Make Public Policy Cypherpunk Again | Peter Van Valkenburgh - Coin Center

I'm Peter Van valkenberg I'm the director of research at coin Center um can I get my slides up almost there we go so um how many people read this okay so last December vitalic wrote an important post it's titled make ethereum Cipher Punk again and if you haven't read it I hope you'll find it after this talk vitalic was reflecting on 10 years in crypto coin Center um my organization also happened to start 10 years ago we're a nonprofit org based in Washington DC and we're dedicated to defending digital civil liberties specifically your right to build and use permissionless blockchain networks so if you don't know us um I hope you look us up we have bonafides we're the only crypto group that right now has two Pand lawsuits against the US government one challenging the tornado cach sanctions by ofac and um that's the complaint if you want the QR code for the full complaint and another lawsuit challenging a privacy invasive tax reporting law that we um refer to briefly as the 605i reporting requirement we've been around as I said since 2014 um educating members of Congress and folks in the executive agencies so vitalic post recalls his early days in crypto uh when a handful of weird bars in Berlin accepted Bitcoin when ethereum was just an idea um that was really more Cipher Punk than it even was cryptocurrency uh onethird of gav wood's vision for a decentralized internet ethereum and swarm and Whisper um projects that didn't get as much love as ethereum it was the dawn of cryptocurrency currencies but it was already long past noon for Cipher punks so lawyers and technologists had been fighting the crypto Wars for decades Bernstein and the Electronic Frontier Foundation brought their suit against the US government arguing that code was Speech including code for strong encryption like RSA and that therefore it couldn't be restricted under export control laws that lawsuit was brought in 1995 Adam back was selling T-shirts with RSA written in Pearl don't let a foreign National see you wearing this shirt that's actually a federal felony CDA 230 an important internet Safe Harbor it's a law that insulate Publishers of information uh online from crushing defamation liability was passed by Congress also in 1995 the dmca Safe Harbor for the notice and com uh notice and takedown process came into effect in 1998 by the time ethereum had launched in 2015 we were already at least 20 years away from these pathbreaking developments in Internet freedom and US policy but the thing is that at that point already many in that larger internet Freedom Movement were disappointed with the effort the early internet had been made safe from certain measures of government censorship it's true but was it a beacon of freedom maybe blogs file sharing forums email IRC had all given way to Facebook Spotify Google Gmail centralized messaging apps all of these corporate run Services were doing the US government's Dirty Work by sharing mountains of otherwise private user data with the NSA and law enforcement all without a warrant or due process the open- source movement while still going strong had failed to uniformly win the day Pro retary software still dominated most consumer facing tools and wildly important false projects suffered from Key developers aging out leaving these critical systems without sufficient devs to keep them secure we got a reprieve from software censorship but part of the reason we won in USV Bernstein is that the government backed down they stopped pushing to censor strong encryption and they mooded the case rather than appealing it to the Supreme Court risking a bigger loss with binding presidential weight Across the Nation those who would censor software lived to fight another day in 2015 the internet Freedom people were wary from a 20-year battle that had borne only uncertain fruit now 10 years on there isn't even consensus on the value of those internet save Harbors CDA 230 is under attack perhaps rightfully so because it ceased to be a shield for small internet Publishers and has effectively become corporate welfare for the Giants of monetizing user generated content the dmca safe harbors are abused with heckler's getting a veto on any content they want to spam with takedown notices and we're back in the courts defending our First Amendment right to publish software once again crypto as in cryptocurrencies was supposed to fix all of this we were grabbing the Baton from Tim May and Eric Hughes lonus and Barlo and we were expected to Sprint to the next Milestone fix the incentive problem in free and open source software by creating cryptoeconomic models to incentivize digital public goods creation fix the non-competitive state of Internet platform architecture by replacing Google Facebook and the like with so-called fat protocols fix the Privacy Problem by building decentralized shared and encrypted file storage and peer-to-peer messaging we grab that baton knowing that our Tech stack could fix these problems it was the only stack that could as vitalic writes a public decentralized shared hard drive is what we need and it's what ethereum is we took the Baton and we ran like hell straight to Las Vegas cashed it in for an ape picture an Ico boom and gleefully called ourselves degenerates vitalic post is optimistic about new tech for scaling and privacy but at root it is a post about disappointment about losing our way in these 10 years we've seen explosive price growth but little actual good accomplished by the tech did we decentralize the web not yet did we replace banks in Wall Street no what did we do we built a massive Casino in the clouds why vitalic blames transaction costs and I think he's mostly right if fees are high and are paid in a frothy native token then your main users are going to be gamblers and speculators there's not a lot of profit in making public goods like encrypted messaging so without cheap transactions you won't see growth there vitalic is therefore optimistic about rollups and other scaling efforts and so am I but I'm also worried that in the 10 year diance we've lost our alliances with the larger internet Freedom Movement and perhaps worse eroded our capital in Washington DC amongst the so-called weary Giants of Flesh and steel our political enemies are much stronger than ever before now they're not just coming for casinos they're coming for censorship resistance and privacy itself they're coming from Miners and note operators they're are coming for the developers of tornado cach and they have actually mostly successfully banned Americans from using that privacy tool many in Congress confuse us with big Tech can you blame them many in Congress see FTX and assume it's all just fraud and technobabble can you blame them many in Congress know that defi is rarely as decentralized as it lets on many in Congress see binance and they see willful sanctions evad and money laundering with billion doll settlements and assume it's just a bunch of multinational Shadow banks that claim to be exempt from KY caml rules because of reasons can you blame them tornado cach the Privacy tool itself was just software running on the ethereum blockchain but in the wake of FTX and three arrows and innumerable am AML kyc failures at centralized exchanges can you blame folks in DC for mistaking it as a centralized entity I think you can blame them when criminal liabilities on the line but I think you can understand why they're making these mistakes while they're um mostly just software tornado cach did also have uh a dow that controlled ancillary activities and it had a governance token and I'll tell you the hardest part of our lawsuit is convincing a judge who's not technology native that there's a difference between the immutable software tools whose operation is governed by math and the inexorable operation of the ethereum blockchain and the torn token da whose operation is governed primarily by people and we are fighting for our right to use that software we are not even challenging the sanctioning of the non-mutable smart contract addresses associated with the tool nor the designation of the Dow itself now I know there will always be replacements for tornado cach and there already are that one of the great attributes of permissionless blockchains is the resilience that comes from allowing daps to come and go freely but the legal precedence about whether the government can ban people from using certain tools and whether people can go to jail for building those tools those precedents will not come and go so easily and like it or not they're going to be set by our lawsuit and other lawsuits in the next few years now I'm optimistic that we will effectively wield the US Constitution and the courts as a shield this time around fortunately the courts are less concerned with political capital and often do vindicate the plain right of Americans to speak even if that speech is unpopular as Justice Gorsuch wrote in an important recent opinion the first amendment protects an individual's right to speak his mind regardless of whether the government considers his speech sensible and well-intentioned or deeply misguided and likely to cause anguish or incalculable grief I worry however that we will have more trouble defending developers who go beyond mere software publishing and for this reason I want to offer a warning about the current state of socalled decentralized governance and Dows generally when I was starting out the word Dao sometimes Dak decentralized autonomous Corporation was used to discuss the Bitcoin Network RIT large a complex system of people and machines individually driven by self-interest but through cryptography and incentives forced to act as a larger unit for altruistic purposes an autonomous larger unit that was greater than the sum of its parts but also fundamentally different than governments or corporations ations Because the actual opinions and biases of the participants didn't matter much to the behavior of the whole governments and corporations are run by people at their best bylaws shareholder votes elections and constitutions stand across the paths of those people and slow their March down roads that lead to Greed and exploitation Dows are supposed to be different the code governs and people even if they are selfish or malicious are reliably funneled into a pattern of behavior that actually benefits the greater good but today Dow means something very different it's come to mean token voting it's simple corporate governance with all the oligarchy social Choice cycling and inefficiency of that older world but because most Dows estu an actual legal form it's the same as that older world and worse without limited liability without Clarity on regulatory status with always the threat of an enforcement action and the attendant personal and even criminal liability looming over the participants so I have to ask you the tornado cach Dow didn't control the funds and the actual privacy tool those smart contracts were immutable but Alex perov still spent months in a Dutch jail and Roman storm is being charged here in the US so if you're a developer in this space is your dap immutable are you a member of a dow that holds keys to upgrade a contract do you have a lawyer and you might say well my dap has nothing to do with privacy so I'm safer well a lots of other things are illegal like unregulated derivatives trading and B if the only way you can build safely on ethereum is by neglecting to build tools that protect user privacy then what have we done to our Cipher Punk ideals I want to leave you with this we will have your back if you publish code we will have your back if you publish that code to the blockchain we will have your back if you publish that code to a web server that's still speech we will have your back if that code offers strong privacy guarantees to users both good guys and bad guys we don't ask authors to limit who can read their books just because the book carries some knowledge that would be dangerous in the wrong hands we will make public policy Cipher Punk again defending free speech and privacy but the more crypto builds governance mechanisms that involve actual human discretion and judgment rather than the indiffer and verifiable proofs of work stake or knowledge then the more speech gives way to conduct and conduct as in acting on behalf of others rather than merely providing others with software tools and data verification conduct even expressive conduct Garners far less protection from our constitution it's not Cipher to stand up and Lobby for a big corporation that can vote to do whatever it wants so why would it be any different for a big Dow that can control all aspects of a smart contract if sufficient token holders agree if you can build your dap or protocol to be immutable you should do that if you can't then you should be looking for governance tools that are more than just a vote from token holders or a multisig between some fine and honest people if those tools don't exist yet then I can't think of a Better Community than this one to discover and create them together let's make crypto Cipher Punk again thank you Peter sometimes when you're at e