Why we need to build internet protocols that rest on
the consensus of the blockchain, rather than the authority
of giant organizations
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To secure the a crypto currency against hostile forces, we need to secure people's ability to hold conversations, including conversations about payment, contracts, and money, against hostile forces, so we need to replace the domain name system and tcp-ip, and build an overlay network inside and on top of that capable of hiding ip addresses from the parties to the conversation. (Though such a conversation will necessarily be slow and inefficient, so not used routinely.)
Bitcoin and everything blockchain is a centralized ledger. Worse than that – it’s the One True Ledger. It isn’t like gold. Gold one can have directly on one’s person or indirectly in a vault somewhere.
It is possible to have a crypto currency similar to bitcoin where though there is one global ledger recording what public keys own what, there is no way to tell which human actors know the private keys corresponding to those public keys.
A crypto currency needs to be centerless – it needs to able to survive the seizure of key servers by a hostile powerful party. Trouble with bitcoin is that it is not centerless – proof of work winds up being centralized in a small number of extremely powerful and extremely expensive computers.
Thus we need a system with proof of share, and not only proof of share, but proof of client share – the power over the system needs to reside with peers that have a lot of wealthy clients – and it needs to be hard to find who the clients are, and where they are keeping their secrets, so that even if someone seizes important peers on charges of tax evasion and money laundering, does not thereby gain control.
If the system handles an enormous number of transactions, peers are going to be big and expensive, thus vulnerable to people armed with vague and open ended charges of tax evasion and money laundering. Hence the power of peer over the currency needs to be proportional to the wealth controlled by the secrets held by that peer’s clients. And that peer’s clients need to be free to move from one peer to the next, and apt to move to peers that make it difficult for Mueller to find their clients.
Need a crypto currency where Bob can prove to the whole world that he paid Ann such and such amount, in accord with such and such a bill, but no one else can prove he paid Ann, nor that there ever was such a bill, except he or Ann shows them. Bitcoin is far too traceable. We need controlled traceability, where the participants can prove a transaction to third parties and the world, but the world cannot. And Bob needs to be able to prove what the payment was about, that it was part of a conversation, a meeting of minds.
The reason we have end user demand for crypto currency is the same as the reason we have end user demand for gold.
When quasi governmental entities started freezing the accounts of "Nazis", "racists", "Russian trolls", and suchlike, a lot of "Nazis" and "Russian trolls" moved to crypto currency, shortly thereafter followed by a great many very wealthy men who were worried that when they needed their wealth in a hurry, they would suddenly become Nazis and Russian trolls also, and their wealth would suddenly become inaccessible or worthless.
For a long time the big demand for crypto currency has been wealthy Chinese evading currency controls, but with the recent crackdown on hate speech, we are seeing massive American and European demand, which directly resulted in the recent spike in crypto currency values.
Another substantial source of demand for crypto currency, which has been around since the beginning, is buying steroids and suchlike over the internet, but the really huge move in crypto currency demand came during the recent crackdown on political activists.
Obviously political activists do not in themselves have enough wealth to cause such a huge move in market value, but when you go after political activists, you are going to make a whole lot of wealthy people reflect that they are none too popular either. If you are a rich man, makes sense to put a significant chunk of your wealth in crypto currency in case you suddenly become a refugee. For example, if, as is looking increasingly likely, there is a pogrom against whites in the USA, a whole lot of rich people will flee to Singapore, China, Russia, Hong Kong, the Philippines, and Dubai with nothing but the clothes they stand up in, and the master secret controlling their crypto currency in their heads.
So that Bob can contract with Ann without the transaction becoming visible to the world, the crypto currency needs to be built inside and on top of an encrypted overlay network, a method for people to have forbidden conversations about forbidden things. Contracts imply conversations, and secret contracts imply secret conversations. Untraceable payments imply untraceable conversations.
Full bore totalitarianism sufficient to shut down crypto currency is not far from full bore totalitarianism sufficient to shut down the internet.
Full bore totalitarianism sufficient to shut down the internet is going to strangle your economy. If your enemies are markedly wealthier than you are, it is likely to be a problem. North Korea is poor in substantial part because it dares not allow something like the internet to exist. Any contact with the west is used by the state department as a vector for subversion and color revolution.
North Korea wants to open up, and has repeatedly attempted to open up, but wants it to be safe for it to open up. If it does open up, expect a lot of North Koreans to buy crypto currency.
To create an internet where I cannot send arbitrary packets to an arbitrary machine, you are going to have to license every hub that is allowed to accept packets. Expect some serious disputes as to who gets to do the licensing.
Turning the whole world into one big North Korea is not going to be feasible, and attempting to do so is likely to result in a large part of the world glowing in the dark.
However, turning the US into Venezuela is entirely feasible, might well happen. We have a potential Democratic Party president who proposes to do exactly that.
Which is exactly why wealthy Americans are buying crypto currency, so that they can run to those parts of the world that do not turn into North Korea or Venezuela.
The best example of repression which does not bother people too much is China, and the great firewall of China. And until recently, the major demand for crypto currency came from Chinese evading currency controls.
So, to accomplish the goal of shutting down crypto currency requires world wide internet repression at levels considerably more repressive than China, which is likely to be disruptive and damaging within a single nation and a single economy, and apt to lead to conflicts if attempted globally.
