PODCAST Summary: Bankless ep 135 – Crypto Wars 2.0 with Zooko

http://podcast.banklesshq.com/135-crypto-wars-20-with-zooko

#Those who ignore the lessons of history are condemned to repeat them#

Fantastic thought provoking episode, I would recommend you listen to it, but as many are time-poor or prefer to digest slowly whilst reading, I made some notes for a quick digest of the episode.

Zooko Wilcox-O’Hearn, aka just ‘Zooko’ age 48, has been around two iterations of ‘crypto’. The first, 90s cypherpunk cryptography, through early crypto money and later post bitcoin into modern cryptocurrency. Participating in each, (DigiCash, Zcash) this gives him a rare perspective.

Crypto wars 2.0, Why privacy…
(RSA) = Ryan Sean Adams
(DH) = David Hoffman
(Z) = Zooko

Bankless episode notes:
“Crypto privacy is being tested in new ways and Zooko couldn’t be in a better place to explain the current complexities. – – What’s the case for crypto privacy?
– Why is it such a tough problem to solve?
– Why is Zooko optimistic about the future of crypto privacy?”

Shout out to Bankless for the best crypto podcast out there.
https://newsletter.banklesshq.com/

EPISODE NOTES
(Z) Privacy is the foundation of any free society. But not ‘Privacy’ as the ultimate goal, just a means to an end. Privacy to allow us to be our authentic selves, this is even more important for people in desperate situations eg authoritarian regimes

When we give away privacy / data to corporations or govts it always seems to create negative outcomes, election results manipulated, civil wars incited..

Privacy is not the same as secrecy, it should be your choice what you share.
(RSA) Decentralisation in the same vein is a means to an end, not the desired state per se

(Z) Optimistic that younger generations are more interested in privacy. Sometimes it seems that youth may have become somewhat nihilistic about their data, the big corps are a necessary evil, but crypto natives seem far more optimistic as they see a path forward to create systems of self-control of who gets my data. They see more possibilities.

(Z) There seems to be a view from some that “of course govts track all our transactions they always have..” but no.. this really started with Nixon 1970 and the bank secrecy act, and increased from there with the war on drugs. Prior to that there was little state oversight of financial transactions. 50 years ago privacy reigned.

(Z) So its not radical to go BACK, the current state is the ‘experiment’ not the norm

Zooko’s rallying cry is “Privacy is normal!”

(RSA)  counterpoint, what if too much privacy is a bad thing, abuses by terrorists/ criminals/ despots .. maybe now, they could be stopped?

(Z) There have always been these actors. The founders of US bill of rights enshrined privacy, 4^th amendment of US constitution. Look at (pre)history under any types of surveillance rule they were failed societies.

Every successful thriving society or nation had a voluntary cooperation between individuals, a balance between social, societal and government needs

(DH) New player emerged, the internet, makes everything open, we have to ADD privacy back into it, then the base layer for communications goes from transparent to private.

(Z) with regards the capture and distribution of user data, this is an unintentional state of affairs. The original root cause is the advertising model;

Collect information, so that you can be more effectively sold to, better influenced or worse manipulated

(Z) This was somewhat unintentional – Few would think Mark Zuckerberg/ Facebook/Meta should have control and insight into everyone on the planet. Radical tech revolutions take decades for people to learn and consent around how we should live

Case in point – The Gutenburg press, it took around 100 years for society to adapt to the disruption this brought to world

We are only 25 years into this experiment and automated mass surveillance is becoming the reality

(Z) No one really wanted this, unintended consequence, not even Mark Zuckerberg, we slid down a slope into this radical dangerous unprecedented situation

Crypto / ZK tech and blockchain offer way to slow this descent and reinstate old ways

These are really American patriot values, American exceptionalism ;

These technologies may sound to non-tech folk like sci-fi ‘light sabre’ technologies but they are aligned with American values such as;

• Freedom from unreasonable search and seizure
• Freedom of speech
• Freedom of association
• Rule of law

(RSA) – constitution founders values preserved rights in a document similar to who we might see a protocol / code. The 4^th amendment was basically baking privacy into a social protocol. But now things have switched around and we have to justify privacy

(Z) So why did privacy deserve to be included in the first 10 amendments to Bill of Rights as the principles were essentially freedom and decentralisation?

• When you lack privacy you become vulnerable to the most powerful and least ethical actor around
• Can extort / exploit anyone that they have sufficient information about

(Z) The information leaked about you or ‘mined’ /stored up about you makes you vulnerable to the most powerful entity in say 10 years time

e.g. During the holocaust Jewish people in well organised countries survived far less well in WWII than those in regimes with poor ‘databases’. Unintended consequences of data capture. It didn’t seem dangerous at the time

(RSA) This is a Negative externality – something that damages a society as a whole even if it is not that detrimental to each individual

(Z) yes;

• Data accumulates / aggregates and is exported by other actors than we may have expected
• e.g. Cambridge Analytica, data breaches by US govt departments falling into enemy hands
• Privacy levels this playing field between the individual and big players, its not just about today

(Z) There is a notion called ‘The chilling effect’, where you clam up or act differently if you know you are being watched / spied on. We need to feel safe in order to be our authentic selves and express our morals and dignity. This is necessary for democracy, family life, innovation, education

(Z) people with means to aggregate information are not usually individuals, but are those centralised well capitalised and powerful actors.

Why do data leaks have negative consequences for individuals? Answer: consent and dignity. Corporations are naturally money / profit seeking and data is profit. States are naturally power / control seeking and data gives that

(Z) What if we could reimagine the world  and take back the 25 years and start afresh with these new technologies.. how would this have developed?

• Development of AI has hit an inflection point
• The web used to be client side smart/ server side dumb. Web servers just dumb forwarding machines, browser software was the clever stuff
• Once advertising figured out the profit in data this reversed and servers became data aggregators

(Z) At this point (2022) the surveillance capitalism / government model is starting to transform into a surveillance control system

• In East Germany the Stasi collected dossiers but nothing like what could be done with moden data / AI
• Centralised AI’s will have increasingly more levers over peoples lives
• Already happening eg in China some are prevented from buying train tickets / hotels

(RSA) – Peter Theil has a thesis that in the future there is only AI and Crypto as a sort of Yin/Yang. AI being centralised and ever increasing power, Crypto offering the decentralised alternative.

Centralised has the upper hand currently and cryptography is the only chance we have to embed the will of US constitution framers. If current state continues there would be a gradual erosion of rights and we won’t even notice it happening. Generations will be born without knowing another possibility

(Z) – somewhat disagrees, thinks that it is an accident of history that AI became centralised, it could have been the client side (not server side) that grew to capture all this data. If the economics had been different

(Z) Albert Wenger author of ‘The World After Capital’ and a VC said that in the same way you have the right to a lawyer because you are not competent to exercise your own rights, in the future you will need a right to be represented by a ‘friendly’ AI. When dealing with an AI ‘loyal’ to someone / other entity you should have a right to have an AI represent your own interests

The attorney / client privilege means the lawyer MUST have a duty of loyalty, they cannot represent any conflicting interest. Right now, already AI controls which friends you see posts about, shaping your relationships even if you are not aware. So Big data AI says either ‘we’ manage it or ‘you’ manage. But this is a false alternative, it should be that ‘we’ or ‘your AI’ can manage the data. The big question is becoming, ‘to whom is the AI loyal’

Back to the crypto wars;

Crypto wars 1.0 – 90s cryptography, a major battle started as the internet started to be developed. Factions of US govt, the NSA, got involved and ordained that a chip should be added to every device capable of internet connection.

The ‘Clipper Chip’ , this chip was a back door for NSA to see what everyone else was saying whilst allowing people to keep their discussions ‘private’ from others. This beget some civil disobedience-  For example an scientist, Matt Blaize, showed that clipper chip did not work.

(Z) Prior to this there was Crypto wars ‘0’ – mathematicians and scientists who oversaw the (re)discovery of Public Key Cryptography, Ron Rivest, Adi Shamir and Leonard Adleman, Whitfield Diffie and Martin Hellman, David Chaum, Ralph Merkle and others. They took personal risks to defy the US military and publish this scientific breakthrough before they could hide it and nationalise it. And if they hadn’t done that, we would not have an internet, cannot have internet without Public Key cryptography.

(Z) Puzzles and Games columnist for Scientific American, Martin Gardener, published Public Key Cryptography and this act of civil disobedience stopped the US govt from taking control of Public Key Cryptography as a state secret.

n.b. A few years prior the British Govt had made Public Key Crypto but they kept it secret until it was rediscovered (above)

(Z) CDBC’s represent a modern equivalent of the Clipper Chip. Govts are coming to terms with this globalised decentralised tech but they want a back door.

in a CDBC, users have autonomy over one another but not from Government, all users subject to control by a govt such as Chinese communist party.

(RSA) It’s distressing to think US would try and copy this approach, they should focus on values and strengths that have made them successful. Not half-assed authoritarianism

(Z) US Govt may never ship CDBC. The clipper chip never shipped.

(RSA) Privacy not really adopted by mainstream crypto – BTC and ETH did not implement privacy by default, why not ?

(Z) Zooko saw fall of Berlin wall, USSR fail and the internet emerge. Then saw the science papers of David Chaum.

Thought was ..we need 3 freedoms

– Political freedom

– Freedom of speech (internet)

– Economic cooperation freedom (the promise of cryptocurrency)

With these we can innovate and grow faster

(Z) Bitcoin sacrificed privacy for a technical reason, Satoshi / Hal Finney considered freedom from centralised control of banking and centralised powers over people to be more important than privacy.

Satoshi considered using Zero-knowledge proofs to fix the problems in bitcoin said something like ‘if we could use zk proofs we could have a much more useable version of Bitcoin’. But ZK was still not ready.

(Z) In 2013 ZK became more practical and scientists contacted zooko to implement ZK proofs to provide end to end encryption. At first Zooko considered and said no as Bitcoin was the mainstream cryptocurrency and well adopted

– But overnight changed his mind, the mainstream crypto cannot be leaking to competitors, hacker, thieves, foreign enemies, we need mainstream privacy and so agreed to work on what became ZCash

(DH)– Are we now recreating a problem with blockchains as happened with the origins of the internet as the numbers 1 and 2 by Market cap cryptos BTC and ETH do not enforce privacy and are transparent by default. Similar story to early internet/

(RSA) What if, in 10 years time we look back and say great crypto ‘won’ but what got created instead was some sort of global panopticon

Would crypto have make progress if privacy had been on as default?

(Z) thinks this sounds rather like a rationalisation from someone with heavy bags

US govt wants to see what no one else can see and BTC/ETH do not do that

Crypto industry has tried to appease, made a palliative statement in saying ‘ don’t worry crypto is all open and transparent’ . But this is not what governments wants.

Crypto without privacy violates the mandates of many US agencies, eg healthcare. Sharing of data is just not compatible with these departments / agencies eg Gramm-Leach-Bliley Law disallows sharing of sensitive data

(Z) ZCash allows the use end-to-end encryption of data using Zero Knowledge proofs for privacy and scalability. They are used in the base layer for Zcash (Eth uses in the APP layer)

(DH) – Can we do DeFi with privacy

(Z) No need for full privacy in Defi, can be problematic with requirements for liquidity, transparency assurances

Can simply come out of privacy chain, into Defi world and back again

(Z) ZCash in the future;

Could move to proof of stake

Currently US govt still allows ZCash, but not tornado cash, OFAC is a very specific agency addressing a problem from their isolated perspective

Zcash listed on several major US exchanges
Zcash https://z.cash/ 

(Z) Final thoughts; the Crypto wars 1.0 in the 90s was eventually won because of mainstream utility. The govt could not hold back the dam, too much commercial pressure from a useful Amazon, email etc. This is what crypto need urgently now.

END