records, and credit records that include _all_ creditor information (not just the last 7 years, and not just the "allowable" dare anyone infringe my right to take into account records more than 7 years old?!).

(For those worried about tracing the calls, about sting operations, etc., that's where digital mixes (remailers) come in and where prepaid "coupons" ("The holder of this number is entitled to one database query") come in. Even short of full-blown Chaumian digital money, a lot can be done. Prepaid digital coupons, or digital postage of a sort, can be used to make these off-shore--or in cypherspace, a la the "BlackNet" demonstration I did a few months back, and written about in Wired--markets liquid and profitable.)

Like a seed crystal dropped in a supersaturated solution, crypto could trigger a phase change of immmense proportions. (The metaphor is slightly awkward, as I see the crypto phase change _increasing_ the number of degrees of freedom, as in the transition from a solid to a liquid to a gas.)

The "Oceania" project, in contrast, tends _not_ to produce this kind of phase change. Joe Nextdoor may eventually start using data havens and crypto tax evasion schemes, but he's not at all likely to volunteer to man the oars on a floating barge.

(I don't mean to defame the Oceania project. Just my sense of humor.)

Ocean-going colonies have not appeared, even by corporations and states, for whatever reasons, so the onus is on the oceanauts to explain just what is out there that is so valuable (that can't be done by ordinary boats and ships that fish, mine for manganese nodules, do oceanographic research, etc.).

Merely seeking freedom is probably not enough. Gambling, prostitution, and easy access to drugs and other hedonistic delights may be enough, but I've seen nothing to indicate this type of "Love Boat" is being planned. Just the dreamy ideas about self-sufficiency. A commune by another name. A floating "Hog Farm," with anarchocapitalist ideology replacing Thoreau and Marx.

In any case, Oceania-type projects, even if moderately successful (and not just the rusting pontoons I predicted in an earlier posting), are very unlikely to trigger a phase change such as the one I see for crypto.

This is why I am currently placing my faith in strong crypto and am so active in the Cypherpunks group. That's one place where the Revolution _will_ be televised.

--Tim May

Date: Mon, 29 Nov 93
From: Timothy C. May

In this essay, quickly written, I'll address some points raised about the government and its "willingness" to let strong crypto and crypto anarchy develop, and how the Data Superhighway will require all data packets to have "license plates" on them (my biggest speculative leap).

We're in an arms race, us versus them, and I think the government as we know it will ultimately lose.

Mike McNally writes:

> Given the material in the WiReD 1.6 article, how likely is it that a
> true anonymous digital cash system would be allowed? I know, I know;
> there's "no way to prevent it"; however, I think that concept is based
> on the premise that the Government proceeds rationally.

You mean, how likely is that the government will allow a system that makes taxation almost impossible, that enables black markets, that facillitates the transfer of illegal information, and that basically nukes the present arrangement?

I don't think they'll "allow" it. But this doesn't mean it won't happen.

> If somebody with an axe to grind gets hold of the "kidnapped baby"
> scenario described in _Applied_Cryptography_, plenty of public outrage
> and indignation could be generated. Imagine a made-for-TV docu-drama
> that shows teams of strange greasy little hackers hunched over their
> glowing workstations, wailing kidnapped babies piled in a corner.
> Go on, reassure me that "all is well".

I can write more after I shut these babies up...maybe it's time to just sell a few or recycle my stock. My new babytender, a nice young girl named Polly Klaas I picked up a while back, is working out well, though.

(This was politically incorrect humor, outlawed on the Data Highway in 1997. As President Hilary put it: "That's not funny!")

The "crypto crackdown" Mike is alluding to is one that has be predicted for a long time. We are indeed in an "arms race": both sides are racing to cut the other off.

Strong crytography means government can no longer do its thing, at least not has it's accustomed to. Strong crypto means untraceable payments, secure phone lines, information markets in what are now military and corporate secrets, liquid markets in illegal services, and of course a nearly total collapse in taxation abilities.

On taxation, it is certainly clear that many folks will still be "visible" and will be taxed as heavily as other--I don't want to imply that the guy who works for Lockheed or behind the counter at Safeway is somehow going to be liberated from paying taxes by the onset of crypto anarchy.

No, the effect will be more of an erosion of _support_ for taxation, as word spreads that many consultants, writers, information sellers, and the like are sheltering much of their income via use of networks and strong crypto. The tax system is already shaky--$5 trillion national debt, growing every year--and it may not take much of a push to trigger a "phase change," a tax revolt.

This "crypto phase change" (a term I prefer to the term "Singularity," so beloved by the nanotechnology folks) is what I see coming. Whether the government can crack down first is the fly in the ointment.

Note that the way strong crypto works means a successful crackdown could only come as the result of strong police state policies. That is, outlawing of unapproved encryption, on demand inspection of all data packets, strict regulation of across-the-border telecommunications, an end to the Internet as we know it today, and strict penalties merely for "conspiring" to use strong crypto. Eric Hughes' "Use a random number, go to jail" line is not so far from the truth.

I oppose the government's plan for a "data superhighway" for two main reasons. First, there's no need and the free market is already giving us a multiplicity of lines, channels, satellites, etc. Anarchic development can produce a more robust system, actually. Second, I fear the involvement of government. Already the NII proposal is talking about the nice things it needs to ensure fair access, a nondiscriminatory system, and so on. These "nice" things also imply government restrictions on content. But I'll save this for another thread.

Imagine this: to get on the Data Superhighway, which will likely be the only major lines if the government succeeds in making it the mandatory standard, every data packet must have a "license plate." Don't laugh! The idea of a license plate on data packets is coming. It would provide the kind of traceability that control freaks like Detweiler claim to want (I say "claim" because our pal LD is the largest user of pseudonyms we have.) It would provide for taxation of packets, much like road fees and truck charges, and it would generally make the Net an environment hostile to crypto anarchy.

The forces of NIST/NSA and the National Information Infrastructure are moving in this direction.

I'm moving in another direction, toward the overthrow of the present system.

Over the past several years I've thought about these issues at length. I don't think they can crack down. Can they stop "dial-a-prayer" computer confessionals? (priest-confessor privilege, recognized at a deep level) Can they stop attorney-client computer communications? (To wiretap these would break open the entire legal system.)

Can they place police monitors in every role-playing game or deep-immersion VR system? (Make no mistake about it, systems like "Habitat" and LambdaMOO, and many more are coming or already exist, will be full-fledged agoric marketplaces, with goods and services being traded. Read "Snow Crash" or "True Names" to remind yourself of this (I'm not endorsing the specific views of Stephenson or Vinge, who got some things "wrong"--no big deal, as their general vision was what was so important.)

Can they tell people they can't compress their files? (compressed files look outwardly like encrypted files) Can they ban the use of steganography--if they can find it being used at all?

No, too many bits are flowing already. Too many degrees of freedom. A Soviet-style crackdown is not in the cards.

But we stil have to fight.

Things like the Clipper still need to be fought, by ridicule ("Big Brother Inside" stickers), by lawsuits (not my specialty), by denouncement (as when industry groups denounce it), and especially by developing and promoting alternatives. The market is truly ripe for a Soundblaster-type voice encryption system---when will one of you budding entrepreneurs get one out?

Having read the three main "position papers" on NII (the White House paper, the CPSR analysis, and the EFF "Open Platform" piece), I'm as convinced as ever that the Data Highway is largely about regaining control of the currently anarchic network system. It just isn't about giving ghetto residents access to Crays, nor is it about the government being benificent in expanding our cable choices from 50 channels of shit to 5000 channels.

No, it is about taxing the commerce that is moving increasingly into cyberspace. It is about continuing to regulate and control. It is about the survival of Big Brother.

The arms race is on.

--Tim May

Timothy C. May | Crypto Anarchy: encryption, digital money, | anonymous networks, digital pseudonyms, zero
408-688-5409 | knowledge, reputations, information markets,
W.A.S.T.E.: Aptos, CA | black markets, collapse of governments.
Higher Power: 2^756839 | Public Key: PGP and MailSafe available.
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