Open Transactions - Untraceable Digital Cash

Sounds very interesting. I don't see Usenet as scary, just uncivilized. But that's not to say there aren't good things to be found. I just couldn't put up with the incivility and sock puppets. Hey, if I've been too harsh on you -- I'm sorry. Truly. We actually, I have noticed, have a lot of similar thoughts and ideas.

 

Source code:
http://github.com/FellowTraveler/Open-Transactions

Wiki:
http://github.com/FellowTraveler/Open-Transactions/wiki

FAQ:
http://github.com/FellowTraveler/Open-Transactions/wiki/FAQ

 

Do we have a revolution in the making?

 

This is actually a pretty old concept. A more sinister outgrowth of digital cash is something called assassination politics. This is an online market where people anonymously place bets on the date of death of a politician and whoever guesses correctly wins the pool of money. The idea being that assassins will be inclined to carry out the deed when the pool has reached a high enough level. And the person who wins the bet has the digital cash reward encrypted with his public key and sent out onto the Internet for download by anyone. Only the person with the corresponding private key can decrypt it an thus collect the money. This way those collecting the money cannot be traced.

But again, the idea of digital cash has been around since at least the early 90's, so I am not sure we will see a financial revolution any time soon.

 

Go back and read cypherpunks during that period. It was a hoot -- Jim Bell, Toto and all. OTOH, it was rather tense during Jim Bell's (first) trial.

 

Allow me to respond?

1) Blinded tokens were invented in the early 80s and promptly patented. Nothing at all happened with the technology after that for years. (Many people are quick to point this out, BTW.)

2) Of course there wasn't even an "Internet" then, the way there is now. (While the math existed for digital cash, the infrastructure did not.)

3) As the Internet came up in the 90s, digital cash was still under patent. The one company that controlled it (DigiCash) was offered all sorts of great, multi-million-dollar deals from companies like Microsoft. But ultimately, DigiCash fumbled and the inventer (Chaum) was widely blamed for it and then criticized for his business skills and paranoia.

4) The patent has only recently expired.

5) Blinded tokens have a business problem, in that many of its interesting potential uses are illegal. Furthermore its prime benefit, anonymity, is one that many governments will never allow at the exchanger level (exchangers are businesses that convert between various digital currencies, like e-gold, and various government-issued currencies, such as the dollar.)

6) However, the above is not enough to convince me that the entire branch of mathematics that is crypto and blinded tokens lacks value in today's world--nor that it lacks great potential to change it significantly in the future.

7) Specifically I think digital cash has great potential to solve problems of resource allocation on anonymous networks which are now, unlike in the 80s, starting to proliferate.

For example, digital cash postage makes it possible to pay for information and downloads anonymously. Someday soon, college kids may leave their computers running all day, allowing anonymous file-sharing to occur through their computing resources--providing that digital cash postage is accruing the whole time in return. When they get home from class, this postage can pay for their own downloads. Now they can have fast Tor, fast I2P, fast anonymous p2p--without ever having to actually purchase anything, since their computing resources paid for it.

9) Effectively the next generation of anonymous networks will make it possible to pay for speed, or to get speed "for free" by contributing computing resources--users' choice.

10) Proponents of the crypto-currency Bitcoin will be quick to remind anyone that their currency is not easily counterfeited by criminals, nor can it be manipulated by monetary authorities, because it requires real computing resources, in the real world, to generate the new bitcoins.

11) Are not file-sharing resources an even more relevant example of computing resources than bitcoins, since they provide a real and measurable value to people? And isn't it only a matter of time before people monetize these resources using instruments such as my software, and use them to solve issues of resource allocation?

12) Once there are legitimate forms of digital cash, there will be exchangers dealing in them. People always ask "But how do you get the digital money transferred into real money?" They don't understand that exchangers ALWAYS pop up whenever there are multiple currencies to be traded. You can buy chinese video game money right now, if you want to. You can certainly buy various forms of digital gold right now and exchange them for national currencies.

13) Once anonymous tools are widely available online, anonymous exchangers will also appear. From that point, any issues that cannot be re-routed on the network, in the software, will instead be re-routed jurisdictionally.

14) Early adoption will occur in industries where new competitive benefits are introduced by anonymity. (Porn and gaming come to mind, as well as anyone in countries with debased currencies such as Zimbabwe, Argentina, and Indonesia, to name a few.)

15) Those who keep up on the news will already see that the online gaming laws are loosening in the United States as online gaming has moved offshore.

Notice the pattern:
Napster gets shut down => P2P appears.

People start getting sued => Freenet appears. Tor appears. I2P appears. Etc.
Online gaming is regulated => Online gaming moves offshore.

(Any attempt to crack down on offshore hosting => Anonymous hosting will start to appear. Even hosting that is encrypted on Amazon S3 somewhere and no one can trace where it is... the natural forces and pressures drive the creation of such software. Software really is just power. Not electrical power, but real power, like a gun, or a piece of gold, or a movement. Over time, handheld devices combined with software means distributed power, more and more, cheaper and cheaper, decentralized power in the hand of each person.)

Online gaming moves offshore => US authorities start to change their tune on gaming.
E-Gold and various exchangers prosecuted => The digital gold market moved off-shore.

Several anonymous Internet banks have now appeared online. For example, eCache operates on Tor, and they are experimenting with the use of bonded auditors to provide trust, anonymously, to their depositors.

16) New software (such as mine) looks more and more towards distributing risk across multiple servers and jurisdictions, and even across multiple issuers using basket currencies, so that users don't have to trust any single issuer. New software also looks towards users who are more and more networked via anonymous p2p. Such software will continue to be integrated into other software wherever it provides real benefits.

17) As people gain more and more access to secure, untraceable currencies in their own pockets (Open Transactions, for example, is now available for the Android platform) then it stands to reason they will take more and more advantage of that power over time.

1 Presumably tax and monetary systems, in such a scenario, would be forced to adjust over the years, the same way that the music industry has been forced to adjust to the new realities of the digital age.

19) IMO, looking farther out, while the Federal Reserve Dollar itself may someday become extinct like the buggy-whip, taxes will remain as certain as death, so long as people continue to form political bands based on geography, and so long as they continue to live on real land, eat real food, and buy real goods.

-----

Of course this is all speculation. No one in the middle ages could have predicted the changes that would eventually come to society from inventions such as movable-type printing and double-entry bookkeeping, just as no one today can really imagine all the changes that will come to society in the coming decades and centuries as a result of the Internet.

But it sure seems to be happening fast.

 

Good points, all.

A few responses...

-- I don't think using digital cash for resource allocation on distributed networks is even a new idea. Mojo Nation first came up with it in the 90s.

Anonymous networks are always trying to come up with good solutions to problems of resource allocation (e.g. people hogging resources since there's no anonymous way to pay for them.) The GNUnet solution is to record behavior of peers and then reward the ones that are most trusted.

-- I agree that the concepts are complicated, but that's no excuse. As far as I'm concerned it comes down to good client software design. Anyone's grandma can use an iPhone even though it's probably some sort of UNIX underneath. Give that same lady a Linux distribution and she's in trouble. It's all about good design.

-- I'm only using Tor as an example. But continuing along that line of thought, I just googled the phrase "run a tor node" and up comes various web pages advocating that people should contribute to freedom by operating Tor bridges, relays, outproxies, etc. Notice that such things are always run by hobbyists and enthusiasts. The same with remailers. Why? Because there's no way to pay for resources anonymously. Today you can't run such things for profit. It comes back to this same issue, I think: resource allocation. You are right that it will have to be easy to use, and integrated with well-designed client software -- but those sorts of networks will only get the full resources they need when there is a way to contribute them. Blinded tokens provides the technical means of doing so.

-- You are right that there has to be a guarantor (at least, if the digital asset type is backed in some real-world commodity.) Open Transactions assumes that some jurisdictions are friendlier than others, and is designed to allow users to distribute risk across multiple servers in a diversity of jurisdictions, as well as distributing their currencies across multiple issuers via basket currency. Transaction servers will also be able to operate anonymously, on anonymous networks, and still turn a profit. As for what form the ultimate solution will come in, I don't know. But consider: once computing resources are monetized, it becomes possible for the digital cash to have real world value without the necessity of commodity backing. Everything stays in the ether.

 

interesting stuff but gotta admit, most of it is over my head....also, not sure how you build trust or credibility in that system because to tell you the truth i don't even trust our current gov't and banking systems re electronic records and transactions etc...and once physical cash is phased out i think people are going to be in for a rude awakening as far as what an evil and corrupt gov't can do to the individual....maybe that's an argument for your system though?

btw, i don't see how "computing resources" are going to be all that valuable and i don't trust TOR....not that i have anything to use TOR for but seems the gov't agencies always finding ways to get whatever they want, legal or not...

 

i hear about this on talk radio every once in a while...somebody will call in complain about Nixon and then the host(usually Michael Medved) will claim "there's not enough gold in the world for us to go back on the gold standard"...i do comprehend the thing about paper not having any intrinsic value....

"who controls the bits and bytes" - i was listening to the Kim Komando show yesterday and her opinion of online gambling sites was that they weren't trustable as there was no way to verify that they were legit or on the level as it was all in software anyway...and then she said that some news program like 60 Minutes(?) had supposedly done an investigation on those gambling sites(not sure how they'd get access) and had arrived at the same conclusion....this is my point of view for now but i guess things could change - seems like you guys have thought things through and studied this and have a different conclusion....

eh, i think i misunderstood here...i read that part about the students leaving their computers on while going to class and accruing(what i thought might be a useful amount of) digital cash and i thought that somehow this was going to be a key driver of the plan but i guess its just a minor example of the potential usefulness(?)....i mean i still don't see how it(selling computer cycles) would be too profitable - i've read that a bunch of cheap computers connected together can function like a supercomputer but at a much cheaper cost but seems like a narrow group of companies or organizations that would have a demand for that...myself i just have a few netbooks and they have more than enough capability for now and computers are continually getting cheaper and more powerful....seems like the price of computational power would get cheaper all the time as well....

would be interesting to see that system gain a foothold because the current politicians and gov't(here in the U.S. anyway) seem to be less and less accountable to the citizens...they pass laws that 70% of the people oppose, leave the borders undefended even though vast majority want something done, etc etc...and i know in the past Roosevelt decided he had the authority to demand everyone turn in their gold(where he got this authority i have no idea), Ron Paul thinks The Fed should be audited etc etc, maybe this would put some checks on gov't power...that's what i'm interested in...

EDIT: one negative though is this:

myself and most people i talk to are not down with "file-sharing" aka theft, and to see that the person apparently behind some of this effort ("Fellow Traveler") has such a cavalier attitude about others' property and their property rights doesn't inspire any confidence that they would be any more concerned with my property rights in that system....if i was "Fellow Traveler" i would re-think some of these attitudes....

 

I don't care for Kim Komando, but I have to agree with her on this one. There have been at least two major cheating scandals on two different poker sites in the past few years. First was Absolute Poker. Some guys were racking up on the high stakes tables (their win % was much higher than even the best players in the world can pull off). So, other players began investigating and came to the inescapable conclusion that someone could see the hole cards. Come to find out, it was an inside job -- the guy who ran the site had somehow hacked the software to where he could see everyone's cards. He later fled to South America with the several hundred grand he had cheated other players out of.

Then, a while later, the exact same thing happened at Ultimate Bet (another major poker site). It was the same situation -- some insiders had manipulated the software to reveal hole cards.

The problem is not really in the RNG's (these sites use quantum RNG's) but is in who has access to the software. The "gaming commissions" that oversee this stuff are about as reliable as the Mafia. The people in the commissions are almost as crooked as those doing the cheating.

I used to play online poker for money a lot until I heard about these scandals. No more.

 

Last night I went onto a file-sharing network and downloaded a copy of FreeBSD. I don't believe that I am guilty of any theft, nor that I have advocated it. Not every download is a theft.

My point above was that it's possible to pay for resources on an anonymous network, if you have an anonymous payment mechanism. This makes it possible to solve issues of resource allocation on anonymous networks. This also means that the currency accrued, whatever it is backed with, will continue to "hold value" as long as people know they can always use it later to pay for their own downloads in return. The point being that people will have practical use of the network without having to actually pay money for resources (as long as they make their computing resources available to the network--which shows exactly how the problems of resource allocation are thus solved.)

I earn some of my own income from sales of copyrighted materials, and I am not here to advocate theft. Rather, I am advocating software that gives people more and more privacy and security over their own transactions.

Put another way: Using anonymous money, more people will pay for ~ Snipped as per TOS ~, too. That doesn't mean I'm advocating ~ Snipped as per TOS ~. But I AM advocating anonymous money. See the difference?