‘Bitcoin Santas’ surprising hackers with anonymous Christmas donations


Bitcoin’s real revolution isn’t hard money, its economic panarchy
by Zacqary Adam Green  /  2013/11/06

The earth-shattering thing about bitcoin isn’t its fixed money supply. It’s not the carefully tuned algorithm that keeps its growth at a steady rate, or the inability of a political body to play with its value. What’s new and government-toppling about bitcoin is that it’s a framework for starting a new economy. Gold and silver have coexisted with governments and nation-states for thousands of years. If the economic properties of bitcoin — its finite supply — were inherently state-smashing, we’d be living in a very different world before the computer were even invented. No, bitcoin’s revolution isn’t what the Bitcoin Foundation calls its “non-political economy.” In fact, you could argue that “non-political economy” is an oxymoron. If we define “political” as only referring to the workings of a state, then sure, you can have a non-political economy. But in the colloquial way that people often talk about “politics” — the “internal politics” of a workplace or social club, for example — there’s no such thing as a non-political economy. Any kind of money — whether it’s gold, dollars, bitcoin, or licking things to claim them as your own — only has any value if everyone in the economy agrees that it does. You could say that this observation doesn’t challenge the neoclassical economic theory of money very much at all. For example, bitcoin has value because there’s a demand for it, plus it’s in short supply. This is like saying that general relativity is consistent with the Genesis story, because the Earth could have been created in six “relative” days. It’s not technically wrong, just not a very helpful way of looking at the world. I like the way David Graeber puts it in Debt:

[Money] is not a “thing” at all. You can no more touch a dollar or a deutschmark than you can touch an hour or a cubic centimeter. Units of currency are merely abstract units of measurement…If money is just a yardstick, what then does it measure? The answer [is] simple: debt. A coin is, effectively, an IOU.

Brett Scott expands on this:

Perhaps we can tinker with the word ‘money’ itself. It’s a mass noun, like you’d use for some kind of tangible substance, and it makes money sound like a ‘thing-in-itself’. As a kind of mental discipline, I prefer to use a different word: COGAS. It stands for ‘claims on goods and services’, which is all money really is.

So money is just a way of measuring who owes what: you give me something or do something for me, and now I owe you something equally valuable in return. That’s a social relation. And if a big group of people get together to agree on how their social relations should work, it suddenly starts to look political. Even the decision to use bitcoin requires the initial political decision to not screw with its politics in the future.

Bitcoin’s real contribution to the world is its source code. The blockchain, the network protocol, the cryptographic verification — anyone can take this and build a currency with any economic properties their community needs. I’m not convinced that bitcoin’s Austrian School properties can sustain a global (or even local) economy, but you know what? That’s okay. If I ever feel the bitcoin economy has become too unequal, unbalanced, or stagnant, it’s now trivial for me to start my own damn currency. A single bitcoin belongs is a measurement like a centimeter, but the bitcoin community is a social network. People use bitcoin because other people they trade with use bitcoin. If my town is running low on bitcoin but has a lot of resources to share internally, we can create our own local currency to free up bitcoin for importing and exporting. Or I could join an online network of artists who work on one another’s projects, and we’d create our own internal currency that plays by whatever rules we need it to. There is no perfect monetary system for every situation. Bitcoin is not going to be the one world currency, and it doesn’t need to be. A lot of people compare Bitcoin to the Internet, but it’s more like CompuServe. It’s the first of many digital, non-state currencies to come, that will all interoperate with each other in ways we can’t even dream of yet.

The World’s Most Powerful Computer Network Is Being Wasted on Bitcoin
by Eric Limer / 5/13/13

Bitcoin mining machines are insane powerhouses, and they’re only getting crazier. How much power is getting sunk into the digital cryptocurrency? More than the world’s top 500 supercomputers combined. What a waste. According to Bitcoin Watch, the whole Bitcoin network hit a record-breaking high of 1 exaFLOPS this weekend. When you’re talking about FLOPS, you’re really talking about the number of Floating-pointOperations a computer can do Per Second, or more simply, how fast it can tear through math problems. It’s a pretty common standard for measuring computer power. An exaFLOPS is 1018, or 1,000,000,000,000,000,000 math problems per second. The most powerful supercomputer in the world, Sequoia, can manage a mere 16 petaFLOPS, or just 1.6 percent of the power geeks around the world have brought to bear on mining Bitcoin. The world’s top 10 supercomputers can muster 5 percent of that total, and even the top 500 can only muster a mere 12.8 percent. And that 1 exaFLOPS number is probably a little low. Because Bitcoin miners actually do a simpler kind of math (integer operations), you have to do a little (messy) conversion to get to FLOPS. And because the new ASIC miners—machines that are built from scratch to do nothing but mine Bitcoins—can’t even do other kinds of operations, they’re left out of the total entirely. So what we’ve got here is a representation of the total power spent on Bitcoin mining that could theoretically be spent on something else, like real problems that exist naturally. Because of the way Bitcoin self-regulates, the math problems Bitcoin mining rigs have to do to get more ‘coin get harder and harder as time goes on. Not to any particular end, but just to make sure the world doesn’t get flooded with Bitcoins. So all these computers aren’t really accomplishing anything other than solving super difficult and necessarily arbitrary puzzles for cyber money. It’s kind of like rounding up the world’s greatest minds and making them do Sudokus for nickels.

Projects like Folding@Home and SETI@Home use similarly networked power for the less-pointless practices of parsing information that could lead to more effective medicines or finding extra-terrestrial life, respectively, and either are hard-pressed to scrounge up even half of a percent of the power the Bitcoin network is rocking. And with specialized Bitcoin-mining hardware on the rise, there’s going to be an army of totally powerhouse PCs out there that are good for literally nothing but digging up cybercoins. It’s incredible to think about the amount of power being directed at this one, singular purpose; power that’s essentially being “donated” by thousands of people across the globe just because they have skin in the game. It’s by far the most computational effort that has ever been devoted to a single purpose. And sure, Bitcoins are fine and all, but can you imagine what we could do if this energy was put behind other tough problems? We’ll you’re going to have to imagine, because so long as mining Bitcoins can earn you money and folding proteins can’t, it’s pretty clear which one is gonna get done.

Bitcoin fuels Africa’s banking revolution
by James Smith  /   12 July 2013

Bitcoin has landed in Kenya. The online currency that was, until recently, the preserve of tech entrepreneurs and only the most pioneering financiers, is to go mainstream in Nairobi while the rest of us continue to look on gingerly from the sidelines. This is thanks to Kipochi a Bitcoin wallet that will enable users to transfer bitcoins to each other before converting them into local currency. Kipochi – Swahili for “wallet” – will allow Kenyans to send money quickly and cheaply, effectively avoiding the high transaction fees charged by existing services such as moneygram. Enabling the transfer of funds between countries is significant given the huge importance of remittances to Africa’s economy. Remittances from outside Africa dwarf Western aid, for example, and the growth of economic migration across African borders means that transactions are increasingly international.

Mobile phone banking is already flourishing in Africa much more quickly than here in the UK. It is driven by widespread mobile phone use and the relative scarcity of banks. The numbers are illuminating. In Kenya, the heartland of M-Pesa – the world’s leading mobile money service, approximately 70% of adults do not have access to a formal bank account. At the same time around 70% do have access to a mobile phone, and the overwhelming majority of those with phones have used them to access M-Pesa to transfer money. M-Pesa, M for mobile and Pesa – Swahili for money – is one of the relatively rare examples of “technological catch-up”, where the rapid adoption of a new technology allows less developed parts of the world to make substantial strides forward. M-Pesa is very straightforward. Once one has registered an account and deposited some money, one simply dispatches cash to the intended recipient via a text message. The recipient then converts the text message into cash at one of the 40,000 agents dotted around the country. The service is a godsend in many ways, it avoids lengthy bank queues, it negates the rigmarole of setting up a formal bank account and it facilities the support of the many rural-urban households that stretch across the country in an effort to secure a livelihood.

Mobile phones are a vital tool in African banking

Many parts of Africa have managed to effectively leapfrog the era of wired telecommunications by taking advantage of cheap, contract-free mobile phones to keep in touch. In turn, the massive demand for communication has driven private sector investment to ensure the growth of wireless networks across the continent. It was therefore only a matter of time before a company woke up to the potential of a service like Kipochi. The advent of Bitcoin has provided the perfect vehicle for the next stage in the revolution. What mobile phones have done in Africa is meet a need in a way that is affordable to the majority of the population in many African countries. And he growth in their use demonstrates the power of the African consumer to mobilise the private sector. Tellingly, by 2012, more than 30% of Kenya’s GDP was transacted through M-Pesa. There are risks, however. Bitcoin has proved itself to be volatile, fuelled by speculators – although this is not something that Africans are unaccustomed to. M-Pesa as a brand might be a trusted one, but the more abstract connection to Bitcoin might be a harder sell. Currently, Kipochi above all else represents possibility, as M-Pesa once did. The growth of mobile money also represents something more profound. In Kenya, this emergent global economy isn’t about the internet, or mobile phones, or new technological platforms and opportunities. Ultimately its about customers. The transformative power of technology for Africa is actually a story of the transformation of Africans from recipients to customers, and the emergence of Africa as a place of opportunity and entrepreneurship. Monetary innovation is a story of needs finally being met.

Bitcoin and the Three Laws of Robotics
by Stan Larimer  /  14 September 2013

You may not have considered it, but Bitcoin can be viewed as an unmanned company – or a Distributed Autonomous Corporation (DAC) if you prefer. Unlike passive currencies, Bitcoin derives much of its tangible value by performing a trustworthy confidential fiduciary service. Essentially, it keeps private books for customer “checking” accounts and will transfer credits between accounts upon receipt of a properly signed “check”.   Aren’t these some of the same private services for which Swiss banks were once famous – back when privacy was something they could really offer?  Isn’t Bitcoin more like a bygone Swiss Bank than a commodity or a colorful piece of paper? Would a DAC metaphor fit Bitcoin even better than its current coin metaphor? Distributed Autonomous Corporations (DAC) run without any human involvement under the control of an incorruptible set of business rules. (That’s why they must be distributed and autonomous.) These rules are implemented as publicly auditable open source software distributed across the computers of their stakeholders.   You become a stakeholder by buying “stock” in the company or being paid in that stock to provide services for the company.  This stock may entitle you to a share of its “profits”, participation in its growth, and/or a say in how it is run. Bitcoins can be viewed as a small “share” of the total market cap of the Bitcoin “corporation”.   The “mining” services that validate transactions and secure the network are paid for in new bitcoins that slowly dilute the “stock” as the corporation’s market cap ebbs and flows.  You can generally trade your shares for other currencies, goods, and services.  Operating rules for the corporation cannot be changed unless a majority of stakeholders vote for them by switching to another version of the software.  Interestingly, it is not the holders of existing shares that get to make this decision, but only those “employees” who are contributing their computer resources (mining bots) to run the company. Nothing says a corporation can’t be structured to distribute voting rights this way, and that’s exactly what Bitcoin has done.  Shareholders get equity growth.  Employees get voting rights.  All “revenue” is paid to the employees as compensation for their work.  There are no profits.

Bitcoin is a shareholder-owned, employee run, not-for-profit crypto-corporation
“Real” corporations, of course, are legal constructs created by governments so that groups of people can act as a single artificial person.  But groups of people are in general no more trustworthy than individuals. Even if you completely eliminate all humans in the corporation via automation, the result will no more honorable than the rascally humans that control and maintain it.   Can we construct a DAC that you would trust more than a Swiss Bank?  I think Bitcoin may have found a way – with distributed autonomous software and its own Three Laws of Robotics.  If you’re a true Sci-Fi buff, you already know the original set by heart:

Asimov’s Three Laws of Robotics

  1. A robot may not injure a human being or, through inaction, allow a human being to come to harm.
  2. A robot must obey the orders given to it by human beings,
    except where such orders would conflict with the First Law.
  3. A robot must protect its own existence as long as such protection does not conflict with the First or Second Law.

In Isaac Asimov’s I, Robot universe, every robot was required to have these laws hard-wired into its positronic brain as a safety feature.  Does Bitcoin not have analogous “laws” indelibly etched into its very core?  Are not these Core Laws what make Bitcoin virtually incorruptible? The critical innovation with distributed blockchain systems like Bitcoin is their ability to credibly implement their own set of incorruptible Core Laws. Any set of business rules could be implemented by a DAC, even those most would consider evil.  The key idea is that the Core Laws ensure that a chosen set of business laws are burned-in, immutable, and incorruptible.  If you like a DAC’s incorruptible business rules, you can rely on them.  If you don’t like them, don’t do business with them.  But you can never be betrayed.

DACs can still be designed to have a robotically inviolable intention to rob you blind, but to enter the open source arena they must be honest about their plans to do so. What Core Laws should DACs implement and how would they do it?  Here’s my stake in the ground, with apologies to Dr. Asimov:

Three Laws of Robotics for Distributed Autonomous Corporations

  1. A DAC must always obey its own published business rules.
  2. A DAC must never change its rules without consent of its stakeholders, except where such change would conflict with the First Law.
  3. A DAC must protect its own existence, as long as such protection does not conflict with the first two laws.

In actual practice, these Three Laws are embedded into open source software for all stakeholders to inspect. They govern the protection of the rights of stakeholders and how other rules can be changed, but they themselves can never be changed. The First Law, integrity, is enforced by cross checking every DAC node’s actions with many other DAC nodes (i.e. bots). Rogue actions by individual DAC bots are simply blocked by the collective and their perpetrators shunned.  Rule disobedience is futile.  Coercion by nefarious agencies is futile. The Second Law, incorruptibility, ensures updates to any DAC source code are not incorporated without consent of a majority of stakeholders. Unless more than half of the total collective work force agrees to adopt it, corrupting even a large minority of DACBOTs will have no effect. The Third Law, self-preservation, covers features engineered to harden the software against very real threats to a DAC’s existence.  The first two laws already mitigate the introduction of bad bots into the collective. Open source software has thus far prevented corrupt agencies from introducing corrupting “features”. But a more serious risk is any persistent tether to a DAC’s human creators who must necessarily remain exposed to all the corrupting influences that flesh is heir to.  Such tethers are easy to exploit by shutting down web addresses, passing laws, proliferating regulations, issuing injunctions …or much darker methods. Attacks against a DAC’s creators remain its Achilles’ heel. To survive as trusted entities, DACs must become internationally autonomous.

Implementing the Three Laws of Robotics for DACs will be a never-ending arms race.
Asimov had the enviable privilege of decreeing his Three Laws as a fait accompli.  In the cold, cruel real world, we must tend to the engineering details.  Integrity, incorruptibility, and self-preservation technology must evolve with the escalating threats against them.  To stand still is to be overrun. One obviously needed self-preservation strategy would be to include with each DAC’s distribution package a massively distributed ability to propagate that distribution package. DACBOTs need to be able to clone more identical DACBOTs without the interdictable support of their creators.   Another desperately needed innovation is a better way to introduce inevitable software updates that affect all DACBOTs.  Software updates generally rely on trusting the developer.  But now, it is way too likely that any trusted DAC provider will be shut down, prevented from offering its software, or seduced/coerced into installing back doors for Nefarious Secret Agencies in their next maintenance release.  Developers are, after all, only human. To date, Bitcoin has been well protected from such Trojan horses by its open source policy and a worldwide network of anonymous, independent Steely-Eyed Geeks (SEG) who would love to be the first to blow the whistle.  Unfortunately, Steely-Eyed Geeks are a scarce resource that must be attracted like antibodies to a DACs defense.  As DACs proliferate, novelty and fame will be less effective in attracting such resources.  So DACs will need to find ways to autonomously compensate their human defenders. Direct hiring by the DAC’s creators would expose SEGs to the same seduction and coercion risks.  To be effective, SEGs must remain motivated, anonymous and independent.  Distributed Autonomous Corporations need a SEG benefits package! Ultimately, to achieve complete incorruptibility, developers must be willing to let go of their own control.  If there remains any centralized human control anywhere, it will eventually be exploited to the detriment of the DAC’s stakeholders.  DACs need to be free to be trusted.

“Centralization tends to corrupt, and absolute centralization corrupts absolutely.”
Bitcoin has already demonstrated its ability to credibly implement a social contract based on a rudimentary set of inviolable Core Laws.  We are betting that, having recognized they are in an arms race, developers will continue to out-distance the necessarily reactive forces that will try to corrupt them.  Put another way:  “incorruptibility is a necessity and necessity is the mother of invention.” DACS with superhuman robot honor are inevitable.  It’s their unique competitive edge.

The Future of DACS
The DAC metaphor seems to be helpful in appreciating the revolutionary nature of blockchain technology.  Its not just the sine quo non of digital currency, it’s a way to implement incorruptible business relationships of almost any kind.  Adopting this new metaphor is like the difference between using a flat earth or a sphere as your model for planning global shipping routes. All sorts of new insights open up when we tap our prior experience about how market-driven corporations work in the physical world.   Lets go there in two steps:  First, try to imagine the value of a corporate entity you can design to have robotically inviolable fiduciary regard for the interests of its customers and stakeholders. Second, lets consider how to make it operate like a traditional corporation optimized to compete with its shifty human peers.

Step 1:  Recognize the nature of the beast. Relentlessly honorable autonomous corporations would have many advantages in the free market.  Like Bitcoin, DACs armed with a set of inviolable Core Laws are far safer to deal with than corruptible human organizations.  Moreover, such entities have emergent characteristics with far more interesting applications than just keeping the books for a crypto currency. Blockchain ethics allow a suitably motivated engineer to “incorporate” some or all of the following SEG-verifiable characteristics.

  • They are corporations – They are, and of a right ought to be, free and independent persons.
  • They are autonomous – once up to speed; they no longer need (or heed) their creators.
  • They are distributed – there are no central points of control or failure that can be attacked.
  • They are transparent – their books and business rules are auditable by all.
  • They are confidential – customer information is securely (and incorruptibly) protected.
  • They are trustworthy – because no interaction with them depends on trust.
  • They are fiduciaries – acting solely in their customers’ and shareholders’ interests.
  • They are self-regulating – they obey their own rules like, well, robots.
  • They are incorruptible – no one can exercise seductive or coercive influence over them.
  • They are sovereign – over their digital resources.  They don’t need governments to exist.

Collectively these imply that: DACs don’t need regulation, you don’t want to regulate them, and happily you can’t. A DAC can be introduced into the wild from anywhere in the world and will spread on its own to wherever its services are appreciated.  It will survive if it is well adapted to its market environment and perish if not. Its creator can improve its survival odds by promoting it and defending it up to a point.  But the umbilical cord should be quickly severed since its creator remains exposed to the risks of the real world. This is not to say that DACs are above the Law of the Market. Such natural law is the most legitimate source of regulation. If a DAC doesn’t provide trustworthy value in the marketplace, it will be shunned and die of neglect.  If its published social contract and the services it offers don’t make it a desirable business partner, it will perish. In the end, a DAC’s survival depends on the willingness of others to engage in voluntary exchange with it.  DACs, like people, will develop reputations.  The Core Laws make sure that once a reputation is earned, it can be counted on to persist.  History is littered with human organizations that started out with high ideals like “We the people” or “Don’t be evil” only to succumb to ethics rot as flesh and blood executives are seduced and/or coerced.  Inviolable DAC ethics can start out bad, but they can’t rot. Like the industrial and Internet revolutions before it, the DAC revolution will be a boon to those jurisdictions that restrict it the least.  Would-be regulators can’t stop the world’s truly free markets from adopting it. They can only make it harder for their own hobbled markets to benefit. Perhaps that’s a price they are willing to pay for power. Regulation by force, like the use of antibiotics, will only lead to new, more resistant strains. Namecoin, Mastercoin, BitShares and other “crypto-entities” already share many of these characteristics though some may not fully realize it. New insights and design patterns can be gained by recognizing (and perhaps standardizing) the DAC metaphor.  Such standards (and a good benefits package) will focus and conserve critical and limited Steely Eyed Geek resources.

Step 2:  Exploit the utility of the beast. Technologies for making impeccably honest and tamper-proof software are only valuable if the software does something useful.  If we use a currency metaphor, we can invent better currencies.  If we use a corporation metaphor, we can invent almost anything.   A DAC is a company and can work in many ways like those of brick and mortar and flesh and blood.

  • It can raise capital by selling shares of its stock … and pay dividends.
  • It can raise capital by borrowing against its stock … and pay interest.
  • It can raise capital by providing services of value to its customers.
  • It can use stock to pay persons (human or artificial) for resources and services.
  • It can use Internet APIs to automate access to its products and services.
  • It can adapt its business processes in response to market feedback.
  • It can use stock transfers to (fairly) reward or penalize the behavior of others.

As a DAC performs fiduciary services of value to others it generates real wealth that can be stored and transferred via its own stock.   But, as Clint Eastwood might say, “a DAC’s gotta know its limitations.” A sovereign DAC has no way to accept, hold, or remit physical commodities or fiat currencies and still remain independent of external forces. Further, an open source DAC can’t keep a secret.  It can securely hold encrypted data for others, but it has no place to keep a private key of its own. Thus, a DAC can’t have its own crypto wallet full of blockchain assets. So it works best when creating or transferring value entirely within the DAC domain.   This is not to say that humans can’t trade real assets among themselves in exchange for rights to a DAC’s shares, or that a DAC can’t participate in the allocation and tracking of those rights. But its sovereignty extends only over the contents of its own blockchain.

Here are some notional DACs that might well appear in the coming year …or decade.   Naturally, their corporate names in the DAC Domain would end in DAC, not INC, LTD, or LLC.  (Folks will want to know if they are dealing with a Corporation of Superhuman Integrity.) The common denominator is they all exploit an emerging competitive edge:

DACs trade on their incorruptible ability to apply transparent rules to secure data.

  • Reputable Monikers, DAC – Manages rights to an identity namespace.
  • Robo Courier, DAC – A secure electronic courier service.
  • TradeBitShares, DAC – Robotically honorable banking and brokerage services.
  • Unmanned Escrow, DAC – Escrow services that conditionally transfer ownership rights.
  • Virtual Ventures, DAC – A crowd-sourced venture capital firm.
  • Autonomous Arbitrators, DAC – Incorruptible arbitration services.
  • DAC Installers R Us, DAC – Trustworthy auto-installation of consensus-based DAC updates.
  • SkyNet, DAC – A swarm of DACBOT satellites implementing a unbuggable new Internet.
  • One World Government, DAC – A government that can’t ignore its own constitution.

I’ll quit before I get carried away.  The point is, changing metaphors opens up unlimited new possibilities.  You’re not limited to just another altcoin.  What earth-shaking, paradigm-busting DAC could you release into the wild?

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