On the importance of a privacy-driven and fungible Bitcoin while invasive bills such as the CLOUD Act pass and central banks push towards a cashless society

Background

Bitcoin is not an anonymous payment system and law enforcement has exploited this for some time. This has been a common misconception floating around mainstream media, and it's only as of recent being debunked for mainstream audiences.

In the early days, Bitcoin was reasonably close to being anonymous, close enough to remove the need to correct people that claimed this characteristic. Since the majority of Bitcoin was mined by lonely users in the beginning, before the mining farms that cling to cheap power counties or counties with corruptible government officials looking to wet their beak, it was difficult to ascertain the identities of those who ‘found’ the coin mined. With an increase in privacy comes an increase in fungibility, and if we're able to look back at coins with 'illicit' pasts, we take both away.

Over time it has become easier to trace coins back to a real identity. The vast majority of coins now touch a personally identifiable, real life account of a user at some stage, allowing any apt investigator to connect the dots of transaction to transaction in mapping out the transfer of value. Every transaction lives on the public ledger. It’s, out of technical necessity, public for all to see. Every amount, every wallet to wallet, every time and date.

Bitcoin developers are looking to change this, and as a community it is clear why. Privacy is going to be a core feature driving future developments in Bitcoin, fueled by users realizing implications of the lack of it - perhaps initially through taxation indiscretions.

NSA tracking bitcoin since 2013

The Intercept recently published a piece on the NSA’s technical capability to track Bitcoin users since 2013.

Fellow Crypto Insider author Tristan Roberts predicted law enforcement’s capabilities before The Intercept broke the story, using reason to deduct the then controversial, now seemingly obvious operations. With the capabilities of the SIGINT community alphabet agencies coming to light since 2013, and a real shift in the mental scrutiny, this should not shock anyone. The ability to siphon data is beyond our comprehension.

One would believe that these agencies cannot necessarily process the entirety of this information at this stage: how can they? This information is is vast, constant, and never ending. But that isn’t the current goal.

We are living in the ‘collection’ phase. The ‘processing’ phase will come once quantum computational power becomes a usable reality, and someone rolls out software to match the hardware leaps and bounds. It's a phase where the effects of our surrendered privacy are not yet fully felt, and that is why it's met with a level of apathy.

However, Bitcoin can reshape itself as it develops, and it will likely change to make privacy and fungibility core considerations.

Source: OAKSTAR Weekly 2013-03-08

Will we then be facing retrospective taxation indiscretions for those few cryptocurrency transactions we forgot to calculate the tax on? Are crimes in general punishable when looked back on? Generally, yes (if criminal and not civil, as civil has a statute of limitations), but we’ve never had power to apply this to seemingly minor indiscretions. It all bring up some deeply philosophical questions about the way we investigate and enforce laws in our society. Laws that are never black and white, but that a machine learning application with unlimited information may only see in black and white.

It’s beyond cryptocurrency. It’s the reason many of us are in this bleeding edge area to begin with. The cypherpunks in us.

When I’m queried on the development of technology in association with the law I like to use the following example of the scope creep we may be subjecting ourselves to. All because we  fail to address the outlandish budgets in law enforcement, military, and security industries, as well as address elephant of whether ‘we should’ as oppose to ‘we can’ in technological advancements.

We’re jumping off the cryptocurrency page a little, but given it’s highly likely every single reader has failed to pay taxation on at least one cryptocurrency transaction in the past, it will come full circle.

* * *

Imagine this

It’s 1980. Pick any Western country, and this is where a man lives. It’s a Saturday night, the streets are busy, loud and alive. This man has just met his friends for a few drinks in the late afternoon sun, which turn into a few more drinks as dusk turns to night. The air is sweet, the street chatter is happy. Eventually, he gives his jolly goodbye hugs and begins the short third of a mile walk back to his inner city apartment. In the county his resides, it’s a crime to be drunken and disorderly in public. This law was written in 1950 following an alcohol fueled riot on the city streets.

This is the contextual backdrop against which the laws were passed: to prevent future riots and provide law enforcement with a mechanism to ensure the prevention. The man stumbles here and there, but is cheerful enough, certainly no threat to anyone, and eventually he makes his way up his apartment steps, finds his keys, drops them, picks them back up, makes some food and falls sleep in front of the television replaying a football game.

No riots commence, and no damage is done.

Now, let’s imagine how this scenario could differ in a dystopian ‘not too distant’ future. Same country.

It’s the mid 21st century. The man is in the same town, with the same law in force, and he finishes the same number of drinks before stepping out into the public space and beginning his short journey home. In this time, though, local law enforcement agencies have a seemingly unlimited budget, and access to versions of tools passed down from the NSA and other alphabet agencies to help them ‘serve and protect’.

The man’s face is almost immediately clocked on a nearby CCTV checkpoint as he leaves the bar. The facial recognition technology get to work, identify him, and the time and location is saved in a database. He stumbles once within camera’s field of range, a police parameter is met and his profile is raised to a new ‘threat’ setting: the consequence of which means more computational power is thrown at his movements as he is tracked camera to camera. A second stumble, nothing nefarious, just a raised bit of sidewalk that nearly everyone stumbles on, but the computer system tracking him doesn’t account for something like that: he is now in possible breach of a law.

He passes a CCTV checkpoint with infra red sensors that measures his temperature, and on the basis of two stumbles and his raised body temperature he is deemed ‘possibly intoxicated’. Law enforcement officers’ augmented reality headsets are fed his profile and an officer sees the virtual red box that surrounds his face as he approaches her. The man is questioned by the officer and forced to blow into a breathalyzer. He is deemed to be in contravention of a section of the 1950s Public Intoxication & Riot Act and is spot fined $200 dollars.

He makes his way home, but in the background of this encounter the registration of his vehicle linked to his police profile is ‘black’ marked in the traffic system as ‘possible DUI driver’ for the next two years, and AI computer power in CCTV traffic footage is directed to checking the way his car sways in a lane against a DUI algorithm to check if pulling him over is required.

Further, he’ll be breathalyzed on entry to any festival in a public place, and not allowed admission if he is ‘publicly intoxicated’.

Implications could go on.

It’s arguable that current law enforcement, in 2018, is limited only by the technology at their disposal. Given more technical capabilities, law enforcement will use them.

This example shows how one tiny law, a law originally written in this hypothetical little world to prevent alcohol fueled riots on the streets, can be unequivocally changed by technology. Older laws unaltered to do not catch up with technology. They do no mesh with technology. The human ‘reasonably’ factor from police officers, expected from every legislator who passed the law to begin with, becomes an antiquated methodology in enforcement.

This is genuinely the path we are walking.

What the hell does this have to do with Bitcoin and cryptocurrency? It’s an illustration of the way technology in the hands of invasive institutions can be used – tracking every transaction and eventually snapping a real world identity to a wallet – and when applied to laws that currently exist, can create a criminal out of every single person if examined long enough.

We should be concerned with the NSA’s capability. We should be concerned that local law enforcement can and will catch up, like they always have. We should be concerned that corners of governmental agencies will catch up. They see what’s been created without them. The privacy driven path of cryptocurrency has governments scared.

* * *

Tracking currency

Law enforcement has a requirement to track currency. It’s a necessary part of tracking criminal activity. To track the money is to find the source of a syndicate. And law enforcement have been seeking bigger and better ways to do this since their inception. With the age of the digitization of currency, tracking has never been easier.

A credit card company has metadata that paints a profile which might know more about you than you. Your spending habits are indicative of your life. Times of transactions, places you shop, grocery store amounts, payment history, income, gender style taste (stores visited), whether you’re a family man, loving husband, or cheating asshole. Everything. And it’s been available to law enforcers for a small (large) processing fee. What a great deal for both parties.

Cash has been the only refuge against this creep toward a privacy invasion, yet cash is consistently being phased out. A cashless society is a society under a microscope. And a cashless society is a step closer to a government in what they perceive as ‘control’.

The EU are removing the $500 Euro note from circulation. The Australians are considering removing the $100 dollar note, and have previously considered embedding nano trackers into both the $50 and $100 dollar note. The United Kingdom are the silent assassin in the privacy destroying nations, and are fast becoming a cashless society by all reports. I’ve touched on the topic before, but from a freedom perspective The fact is that a cashless society is imminent.

But there is hope in cryptocurrency. Cryptocurrency is the dark horse in this. As more and more stores put up Litecoin signs and ‘Bitcoin accepted here’ decals in the windows, the cashless society can both become a reality and be on the people’s own terms. Without the embedded privacy destroying measures.

CLOUD Act

Why do the initially fun and fluffy sounding legislation always turn out terrifying?

The ‘Clarifying Lawful Overseas Use of Data (CLOUD) Act has passed in the US recently, and has implications for all cryptocurrency users. It’s not fun white fluffy clouds, it’s rain clouds and it’s a storm over us, always. Always above us is not too far from an analogy for this Act.

From a cryptocurrency perspective, the Act essentially (and this is a huge oversimplification) makes law enforcement tools in obtaining private information legal, after the fact these tools have already been created sometimes years ago and undoubtedly been in illegitimate use prior to the Act. Databases in exchanges for example, which store large amounts of cryptocurrency users' information, are now susceptible to government probing, regardless of where they're based around the world.

Government are no longer accountable. Bills such as the CLOUD Act purely exist, at least to this commentator, as a way to create a lawful justification for reversing a cornerstone of our legal system from the ‘presumption of innocence’ to ‘guilty until proven innocent’.

It’s so easy to be apathetic towards the future. But it’s a bright future with advances that will help life on earth to a degree never before imagined. Adjacent, though, is the incredible tools law enforcement will have access to, and the level of information on an internet that was once free but is now waiting to become a future court transcript.

Cryptocurrency can try to solve a serious societal problem we were walking backwards into: a cashless society embedded with tools built to track us.  The mantra ‘privacy is for the people, transparency is for the government’ rings true, but only as a mystical mantra. Government write legislation to attack and reverse this, just as they seek to put onus on citizens and make them justify actions. They want to operate without oversight, in the shadows, ominous and omnipresent.

The problem crosses the line between cryptocurrency and fiat cash. We don't control fiat cash, but we do control, as a collective, cryptocurrency. This is the core distinction. We're able to shape Bitcoin's future to be driven by a level of privacy that affords us the protection we require, at a threshold we set through the nodes we run and the decentralized exchanges we trade at.

Bitcoin's future is one with increased privacy technologies embedded. Bitcoin isn't set. It changes based on consensus and development of features through reverse compatible upgrades. As the landscape changes and the fists tighten, the majority of users will demand privacy and the market will follow. It's the technical privacy measures that will hinder law enforcement from performing what might be considered investigations without warrants.  And the natural by-product of this entirely essential privacy aware Bitcoin is an increased fungibility - leading to a more natural adoption as an optimal currency.

One part ‘NSA tracks us as cryptocurrency users’. A shake of ‘CLOUD Act provides a lawful mechanism to obtain information easily and quickly without warrant or justification’. And a generous dollop of ‘our society is more cashless than ever before’. It’s a wonderful recipe for that dystopia where humanity and reason is placed to one side in favor of words written, voted and passed by fallible humans.

Our remedy is in technology - further development to create a privacy-driven Bitcoin with increased fungibility.

Featured image from Zac Ong on Unsplash

Verified on Po.et

April 9th 2018, 23:49

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Con’s a writer. His education background is law, where he’s published in law journals on the legal issues of crypto-currency. His opinion editorials tend to focus the relationship between people and technology, as well as the societal challenges technology can present. He’s consulted for non-profit privacy and digital rights groups, aiding governmental submissions. His passion is for information security, technology and the intertwining legal issues.

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