Wendy McElroy: Satoshi Revolution – Afterword

Satoshi Revolution - Afterword

The Satoshi Revolution: A Revolution of Rising Expectations.
Afterword
by Wendy McElroy

I meant to end this book by discussing the blockchain’s impact on physical violence, on crimes of violence. I can’t. I don’t think there is an impact. I don’t know how the blockchain can prevent back-alley rapes, for example. I could talk about putting sex work on an open ledger, but that would be weak tea, and it would feel like an evasion. This is a book of original theory, which explores what has never been said before about cryptocurrency. I don’t always know where the ideas are taking me. But the impact on physical violence isn’t one of those destinations.

And, so, I am writing the afterword to my book, instead.

My journey through cryptocurrency began in a kitchen in Chile. I was the featured speaker at a conference that also presented a panel of three experts on bitcoin. My husband and I decided to rent a house through airbnb because we wanted to extend the couple of days into two weeks of bouncing around the country, which was magical. The house we ended up with, however, was outfitted for weddings. Translation: there were no fewer than thirty beds crammed into about twenty rooms that were linked by floors that consisted of cracked plywood between which there was you and a two-story drop. It wasn’t a house; it was an adventure, with one working bathroom. I prefer to consider it “quaint.”

The conference housed the speakers and attendants on a remote compound, which quickly filled up. At some point, the organizers asked us to put up the bitcoin experts. We immediately and gladly agreed. They were pleasant, presentable fellows—albeit men who spoke of matters that made no sense whatsoever to me. Fortunately, my husband develops hardware and software for embedded systems, so I am used to not quite understanding things.

And, then, there was the morning after they arrived. One fellow slept in. One insisted on cooking breakfast; I do not mean to cast aspersions upon him, because he was wonderful and trying to be a good guest. But people do not cook around me. I cook; you eat; we get along fine. He cooked.

So I was in a cranky mood when I stared across the breakfast table into the coal-black eyes of Michael Goldstein, whom I later learned is the Satoshi Institute. A remarkable young man. Michael is nicknamed Bitstein by those who have affection for him…and, really, all you have to do is meet him for that to happen. When I looked into his eyes, I had an oh-so-familiar feeling because I do have mirrors in my bathroom. “This is a fanatic,” I concluded. I happen to like fanatics, depending on the topic under discussion, of course. I had nothing against the topic of bitcoin, which had started to interest me because so many people I liked took it so darned seriously.

With an unwavering stare, Bitstein told me the blockchain was an open ledger that delivered anarchy. Okay. I immediately understood the power of crypto to bypass the central banking system…if it was widely adopted; if it was not outlawed, if… But anarchy? All my reservations were political and entirely different than those of husband, who joined us after about fifteen minutes. Brad waited until Michael took a breath and, then, he said one word: “scalability.” It was the first time Michael stumbled. Michael said, “we’re working on that.” I saw Brad lose interest.

I didn’t. I didn’t know what scalability was, except in the definitional sense. But I didn’t care because the word “anarchy” had been uttered, and that I knew about. Michael seemed more than happy to leave behind scalability for politics, and I pursued why he thought the dawn of freedom had arrived like the cavalry on an algorithm.

Michael answered, and he did not convince me, but he did prompt me to read. As did my old friend Jeff Tucker. As did the incredible Stephan Kinsella. Other people tried to raise my awareness, as well. Mihai Alisie, of Bitcoin Magazine, asked me to write for him on anarchism, for example. I don’t think I adequately thanked the man for having such automatic confidence in me. And, at that point, his confidence was probably ill-founded. I submitted one article to Bitcoin Magazine, which was far from my best work. It drew a better response than I deserved: they were willing to “work with me.” I thanked the editor, and backed away with the absolutely genuine excuse that I did not know if I had anything original to contribute to the discussion. I had nothing new to say. I had not yet grasped the hard, cold edges of crypto theory, and I did not understand its power. Which meant I had not yet staked out the one area where I could and can contribute something original: the integration of crypto-anarchism with the rich history of anarchist-libertarian theory that has spanned centuries.

As I read further, I became ashamed of myself. Crypto-anarchism: the most important political development in my lifetime had occurred without my noticing it happening, which is inexcusable. I had spent my time on “official” libertarianism—donation-driven and donation-defined institutes, tax-funded universities, academic journals… When did freedom ever come packaged in tax dollars, awards, and honors delivered at rubber-chicken dinners? Freedom is a street fight. Crypto-anarchism took over the streets without my noticing. I notice now.

Enter Roger Ver. Our first contact was an email that he sent out of the blue. Roger’s email “had” me at hello, because he used the word “voluntaryism” while asking me to write for his site. In 1982, I was one of three people who created the modern Voluntaryist movement during a bull-session in a two-bedroom rent-controlled apartment in Hollywood, California. I remember my fingertips literally buzzing from the excitement of the ideas and plans we were forging back then: Carl Watner, George H. Smith, and me. But, mostly, Carl. It was and is almost unbelievable to me that, decades and decades later, a voluntaryist visionary named Roger would be knocking on my door (so to speak).

Roger had good timing. In science-fiction language, I had finally grokked bitcoin; I tip my hat to Robert A Heinlein for that word, BTW. I also tip my hat to Roger and the entire bitcoin.com crew for never– and I mean not once, in any manner whatsoever–trying to influence the ideas as I spun them out in my sometimes clumsy attempt to integrate crypto-anarchism into the broader traditions of classical liberalism, Austrian economics, and individualist anarchism. And, yes, a period of fierce editing will ensue. Clumsiness will be eradicated.

Before closing, I must address another aspect of crypto-anarchism. I did not expect this side benefit, but there you have it; life is often unexpected. Crypto has made me young again.

I’ve had the immense good fortune to befriend and to spend so many years with people who helped found the modern libertarian movement. Murray Rothbard used to joke at conferences in the 1980s that libertarianism could be eliminated by one well-placed bomb. He was correct.

There is a downside to my immense good fortune, however. The people with whom I grew into intellectual adulthood now make me feel old, mostly because so many of them are dead. Feeling old is feeling tired, with nothing in sight that makes your eyes sparkle.

I remember Murray, and his passion—I remember it so vividly. But, increasingly and over years, something went wrong with his passion. It came from anger, and it was expressed by attacking other people. I remember an after-conference dinner at which a diner had the incredible misfortune to say something positive about Keynes. And, then—God help us all!–he elaborated. Murray finally exploded into a rant in his Brooklyneque-squawk of a voice, and the fellow started to back down. I think he would have backed his chair out of the restaurant, if that had been a possibility. He conceded that Keynes may have been wrong on “this” issue, and on “that” one, and that Keynes was probably weak on historical context. Murray slammed his open hand down on the table and declared, “And Hiter was ‘weak’ on the Jews!” Everyone laughed, but it was an attack, nevertheless.

Crypto sparkles like a spinning thing in the sun, and the sparkle is clean, because it does not come from anger or from demeaning someone or something else. The passion is positive. A door has been flung open, and I don’t know where the path outside of it will lead me because I could never have predicted the path up to this point. Let it evolve.

One thing I know. I am in good company; the bitcoin.com crew has been nothing but decent and grinning toward this gal who plopped into their midst. That means the world to me. I don’t know where I will end up next, but I do know that technology—not merely crypto—is going to give us all a wild ride for the rest of our lives. I will have my hands on the keyboard, trying to put the dizzy changes into historical perspective, even as they happen.

I have a chance of doing so…because I am young again. I am hopeful. And nothing, nothing is impossible. That’s what this book has meant to me. I pause in this journey to thank you for being part of it.

Reprints of this article should credit bitcoin.com and include a link back to the original links to all previous chapters


Wendy McElroy has agreed to ”live-publish” her new book The Satoshi Revolution exclusively with Bitcoin.com. Every Saturday you’ll find another installment in a series of posts planned to conclude after about 18 months. Altogether they’ll make up her new book ”The Satoshi Revolution”. Read it here first.

The post Wendy McElroy: Satoshi Revolution – Afterword appeared first on Bitcoin News.

Wendy McElroy: From Drugs to Gold and Prostitution, the Blockchain Minimizes Violence

From Drugs to Gold and Prostitution, the Blockchain Minimizes Violence

The Satoshi Revolution: A Revolution of Rising Expectations
Section 5: Saving the World Through Anarchism
Chapter 11, Part 9
From Drugs to Gold and Prostitution, the Blockchain Minimizes Violence

The most obvious objection to relying on self-defense…and restitution to prevent and rectify rights violations, is that these measures will be inadequate to deter criminals…Most people fail to appreciate the fundamental obstacles placed in the path of crime prevention by the perverse logic of public property, public law enforcement, and public imprisonment. Step one: start with public streets, sidewalks, and parks where every citizen must be permitted unless proved guilty of a crime. Step two: rely on an inherently inefficient public bureaucracy to catch, prosecute, and try those criminals against whom enough evidence of guilt exists. Step three: should they be convicted, subject criminals to the dangerous, unproductive, and sometimes uncontrollable setting of public prisons to prevent them from engaging in further misconduct. Step four: periodically release most prisoners back into the community and then return to step one and repeat the cycle.

–Randy Barnett, The Structure of Liberty: Justice and the Rule of Law

The state manufactures criminals. Then it centralizes and monopolizes a solution to the problem of crime, for which it is largely responsible. Put aside the manufacture of false criminals–that is, peaceful people who are considered to be immoral or unpatriotic or otherwise living their lives in an unacceptable way. The state factory also creates real career criminals—people who habitually initiate or threaten violence for profit. (For a discussion of fraud, please see the immediately previous articles.)

Today’s perverted system of law and justice deliberately produces two types of real criminals. The first and largest group consists of state-sanctified ones who use the veil of legitimacy to plunder the wealth and to control the actions of ordinary people. These are politicians, bureacrats, and other agents of the state, including crony corporations. They are “men of the system.” When the veil of legitimacy falls away and people refuse to obey, the state initiates or threatens open force against them. In this way, violence is legalized and institutionalized across society.  The state functions according to a parallel and different standard of morality; society is expected to accept a double standard by which state agents can commit official violence that would be unacceptable if committed by ordinary people.

The second group of criminals manufactured by the state system consists of unsanctified or street thugs. They pursue profit in the same manner as the state—the initiation or threat of force—but they do so without the veil of legitimacy or hypocrisy. The brutalization of innocent people for profit is not accompanied by lies.

The state manufactures street criminals, for at least three reasons.

As long as people believe the state is the thin line between their safety and rampaging savages, then people will accept the comparatively-civilized violence of the state. They will render obedience.

The state also profits from the confiscation of the criminals’s wealth, through mechanisms such as civil asset forfeiture, and of their labor in prison factories.

The state is able to monopolize and industrialize yet another human need—the need for safety and justice. There is the legislative industry, the regulatory bureaucracies, the police industry, the court system, and the prison industry. This industries are immensely profitable. The payoff comes not merely from the exploitation of people who are processed through the machine but also from taxpayers who pay for the facilities, wages and pensions to men of the system.

If a villainous mastermind had deliberately designed a system to create career criminals of both sorts—the sanctified and the not–it would be difficult to imagine an operation that is better suited to the task than the trusted third party institutions of the state.

The law-and-justice industries are mirror images of the financial ones against which Satoshi Nakamoto struck a telling blow. The central banking system wears a fabricated mantle of legitimacy, and it declares “I am necessary!” even as it confiscates and regulates private wealth. The banks claim to be the thin line against economic barbarism, crime, and chaos. Crypto exposes that lie. The banks are the barbarians at the gate, just the current distortion of law and justice are the real criminals at the doorstep.

It is difficult to believe that any system could be worse.


Decentralizing Law and Justice

No collection of Mafia or private bank robbers can begin to compare with all the Hiroshimas, Dresdens…and their analogues through the history of mankind. [I]t is illegitimate to compare the merits of anarchism and statism by starting with the present system as the implicit given and then critically examining only the anarchist alternative. What we must do is to begin at the zero point and then critically examine both suggested alternatives.

–Murray Rothbard, “Society Without a State”

Ground zero of any system is human nature.

Human beings are incredibly diverse and driven by free will. Every choice possible to human beings will be pursued by someone. The vast majority of those in society will deal with each other peacefully and exchanges that represent mutual advantage. But violence is an active alternative, and it will be chosen to some degree by some people, whether or not a state exists.

The goal of crypto anarchism with regard to violence is twofold: first, to minimize its occurrence; and, second, to make the cost of violence fall upon those who make that choice.

Minimizing violence is built into the blockchain. It is not merely that the blockchain epitomizes a society by contract without the corrupting influence of a trusted third party. It is also due to features such as pseudonymity and transparency.

Consider drug dealing. In an anarchist society, it would be legal to sell anything that did not violate a person’s body or property, whether or not the good is viewed as moral by others. Bitcoin.com contributor Sterlin Lujan observed, “Those are personal choices that apply to an individual’s own body and mind. Anyone who tries to control a person’s drive to have sex or use drugs is essentially a tyrant trying to subdue another person. It is not the moral high ground to harm someone if they are merely pursuing their own version of happiness. This is referred to as individual sovereignty, and it is important.”

But high-priced and portable items, like drugs or gold, would remain especially vulnerable to violent theft. One of the most demonized aspects of the crypto community offers a partial solution. Darknet markets have prevented violence. By providing a means through which people can buy drugs and other high-value items with a diminished risk of violence. For one thing, competing drug-dealers hock their wares without killing each other over whose territory a street corner represents. Under anarchism, darknet markets would be accessible through searches on popular browsers, and drugs would be treated like any other commodity. But such high-value commodities would have a filter against violence, especially commodities that might well attract “immoral” or erratic people.

The privacy of the blockchain also offers protection, while providing the value of a  transparent exchange. Who wants others to know that they own a fortune in gold and silver—a fortune for the taking? Eliminating the middle man—the trusted third party—eliminates risk factors. Precious metals can be ordered with comparative anonymity and then stored as though they did not exist. The blockchain, or technology in general, does not change what people want from the world: the pleasure of drugs or the safety of gold will still be sought. But technology reduces the risk of violence attached to satisfying such wants.

In her article “A Hundred Years of Crypto Anarchy,” Elaine Ou commented, “When Tim May wrote The Crypto Anarchist Manifesto, it wasn’t a call to action or instigation of sorts. It was simply an observation. We now have the technology to create and enforce our own rules, and this knowledge cannot be stopped. We can either rail against the inevitable, or use these tools to build the world we want.” The building block of personal safety is anonymity with transparency. “Public Key cryptography isn’t just for encrypting private messages,” Ou explained, “It also provides proof that the sender is who they say they are. When buyers and sellers conduct transactions, they sign messages with their private keys. The signatures become digital identifiers.” If this seems trivial in preventing violence, skeptics should talk to sex workers who can verify the crypto-identities of “safe” and reliable clients and then share those identities through an online database. Sex workers are among the most vulnerable people in any society to violence because of the privacy and intimacy of the exchange. An often overlooked role of a pimp is to ensure the safety of sex workers by screening customers. In short, pimps are trusted third parties to the exchange; like every trusted third party, they are often more abusive than not. Pimps also take a substantial part of all earnings. Cryptography can change that dynamic to benefit sex workers.

The foregoing examples merely hint at how crypto anarchism could revolutionize for the better some areas of human exchange that are most prone to violence. In each diverse case, the risk is minimized in the same manner: control is decentralized into the hands of the direct participants. And self-control is the antithesis of enduring violence. Self-control is almost a definition of living in peace.

The other aspect of how crypto anarchism addresses violence is to make the cost of that choice fall upon those who make it.

[To be continued next week.]

Reprints of this article should credit bitcoin.com and include a link back to the original links to all previous chapters


Wendy McElroy has agreed to ”live-publish” her new book The Satoshi Revolution exclusively with Bitcoin.com. Every Saturday you’ll find another installment in a series of posts planned to conclude after about 18 months. Altogether they’ll make up her new book ”The Satoshi Revolution”. Read it here first.

The post Wendy McElroy: From Drugs to Gold and Prostitution, the Blockchain Minimizes Violence appeared first on Bitcoin News.

Wendy McElroy: Avoiding Fraud by Going Crypto-Anarchist

Avoiding Fraud By Going Crypto-Anarchist

The Satoshi Revolution: A Revolution of Rising Expectations
Section 5: Saving the World Through Anarchism
Chapter 11, Part 8
Avoiding Fraud By Going Crypto-Anarchist

A transfer on the blockchain is a simplistic peer-to-peer contract, which memorializes the terms for those involved and is seen to be valid by the surrounding community through transparency. It is a voluntary exchange. The blockchain is also an instrument of enforcement that embodies the terms of execution, such as irreversibility, to which both parties have agreed; their agreement is expressed through the willingness to use the blockchain. Thus the blockchain expresses both requirements of libertarian law; it facilitates voluntary interaction and it acts as an instrument of enforcement.

–Wendy McElroy, “Don’t Smash the State, Bypass the State”

The late Samuel E. Konkin III (SEK3), the father of agorism and an old drinking buddy of mine, used to answer his telephone with the salutation “Smash the State.” And, yet, his lifestyle did not include direct confrontations with authority. Whenever possible, SEK3 avoided or replaced the state in his daily life, because he knew that the most effective way to smash the state was to render it irrelevant. His lasting legacy to anarchist theory: Agorism is a peaceful revolution that is achieved by counter-economics, which SEK3 defined as “the study or practice of all peaceful human action which is forbidden by the State.” Counter-economics is a black market version of Ludwig von Mises’s praxeology—the study of human action that flaunts the state.

SEK3 would have reveled in the audacity of cryptocurrency, which both avoids and replaces state fiat because being a better currency is the surest way to destroy fiat. He would have declared crypto to be the “counter-economic currency”–the currency of agorism. But more than this. In a flash, SEK3 would have recognized crypto’s implications for justice, because it also avoids and replaces state law as the default position for contracts. The default position becomes the free market or agorism. I can see SEK3 take a swig of black beer and a drag on his constantly present pipe, before announcing that anarchy had arrived.

The message of anarchism never should have been “smash the state” or “convince everyone to become an anarchist.” Those are impossible ends. The message should be “free yourself” by decentralizing the power expressed by every decision into your own hands. To the extent you can act as though the state does not exist, it does not.


The Basis of a Free Society

The contract is the basis of anarchist law because it is tangible evidence of the consent of individuals, upon which a free society rests. That’s why it is essential to decentralize contracts under the direct control of participants. The blockchain is a self-executing transfer, with immutable and transparent terms that are dictated by the users rather than by the jurisdiction of a state; it can become a self-executing agreement through the addition of a smart contract. (Note: smart contracts are still a developing technology, but proof of principle is definitely there.) The blockchain is its own defense against fraud and theft, largely because it bypasses trusted third parties, who are the overwhelming causes of corruption.

A Brookings Institute article asks, “Can Cryptocurrencies and Blockchain help Fight Corruption?” Pointing to accountability and transparency, it presents a practical example of how the blockchain prevents fraud. “If a government decides to construct a road, it can now track how each dollar is being spent, identify all the users of the funds, and ensure that only those authorized to spend money do so on originally intended expenses within the permitted time. Fraud and corruption investigations that now take on average 15 months could be performed at the touch of a button and at a fraction of the cost.”

The blockchain is part of a growing push to minimize the need for lawyers and courtrooms. An article in Futurism, entitled “An AI Law Firm Wants to Automate the Entire Legal World,” explains another aspect of the trend—an automated service called LawGeex. “On LawGeex, users upload a contract and, within a short period of time (an hour on average), they receive a report that states which clauses don’t meet common legal standards. The report also details any vital clauses that could be missing, and where existing clauses might require revision. All of this is calculated by algorithms.” For a modest fee, algorithms can detect clauses that enable fraud or provide inadequate protection. It can vet smart contracts before they are coded.


The Lingering Reality of Fraud

Fraud is like violence. Both will always be present because some people will always choose them as options. As with violence, the goal in countering fraud is not to eliminate it, because that is Utopian. The goal is to drastically reduce it and keep it away from your life.

What is fraud? It is not merely “dishonesty”–a word that is sometimes used as a synonym. Nor is it a breach of contract, which can occur between well-meaning people who then usually come to a settlement. In an anarchist framework, aggression is defined  as the usurpation of property—whether it is a person’s body or goods—without the owner’s consent. In crypto, the aggression is committed against goods or wealth. If it is taken through violence, such as in a mugging or a burglary, then it is straightforward theft. If it is taken through deception or stealth, then it is the type of theft called fraud. In fraud facilitated by a contract, there may be a bogus exchange of value; a person is assured that an expensive watch is a Rolex, for example, when it is a cheap knock-off. Or the exchange may happen on falsely-stated terms; the genuine Rolex is stolen property to which the seller has no title. The seller lies; the buyer believes; the contract of sale—explicit or implicit–is invalid because the values or terms were not agreed upon by both parties.

Before discussing fraud in crypto, it is important to note that the phenomenon may not be as common as many assume. The Australian Competition & Consumer Commission released a report on the level and types of scams that happened in 2017. Crypto-related fraud constituted 0.6% of the total. Each instance seems to draw media attention, however, because powerful forces use the accusation of fraud to call for regulation. Or, as a headline at Panda Security recently stated, “Cryptocurrency fraud is the exception, not the rule.”

I also know that for every scam, there are countless examples of cryptocurrency and blockchain technology being used responsibly to create opportunities, grow economies, and do good in the world. We need to remember that cryptocurrency fraud is the exception, not the rule.

The attention to fraud is warranted, but the conclusion of a need for state involvement is not. Inviting in the state—the greatest trusted third party scam in existence—is dangerous folly. Instead, people need to focus on the correcting the unsafe user practices that are revealed by every scam. They should stop opening their wallets and crypto to thieves, statist or private.

Consider the 2017 “mybtgwallet.com” scam. The website claimed to be an online web wallet for Bitcoin Gold, which was considered to be legitimate. Mybtgwallet.com offered users free Bitcoin Gold wallets through which they could check their balances, and use the website for one day for free transactions. The scam link was lent credibility by appearing briefly on the official Bitcoin Gold site—an act of incredible carelessness on the site’s part, to say the least. To take mybtgwallet.com up on its offer, users had to submit their private keys or recovery seeds. Of course, after they did so, the crypto in their wallets was forwarded to other addresses.

No one should have fallen for this scam but even some crypto veterans did. Coindesk reported that “more than $3.3 million has been stolen as part of an elaborate scam that took advantage of bitcoin users seeking to claim their share of the newly created cryptocurrency bitcoin gold. At least $30,000 in ethereum,$72,000 in litecoin, $107,000 in bitcoin gold and more than $3 million in bitcoin were confiscated.”

What are the lessons of the mybtgwallet.com debacle?

  • Always assume a strange site might be trying to steal crypto. Extend trust only after due diligence.
  • Due diligence or not, never trust anyone with private keys or recovery seeds. This is equivalent to disclosing the combination of a safe or handing over title to your wealth. The keys and recovery seeds are the proof and control of ownership.
  • Immediately distrust anyone who asks for keys or recovery seeds.
  • Never enter your keys or seeds anywhere that is vulnerable to being copied or stored.
  • Always keep a paper version of both in a secure place.
  • In essence, maintain privacy. Thieves require personal data in order to loot.

If the preceding lessons are repetitive, it is because they bear repetition. Remember: when crypto leaves your wallet, it is gone forever. That should at least be the assumption. The transaction cannot be reversed, and there is no insurance company to make you whole (although the crypto community should sell this service). As it is, victims rarely receive back even cents on the dollar, as the Mt. Gox victims did after years and years of strenuous effort.


The Biggest Message of mybtgwallet.com

Avoid trusted third parties, however convenient or alluring they may seem. They are the major point of vulnerability for fraud and other theft.

Third parties may be necessary for some purposes, such as converting between cryptos. If so, use exchanges or other services that require as little trust as possible. Many decentralized exchanges do not require keys or personal information beyond the absolute minimum of an email address and user name; prefer them over centralized exchanges that strip away all privacy. In your account, keep the least amount of crypto possible for as short a period as necessary to accomplish your goal.

The trusted third party to avoid the most is the state. Unfortunately, when massive fraud occurs, even people who should assume some responsibility for the theft call, instead, for government regulation. There is an irony here. One reason fraud happens is because of the statist mindset with which people approach investing and all things monetary. They are accustomed to guarantees of safety from the state, and many believe the guarantees are real. Fiat money is backed by the state and, by law, it must be accepted as payment. Bank deposits are insured; in the U.S., the Federal Deposit Insurance Corporation insures up to $250,000. Law enforcement operates fraud divisions that record reports of theft. In short, the state makes people feel safer than they should, and they neglect the due diligence that is the responsibility of every individual. Protecting your property is part of self-defense. The world’s most fraudulent trusted third party—the state–is not a remedy. It is not a reason to relinquish self-defense. It is a reason to learn how to be comfortable and skilled in exercising it.

[To be continued next week.]

Reprints of this article should credit bitcoin.com and include a link back to the original links to all previous chapters


Wendy McElroy has agreed to ”live-publish” her new book The Satoshi Revolution exclusively with Bitcoin.com. Every Saturday you’ll find another installment in a series of posts planned to conclude after about 18 months. Altogether they’ll make up her new book ”The Satoshi Revolution”. Read it here first.

The post Wendy McElroy: Avoiding Fraud by Going Crypto-Anarchist appeared first on Bitcoin News.

Wendy McElroy: Don’t Smash the State, Bypass the State

Don’t Smash the State, Bypass the State

The Satoshi Revolution: A Revolution of Rising Expectations
Section 5: Saving the World Through Anarchism
Chapter 11, Part 7
Crypto Justice: Don’t Smash the State, Bypass the State.

The 19th century individualist-anarchist Benjamin Tucker referred to anarchism as “society by contract.” The contracts could express any exchange, from leases to prostitution, from insurance policies to drug deals. The contracts would not be legal or illegal, only consensual. Just as crypto bypasses central banking and decentralizes economic control down to the individual, smart contracts have the potential of bypassing much of the legal system and returning to the people’s law—contract law. But, like crypto, the contracts would not require a trusted third party.

– Wendy McElroy, “How the Blockchain Provides Private Justice”

Last week’s installment of The Satoshi Revolution was entitled “How the Blockchain Provides Private Justice.” It examined a key argument used to counter the possibility of libertarian or private law. In summary: for justice to function, the content and administration of justice needs to be widely accepted, and that acceptance is based on the system being considered legitimate. The legitimacy is deemed to rest on consensus—on the judgment arrived at by most of those concerned–not on individual choice. This means the administration of justice must be centralized and homogenized by an agency that enjoys consensus because such an agency enjoys the compliance, if not the respect, of society. The preceding dynamic requires the state. When neither obedience nor respect are present, then the justice system commands compliance through the institutionalized violence of law enforcement.


The Parallels of Crypto and Justice

The argument for fiat and against crypto is remarkably similar. In order to function, it is claimed, a currency needs to be widely accepted, and this happens only when the public views it as legitimate. A consensus is necessary. The logic: a currency must be issued by an agency that enjoys public support and can command compliance in the form of acceptance. If the “consensus currency” is not used voluntarily or if it suffers from competition, then its use can be compelled by institutionalized force, such as legal tender laws. Again, this requires the state.

This line of reasoning is invalid for currency; it is invalid for justice. Crypto proved that individual consent coupled with an instrument of administration—the blockchain—can create a currency that others accept. The currency needs only the  consent of users, not a broader consensus, and compliance with the blockchain is an automatic matter.

The consensus argument for both currency and justice is more than invalid, however. It is deeply dishonest. For one thing, it is a contradiction in terms. If the administration and acceptance of a “service” relies upon force, then the service is not widely viewed as legitimate; it is widely opposed.

The argument also contains several sleights of hand or sleights of concept. One is how consent and consensus are presented. Consent is equated with legitimacy. This sounds reasonable because, on a personal level, it is. Consent and legitimacy are cause and effect when discussing a person’s willingness to engage in an exchange; a marriage becomes legitimate by saying “I do.” But the legitimacy argument takes a sharp turn when it introduces consensus. At this point, legitimacy is no longer based on individual consent but upon a collective agreement in which individual consent is democratized; the majority wins. The individual loses. As the political satirist P.J. O’Rourke stated “bipartisan consensus. Those are the two most frightening words in Washington. Bipartisan consensus is like when my doctor and my lawyer agree with my wife that I need help.”

The consensus argument rests on geography. Because communities are geographically defined, it is assumed that geographically-homogeneous laws must exist, and they are usually established by some form of majority rule. Binding elections result in politicians—that is, people empowered by consensus—who pass laws that apply to every individual, for example, whether the individual consents or not.

What happens when geography does not define a community and its institutions? Crypto answered this question in at least one area: currency.  Money is no longer restricted to the fiat issued by jurisdictions, which flows through the physical choke points called banks. Crypto decentralizes currency and bypasses the geography of the state.  The key to private law and justice is the same as the key to money: remove the trusted third party by decentralizing control down to the individual.


Private Justice

Justice occurs when everyone receives what they deserve. Libertarian or private law consists of the rules necessary to achieve this end.

The most persuasive theorist on private law may well be the libertarian Randy Barnett, who teaches legal theory and contracts at Georgetown University. In his book The Structure of Liberty, Barnett contends that the adjudication and enforcement of law should be privately administered, with inefficiencies addressed by the free market; an example of the latter in crypto is the emergence of decentralized exchanges to handle conversion problems. Barnett argues that private law is the solution to the corrupting influence that vested interests and power will inevitably exert upon justice.

Private law is incredibly simple compared to modern models. Barnett writes, “Every dollar spent to punish a drug user or seller is a dollar that cannot be spent collecting restitution from a robber. Every hour spent investigating a drug user or seller is an hour that could have been used to find a missing child. Every trial held to prosecute a drug user or seller is court time that could be used to prosecute a rapist.” Libertarian law is contract law. And as the iconic Murray Rothbard wrote, “It is not the business of the law to make anyone good or reverent or moral or clean or upright.” Law should make people whole.

(Note: how contract law could handle fraud and other acts of aggression will be addressed in subsequent installments. This installment deals with exchange.)

Private law requires two things: voluntary interaction and an instrument of enforcement. Again, the voluntary interaction is the contract, which is not restricted to the economic exchange. There is no aspect of human contact that agreement—implied, verbal, or written–cannot govern.

The obstacle over which theories of private law have stumbled is the instrument of enforcement. For one thing, it invites the participation of a trusted third party. The third party in private law would be a free market one and, presumably, it would be restrained by dynamics like the desire to preserve a good reputation. But any model of law that is dependent upon a trusted third party is vulnerable to corruption, incompetence, and other risk factors. The more dependent it is, the more vulnerable it becomes.

The genius of Satoshi Nakamoto was to remove the trusted third party problem from economic exchanges, but the blockchain’s potential extends much further. It has profound implications for contract law.

Some of the Blockchain’s Implications for Contract Law

A transfer on the blockchain is a simplistic peer-to-peer contract, which memorializes the terms for those involved and is seen to be valid by the surrounding community through transparency. It is a voluntary exchange. The blockchain is also an instrument of enforcement that embodies the terms of execution, such as irreversibility, to which both parties have agreed; their agreement is expressed through the willingness to use the blockchain. Thus the blockchain expresses both requirements of libertarian law; it facilitates voluntary interaction and it acts as an instrument of enforcement.

When law is reduced to contracts and their execution, then the code is the law, literally. This sounds simplistic because it expresses the simplicity of private law.

But the peer-to-peer and one-off exchanges offered by the blockchain has limited value for societies that require complexities such as ongoing contracts for rent. That’s where smart contracts (discussed in the previous installment) come into play. The self-executing contracts allow individuals to escape the blockchain’s limitations by setting their own additional terms for an exchange and its enforcement, including provisions for default. Smart contracts are in a primitive stage of development right now, but their social and political significance are clear. They decentralize law down to the individual level by personalizing the terms of agreement and eliminating the need for a third party instrument of enforcement.

This paradigm of law is free of geography, which makes it free of the perceived need for consensus. The blockchain erases borders as it carries the contract that is consent into every jurisdiction of the world. The implications of this are immense.

If every exchange defines and executes its own version of law, and if justice consists of each person receiving what he deserves, then people can code their own version of what is just and many visions of “justice” can exist and self-execute in parallel and peace. One person might conduct daily life through contracts that express Western common law. His Orthodox Jewish neighbor may prefer contracts that embody Hasidic law. Another neighbor may be a communist. If justice is decentralized down to the individual, then rampant diversity is not only possible but also inevitable. In other words, a free market in justice.

The code is not only the law, it is also justice.

The need for law enforcement, attorneys, and arbitrators would not be eliminated, but it would be so reduced as to become invisible to most people. The need would not be eliminated because it is still necessary to address not merely the operation of daily life but also the break down of daily life: acts of fraud and other violence.

[To be continued.]

Reprints of this article should credit bitcoin.com and include a link back to the original links to all previous chapters


Wendy McElroy has agreed to ”live-publish” her new book The Satoshi Revolution exclusively with Bitcoin.com. Every Saturday you’ll find another installment in a series of posts planned to conclude after about 18 months. Altogether they’ll make up her new book ”The Satoshi Revolution”. Read it here first.

The post Wendy McElroy: Don’t Smash the State, Bypass the State appeared first on Bitcoin News.

Wendy McElroy: How the Blockchain Provides Private Justice

How the Blockchain Provides Private Justice

The Satoshi Revolution: A Revolution of Rising Expectations
Section 5: Saving the World Through Anarchism
Chapter 11, Part 6
How the Blockchain Provides Private Justice

The key to…an anarcho-capitalist court system is found in the concept of a “personal judiciary”. [Acting as your own judge.]…The courts’ purpose is to enable men to settle disputes so as to avoid violent resolution as well as aggression-overcompensation cycles. Regarding the courts’ decisions as legitimate is the only way for the litigants to avoid personal judiciary actions.

– Karl T. Fielding, “The Role of Personal Justice in Anarcho-Capitalism”

Justice is a stumbling block for all political systems. It is a particular problem for anarchism because its conception of justice sounds bizarre to many; anarchism uniquely argues that justice should be a commodity or service provided through the free market, rather like insurance. The view of justice also sounds contradictory to some; how can a society based entirely on voluntary exchange deal with crimes such as theft that might require seizing stolen goods and holding criminals against their will?

The latter objection was ably dismissed by Murray Rothbard during a remarkable debate on anarchist justice with Professor of Philosophy John Hospers. Rothbard wrote, “I see no reason whatever why anyone should worry about the consent of criminals to their just punishment. I believe that nothing should be done to anyone without his consent, except for the just punishment of criminals who have already violated the “consent,” the person or property, of their victims.”

The main point becomes whether or not the free market can deliver justice. And the first question to arise on this topic is usually, “What would free-market justice look like?” The unsatisfying answer is that no one knows for sure, any more than people from decades ago knew that communication would look like the Internet or transactions like the blockchain. (More on this later.)

Meanwhile, the principles upon which private justice is based can and must be defined with clarity.


John Locke’s “TINA” Argument


The classical-liberal philosopher John Locke used a “There Is No Alternative” argument in his book Second Treatise of Government. It is a type of either/or reasoning in which disproving the “either” (anarchism) means validating the “or” (the state).

In this article’s opening quote, Karl Fielding used the term “personal judiciary.” The term is based on a political argument presented by Locke, and it refers to the idea that a man has a natural right to be the judge of his own case. Every man has the right to forcefully reclaim his property from a thief, for example, because this is an extension of his right to defend person and property.

Locke acknowledged this right, but he was against practicing it. He wrote, “That in the state of nature every one has the executive power of the law of nature, I doubt not, but it will be objected, that it is unreasonable for men to be judges in their own cases, that self-love will make men partial to themselves and their friends: and on the other side, that ill-nature, passion and revenge will carry them too far in punishing others; and hence nothing but confusion and disorder will follow.”

“The state of nature” refers to human existence without “society,” in the modern sense of that word. In a state of nature, Locke believed all men were equal with the same natural right to judge their own cases. Again, if a possession had been stolen, then the owner could judge the act to be unfair and personally remedy the injury; he could retrieve his property, including whatever compensation he deemed was due. In short, private justice is a matter of right.

Locke believed a private judiciary process would tend sharply toward unfairness, however, because even an honest man sees things from his own perspective and self-interest. Even a well-meaning man could be mistaken about the facts, including the aggressor’s identity. This means a world occupied by people who judged their own cases would lead to discord, especially if the aggressor himself felt aggrieved. An aggressor might think the violence used in retrieving the possession was excessive, for example, or that the compensation added was unreasonable. At that point, the aggressor would judge his own case and find himself to be the victim; he might well seek redress or revenge. Or a falsely-accused non-aggressor might decide to rectify the wrong done to him. The process could easily become an endless loop of violence because the justice was not accepted as legitimate by both parties.

Locke believed that breaking the cycle of “confusion and disorder” required an unbiased judge whose assessment would be seen as legitimate by both sides. Put in crypto terms: decentralized justice needed to be centralized under the authority of a trusted third party. The stakes were non-trivial. Without a trusted third party to judge cases and render legitimate decisions, civil society was not possible.

The need for legitimacy in justice was a major reason—if not the major reason– Locke advocated a limited state. For centuries, this has been a mainstay argument against anarchism and freedom. And the either/or argument is correct, in this case. It is either freedom or it is the state, with justice being a pivot point between the two. (A form of this argument is playing out within the crypto community; it is either anarchism or the state, with recourse against theft and fraud being the pivot point.) Otherwise stated: If individuals cannot render justice, then the state becomes necessary, even for those who view the state as a necessary evil and try to constrain it through checks and balances.

What does this have to do with the blockchain? With the blockchain, the centralization of justice is reversed immediately; control is taken from the state and returned to the individual, without blood or votes or revolution. But if Locke is correct about justice requiring a trusted third party, then the state’s monopoly over justice is likely to establish itself again. What can transparent ledgers do to prevent this?

A definition of justice is a place to start answering. Justice is far too closely associated with police officers, lawyers, courts, and prisons. Such state employees are not justice; they are the ones who come into play when justice breaks down; they are there to protect the state, not individuals or the peace. The state so dominates this area, however, that administrative justice is the first definition that comes to people’s minds.

Ethical justice applies to the conduct of civil and private life. The Aristotelian definition appeals to common sense: everyone should receive what they deserve from each other. Few things are as just as the free market in which two people make a direct exchange for agreed-upon values, and then walk away. A woman who goes shopping, buys a tomato, and goes home is enjoying justice. It may seem as though she is merely enjoying daily life, because that statement is also true. In normal life, the free market generally provides people with what they deserve, even if it is not what they want.

The tricky bit is what to do when the justice of normal life breaks down—a situation that is otherwise known as violence. Eliminating the most pervasive form of violence—the state—would also eliminate most injustice. But a stateless society would experience private violence against person or property.

Two approaches to minimizing private violence and its damage are prevention and punishment. Prevention is the best approach, by far, for a free society. It preserves person and property; it avoids the unpleasant process of correcting an injustice; it greatly reduces the need for procedures or institutions to correct injustice; it does not create an entry point for the state.

The blockchain does not merely promote freedom, it also prevents theft by both the state and by private individuals. A peer-to-peer transfer avoids the trusted third party participation where so much theft occurs; privately-held wallets eschew the need to trust banks, exchanges, or other third parties. The blockchain’s transparency makes it possible to view where every piece of crypto goes. The irreversibly and time-stamping of the transfer were included specifically to prevent theft. The anonymity that is possible with a bit of effort provides protection as well.

The protection of crypto and the blockchain breaks down most dramatically when trusted third parties are once again introduced into the equation. Many of the problems that the blockchain cured return with trusted third party involvement. The greatest theft has occurred in exchanges, for example. With unethical exchanges or centralized ones that function like banks, the user’s trust has been misplaced, and the exchanges become thieves. The ethical but incompetent ones serve as an invitation to hackers, and the user’s trust has again been misplaced. Ones that are both ethical and competent are still risks because they are public; they are like well-locked houses that get burglarized, nevertheless.

Guidelines are available for using exchange in as a safe a manner as possible. Choose a decentralized one, for example, and never surrender private keys. But the crypto community has not adequately addressed the problems created by re-introducing trusted third parties. To my knowledge, no exchange even offers users an insurance policy or charges higher fees as a warranty against theft.

So far, only the impact of the blockchain on economic justice has been discussed, but the possibilities for all forms of justice are immense. Distributed systems can transmit peer-to-peer smart contracts that are self-enforcing. A recent U.S. Senate report stated of smart contracts, “the concept is rooted in basic contract law. Usually, the judicial system adjudicates contractual disputes and enforces terms, but it is also common to have another arbitration method, especially for international transactions. With smart contracts, a program enforces the contract built into the code.” (How smart the current contracts actually are is a debated point, but they are a proof of principle.)

The 19th century individualist-anarchist Benjamin Tucker referred to anarchism as “society by contract.” The contracts could express any exchange, from leases to prostitution, from insurance policies to drug deals. The contracts would not be legal or illegal, only consensual. Just as crypto bypasses central banking and decentralizes economic control down to the individual, smart contracts have the potential of bypassing much of the legal system and returning to the people’s law—contract law. But, like crypto, the contracts would not require a trusted third party.

[To be continued next week.]

Reprints of this article should credit bitcoin.com and include a link back to the original links to all previous chapters


Wendy McElroy has agreed to ”live-publish” her new book The Satoshi Revolution exclusively with Bitcoin.com. Every Saturday you’ll find another installment in a series of posts planned to conclude after about 18 months. Altogether they’ll make up her new book ”The Satoshi Revolution”. Read it here first.

The post Wendy McElroy: How the Blockchain Provides Private Justice appeared first on Bitcoin News.

Wendy McElroy: Crypto as Propriety Justice and a Solution to Private Violence

Crypto as Propriety Justice and a Solution to Private Violence

Crypto As Propriety Justice And A Solution To Private Violence

by Wendy McElroy

The libertarian view is that human actors are self-owners and these self-owners are capable of appropriating unowned scarce resources by Lockean homesteading − some type of first use or embordering activity. Obviously, an actor must already own his body if he is to be a homesteader; self-ownership is not acquired by homesteading but rather is presupposed in any act or defense of homesteading.

Stephan Kinsella

Self-ownership is the foundation of free-market justice. There are three ways to answer the question “Who owns you?”: you own yourself, which is self-ownership; someone else owns you, which is slavery; or, you are unclaimed goods, like luggage in the lost and found. Anarchism is the belief that everyone owns his body, his property, and the right to peacefully use both.

But what happens if others prefer aggression? Free-market anarchism wrestles with how to provide private justice; that is, how can a peaceful society prevent or remedy the violence individuals commit against each other? To many, free-market solutions sound hypothetical because they have generally been forced to operate in that realm. The state refuses to allow rival systems of justice to compete in parallel with it; the closest it allows to competing systems are religious authorities that exercise limited jurisdiction over consenting members.

Crypto anarchism changes the modus operandi. Just as crypto and the blockchain revolutionized economic exchanges, it has the potential to do the same for other interactions, such as justice. A blast of fresh air is sweeping through old political theories and issues; the experience and insights of past anarchism do not need to blow away. Those blueprints of justice can be held up and compared against the solutions made possible by crypto anarchism. Let the best anarchism win. Let the best aspects of anarchisms merge. Solutions should evolve in parallel on the free market so that individuals can choose.

First, The Specific Principles of Crypto Anarchist Justice

The simplest way of understanding justice is giving people what they deserve. This idea goes back to Aristotle. The real difficulty begins with figuring out who deserves what and why.

– Michael Sandel, American political philosopher

The who of justice is any individual who is deprived of what is rightfully his. This definition eliminates victimless crimes and crimes against the state. Only individuals can be victimized by the denial of their property. The legal realm is reduced to contractual disputes and to torts—that is, to acts that cause loss or harm to others.

The what of justice—its focus-is the specific use of body or other property that is wrongfully taken. With crypto, the denial almost always consists of wealth that is taken by direct violence, threats, or fraud. Justice lies in restoring the status quo to the victim in the form of returning stolen property or its equivalent, along with reasonable compensation for associated losses, such as time, suffering, inconvenience, and the period of denied use. The aggressor may or may not be punished through further social sanctions. The offender’s bad acts could be published on a database that pays for valid information and charges for the use of its service, for example.

The why: Peaceful exchange enriches individuals and creates a free society. By contrast, aggression or violence returns individuals to a Hobbesian state of nature—a war of all against all. That is savagery, not society. Using the institutionalized violence of the state to rein it in is slavery, not freedom.


The How of Justice

The how of justice is the missing piece.

In general terms, self-defense is the how. Self-defense decentralizes justice down to the level of the individual. That’s what the right of gun ownership provides: a decentralized peer-to-peer way for individuals to defend themselves.

Self-defense falls into three rough categories or stages: prevention, direct action, and remedy. (Prevention is discussed in Chapter 9, Part 6.) There is a key difference between direct self-defense and acting to remedy an aggression. Direct defense occurs in real time when a person is confronted by violence, such as a break-in; the use of defensive force on the spot is obviously appropriate. But remedy occurs after the fact, when the aggression is a fait accompli.

Prevention and direct self-defense are not great challenges for anarchism. Both can be addressed through individual action or through a service provider that is hired or fired at will. For most people, it is the remedy stage where anarchism stumbles. That’s where they relegate their self-defense to the centralized monopoly of a trusted third party that cannot be fired: again, the state.

In his article, “Why the Elites Prefer a Centralized Legal System,” historian Chris Calton observes that “the motivation to centralize legal authority was entirely political.” A vital service fell under the control of those in power who imposed an increasingly arcane legal system upon an entire population in the name of consistency. In obscene perversity, “justice” came to be identified with the institutionalized violence of police, courts and prison systems. The situation is similar to believing that the vital service of commerce requires the monopolies of central banking and state-issued money.

Calton continues, “But in the early nineteenth century, consistency was valued less than flexibility in the legal system. When the courts were local, the people of a given community had a vested interest in seeing justice carried out according to the particularities of each individual case….And for those who were not fortunate enough to find themselves at the top of the legal hierarchy – the uneducated, the poor, women, children, and blacks – this flexibility upheld even modern notions of justice – if imperfectly – more effectively than did the centralized and legally consistent courts that followed.”

Most Western systems of justice were built on common law, which has been widely displaced by civil law. Chapter 8, Part 1 of The Satoshi Revolution—“Crypto: Civil Law Versus Common Law”–explains that “common law offers an alternative legal blueprint. Rooted deeply in the English tradition, it is a body of law that develops from the grassroots upward. It involves no presence of Parliament. It comes from the decentralized judicial decisions that arise from real legal disputes…” The answers presented by common law may be right or wrong in any particular case, but they are not codified to benefit the privileged. Common law is so named because it benefits the common person. And it is a giant step toward decentralization. The exercise of every individual’s power over his own life is the ultimate goal.

Why Have Any Trusted Third Party?

When self-defense is decentralized, why shouldn’t people simply administer their own remedies for past aggressions? Certainly, they have a right to do so. They can rightfully reclaim stolen crypto by accessing the digital account of a thief, for example, and hacking back the coins. But there are good reasons why doing so is unwise. The victim may be mistaken about the identity of the criminal, which converts a so-called remedy into an act of violence; achieving restitution can be dangerous, or beyond the victim’s ability; the retrieval can fail; it can also harm innocent third parties, leaving the remedy-seeker with liabilities.

The innocent third party problem is the main argument in favor of hiring a third party to remedy an aggression. To bystanders and to the rest of society, it is usually not clear who is the victim and who is the aggressor. In direct self-defense, bystanders who witness a person being attacked know who the victim is; if he pulls out a gun, the act is obviously one of self-protection and not of aggression. When a woman grabs back a purse that has just been snatched, third parties do not think she is stealing it; she is reclaiming property. The same is not true of personally retrieving stolen coins from the account of a thief. To third parties, such as the company handling the thief’s deposits, the retrieval is an act of theft.

In the preceding examples, the acts of victims and aggressors are basically the same. Both may be pointing guns; a purse is being snatched back and forth. Accounts are being hacked. Unless he sees the violence from its beginning, a bystander cannot know who the aggressor is. This makes personal remedies very risky. Consider: a necklace is stolen and the owner recognizes it around the neck of a person on the street. However, yanking the necklace off of the wearer looks like violence to all of society. A good Samaritan may well intercede to prevent what he believes is an attack on an innocent person. Meanwhile, the real aggressor may yell “Police!” and claim that the victim is the thief. How can people distinguish self-defense from aggression?

There is a simple litmus test: Who owns the property? The answer makes clear which is an act of violence and which is self-defense. To be effective, therefore, a remedy should allow third parties to identify who owns the property involved.


Crypto As Proprietary Justice

In his essay “The Proprietary Theory of Justice in the Libertarian Tradition,” Carl Watner writes, “The proprietary theory of justice is concerned with just one thing: the crucial determination of just versus unjust property titles of individuals in their own bodies and in the material objects around them.”

By far, the best way for individuals to use proprietary justice is by contracting with a trusted third party whose reputation and business depends upon the accuracy of its business practices. In this case, the “trust” is based on merit and performance; the relationship of trust lasts only as long as the victim values the service. The third party’s purpose is to return stolen property, but it also acts as a protection for bystanders, innocent parties who may have involvement, and even the aggressor himself. As a business in a competitive market, the trusted third party has a strong incentive to reduce the expense and complications of injuring anyone.

The most commonly proposed mechanism of proprietary justice is the private defense agency (PDA). This may function in much the same manner as private fire departments with which home-owners contract. The details of how PDAs would operate are mostly speculative because of the state’s monopoly on justice and because predicting how free-market solutions would evolve without the state is not possible. Nevertheless, anarchists have attempted to do so for many years.

David Friedman sketches one vision in his book Machinery of Freedom. Friedman begins by considering “the easiest case, the resolution of disputes involving contracts between well-established firms.” Resolution between well-established crypto exchanges would likely be similar. Many such disputes are settled by arbitration that is specified within the contracts themselves as a way to avoid the expense and unpleasantness of court. “Currently, arbitrated decisions are usually enforceable in the government courts,” Friedman admits, “but that is a recent development; historically, enforcement came from a firm’s desire to maintain its reputation.”

But what of violent disputes? “Protection from coercion is an economic good,” Friedman explains. “It is presently sold in a variety of forms-Brinks guards, locks, burglar alarms. As the effectiveness of government police declines, these market substitutes for the police, like market substitutes for the courts, become more popular. Suppose, then, that at some future time there are no government police, but instead private protection agencies. These agencies sell the service of protecting their clients against crime. Perhaps they also guarantee performance by insuring their clients against losses resulting from criminal acts.” Insurance purchased from PDA becomes the immediate remedy to the victim. Then the PDA proceeds to retrieve the property and the cost of its services from the aggressor, assuming the risk of failure.

Friedman concludes, “What I have described is a very makeshift arrangement. In practice, once anarcho-capitalist institutions were well established, protection agencies would anticipate such difficulties and arrange contracts in advance, before specific conflicts occurred…”

Until proofs of principle are allowed to exist, however, the anarchist system of proprietary justice remains just a discussion. Happily, crypto may provide the elusive proof of principle in the area of theft. For one thing, it solves the pivotal problem posed by Watner: how to establish the property claim that defines whether the use of force is defensive or aggressive. The blockchain does this automatically. Its structure inherently answers the key question of proprietary justice.

[To be continued next week.]

Reprints of this article should credit bitcoin.com and include a link back to the original links to all previous chapters


Wendy McElroy has agreed to ”live-publish” her new book The Satoshi Revolution exclusively with Bitcoin.com. Every Saturday you’ll find another installment in a series of posts planned to conclude after about 18 months. Altogether they’ll make up her new book ”The Satoshi Revolution”. Read it here first.

The post Wendy McElroy: Crypto as Propriety Justice and a Solution to Private Violence appeared first on Bitcoin News.

Wendy McElroy: In a Stateless Society Crypto is Law and Justice

In a Stateless Society Crypto is Law and Justice

The Satoshi Revolution: A Revolution of Rising Expectations
Section 5: Saving the World Through Anarchism
Chapter 11, Part 4
In a Stateless Society, Crypto is Law and Justice

The economic analysis of crime starts with one simple assumption: Criminals are rational. A mugger is a mugger…because that profession makes him better off, by his own standards, than any other alternative available to him…. If muggers are rational, we do not have to make mugging impossible in order to prevent it, merely unprofitable….If little old ladies start carrying pistols in their purses, so that one mugging in ten puts the mugger in the hospital or the morgue, the number of muggers will decrease drastically–not because they have all been shot but because most will have switched to safer ways of making a living. If mugging becomes sufficiently unprofitable, nobody will do it.

-David Friedman, “Rational Criminals and Profit-Maximizing Police

The specter of aggression haunts every society. Crimes against person and property cannot be eradicated, unfortunately, because violent impulses are part of human nature, and crime can be profitable. The desire for safety and peaceful exchange is also part of human nature, however. It creates a market demand for the protection of individual “rights.”

How can society minimize and redress the violation of rights? This reduces to how individuals can address crime within an otherwise peaceful society.

Overwhelmingly, the crime against which crypto users must protect and seek redress is theft—not murder, not rape, not battery, not victimless crime, or crime against the state. Theft.

Focusing on one area of crime simplifies the problem enormously. Some argue that crypto’s remedy for theft is contained within the definition of crypto anarchism itself: the use of encryption and technology to achieve personal freedom by enabling privacy, autonomy, and self-empowerment. Encryption and technology. Most of crypto’s features provide specific protections to individuals, including irreversibility, transparency, pseudonymity, time-stamping, and private wallets.

But the protection is primarily against the state, especially against its trusted third party arm—the central banking system. Crypto anarchism needs to address private crime, the crimes individuals commit against each other. Those crimes occur at points of intersection, at points where people access or exchange with each other. Again, the solution is the free market. Safety and the redress of crime are both services, like insuring a car or retaining a lawyer. In a real sense, people realize this. They pay for the service of safety and redress through the collective bill of taxation that funds police and court systems.

Many people discuss the inadequacies of these services. But only anarchists claim the problem is that the services come from the state. People simply take it as a given: the state supervises violence. It is such a deep assumption that protecting against violence is the first and last argument the state uses to justify its existence. Without my presence, the state declares, the street would run red with blood and enemy armies would surge across the border. Odd. It is widely acknowledged that every other service required by society can be provided privately, but security cannot be addressed or redressed through voluntary exchange.

Anarchists disagree. They object to the grave mistake of granting the state a monopoly over a basic human need, which destroys the very possibility of a free society. They understand: private money and self-banking cannot co-exist in narrow parallel with central banking because the state attacks any threat to its authority. This is happening already. The state is playing catch-up in order to rein in the crypto that flows outside its control. The spread of “wild crypto” is irreversible, however, in much the same manner as the black markets that thrive despite or due to repression.

The monetary systems run in parallel only by maintaining a sharp separation. The state is a money and banking monopoly with the goal of social control; crypto is its antithesis. In close proximity, one will destroy the other. The same would be true of any free-market institution that serviced the human need for safety. The state would try to control or destroy it as a threat to its own monopoly. The state and society are either-or. Crypto anarchist and security expert Pavol Luptak explains the schism. “Personally, I don’t like black & white plots, but it seems we will live either in a digitally free society or digital dictatorship. Even now, we can see an intense polarization of society splitting into the government’s controlled dictatorship and parallel free crypto societies at the same time. Unfortunately, I don’t think there is a place for some other alternatives.”

To grasp the depth of this either-or choice, it is useful to sketch a broader context for the conflict.

The State’s Monopoly of Self-Defense Leads to Totalitarianism

A society that robs an individual of the product of his effort, or enslaves him, or attempts to limit the freedom of his mind, or compels him to act against his own rational judgment—a society that sets up a conflict between its edicts and the requirements of man’s nature—is not strictly speaking a society but a mob held together by institutional gang rule.

—Ayn Rand, “The Nature of Government”

Free exchange is natural to the institutions that comprise society, including family, the marketplace, education, and art. These systems evolve spontaneously in response to human needs and desires. They are the reason why individuals band together in the first place, instead of living in isolation. Through natural networks, individuals enrich themselves, fulfilling requirements that are both physical and psychological.

The extent to which violence intrudes into natural institutions is the extent to which the institutions become their own mirror opposites. This is true of the intrusion of private crime. Domestic violence converts a home from a place of safety into one of danger. Fraud transforms a business from a place of mutual exchange into one of victimization.

It is also true of violence that is entrenched within society, as with a state. A key difference? New institutions are created by the state in order to circumvent the human instinct to defend against violence, if only by avoiding where or how it happens. These new and artificial institutions are often monopolies that displace their free-market counterparts. The extent to which such artificial institutions intrude upon society is the extent to which the benefits of society are destroyed. Taxation reduces the benefit of productivity. Central banks introduce third-party theft into commerce. Police use guns and threats to preserve the peace.

The freedom level of a society can be measured by the ratio of its artificial to natural institutions. When there are few to none, the society is called “free”;  the individuals within it receive immense benefits from interacting. When artificial institutions dominate, the society is called “totalitarian”; the individuals within suffer and face unnatural choices. They can live in quiet and obedient despair. They can risk becoming outlaws on the economic or intellectual black market. They can become thugs and join with those who administer the violence. Or they can flee to a place with less entrenched violence. When these are the choices individuals confront, civil society is dead.

Those are the stakes in play on how a society deals with safety: nothing less than freedom versus the state. As long as the state can convince people that its monopoly on the use of violence is necessary to guarantee safety, then the state can justify its existence. Once the state has that monopoly, it has everything.

Crypto “solved” the embedded violence of central banking. It did so through a stunningly brilliant insight and application of political theory: the trusted third party problem. Central banks forced individuals who wished to function in modern commerce to use them as an intermediary and so to participate in the fiat money and fiat banking that defrauded them at every turn. The banks reported personal and financial data to an umbrella trusted third party—the state. Layer after layer of intermediary institutions killed not only personal freedom but also the freedom and benefits of society. Until bitcoin sidestepped the institutional violence.

Equally, crypto needs to develop ways of handling private criminals who rob, extort (ransomware), and defraud. The strategies used on state violence will not work. Bypassing trusted third parties will not work on private crimes that are peer-to-peer. What would work?

Crypto’s Greatest Political Challenge

Private crime is the Achilles Heel of crypto. Users who view crypto merely as a way to make money, rather than as a promise of freedom, want state involvement to ensure a safe haven that is modeled on central banks. Every high-profile case of private crime is used as a reason to call for regulation. The Satoshi Revolution‘s final challenge is to suggest free-market methods by which the community can address private violence. The focus is not on the unpredictable breakthroughs in technology that are destined to change how crypto deals with crime. (Prevention has been discussed previously.) The focus is on the make-up of the institutions and methods through which crypto can minimize crime and provide remedies when it occurs.

Technology is able to adapt in a snap. But this means that economic and social patterns evolve as quickly. Crypto, the blockchain, 3-D printing, and robotics are among the game-changing technologies that are reshaping the world in their own images. And this evolution will only accelerate. The transformation of politics will be extreme. It is about time. Today’s political system emerged from the Industrial Revolution and it grew over centuries of war after war. The state’s characteristics include massive bureaucracy, extreme centralization, nationalism, and crony capitalism. But a new revolution is in town. Crypto’s characteristics include peer-to-peer exchange, decentralization, a flow without borders, and the lack of governmental privilege. Politics has already changed, whether politicians know it or not.

Anarchism, liberty, does not tell you a thing about how free people will behave or what arrangements they will make. It simply says the people have the capacity to make the arrangements. Anarchism is not normative. It does not say how to be free. It says only that freedom, liberty, can exist.

—Karl Hess, “Anarchism without Hyphens”

How will crypto prevent and remedy private crime? It is difficult to say, for many reasons, including the unpredictability of technological advances. Some of the obstacles:

  • The state regulates or bans any threat to its authority. This is especially true of law enforcement and the use of force, which are mother’s milk. One result: few anti-crime institutions exist that have not been defined by their need to comply with laws of the state. Even private police forces mimic state ones.
  • People base their assumptions on what they are taught and what they have seen. If they had been taught that the food supply requires a centralized coordination by the state and they had seen nothing else, then they would laugh at the very idea of the free-market spontaneously coordinating agriculture, transportation, canning factories, and grocery stores. The same is true of the free market coordinating safety.
  • The state does not encourage research and development into alternative forms of justice that are outside of its control. 3D-printed guns are an example. 3-D guns allow individuals to defend themselves without surrendering their privacy to authorities. The state’s response? The pioneer of 3-D weaponry, Cody Wilson, has been arrested on what appear to be “set-up” charges.
  • The entrenched assumptions of the public are against crypto solutions. The assumptions include: one law must cover everyone in a geographical territory, not a mosaic that reflects personal choice; and, the primary purpose of law is punishment, not restitution.

Armed with caveats, the next step is to explore a practical method by which crypto anarchy can deal with private crime. Like crypto itself, the method has to be individualistic, decentralized, transparent, and entirely private. The best place to begin is with an analogy that has already been drawn: car insurance.

[To be continued next week.]

Reprints of this article should credit bitcoin.com and include a link back to the original links to all previous chapters


Wendy McElroy has agreed to ”live-publish” her new book The Satoshi Revolution exclusively with Bitcoin.com. Every Saturday you’ll find another installment in a series of posts planned to conclude after about 18 months. Altogether they’ll make up her new book ”The Satoshi Revolution”. Read it here first.

The post Wendy McElroy: In a Stateless Society Crypto is Law and Justice appeared first on Bitcoin News.