Black Crawling Systems Archive Release 1.0/Black Crawling Systems Archive Release 1.0 (L0pht Heavy Industries, Inc.)(1997).ISO/tezcat/Big_Brother/Crypto_Anarchy.txt

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Crypto Anarchy and Virtual Communities







Timothy C. May



535 Monterey Drive



Aptos, CA 95003 U.S.A.



[e-mail]





Extended Abstract



The combination of strong, unbreakable public key

cryptography and virtual network communities in

cyberspace will produce interesting and profound

changes in the nature of economic and social sys-

tems. Crypto anarchy is the cyberspatial realization

of anarcho-capitalism, transcending national

boundaries and freeing individuals to make the

economic arrangements they wish to make consen-

sually.



Strong cryptography, exemplified by RSA (a public

key algorithm) and PGP (Pretty Good Privacy), pro-

vides encryption that essentially cannot be broken

with all the computing power in the universe. This

ensures security and privacy. Public key cryptogra-

phy is rightly considered to be a revolution.



Digital mixes, or anonymous remailers, use crypto to

create untraceable e-mail, which has many uses.

(Numerous anonymous remailers, in several coun-

tries, are now operating. Message traffic is growing

exponentially.)



Digital pseudonyms, the creation of persistent net-

work personas that cannot be forged by others and

yet which are unlinkable to the "true names" of their

owners, are finding major uses in ensuring free

speech, in allowing controversial opinions to be

aired, and in providing for economic transactions

that cannot be blocked by local governments. The

technology being deployed by the Cypherpunks

and others, means their identities, nationalities, and

even which continents they are on are untraceable--

unless they choose to reveal this information. This

alters the conventional "relationship topology" of

the world, allowing diverse interactions without

external governmental regulation, taxation, or in-

terference



Digital cash, untraceable and anonymous (like real

cash), is also coming, though various technical and

practical hurdles remain. "Swiss banks in cyber-

space" will make economic transactions much more

liquid and much less subject to local rules and reg-

ulations. Tax avoidance is likely to be a major at-

traction for many. An example of local interest to

Monte Carlo might be the work underway to devel-

op anonymous, untraceable systems for "cyber-

space casinos." While not as attractive to many as

elegant casinos, the popularity of "numbers games"

and bookies in general suggests a opportunity to

pursue.



Data havens and information markets are already

springing up, using the methods described to make

information retrievable anonymously and untrace-

ably.



Governments see their powers eroded by these

technologies, and are taking various well-known

steps to try to limit the use of strong crypto by their

subjects. The U.S. has several well-publicized ef-

forts, including the Clipper chip, the Digital Tele-

phony wiretap law, and proposals for "voluntary"

escrow of cryptographic keys. Cypherpunks and

others expect these efforts to be bypassed. Technol-

ogy has let the genie out of the bottle. Crypto anar-

chy is liberating individuals from coercion by their

physical neighbors--who cannot know who they

are on the Net--and from governments. For libertar-

ians, strong crypto provides the means by which

government will be avoided.



The presentation will describe how several of these

systems work, briefly, and will outline the likely im-

plications of this combination of crypto anarchy

and virtual cyberspace communities.



1    Introduction



This paper describes the combination of two major

technologies:



%    Strong Crypto: including encryption, digi-

tal signatures, digital cash, digital mixes (re-

mailers), and related technologies.



%    Cyberspatial Virtual Communities: includ-

ing networks, anonymous communications,

MUDs and MOOs, and "Multiverse"-type vir-

tual realities.



These areas have generally remained separate, at

least in published papers. Certainly the developers

of cyberspace systems, such as MUDs, MOOs, and

Habitat-like systems, appreciate the importance of

cryptography for user authentication, overall secu-

rity, and certainly for (eventual) digital purchase of

services. But for the most part the combination of

these two areas has been the province of the science

fiction writer, notably writers such as Vernor Vinge,

William Gibson, Bruce Sterling, and Orson Scott

Card.



The "Cypherpunks" group, a loose, anarchic mail-

ing list and group of hackers, was formed by sever-

al of us in 1992 as a group to make concrete some of

the abstract ideas often presented at conferences.

We've had some successes, and some failures. [1]

The Cypherpunks group also appeared at a fortu-

itous time, as PGP was becoming popular, as Wired

magazine appeared (they featured us on the cover

of their second issue), and as the publicity (hype?)

about the Information Superhighway and the

World Wide Web reached a crescendo.



The site ftp.csua.berkeley.edu has a number of es-

says and files, including crypto files, in the directo-

ry pub/cypherpunks. I have also written/

compiled a very large 1.3 MB FAQ on these issues,

the Cyphernomicon, available at various sites, in-

cluding my ftp directory, ftp.netcom.com, in the di-

rectory pub/tc/tcmay.



The Cypherpunks group is also a pretty good ex-

ample of a "virtual community." Scattered around

the world, communicating electronically in matters

of minutes, and seeming oblivious to local laws, the

Cypherpunks are indeed a community, and a virtu-

al one. Many members use pseudonyms, and use

anonymous remailers to communicate with the list.

The list itself thus behaves as a "message pool," a

place where information of all sort may be anony-

mous deposited--and anonymous received (since

everyone sees the entire list, like a newspaper, the

intended recipient is anonymized).



Legal Caveat: Consult your local laws before apply-

ing any of the methods described here. In some ju-

risdictions, it may be illegal to even read papers like

this (seriously). In particular, I generally won't be

giving ftp site addresses for copies of PGP, remailer

access, digital cash systems, etc. These are well-cov-

ered in more current forums, e.g., sci.crypt or

talk.politics.crypto, and there are some unresolved is-

sues about whether giving the address of such sites

constitutes (or "aids and abets") violation of various

export and munitions laws (crypto is considered a

munition in the U.S. and probably else-

where....some nations consider a laser printer to be

a munitions item!).



2    Modern Cryptography



The past two decades have produced a revolution

in cryptography (crypto, for short) the science of

the making of ciphers and codes. Beyond just sim-

ple ciphers, useful mainly for keeping communica-

tions secret, modern crypto includes diverse tools

for authentication of messages, for digital time-

stamping of documents, for hiding messages in

other documents (steganography), and even for

schemes for digital cash.



Public key cryptography, the creation of Diffie and

Hellman, has dramatically altered the role of cryp-

to. Coming at the same time as the wholesale con-

version to computer networks and worldwide

communications, it has been a key element of secu-

rity, confidence, and success. The role of crypto will

only become more important over the coming de-

cades.



Pretty Good Privacy, PGP, is a popular version of

the algorithm developed by Rivest, Shamir, and

Adleman, known of course as RSA. The RSA algo-

rithm was given a patent in the U.S., though not in

any European countries, and is licensed commer-

cially. [2]



These tools are described in detail in various texts

and Conference proceedings, and are not the sub-

ject of this paper. [3] The focus here is on the impli-

cations of strong crypto for cyberspace, especially

on virtual communities.



Mention should be made of the role of David

Chaum in defining the key concepts here. In several

seminal papers (for example, [4] [5]), Chaum intro-

duced the ideas of using public key cryptography

methods for anonymous, untraceable electronic

mail, for digital money systems in which spender

identity is not revealed, and in schemes related to

these. (I make no claims of course that Chaum

agrees with my conclusions about the political and

socioeconomic implications of these results.)



3    Virtual Communities



Notes: cyberspace, Habitat, VR, Vinge, etc. Crypto

holds up the "walls" of these cyberspatial realities.

Access control, access rights, modification privileg-

es.



Virtual communities are the networks of individu-

als or groups which are not necessarily closely-con-

nected geographically. The "virtual" is meant to

imply a non-physical linking, but should not be tak-

en to mean that these are any less community-like

than are conventional physical communities.



Examples include churches, service organizations,

clubs, criminal gangs, cartels, fan groups, etc. The

Catholic Church and the Boy Scouts are both exam-

ples of virtual communities which span the globe,

transcend national borders, and create a sense of al-

legiance, of belonging, and a sense of "community."

Likewise, the Mafia is a virtual community (with its

enforcement mechanisms, its own extra-legal rules,

etc.) Lots of other examples: Masons, Triads, Red

Cross, Interpol, Islam, Judaism, Mormons, Sindero

Luminoso, the IRA, drug cartels, terrorist groups,

Aryan Nation, Greenpeace, the Animal Liberation

Front, and so on. There are undoubtedly many

more such virtual communities than there are na-

tion-states, and the ties that bind them are for the

most part much stronger than are the chauvinist na-

tionalism emotions. Any group in which the com-

mon interests of the group, be it a shared ideology

or a particular interest, are enough to create a cohe-

sive community.



Corporations are another prime example of a virtu-

al community, having scattered sites, private com-

munication channels (generally inaccessible to the

outside world, including the authorities), and their

own goals and methods. In fact, many "cyberpunk"

(not cypherpunk) fiction authors make a mistake, I

think, in assuming the future world will be domi-

nated by transnational megacorporate "states." In

fact, corporations are just one example--of many--of

such virtual communities which will be effectively

on a par with nation-states. (Note especially that

any laws designed to limit use of crypto cause im-

mediate and profound problems for corporations--

countries like France and the Philippines, which

have attempted to limit the use of crypto, have

mostly been ignored by corporations. Any attempts

to outlaw crypto will produce a surge of sudden

"incorporations," thus gaining for the new corpo-

rate members the aegis of corporate privacy.)



In an academic setting, "invisible colleges" are the

communities of researchers.



These virtual communities typically are "opaque"

to outsiders. Attempts to gain access to the internals

of these communities are rarely successful. Law en-

forcement and intelligence agencies (such as the

NSA in the U.S., Chobetsu in Japan, SDECE in

France, and so on, in every country) may infiltrate

such groups and use electronic surveillance

(ELINT) to monitor these virtual communities. Not

surprisingly, these communities are early adopters

of encryption technology, ranging from scrambled

cellphones to full-blown PGP encryption. [8]



The use of encryption by "evil" groups, such as

child pornographers, terrorists, abortionists, abor-

tion protestors, etc., is cited by those who wish to

limit civilian access to crypto tools. We call these the

"Four Horseman of the Infocalypse," as they are so

often cited as the reason why ordinary citizen-units

of the nation-state are not to have access to crypto.



This is clearly a dangerous argument to make, for

various good reasons. The basic right of free speech

is the right to speak in a language one's neighbors

or governing leaders may not find comprehensible:

encrypted speech. There's not enough space here to

go into the many good arguments against a limit on

access to privacy, communications tools, and cryp-

to.



The advent of full-featured communications sys-

tems for computer-mediated virtual communities

will have even more profound implications. MUDs

and MOOs (multi-user domains, etc.) and 3D virtu-

al realities are one avenue, and text-centric Net

communications are another. (Someday, soon,

they'll merge, as described in Vernor Vinge's pro-

phetic 1980 novella, True Names.)



4    Observability and Surveil-

lance



An interesting way to view issues of network visi-

bility is in terms of the "transparency" of nodes and

links between nodes. Transparent means visible to

outsiders, perhaps those in law enforcement or the

intelligence community. Opaque mean not trans-

parent, not visible. A postcard is transparent, a

sealed letter is opaque. PGP inventor Phil Zimmer-

mann has likened the requirement for transparency

to being ordered to use postcards for all correspon-

dence, with encryption the equivalent of an opaque

envelope (envelopes can be opened, of course, and

long have been).



Transparent links and nodes are the norm in a po-

lice state, such as the U.S.S.R., Iraq, China, and so

forth. Communications channels are tapped, and

private use of computers is restricted. (This is be-

coming increasingly hard to do, even for police

states; many cite the spread of communications op-

tions as a proximate cause of the collapse of com-

munism in recent years.)



There are interesting "chemistries" or "algebras" of

transparent vs. opaque links and nodes. What hap-

pens if links must be transparent, but nodes are al-

lowed to be opaque? (The answer: the result is as if

opaque links and nodes were allowed, i.e., full im-

plications of strong crypto. Hence, any attempt to

ban communications crypto while still allowing

private CPUs to exist....)



If Alice and Bob are free to communicate, and to

choose routing paths, then Alice can use "crypto ar-

bitrage" (a variation on the term, "regulatory arbi-

trage," the term Eric Hughes uses to capture this

idea of moving transactions to other jurisdictions)

to communicate with sites--perhaps in other coun-

tries--that will perform as she wishes. This can

mean remailing, mixing, etc. As an example, Cana-

dian citizens who are told they cannot access infor-

mation on the Homolka-Teale murder case (a

controversial case in which the judge has ordered

the media in Canada, and entering Canada, not to

discuss the gory details) nevertheless have a vast

array of options, including using telnet, gopher, ftp,

the Web, etc., to access sites in many other coun-

tries--or even in no country in particular.



Most of the consequences described here arise from

this chemistry of links and nodes: unless nearly all

node and links are forced to be transparent, includ-

ing links to other nations and the nodes in those na-

tions, then the result is that private communication

can still occur. Crypto anarchy results.



5    Crypto Anarchy



"The Net is an anarchy." This truism is the core of

crypto anarchy. No central control, no ruler, no

leader (except by example, reputation), no "laws."

No single nation controls the Net, no administra-

tive body sets policy. The Ayatollah in Iran is as

powerless to stop a newsgroup--alt.wanted.mos-

lem.women or alt.wanted.moslem.gay come to mind--

he doesn't like as the President of France is as pow-

erless to stop, say, the abuse of French in soc.cul-

ture.french. Likewise, the CIA can't stop

newsgroups, or sites, or Web pages, which give

away their secrets. At least not in terms of the Net

itself...what non-Net steps might be taken is left as

an exercise for the paranoid and the cautious.



This essential anarchy is much more common than

many think. Anarchy--the absence of a ruler telling

one what to do--is common in many walks of life:

choice of books to read, movies to see, friends to so-

cialize with, etc. Anarchy does not mean complete

freedom--one can, after all, only read the books

which someone has written and had published--but

it does mean freedom from external coercion. Anar-

chy as a concept, though, has been tainted by other

associations.



First, the "anarchy" here is not the anarchy of popu-

lar conception: lawlessness, disorder, chaos, and

"anarchy." Nor is it the bomb-throwing anarchy of

the 19th century "black" anarchists, usually associ-

ated with Russia and labor movements. Nor is it the

"black flag" anarchy of anarcho-syndicalism and

writers such as Proudhon. Rather, the anarchy be-

ing spoken of here is the anarchy of "absence of

government" (literally, "an arch," without a chief or

head).



This is the same sense of anarchy used in "anarcho-

capitalism," the libertarian free market ideology

which promotes voluntary, uncoerced economic

transactions. [6] I devised the term crypto anarchy as

a pun on crypto, meaning "hidden," on the use of

"crypto" in combination with political views (as in

Gore Vidal's famous charge to William F. Buckley:

"You crypto fascist!"), and of course because the

technology of crypto makes this form of anarchy

possible. The first presentation of this was in a 1988

"Manifesto," whimsically patterned after another

famous manifesto. [7] Perhaps a more popularly

understandable term, such as "cyber liberty," might

have some advantages, but crypto anarchy has its

own charm, I think.



And anarchy in this sense does not mean local hier-

archies don't exist, nor does it mean that no rulers

exist. Groups outside the direct control of local gov-

ernmental authorities may still have leaders, rulers,

club presidents, elected bodies, etc. Many will not,

though.



Politically, virtual communities outside the scope of

local governmental control may present problems

of law enforcement and tax collection. (Some of us

like this aspect.) Avoidance of coerced transactions

can mean avoidance of taxes, avoidance of laws

saying who one can sell to and who one can't, and

so forth. It is likely that many will be unhappy that

some are using cryptography to avoid laws de-

signed to control behavior.



National borders are becoming more transparent

than ever to data. A flood of bits crosses the borders

of most developed countries--phone lines, cables,

fibers, satellite up/downlinks, and millions of dis-

kettes, tapes, CDs, etc. Stopping data at the borders

is less than hopeless.



Finally, the ability to move data around the world at

will, the ability to communicate to remote sites at

will, means that a kind of "regulatory arbitrage" can

be used to avoid legal roadblocks. For example, re-

mailing into the U.S. from a site in the Nether-

lands...whose laws apply? (If one thinks that U.S.

laws should apply to sites in the Netherlands, does

Iraqi law apply in the U.S.? And so on.)



This regulatory arbitrage is also useful for avoiding

the welter of laws and regulations which opera-

tions in one country may face, including the "deep

pockets" lawsuits so many in the U.S. face. Moving

operations on the Net outside a litigious jurisdic-

tion is one step to reduce this business liability. Like

Swiss banks, but different.



6    True Names and Anonymous

Systems



Something needs to be said about the role of ano-

nymity and digital pseudonyms. This is a topic for

an essay unto itself, of course.



Are true names really needed? Why are they asked

for? Does the nation-state have any valid reason to

demand they be used?



People want to know who they are dealing with, for

psychological/evolutionary reasons and to better

ensure traceability should they need to locate a per-

son to enforce the terms of a transaction. The purely

anonymous person is perhaps justifiably viewed

with suspicion.



And yet pseudonyms are successful in many cases.

And we rarely know whether someone who pre-

sents himself by some name is "actually" that per-

son. Authors, artists, performers, etc., often use

pseudonyms. What matters is persistence, and non-

forgeability. Crypto provides this.



On the Cypherpunks list, well-respected digital

pseudonyms have appeared and are thought of no

less highly than their "real" colleagues are.



The whole area of digitally-authenticated reputa-

tions, and the "reputation capital" that accumulates

or is affected by the opinions of others, is an area

that combines economics, game theory, psychology,

and expectations. A lot more study is needed.



It is unclear if governments will move to a system

of demanding "Information Highway Driver's Li-

censes," figuratively speaking, or how systems like

this could ever be enforced. (The chemistry of

opaque nodes and links, again.)



7    Examples and Uses



It surprises many people that some of these uses are

already being intensively explored. Anonymous re-

mailers are used by tens of thousands of persons--

and perhaps abused. [13] And of course encryption,

via RSA, PGP, etc., is very common in some com-

munities. (Hackers, Net users, freedom fighters,

white separatists, etc....I make no moral judgments

here about those using these methods).



Remailers are a good example to look at in more de-

tail. There are two current main flavors of remailers:



1    "Cypherpunk"-style remailers, which process

text messages to redirect mail to another sites, using

a command syntax that allows arbitrary nesting of

remailing (as many sites as one wishes), with PGP

encryption at each level of nesting.



2    "Julf"-style remailer(s), based on the original

work of Karl Kleinpaste and operated/maintained

by Julf Helsingius, in Finland. No encryption, and

only one such site at present. (This system has been

used extensively for messages posted to the Usenet,

and is basically successful. The model is based on

operator trustworthiness, and his location in Fin-

land, beyond the reach of court orders and subpoe-

nas from most countries.)



The Cypherpunks remailers currently number

about 20, with more being added every month.

There is no reason not to expect hundreds of such

remailers in a few years.



One experimental "information market" is Black-

Net, a system which appeared in 1993 and which al-

lows fully-anonymous, two-way exchanges of

information of all sorts. There are reports that U.S.

authorities have investigated this because of its

presence on networks at Defense Department re-

search labs. Not much they can do about it, of

course, and more such entities are expected.



(The implications for espionage are profound, and

largely unstoppable. Anyone with a home comput-

er and access to the Net or Web, in various forms,

can use these methods to communicate securely,

anonymously or pseudonymously, and with little

fear of detection. "Digital dead drops" can be used

to post information obtained, far more securely

than the old physical dead drops...no more messag-

es left in Coke cans at the bases of trees on remote

roads.)



Whistleblowing is another growing use of anony-

mous remailers, with folks fearing retaliation using

remailers to publicly post information. (Of course,

there's a fine line between whistleblowing, revenge,

and espionage.)



Data havens, for the storage and marketing of con-

troversial information is another area of likely fu-

ture growth. Nearly any kind of information,

medical, religious, chemical, etc., is illegal or pro-

scribed in one or more countries, so those seeking

this illegal information will turn to anonymous

messaging systems to access--and perhaps pur-

chase, with anonymous digital cash--this informa-

tion. This might include credit data bases, deadbeat

renter files, organ bank markets, etc. (These are all

things which have various restrictions on them in

the U.S., for example....one cannot compile credit

data bases, or lists of deadbeat renters, without

meeting various restrictions. A good reason to

move them into cyberspace, or at least outside the

U.S., and then sell access through remailers.)



Matching buyers and sellers of organs is another

such market. A huge demand (life and death), but

various laws tightly controlling such markets.



Digital cash efforts. A lot has been written about

digital cash. [14] [15] David Chaum's company,

DigiCash, has the most interesting technology, and

has recently begun market testing. Stefan Brands

may or may not have a competing system which

gets around some of Chaum's patents. (The attitude

crypto anarchists might take about patents is anoth-

er topic for discussion. Suffice it to say that patents

and other intellectual property issues continue to

have relevance in the practical world, despite ero-

sion by technological trends.)



Credit card-based systems, such as the First Virtual

system, are not exactly digital cash, in the Chaumi-

an sense of blinded notes, but offer some advantag-

es the market may find useful until more advanced

systems are available.



I expect to see many more such experiments over

the next several years, and some of them will likely

be market successes.



8    Commerce and Colonization

of Cyberspace



How will these ideas affect the development of cy-

berspace?



"You can't eat cyberspace" is a criticism often lev-

elled at argument about the role of cyberspace in

everyday life. The argument made is that money

and resources "accumulated" in some future (or

near-future) cyberspatial system will not be able to

be "laundered" into the real world. Even such a pre-

scient thinker as Neal Stephenson, in Snow Crash,

had his protagonist a vastly wealthy man in "The

Multiverse," but a near-pauper in the physical

world.



This is implausible for several reasons. First, we

routinely see transfers of wealth from the abstract

world of stock tips, arcane consulting knowledge,

etc., to the real world. "Consulting" is the operative

word. Second, a variety of means of laundering

money, via phony invoices, uncollected loans, art

objects, etc., are well-known to those who launder

money...these methods, and more advanced ones to

come, are likely to be used by those who wish their

cyberspace profits moved into the real world.



(Doing this anonymously, untraceably, is another

complication. There may be methods of doing

this--proposals have looked pretty solid, but more

work is needed.)



The World Wide Web is growing at an explosive

pace. Combined with cryptographically-protected

communication and digital cash of some form (and

there are several being tried), this should produce

the long-awaited colonization of cyberspace.



Most Net and Web users already pay little attention

to the putative laws of their local regions or nations,

apparently seeing themselves more as members of

various virtual communities than as members of lo-

cally-governed entities. This trend is accelerating.



Most importantly, information can be bought and

sold (anonymously, too) and then used in the real

world. There is no reason to expect that this won't

be a major reason to move into cyberspace.



9    Implications



I've touched on the implications in several places.

Many thoughtful people are worried about some of

the possibilities made apparent by strong crypto

and anonymous communication systems. Some are

proposing restrictions on access to crypto tools. The

recent debate in the U.S. over "Clipper" and other

key escrow systems shows the strength of emotions

on this issue.



Abhorrent markets may arise. For example, anony-

mous systems and untraceable digital cash have

some obvious implications for the arranging of con-

tract killings and such. (The greatest risk in arrang-

ing such hits is that physical meetings expose the

buyers and sellers of such services to stings. Crypto

anarchy lessens, or even eliminates, this risk, thus

lowering transaction costs. The risks to the actual

triggermen are not lessened, but this is a risk the

buyers need not worry about. Think of anonymous

escrow services which hold the digital money until

the deed is done. Lots of issues here. It is unfortu-

nate that this area is so little-discussed....people

seem to have an aversion for exploring the logical

consequences in such areas.)



The implications for corporate and national espio-

nage have already been touched upon. Combined

with liquid markets in information, this may make

secrets much harder to keep. ((Imagine a "Digital

Jane's," after the military weapons handbooks,

anonymously compiled and sold for digital money,

beyond the reach of various governments which

don't want their secrets told.)



New money-laundering approaches are of course

another area to explore.



Something that is inevitable is the increased role of

individuals, leading to a new kind of elitism. Those

who are comfortable with the tools described here

can avoid the restrictions and taxes that others can-

not. If local laws can be bypassed technologically,

the implications are pretty clear.



The implications for personal liberty are of course

profound. No longer can nation-states tell their cit-

izen-units what they can have access to, not if these

citizens can access the cyberspace world through

anonymous systems.



10    How Likely?



I am making no bold predictions that these changes

will sweep the world anytime soon. Most people

are ignorant of these methods, and the methods

themselves are still under development. A whole-

sale conversion to "living in cyberspace" is just not

in the cards, at least not in the next few decades.



But to an increasingly large group, the Net is reality.

It is where friends are made, where business is ne-

gotiated, where intellectual stimulation is found.

And many of these people are using crypto anarchy

tools. Anonymous remailers, message pools, infor-

mation markets. Consulting via pseudonyms has

begun to appear, and should grow. (As usual, the

lack of a robust digital cash system is slowing

things down.



Can crypto anarchy be stopped? Although the fu-

ture evolution in unclear, as the future almost al-

ways is, it seems unlikely that present trends can be

reversed:



%    Dramatic increases in bandwidth and local,

privately-owned computer power.



%    Exponential increase in number of Net us-

ers.



%    Explosion in "degrees of freedom" in per-

sonal choices, tastes, wishes, goals.



%    Inability of central governments to control

economies, cultural trends, etc. [9]



%    The Net is integrally tied to economic

transactions, and no country can afford to "dis-

connect" itself from it. (The U.S.S.R. couldn't do

it, and they were light-years behind the U.S.,

European, and Asian countries. And in a few

more years, no hope of limiting these tools at

all, something the U.S. F.B.I. has acknowl-

edged. [11]



Technological Inevitability: These tools are already

in widespread use, and only draconian steps to lim-

it access to computers and communications chan-

nels could significantly impact further use.

(Scenarios for restrictions on private use of crypto.)



As John Gilmore has noted, "the Net tends to inter-

pret censorship as damage, and routes around it."

This applies as well to attempts to legislate behav-

ior on the Net. (The utter impossibility of regulating

the worldwide Net, with entry points in more than

a hundred nations, with millions of machines, is not

yet fully recognized by most national governments.

They still speak in terms of "controlling" the Net,

when in fact the laws of one nation generally have

little use in other countries.)



Digital money in its various forms is probably the

weakest link at this point. Most of the other pieces

are operational, at least in basic forms, but digital

cash is (understandably) harder to deploy. Hobby-

ist or "toy" experiments have been cumbersome,

and the "toy" nature is painfully obvious. It is not

easy to use digital cash systems at this time ("To use

Magic Money, first create a client..."), especially as

compared to the easily understood alternatives.

[12] People are understandably reluctant to entrust

actual money to such systems. And it's not yet clear

what can be bought with digital cash (a chicken or

egg dilemma, likely to be resolved in the next sev-

eral years).



And digital cash, digital banks, etc., are a likely tar-

get for legislative moves to limit the deployment of

crypto anarchy and digital economies. Whether

through banking regulation or tax laws, it is not

likely that digital money will be deployed easily.

"Kids, don't try this at home!" Some of the current

schemes may also incorporate methods for report-

ing transactions to the tax authorities, and may in-

clude "software key escrow" features which make

transactions fully or partly visible to authorities.



11    Conclusions



Strong crypto provides new levels of personal pri-

vacy, all the more important in an era of increased

surveillance, monitoring, and the temptation to de-

mand proofs of identity and permission slips. Some

of the "credentials without identity" work of

Chaum and others may lessen this move toward a

surveillance society.



The implications are, as I see it, that the power of

nation-states will be lessened, tax collection policies

will have to be changed, and economic interactions

will be based more on personal calculations of val-

ue than on societal mandates.



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 ex-

treme examples. It is hard to imagine any level of

digital contract killings ever coming close to nation-

state barbarism. (But I agree that this is something

we cannot accurately speak about; I don't think we

have much of a choice in embracing crypto anarchy

or not, so I choose to focus on the bright side.)



It is hard to argue that the risks of anonymous mar-

kets and tax evasion are justification for world-

wide suppression of communications and encryp-

tion tools. People have always killed each other,

and governments have not stopped this (arguably,

they make the problem much worse, as the wars of

this century have shown).



Also, there are various steps that can be taken to

lessen the risks of crypto anarchy impinging on

personal safety. [10]



Strong crypto provides a technological means of en-

suring the practical freedom to read and write what

one wishes to. (Albeit perhaps not in one's true

name, as the nation-state-democracy will likely still

try to control behavior through majority votes on

what can be said, not said, read, not read, etc.) And

of course if speech is free, so are many classes of

economic interaction that are essentially tied to free

speech.



A phase change is coming. Virtual communities are

in their ascendancy, displacing conventional no-

tions of nationhood. Geographic proximity is no

longer as important as it once was.



A lot of work remains. Technical cryptography still

hasn't solved all problems, the role of reputations

(both positive and negative) needs further study,

and the practical issues surrounding many of these

areas have barely been explored.



We will be the colonizers of cyberspace.



12    Acknowledgments



My thanks to my colleagues in the Cypherpunks

group, all 700 of them, past or present. Well over

100 megabytes of list traffic has passed through he

Cypherpunks mailing list, so there have been a lot

of stimulating ideas. But especially my appreciation

goes to Eric Hughes, Sandy Sandfort, Duncan Fris-

sell, Hal Finney, Perry Metzger, Nick Szabo, John

Gilmore, Whit Diffie, Carl Ellison, Bill Stewart, and

Harry Bartholomew. Thanks as well to Robin Han-

son, Ted Kaehler, Keith Henson, Chip Morningstar,

Eric Dean Tribble, Mark Miller, Bob Fleming, Che-

rie Kushner, Michael Korns, George Gottlieb, Jim

Bennett, Dave Ross, Gayle Pergamit, and--especial-

ly--the late Phil Salin. Finally, thanks for valuable

discussions, sometimes brief, sometimes long, with

Vernor Vinge, David Friedman, Rudy Rucker, Dav-

id Chaum, Kevin Kelly, and Steven Levy.



13    References and Notes



1    The Cypherpunks group was mainly formed

by Eric Hughes, Tim May, and John Gilmore. It be-

gan both physical meetings, in the Bay Area and

elsewhere, and virtual meetings on an unmoderat-

ed mailing list. The name was provided by Judith

Milhon, as a play on the "cyberpunk" genre and the

British spelling of cipher. The mailing list can be

subscribed to by sending the single message sub-

scribe cypherpunks in the body of a message to major-

[e-mail]. Expect at least 50 messages a day.

About 600 subscribers in many countries are pres-

ently on the list. Some are pseudonyms.



2     RSA Data Security Inc., Redwood Shores, Cal-

ifornia, is the license administrator. Contact them

for details.



3     Many crypto texts exist. A good introduction is

Bruce Schneier's Applied Cryptography, John Wiley

and Sons, 1994. This text includes pointers to many

other sources. The "Crypto" Proceedings (Advances

in Cryptology, Springer-Verlag, annually) are essen-

tial references. The annual Crypto conference in

Santa Barbara, and the Eurocrypt and Auscrypt

conferences, are where most crypto results are pre-

sented.



4    David Chaum, "Untraceable Electronic Mail,

Return Addresses, and Digital Pseudonyms,"

Comm. ACM 24, 2, February 1981, pp. 84-88.

Cypherpunks-style remailers are a form of

Chaum's "digital mixes," albeit far from ideal.



5    David Chaum, "Security without Identification:

Transaction Systems to make Big Brother Obso-

lete," Comm. ACM 28, 10, October 1985. This is an

early paper on digital cash...be sure to consult more

recent papers.



6    David Friedman, The Machinery of Freedom, 2nd

edition. A leading theoretician of anarcho-capital-

ism. (Hayek was another.)



7    Tim May, The Crypto Anarchist Manifesto, July

1988, distributed on the Usenet and on various

mailing lists.



8    The political opposition in Myan Mar--former-

ly Burma--is using Pretty Good Privacy running on

DOS laptops in the jungles for communications

amongst the rebels, according to Phil Zimmer-

mann, author of PGP. This life-and-death usage un-

derscores the role of crypto.



9    See Kevin Kelly's Out of Control, 1994, for a dis-

cussion of how central control is failing, and how

the modern paradigm is one of market mecha-

nisms, personal choice, and technological empow-

erment.



10    Robin Hanson and David Friedman have writ-

ten extensively about scenarios for dealing with the

threats of extortionists, would-be assassins, etc. I

am hoping some of their work gets published

someday. (Much of the discussion was in 1992-3, on

the "Extropians" mailing list.)



11    During the "Digital Telephony Bill" debate, an

FBI official said that failure to mandate wiretap ca-

pabilities within the next 18 months would make it

all moot, as the cost would rise beyond any reason-

able budget (currently $500 million for retrofit

costs).



12    "Magic Money" was an experimental imple-

mentation of Chaum's digital cash system. It was

coded by "Pr0duct Cypher," a pseudonymous

member of the Cypherpunks list--none of us knows

his real identity, as he used remailers to communi-

cate with the list, and digitally signed his posts.

Many of us found it too difficult to use, which is

more a measure of the deep issues involved in us-

ing digital analogs (no pun intended) to real, phys-

ical money.



13    Abuse, according to some views, of remailers is

already occurring. A Cypherpunks-type remailer

was used to post a proprietary hash function of

RSA Data Security, Inc. to the Usenet. (Let me has-

ten to add that it was not a remailer I operate, or

have control over, etc.)



14    article on digital cash, The Economist, 26 No-

vember 1994. pp. 21-23.



15     article on digital cash, Steven Levy, Wired. De-

cember 1994.