Hal Finney on cryptography and government

Surprising!

This week I want to talk about Hal Finney again.

I’ve known for years now that a lot of what we have been told about Bitcoin, its history, and its original vision has been filtered, distorted and revised by different types of people with agendas that may or may not be good.

But sometimes I still find something that genuinely surprises me.

Last week I shared how Hal Finney had argued ‘way back in the 90s', as a certain Australian might say, that traceability in digital cash might be a good thing.

This surprised a lot of you as it did me because, from everything the common narrative would tell us about Hal, he should have been dogmatically against it.

This week I have something even more surprising, from Hal himself again, written on the Cypherpunk Mailing List in 1994. Keep in mind that Hal was arguably the first person other than Satoshi (or the Satoshi team) to run the Bitcoin software.

Hal was responding to the following statement by a ‘Mike Ingle:’

Technological gains are permanent. The political approach is only useful as a tactical weapon, to hold them off until technological solutions are in place. If you want to change the world, don't protest. Write code!

Mike’s comment is almost a perfect representation of the standard one pushed by many in crypto today, especially those from Core: use code to subvert the government.

It’s an idea I’m sympathetic to as someone who thinks government force has been a great evil in this world and that the ‘rule of law’ and constitutionalism have been an insufficient check on that force, but it is one I also recognize could be flawed, strategically inept, and utopian.

From everything they’ve said about Hal, you’d think he would have agreed with Mike.

But here is what Hal wrote about cryptography, code, law and government in his reply:

This position seems to be fast becoming cypherpunks dogma, but I don't agree. The notion that we can just fade into cypherspace and ignore the unpleasant political realities is unrealistic, in my view…Have people forgotten the PGP export investigation? Phil Zimmermann hasn't. He and others may be facing the prospect of ten years in prison if they were found guilty of illegal export. If anyone has any suggestions for how to escape from jail into cyberspace I'd like to hear about them.

Hal elaborated:

Fundamentally, I believe we will have the kind of society that most people want. If we want freedom and privacy, we must persuade others that these are worth having. There are no shortcuts. Withdrawing into technology is like pulling the blankets over your head. It feels good for a while, until reality catches up. The next Clipper or Digital Telephony proposal will provide a rude awakening.

In another post from the same year, Hal writes:

I can agree that cryptography will make some kinds of illegal private transactions easier. What I doubt is that this will happen at a large enough scale to seriously threaten the ability of governments to fund themselves…if the government goes down the tubes it won't be because of the advent of strong cryptography.

Here’s one last one, from the same year:

My primary motivation is of course simply to test what I see as a discrepency between the world I live and work in and that proposed in the crypto-anarchy model. I also want to question speculations that I see playing into the hands of law enforcement interests by making cryptography look more threatening than it is.

Another reason is to discourage complacency that cryptography will solve our political problems by automatically ushering in a libertarian/anarchist utopia.

This is all fascinating to me because Hal is someone who is often held up as the 'ideal’ crypto-anarchist AND he is one of the first people to work on Bitcoin, yet he quite frankly doesn’t sound anything like them here.

He’s obviously someone who cared deeply for human liberty and who understood the potential monetary and social value Bitcoin could have, but, at least in these posts, he argues against the standard narrative about cryptography and government, and thus, about Bitcoin and government.

Maybe he’s right and there is a better way to create a society free from force and fraud than withdrawing to TOR, black markets, and basement coding.

We’ve had 10 years of Bitcoin as subversive anarchist money and I think many of us are a bit exhausted of that all. It doesn’t seem to have worked as well as many thought.

Maybe it’s time Bitcoin is positioned as capitalist, free-market money—money that is appealing to everyone and not just a fringe group of agoraphobic anarchists who think everyone is out to get them.

As always, I don’t really have a definite view on these things right now, and I’m excited I have two options to choose from in BCH and BSV right now, but I find Hal’s argument worth paying attention to.

That’s all for this week! If you like this email and want to shoot me a tip, my Handcash handle is: $makgill.

You can also mark me as a contact so these emails don’t show up as promotions or spam.

Best,

Deryk Makgill

Hal Finney on digital cash traceability

Not what you would have thought!

Happy New Year, all!

This is a short one but something you won’t see anywhere but here in this newsletter.

Craig Wright says a lot of controversial things, but probably the most controversial is the idea that Bitcoin is meant to be traceable.

It sounds scary, 1984-ish, and dammit totally contrary to everything we thought about the purpose of Bitcoin! Right?

I say maybe, maybe not, but this isn’t about me or Craig. It’s actually about Hal Finney.

Revered by the cypherpunks and crypto-anarchists, and often himself the subject of speculation about the identity of Satoshi Nakamoto, Hal seems like the last guy to have made the case for traceable digital cash.

But here’s what I found that Hal wrote about digital cash and traceability in 1994 on the Cypherpunk Mailing List:

…the political point is that if you can make an untraceable payment, you could be coerced into doing so, for example by being robbed at gunpoint. Contrariwise, if the cash system used by you and your bank is such that all money is inherently traceable, it will be a lot harder to commit robbery, extortion, kidnapping, and all those other horrors which people fear will come with digital cash.

That doesn’t sound all that different from what Craig says about traceability, and it actually points to an interesting question: could traceability actually create a freer, less coercive society? Would it actually be a check on bad actors? Is Craig, in fact, Wright?

I don’t think it’s clear, but I think the people who dogmatically dismiss the idea as ‘totalitarian’ or because it’s Craig who said it are not thinking creatively enough, and now we know those people are revising history when they say the question has never been raised before.

That’s all for today. Let me know your thoughts on Twitter or email.

Best,

Deryk Magill

P.S. Craig, it might help your case if you didn’t talk so much about sending people to Thai prison!

Szabo = Satoshi?

Unlikely.

The old Nick Szabo = Satoshi Nakamoto theory was making rounds again this week thanks to an article on Bitcoin.com. If you’ve never heard the general case, here’s a link.

In this inaugural issue of the Breaking Satoshi newsletter, I show why this question is important, why it is unlikely that he is Satoshi, and refute two of the strongest arguments for the theory, one of which never appeared in my original Tweet thread, nor anywhere else.

1/ Szabo’s Satoshi-ness is important insofar as it has historically been used to push a particular small block agenda in Bitcoin. For example, during the 2017 Segwit 2x fork debacle Charlie ‘Labor Theory’ Lee used the possibility of Szabo being Satoshi as evidence against the fork.

In my opinion, Nick Szabo is the closest we have to Satoshi, if not Satoshi himself. With Nick and all of Bitcoin Core devs against Segwit2x, why are people still pushing for this hardfork that will split the chain?

2/ It’s unlikely that Szabo is Satoshi though, given that what we know about Szabo’s economic view of Bitcoin, and his earlier BitGold proposal, contradicts what Satoshi himself saw for the technology.

3/ Szabo has said that since 1998 he’s known digital cash would need to have a base settlement layer and a second consumer payments layer.

My bit gold design in 1998 was 2-layer: bit gold for settlement, Chaumian e-cash for a privacy-enhanced payments layer. I've always thought of Bitcoin as evolving into a settlements-and-large-payments layer that in the long term needed a layer 2 for consumer payments.

4/ Compare this with Satoshi who instead described scaling for small consumer payments on the base layer of the protocol.

Another way they can become more practical is if I implement client-only mode and the number of network nodes consolidates into a smaller number of professional server farms. Whatever size micropayments you need will eventually be practical. I think in 5 or 10 years, the bandwidth and storage will seem trivial.

5/ Lest we think Szabo has simply changed his mind after his Satoshi days, in 1993 he wrote on the Cypherpunk Mailing List about a similar concept of digital cash requiring some form of final settlement.

Digital cash: accumulating credits/debits for use of on-line services (including travel services, concert tickets, etc. purchased on-line), eventually paid for by some "real" currency: FRNs, yen, etc. Implemented with Chaum-style protocol to prevent forgery and assure privacy.

6/ Timeline and testimony from early people in communication with Satoshi Nakamoto also tell us Szabo is probably not him.

7/ Satoshi’s first known email was to Adam Back, who told him about b-money.

I believe it was me who got Wei Dai’s b-money reference added to Satoshi’s bitcoin paper when he emailed me about hashcash back in 2008.

8/ Szabo would have already known about b-money though because of his long connections to the cryptoanarchy and digital cash space and he would not have needed the introduction. He has confirmed as much.

Myself, Wei Dai, and Hal Finney were the only people I know of who liked the idea (or in Dai's case his related idea) enough to pursue it to any significant extent until Nakamoto.

9/ Satoshi then emails Wei Dai asking him for the date of his paper so he can cite it properly.

I'm getting ready to release a paper that expands on your ideas into a complete working system.

Adam Back (hashcash.org) noticed the similarities and pointed me to your

site.

I need to find out the year of publication of your b-money page for the

citation in my paper. It'll look like:

[1] W. Dai, "b-money," http://www.weidai.com/bmoney.txt, (2006?).

10/ Thus it appears that Satoshi was not familiar with b-money before creating Bitcoin.

11/ Wei Dei confirms that Satoshi didn’t know what b-money was and that his creation was independent of previous attempts to create digital cash.

My understanding is that the creator of Bitcoin, who goes by the name Satoshi Nakamoto, didn’t even read my article before reinventing the idea himself. He learned about it afterward and credited me in his paper. So my connection with the project is quite limited.’

12/ When Satoshi later writes ‘Bitcoin is an implementation of Wei Dai’s b-money proposal […] on Cypherpunks […] in 1998…’ he’s citation stuffing. He didn’t really use b-money as a source or know about it before he created it.

13/ Satoshi says he made Bitcoin before ever thinking about the whitepaper or citations.

I actually did this kind of backwards. I had to write all the code before I could convince myself that I could solve every problem, then I wrote the paper.

14/ Why didn’t Satoshi cite BitGold in the whitepaper? Wei tells us Satoshi didn’t know about BitGold until he was told by him, after he had created Bitcoin.

In Satoshi’s early emails to me he was apparently unaware of Nick Szabo’s ideas.

15/ When Satoshi writes years later that Bitcoin is also an implementation of ‘Nick Szabo’s Bitgold proposal,’ we can assume he is probably just referencing it in the same way he referenced b-money. He’s not literally claiming he was influenced by it.

16/ Much controversy has been made out of the fact that Szabo postdated his 2005 blog post about BitGold to 2008, around the time Satoshi was publishing Bitcoin. Many claim this is proof Szabo was covering his tracks. It does look suspicious.

17/ But this is not the only essay that was postdated. The Kula Ring and several other early articles were also redated in 2008 and 2009. Bitgold was not uniquely edited as many have thought. Why?

18/ Szabo wrote a post on August 20, 2008 announcing that he would be doing this so that he could bump his better articles to the front of the site as ‘reruns.’ A web archive search of the 2006 article Wet code and dry shows he began changing dates to 2008 only a few days after the announcement, just like he said he would.

19/ Szabo was not covering his BitGold tracks or even attempting to do so. He was promoting his old posts like normal bloggers do. I am surprised that this has been overlooked, since the theory is so popular and the postdating so scandalous.

20/ Szabo of course could still be Satoshi and all of this part of a plan to obscure that. He’s certainly brilliant. I don’t think he is, but I’ll end with a quote of his from a 2008 essay on BitGold that sounds very similar to Satoshi’s view that mining would become a specialized profession to keep us honest.

Some computers are more energy efficient than others, some have more spare cycles than others, some algorithms and custom circuits will solve puzzles far faster than others, and so on, so there will be great differences in profitability, and as in gold mining the market will evolve towards only a few of the best specialists in puzzle solving making a reasonable profit. 

Thank you for reading this first Breaking Satoshi newsletter. I’m working on Season One now and hope to have updates soon. In the meantime, let me know if there are newsletter topics you’d like me to write about.

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