The Demise of Crypto Anarchy

by on September 15, 2003 at 2:00 am in Web/Tech | Permalink

Crypto anarchists and cyber-libertarians promised a new world of privacy and liberty built on the foundations of the internet and public key cryptography. As David Friedman memorably put it public key cryptograpy allows “anonymity with reputation” thus it becomes possible in theory to evade the taxman while still maintaining a public presence.

All of this now looks somewhat naive. Consider, for example, how internet gambling has been quashed. First, the credit card companies caved into government pressure and refused to process gambling related transactions. Initially, gamblers shrugged this off and routed their transactions through PayPal but a U.S District Attorney accused PayPal of violating the USA Patriot Act and to avoid charges PayPal was forced to pony up 10 million dollars. (Why am I not surprised that a law intended to go after terrorists has been used to most affect against peaceful gamblers?). Entrepreneurs have taken their online gambling sites to places where it is legal like Antigua and Costa Rica but don’t try coming home again. When Jay Cohen, founder of the World Sport Exchange, did that he was tried, convicted and jailed in a Federal prison.

The cyber-anarchists and libertarians were correct about the technology – public key cryptography can do what they say it can do – so where did the argument go wrong? In part, the cyber anarchists forgot that most of the value of cyberspace comes from its overlap with real space. I don’t blog anonymously because I want to be rewarded for my blogging with something that I can use to buy a car (ok, maybe a toaster is more realistic). Even if privacy is perfect in cyberspace the many margins of overlap with real space leave plenty of room for authority to insert its hooks especially when authority itself is technologically adept. Moreover, as Richard Posner has noted, the demand for privacy is more often than not a demand for control over the public presentation of self and cryptography does nothing to help and may even impede that demand.

The cyber-anarchist world works in a thought-experiment when everyone demands privacy and as a result the technology for getting privacy is built into all of our communications structures and used as a matter of routine. But that’s a description of an equilibrium and not a description of how to get there from here. At present, most people are not that bothered with privacy and so do not, for example, encrypt their email. As a result, privacy is not convenient even for those who want it. Indeed, someone who encrypts their email or phone conversations is probably calling more attention to themselves than they otherwise would.

The cyber anarchists may yet be proven right but today David Brin’s forecast of a Transparent Society in which no one has privacy, including authority, is looking far more realistic. Need I mention this as proof of Brin’s thesis?

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