I just found this video about some people’s initial responses to the coronavirus in China. The idolatry for the Chinese government, within China, is very remarkable: “Not afraid! We have our government, government can protect us!”
This is the second of four posts in which I discuss cryptography. If you read all four posts, you will understand the differences between symmetric and asymmetric cryptography, why the US government were against the spread of modern cryptography, how it has resulted in the first crypto war between code rebels (techno-libertarians) and the US government, and how you can easily protect your privacy using Pretty Good Privacy (PGP).
The topics of the four posts are:
- What is symmetric cryptography;
- What is asymmetric (public key) cryptography;
- The first crypto war between code rebels and the government;
- How to easily use PGP to protect your e-mail communication.
What is asymmetric (public key) cryptography
In my previous post, I mentioned four disadvantages of symmetric cryptography. These disadvantages are:
- The secret key must be shared between sender and receiver, before messages can be exchanged safely, preferably over a secure channel.
- The secret key is in two separate places.
- The sender of the message must trust the receiver that he will not steal or copy the secret key.
- It is not scalable for, for example, e-commerce.
Soon after the publication of the Data Encryption Standard (DES), asymmetric (public key) cryptography was invented by the Stanford graduate student, Whitfield Diffie, and Stanford Professor, Martin Hellman. This was a huge revolution within cryptographic research, because up until then it was thought that there should always be a shared secret key for the communication between the sender and receiver. The main question that Diffie and Hellman were trying to solve was: how can you create secure communication over a unsecure channel, when two corresponding people have never had contact with one another and therefore have not yet been able to share secret keys with each other.
The solution, public key cryptography, was introduced by Diffie and Hellman in their paper, ‘New Directions in Cryptography’ (1976). It inspired more cryptographic research outside the circles of secret agencies. Soon after the first publication on public key cryptography, three young Professors at MIT, Ron Rivest, Adi Shamir and Leonard Adleman, developed the now famous RSA public key cryptosystem in 1977.
Public key cryptography works as follows. There are two separate keys that correspond mathematically with one another: the public key and the private key. The public key is used to encrypt a message, and can be shared to other people. The private key is used to decrypt a message, and should be kept secret. Public key cryptography is hence a two way function. Just by knowing someone’s public key, it’s not possible to find out the person’s private key.
In our below example,
- Alice would like to send a secret love message to Bob.
- Bob has a corresponding public an private key, and sends the public key over a unsecure channel to Alice.
- Alice uses Bob’s public key to encrypt her secret love message.
- Alice sends the secret love message to Bob.
- Bob uses the corresponding private key to decrypt the message and finds out that Alice loves him.
Doing so, you can have private correspondence over an unsecure channel. Actually, we’re using public key cryptography all the time. Whenever you see a green padlock in front of the URL bar, it means that the data you enter on the website is first encrypted before it’s sent out.
Public key cryptography is not only used for the encryption and decryption of messages, but also for message authentication. If Alice would not have encrypted her message with Bob’s public key, but with her own private key, then the encrypted message can be decrypted with her public key. If you receive a message of John Locke and you’d like to know whether it’s really sent out by Locke, then you could look up his public key and use it to decrypt his message. If the result is plaintext, and assuming that Locke is the only person in the world who possesses the only private key that can produce the encrypted message, you can be sure that the message was sent by Locke. In other words: applying a private key to a message is the equivalent to putting a digital signature.
Digital signatures are particularly important, because they provide the following security aspects:
- Authentication: it offers proof that the message comes from the right person.
- Non-repudiation: we cannot deny that the signee has sent it.
- Data integrity: the message cannot be altered after it has been signed.
Diffie and Hellman saw great potential for public key cryptography in the coming digital age. The US secret intelligence, however, were not happy with this development in cryptography and tried to prevent public use of this new cryptosystem. The standoff between privacy advocates of whom many were cryptographers and the US government is known as the first crypto war.
In part three of this series, we will discuss the crypto war. Eventually, at the end of the post series, you will be able to encrypt your e-mails using public key cryptography.
Our Blockchain Basics book (Blockchain Basisboek in Dutch) has just been published on January 17th. You can download it here for free. The book will be used in classrooms across more than 8 local universities in the Netherlands. Hopefully, other universities will follow soon.
In this post, I’d like to discuss why I started the initiative to write the ±550 pages book, and what other project I have in mind to further improve blockchain education in the Netherlands.
The current state of blockchain education in the Netherlands
After two months of teaching blockchain at a local Dutch university, October 2018, I realized that blockchain education in the Netherlands (probably in most parts of the world) is still lacking.
I have identified the following 7 issues with our blockchain education in the Netherlands.
- Few Dutch class material. Good blockchain content is mostly written in the English language. My required reading list therefore consists mainly of English material, which proves to be a high barrier for Dutch-speaking students that are not at all familiar with (a) the technology and (b) the technical jargon used in the blockchain space.
- Dutch content is dispersed. Good content in Dutch is very dispersed among many different websites.
- Current Dutch books are not very useful for educational purposes. The books available on the Dutch market are not comprehensive enough and are not suitable for students.
- There is no standard for good blockchain education. Most universities are developing curricula on their own and there’s no standard on what good blockchain education consists of.
- Few sparring partners. Most universities don’t share their class materials or experiences teaching blockchain. Fortunately, the Dutch Blockchain Coalition is trying to change this, but we need to put much more effort to do cross-institutional sharing. Many universities also want to develop blockchain education, but lack the expertise. It would be good if these universities jointly develop their blockchain curriculum with other universities and share teachers.
- Knowledge is dispersed. Different faculties within a university are developing blockchain education in isolation and have their own blockchain experts who don’t know that some of their colleagues are also working on blockchain. Someone who’s working on the legal side of blockchain may not know that there’s someone at another faculty who is working on the technical or ethical side of blockchain. Bringing knowledge from different people together can lead to interesting and surprising new perspectives.
- Not enough diversity in perspectives. Blockchain can be approached from many different perspectives. Most classes only focus on a limited number of perspectives. A business department may heavily focus on blockchain applications and little on the technical side. Not knowing the technical side of blockchain, a business teacher may talk about potential blockchain applications and develop business models that are technically unfeasible.
I wrote the Blockchain Basics book, together with my colleague Arthur Janse, to tackle the first 3 issues (in green).
Main topics of the book
The book comprises three parts:
- Part I contains the technical side of blockchain and relevant innovations. Topics that we discuss are Bitcoin, current payment systems, consensus protocols, mining, nodes, forks, cryptography, smart contracts, governance, cryptoeconomics, and self-sovereign identities.
- Part II contains the economic and philosophical background of the Bitcoin blockchain. It discusses the different economic schools and in particular how the Austrian School of Economics and libertarianism, crypto-anarchism and cypherpunk have influenced Bitcoin.
- Part III contains topics revolving around enterprise blockchain. It discusses decentralized business models and enterprise applications.
While writing the book, I came up with the idea to create an organic community based open access digital knowledge platform that anyone can join for free. I pitched the idea in September 2019 at a Dutch Blockchain Coalition (DBC) event for all universities in the Netherlands. The DBC and other universities responded enthusiastically. Four months later, we have a proposal ready to develop the platform with 6 universities and the DBC.
We would like to use the Blockchain Basics book as the foundation of the platform, and – acknowledging that knowledge is decentralized – give all users the right to add new or revise already existing content. A public reviewing feature and a reputation system will be put in place to make sure that wrong content becomes corrected and to incentivize users to add good content. Students can also submit their Bachelor, Master and PhD dissertations and researchers can submit their papers on the platform.
I think that the multidisciplinary and cross-institutional cooperation will structurally improve blockchain education in the Netherlands. Doing so, I think we can tackle all the other issues (issues number 4 – 7).
In my previous post, I discussed the decline of internet freedoms around the world. While writing the post, I realized that I should follow-up on the topic and discuss how we can use cryptography to protect our communication from surveillance by governments and corporations.
This is the first of four posts in which I discuss cryptography. If you read all four posts, you will understand the differences between symmetric and asymmetric cryptography, why the US government were against the spread of modern cryptography, how it has resulted in the first crypto war between code rebels (techno-libertarians) and the US government, and how you can easily protect your privacy using Pretty Good Privacy (PGP).
The topics of the four posts are:
- What is symmetric cryptography;
- What is asymmetric (public key) cryptography;
- The first crypto war between code rebels and the government;
- How to easily use PGP to protect your e-mail communication.
What is symmetric cryptography
The use of cryptography is more than 4,000 years old. A classic example of symmetric cryptography is the Caesar cipher. It was used by Julius Caesar for his private correspondence with his generals.
The principle of the Caesar cipher is simple. The receiver of the message has to replace each letter with another letter, some number of fixed positions down the alphabet. If a Caesar cipher, for example, makes use of a rotation of three to the left,
- A in the encrypted text becomes X
- C becomes Z
- E becomes B
A Caesar cipher, compared to modern encryption methods, can be easily deciphered. You can for example make a frequency analysis of letters and see whether the letters in the encrypted text resemble typically Dutch or English writing. Also, each letter in the encrypted text only has 26 possibilities in the decrypted text, including itself. You can also make a table in which you write down the text and let a computer replace each letter with all 26 possibilities.
Up until the 1970s, cryptographers made use of this type of cryptography – also known as symmetric cryptography.
With symmetric cryptography, there is one key (the secret key) that is used for encrypting and decrypting the message. It’s therefore necessary for the sender of the message to share the secret key with the party he would like to correspond with.
The Caesar cipher is considered to be symmetric cryptography, because knowing the exact rotation (secret key) that is used to encrypt the message, you do also know how to decrypt the message.
Disadvantages of symmetric cryptography
There are several disadvantages to symmetric cryptography.
The first disadvantage is that the secret key has to be shared between the sender and receiver for messages to be exchanged privately. Sending the secret key over an unprotected communication channel is not recommended. In the next post, we will see how asymmetric (public key) cryptography allows us to send the encryption key safely over unprotected communication channels, while keeping the decryption key safely in our own possession.
The second disadvantage is that the secret key is now on two different locations. Thus, there are now two points of attack.
The third disadvantage is that the sender has to trust the receiver that he will not steal or copy the key or give it to someone else. It’s comparable to sharing the keys to your apartment: you also have to trust the other person not to steal your key, or copy your key, or give the key to another person.
The fourth disadvantage is limited scalability. Assuming that we’d like to communicate with a great number of parties, and that we’d like to provide each party with a different secret key for security reasons, we’d need to maintain a database of secret keys. For this setup to be user friendly in an environment like the internet, it would probably require an infrastructure of specialized distribution centers that generate secret keys each time two parties would like to initiate a private conversation. As these distribution centers would hold many secret keys, it would be a honey pot for hackers.
An example of symmetric cryptography is the Data Encryption Standard (DES), which was released on the market in 1975. It was developed by IBM, and was primarily meant to protect electronic communication between large financial organizations. Up until DES, cryptography was mainly a field for governments’ secret intelligence agencies to protect state communication. When the DES was released, it was received very well by cryptographers, until people found out that the National Security Agency (NSA) was involved with the development of the encryption key and purposefully influenced IBM to limit the key sizes from 64 bits to 56 bits. With 56 bits, there are 2^56 possible key combinations. This is considerably less than 64 bits keys. It is therefore much easier to break the encryption. Cryptographers believed that it would just be a matter of time before someone would find the right keys through a brute force search – meaning that you are trying all possible key combinations to find the right one.
Symmetric cryptography was the way cryptography was done until 1976 when two young researchers from Stanford University, Whitfield Diffie and Martin Hellman, invented asymmetric or public key cryptography.
Both researchers were discontent with DES, and Hellman even addressed a letter to the Secretary of Commerce, Elliot Richardson, saying:
I am writing to you because I am very worried that the National Security Agency has surreptitiously influenced the National Bureau of Standards [NBS] in a way which seriously limit the value of a proposed standard, and which may pose a threat to individual privacy. I refer to the proposed Data Encryption Standard. … I am convinced that NSA in its role of helping NBS design and evaluate possible standards has ensured that the proposed standard is breakable by NSA.
In my next post, I will discuss how public key cryptography works. Eventually, at the end of the post series, you will be able to encrypt your e-mails using public key cryptography.
What’s the state of our internet freedoms around the world? Freedom House (2019) has recently released a report entitled ‘Freedom on the Net 2019‘.
According to the report, more than 3.8 billion people still have no access to the internet, but
- 71% of those who have access do live in countries where individuals have been arrested and thrown in jail for posting political, social or religious content;
- 65% live in countries where individuals have been attacked or killed for their online activities;
- 59% live in countries where authorities use online commentators to manipulate online discussions;
- 33 out of 65 countries that were assessed have seen their internet freedoms decline over past year.
The greatest declines in internet freedoms happened in Sudan, Kazakhstan, Brazil, Bangladesh and Zimbabwe. For the fourth consecutive year, China has been the greatest abuser of internet freedoms, and although the United States is still scoring well, they have been on decline for three consecutive years.
The ranking from most to least free is as follows:
The report scores the countries, based on the internet controls that are in place:
Governments hold more technological capabilities than ever before to surveil their citizens. They make use of bots to manipulate social media and big data analyses to surveil citizens. See for example this. In August 2018, Le Dinh Luong has been sentenced to jail for 20 years in Vietnam for addressing and posting about human rights abuses on social media in the country. In March 2019, an Uyghur Muslim was stopped and interrogated for three days, because not HE but someone ELSE on his WeChat contact list had checked in from Mecca.
What was once a liberating technology has now become a conduit for surveillance and electoral manipulation. What can we do to protect our internet liberties?
When people say that we should involve society in discussing the ethics of cryptosystems and blockchain, we should ask ourselves why society is suddenly paying attention to the strides we’re making in the cryptospace. Where does this attention come from?
Back in 2011, society was considering us weird and misinformed. Encryption, digital money, anonymous networks, digital pseudonyms, zero knowledge, reputations, information markets, black markets, collapse of governments were spoken about openly in the cryptospace and no one paid much attention.
6-7 years later, after Bitcoin has shown it’s not just a fad, some groups within society have particularly paid close attention to cryptosystems and are now leading the discourse of what they call “discussions for society’s sake”. Who are they and what are their interests? Banks, central banks and national governments. They’re trying to shape the discourse around cryptosystems, because (a) banks are afraid of becoming obsolete by cryptosystems, (b) central banks are afraid of losing control over monetary policy, and (c) governments are afraid that their national currencies will be outcompeted by cryptocurrencies and their inability to tax and trace crypto payments. When they call for societal discussions about the ethics and consequences of cryptosystems, they thus enter the discussions from a position of fear. Can we then really have substantial discussions with them?
Or will they enter the discussions already motivated to overregulate cryptosystems – spoiling everything beautiful about cryptosystems so that their operations are not threatened?
My main point: be careful of those who say we need more public discussions on cryptosystems. Their calls sound noble, but they may have hidden agendas and don’t enter discussions with an open mind to learn about the beauty of cryptosystems.
Example case of this: Benjamin Lawsky and BitLicense.
Today is a big day for Hong Kong, as the people are voting for their district representatives. Never before has there been such a high voter turnout: 71.2%. I haven’t found any English website that allows you to follow the results live, so here is a Chinese website: https://dce2019.thestandnews.com/
Yellow is the pro-democracy camp and red is the pro-establishment (pro-Beijing) camp. As of this writing, some results have come in already and the pro-democracy camp is far ahead having occupied more than 90% of the seats (45 against 4).
This is the first stage of the 2019-2020 election cycle. The election will fill 452 seats on Hong Kong’s 18 District Councils. Next year, there will be elections for the territory-wide Legislative Council.
//Those who remain seem determined to fight to the end, no matter the risk.//
//“Everyone is exhausted and [when] someone wants to leave, they can’t. There are even kids that are 11, 12 years old,” said a social worker trapped in the campus//
//“Those people on the front, they are putting their lives on the line to fight for what they believe … they are doing it for all of us.” – Calvin See, 27//
《The New York Times》
//“They were all in good spirits,” he said. “They were not being deterred. They were ready to be arrested. They said, ‘We stand for freedom, dignity, democracy, human rights.’ They said they were staying.” – The pastor, William Devlin//
//“Carrie Lam’s murderous regime has resorted to brutality, which makes Hong Kong become a state of savage existence and astonishes the international communities,” he said in a statement early Monday.//
//“We’re fighting for our rights: we’re fighting for freedom of expression,” said a woman aged 25 who identified herself only as Mary-Jane. //
//”The Hong Kong government has all along decided to treat this as a law-and-order matter and has had no willingness to negotiate or talk or listen in any serious way to the demands of the protesters. At the end of the day, there has to be some kind of political solution,” Roderic Wye told Al Jazeera.//
//”If we don’t come out, no one will come out and protect our freedoms. Polytechnic University is my home,” – A 23-year-old protester and Polytechnic University alumnus//
The Hong Kong protests are sometimes called “open-source protests”, “decentralized protests” or “water revolution” due to its leaderless and organic nature. It’s a great example of how order can emerge within a decentralized social organization.
The protests may seem chaotic, but if one looks closer one can easily identify the diversity of roles that protesters and different communication tools are playing – making up an harmonious order. Below, you can find the different groups and tools within the movement that I have been able to identify.
|Communication channels||LIHKG, Reddit, Twitter, Telegram, Facebook and more… Communication channels with high encryption standards and servers outside of Hong Kong are preferred as to maintain more privacy and to make it harder for the HK government to close down the servers or seize account information of protesters|
|Protest songs||Glory to Hong Kong, We Will Fight for Hong Kong, Sing Hallelujah to the Lord, Do you hear the People sing, Below the Lion Rock, Boundless Oceans Vast Skies, Raise the Umbrellas, Add Oil etc…|
|Teargas ‘fire fighters’||Fire fighters whose main role in the protests is to extinguish the police’s tear gas|
|Dunkirk moment||When the police shut down the Hong Kong metro system (MTR) after the protests at the HK Airport, most protesters either had to walk home or take the buses back to Hong Kong central. As buses were checked by the police to find, and in many cases arrest, the protesters, some sympathizers of the protests took their cars to HK Airport and give them a ride home|
|Pro-HK pr||Artists mobilize themselves in Telegram groups – some are as large as containing 200+ artists – to create art and other pr material to support the protests|
|Suppliers and first-aid people||Suppliers donate anonymous travel cards, cash, clothes, vouchers, temporary housing etc… The first-aid people give medical care to those injured in the protests. They carry around first-aid kits|
|Protect the Children group||Elderly that come between the police and young protesters during confrontations to give the youngsters time to flee|
In this post, I’d like to share some protest songs that have emerged in the past few months. Some songs were specifically created during the protests, while others are older songs that have been adopted to emphasize the spirit of the movement.
Compilation of several Protest Songs
Glory to Hong Kong
We will fight for Hong Kong
Do you hear the People sing
Boundless Oceans vast Skies
Fly with You (和你飛)
High Wall and Egg (牆與雞蛋)
This song is based on the following quotation from Haruki Murakami’s Jerusalem Prize acceptance speech in 2009:
If there is a hard, high wall and an egg that breaks against it, no matter how right the wall or how wrong the egg, I will stand on the side of the egg. Why? Because each of us is an egg, a unique soul enclosed in a fragile egg. Each of us is confronting a high wall. The high wall is the system which forces us to do the things we would not ordinarily see fit to do as individuals… We are all human beings, individuals, fragile eggs. We have no hope against the wall: it’s too high, too dark, too cold. To fight the wall, we must join our souls together for warmth, strength. We must not let the system control us – create who we are. It is we who created the system.
No Withdrawal, No Surrender, No Retreat (不撤∙不散∙亦不退)
Welcome to the Black Parade
I’ve been following the Hong Kong protests very closely since it started. Watching the live videos of the protests gives you a better impression of what Hong Kong is really like at the moment.
In this post, I’d like to share a link where you can view live videos of on the spot journalists:
The chief executive of Hong Kong has passed the anti-mask law today, further escalating Hong Kongers’ anger. Large groups of protesters in Hong Kong have now declared the establishment of a provisional government of Hong Kong in several neighborhoods.
The main premise of the declaration is that when a government does not represent the people anymore, the people have the right to establish their own government. The English version of the full declaration is as follows:
In the development of human civilisation it is inevitable for a dysfunctional institution to be abolished and replaced by a better one. This is how progress is made. If a government is not of the people, by the people, for the people, then it is inevitable that the people will establish a government of the people. The Hong Kong Special Administrative Region Government has proved itself to be not of the people, by the people, for the people. We hereby declare the establishment of the Provisional Government of Hong Kong.
‘We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.’ We have always identified with this inviolable principle of truth. The government and the legislature are established by the people to ensure that their rights will be protected against encroachment. All the powers of the government are derived from the people. If a government violates this principle, then the people have an absolute right to abolish it and establish a new one.
The HKSAR government, which is controlled by the People’s Republic of China and the Chinese Communist Party, has turned a blind eye to the demands of the people, deprived the people of their rights, failed to enact laws safeguarding the wellbeing of the people, and taken away the freedoms of the people. Today, against the wishes of the majority of the people, the HKSAR government bypassed the Legislative Council and enacted the Anti-Mask Law in a deliberate attempt to deny people the right of assembly. We believe that the HKSAR government has lost its legitimacy as well as the authorisation from the people. We thereby declare the immediate abolition of the powers of the Chief Executive and the principal officials of the HKSAR government.
The Provisional Government of Hong Kong declares:
- The departments of the HKSAR government from now on shall be placed under the authority of the Hong Kong Provisional Government;
- The chief executive, the chief secretary, the directors and deputy directors of the bureaus, the heads and deputy heads of the departments shall leave office and the new post holders shall be appointed by the Provisional Government;
- All departments shall immediately cease all the new policies promulgated by the HKSAR Government since 2018, and personnel at all levels of personnel shall retain office and maintain the operation of necessary services of the departments until further notice;
- The Provisional Government’s term ends in five years or until the formation of a government under a chief executive nominated and elected by universal suffrage (whichever is sooner); the Provisional Government shall prepare for the election within one year of its establishment and complete the election within three years;
- The chief executive and the appointed officials of the Provisional Government shall not be eligible for appointment as officials of the government or public organisations once they leave office;
- The provisions of the Laws of Hong Kong shall remain in force until new laws are enacted by the Hong Kong Provisional Government;
- The Legislative Council shall be dissolved and the Provisional Legislative Council shall be elected within three months and the Legislative Council shall be elected within one year; there shall be 70 seats in the Provisional Legislative Council: 12 seats each for Hong Kong Island and the Kowloon West constituencies, 10 seats for East Kowloon East, and 18 seats each for the New Territories West and New Territories East.
After many years on the sidelines, a consortium of large corporations and social impact organizations led by Facebook will soon enter the blockchain space. In the past week, Facebook has given more details regarding their future cryptocurrency, the Libra. It is supposed to be released by the consortium in the first half of 2020.
This article is my first reaction to the Libra White Paper, which describes Libra as a cryptocurrency with low volatility that will make use of its native Libra blockchain. What follows is a description of Libra as described in the White Paper, and 11 predictions about its consequences for the blockchain and financial world.
Goal of Libra
The goal of the Libra Association is to create a stable currency that makes use of a secure and stable open-source blockchain. Open-source means that the source code is public for anyone to see. In order to keep the currency stable, it will be backed by Libra Reserves – a basket of low-volatility assets, such as bank deposits and short term government securities in currencies from stable and reputable central banks such as the USD, EUR, CNY, and GBP. These assets will be managed by a global network of custodians. The Libra will thus enjoy the benefits of stable traditional government money and the benefits of blockchain-based cryptocurrencies. Users of Libra should theoretically be able to make transactions with Libra coins with low costs, and within immediate speeds to anyone anywhere in the world.
The Libra Association is hopeful that it will give a boost to better and cheaper financial services, therefore, making financial services accessible for everyone.
Considerations for building the Libra blockchain
The Libra blockchain has been developed, while taking the following three requirements into consideration:
- It must be scalable to accommodate billions of accounts, meaning that it can process a high transaction throughput with low latency.
- Funds and financial data must be secure.
- It must be flexible enough to power the ecosystem’s governance and future implementations of innovative financial services and upgrades to the network are possible.
In order to make the above possible, the association has chosen to:
- Develop a new programming language, called Move. The goal of Move is to make the development of “smart contracts” and transaction logic more secure. Hence, with fewer risks that a software developer writes mistakes into his code that lead to unforeseen bugs and unpredictable behavior of the software.
- In addition, a Byzantine Fault Tolerance consensus protocol suitable for processing a great number of transactions will be used. This protocol will also be more energy efficient, than for example Bitcoin’s “Proof of Work” consensus protocol, and have less network latency. The protocol is a set of rules determining how consensus about the correct state of the blockchain within a blockchain network can be reached and what the requirements are for approving transactions.
- Finally, according to the White Paper, the blockchain will be pseudonymous and will offer users the option to create multiple addresses that cannot be linked to their real-world identities.
The Libra Association
The Libra Association will consist of a consortium of around 100 founding members. It has approximately 30 members so far. Among these members are PayPal, Mastercard, Visa, Spotify, Über and Ebay. In order to become a founding member, they had to put in $10 million for the Libra Rerserve. In addition to commercial corporations, there are also social impact organizations such as Women’s World Banking and Kiva. The members of the consortium will receive Libra Investment Token (LIT) with which they can participate in the governance of the Libra Association. It is also possible that they will be rewarded with LIT for maintaining the blockchain and approving the transactions.
The Libra Association will manage the Libra Reserve for the stability and growth of the Libra economy. The interest earned from the reserves will be used to cover their costs. The Libra Association will be the only party that can issue and burn (destroy) Libra tokens. When authorized resellers have bought Libra from the Association with fiat money, new Libra will be issued. Libra will only be burned when authorized resellers sell their Libra to the Libra Association in exchange for their underlying assets. The Libra Reserve thus acts as the “buyer of last resort”. The policy of the Libra Association can only be changed through majority consensus of the members. It’s still unclear how much consensus is needed to change the Association’s policies. It’s also unclear how much consensus is needed to approve a transaction. It’s expected that this will be similar to other Byzantine Fault Tolerance protocols and that 67% consensus is needed.
Another goal of the Libra Association is to develop a standard for open digital identities. Such identities are, according to the Association, a prerequisite for financial inclusion.
According to the White Paper, the blockchain is permissioned. This means that not everyone is able to run the blockchain on their own computer – only the members of the Association are allowed to do so. They are nonetheless planning to make the transition towards a permissionless environment in which everyone can run his or her blockchain node within 5 years.
Is the Libra blockchain really a blockchain?
Although the Libra Association asserts that Libra is blockchain-based, one could argue that it’s actually not. Blockchains normally make use of data blocks that are chained to each other. Libra, on the other hand, is a single database and does not make use of such blocks. It acts more like a payment scheme.
For more details regarding this topic, see the following article of Simon Lelieveldt.
If Libra does not make use of a blockchain, is it a cryptocurrency?
Some may believe that Libra is not a real cryptocurrency if it does not make use of blockchain. However, in order to be consistent, they should then also maintain that B-money – a precursor to Bitcoin with many similar properties as Bitcoin, but without the use of blockchain – is not a cryptocurrency.
I will not get deeper into the discussion whether Libra is a blockchain or a cryptocurrency.
Libra will be implemented into the ecosystem of Facebook and will also be available in other applications owned by Facebook, such as Messenger, Whatsapp, and Instagram. The wallet in which Libra will be stored is called the Calibra wallet.
What will be Libra’s consequences for the blockchain and financial world?
It’s difficult to make correct predictions about Libra, especially since many details about Libra are still missing. Nonetheless, there some predictions I already dare to make.
- The Libra blockchain will not be entirely neutral and borderless. The Libra Association will conform to governmental rules and regulations. It will hence be unlikely that transactions to sanctioned countries, such as Iran, will be approved.
- The Libra blockchain will compete with banks and fintech companies. It will introduce innovative financial products that will directly compete with financial products offered by banks and fintech companies. Also, Libra transactions will not require payment service providers and intermediary banks and schemes to facilitate the transactions. People could, for example, be able to send money abroad with low transaction costs, and pay with Libra for Über rides and Spotify without traditional payment facilitating intermediaries.
- Libra will compete with central banks. Libra could undermine the demand for national currencies – something that central banks and national governments will not accept. Shortly after the announcement of Libra, French and Russian politicians have already expressed their worries that Libra will undermine their national financial system. In addition, it will also be more difficult for central banks to prevent capital flight. Recently, voices have been raised in the United States to (temporarily) stop the development of Libra in order to make sure it will not compete with the USD. Thus, it’s still unsure whether the Association will be able to release Libra in the first half of 2020.
- Libra will lead to tension with rules and regulations, and show that current financial rules and regulations are outdated. The call for clearer regulations with respect to cryptocurrencies will grow.
- Libra will show that those who say “cryptocurrencies are not interesting, it’s all about blockchain” are dead wrong. Cryptocurrencies will be a tremendous force for mainstream adoption of blockchain, just like e-mail was for the internet.
- Libra will compete with stablecoins. Stablecoins are cryptocurrencies that are pegged to assets with stable value. Think for example about the USD, the EUR and precious metals. Stablecoins that already exist are Tether (USDT), Gemini Dollar (GUSD), bit.USD, and Coinbase Dollar (USDC).
- It’s unclear how the Libra Association will handle their users’ privacy. I expect that users will be required to provide private information if they would like to make use of the Calibra wallet. The White Paper mentions that having a digital identity is a prerequisite to make use of Libra. However, it also mentions that users will be able to create wallets that cannot be linked to their real-world identities. In addition, it’s also unclear how the Association will deal with users’ transaction data. The Association members will be able to view all transaction data as they are allowed to run a Libra node on the network.
- The people that will benefit most from Libra are those who are still facing big barriers to participate in the financial world. If Libra is able to lower the barriers of entree, it will greatly improve the financial opportunities of the unbanked.
- Libra will lead to more intensified discussions about what money is. People will become more skeptical about national currencies, and more will become convinced of the benefits of privately issued currencies like cryptocurrencies.
- Libra will make people more familiar with cryptocurrencies and better educated about the benefits of blockchain.
- In the long run, people will look for alternative currencies that cannot be controlled by governments and central banks. They will hence make more use of cryptocurrencies that are open, public, borderless, neutral and censorship resistant like Bitcoin. These currencies will eventually benefit from Libra.
Libra is an interesting development that will benefit the blockchain space, as well as the financial world. The members of the Libra Association already have a combined reach of more than 2.5 billion people, so they can accelerate mainstream adoption of blockchain. Users will be able to perform transactions against lower costs and with immediate speed. Those that will benefit most from Libra will be mainly people from developing countries.
Eventually, though, Libra will lead to greater adoption of cryptocurrencies that are truly open, public, borderless, neutral and censorship resistant like Bitcoin.
I have recently given a 7-minute smart talk on “the Philosophy and Ethics behind Blockchain” at the Saxion Smart Solutions Festival. The talk is intended for laymen who are interested in the intersection of Philosophy and Blockchain.
What follows is a video and transcript of the talk.
Purpose of my Smart Talk
The purpose of this smart talk is four-fold:
- Firstly, I contend that philosophy matters if we would like to understand the practical and social implications of Blockchain;
- I then give a brief description of Crypto-Anarchism, a philosophy that together with the Cypherpunk movement have deeply influenced the Blockchain space from its early beginnings;
- This is then followed by a description of the essence of the Bitcoin Blockchain. I also make a comparative analysis between the Bitcoin Blockchain and Crypto-Anarchism;
- Finally, I will conclude that the Blockchain space is moving towards the development of products that are very well in line with its initial philosophy. These products are Distributed Autonomous Organizations or DAOs in short.
Why Philosophy Matters
I believe that in order to understand something, and to understand where it’s going to we have to understand where it’s coming from. In other words, if we want to understand the practical and social implications of Blockchain, we cannot dismiss the philosophy that has given birth to it.
What is the Crypto-Anarchist and Cypherpunk philosophy?
The invention of Blockchain has a long and very intriguing history. Blockchain was invented in 2008 by Satoshi Nakamoto, a mysterious person or group of people whose real identity until this day has always been concealed. Although Blockchain was invented in 2008, we also know that Satoshi was heavily influenced by crypto-anarchists and cypherpunks.
In 1992, a crypto-anarchist called Timothy May invited a group of cryptographers, mathematicians, engineers, and others concerned with our liberties for a meeting. Their goal was to think of ways to protect
- their privacy,
- their political freedom,
- and their economic freedom through the use of cryptography.
Cryptography is the science or practice of making information unintelligible. It is a means to protect your communication. For example, if you make a purchase on a webshop you actually don’t send a message to the payment service provider that includes your name, your product Y, the amount X and the time Z. What you send is a message that is scrambled into something unintelligible so that whenever a person intercepts the message – for example a malicious hacker – will not be able to understand it.
Crypto-anarchists and cypherpunks are practical idealists so they developed real-life applications that supported their ideals. They developed such things as untraceable e-mail, untraceable payments. They discussed ideas of anonymous markets, self-enforcing smart contracts, secure messaging etc. Most of the technical elements that form the foundation of Bitcoin and the Bitcoin Blockchain were already developed by this group of people.
This group of people that came together in 1992 are known as Cypherpunks. I am sure that most people know at least one person from that group. The Dutchman Robert Gonggrijp (founder of XS4ALL) was part of this group as well as Julian Assange (founder of Wikileaks).
An important question we have to raise here is:
“What are Crypto-anarchists and Cypherpunks and what do they want?”
In the words of Timothy May (1994),
“Crypto-anarchy is the cyberspatial realization of anarcho-capitalism (libertarian anarchism)… Digital cash, untraceable and anonymous (like real cash), is also coming, though various technical and practical hurdles remain… For libertarians, strong crypto provides the means by which government will be avoided.”
Working in the same philosophical tradition as John Locke. The crypto-anarchists are also strict contractarians. They believe that two parties should be allowed to engage in any social and economic activity as long as both parties agree on the said activity. In other words, they believe that every social interaction should be legitimate as long as it happens voluntarily and without coercion. They are very skeptical of centralized institutions, such as governments as – according to them – governments are monopolistic coercive institutions. They want governments to be limited, and preferably non-existent. Crypto-anarchists don’t equate anarchism with disorder. They believe that within an anarchist society – thus one without a government – rules and regulations will emerge naturally from the ground up.
“And what are cypherpunks?”
Cypherpunks are activists who are also very skeptical of centralized institutions like governments. They use cryptography as the means to preserve the freedoms they deem important.
Let’s sum up what they want.
|Transparency: Transparency of governments|
|Voluntaryism: Voluntaryist social and economic interactions|
|Privacy: Privacy for everyone|
|Propertarian: Strict property rights|
|Free markets: No institutional monopoly of money production|
|Decentralization: Decentralization of power. Social order happens from the bottom-up|
Overview of the workings of the Bitcoin Blockchain
Now, let’s take a look at what a Blockchain is and see how it’s related to Crypto-anarchism and Cypherpunk. The most basic explanation of Blockchain is that it is a database, distributed among a network of computers so that every computer has an exact copy of this database. Every computer on the network – also called a node – verifies every mutation of the database. When someone tries to insert malicious data into the Blockchain, the network will easily discover it. In order to hijack the database, you need to be able to hijack a majority of the nodes on the network.
This is in stark contrast with traditional, centralized networks that contain a central server. The relationship between the central server and the connected devices is called a client-server relationship. However, one could also refer to it as a master-slave relationship. The central server has an administrator. This administrator can determine who Is adding what content to the database, he stores your password, your username etc. In such a network, you have to trust the administrator that he acts properly. These type of networks are very prone for corruption, censorship and attacks. In order to attack this centralized network, all you have to do is attack this central server. Therefore, we also say that it has a single point of failure (SPOF).
This is the most basic explanation of what Blockchain is and how its contrasts with centralized networks – but it’s also a boring explanation. A question I’d like us to explore is:
“What is the essence of Blockchain?”
The essence of Blockchain, I beleive, is that it creates trust in a network of unknown participants. It is an elegant solution to the possible corruption of digital networks. In its essence, it is a technology against censorship and corruption of digital networks. There is no need to appeal to authority, because rules are set by consensus, reached through active discussions and persuasion instead of coercion.
In this sense, the Bitcoin Blockchain perfectly matches the philosophy of Crypto-anarchism and Cypherpunk.
Comparison between Crypto-Anarchism and the Bitcoin Blockchain
|Transparency: Transparency of governments||Transparency: Blockchain is open source and transparent. Everyone can look into the source code and follow every transaction.|
|Voluntaryism: Voluntaryist social and economic interactions||Voluntaryism: Everyone is free to join and leave the network. Everyone is allowed to use Bitcoin, and not coerced into using it.|
|Privacy: Privacy for everyone||Privacy: Anyone, anywhere can create a Bitcoin wallet without having to provide private information. Bitcoin addresses are pseudonymous and its encouraged to use a different Bitcoin address for every transaction.|
|Propertarian: Strict property rights||Propertarian: When you own your private key of your wallet, no one can take it away from you.|
|Free markets: No institutional monopoly of money production||Free markets: Introduces competition in money production.|
|Decentralization: Decentralization of power. Social order happens from the bottom-up||Decentralization: Blockchain is copied and distributed over a large network of computers. There’s no need to appeal to authority to participate or to make transactions. In that sense, it is radically neutral. Everyone on the network, no matter whether you are a king or humble civil servant, is treated the same and according to pre-specified consensus rules.|
What types of applications can we look forward to
Knowing where Blockchain came from. What can we say about the types of applications they would like to build? What types of applications can we look forward to in the future that hold true to this anti-censorship/anti-corruption philosophy of the Crypto-anarchists and Cypherpunks?
The ultimate types of application for them are Distributed Autonomous Organizations or DAOs for short. These are organizations, that don’t have a single point of decision-making. They have no board of directors, no select group of owners that have exclusive ownership rights, no one executive that directs the organization. These organizations, instead, are open and inclusive for anyone. They are ruled by machine consensus and not by the whims of a small group of people.
There are already DAOs. Bitcoin was the first DAO. There is no Bitcoin company, no Bitcoin executive. If you think about DAOs, imagine a Facebook without a Facebook CEO, a YouTube without a YouTube company, and an investment fund without a fund manager.
We are nearing the end of my first semester as a Blockchain lecturer at a local university. We have discussed many topics, such as cryptography, consensus protocols, tokenization, smart contracts, how to build your own crypto-token…
During the final examination, I have asked what their biggest takeaways are from my classes. Do you know what the biggest takeaway is among most students?
It’s that they will never look at government and money the same way again. None of them had heard of the word Libertarian before, but now they leave the classes a little more sceptical of government and hopefully a little more libertarian.
News has arrived that Timothy May, the founder of the crypto-anarchist movement has died on December 15th, 2018. He has been a hero and inspiration for many in the crypto-anarchist/anarcho-capitalist community for his ideas to spread freedom and privacy through the use of cryptography.
Once an Intel senior engineer, he has written extensively about privacy, cryptography, and internet freedom. Without a doubt, he has been a great influence on the likes of John Perry Barlow (declaration of independence for cyberspace), Nick Szabo (smart contracts and Bitgold), Wei Dai (B-money), and Satoshi Nakamoto – the inventor of Bitcoin and blockchain. He has also contributed extensively to the Cypherpunks electronic mailing list, the same list that Satoshi initially used to spread his Bitcoin whitepaper and to invite cryptographers to join further developments of Bitcoin.
In his Crypto Anarchy and Virtual Communities (1994) paper, May describes Crypto anarchy as
the cyberspatial realization of anarcho-capitalism, transcending national boundaries and freeing individuals to make the economic arrangements they wish to make consensually.
He furthermore writes that
Digital cash, untraceable and anonymous (like real cash), is also coming, though various technical and practical hurdles remain. “Swiss banks in cyberspace” will make economic transactions much more liquid and much less subject to local rules and regulations.
Acknowledging the possible negative sides of crypto anarchism, May sees the development of crypto anarchism as mostly good. He believes that criminal activity within a crypto anarchist community are mostly exceptions and not the rule. He writes,
Is this a Good Thing? Mostly yes. Crypto anarchy has some messy aspects, of this there can be little doubt. From relatively unimportant things like price-fixing and insider trading to more serious things like economic espionage, the undermining of corporate knowledge ownership, to extremely dark things like anonymous markets for killings.
But let’s not forget that nation-states have, under the guise of protecting us from others, killed more than 100 million people in this century alone. Mao, Stalin, Hitler, and Pol Pot, just to name the most extreme examples. It is hard to imagine any level of digital contract killings ever coming close to nationstate barbarism.
Few mainstream news outlets today will write about Timothy May’s death and impact on our world, but for us who aspire to uphold Bitcoin’s initial principle to make (financial) freedom and privacy absolute, he will always be remembered for his inspiring contributions to secure our rights to life, liberty, and property.