Bitcoin and the End of History

Bitcoin and the End of History

The Rise of Sovereign Individualism: Cryptography, the Internet, and the Collapse of Governments.

Video transcription

“You’re looking at this and thinking, ‘Wow! Wouldn’t it be amazing if this worked?’ And then you realize, ‘Oh my gosh, it does work!’ National borders are just speed bumps in the information superhighway. Cryptography is really strong, so we can do whatever we want here. It might provide the equivalent of what the government does in a decentralized fashion.I talk about the collapse of governments.I think we actually saw that in the Middle Ages, probably as a result of the printing press. This is the story of a community of scientists, mathematicians, philosophers, and activists who believe that the internet, combined with recent breakthroughs in the field of cryptography, would upend society and usher in a new era of sovereign individualism. We have the power to begin the world over again right now, and there is an internal clash over the optimal path to achieving that goal. Can evil be done with this technology? Yes. And so what? Deal with it.

From the Fall of the Berlin Wall to Bitcoin: How the Cypherpunk Movement Helped Shape a Borderless World

Here’s the final installment in a four-part series on the origins of the cypherpunk movement and how it helped shape our modern world. We see a free world that has achieved a level of prosperity unprecedented in all human history. ‘Mr. Gorbachev, tear down this wall!’ If you had asked me 10 years ago, ‘Is it possible that communism could collapse by the year 1992?’ I would have said, ‘Absolutely ridiculous.’ The fall of the Berlin Wall was important to me because I thought it was the end of history and that national borders would cease being the walls of prisons. And so, a couple of years later, when I discovered the internet, I thought, ‘Oh, this is part of this pattern where borders and distance stop being barriers to people.’ Then I discovered a whole clan of people who self-identified as computer people.I found my tribe.

Cypherpunks: The Cryptography Activists Behind Bitcoin’s Privacy and Decentralization

And among that clan was the cypherpunks mailing list.”If you want to subscribe to our mailing list, send a blank email message and simply say “subscribe cypherpunks.” And what is a cypherpunk? What do you guys stand for? Cypherpunks are cryptography activists. The cypherpunks email list, which started in the fall of 1992, one year after the launch of the World Wide Web, became a gathering place for a global community interested in using cryptography to allow individuals to communicate and transact on the internet privately and without interference from a central authority. In the last 20 years, basic techniques to do all sorts of impossible-seeming things have suddenly emerged. Put them into practice. Many cypherpunks were inspired by the work of computer scientist David Chaum, who had demonstrated that it was possible to use cryptography to build an anonymous payment network that ran on the internet.

Bitcoin and the End of History

Cypherpunks and the Crypto Anarchy Movement: A Divide on the Future of Economic Freedom

Because of the cypherpunks and the science papers of David Chaum, I thought the third thing that’s going to happen is economic freedom. That people are going to be no longer constrained by national borders and distance from cooperating, sharing resources, and helping each other. But at this watershed moment of collapsing borders, there was a divide within the cypherpunk community over whether these cryptographic tools would lead to more individual freedom, free trade, and the spread of democracy, or the end of government altogether. The cypherpunk movement’s most influential figure was the physicist and intellectual provocateur Tim May, who coined the phrase “crypto anarchy.” He saw the fall of the Berlin Wall as evidence that the societal institutions we take for granted could collapse in short order, just as they had in the Middle Ages.

Cypherpunk Manifesto: How Cryptography Would Upend Society and Protect Against External Threats

We saw the little principalities, the monarchies, the religious, the papal states; we saw those collapse probably as a result of publishing and printing. May wrote a one-page summary on how cryptography would upend society. She sat down at her Macintosh and loosely patterned it after the Communist Manifesto, stating that “a specter is haunting the modern world, the specter of crypto-anarchy.” May believed that cryptography was incredibly strong and could protect us from external threats such as observers, watchers, and imposers of the past. She was skeptical of the idea that humanity was witnessing an unabashed victory of economic and political liberalism or that it was possible to overcome tyranny through collective action.

Cypherpunks’ Technology-Based Theory of Historical Change in the Age of Bitcoin

May embraced a technology-based theory of historic change, summed up by the movement’s tagline coined by mathematician Eric Hughes: “cypherpunks write code.” This meant building systems for anonymous transactions on the internet, making the arbitrary divisions of the political world irrelevant. May believed that arguing, complaining, lobbying, and politics had nominal effects, and that what changes the world is technology adoption and society shifting its viewpoints. National borders are merely speed bumps on the information superhighway. Online cryptographic networks should be structured like geodesic domes, a form praised by counter-cultural technologists in the 1970s for being in harmony with nature and highly resistant to external attacks. Networks with no owners and many interconnecting nodes would be virtually unstoppable.

Cryptographic protocols enable decentralized solutions to traditional government functions in a geodesic market

In a geodesic market, “economics will no longer be the handmaiden of politics,” noted cyberpunk writer Robert Hettinga. “Nation-states will eventually be as ceremonial as modern-day constitutional monarchs.” This idea of many-to-many connections was clearly going to happen, but it was much easier to build a functional network for cooperation and trade when relying on a central authority to enforce the rules. How could we use this weird crypto technique to solve this strange, esoteric little problem that in the real world is solved by knowing someone’s social security number or having a government-issued ID to open a bank account and link it to a loan? It was trying to deal with those problems that led to the idea of buying and selling property in cyberspace using cryptographic protocols and finding ways for people to provide the equivalent of what government does in a decentralized fashion.

Cypherpunks’ Pursuit of Electronic Cash: A Key Component in Building a Borderless World

Tim stole some ideas from my Machinery of Freedom and reprocessed them with all this technological stuff, and then I stole them back.A function of government that was particularly hard to replicate using cryptography was the issuance of money. The cypherpunks attempted to build a borderless internet currency system that was as anonymous as cash and, like gold, held its value without the backing of a central bank. Gold makes very good money because nobody can readily manufacture more of it, to put it mildly, whereas bits are perfectly copyable, making it quite difficult to turn them into good money. Tim May and many others considered electronic cash to be the holy grail because it completed the picture. May argued that a private and decentralized monetary system was a key component in constructing a new borderless world where the activities and assets of individuals would be resistant to government control and confiscation.

High-Tech Hayekians: Using Technology to Demolish Walls and Divisions in the Existing World.

If you don’t physically meet the person and don’t even know what continent they’re on, you can’t coerce them. However, there was another faction within the movement that rejected Tim May’s vision of cordoning off a new world in cyberspace. The High-Tech Hayekians were people like Eric Drexler, Mark Miller, and Phil Salin. They focused on designing secure computing systems based on economic insights, particularly those of the Austrian-born Nobel Prize winner Friedrich Hayek. Instead of building a new virtual world shielded from government interference, the High-Tech Hayekians sought to use technology to demolish walls and divisions within the existing world. They imagined that introducing new tools for human coordination would gradually erode the government’s ability to impinge on our freedoms. We did lots and lots of fantasizing about how the world could be different, but we saw this as emerging from inside the world.

Cryptography and Bitcoin: Tools for Gradual Transformation towards Less Corruptible Systems

Cryptography was a tool for porting economic concepts and legal structures onto the internet. But the aim was to foster new forms of peer-to-peer commerce and knowledge sharing. The High-Tech Hayekians believed that even imperfect systems can gradually transform society from within. The overall arc of world history is towards the rule of law and less corruptible systems. If the emergence of the world of crypto-commerce creates systems that are vastly less corruptible, but under a whole mix of different mechanisms and governance regimes, such that they’re not always everywhere incorruptible, I think that’s fine. There’s a lot of power in providing people with tools so that they can successfully start to act more like you would like them to, as opposed to “You’ve got to come over here where it’s really hard edge encrypted and it works exactly the way we want.” No, let’s raise people’s levels incrementally, and that’s an improvement in the world.

Crypto-Anarchists and the Dark Side of Cryptography: The Controversial Views of Jim Bell

For many cypherpunks, the darker side of crypto-anarchy was epitomized by the writings of a chemist and electrical engineer, Jim Bell, a participant on the email list, who in the mid-nineties compared aggression by the state to that of muggers, rapists, robbers, and murderers, and posited a cryptographically protected marketplace in which anonymous individuals could, in effect, pay to have government employees killed with the goal of destroying the state. In 1997, Bell was arrested and went to prison for, among other things, dropping a stink bomb on a government building. Tim May distanced himself from Bell’s writings and activities while maintaining that marketplaces for assassination, like the one Bell had described, might be both inevitable and desirable. Can evil be done with this technology? Not just the internet, but especially the crypto part of it? Yes. And so what?

Zimmerman’s Regret: PGP and the Consequences of Technology in the Age of Bitcoin

Deal with it. Zimmerman once told me that he sometimes regretted introducing PGP to the world because it could be used by Al-Qaeda or the Taliban or other groups. I say, so what? I’m not morally responsible. It would have happened whether we existed or not because technology has its own logic, and people want to do what they want to do. They want free stuff and the freedom to do things. Even if they say it should be regulated, they often make the conscious decision to copy music or videotapes they want to see. BlackNet is a negative consequence, and I’m not interested in creating that. When you build technology to solve problems, there are consequences that we try to think ahead of, look at, and figure out how we might address and get ahead of the downsides of what we build. That’s responsible development, and we certainly engaged in that.

Cypherpunks’ Dream of Human Freedom and Bitcoin’s Role in Democratizing the Future

Talking with Tim May and putting on that “What if I was a black hat” kind of thing was certainly a useful foil for working through those kinds of ideas, but that’s absolutely not what cypherpunks were. So, the progress of the spread of democracy, if you take a sufficiently long-term view of it, has been quite remarkable. Our dream was to enable the future of human freedom, and we had this bizarre confidence about how the future would unfold and to use Alan Kay’s famous phrase, have a huge hand in inventing it. But the road had a lot more weeds and detours than we could have anticipated. When we first launched, we were hoping for maybe 400 or 500 people. Now we have 100 thousand people, so who knows where we’re going next? We’re using the ever-growing storage capacity of servers belonging to companies like Google. Instead of it being on your server under your desk, that stuff is being taken care of for you. Professionals keep track of all the programs and data. Who doesn’t want a simpler life?

The Dark Side of Internet Freedom: Surveillance and Data Collection in the Age of Bitcoin

I find this way of working simpler. What do you do with half a gigabyte of information on your customers? They want to know everything about you so they can sell you stuff, resulting in each person getting a digital proctology exam. The NSA specifically targets the communications of everyone. Over the next quarter-century, the internet would make an explosion of individual freedom and information sharing possible, just as Phil Salin had predicted in 1991. However, it would also grow into a surveillance apparatus that bore out the dystopian vision of journalist David Burnham in his 1983 book, The Rise of the Computer State. “Large bureaucracies with the power that the computer gives them become more powerful and escape the checks and balances of representative democracy.” Facebook collects information that the East German Stasi would have killed for.

Bitcoin sparks a new wave of cypherpunk activity in the aftermath of the financial crisis

I think that most people are quite happy to hand over all their information online in return for a few pictures of their high school friends, kids, or whatever. By the mid-2000s, it seemed the cypherpunk movement had mostly failed. Then came a global financial crisis followed by massive bailouts by central banks. On October 31st, 2008, a pseudonymous inventor named Satoshi Nakamoto shared a white paper describing a new peer-to-peer, non-governmental monetary system, pulling together technical and philosophical concepts developed on the Cypherpunks’ email list. Within a few years, the movement was reborn with a new generation committed to enhancing personal freedom and privacy with cryptographic tools. It’s like discovering an oasis when you’re lost in the desert. Bitcoin is single-handedly responsible for the current wave of cypherpunk activity.”It’s always messier than visionaries can anticipate because reality is bigger than any one head.

Building Bitcoin Architecture to Safeguard Human Freedoms in the Face of Historical Dynamics

We’re still on the road in the quest to build architectures that amplify human freedoms and protect us from the dynamics in the other direction.”

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