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I blog about Ripple & XRP. FULL DISCLOSURE: All views are my own. I do not work for Ripple; I am not a professional financial analyst, and the majority of my crypto holdings are XRP.FAANG stands for …
I blog about Ripple & XRP. FULL DISCLOSURE: All views are my own. I do not work for Ripple; I am not a professional financial analyst, and the majority of my crypto holdings are XRP.FAANG stands for "Facebook, Apple, Amazon, Netflix, and Google." These five stocks have become staples in mainstream finance investing when it comes to large Silicon Valley power-houses. Until this point, these companies have formed a unique blend of access and restriction for their user base when it comes to content. Netflix buys the rights to many independent films and projects, and even produces its own fantastic array of content, known as "Netflix originals." And where Netflix focuses on video content, Amazon has expanded its umbrella to include all media types, including music and written content (e-books). Google, in addition to its massive YouTube video collection, has an online marketplace for music and books. Facebook has shown its interest in connecting to online marketplaces. Each of these members of FAANG have so far enjoyed a virtual monopoly on most electronic content access, but there is discontent from the artistic and creative community. There are many stakeholders - mainly in the creative community of artists, writers, and musicians - that are not satisfied with the meager earnings they receive from these companies as opposed to more traditional modes of marketing and access. 1 2According to one article, musicians depending on Amazon royalties will need to have 366,169 streams per month to earn the equivalent of the monthly minimum wage in the United States. 3 This means that only a very small handful of artists can adequately support themselves through current varieties of content monetization if they rely only on these new media monopolies.And this need... this unexploited, massive, pent-up demand for better ways for creative types to both market their wares and receive payment, has prompted some refreshing innovations that are well on their way to becoming a reality.Coil, a new company that was founded by Stefan Thomas, the former Chief Technology Officer at Ripple, has joined ranks of other content monetization providers like Patreon to assist artists in receiving payment for their work.Coil takes an agnostic approach to the specific channel of content delivery, even allowing artists to use these FAANG sites if they so choose. For example, if a YouTube channel owner wants to monetize their handiwork, they can do that by plugging in their channel in their Coil account; each time a Coil-monetized browser views their channel content, they will receive a Coil payment, denominated in XRP.For those of us that are in the XRP community, this method of content monetization is a huge win-win. Many of us are creative types, but because there has been no reliable mechanism of content monetization aside from dependence on the meager payouts from these FAANG monopolies, we've been forced to consider our content creation as 'sideline gigs' only, while we pay the bills with more traditional, business-oriented occupations.Coil is just starting out, but the feedback from the larger crypto community has been overwhelmingly positive, and you can sense a massive pent-up demand for a way around the unhealthy dependence on these media giants.Those webmasters that are adept at technical topics enough to run their own ILP plugin and 'moneyd' instance can actually create their own payment pointer. However, I'm going to assume that most content creators want to 'keep it simple,' so I'll let other authors handle that topic.If you want to 'keep it simple,' and you're an artist, and this is the first time you're hearing about Coil, it works this way:NOTE: If you're a member of the XRP Tip Bot community, you have one automatically created already, and just need to log into www.xrptipbot.com and then navigate to https://www.xrptipbot.com/deposit?method=ilp to find it. If you're looking to monetize your website, this is almost the end of the process. The last step is to copy the automatically-generated meta tag that Coil provides you, and then add it to the (head) section of the web page you wish to monetize on your site:And even though the project is still in "preview mode," Coil also supports monetization of YouTube and Twitch channels, for those that stream their content over those two services:And that's it; for now, the options for monetization are comprised of these initial set of techniques.If you'd like to see much better instructions than my own for how to do any of these steps, I recommend the official Coil-published set of instructions:I'm guessing that Coil will expand these instructions in the coming months as they proceed to add more functions and capabilities. For now, though, these options have been enough to seriously energize content creators and motivate many to include the Coil monetization tag in their sites. The effect of Coil monetization has the result of creating a circular set of participants: Creators, Consumers, and Coil, that combine to form an entire ecosystem that is more attractive to artists on a per-download, per-stream basis:As long as the reward structure for Coil is more profitable for artists than that of the FAANG-related sites, it will continue to gain traction and grab market share from these major players. In addition to its own service, the team at coil is also busy supporting each of the components that drives its own product. This includes creating code proposals for both ILP and the XRP Validator software, and we've seen the team recently release the Rafiki ILP connector (beta). This work is necessary for the support of other participants in web monetization that may integrate with Coil in the near future, such as streaming payments for the music industry (RISE), or for markets in gaming (Forte).The vision behind Coil web monetization is profound, far-reaching, and ambitious.In addition, the Coil team is currently focused on the use of XRP as the base-layer digital asset for much of its tool-set. Coil currently reimburses in XRP. The Codius smart contract platform supports XRP out-of-the-box. And ILP is configured to be agnostic - open to any currency; however, Kava and other companies have so far included XRP among their list of currencies available for streaming support.In a recent interview, I asked Bob Way, a Ripple alumnus, which XRP ecosystem component that he though would be 'first in line' to significantly impact utility-driven demand for XRP. Bob Way is correct; and I believe we might even see the effects of Coil adoption at scales much greater than their current levels later this year; it's difficult to keep a secret in the new field of streaming micropayments and web monetization. Artists and other creatives want to be paid fairly for their work, and Coil seems to be edging closer to something truly spectacular. It's for these reasons that I recommend following Coil & its team members. Here is a small subset of accounts; but I'm sure there are many others that should be on the list as well:Coil on Twitter: @Coil Coil's Website: coil.com Stephan Thomas (Coil Founder & CEO): @justmoon Ben Sharafian (Coil Co-Founder & CTO): @sharafian_ Ethan MacBrough (Coil Lead Scientist): @emacbrough Adrian Hope-Bailie (Coil Head of ILP): @ahopebailieIf you're a developer or webmaster and you'd like to learn more about all sorts of amazing ways to customize your website and publish content to specifically reward your Coil customers, you should really have a look at all of the scripts that Coil has made available on their Github repository, and take a look at Ben Sharafian's Twitter account.In addition, Coil has in-depth content and articles posted online in its help center for those looking to 'dig' into Coil content monetization:Most XRP fans are very interested in xRapid progress.xRapid is Ripple's liquidity-sourcing tool for banks, financial institutions, and remittance processors, which allows them to reduce their dependence on maintenance of foreign nostro accounts and banking relationships.xRapid allows remittance processors to utilize the liquidity of the XRP market for settling fiat-to-fiat transfers, with an exchange to a digital asset that can then be transformed into a myriad of other currencies; this market is projected to be massive.The community, as a result, has been tracking adoption numbers and volumes on exchanges, which has started out with a number of remittance processors and banks, including that of Mercury FX. Mercury FX is a UK-based remittance processor that also has offices in South Africa and Hong Kong. The company is expanding, and processes approximately $1.8 billion dollars globally. Mercury FX's CEO, Alastair Constance, was quoted in an article on March 20th, saying: 4“We are steaming ahead, to be honest, and we are looking for more jurisdictions and more flow to the jurisdictions we’ve already opened up. We are working very closely with (Mexico and the Philippines) on opening up new channels. We are very keen to move very fast but it’s difficult when you’re building a new network ... We are actively working with Ripple to market to expatriate Filipino and Mexican communities, but also to companies doing business in those channels.”"Once the pipe is open, there is no limit to how much one can put through it. We are actively marketing with Ripple, to try to invite those kinds of clients and, I think, with increasing success. It could be that we have serious amounts of luck and we end up doing hundreds of thousands, millions, tens of millions of dollars."The incredible part about his comment is that it reflects the progress that one remittance processor has accomplished using the ultra-low-cost xRapid liquidity sourcing channels.There are other remittance processors, and banks and credit unions, that Ripple is working with as well, and if Mercury FX is any indication, xRapid is on its way to accomplishing something monumental as it gains traction in payment settlement.The DC Blockchain Summit is a blockchain technology conference that just had its fourth annual meeting in Washington DC. Its focus is much more centered around public policy than other blockchain technology conferences; when I looked through the collection of attendees, events, speakers, and interviews, it is very apparent that the organizers are focused on the "levers and fulcrums" of public policy decision-making.For example, on its home page, instead of displaying icons of crypto or fintech, the conference displays the photos and short introductions to three US Representatives, all of whom are members of the "Congressional Blockchain Caucus," a group formally established in 2017 to bring clarity and focus to blockchain technology and its public policy implications. 5The conference is co-sponsored by Georgetown University, and the site communicated its emphasis on public policy:"DC Blockchain Summit 2019 will feature discussions with innovators and technologists from around the globe, including in-depth conversations with policymakers and regulators on the issues impacting the growing blockchain landscape."Ripple was there, in addition to many other prominent leaders in fintech, all eager to interact with the legislative leaders who have shown their willingness to provide direction in these new, challenging areas of technological innovation. Brad Garlinghouse, the CEO of Ripple, was interviewed by Jill Malandrino, a Global Markets Reporter for the Trading & Market Services branch of Nasdaq:About seven minutes into the conversation, Jill Malandrino asked Brad Garlinghouse a question aimed at the differences in regulation and adoption between the United States and other nations:Question (Jill Malandrino): "It seems to be, everywhere ex-US, and more developed nations, Western Europe; they are adopting cryptocurrency technology, blockchain technology, quicker than we are. Is that a scalability and regulatory issue? Is it, like I'd mentioned before, we have these legacy systems in place, and they don't have to worry about the old infrastructure?There's roadblocks here in the US, and what do we need to overcome that?"Answer (Brad Garlinghouse): "I'll introduce that question by first telling that I grew up in Kansas; I go see my mom, and my mom will ask me, 'why don't ... you don't have that many (US) customers,' relatively speaking. We've announced two hundred customers, and as a percentage, a very small percentage of those are US-based banks. So people ask me 'why is that?' There are a handful of reasons; we'll talk about regulatory in a moment ... "He then made an interesting point about the internal decision-making dynamics of Western banking leadership, indicating that larger Western banks, because their exposure to cross-border transactions are smaller, may not be as motivated to make significant changes to their technology stack. On the other hand, banks that do have a significant percentage of their payments crossing borders are much more willing to look at - and adopt - technology that enables them to significantly lower their cost. "Some countries clearly have provided more regulatory certainty - clear rules of the road. I heard it described backstage right before I got on, that we've been asked, as an industry, 'not to speed,' but we weren't given a speed limit. So it's really important, I think, that governments globally provide frameworks and ... it would be nice if they were all the same ... but they don't have to be all the same; it's just that the companies investing and building capabilities need to understand 'what are the rules of the road' so that we can hire and invest and understand ... when we go live with a bank in Singapore, or Thailand, or the Philippines, what they need to know to go live. ... in contrast to what we saw happen in the Internet space in the late nineties; the US provided clarity. A lot of it was 'hands-off clarity,' but there was clarity. And we don't really have as much of that yet with the US government."The comparison with the US government's response to the innovations connected to the Internet in the late nineties was fitting, and provides an accurate criticism for the lack of clarity that we've seen with policy towards cryptocurrency and blockchain technology. The uncertainty that many large businesses face when investigating the regulatory guidance for digital currencies is one risk factor that may absolutely impact the timing, schedule, and resources devoted to those projects.The remainder of the interview included topics that were frequent favorites of Brad Garlinghouse, such as scalability, interoperability, and the focus of Ripple on specific payment use cases; the level of Q&A was geared for a comfortable amount of technological sophistication that would be expected from decision makers in both corporate and legislative positions of leadership, which made many of the topics accessible for a wider audience.Most of the crypto universe knows that "Joel Katz" is the social media avatar on various platforms that represents David Schwartz, Ripple's Chief Technology Officer, and former Chief Cryptographer.In addition to his normal role as Ripple's CTO, he also takes the time to author pieces about blockchain technology and fintech, generally, in addition to several other challenging topics. His blog, Distributed Agreement, includes two recent inter-related posts he's written on the topic of blockchain, and each of them provides his perspective on topics that have become an interesting battleground for those in the crypto space: the very definition of a blockchain, and then in his latest follow-up, what these blockchains are 'good for:'"The primary advantage of a blockchain design over previous designs is that a blockchain design naturally allows every participant who wishes to do so to ensure that every system state change complies with every system rule. This is both a security and a design advantage.It is very difficult and expensive to provide this kind of security in a non-blockchain system. If one tried to put this capability into a non-blockchain system, one would essentially be turning it into a blockchain. It is this property that gives blockchains one of their most important characteristics — the absence of any central data store that needs to be defended."In these two paragraphs, David Schwartz puts into words what many crypto fans have long understood from a purely intuitive, right-brain standpoint; that the requirement of trust in a central party is greatly diminished by using a blockchain.He also explores the burgeoning field of 'private blockchains,' and rather than paint the entire category with dangerous generalizations like other analysts, he takes the topic in stride, and provides valuable context for when these networks provide value:"Consider, for example, the tracking of pharmaceutical products ... This can be solved with blockchain. Each manufacturer can stand up a private blockchain node ... This system will run reliably so long as some subset of the manufacturers keep their nodes operating. Manufacturers are not trusting third parties with access to their distribution and sales networks. The public, but encrypted, data allows any recipient to confirm at any time that they are the only recipient of a particular item placed into the system by its manufacturer. This is a great example of a problem that is a perfect fit for today’s blockchain technology that has nothing to do with cryptocurrencies. It is a real-world use case for a permissioned blockchain."He continues, discussing the difficulty with using a blockchain solution for various use cases, and then teases some of his future topics at the end; I enjoyed reading both the first and current entries, and it seems to capture David Schwartz's own stream-of-thought realizations about the new industry, combined with crisp, real-world experience and examples.I highly recommend his blog for any student of XRP, cryptocurrency, or blockchain technology in general.How many times have you had the inkling to share an idea for XRP use?For me, it's a constant issue; I'm driving along on the road, with no way to record my thoughts or share them, and suddenly an idea will 'hit' me out of the blue about an innovative use of digital assets. But by the time I reach my destination or move on with my day, the idea has faded or been forgotten. Wouldn't it be nice if there was a place where we could document our ideas collectively and discuss them, and if they were worthy, fund a developer (or two) to work on them?To me, it's no surprise that Wietse Wind created the idea for a central messaging board to share development ideas - he has a knack for identifying the technological solution to everyday needs that even future users may not have anticipated. If there was a developer "most likely to create the next viral app," it would probably be him.The suggestion board was immediately overwhelmed with suggestions, so the people involved (which includes Wietse) placed this admonition on the XRP Community Fund Home Page:"The XRP Community Fund will be used to support the development of tools / apps / integrations / plugins that make it easier to use XRP for (consumer/small business) payments. We also hope to attract more developers to the community. Bounties will be available for developers working on tools requested over a longer period of time by the XRP Community. Ideas will be carefully selected. They need to be doable within a decent amount of time, target a great audience, and ideally have a decent amount of votes (not the highest per se)."However, this doesn't open the door as a free-for-all funding mechanism. Ideas that involve other uses for tipping will not be considered, and neither will any ideas that pertain to gambling in any form. While these standards may not be popular, it's important to keep a narrow focus if the bounties are to have a widespread impact.Essentially, the suggestion board is there to accept suggestions that involve extending the reach of XRP for use in payment processing - for retail or otherwise.Some Ideas Will Not Be Considered In a follow-up, Wietse emphasized one point in particular about the suggestions that should be submitted by users, commenting that they should be concepts ..."... that make it easier to use XRP for (consumer/small business) payments"It's this key point that will be the deciding factor in whittling down the suggestions into viable bounties and ones that are not.As an example of what can be accomplished with the fund, it was decided to initially fund the bounty for the creation of a WooCommerce plugin for XRP, which was constructed within days of the posting:Crytpo news outlets talked about the new plugin in widespread coverage following its completion. 6 7It goes to show us what a simple idea can do to help XRP adoption, and what a funded bounty can accomplish for our community.If you have a suggestion, or would like to contribute some amount of your zerps to the community fund, here is the link to both of those pages:One of the most popular IP phone applications is Skype.Their customer base is estimated to be somewhere in the range of one-tenth of the worlds entire population. Yes, you read that correctly. Some estimates have put the user base of Skype in the neighborhood of between 600 and 800 million people. 8Because of this towering customer reach, a recent suggestion by an XRP community member captured the imagination of many on Twitter:Not only did David share his idea on Twitter, but he submitted a proposal to Skype about the idea on March 20th, saying:"Dear Skype, The age of micropayments has come and we need your support. The era of Internet of Value is knocking at the door. My idea is to implement micropayments in Skype. Allow us to buy SkypeCredits with XRPTipBot, allow us to send micro payments on Skype chat as well."He continued on, providing a great post with supporting links and data for those at Skype to review, including many amazing facts about Wietse Wind's XRP Tip Bot.Skype responded, providing this feedback the next day:"Hi. Thanks for sharing this Idea! Cryptocurrency micropayments sounds really cool right. Like any other leading technology company Microsoft is already testing blockchain.Although I don’t have any information about cryptocurrency adoption for Skype or any other MS product, please keep continue supporting this Idea. I will share it with our teams.Note: I’ve edited the title of this Idea little bit so it fits to cryptocurrencies generally."Skype seems to at least understand the importance of customer feedback and interaction; whether or not this idea will gain traction and result in the integration of micropayment tipping or payments, generally, has yet to be seen, but as a reference point, there have been some mobile-based applications that have chosen to enable crypto payments, such as the LINE messenger app. 9If Skype enters the micropayment and tipping space, it would undoubtedly have a major impact, just from the numbers comprising its user base.XRP swag is great for breaking the ice with others; and there have been few online shops as effective at creative marketing as the @CrypToe_Man (Twitter avatar). He specializes in cryptocurrency-related socks, but has a wide variety of merchandise and clothing as well. His latest marketing efforts were hilarious:The video was a comedic spoof on some of the well-known 'real' communications from each of the named individuals, and garnered much positive feedback from the community.Another online shop that advertised new XRP swag was @INotoriousxrp (Twitter avatar), who offers a line of clothing through the teespring online marketplace.Here are the links to both of these online shops if you're interested in purchasing some new XRP clothes:The past week was packed with exchanges and businesses adding support for XRP. Here is a subset of the amazing pace of activity:Digitec-Galaxus: Known colloquially as the "Amazon of Switzerland," the online market now accepts XRP as a means of payment. 10Coinberry: Coinberry, a Canadian-based crypto exchange platform and mobile app, has now added XRP support. 11Bitbuy: Bitbuy, a Canadian crypto exchange based in Toronto, has added support for buying and selling XRP against the Canadian dollar (CAD). 12Rain: Rain, a crypto exchange based in Bahrain, announced their support of XRP trading on March 20th. They indicated their exchange is in private beta when questioned by @LeoHadjiloizouZipmex: Zipmex, a Singapore-based crypto exchange and trading platform, recently announced its support for XRP.Thanks to @LeoHadjiloizou (Twitter avatar) for providing his consistent tracking and updates on additions to the XRP ecosystem of exchanges and businesses.Some may not know this, but in addition to his timely tweets about XRP adoption by exchanges and businesses, Leonidas also maintains a site where this content is organized in a fun - and intuitive - fashion.The site is known as XRP Arcade, and it contains specific areas where you can look through exchange listings, businesses, Ripple customers (sorted into categories), exchange wallets, and recent news items.Many innovations that have become accepted as part of our daily life started out with modest origins, and even struggled to find their user base when they first appeared.In some cases, the underlying technology itself was not equipped to support what eventually became an unstoppable wave of adoption, as in the case of IP phones. There was a time less than twenty years ago when most of the conversations over telephones involved landline-based systems, colloquially known as 'plain old telephone service.' The first IP phones were built on fresh technology and protocols whose back-end systems had recently been developed and released; but their business model was solid, and relied on reduction of costs to a price point far below that of landline-based services.The initial release of Skype, a VOIP service provider, website, and application, was in 2003.It was a small, compact team that released the software, and they were based in Sweden and Denmark, with some of the software components having been created by a team in Estonia.The service quickly found users who were looking for a lower-cost way to make phone calls over the Internet, and very soon, what was a small idea blossomed into a behemoth whose services were in high-demand. Now its user base can be measured as a significant percentage of the entire population of the Earth.Could this eventually happen to web content that is a part of the Coil ecosystem? If musicians, artists and authors find a much better reimbursement model for being rewarded, and lead the way with their own creative content, there might be an extraordinary impact for the entire world.Currently, creative content is channeled through a small handful of FAANG-related companies, but if enough consumers start voting for change by paying a small monthly fee - less than that of Netflix - it could start a vast landslide of adoption for both Coil and its preferred mode of reimbursement; that of XRP, the digital asset.It's something to contemplate for those of us that own XRP.What we personally support - whether as part of the creative community of individuals that want to give Coil monetization a try, or as consumers - makes a difference. There is much we can do personally to invigorate the adoption of XRP, and it looks like Coil may be an unexpected door to mainstream use of the fastest, most scalable digital asset for payments. Sources and Credits:I blog about Ripple & XRP. FULL DISCLOSURE: All views are my own. I do not work for Ripple; I am not a professional financial analyst, and the majority of my crypto holdings are XRP.Who doesn't want to make money? The meme "I'm into crypto for the technology!" has become a metaphor of the way in which a new technology can be championed - orStay up to date! Get all the latest & greatest posts delivered straight to your inbox
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cryptography uses a binary key, in which the two parts are linked and both are required to decrypt and encrypt. By splitting the key into two linked parts, one part can be kept secret, while the …
cryptography uses a binary key, in which the two parts are linked and both are required to decrypt and encrypt. By splitting the key into two linked parts, one part can be kept secret, while the other is made public (the parts are typically linked mathematically—e.g., prime factorization or calculating the discrete logarithm—but any suitable mechanism could be used). The private key should not be easily deducible from the public key, yet the public key should be easily deducible from the private key (using so-called mathematical trap-door functions). A trap-door function such as exponentiation modulo is based on the mathematical belief that it is easy to calculate the remainder when a number is raised to some power, divided by another (the modulus), yet, if given all the information other than the exponent, it is very difficult to solve for the exponent (i.e., it is slow to compute the discrete logarithm). Only when the secret key is possessed is it easy to open the trap door, otherwise the calculation is slow (but certainly tractable). Asymmetric-key setups offer several interesting possibilities. The key used to encrypt a message is not the same key used to decrypt it, so I may encrypt a message with your public key, in which only you can decrypt (using your linked private key). Configured this way, I can send you a message that only you can read (akin to placing a piece of mail in a publicly-accessible but locked mailbox), and you can do the same for me by using my public key, ensuring confidentiality.xvii Similarly, if I encrypt a message with my private key and send you both my (cleartext) message and the encrypted message (or a “digest” of it), your ability to decrypt the encrypted message with my public key ensures that the message is authentic (non-repudiated, i.e., guaranteed to be mine). These features work to permit secret message communication without ever requiring a secret communication channel, or to ensure that a message has not been changed. In a world where the communication channel is necessarily open to eavesdropping, asymmetrical-key cryptography performs a kind of magic trick: secret messages over public channels without ever requiring the prior transmission of secret information. A related application of asymmetric-key cryptography is the hash function. A hash function is a set of permutations that transform some data into a fixed-sized output (a digest), which changes considerably given even a slightly different input datum. When a hash function uses cryptographic mechanisms to create the digest it can be used to ensure the message is not repudiated (its integrity can be verified), which is especially useful for creating compact, easily transmittable “fingerprints” of data. Similarly, by computing a hash for a password, the hash may be stored in place of the secret password, and authenticated against the digest representation instead of the actual password (allowing the digest to be captured by an adversary without losing secrecy). The hash algorithm used in Bitcoin is SHA-256, a protocol for hashing in the Secure Hash Algorithm 2 family that outputs 256 bit digests. SHA-256 is composed of a simple set of logic transformations configured to perform the necessary mathematical trap-door function required by the asymmetric-key cryptography. Thus, described in as many of levels of abstraction as I can muster, from the basics of digital computation to a full ASCII-encoded hash digest, the SHA-256 hash algorithm operates as follows. Electromagnetic flux is discretized on a clock-cycle. Bits are then transformed using logical operations performed by transistors. The binary representation is collected into 64 bit “words” that function as high-level data structures (integers). Mathematical trap-door/one-way functions are constructed from the set of transformations (+, and, or, xor, shr, rot), with the entire algorithmic structure corresponding to the Merkle–Damgård padding and compression scheme (Figure 6). The resulting 256-bit hash digest may then be encoded into an ASCII-encoded character string for portability and human-readability. In sum, SHA-256 is the process of successively interpreting electric-magnetic flux as a series of different ordering mechanisms or techniques. The primary ordering is the first: from flux to binary, and once this discretization is accepted as real (by fiat) the ordering techniques are limited only by human imagination. The fundamental cryptographic algorithm used in Bitcoin is SHA-256, however, its conceptual utility draws on a recent history of academic and practical developments. Of the numerous developments, the most significant and relevant are: Ralph Merkle’s hash-trees (patent filed in 1979), David Chaum’s blind signatures (1982), Adam Back’s hashcash proof of work system (1997), Wei Dai’s b-money scheme (1998), Nick Szabo’s bit gold concept (1999), and Hal Finney’s reusable proofs of work (2004). In addition to having a hand in the invention of public key cryptography, Ralph Merkle developed a system for efficiently verifying large data structures through a tree structure of hash digests (Merkle, 1982). As described above, a hash digest can be used to verify the non-reputability of a datum, but for large data structures it would be extremely time-consuming to perform a hash function on every datum. Merkle realized that by organizing hash digests into a tree structure (where each node is a hash digest) it is possible to compute the hash digest for only the top-most node (while authenticating the left and right nodes) rather than every node, to ensure non-reputability. Hash trees are commonly used to ensure data integrity, but when used with cryptographic hash functions every prior message is checked for authenticity (none of the messages can be faked). Blind signatures are another result of public key cryptography being used in unexpected ways. In Chaum’s original concept for blinded signatures, payment systems with the anonymity of cash but the security of digital money (like Bitcoin) were the intended target (Chaum, 1982). By using public key cryptography Chaum proposed a system that ensured 1) the inability of third parties to determine information about the payee, 2) the ability of individuals to provide proof of payment, and 3) the ability to stop payments when needed (in cases of theft). Chaum envisioned a digital equivalent of paper envelopes lined with carbon paper. By writing a signature on the outside of the envelope a second “blind” signature is duplicated on the inside. In Chaum’s example of authenticated secret voting, the blinded signature is sent to the elector, removed from the envelope, signed by the elector, and mailed back to the voter in a new envelope (thus only the elector views the signature). If a voting dispute arises the signatures can be authenticated against the signatures on the envelopes, but each vote remains anonymous. While the mutability of binary digits is useful for much computing, a system of electronic cash requires the opposite quality: money needs to be made solid, slow, and non-(token)replicable. Originally proposed and developed by Adam Back (1997) for limiting email spam, hashcash uses two facts of public key cryptography: non-reputability of hash digests, and the computational difficulty of finding a hash “collision.” Due to the fact that it is nearly impossible to predict the outcome of a hash function on an arbitrary input (with current knowledge of the mathematical underpinnings of asymmetric-key cryptography used in hash functions), but easy to verify the results, a challenge-response mechanism can be created to require “work” (computational effort). By arbitrarily requiring a specified output of a hash function—such as that the first 20 or more bits of the hash digest must be zeros—the sender can establish a “difficulty” threshold. The only way to find a hash digest with a specified output is to compute the hash of a different input value over and over until the result meets the necessary difficulty, and since the result can be verified easily the receiver of the hash function does not need to repeat the computational work to verify that the sender expended a set amount of work. For its original purpose of limiting email spam, the requirement to perform work when sending email would make sending email slow and computationally expensive, thus, sending a single email would result in a modest slow-down, but sending millions would become nearly impossible (or at least would require many expensive computers). In such an email system any email that was sent without corresponding evidence of computational work would not pass verification by the receiver (which is a quick calculation, in comparison to performing the original hash calculation), and would be discarded as spam. As part of the discussion of applications to Back’s hashcash proposal on the Cypherpunks mailing list, Wei Dai proposed a system of currency generation using Back’s mechanism (Dai, 1998).xviii Dai applies Back’s hashcash mechanism in an effort to create a world where cryptography functions as the “medium of exchange,” and as a way to “enforce contracts” without the intervention of a government (Dai, 1998). Dai’s protocol for the creation of bmoney requires a specified amount of computational work (that anyone can perform), which is then verified by the community who update a collective ledger book, awarding the worker the specified funds. In the bmoney proposal, exchange of funds is accomplished by collective bookkeeping (authenticated with cryptographic hashes), and contracts are enforced through the broadcast and signing of transactions with digital signatures (i.e., public key cryptography). Hal Finney (2004) extended the bmoney and hashcash proposals by suggesting a formalization of the proof of work mechanism, a scheme that permits the reuse and exchange of proof of work tokens (hash digests). With these extensions it became possible for Nick Szabo (Szabo, 2008, 1997) to conceive a system that accurately calculates the “difficulty” of proof of work for the purpose of money generation, and to allow the generated money (hash digests) to be exchanged and reused. When the pseudonymous programmer Satoshi Nakamoto proposed Bitcoin in 2008 it built on the crypto-anarchist developments from the following two decades (Nakamoto, 2008). In terms of invention, Bitcoin introduced a modest change to the bmoney, bit money (and other) proposals already in existence. Rather than require a single collective ledger of transactions, or awkwardly share the ledger among parties, Nakamoto suggested that a “blockchain” contain all transactions (including generated money by “miners” performing cryptographic proofs of work, described in more detail below). The blockchain is a Merkle hash tree of transactions. For each transaction the mining servers verify the hash digests that result from transactions, incentivised to perform computational work by being awarded money for successfully performing proofs of work. The transactions are verified by the miners and grouped into “blocks”; once the top node of each block is verified a specified amount of work is required to seal the block and win the resulting money. A full round of a transaction requires several steps. Money is stored in a wallet, which is a unique hash digest generated by each user (and any number of wallets are possible). To send you money I first digitally sign the transaction request with my private key (that is, I perform asymmetric-key encryption on the transaction request data). Using my public key, the network can verify my transaction request. The transaction request is sent (via peer-to-peer communication protocols) to the network and then bundled with others into blocks every ten minutes. Each block includes a hash digest of the previous blocks (arranged in a hash tree), a hash digest of the current block, and a “nonce”. A nonce is added input that (when hashed) results in a radically different output. Only when an output value meets a certainly “difficulty” (proof of work) will a block be considered authenticated (the difficulty is specified by requiring at least n leading zeros in the hash digest output, set by the protocol to regulate the speed of block generation). As each subsequent block is verified the previous blocks fall further down the hash-tree, with the newer hashes contingent on the previous hash digests’ value. In this way any fraudulent changes to the blockchain are instantly discovered (and rejected). It is improbable to create fraudulent transactions because as time goes on, and block upon block is verified by the miners, fraudulent transactions would require changing every subsequent block, at a rate greater than the (legitimate) network of miners. A fraudulent block would only be accepted if the alternative blockchain is longer, which would require performing more proofs of work than the legitimate network.xix In many ways the Bitcoin miner is at the heart of Bitcoin cryptography, since it creates money and verifies transactions. Starting in 2013, I engaged in the practical operation of a Bitcoin miner. What follows is a description of this Bitcoin praxis as I learned the details of the protocol. As described above, the Bitcoin algorithm uses the SHA-256 method of computing hash digests. While any computing mechanism could in theory calculate a SHA-256 hash, there are certain reasons why conventional Central Processing Unit (CPU) mining is now rarely used. With even the fastest modern CPUs running software designed to take advantage of multithreaded computation the number of hashes computed per second is low compared to other technologies, and because the ability to “win” the awarded money for a successfully verified block is in competition with other miners, an arms race is always at hand. CPUs are usually designed to manage and switch computational tasks, and take care of a variety of sub-processes, which makes a CPU ideal for general computing but inefficient for performing the same type of simple calculation repeatedly. Commercially available Graphics Processing Units (GPUs) are designed to be relatively free from the management of resources and thus (when appropriately programmed using low-level software) are able to perform repeated calculations much faster than CPUs. Additionally, GPUs are designed to work in parallel, so while a multi-core, multithreaded CPU may be able to perform a certain amount of work in parallel, a modern GPU can perform thousands of computations in parallel. Some GPUs are ideally suited to perform SHA-256 calculations because they have been designed to perform XOR logic in a single step, rather than the two steps (or cycles) needed for other devices (the SHA-256 algorithm relies extensively on XOR transformations). For real-world comparison, on a slightly aging (2008) Mac Pro computer I was able to perform roughly 30 Kh/s (kilo hashes per second, or thousands of hashes per second) using the CPU (a server-grade 3GHz quad core Intel Xeon processor). When I installed a modern mid-level gaming video card (AMD Radeon HD 5850) with a dedicated GPU the same machine was able to perform roughly 350 Mh/s (millions of hashes per second), using only the GPU for calculating the hashes. While 350 Mh/s may seem like considerable computational power—and it is, especially for the corollary purpose of password cracking—newer technologies have all but obsoleted GPU Bitcoin mining. For the last several years more dedicated Bitcoin mining individuals have purchased Field Programmable Gate Array (FPGA) devices that are tailored to perform these sorts of computational tasks, doing so much more quickly and with less power consumption. By the end of 2012 the newest type of Bitcoin mining device entered the commercial market, eclipsing even FPGA devices in terms of speed and power efficiency. These Application-Specific Integrated Circuit (ASIC) devices are custom-designed for Bitcoin mining and thus do so with remarkable speed and power efficiency. As of 2013 there are commercially available Bitcoin miners available for $150 USD that perform 5 Gh/s (billions of hashes per second) and use only 30 watts of power (compared to an average video card’s consumption of 100-150 watts), with more expensive versions performing hundreds or even thousands of Gh/s. Efficient Bitcoin mining is only possible using specially built software, tailored to take advantage of built-in hardware capabilities. On GPUs the programming language used to write the portion of software that performs the hash calculations is typically Compute Unified Device Architecture (CUDA) or Open Compute Language (OpenCL), whereas the high-level software that controls the input/output, networking, and display of graphical user interfaces can be written in any suitable programming language. Contemporary cryptography algorithms are highly repetitive, requiring round after round of simple logic transformations, just like digital signal processing, big data and science computing, and gaming (computing millions of polygons). For this reason, cryptography shares many of the technological advances with these computing fields. As demonstrated above, a more expansive view of cryptography suggests that cryptography can be used for more than just secrecy; it can be fruitfully understood as a notational system. When this notational system is operationalized it orders its symbolic input according to particular logics. When these ordered symbols represent the world, as in the case of economic transactions, a politics of ordering is present. That the economy is a “slave to the algorithm” (Slater, 2013) is not due to Bitcoin; dominant capital is now almost exclusively run through digital trading software (acknowledged as “high-frequency trading”), and much of the developed world’s “cash” passes digitally direct from bank to merchant (to bank) through debit or credit machines at point-of-sale terminals. Cash money already seems quaint: the stuff of slightly unscrupulous transactions (a manual trade exchanged for tax-free cash payment), or downright illegal transactions (purchasing drugs). The politics of this “new” economy can be read in light of Gilles Deleuze’s short “Postscript on the societies of control” (1992). Deleuze summarizes Foucault’s (1979) periodization of history by reflecting on the “transience of the model,” noting that the sovereign society was replaced by a disciplinary one—a transition occurring roughly at the dawn of the eighteenth century. According to Deleuze, the next shift occurs at the outset of the twentieth century, towards a control society (Deleuze, 1992). Deleuze charges his readers not to “fear or hope [for]” these mechanisms but instead to “look for new weapons” (Deleuze, 1992, p. 4). I argue that cryptography is one such new weapon in the control society: controlling economics through the ordering application of Bitcoin. Deleuze argues that the control society is characterized by modulation, rather than the “molds, distinct castings” of the prior disciplinary society (Deleuze, 1992). In the English translation “modulation” evokes the Latin modus, meaning measurement, accomplished by numbers (“numerical”). Similarly, each society is characterized by a kind of language: the disciplinary society is analogical and the control society is numerical. Yet, Foucault spends considerable effort in Order of Things (2002) showing how measurement and number are still foundational to the logic of the classical era, summed up in the term “order.” While it is commonly believed that cryptography is mathematical (mathematicians, after all, are the gatekeepers of contemporary cryptography), above I showed how mathematics is but one of many ways to enact a deeper ordering. The notational system—discrete marks capable of being rearranged—is, I argue, the heart of cryptography. Numeracy is an after-effect of the deeper logic that Leibniz, Turing, and others recognized—and proven daily by capable software developers with almost no mathematical skill. So long as you can represent objects within a notational system, the world can be ordered with no mathematics at all. Yet, Deleuze thinks that the mechanism of the control society is modulation or measurement, and Kittler too thinks that by counting the Greek alphabet we arrive at all the mathematical truths of the world (Winthrop-Young, 2011). It is exactly the infinite variability of measurement that cannot be ordered, since there is always a more precise measurement possible (Goodman’s formalization explicitly rules out continuous measurement). Kittler’s gramophone records the smooth contours of a voice perfectly, but the result is not susceptible to decomposition, and therefore cannot be ordered. It is only by ignoring the measurements (continuous waves) that ordering technologies are able to function. When we discretize the voice we perform violence, and we lose the knowledge of what king Akhneten called his N-f-r-t-t. For Bitcoin, the smooth transfer of cash (previously “filthy lucre”) from hand-to-hand is replaced with an algorithmic logic. In our society, the largely invisible but very powerful effects of control often result from ordering technologies. Algorithmic technologies are able to sort, move, and re-arrange entire populations in ways that mimetic technologies are unable to accomplish. The Hollerith tabulator, an early proto-computer, was effective in aiding the Nazi extermination of Jews (Luebeke and Milton, 1994) because it could collect, process, and order entire populations in ways that mimetic technologies such as radio or television were incapable of. Cryptography now functions infrastructurally, and sits invisibly behind most of the world’s communications (machinic “data” transmissions such as encrypted Netflix TV streams or Trusted Computing modules, but also human correspondences such as email communications). As Bitcoin and other electronic crypto-cash systems become prevalent, cryptographic ordering will become more entrenched in the economic realm (it already functions invisibly at electronic point-of-sale machines, automated bank tellers, financial trading, and so on). For Bitcoin, the specific ordering is the logic of SHA-256 described above: discrete symbols arranged through a collection of logical transformations, built block by block of irreversible containers with strong identity parameters (necessarily discrete and disjoint). The hash digests are then organized into a tree structure. Finally, the hash tree is sent through peer-to-peer networks, succumbing to a logic of collusion and virality. Cryptography is “code,” and code is cryptography. Code is powerful because it represents, that is, it both “re-presents” or makes something present again, and “stands for” or “substitutes” (Prendergast, 2000). Code worries us for the reasons that Rousseau rallied against political representation, fearing a dictatorial relationship where we permit others to “stand in” for us (2003). Similarly, Heidegger calls representation the master category of modern thought because it forces the division of subject and object (Heidegger, 2002; Prendergast, 2000). More concretely, our cryptographic technologies are at once Privacy Enhancing Technologies and also weapons in the commonplace cyberwars amongst developed nations. Even prosaic questions become ambiguous. Does Google increase my privacy by encrypting my Gmail communications, now open to only the machinic display of advertising? Am I better off by having a cryptographically secure boot sequence for my computer (and thus preventing the installation of “competitor” operating systems, like Linux)? Is it a “feature” that Bitcoin transactions are cryptographically irreversible? In this new control society there is no second-guessing your economic decisions, and no need to involve messy legal and political authorities, since code has become law in frighteningly efficient ways (Lessig, 2006[Editor’s note, see http://www.iqdupont.com/ and H/T Žarko Almuli] It was April 10th, 2013 and the price of a single Bitcoin surged past 250 USD on the Mt. Gox exchange. A few months prior I had purchased seven Bitcoins for just under $200, and now they were nearing $2000 in value (Figure 1). But, just as fast as the market went up, it came down. Ever the amateur gambler, I panicked and sold too early. But, I was lulled by my humming money machine, permuting cryptographic codes by the millions every second. I was not the only one interested in playing the Bitcoin market, and the increasing price of Bitcoin was due to a number of factors, including a sustained distributed denial-of-service attack on Mt. Gox, and other people like me gambling in the latest crypto-anarchist adventure. It was April 10th, 2013 and the price of a single Bitcoin surged past 250 USD on the Mt. Gox exchange. A few months prior I had purchased seven Bitcoins for just under $200, and now they were nearing $2000 in value (Figure 1). But, just as fast as the market went up, it came down. Ever the amateur gambler, I panicked and sold too early. But, I was lulled by my humming money machine, permuting cryptographic codes by the millions every second. I was not the only one interested in playing the Bitcoin market, and the increasing price of Bitcoin was due to a number of factors, including a sustained distributed denial-of-service attack on Mt. Gox, and other people like me gambling in the latest crypto-anarchist adventure. Like many other modern currencies, Bitcoin is fiat money. But, unlike traditional fiat money, Bitcoin is cryptographic and electronic. There is no “physical” substrate to Bitcoin; the “coins” exist only as cryptographic representations stored in digital wallets. In the simplest caricature of complex economics, fiat money has no intrinsic value and thus requires people to trust that it will retain value. Usually government backing provides this semblance of trust, but when this trust is eroded (e.g., a weak government), value often plummets. Technical flaws also cripple the trust that sustains fiat money, such as rampant fraud, counterfeiting, or hyperinflation. Trust in Bitcoin rests on a range of technical advantages supplied by cryptography. According to advocates, cryptography is secure (safe from technical or mathematical error).iii When applied to economic apparatuses, counterfeiting and double-spending is prevented through the use of public key cryptography, and hyperinflation is kept in check because the cryptographically-secure mining protocol ensures the measured production of money (with a maximum number of coins produced). Yet, as with general discussions of cryptography, complicated political issues often transform into a binary of state versus personal power. On the one hand, when cryptography is used for Privacy Enhancing Technologies it is seen as a block against government snooping. On the other hand, these same cryptographic technologies are often used against the people. This debate is particularly important for crypto/cyber-libertarians,iv who often believe that Bitcoin’s lack of government backing is a virtue (J.M.P., 2013). Described generally, cryptography is typically understood as a means to ensure “information security” or “information secrecy” (see e.g. Kohno et al., 2010). Here, security and secrecy are understood in terms of social relations (c.f. Bellman, 1979). Modelled in its simplest formulation, a secret is some information that I possess and you do not, while information security might be described more abstractly as control of information within a relationship. Or, the encyclopaedic definition: “the aim [of cryptography] is secrecy and confidentiality: the practice of keeping secrets, maintaining privacy, or concealing valuables” (Bauer, 2005). Though the conceptual analysis usually stops here, cryptography also functions more deeply, in ways rarely appreciated by those developing the technology. Understanding how cryptography functions at this deeper level is essential to understanding how Bitcoin functions. I argue that cryptography is central to Bitcoin and yet produces a set of non-secret powers for its social (and economic) effect. This paper suggests that cryptography can be reimagined and reconceptualised, putting forth an alternative to the dominant view that cryptography is secrecy. The long history of cryptography is abbreviated to show that cryptography previously functioned in many different ways, but has been systematically black-boxed. By opening up this black box and reconceptualizing cryptography I argue that we can attend to the history of cryptography yet retain analytical rigour by viewing cryptography as a discrete notational system. Then, returning to Bitcoin, I describe the specific cryptographic mechanisms as used in Bitcoin. Building on this foundation I offer a description of a full Bitcoin transaction. My method for understanding this technical foundation was to engage in praxis, and so, returning to my introductory story about my own experiences with Bitcoin I describe the lessons I learned by running a Bitcoin mining machine. Finally, I take up Gilles Deleuze’s suggestion to “look for new weapons” in our control society. By drawing on my reconceptualization of cryptography as a discrete notational system I suggest that Bitcoin functions as a new weapon in a logic of order. Given the important role that cryptography plays in our lives, it is surprising how little attention it receives outside of the academic worlds of mathematics/engineering and privacy/law. A few authors outside of these fields have explored how cryptography intersects with other domains, but for the most part, cryptography has been a mathematical and legal concern.v Perhaps the most useful of these authors is Kahn (1967) who provides a history of cryptography,vi identifying how the golden age of Western cryptography started with Leon Battista Alberti (1404-1472). Reaching far beyond mathematics and law, Alberti identified cryptography as an intriguing mix of technologies and practices: the “occult arts,” “mysteries of nature,” “strange characters with unusual meanings,” ”movable type,” and secrecy (Alberti, 2010). Over the next six centuries these themes played out in interesting ways. In the 17th century, John Wilkins (1614-1672) developed a proposal for an unambiguous, universal/philosophical language (1668) after developing the ideas in Mercury (1694), the first English-language cryptography manual.vii Athanasius Kircher (c. 1601-1680), similarly, reworked Johannes Trithemius’ (1462-1516) troubled work on cryptography for his universal language scheme (Figure 2).viii Francis Bacon (1561-1626) worked out a method for universally signifying nature with his bilateral cipher before launching his “great reformation” of scientific interpretation (Bacon, 1762). And Gottfried Wilhelm Leibniz (1646-1716) contributed to discrete mathematics after writing his dissertation (1989) on the cryptographic combinatorics of Raymund Lull’s (1232-1315) occult and cabalistic science (Gardner, 1958). The richness of these historical themes has now, in contemporary cryptography, practically disappeared. Cryptography has become operationalized and nearly univocal—gone are the vibrant connections to language, science, and art. Today, our most influential conceptualization is Claude Shannon’s (1945) linked notion of secrecy and information. Prior to his famous Mathematical Theory of Communication (Shannon and Weaver, 1948), Shannon had been working on war-time encryption systems.x Shannon’s cryptographic work stemmed from a long line of influences and prior work (e.g., Nyquist, Hartley, and Wiener) (Thomsen, 2009), as well a richer, multivocal, and open conceptual backdrop (Cherry, 1953; Geoghegan, 2008). Research on cryptography set the stage for Shannon’s more general, and more rigorous portrayal of information. It was in working out the coding issues for cryptography that Shannon developed his theory of information.xi In contrast to much of the engineering work being done on information transmission at that time, Shannon focused on discrete rather than continuous signals (Thomsen, 2009). Drawing on Hartley, Shannon bracketed the issue of meaning, and discussed only how much information can pass through a channel. This conceptualization, combined with Nyquist’s observation that information transmission obeys a logarithmic rule, allowed Shannon to generalize the issue and show that information accords to physical properties of the world (Aspray, 1985; Hayles, 1999). Despite being central to his study, Shannon left his understanding of “secrecy” implicit. The closest we get to a description of secrecy is that it arises from the “a priori probability associated with… choosing that [enciphering] key” (Shannon, 1945). The a priori probability is a function of the statistics of the transformation from one (information) space to another. In ideal situations, secrecy becomes a matter of making guesses in the presence of a stochastic phenomenon. Before Shannon “won” the battle for our history—how we come to think of cryptography—the field of possibility was more open (Cherry, 1953). Competing conceptualizations existed but none were better prepared than Shannon’s for the coming changes in cybernetics and informatics (also made possible, in large part, by his work on the Mathematical Theory of Communication). By identifying “secret information” as the endpoint of cryptographic conceptualization, however, we risk teleological explanations that make it difficult to understand cryptography’s non-secret role in contemporary society. If we start to reconfigure our understanding of cryptography—open the socio-technical black box—we stand to gain a deeper appreciation, and may be better able to understand the politics of technologies that use cryptography. In order to open the black box of cryptography our metaphors must also be rethought. The analysis of cryptography rarely penetrates beyond metaphors, so it is especially important to dispel any mistaken notions. There are two closely related classes of metaphor most often used to describe cryptography: the dead, and the missing or hidden. The metaphor of death is most common in literary accounts, if for no other reason than the association of “crypt” and “cryptography.” On this account cryptography “buries” (Derrida, 1998; Turing quoted in Mackenzie, 1996) and even communes with the dead (Poe, 1991; Rosenheim, 1997). The metaphor of being “hidden” is likely due to the perceived semiotic shift that occurs when a text gets encrypted: at one moment it is there and seen by all, and (like a good magic trick) the next moment it is gone (until conjured up again in decryption). Here the language used is “hidden” (Schmeh, 2012), “veiled” (Cooke, 1983), or perhaps text containing a “false bottom” (Glidden, 1987). These metaphors are evocative but lacking. As will become clear below, a more useful metaphor is “discreet,” in the sense of being circumspect, but also “discrete” as separate or distinct.xii I argue that cryptography can be re-conceptualized as a generic notational system, quite appropriately sharing the ambiguous name “code.” To get to this conclusion, I argue that cryptography is unspeakable in the sense of being a written language without syllables (which perhaps disqualifies it as a language at all). Due to the curious nature of being unspeakable, cryptography shifts from mimetic to algorithmic representation. Algorithmic representation permits the transposition and combination of its symbolic elements, but only when made of disjoint, articulate, and unambiguous marks. This system of marks is a discrete notational scheme. Additionally, because algorithmic representation permits the rearrangement of its symbolic structure it can be used to order the world, in subtle but powerful ways. “Literature has nothing more to say,” remarks Friedrich Kittler, “because it all ends in cryptograms” (1999). This is only true if we take Kittler very literally, that literature has been silenced and can no longer speak. Kittler reminds us that speaking written words is not natural and immediate. First, the Greeks needed to “invent” vowels so as to create a storage system able to capture the wealth of articulable knowledge (Winthrop-Young, 2011). Second, in what Kittler (1990) called the Discourse Network 1800, the Mother’s Mouth must teach children how to speak these written marks. Kittler goes on to accuse those languages lacking written vowels as being unable to perfectly capture the world’s information. Written languages that lack vowels are not as expressive, Kittler problematically suggests, and so are not as mimetic (Winthrop-Young, 2011). Kittler remarks, “nobody knows how the heretic king Akhneten called his N-f-r-t-t when they were making children” (Kittler quoted in Winthrop-Young, 2011, p. 91). But, of course, this is a challenge for history, not the Egyptians. The Egyptians were able to speak the name that was recorded as N-f-r-t-t because they added the appropriate vowels, that is, they created syllables in speech. It is hard to underline this important point in the written form—I suggest you try speaking the letters, but out loud: N-f-r-t-t. The punchline is that in order to be voiced, syllables must be created, making sounds like “nef eff arr tee tee.” In the audio book version of E.A. Poe’s The Gold Bug (2013) this same comedy plays out when the poor narrator is forced to articulate a long series of cryptographic symbols, so that 5 3 ‡ ‡ † 3 0 in the text becomes “five, three, double dagger, double dagger, single dagger, three, zero” in the audio book (and to great comedic effect, this goes on for half a page). While the narrator demonstrated that it is possible to speak a cryptogram in some fashion, it no longer counts as speech in the sense of meaningful language. This is the lesson that the Mother’s Mouth must teach her children, separating the grunts of animals from those of human language (Kittler, 1990). The reason cryptography cannot be spoken is because it has very particular syntactic requirements. These requirements where formalized by Nelson Goodman (1976) in his analysis of notational schemes. Roughly, a notational scheme requires that marks can be interchanged within a class of marks without difference, and that one can in theory determine what character a particular mark belongs to. The result of this analysis is that a number of forms of writing, upon inspection, share a common ancestor. In addition to cryptography, notational schemes include musical notation, Morse code, and binary (e.g., compiled software code). Although Kittler’s accusations that consonantal written languages are less mimetic than their vowelized cousins is problematic, this lack becomes very real when writing transforms into a notational scheme. The smooth contours of the world are not well represented in a notational scheme. In Kittler’s media triptych, the gramophone and film camera are highly mimetic in that they record every gradient of nature, whereas the typewriter eradicates the “continuous movement of the hand” in handwriting (Benjamin quoted in Kittler, 1999, p. 196). The representation of likeness or verisimilitude is easy to imagine with a photograph, and yet even a typed, well-crafted story can also be very mimetic, as though the reader is transported into the scene. So the typewriter can, of course, be used to write a mimetic story, but it excels when it reduces the world to discrete symbols. Putting aside, for the moment, Kittler’s (1999) penchant for inaccurate but provocative history, it is a short historical step from typewriter to cryptogram, with the transformation of Nietzsche’s Malling typewriter into the German crypto-typewriter, the Enigma machine (Figure 3). Unlike the gramophone and film camera, recording N-f-r-t-t is no trouble for the typewriter. While the typewriter cannot capture voiced syllabification, it perfectly represents the alphabetization of language. And for the typewriter so too for cryptography: when encrypted, N-f-r-t-t readily becomes A-S-E-G-G. While notational schemes are poor at mimetic representation, the ease in which parts can be split and rearranged make them ideal for what I call “algorithmic” representation. Algorithmic technologies are powerful because they chop the world up in to discrete pieces and then re-arrange the results.xiii These technologies order the world rather than model or recreate it. To underline the point, all cryptography is just the simple substitution cipher, shuffling symbols about in determined, ordered ways. And the same principle is at work in all notational systems, where complex and surprising uses abound. Conceptualized in light of a notational scheme, cryptography surpasses the typical narrow conceptualization as secrecy. For example, Kittler’s barbarian Spartans invented a writing technology called the skytale. The skytale is a leather strap along which letters are written that, once wrapped around a wooden rod of a particular diameter, reveals a message. The device was once thought to facilitate a kind of primitive encryption, but recent research has shown it to be something else (Kelly, 1998; West, 1988).xiv How this technology was actually used is unknown, and somewhat beside the point: the skytale exemplified an early algorithmic machine, made of Kittler’s alphabet but impossible to phonetically speak. In fact, there is good evidence that the device may have been used to ensure silence, as a way of guarding against the accidental articulation of bad omens and the like (c.f. Lateiner, 2005; Montiglio, 2000). The skytaleis, perhaps, the first device to destroy syllabification, and to depart from mimetic media and move towards ordering language and the world. Another important aspect of cryptography is that it decomposes language into identical, modular pieces. This fact works equally well for other applications of the discrete notational scheme too. A thousand years after the Spartans, Alberti ushered in a new notational method for architecture that replaced the older craft-oriented way of building (Carpo, 2011). This notational system permitted architects to become designers, not makers, and enabled the construction of identical but modular buildings. So close is the connection between the notational schemes of architecture and cryptography, in fact, that Alberti generalized his architectural advancements and applied the same thinking to language to develop polyalphabetic cryptography (Alberti, 2010; Kahn, 1980). Similarly, Leibniz employed a notational scheme when he established the groundwork for discrete mathematics, and specifically, the mode of mathematics that we now use to analyze and model cryptography, known as combinatorics (what Leibniz called “complexions”). In Leibniz’s early work, Dissertation on the Art of Combinations (Dissertatio de arte combinatoria) (1989), he develops Raymund Lull’s cabalistic method of interrogating language and the natural world, setting it on firm mathematical and logical ground (Figure 4).xv To do so, Leibniz derives his metaphysical analysis of order from the existence of natural parts and wholes (or “unities”). Leibniz writes, “let the whole be ABC; then AB, BC, and AC will be smaller wholes,” which “by reason of order” results in “abcd, bcda, cbab, dabc” (calculated to be “arranged in 24 ways”) (Leibniz, 1989, p. 78). Leibniz’s development of order ultimately leads to modern symbolic logic, and by way of Stanhope, Jevons, and others to the calculating machine (Gardner, 1958). Eventually, it can be surmised, Turing’s machine would read a tape of Leibniz’s letters and re-order the input, perhaps (after von Neumann) according to a particular programmed algorithm. Although Shannon recognized the importance of discrete symbol processing (as noted above), it was Turing that really advanced this position by seeing the potential in ordering discrete symbols (Figure 5). The link from Alberti to Turing arrives by way of representational machines that employ a discrete notational scheme. When this representation is set in motion, the complex ordering is not limited to language. Cryptography has long been used to investigate the natural world or create art, and is now poised to order the economy. Before showing how Bitcoin orders the economy we must understand how cryptography functions in Bitcoin. The cryptography used in Bitcoin is not unusual or exemplary; in fact, there are no cryptographic innovations in Bitcoin (in computer security terms, this is a virtue of the system). Bitcoin uses a standard SHA-256 hashing algorithm. This hashing algorithm is put to some seemingly strange uses, but nothing unique to the history of cryptography since the development of public key cryptography in the 1970s. For the vast majority of the history of cryptography—its development from substitution ciphers and code systems to polyalphabetic and keyed algorithms—the encrypting mechanism was unitary. With the invention of public (or asymmetric) key cryptography in the 1970s it became possible to create a system that “split” the cryptographic key.xvi Splitting the cryptographic key (explained below) ushered in new uses for cryptography, and was well timed for the coming advance of the Internet and popularization of point-to-point electronic communication. In simple “code” systems (often called “nomenclators”) a letter, word, or entire phrase may be replaced with an alternative, with the substitution presumably kept private between the two communicating parties (Kahn, 1967). The basic principle is captured by so-called substitution ciphers, which exchange one letter for another in a deterministic manner. From this mechanism more complicated forms of cryptography were invented. Polyalphabetic cryptography uses multiple alphabets for the substitution, sometimes jumping from one alphabet to another according to an agreed-upon secret “key.” For much of the history of cryptography no notion of cryptographic “key” existed. In more recent usage the key became analytically separated from the cryptographic algorithm, as a result of “industrial” uses of cryptography that require reusable ciphers. We now generally speak of an immutable (public) algorithm, and a mutable (private) key. In fact, the key is no more important than the set of transformations (and should be characterized as part of the system of transformation). For purposes of cryptanalysis (“codebreaking”) a key is only as valuable as knowledge of the corresponding mechanism or set of transformations. Yet, in recent years cryptographic best practice requires keeping the key secret and the mechanism public (working on the assumption that the mechanism will eventually be discovered and reverse-engineered anyway). Symmetric-key cryptography employs the same key for encryption and decryption, so the shared secret item is identical among parties. The obvious downside is that to maintain secret communications all parties must ensure that the shared key is kept private from any so-called adversaries. Modern forms of symmetric-key cryptography work on digital bits, either encrypting the bits one at a time (or, more realistically, encrypting byte by byte or in prescribed bit-length “words”), or grouping the bits into blocks (and adding padding as needed so that each block includes the same number of bits). Other non-cryptographic features may be present in a modern cryptographic system, such as error detection, compression, and so on. The symbolic transformations in symmetric-key cryptography are fundamentally the same as that of asymmetric-key cryptography—in fact, symmetric-key primitives can be used to build asymmetric-key systems. The sole (but critically important) difference between symmetric-key and asymmetric-key cryptography is that rather than sharing a single (unitary) secret key, asymmetric-key). This paper showed how the traditional (secrecy) conceptualization of cryptography is wanting; in its place, I argued for a new conceptualization as a notational system. As Leibniz and Turing understood, a notational system can order the world in powerful ways. Reading the politics of Bitcoin in light of a reimagination of Deleuze’s control society (replacing modulation with order) I suggested that cryptography is a powerful “new weapon,” functioning as an ordering machine. I argued that Bitcoin is at the forefront of advancing this ordering logic, updating the economic system for our new control society. Quinn DuPont firstname.lastname@example.org Faculty of Information, University of Toronto i Mt. Gox was the most popular bitcoin exchange, and dealt primarily in USD, although many other exchanges are available (some with regional or jurisdictional foci). Mt. Gox started as a trading card exchange for the online game Magic: The Gathering Online, but eventually rebranded to focus exclusively on bitcoin. ii This was the first spike in value for 2013; the second (much larger) spike occurred a few months later when bitcoins were trading above 1000 USD/bitcoin, often swinging more than 50% in value in a matter of hours. iii The recent revelations of US military contractor Edward Snowden perpetuate this ideology, even if they eroded the universal trust in cryptography. For many, the response was simply a need for better cryptography, seemingly safe from the revealed fact that US Intelligence services can readily crack or circumvent available cryptography. iv The Electronic Frontier Foundation advocates the widespread use of cryptography (Opsahl et al., 2013); see below for evidence of bitcoin’s origins on the Cypherpunks mailing list. v See for example Rosenheim (1997) and Shoptaw (2000) on literature and poetics, Ellison (2011, 2008) on textual studies, Gleick (2011) on information, Pesic (2000a, 2000b, 1997) on science, Blanchette (2012) on documentation, Eco (1986) on semiotics, and Zielinski (2008) on media. vi See the journal of record, Cryptologia, for the history of cryptography. While many of the articles published in Cryptologia are the only source of history and should be applauded for their trailblazing work, most are published by hobbyists or experts in engineering who have an interest in historical matters. Even Kahn himself, who over the years has become a highly capable self-trained historian, started as a journalist. These histories, correspondingly, usually suffer from the evils of bad historiographical methodology: “impact” accounts of technical change, over-reporting of military technologies, and whiggish, teleologically-driven narratives. vii Although written prior to his famous Essay, Mercury was published posthumously. viii For an assessment of universal and philosophical language schemes, with occasional reference to the role of cryptography, see (Cohen, 1954; Formigari, 2004, 1993, 1988; Maat, 2004; Rossi, 2000; Salmon, 1971, 1966; Slaughter, 1982; Wilding, 2001). ix Note that Glidden (1987) argues that the French version (here pictured) of Trithemius’ Polygraphiae contains a slightly artificial “reinforced” link to Lullian and cabalistic influences. x Cryptography is often twinned with war. At times these associations can be productive (Deleuze and Guattari, 1987; Kittler, 1999), but far too often they constrain our thinking, leading to discourse (and associated models) of “adversaries,” “man-in-the-middle,” “attack” and so on. The bellicose nature of cryptography cannot be dismissed—it is a war machine—but I think we should derive, not assume, such connections. xi Although only occasionally recognized, the histories of information and cryptography are intimately tied (see e.g., Gleick, 2011). xii “Discrete” and “discreet” share the Latin origin discretus. xiii For a more extensive description of the dialectic of mimetic and algorithmic technologies see Takhteyev and DuPont (n.d.). xiv The skytale has been disqualified as cryptography simply because it doesn’t offer plausibly good secrecy. As I have been trying to argue, we need to think more expansively about our conceptualization of cryptography, and may want to return to the original understanding of the skytale as an encryption device, but one that offers something other than secrecy. xv It is worth noting that Alberti’s cryptographic work was also influenced by Lull (Kahn, 1980). xvi Asymmetric-key cryptography was initially invented in 1973 at the Government Communication Headquarters in the UK by James Ellis, Clifford Cocks, and Malcom Williamson but kept secret; it was then publically re-invented in 1976 by Whitfield Diffie and Martin Hellman (Levy, 2002). xvii More complicated three-pass schemes are possible too, in which I encrypt a message and pass it to you, then you encrypt the already-encrypted message and pass it back, I then decrypt my encryption and pass it back to you, at which point you can finally decrypt your encryption and read the message—successfully transferred in public while remaining encrypted. xviii At this point the anarchist/libertarian undercurrents are completely at the fore, Dai (1998) starts his proposal, “I am fascinated by Tim May’s crypto-anarchy.” xix Of course, this is the ideal scenario. Any competing network of greater computational power could best the legitimate one, and therefore human vagaries of collusion and consolidation come to play. This has actually happened, when due to a technical bug the blockchain became “forked,” and was only reset when a cartel of powerful mining pools colluded to switch to the “corrected” blockchain. Alberti, G. B. (2010). De componendis cifris. In K. Williams, L. March, & S. R. Wassell (Eds.), The Mathematical Works of Leon Battista Alberti (pp. 169–187). Basel: Springer Basel. Retrieved from 007%2F978-3-0346-0474-1_4 Aspray, W. F. (1985). The Scientific Conceptualization of Information: A Survey. Annals of the History of Computing, 7(2), 117–140. Back, A. (1997, March 28). hash cash postage implementation. Cypherpunks. Retrieved from http://www.hashcash.org/papers/announce.txt Bacon, F. (1762). Novum organum scientiarum. Venetiis: Typis G. Girardi. Bauer, F. L. (2005). Cryptology. In Encyclopedia of cryptography and security. 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Gramophone, Film, Typewriter (1st ed.). Stanford University Press. Kockmeyer, B. (2007). A schematic that shows the SHA-2 algorithm. Retrieved from http://en.wikipedia.org/wiki/File:SHA-2.svg Kohno, T., Ferguson, N., & Schneier, B. (2010). Cryptography Engineering: Design Principles and Practical Applications. Indianapolis, IN: Wiley Publishing, Inc. Lateiner, D. (2005). Signifying names and other ominous accidental utterances in classical historiography. Greek, Roman, and Byzantine Studies, 45(1), 35–57. Leibniz, G. W. (1666). Dissertatio de Arte Combinatoria. Leipzig: Joh. Simon Fickium et Joh. Polycarp. Retrieved from http://www.rarebookroom.org/Control/leiart/index.html?page=7 Leibniz, G. W. (1989). Dissertation on the Art of Combinations. In L. E. Loemker (Ed.), Philosophical Papers and Letters (pp. 73–84). Dordrecht / Boston / London: Kluwer Academic Publishers. Lessig, L. (2006). Code v2. Basic Books. Levy, S. (2002). Crypto: Secrecy and Privacy in the New Code War. 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The Cryptographic Imagination: Secret Writings from Edgar Allen Poe to the Internet. Baltimore: The Johns Hopkins University Press. Rossi, P. (2000). Logic and the Art of Memory: The Quest for a Universal Language. London: Athlone Press. Rousseau, J.-J. (2003). On the Social Contract. (G. D. H. Cole, Trans.). New York: Dover Publications. Salmon, V. (1966). Language-Planning in Seventeenth-Century England; Its Context and Aims. In C. E. Bazell, J. C. Catford, M. A. K. Halliday, & R. H. Robins (Eds.), In Memory of J.R. Firth (pp. 370–395). London: Longmans, Green and Co Ltd. Salmon, V. (1971). The Evolution of Dalgarno’s “Ars Signorum.” In Studies in Language and Literature in Honour of Marget Schlauch (pp. 353–371). New York: Russell & Russell. Schmeh, K. (2012). The Pathology of Cryptology—A Current Survey. Cryptologia, 36(1), 14–45. doi:10.1080/01611194.2011.632803 Shannon, C. (1945). A Mathematical Theory of Cryptography (No. 20878). New Jersey: Bell Labs. 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(1561). Polygraphie: Universelle escriture Cabalistique de M.I. Tritheme Abbé. Paris: Jaques Keruer. Retrieved from http://fantastic.library.cornell.edu/bookrecord.php?record=F034 Turing, A. (c. 1939-42). Turing’s Notes on the Enigma Machine (Catalogue reference: HW 25/3). Retrieved from http://www.nationalarchives.gov.uk/spies/ciphers/enigma/en1.htm West, S. (1988). Archilochus’ Message-Stick. The Classical Quarterly, 38(1), 42–48. Wilding, N. (2001). “If You Have A Secret, Either Keep It, Or Reveal It”: Cryptography and Universal Language. In D. Stolzenberg (Ed.), The Great Art of Knowing: The Baroque Encyclopedia of Athanasius Kircher (pp. 93–103). Firenze, Italia: CADMO. Wilkins, J. (1668). Essay Towards a Real Character and a Philosophical Language. London: Royal Society. Wilkins, J. (1694). Mercury: or, The secret and swift messenger. Shewing, how a man may with privacy and speed communicate his thoughts to a friend at any distance. London: R. Baldwin. Winthrop-Young, G. (2011). Kittler and the Media. Cambridge, UK; Malden, MA: Polity Press. Zielinski, S. (2008). Deep Time of the Media: Toward an Archaeology of Hearing and Seeing by Technical Means. (G. Custance, Trans.). The MIT Press. You must be logged in to post a comment. Joining Humanity+ as a Full, Plus or Sponsor Member enables you to participate in Humanity+ governance and decision-making - an important role in the growing Transhumanist movement. It also, of course, gives you the opportunity to support us in the work Humanity+ does!
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[Note: below is chapter 3 to Great Chain of Numbers] As innovative and groundbreaking as Bitcoin has been, it has several known technical limitations.1 Simultaneously, the current development team is …
[Note: below is chapter 3 to Great Chain of Numbers] As innovative and groundbreaking as Bitcoin has been, it has several known technical limitations.1 Simultaneously, the current development team is hard at work on priorities revolving around improving the security of the protocol from vulnerabilities and exploits.2 This is not a criticism of their activities and actions, especially in light of the transaction malleability issue that caused frenetic activity within the ecosystem during the middle of February.3 Other developers in the community have tried to assume the mantle of responsibility for improving the functionality and capabilities of this space. Some projects involve fusing exoskeleton systems built around the Bitcoin protocol; others create their own independent ledgers; still others have even created bridges between Bitcoin and other ledgers. Below, I introduce eight projects that are currently developing a mechanism to design and transport smart contracts or smart contract functionality.4 For each, I attempted to interview the main developers. As noted above, one way to utilize a crypto blockchain to verify wares is through a process being developed called Colored Coins.5 In a nutshell, this endeavor allows users to “color” a token to represent a specific asset such as a car, home, boat, commodity, a share, a bond – virtually any type of asset (e.g., 0.5 BTC colored green to represent your home). These tokens can then be exchanged, just like bitcoin tokens, by anyone anywhere. This enables a decentralized, trustless form of asset management that uses a blockchain as both a ledger and transportation mechanism. Alex Mizrahi, who is leading the development of the Chroma Wallet used by the Colored Coins project says that “it is going to be very easy for the asset management industry as a whole to use Colored Coins.6 For example, some of the first places we are going to have adoption will likely be real-estate and portfolio management. In fact, for any type of asset management it’s going to be simple to issue his own color that represents his goods. A portfolio manager can issue one color that represents a portfolio of stocks backed by the real holding and sell it globally. If he is savvy and his products are good, his colors are going to have demand. So transferring ownership is very easy, quick and safe — just like bitcoins. In the real estate industry someone can issue their apartments using colored coins and have them float on the blockchain, or manage time-sharing based on color.”7 Meni Rosefeld, another member of the development team, described several of the advantages of using a secondary attribute (color) within the asset management industry. “The greatest advantage is the removal of barriers of entry. Currently, new businesses wishing to raise capital use cumbersome and inefficient private deals; and those aspiring to be listed in order to allow for the market to valuate them with an efficient mechanism, can only do so with a great expenditure. With colored coins, anyone can easily raise funds in exchange for equity, removing barriers of entry, encouraging innovation and allowing society as a whole to better allocate its resources between ventures.” One area of confusion within the Bitcoin community is the misplaced understanding – that centralized servers are needed to issue and track a secondary attribute (the “color”). According to Rosefeld, this is incorrect. “No centralized servers are needed for tracking – this is done in the decentralized network of the host currency (such as Bitcoin). There does need to be an entity issuing each particular colored coin – however, an entity raising funds for a generic purpose is not usually in the business of running an exchange. Without colored coins, they would have to resort to a large 3rd party exchange with all the usual problems of barrier of entry (for both issuers and exchanges) and vendor lock-in. With colored coins, they can outsource the tracking and exchange to the efficient decentralized network. The issuer is only involved when issuing or recalling the coins; investors can then trade the coins between themselves without involving any 3rd party, which has implications for privacy, efficiency, and the kind of advanced transactions one can do.” I also spoke with Amos Meiri, head of dealing at eToro, another member of the development team for the Colored Coins project.8 I asked: would it be easier to simply conduct all trade privately at the centralized exchange where it will be more scalable and private. In his view, “Centralized exchanges definitely have their advantages, but colored coins can be useful for following reasons. First, users do not need to trust their bitcoins to a centralized exchange. Companies cannot manipulate ownership records (to commit fraud, for example). So basically, if somebody gives you an IOU, it isn’t a good idea to leave it with the person who issued it or to affiliated parties. Another reason is that companies cannot control how its shares are being traded, thus it cannot block trade. And lastly, there is no need to maintain servers or manage security due to its integration with the blockchain.” While this is obviously easier said than done, as noted above, this idea of using cryptoledgers to manage smart property has inspired and motivated numerous other groups to put forth similar efforts. For example, Counterparty was launched in January.9 Its mysterious, relatively anonymous development team has released similar open-source applications, documents, binaries and tools that allow users and entrepreneurs to build smart property functionality such as derivatives and dividends in a decentralized manner. Also in January, reporter Jon Southurst discussed several other groups including Reality Keys that can utilize a crypto protocol to build a predictions market or a way to hedge against currency fluctuations.10 At the beginning of January 2014 I spoke with Taariq Lewis, the founder and CEO of BitcoinBusiness, a Bitcoin advisory firm and he is also the Smart Property and Business Development Lead of the Mastercoin Project.11 Mastercoin is a crowdfunded, non-profit endeavor to create an open-source decentralized exchange protocol for Bitcoin. As noted above, the Mastercoin project has received 4,700 bitcoins ($5 million at the time) in crowdfunding which has been used to pay for bounties, building tools and write documentation all of which is ultimately released on an open-source basis.1213 According to Lewis, “we are on the tip of the iceberg of the democratization of upper level finance and investment management. One apt analogy is that the current system involves a highly siloed, highly centralized organization reminiscent to the music industry prior to P2P innovations. We are now approaching the first wave of people being able to distribute financial products to each other on a peer-to-peer basis. While this obviously has regulatory repercussions such as the SEC and CFTC oversight in the US, there is no “Wolf of Wall Street” in crypto. In fact, projects like Colored Coin, Counterparty and Mastercoin will create applications that will decentralize stock and bond exchanges allowing individuals and entrepreneurs to build dividend products and distribute the assets without middlemen.” I also spoke with Ron Gross, co-founder of Bitblu and executive director at the Mastercoin Foundation, who also pushes the open-source nature of the project. “With Mastercoin, we are all developing open source software and tools that eventually will enable anyone to build their own applications on the platform. We are still hiring people for the core development team yet ultimately we want to move into a decentralized structure where we as team do not actually own anything or manually hire and fire but rather a Decentralized Autonomous Application (DAA) does. In addition we have put together a series of external bounties, where we give away $100,000 each month to developers outside the organization either working on specific milestones or just doing general innovation around the ecosystem. Thus new programmers to this space could immediately be financially rewarded for looking through a list of bounties and submitting solutions to them, or for being creative and building around the infrastructure.” Gross sees this ecosystem eventually mapping the real world in a digital space: as self-reinforcing entrepreneurial activity – continuously builds the ecosystem a new financial system will emerge that serves as a bridge between cryptoledgers and the existing world. As part of this vision, a natural outgrowth encompasses decentralized applications, bonds, asset backed coins, commodities, real estate, betting and prediction markets that correspond to a smart property token will emerge. One on-going project he highlighted in particular was an open-source omniwallet, which will eventually be capable of handling and tracking the cornucopia of altcoins, metacoins, and even colored coins. Yet getting there will obviously involve hurdles. According to Gross, “just getting the protocol developed and robust will be a rewarding challenge. The infrastructure is not quite ready for large more complicated projects and is undergoing massive development yet Mastercoin and all the other protocols in the same space are still accessible due to the open-source nature. Any developer, anyone can come – look at the spec, go into the debates, send in your pull requests, look at the code – and contribute immediately. There is no need for a central brick-and-mortar building because if you contribute anything that is positive, you will get rewarded for it. BitAngels is launching a fund soon that is going to invest in protocols, development of DAOs and other “2.0” initiatives through hackathons where the top winners will receive a $500,000 investment.14 And through these efforts we will build a better financial system, one that is decentralized and creates complete financial freedom. The impact of creating such tools is obviously a matter of speculation but even a fraction of the pie is going to be really large.” I also spoke with David Johnston, managing director of BitAngels, the first angel investment network focused on digitial-currency startups, and a board member at the Mastercoin Foundation.15 In his view, “cryptocurrencies are more than a payment network, it is more than a new type currency or store of wealth. It is a whole new platform and is a way for people to now make programmable money and that gives rise to smart contracts. Now that this money is programmable I can put it into applications, I can create other digital tokens. That’s what really gets me excited where anyone can build anything. In the long-run we also plan to turn the entire project into a DApp, to maximize resources and improve efficiencies.” A DApp is short for decentralized application. The Mastercoin platform, like arguably every other one, is still a work in progress and has gone through several iterations based on community feedback. It also faces market competition from several others in this space such as Open-Transactions, Invictus (formerly BitShares). As a consequence, it looks like a promising area for Christensen-style innovation. Launched in late November 2013, NXT is a new cryptoplatform written entirely from scratch in Java.16 The platform has the ability to natively track “colored coins” – tokens that represent a specific asset based on their “color” (e.g., using a fraction of NXT to represent a car or house). It also includes a decentralized asset exchange, which means you can buy and sell assets without going through a 3rd party. For instance, one of the problems that impacts centralized exchanges and online stores today is that both your fiat and tokens are vulnerable to theft, hacking and other abuse. In one notable instance, in December 2013, an online commerce site called Sheep Marketplace was hacked and 96,000 bitcoins were removed from its web-based wallet making it the largest known cryptoheist.17 This type of abuse is nearly impossible in a decentralized peer-to-peer exchange because there is no single centralized point of attack.18 In February 2014, I exchanged messages with “Uniqueorn,” contributor to the NXT development team.19 In his view, “the best way to compare NXT to the other cryptocurrencies is basically to not do it. NXT is not an altcoin at all. While most of the cryptocoins being circulated are typically clones of the Bitcoin codebase with a few slight variations, very few of them bring anything new or substantial to cryptocurrency functionality. On top of this is a built-in encrypted messaging system (like BitMessage) and anonymous payments (similar to Zerocoin) which adds an additional layer of privacy to protect confidential information and trade secrets. Yet a lot of work still needs to be done both with our platform and the rest of the industry. You cannot expect that your mother and father are going to sit down and understand this. For them it is supposed to be a tool to make their lives easier, not harder.” Another key difference is that unlike Bitcoin and Litecoin which utilize proof-of-work mechanisms that scale in difficulty with network hashrate (i.e., additional hashrate added to a cryptoledger proportionally increases the block difficulty level); NXT instead utilizes something called ‘Forging,’ which is basically recirculation of NXT (Proof-of-Stake).20 “Uniqueorn” noted that, “proof-of-stake allows ‘miners’ to generate NXT without requiring the use of relatively large sums of electricity that other cryptocoin proof-of-work systems currently do.” In other words, the barriers to entry are significantly lower as user does not need to utilize a top-of-the line ASIC machine which is discussed later in Chapter 7. Therefore, a user can “forge” tokens on a smart phone, a solar powered Raspberry Pi, or a laptop computer. In practice, an algorithm randomly picks one node to process all of the transactions and all other machines know this system is the sole transaction ‘forger’ – thus all other erroneous transactions can be discarded. All machines participating in this ‘forging’ effort are rewarded according to the proportional amount of NXT they have; thus if you have 1% of the tokens you have a 1% chance of being selected to forge the next block. Because the transactions nodes are known, this provides increased security, an estimated 90% of the NXT tokens must be controlled by one agent in order to compromise the network via a double-spend (e.g., 51% attack).21 I also corresponded with ‘Graviton’ who is the Nextcoin.org community founder.22 According to him, one of the motivations for why the core team decided to move beyond Bitcoin was, “there certainly seemed to be demand for a technically advanced cryptocurrency with a completely new codebase that puts away the requirement for energy expensive Proof-of-Work once and for all. The environmentally green and attack resistant Proof-of-Stake algorithm, plus the important fact that NXT is not only a payment instrument but a new generation platform natively supporting a suite of services such as decentralized trading and encrypted messaging, seems to have filled gaps that were shining open wide with the existing old school cryptocurrencies.” He is also looking forward to the deployment of a decentralized asset exchange as well as colored coin functionality on the NXT platform and believes that these will “become a popular standard for quite a bit of trading applications, for both – cryptocurrencies and assets denominated in them. The rest of the industry will integrate seamlessly to that, so the distinctions between various crypto brands will start to dissipate.” And like several other developers interviewed, “the killer app would be to have available the simplest possible means to pay for merchandise & services in fiat nomination but from one’s cryptocurrency wallet, to be able enjoy the fiat price appreciation with the same wallet, and to flip your wallet contents to another crypto with a push of a button. Preferably on mobile.” Another “2.0” project that is gaining traction is Ethereum, announced in January 2014 which brings together both a cryptoledger and a Turing-complete programming language. In short, a Turing-complete programming language means that the language can be used to simulate any other computer language (not just its own). The original Bitcoin protocol and software implementation released in 2009 included a language called Script that had many limitations (it was intentionally not Turing-complete) and as a consequence has largely been underutilized. As a consequence, developers have had to try and use these duct-taped exoskeleton wrappers to build on top of the protocol to enable new functionality. Many developers, including those with the Ethereum project, recognized this limitation and, rather than building and providing a specific feature set, will instead use a Turing-complete C-like language (CLL) that software developers can then use to build a cornucopia of tools, including any type of smart contract, asset management instrument or even a decentralized autonomous organization (DAO) that can then be automatically executed, controlled, and audited by the Ethereum ledger.23 While its approach is one of the most holistic thus far, its long-term success still requires a critical mass, mind-share and the network effect. To find out more about Ethereum, I corresponded with Vitalik Buterin, head writer at Bitcoin Magazine and a lead developer on the Ethereum project.24 Because of the all-encompassing abilities “2.0” projects are slated to have, it could be confusing for developers to determine on which platform to initially build their apps, but that may not be the only hurdle. In his view, “I would say the main challenge in the 2.0 space is going to be (1) building contracts, and (2) building interfaces. These have always been problems, of course, but up until now they have been eclipsed by other, larger, problems, like maintaining server infrastructure and scalability, ensuring security of funds, regulatory compliance and having banking relationships. With decentralized apps, most of those problems are gone, so the only two issues that still remain – contract design and interface design – are now at the forefront. The two problems can easily be handled separately; someone should be able to write a derivatives trading GUI and have that port over automatically to various systems inside of Ethereum, BitsharesX and whatever else people want to trade on.”25 Several other developers and investors I spoke with had similar sentiments: creating easy-to-use, intuitive interfaces for end-users would quickly set your product apart from the pack. While there have been many advances, especially for merchant plugins, backing up and securing wallets can be quite cumbersome and even a chore to handle at times, stunting wider-spread adoption.26 Buterin had previously worked on both the Colored Coins and Mastercoin project. While portable, both of these currently utilize the Bitcoin protocol, which has a couple of limitations. In Buterin’s view, “one of the key features of Bitcoin is that it has a concept of “simplified payment verification” (SPV), where a Bitcoin node can verify the validity of a transaction in the blockchain by only downloading the very small subset of data in the blockchain that is relevant to that particular transaction. Given that a “full” Bitcoin node now takes 14 GB of space to run, beyond the reach of many users, this mechanism has become an essential part of Bitcoin security. The problem with on-blockchain meta-protocols, however, is that they do not benefit from this protocol. The underlying Bitcoin layer has no way of knowing whether or not a given transaction is valid in the context of the meta-protocol, so the Bitcoin blockchain will include transactions that are both valid and invalid, and so the validity of a given meta-protocol transaction can only be calculated by recalculating the entire state of the protocol up until that point – requiring the full blockchain. Ethereum solves these issues by not being a meta-protocol, instead relying on an independent blockchain.” SPV is a type of thin client that provides Bitcoin users a lightweight method for sending and confirming transactions without having to carry around the entire database.27 It does this by downloading only the headers for all the blocks (i.e., the Merkle tree) and not the entire blockchain itself. As a consequence, this flexibility enables Bitcoin clients to be used by point-of-sale registers that may not have enough space or bandwidth to continuously download the entire blockchain. And at this time, as Buterin notes, the only way to completely confirm that a transaction based on Colored Coins or meta-coins like Mastercoin is valid is to re-check the entire blockchain. This presents a significant obstacle to scalability. When describing and defining what a “smart contract” and “DAO” are, it can be confusing at times because a robust smart contract is sometimes used synonymously with a DAO. According to Buterin, “I would say there is no clear-line distinction between the two, but there are some general differences in connotation. To me, a smart contract is something that is single-purpose and ephemeral, so they are created for a specific task and can disappear at the end. A financial contract is a good example there. An autonomous agent is something that is more long-term focused, and includes an internal AI to make decisions. And finally, a decentralized autonomous organization is a long-term contract between many people, perhaps even with the ability for people to join in as signatories or trade their positions away, whose main role is to hold on to assets and use some kind of voting system to manage their distribution. There can be many different types of DAOs; the more basic ones live entirely on the blockchain, but more advanced ones might have some of their data stored on other decentralized networks or across a number of servers.”28 Throughout this manuscript, several of Mike Hearn’s presentations are referenced, including the Turing 2013 conference.29 While both Hearn and Vitalik Buterin use the same name, DAO, the definitions for what the term implies, varies. In an email exchange, according to Hearn, “what Vitalik calls DAO’s are not quite the same as what I discussed in the Turing talk. I used to think they were the same, but on closer inspection he called Bitcoin itself a DAO so it’s obviously different. Assuming you mean agents, there are so many challenges I doubt it will happen any time soon. Really you need trusted computing for it to work well and that won’t work well at least until Intel release CPU’s supporting their SGX extensions, which they didn’t even announce a date for.” Trusted computing is a term for computers that can be controlled a certain way via encryption. Many governmental agencies such as the US Department of Defense require that computers acquired by vendors have such functionality. In September 2013, Intel released its programming reference manual for Software Guard Extensions (SGX) which could potentially create similar functionality in consumer-based systems.30 Throughout this guide I describe simple “smart contracts” with the assumption they do not have any sophisticated internal AI components. Similarly I refer to relatively simple DAOs that wholly reside on the blockchain. As programmers become more acquainted with decentralized software and the technology evolves and begins to be used in practical applications, it is likely the specific meaning of each term will be subject to change. This last point is viewed as a critical issue to other 2.0 project managers as well. I had an email exchange with Daniel Larimer, the creator of BitShares, and the first, these processors are unlike the “miners” used in blockchains because of the way the light-weight method consensus is determined which requires substantially less infrastructure (e.g., no need for ASICs or GPUs). Consensus of the ledger is done through a peering method; similar to how peering with trusted nodes works with internet providers. The ledger itself is a bundle of digitally signed data transactions which is sent through the network and voted upon by client peers (nodes). These nodes poll one another to see which transactions came first, the ones that are determined to be false or illegitimate are discarded and all others are included in a verified ledger state that is then considered closed. This entire process takes between every 5 to 15 seconds and nodes that become unreliable with spam are then ignored by peers. The reason the timing is not a fixed rate because transaction bundles not only vary by size (e.g., consumption by consumers does not happen at a unison, flat rate) – and it also illustrates how data itself is processed globally through current public infrastructure. In contrast, the reason that Visa is slightly faster is that they use private centralized nodes which requires significantly more overhead and capital expenditures.” “Gateways are the actual organizations that move assets in and out of the Ripple network. They can range from single-individuals to large banks. Users establish trust lines with gateways which can be located in any part of the world, providing liquidity into nearly any local currency. A unique feature about gateways is, that while they may be a single-point-of-failure in the traditional sense, users can still route around censored nodes. Furthermore, gateways cannot appropriate the assets of one specific user: either they default for everyone or none at all. So for example, Bob can create a debt line with Alice who is trusted party, a gateway. Gateways live by reputation, so they have an incentive to fulfill their obligations. Bob can then exchange a local currency with Alice for IOUs (XRP) with which Bob can then send to any other gateway and convert XRP into the local currency. This can be done in a matter of seconds, which is significantly faster than any blockchain-based system, yet is actually more secure (51% versus 80%).” Ripple Labs refer to their technology as a ‘value web’, an ‘Internet for money’, and ‘http for money.’ Existing financial institutions could serve as gateways today by establishing ‘trust lines’. The gateway system enables financial institutions to exchange value in the form of digitized assets (e.g., commodities, fiat currency). For instance, Bob’s Bank of Buffalo could set up a gateway and trustline with Alice’s Agriculture Bank in China. Bob could provide USD liquidity to Alice and Alice could provide RMB liquidity to him in a cheaper and quicker manner (between 5-15 seconds) than existing wire services which could take days and charge relatively high fees. Ripple acts as trusted ledger for all participants, yet cash balances must be settled outside of the Ripple protocol. XRP is the only currency native to the network. Thomas continued with, “another competitive advantage that the Ripple protocol has over others in this space is that our code uses the smallest amount of trusted code base, basic OP codes which provide the most secure assembly code to which to build from (e.g., interacts directly with the iron, with the metal of the semiconductors). Thus the native software client is less vulnerable to exploits that occur from building above with other higher-language layers. And over the past two years we have open-sourced a significant amount of codebase including the protocol to the public. This in turn has led to further refinements and security fixes. In addition, we are continually looking at ways to expand the protocol’s use, making the ledger essentially a database that will allow for the transaction of smart contracts.54 And because this network is slightly more efficient than most other platforms, this allows for new innovations to take place down the road.” This contract-based system will be Turing complete and include two-stages, the first of which is non-deterministic which enables contracts to interact with real-world protocols such as DNS and HTTP and also allows users to include language interpreters and reference libraries. “This space is rapidly evolving; for instance, the original Bitcoin client was much more cumbersome than it is today. For beginners it used to take 24 hours to download the blockchain and confirm transactions. Now there are numerous projects each of which trying to provide value-added services and this competition is pushing us to look at new ways to innovate, such as peer-assisted key derivation function (PAKDF) – a mathematical way of utilizing blind signatures.55 One of the user-adoption problems in this space is that it is hard to memorize long secure passwords and frustrating for new users to learn how to securely save passwords on disk drives. In contrast, PAKDF will allow Alice to use relatively weak passwords that can be sent to Bob who will sign something (e.g., a contract) without knowing and therefore unable to break Alice’s password. This is called a blind signature which adopts a form of homomorphic encryption and we are integrating into Ripple.”56 Whereas a user would need to memorize a long passphrase, this specific application of securely signing a password could lead to ease-of-use for end-users. In a nutshell, a blind signature scheme “allows a person to get a message by another party without revealing any information about the message to the other party.”57 The analogy typically used to describe how this worked is, Alice places a message inside a carbon lined envelope. This envelope is sent to Bob, who cannot read or see any of the information, but can sign on the outside of the envelope, which imprints the signature on the carbon inside the envelope. This Euler diagram shows two main systems, those currently part of a cryptoledger and those that are not, which in this case is solely Open-Transactions (OT).58 As noted earlier in the chapter, OT works by connecting its OTX protocol to other services (much like SSL does with other databases) such as Bitcoin and is therefore ledger agnostic. Within the cryptoledger diagram are essentially two other distinctions, those that use a blockchain and those that use a consensus ledger. At the time of this writing only the Ripple protocol uses a consensus ledger. When it was first created, Namecoin was also originally its own independent blockchain but the mining process has since merged with the Bitcoin ledger. The other independent blockchains above are Litecoin, Dogecoin, NXT, BitShares and Ethereum. At the time of this writing, the Ethereum team has not settled on which system it will use – it may use a hybrid approach similar to what Peercoin has done (proof-of-work and proof-of stake). Proof-of-work (PoW) involves a network of mining machines as originally employed by Bitcoin in 2009. Computers are given a series of increasingly difficult benign math problems which they complete as a way to stave off rogue attackers. In this example above, Litecoin, Dogecoin, Namecoin, Bitcoin and potentially Ethereum use a proof-of-work method. Proof-of-stake (PoS) is different in that the transaction node for a block is randomly assigned and all network participants communicate directly with it. One advantage to this approach as it reduces the amount of hashing power needed to secure the network. At the time of this writing, only NXT in the above diagram uses a pure PoS method; Peercoin uses a hybrid and Ethereum may also use a hybrid as well. Proof-of-burn (PoB) is a unique method that has only been used thus far with Counterparty; a user sends a token (a bitcoin) to a provably unspendable address (a terminator address). The largest benefit of using this approach is that it removes the need to have a trusted party or a custodian to look after “IPO” assets. The inner red diagram illustrates the smart contract features described in this chapter. While the Bitcoin protocol could conceivably utilize such contracts, the functionality has not been ‘turned-on’ by the development team (version 0.9 will allow for 80-byte hashes that could include a hash of a distributed contract). While there are multiple different platforms that will offer such functionality, a stop-gap solution based on bitcoinJS (a Java-implementation) is being developed by Bitpay called bitcore and is described in chapter 7. Other platforms that can or will shortly allow smart functionality include Colored Coins, Mastercoin, Counterparty, NXT, BitShares, Ethereum and Ripple. Projects that are being built on top of a blockchain include Colored Coins, Mastercoin and Counterparty. Both Colored Coins and Mastercoin work exclusively with Bitcoin’s blockchain, and while Counterparty does as well, other projects such as Peercover (discussed in chapter 5) have enabled Counterparty’s currency to bridge with Ripple’s network. While Ethereum and Ripple are categorized as being the only Turing-complete platforms above, it should be noted that Ethereum has not yet shipped but is expected to in the next six months. In addition, developers with NXT and BitShares expect to include similar robustness if not full Turing complete functionality at some point in the future.59 One large category that is not distinguished in the above diagram is that of “altcoins.”60 Strictly speaking, anything that is not Bitcoin is considered by early adopters as an altcoin. Thus everything but Open-Transactions in the diagram is considered by some, as a type of altcoin. However, this devolves into individual preferences and politics, so it is best ignored. “One contingency is to have a bunch of different cryptocurrencies around […] and if one gets successfully attacked users switch to another. We already have enough cryptocurrencies around for this purpose, but this doesn’t help the people holding Bitcoin or who’ve made other Bitcoin-specific investments. And there are substantial costs in switching to a new cryptocurrency, and such a crisis might persuade many merchants to give up on cryptocurrencies generally rather than switch. A practical means of disaster preparedness is for a number of independent engineers and auditors to keep copies of the block chain, as up-to-date as possible, even if they aren’t participating as a miner or mining pool. Just the fact that a few good engineers have up-to-date copies of the block chain should be enough to dissuade most 51% attacks. 51% is enough to persuade the cryptocurrency algorithms to believe a lie, but it’s not enough to persuade engineers (or auditors with suitable tools) who manually inspect the block chain, if the payor or payee who’ve been blocked or defrauded resend the original payment instructions directly to those engineers. Of course we don’t want to rely on such a manual process in the normal course of business, just for dire contingencies. In the event of a 51% attack there is a fork in the block chain, and the job of these engineers or auditors would then be to persuade users to use the minority but correct block chain and exclude the incorrect majority. It would be expensive but doable. Not something you want to normally see happen. Another way to put it is if there is a 51% attack we have to fall back on methods of ensuring integrity that, like the traditional financial system, are manual and expensive, and the big cost savings from the automated security are temporarily lost. You might call this [ad hoc solution] “proof by engineer,” which would be replacing proof-of-work in the temporary emergency for the purposes of the transactions being disputed in the block chain fork.” [↩] Share the post "Chapter 3: Next Generation Platforms" Currently 80 NXT accounts hold more then 75% of NXT total out there, allowing massive space for price manipulations – what not to love! 🙂 As of right now, more than half of all NXT coins in circulation have been traded on DGEX alone! It stands at 510167388.37 NXT at the moment! That is half a billion. That doesn’t count the private NXT trades, or the NXT trades on https://bter.com/. That is some incredible re-distribution of coins for the first couple of months! It is statistically impossible for 80 NXT Accounts to hold more than 75% of NXT after over half of the Total Supply of NXT has changed hands on on exchange alone unless you assume those 80 Accounts exchanged all the NXT traded on the exchanges back and forth between each other. The Nxt cryptocurrency ecosystem (Symbol NXT) is not just a coin, but presents the leanest available blockchain to build future applications on. Nxt is currently in the process of implementing an automated multi-signature cryptocurrency gateway that is poised makes traditional centralized exchanges obsolete. There’s a new site comparing Colored Coins with Counterparty and Mastercoin: http://www.bitcoin2comparator.org/ quite insightful as well to understand which features each provide. @Marco, that site was setup by a Colored Coins company (CoinPrism) and is accordingly full of false and misleading statements. Your email address will not be published. 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The Untold Story of Silk Road, Part 1 Click to share this story on Facebook Click to share this story on Twitter Click to comment on this story. (will open new tab) I’m sorry; your browser does not …
The Untold Story of Silk Road, Part 1 Click to share this story on Facebook Click to share this story on Twitter Click to comment on this story. (will open new tab) I’m sorry; your browser does not support HTML5 video in WebM with VP8 or MP4 with H.264. “I imagine that someday I may have a story written about my life and it would be good to have a detailed account of it.”—home/frosty/documents/journal/2012/q1/january/week1 The postman only rang once. Curtis Green was at home, greeting the morning with 64 ounces of Coca-Cola and powdered mini doughnuts. Fingers frosted synthetic white, he was startled to hear someone at the door. It was 11 am, and surprise visits were uncommon at his modest house in Spanish Fork, Utah, a high-desert hamlet in the shadow of the Wasatch Mountains. Green ambled over, adjusting his camouflage fanny pack. At 47 his body was already failing him: He was overweight, with four herniated discs, a bum knee, and gleaming white dental implants. To get around he sometimes borrowed his wife’s pink cane. Green waddled to the door, his two Chihuahuas, Max and Sammy, following attentively. He peeked through the front window and caught a glimpse of the postman hurrying off. The guy was wearing a US Postal Service jacket, but with sneakers and jeans. Weird, Green thought. Also odd was a van Green noticed across the street, one he’d never seen before: white, with no logos or rear windows. Green opened the door. It was winter, a day of high clouds and low sun. A pale haze washed out the white-tipped Spanish Fork Peak rising above the valley. Green looked down. On the porch sat a Priority box—about Bible-sized. His little dogs watched him pick up the mystery package. It was heavy, had no return address, and bore a postmark from Maryland. Green considered the package and then took it into his kitchen, where he tore it open with scissors, sending up a plume of white powder that covered his face and numbed his tongue. Just then the front door burst open, knocked off its hinges by a SWAT team wielding a battering ram. Quickly the house was flooded by cops in riot gear and black masks, weapons at the ready. There was Green, covered in cocaine and flanked by two Chihuahuas. “On the floor!” someone yelled. Green dropped the package where he stood. When he tried to comfort his pups, a dozen guns took aim: “Keep your hands where we can see them!” Officers cuffed Green on the floor while fending off Max, the older Chihuahua, who bared his tiny fangs and bit at their shoelaces. Splayed out on the carpet, Green was eye level with dozens of boots: A large tactical team—SWAT and DEA agents—fanned out through the house. He could hear things crashing, some officers yelling, others whispering to each other. He looked at the busted door and thought, Man, that thing was unlocked. On the living room wall hung family photos—his wife, Tonya, their two daughters, and a grandson—smiling brightly above Green, lying amid $27,000 worth of premium flake. (The package was stamped with a red dragon, the symbol for high-quality Peruvian.) Over the whole scene was a needlepoint that said: if i had known you were coming, i would have cleaned up! Excited by the company, little Max stopped shaking just long enough to crap right in the living room. The fact was, Green wasn’t just your average Mormon grandpa. Over the past few months he had been handling customer service for the massive online enterprise called Silk Road. It was like a clandestine eBay, a digital marketplace for illicit trade, mostly drugs. Green, under the handle Chronicpain, had parlayed his extensive personal narcotics knowledge—he’d been on pain meds for years—into a paying gig working for the site. Silk Road was hidden in the so-called dark web, a part of the Internet that’s invisible to search engines like Google. To access Silk Road you needed special cryptographic software. Combining an anonymous interface with traceless payments in the digital currency bitcoin, the site allowed thousands of drug dealers and nearly 1 million eager worldwide customers to find each other—and their drugs of choice—in the familiar realm of ecommerce. For a brief time, from 2011 to 2013, it was a wild success. In that relatively short span, Silk Road managed to rack up (depending on how you count) more than $1 billion in sales. Which is why Green found himself surrounded by an interagency task force. He had been hired by Dread Pirate Roberts, the mysterious figure at the center of Silk Road. DPR, as he was often called, was the proprietor of the site and the visionary leader of its growing community. His relatively frictionless drug market was a serious challenge to law enforcement, who still had no idea who he or she was—or even if DPR was a single person at all. For over a year, agents from the DEA, the FBI, Homeland Security, the IRS, the Secret Service, and US Postal Inspection had been trying to infiltrate the organization’s inner circle. This bust of Green and his Chihuahuas in the frozen Utah desert was their first notable success. The Feds got Green on his feet. They had a lot of questions, starting with why he had $23,000 cash in his fanny pack and who was on the other end of the encrypted chat dialogs on his computer. Green said, improbably, that the money was his tax return. He also asked for his pain medication. Instead they escorted him to the door and into a squad car, informing him that he’d be booked for possession of 1,092 grams of cocaine with intent to distribute. “Don’t take me to jail,” Green pleaded. “He knows everything about me.” Later, under interrogation, Green told the skeptical agents that to charge him and make his name public was a potential death sentence. Dread Pirate Roberts was dangerous, he said: “This guy’s got millions. He could have me killed.” Ross Ulbricht was deep into his regular drum circle when he spotted her. As Ross slapped the hide on his djembe, a West African drum, Julia Vie sat across the circle. She had a head full of curls, light brown skin, and dark brown eyes. The drum circle was assembled on a lawn at Penn State, where in 2008 Ross was working toward a master’s degree in materials science and engineering. Julia was 18, a free-spirited freshman, and when she noticed Ross she felt a powerful attraction. Not long after, Julia visited Ross’ campus office, where they couldn’t help but kiss and fall into a carnal heap on the floor. Both were smitten. Ross studied crystallography, working on thin-film growth. One day he made a large, flat blue crystal, affixed it to a ring, and gave it to Julia. She had no idea how her boyfriend could make a crystal, but she knew she was in love. Ross had grown up in Austin, Texas, and had always been smart and charming. He’d been the kind of kid who was an Eagle Scout—and let his friends give him a mohawk on a whim. He was raised in a tight family. They’d spend summers in Costa Rica; Ross’ parents had built a series of rustic, solar-powered bamboo houses there, near an isolated point break where Ross learned to surf. In high school, “Rossman,” as friends called him, drove an old Volvo, smoked plenty of pot, and still got a 1460 on his SATs. To friends, Ross was carefree but also caring. Ross earned a scholarship to the University of Texas at Dallas and majored in physics. From there he landed a graduate scholarship at Penn State, where he excelled as usual. But he wasn’t happy with the drudgery of lab research. Since college he’d been exploring psychedelics and reading Eastern philosophy. At Penn State, Ross talked openly about switching fields. He posted online about his disenchantment with science—and his new interest in economics. He’d come to see taxation and government as a form of coercion, enforced by the state’s monopoly on violence. His thinking was heavily influenced by Austrian economist Ludwig von Mises, a totem of the modern American libertarian orthodoxy. According to von Mises, a citizen must have economic freedom to be politically or morally free. And Ross wanted to be free. When he finished his master’s in 2009, he moved back to Austin and bought Julia a plane ticket to join him. She left school, and they got a cheap apartment together. It was cramped, but they were young and dreamy. Both imagined they might get married. Ross tried day trading, but it didn’t go well. He started a videogame company. That failed too. The setbacks were devastating. He didn’t want to be trying; he wanted to be doing. During this time, his downstairs neighbor, Donny Palmertree, invited Ross to work with him on Good Wagon Books, a business that collected used books and sold them in digital storefronts like Amazon and Books-A-Million. Ross built Good Wagon’s website, learned inventory management, and wrote a custom script that determined a book’s price based on its Amazon ranking. In his spare time Ross read, hiked, improved his yoga, and, as Julia fondly recalls, had “lots and lots of great sex.” But they also argued, about politics (she was a Democrat), money (what he called “frugal,” she called “cheap”), and their social life (she partied more than he did). Their relationship turned stormy, with frequent breakups. In the summer of 2010, they split up yet again. He was heartbroken, later telling a woman he met on OkCupid how he’d recently been in love and was trying to get over it. Ross was adrift. “I went through a lot over the year in my personal relationships,” he wrote in a journal on his computer, a kind of self-assessment of life goals. “I had left my promising career as a scientist to be an investment adviser and entrepreneur and came up empty-handed.” Ross felt ashamed, but not long afterward Palmertree got a job in Dallas, leaving Good Wagon to Ross. For years, all he’d wanted was to be in charge of something. Now he was. In the Good Wagon warehouse, Ross oversaw five part-time college students sorting, logging, and organizing the 50,000 books on shelves he built himself. That December was Good Wagon’s best month, clearing 10 grand. But by the end of 2010, the new CEO of Good Wagon was looking beyond the book business. During his forays into trading, Ross had discovered bitcoin, the digital cryptocurrency. The value of bitcoin—based only on market factors, unattached to any central bank—aligned with his advancing libertarian philosophy. On his LinkedIn page, Ross wrote that he wanted to “use economic theory as a means to abolish the use of coercion and aggression amongst mankind.” To that end Ross had a flash of insight. “The idea,” he wrote in his journal, “was to create a website where people could buy anything anonymously, with no trail whatsoever that could lead back to them.” He wrote that he’d “been studying the technology for a while but needed a business model and strategy.” Like most libertarians, Ross believed that drug use was a personal choice. And like all people paying attention, he observed that the war on drugs was a complete failure. The natural merchandise for his new enterprise would be drugs. “I was calling it Underground Brokers,” Ross wrote, “but eventually settled on Silk Road.” Ever the capable scientist, Ross decided to cultivate his own psilocybin mushrooms as a starter product. He was spending time with Julia again, while struggling with programming his site and still running Good Wagon. Then, one night in early 2011, Good Wagon collapsed. In the literal sense. Ross was working late, alone in the warehouse, when he heard an enormous crash—the sound of the library falling apart. He’d carefully designed the entire system but had somehow forgotten two vital screws, the ones that held it all together; the shelves came down, every single one, like dominoes. When Ross broke the news to Palmertree, he also admitted that his heart wasn’t in Good Wagon anymore. They agreed to close the company, with no hard feelings. He told Palmertree that he already had a new business idea—“something really big.” Silk Road went live in mid-January 2011. A few days later came the first sale. Then more. Ross eventually sold all 10 pounds of his mushrooms, but other vendors started joining. He was handling all the transactions by hand, which was time-consuming but exhilarating. It wasn’t long before enough vendors and users made it a functioning, growing marketplace. Just before the launch, facing a new year and a blank slate, Ross had resolved to change his life. “In 2011,” he wrote to himself, “I am creating a year of prosperity and power beyond what I have ever experienced before. Silk Road is going to become a phenomenon and at least one person will tell me about it, unknowing that I was its creator.” I’m sorry; your browser does not support HTML5 video in WebM with VP8 or MP4 with H.264. Special agent Carl Mark Force IV was half-asleep when the postal inspector started talking about something weird in the parcel sorters. “Just wanna let everybody know about this,” the inspector said, delivering his brief to a conference room full of bored law enforcement personnel. “We are having problems with drugs coming through the mail.” Force was a Baltimore-based DEA agent, and he was at a regional interagency meeting, a periodic intel show-and-tell with analysts from the FBI, the DEA, the IRS, and Homeland Security. “It’s coming from an underground drug site,” the inspector said, “called Silk Road.” Force sat up. This was the kind of thing he was looking for. He had burned out on the grind of arresting street dealers. At 6 feet and 200 pounds, Force was an athletic guy, and coming up through the agency he’d loved the physical thrill of bursting through a door at 6 am in Doc Martens and a tactical vest, clearing some broke-down row house on some broke-down block and catching some dealer in the bathroom, cuffing the guy before he could wipe his ass. But after countless raids, the adrenaline had worn off. And in the grand scheme of things, who cared about confiscating a few grams? He was pushing 50 and still on the federal payroll in a regional office. That’s when you want to find a big case and get out. And so he went looking for leads in meetings like this, which were mostly yawners—until now. By the time Force heard about Silk Road, it had been around nearly a year. The site was modeled, sensibly, on Amazon and eBay. And that’s what it looked like: a well-organized community marketplace, complete with profiles, listings, and transaction reviews. Everything was anonymous, and shipments often went through the regular old postal service. No need for fake names—you put your real address, and if any one asks, you just say you didn’t order all that heroin! Silk Road’s “Seller’s Guide” had helpful instructions on how to vacuum-seal or otherwise hide drugs to evade electronic sensors or canine olfactories. Most shipments made it to happy customers. That the small percentage of intercepted Silk Road packages represented an uptick spoke to the quickly rising volume of the site’s trade, a vast pharmacopeia covering dozens of categories with 13,000 listings. It was a colorful smorgasbord for every type of connoisseur: fishscale Colombian cocaine, Afghan No. 4 heroin, strawberry LSD, Caramello hash, Mercury’s Famous uncut cocaine flakes, Mario Invincibility Star XTC, white Mitsubishi MDMA, a black tar heroin called the Devil’s Licorice. Then there were the prescription meds, everything from Oxycontin and Xanax to Fentanyl and Dilaudid. Silk Road’s product descriptions and user ratings amounted to an encyclopedic information source. Cantfeelmyface said one product “has a nice shine” and provides “a rush of euphoria and confidence.” Ivory’s review of some crystal MDMA observed that it had “a nice fizz and wisp of smoke =].” The reviews and community standards enforced excellent value and customer service on Silk Road, which brought more users, increasing its reputation further—until Silk Road became the premier destination for digital drug sales. Law enforcement was caught with its tactical pants down. Various agencies had sniffed around Silk Road in the summer of 2011 but gotten nowhere. Force saw potential but didn’t even know where to begin. Months later, in January 2012, he got some good news from his supervisor. Homeland Security was assembling a task force for a full-on Silk Road case. “You want in?” his boss asked. Before he knew it, Force was at a Silk Road summit, where he and 40 other agents picked through doughnut boxes and watched PowerPoint presentations filled with technical information about nodes and TCP/IP layers. Most of the agents’ eyes glazed over, but, yes, Force wanted in. The task force that formed to take on Silk Road—Operation Marco Polo—was based out of the Baltimore Homeland Security Investigations office. Another agent showed Force how to navigate Silk Road. He quickly saw that it had a vocal mastermind, the revered figure known as Dread Pirate Roberts. It was a clever touch, borrowing the name from The Princess Bride, in which the pirate was a mythical character, inhabited by the wearer of the mask. The idea of a malleable but enduring identity only added to Silk Road’s enigmatic appeal. Force was intrigued. Whoever wore this digital mask sat atop a burgeoning empire. Force told his boss that Silk Road was a “target of opportunity.” But he was unskilled at computers, and he didn’t know anything about bitcoin. So he decided to learn. Hector Xavier Monsegur was an unusual visitor to the New York FBI office. Then again, Monsegur was not really a visitor. It was past 1 am one night in the spring of 2011, and he was being led to the back of the empty bullpen by Chris Tarbell, a young agent who had arrested Monsegur earlier that night in the Jacob Riis Houses on the Lower East Side. Monsegur was an enormous Puerto Rican, ears studded with diamonds, who grew up in the projects. He was also Sabu, a cofounder of LulzSec, the elite group of hackers responsible for electronically attacking dozens of corporate and government targets like News Corp. and the CIA. Sabu was the most high-profile member of Anonymous, the “hacktivist” political collective. Tarbell had managed to follow a blind lead from the FBI’s public hotline to Sabu and reel him into the FBI as an informant. It was a remarkable score for Tarbell, especially since he was still a rookie. Tarbell had always had the cop in him, even when his parents thought he was going to be a doctor. In college he was a powerlifter, an unusual sight at James Madison University, a preppy school in the Shenandoah Valley. He already looked like a cop: big, with a short coif on top of that baby face. By the time Tarbell finished college, he sensed where policing was headed and got a master’s in computer science. He didn’t understand programming at first. But he did understand that this was the future, so he paced himself, stuck with it, and came out the other side as a computer forensics expert, working as a civilian for the FBI. Tarbell spent four years traveling the world with global forensics, tracking down terrorists, child pornographers, and botnets. He showed a talent for uncovering digital trails. He thought about how the virtual realm seemed like magic, a secret world, poorly understood; and like all magical realms, it was full of charlatans and practitioners of dark arts. Few could decipher those secrets, and Tarbell liked being one of them. After a few years in forensics, Tarbell told his wife, Sabrina, he wanted to officially join the Bureau. Sabrina, eight months pregnant, approved, even though it meant uprooting their lives. After Quantico, Tarbell was assigned to the New York office, home to the FBI’s nascent cybercrime division. By this time he was 31, a little old to be the new guy. But catching the elusive Sabu made Tarbell’s name at the Bureau. Online, Sabu’s credibility among hackers was unassailable. The FBI set him up with a new laptop in their office, where he gathered evidence against his LulzSec friends. Nine months later dozens of arrests were made, severely disabling two of the world’s biggest hacker groups. After LulzSec, Tarbell looked for a new big case. He took an interest in Tor, the encryption software that allowed users to visit sites such as Silk Road. Tor’s protocol is a kind of digital invisibility cloak, hiding users and the sites they visit. Tor stands for “the Onion Router” and was launched by the Navy in 2002. It has since become a tool for all manner of clandestine communications, licit and illicit, from circumventing censorship in countries like China to powering contraband sites like Silk Road. Tor’s encryption is so layered, agents thought it was unbreakable. When cybercrime investigations hit a Tor IP, they would give up. The supposed impossibility only attracted Tarbell. I’m gonna take on Tor, he thought. Waiting for Dark: Inside Two Anarchists' Quest for Untraceable Money DEA Agent Charged With Acting as a Paid Mole for Silk Road Silk Road Boss' First Murder-for-Hire Was His Mentor's Idea Tarbell briefed his supervisor, who briefed his supervisor, and so on, until they wound up in the office of the SAC, or special agent in charge. Above the SAC is the assistant director in charge—yes, an endless source of amusement when complaining about red tape in the FBI is to talk about how the SAC is just below ADIC. It took a couple of sales pitches to soften up the SAC, but in February 2013, Tarbell opened the FBI’s first Tor case: Operation Onion Peeler. By now Silk Road was a juicy target. Many agencies were working on it, but with no success. Homeland Security Investigations had a case open. The IRS had looked into it. There was Force’s DEA case in Baltimore. And the New York DEA, which asked Tarbell for technical advice. They were using traditional drug investigation techniques, but Tarbell knew this wasn’t an operation where you could flip people up the chain, because there was no chain. You had to go straight to the top. Ross was paddling through the break, lining up for a set. The beach at Bondi, just south of Sydney, sloped down to a gorgeous waterline. For Ross, the waves were among the many advantages of leaving Austin in late 2011 to spend some time in Australia with his older sister, Cally. He quickly made friends there, a lively group that went out drinking, invited him to warehouse parties, and met up to go surfing. Ross had worked that morning but was in the water by afternoon. It was nice, the portable life. And it was made possible by his flourishing online drug bazaar. Silk Road’s usage had exploded in June of that year, after a story on Gawker brought the site mainstream attention. After that, traffic grew so fast that Ross needed technical support to maintain the site, deal with transactions, and add features like automatic payments and a better feedback system. He’d been doing it all himself, learning on the fly, programming automated transactions and using CodeIgniter to write and rewrite the site after a benevolent hacker alerted him to some major flaws. (“This is amateur shit,” the hacker had said.) His homespun efforts worked (miraculously), but Ross lost sleep over it. To outsiders he seemed his normal genial self, but in his digital domain he was frazzled, trying to keep Silk Road running. All the while he recorded in his journal the pitfalls of running a seat-of-the-pants startup: And yeah, that was yet another learning curve, configuring and running a LAMP server, oh joy! … But I was loving it. Sure it was a little crude, but it worked! Rewriting the site was the most stressful couple of months I’ve ever experienced. Early on, Ross had turned to Richard Bates, a college friend who was now a software engineer in Austin. Bates helped Ross with basic programming and tended to crises like the site’s first major outage. When Silk Road took off, Ross tried to hire Bates, but Bates already had a programming job. “Have you ever thought about doing something legitimate,” Bates asked Ross, “something legal?” Ross wasn’t really interested. Driven by the failure of his previous businesses, he was determined to make Silk Road succeed. He disappeared into his work and started professionalizing his organization. He and Julia broke up again that summer. With Silk Road in his computer, there was little to keep Ross in Austin. By the time he got to Australia, he had banked $100,000 and was earning $25,000 a month in commissions. “It was time to bring in some hired guns,” he wrote, “to … take the site to the next level.” Part of the problem was that Ross was grappling with what hackers call operational security, or opsec. To completely seal his two identities from one another, Ross realized, would require a kind of ruthless and elaborate secrecy. He appealed to Bates to stay quiet. Later, Ross told his friend that he’d sold Silk Road to a mysterious buyer. He also struggled with learning how to lie. Just before New Year’s he went on a date with a woman named Jessica; he told her, like everyone else, that he was working on a bitcoin exchange. This alone constituted a security leak. I’m so stupid, he thought. But Ross got “deep” with Jessica and felt an urge to reveal himself. He lamented this feeling, the divide between intimacy and deceit. The Eagle Scout in him agonized over telling half-truths. Sitting across from Jessica, he wished he could be honest; he also wished he’d started with a better lie. But Ross did divulge the most important truth. He told her: “I have secrets.” When Silk Road started, its leader was something of a cipher. Users and vendors only knew that there was a system administrator who’d established the site’s conceptual framework as both a drug marketplace and libertarian experiment. ¶ There was a basic ethics for that experiment. Some of Silk Road’s users were purists who advocated for full transactional autonomy—if heroin, why not howitzers and human hearts?—but the administrator pronounced “a strict code of conduct.” No child porn, stolen goods, or fake degrees. He summed it up like so: “Our basic rules are to treat others as you would wish to be treated and don’t do anything to hurt or scam someone else.” As time went on, the administrator became an important voice, the site’s theorist and advocate for individual liberty. But ideas need a true leader. This role, Ross decided, was too important to go unnamed. “Who is Silk Road?” posted the administrator in February 2012 to the community. “I am Silk Road, the market, the person, the enterprise, everything … I need a name.” “Drum roll please … ,” came the dramatic announcement. “My new name is Dread Pirate Roberts.” Everyone loves The Princess Bride, and the reference was clear immediately. (Force and Tarbell, who had both seen the movie many times, got the implication as well: plausible deniability.) The mask, worn by successive generations of pirates, obfuscates the relationship between the name and the man. The christening of DPR was emblematic of Silk Road’s secrecy. It also ignited a true cult of personality. DPR was thoughtful and at times eloquent. For believers, Silk Road was more than a black market; it was a sanctuary. For DPR, the site was a political polemic in practice. “Stop funding the state with your tax dollars,” DPR wrote, “and direct your productive energies into the black market.” DPR got more grandiose over time, writing that every transaction on Silk Road was a step toward universal freedom. In a way, Silk Road was the logical extension of the libertarian view that animates much of the Internet (not to mention the rising political tide in Washington). It was Silicon Valley in extremis, a disruptive technology wrapped in political rhetoric. DPR was its philosopher-king, envisioning a post-state digital economy, with Silk Road as the first step toward a libertarian paradise. Not only was Silk Road a slap in the face to law enforcement, it was a direct challenge, as DPR wrote, to the very structure of power. All the more reason, of course, why the government wanted to shut it down. Ross had been flattered by the sudden media attention in June 2011, but when US senator Charles Schumer called a press conference to denounce Silk Road, he was alarmed. “The US govt, my main enemy,” he wrote, “was aware of me and … calling for my destruction.” I am a great admirer of your work. Brilliant, utterly brilliant! I will keep this short and to the point. I want to buy the site. I’ve been in the business for over 20 years. SILK ROAD is the future of trafficking. Force wrote this message from one of two government laptops he was issued for his undercover mission on Silk Road. They were Dells, silver and clunky with shitty batteries, so the DEA agent had to keep them plugged in, usually in the seclusion of the guest room of his house in the Baltimore suburbs. That was also the favorite room of Pablo, Force’s cat, who would sit on the bed watching him, in his chair and ottoman, as he took to the keys posing as a high-rolling international drug smuggler. He had constructed an elaborate identity: Eladio Guzman, a cartel operative based in the Dominican Republic whose bread and butter was moving midsize shipments of heroin and cocaine. For Guzman’s Silk Road screen name, Force chose Nob, after the biblical city where David obtains the sword of Goliath. Oh, and the Guzman character was blind in one eye. So Force put on a hoodie and an eye patch and had his 10-year-old daughter take his profile picture. In the photo, Force, aka Guzman, aka Nob, held up a sign: all hail nob. Force knew how to put together a backstory from his years in undercover. As a young agent, he’d been on the front lines of the drug war. He grew out his hair, put bronze hoops in his ear, and inked a huge tribal piece on his back. He said he worked in construction while looking for leads in down-and-out bars, like the Purple Pig Pub in Alamosa, Colorado, the “gateway to the great sand dunes”—and also the gateway to the Rocky Mountain route for Mexican meth. Putting himself in the mindset of a smuggler, Force saw Silk Road’s strength as communications and distribution. Hence his big opening gambit: For Guzman, Silk Road offered the opportunity for covert vertical integration from wholesale to retail. Force hoped he’d get a quick response, and he did. The day after Nob’s proposal, Dread Pirate Roberts wrote, “I’m open to the idea. What did you have in mind?” I’m sorry; your browser does not support HTML5 video in WebM with VP8 or MP4 with H.264. Tarbell was at work, on the 23rd floor of the New York FBI office, early as usual. He was the kind of guy who wanted to be first in the office. Always had been, ever since college, when he started organizing his whole life on spreadsheets. Tarbell and Sabrina’s first date is still on an Excel worksheet somewhere, as is everything that’s happened since: calendar, bills, weight goals, daily run. Tarbell’s father-in-law, a longtime marine, thought Tarbell was the most regimented person he’d ever met. Tarbell set his alarm for 4:30 am, hit the gym by 5, and was showered and seated at his desk by 7 am sharp. Tarbell and his fellow cybercops occupied a couple of dozen spots toward the back of the bullpen, fanned out around a core group of desks called the Pit. This was prime real estate, where the cool kids among the FBI’s computer clique sat. When Tarbell started he was sitting two desks and an aisle away, way over by the windows. But during the LulzSec investigation, a coveted desk opened up and he leapfrogged right into the center of the Pit. Tarbell liked his new colleagues, especially Ilwhan Yum. As a kid, Yum moved from Korea to Long Island, where he got into videogames and later learned about networking and packets from playing competitively in college. Yum would become vital to the Silk Road case because he was the squad’s bitcoin specialist. He’d gone to the first bitcoin conference, in August 2011 in New York. From a law enforcement perspective, bitcoin screamed money laundering. But technologically, Yum thought the protocol “was, simply, beautiful.” Across from Yum was Tom Kiernan. He’d been in the Pit the longest, 17 years, nearly since the DOS era, when he started at the Bureau as a civilian tech support guy, responding when agents’ printers stopped working. Kiernan just understood machines, backward and forward, and became the spine of the cybersquad. He’d seen every case and knew all, like the Pit’s very own oracle—just the guy Tarbell needed to help probe Silk Road’s defenses. Tor was a vexing problem. Tarbell thought it had benefits, but he also believed that all technologies could have their purposes corrupted. In a criminal context, as with Silk Road, Tor made classic law enforcement—knocking on doors, interviewing witnesses, making deals—nearly useless. Sure, you might start to piece together the network or get closer to DPR, but you’d still have only usernames. This was not a people case, Tarbell thought. This was a computer case. The path to DPR was through his server. Finding it was a fearsome technical challenge. Out of 1.5 billion computers in the world, Tarbell started to think about just one machine, day after day. It could be anywhere. He was looking for a nanowire in a haystack. Back in Baltimore, Force was fluffing pillows. This was his habit in the evening, a way to clear his mind before getting on Silk Road as Nob. For the first couple of weeks, Nob pushed his big Silk Road investment scheme. But DPR declined, saying essentially: This operation is bigger than you think. ¶ And it was, because Silk Road worked extremely well. DPR’s robust stewardship was paying off. To protect against scammers he created a Silk Road escrow, where all transactions would be held until settled. DPR wanted to create what he called a “center of trust,” and it was this centralized payment structure that enabled Silk Road to really take off. So when Nob offered to buy the operation, DPR countered with quite a price: $1 billion. Nob scoffed. But in fact, DPR’s number might have been low; the scale of Silk Road commissions over the next year would in fact qualify DPR as one of the biggest entrepreneurs of the second Internet boom. Besides, he told Nob, “this is more than a business to me. It’s a revolution and is becoming my life’s work.” In essence, DPR faced a classic founder’s dilemma. “It would not be easy to pass the baton without hurting the enterprise,” he messaged Nob. “And right now that is more important to me than the money.” Force kept communication with DPR alive by talking about creating a parallel site for cartels, a pro version called Masters of Silk Road. He spent many nights in his guest room, Pablo purring by his side, forging a camaraderie with DPR through the intimacy of late-night TorChat. At times they sounded like college kids getting to know each other in the freshman dorm. “The food pyramid is bullshit,” DPR said, encouraging Nob to go paleo. Nob advised DPR against seeing the latest Batman, invited him to LA for tacos, and talked about how much Latinos like the Smiths. DPR had never heard of the Smiths. But otherwise, Force’s mysterious new pen pal was appropriately cagey. He didn’t want to meet up for tacos. For some reason, Force always imagined DPR as a skinny white kid, probably on the West Coast based on his active hours. Force liked him, this kid he had in mind as DPR. He enjoyed getting deep into the culture of Silk Road. It reminded him of his undercover days. He thought about DPR, living a double life, and the allure—and danger—of taking on a new identity. Force had seen it firsthand in his years in undercover. He came to love being that criminal operator big shot. But a new self comes with a price. The more Force pretended and partied, the easier it was to inhabit the part. At home he was the clean-cut, churchgoing dad. But when he was at some nightclub hunting for drug deals, liquor flowing, surrounded by girls, it was hard to believe just how comfortable he felt. Eventually Force stopped drinking and recommitted himself to church. He’d been a hot undercover agent, but he left behind the double life that nearly destroyed him. That’s how he wound up in the Baltimore office, living in a suburban two-story with a big, solid oak tree in the backyard. But now here he was, within sight of that oak, his family in the next room, venturing again into the drug world as someone else. Force recognized it was all a dangerous game. He knew how you could change. He could see it in DPR already. The thing about taking on a new identity is that it is fundamentally a lie. To the world at first. And then to yourself. “The world is in flux,” Ross tells the camera. He sits across from his friend René Pinnell, recording for StoryCorps, a nonprofit that invites anyone to share their life experiences. Ross and René thought the world should know more about them, so they entered the StoryCorps booth, closed the door, and spent half an hour with each other and the camera. In this recording, Ross is contemplative. He lives in San Francisco now. It has been a revelation. He is awed by the beauty and the entrepreneurial energy. He came at the invitation of René, whom he’d known since seventh grade. René had been an aspiring filmmaker who instead wound up in technology in San Francisco, and one day he phoned Ross, intoning the great American clarion call of opportunity out West. Two weeks later, Ross showed up on his friend’s doorstep. In the video, they get nostalgic about childhood. There was the time the two of them tried to steal extra Tater Tots in the lunch room at West Ridge Middle School. The way Ross would eat his peanut butter chocolate wafers, precisely, by nibbling down the layers. How uncool it was when Ross had a sleepover and some bad kids stole a year’s worth of change he’d saved. Ross Ulbricht Didn't Create Dread Pirate Roberts. This Guy Did Here’s the Secret Silk Road Journal From the Laptop of Ross Ulbricht Read the Transcript of Silk Road’s Boss Ordering 5 Killings Of course, they talk about love, as young men do. Ross reminisces about Ashley, his first, and her great tits. The first time they’d hung out, they did psychedelics, something called AMT. They got it from his neighbor Brandon, a “super-brilliant physics student who was into all of these research chemicals.” Ross was still a teenager then, lying on the floor, expanding his mind next to a beautiful girl for eight hours. Life is a fluctuating value, René says, like currency. René thinks his friend is a trader. René talks about how Austin is “the meh of startups,” whereas San Francisco is “the Mecca.” It’s late 2012, a time of fever dreams in the Bay Area, full of people wanting to “change the world” and make a lot of money in the process. René may not know it, but he is sitting next to someone doing just that. Ross and René wonder: What will happen in 200 years? “I want to have a substantial positive impact on the future of humanity by the time I die,” Ross says. René asks Ross if he thinks he’ll live forever. Ross looks up, breaks into a tiny smile. “Yes,” he says. “I think I might.” As Silk Road became a true global market, DPR reveled in his role as leader and libertarian evangelist. He created a book club, where users could polish their dogma from the sacred texts of von Mises himself. He talked more about a near future when our current governments would seem like ancient history, along with “the pharaohs” and their “armies of slaves.” He extolled the Silk Road faithful for being on the front lines of revolution. “Thank you,” DPR said, “for your trust, faith, camaraderie and love.” He offered them “hugs not drugs,” then amended it: “wait, hugs AND drugs!” The community responded in kind, likening DPR to Che Guevara, calling him a “job creator” and declaring that his name would live on “among the greatest men and women in history.” Silk Road had become a brand cult, with tens of thousands of fanatical users. And DPR was their very own Steve Jobs. Force sensed DPR’s swelling confidence. He’d been talking to him for a year, taking in DPR’s personality and passion. Force could appreciate the appeal. It must be intoxicating, bringing an idea to life, projecting your will into the world through encrypted code and transactions. Sometimes DPR said that he sensed the scale of this achievement and would hear the theme to Tron playing in his head. This was the new spirit of DPR: a self-created beacon in the darkness, spreading the good word through libertarian jubilee, holding aloft his lantern of truth. It was a lonely outpost, however. DPR said so to Nob. He called himself a person “who hides behind computers.” At times DPR wished they could meet. Instead they shared a mix of truth and fiction about their lives. NOB: you doing good?DREAD: yes sir, today is a good day.NOB: so that black cloud that was over your head has gone?DREAD: the new look rolled out with minimal issues, woke up next to a beautiful woman, and I’m listening to one of my favorite bands/songs … and eating fresh strawberries. They talked shop: site fixes, the odd “holiday slump” in drug sales, the human resources problems of a clandestine telecommuting workplace. This was a big problem. To grow, DPR said, he had to build a strong workforce. A leader needs support so he can focus on the future. “I just want to let you know that your work hasn’t gone unnoticed,” DPR wrote to Chronicpain, aka Curtis Green, the Mormon grandpa in Spanish Fork, Utah. “I’d like to offer you a position.” Green had been on Silk Road for some time, and he’d chosen that screen name because of his own chronic pain, caused by a back injury he’d sustained while working as an EMT. On disability, Green had become an amateur pharmacologist, learning the ins and outs of opiates. Green had always been the hobbyist type, ever since his high school obsession with ham radios, which he used to talk to strangers all over the world, including astronauts on the International Space Station. Silk Road fulfilled his yearning for community and technical intricacy, combining computers with his interest in “safe drug use.” With DPR’s approval, Green started Silk Road’s Health and Wellness forum, where he advised people on how to snort ephedrine, cautioned against Fentanyl for the uninitiated, and explained to someone that it’s not a good idea to inject peanut butter or shoot heroin into your eyeball. When Green’s diligent forum-moderating turned into a job offer from DPR, he was thrilled. DPR sent a job description, which included customer service and resetting passwords. Green (taking on a new admin handle, Flush) worked 80 hours a week, mediating drug sale disputes from his lounger, Fox News running in the background. DPR was a complicated boss. He could be a hard taskmaster, haranguing Green for being even one minute late to an appointed time on TorChat. Green was chagrined when he got no Christmas greeting. But other times DPR was full of generosity, staking Green in a poker tournament (and being unfazed when Green lost it all). Like a digital-era don, he could be affectionate and magnanimous in public but decidedly less humane behind the scenes. He gave audience to loyal users seeking favors—one guy got help buying a wedding ring—but was decidedly unsympathetic to the real consequences of his business. Green forwarded one troubling customer service complaint from a woman whose brother overdosed on heroin from Silk Road and noted that under the current system, children could use the site. Perhaps that was a hair too much freedom, Green said. DPR erupted: “THAT’S MY WHOLE IDEA!” Any constraints would destroy the fundamental concept, he said, and refused any assistance for the grieving sister. And yet Green stayed on, despite the insensitivity and ethical contradictions, becoming one of Silk Road’s most trusted employees. On Silk Road, however, trust only went so far. DPR demanded a scan of Green’s driver’s license. It was a loyalty test. Green obliged, even though it exposed him while allowing DPR to remain in the shadows. Like Force, Green felt like he’d established quite a bond with DPR—partners in a secret world. But not all secrets are partnerships. No matter how close Green or Force or anyone else got to DPR, no one had any idea who he was. I’m sorry; your browser does not support HTML5 video in WebM with VP8 or MP4 with H.264. Tarbell had three computers on his desk, as did Kiernan and Yum. The cybersquad crew looked for any flicker of information that would crack open the dark web. But their investigation was moving slowly. They explored the site, read the forums, and crawled Reddit, looking for Silk Road community members talking to each other or to DPR about cryptographic weaknesses they’d discovered. But a month went by with no traction. The crew ate lunch together every day at 11:30 on the nose like the habit-happy cops they were. Most of the time they picked up sandwiches downstairs at the deli, where the guy behind the counter knew them all by their order. Kiernan would be happy with chicken cordon bleu forever, and Tarbell was such a fan of the chicken parmesan that when he’d occasionally get a salad the deli guy would say, “Awww, what’s the matter, Mr. CIA? No chicken parm today?” Tarbell called Yum his “work wife.” They were a good team, he thought: the thinker and the talker. Tarbell was the talker; he had by now emerged as the dominant personality in the Pit. The dues-paying rookie of the previous year had given way to a raucous, confident alpha type who bristled when he heard rumblings from Washington about ownership of the Silk Road investigation. The case had become an enormous bureaucratic battle, as every agency tried to plant its flag. The Baltimore task force—where Force’s case operated—was the most aggressive, claiming complete ownership and bad-mouthing the FBI cybersquad in particular. “They think we’re a joke, poking around on the Internet,” Tarbell told Yum. “But we’re going to prove them wrong.” The other agencies, he noted, had been at it for a while, “and they don’t have fuck-all.” But in the bureaucratic muddle that is the United States government, there is no clear jurisdiction for cybercrime. It’s a growing field that’s fueling law enforcement funding, which attracts egos and politics. Silk Road represented the new frontier of crime, a digital-era Wild West. As with the original frontier, Washington wanted to fence it in—and whoever brought law to the lawless would be a hero. Subdue the digital frontier and there was a star waiting for you, which was why the Silk Road case had become the largest online manhunt in history. Green wouldn’t stop talking, even covered in cocaine. That was how Force found him when the SWAT team finished ransacking his house. Force was running that show; as Nob, he’d orchestrated the shipment of coke, and the whole raid was part of the growing Marco Polo task force investigating Silk Road. He’d watched Green take the bait from a command post across the street, and when he walked in a few minutes later, Green was cuffed on the floor, blabbing already. Green had more answers than Force had questions. He talked and talked and talked until Force couldn’t stand it. Said he was a former EMT; he was just trying to help people; they could have just knocked; he thought the package was something else, a totally legal drug called N-Bombe. Shut the fuck up already, Force thought. Nevertheless, Green was a tangible lead in the Silk Road case, a corporeal asset rather than just letters on a screen. As Green was led to the squad car to be booked on possession by the local cops, Force put his number in Green’s phone and said, “When you get out, call me.” In jail, Green jawboned for hours to anyone who would listen, even declaring that he had been asked to cooperate with the DEA, at which point his tattooed cell mates told him to stop talking. When Green was released on bail, he went home and found his door still broken. His daughter had cleaned up some. In his bedroom the cops had apparently discovered that this particular Mormon grandpa owned a dildo, which they left for him standing straight up on the bed. Home alone with his two Chihuahuas, Green cried like a baby. “I’m a good little Mormon boy,” he said to himself. His thoughts grew dark. He loaded his dad’s .32. Then he looked down the barrel and threw it across the room. Green would be the first to admit that he was too chickenshit for suicide. He ran into the living room and threw himself onto the couch, where his Chihuahuas joined him, licking his face while he fell to his knees to pray. Eventually Green decided to get up, get his phone, and call DEA special agent Carl Force. It wasn’t until Force spent some time on Green’s computer and saw DPR’s messages—“Why aren’t you clearing out your accounts?” “Get back to me ASAP”—that he realized they’d caught a big fish in their net. This guy was a DPR lieutenant. Force mobilized quickly, working with the task force to put Green up in a Salt Lake City Marriott and debrief him. But DPR was jittery, and he’d noticed that his trusted admin had been offline for a few days. A Google search revealed that Green had been arrested, and DPR suspected he would flip. Moreover, he got a message from another employee, Inigo, that $350,000 in bitcoins had just disappeared from various accounts. Inigo quickly traced the theft to Green’s admin identity. DPR went into crisis mode, communicating with his confidants, scrambling for a solution. “This will be the first time I have had to call on my muscle,” he told Inigo. “Fucking sucks.” Moments later, DPR messaged Nob that he had a “problem” in Utah that required violence. According to the backstory Force had created for Nob, his criminal repertoire included enforcement and collection talents, so he acted the part. Sitting in the Marriott, Force received a PDF of the target, opened it, and discovered a scan of Green’s driver’s license photo. Then he looked across the table, where at that very moment Green was half-asleep. Well, this sure is an opportunity! Force thought. NOB: do you want him beat up. shot, just paid a visit?DREAD: I’d like him beat up, then forced to send the bitcoins he stole back.DREAD: not sure how these things usually go. Green claimed he hadn’t stolen any bitcoins and protested that the task force had had his computer when the money went missing. But Force didn’t want to talk about the money. He used DPR’s request to construct an elaborate plan. DREAD: how quickly do you think you can get someone over there? and what does that cost you? Force got Green to sign a waiver, thereby commencing his role in an impromptu staged torture sting against DPR. Soon Green was being dunked in the bathtub of a Marriott suite by phony thugs who were in fact a Secret Service agent and a Baltimore postal inspector. Force recorded the action on a camera. “Did you get it?” Green asked, wet and wheezing on the floor. He’d felt like their simulation was a little too accurate. They dunked him four more times to get a convincing shot. While waiting for news from Nob, DPR considered his options. A Silk Road user named Cimon, a trusted adviser who had guided DPR on opsec, programming, and leadership, asked DPR when a transgression against Silk Road requires a lethal response. “If this was the wild west,” DPR said, “and it kinda is, you’d get hung just for stealing a horse.” A few minutes later, Inigo chimed in, “I don’t condone murder but that’s almost worthy of assassinating him over lol.” DREAD: ok, so can you change the order to execute rather than torture?DREAD: he was on the inside for a while, and now that he’s been arrested, I’m afraid he’ll give up info. Of course, DPR was right that Green had been flipped—by the very same man he’d just hired as an assassin. It was a surprising escalation. The Silk Road leader, who waxed lyrical about “respecting” the Silk Road community, was now pondering pricing for murder. DREAD: never killed a man or had one killed before, but it is the right move in this case.DREAD: how much will it cost?DREAD: ballpark?DREAD: less than $100k?DREAD: have you killed or had someone killed before? It was like Scarface on fast-forward, Force thought. But he played right along. Over a week or so, Force conspired with his team to complete the fake death of Green. Force sent DPR photos of the staged torture, followed by photos of Green, facedown on the floor, pallid, smeared with Campbell’s Chicken & Stars soup—the supposed aftermath of asphyxiation. Green holed up in his house (he had to stay out of sight as part of the ruse) in a kind of self-imposed witness protection, and Force went back to Baltimore. DPR sent $40,000 to a Capital One account controlled by the government as an advance. DPR never got back the stolen bitcoins, but once in receipt of the putative proof of death, he sent another $40,000 for a job well done. NOB: you ok?DREAD: I am pissed I had to kill him.DREAD: but what’s done is done. DPR had momentarily wrestled with his decision. He had talked to Inigo about how he just wishes the best for people, and loves them in the libertarian spirit—even Green, in flagrante delicto—but ultimately concluded that his AWOL employee had become too much of a liability. And so, DPR’s principled, technological stand against the war on drugs slid into murder. Like so many revolutionaries before him, the idealist became an ideologue, willing to kill for his beloved vision. At one point, DPR corrected Inigo that this action was not revenge; it was justice—a new justice, according to the law of the Silk Road. Back in Baltimore, sitting in his guest room with Pablo, Force thought about DPR’s shift. He wondered: What changed? DPR was asking himself the same question. Moral choices blur when your identity is shifting. This was the irony behind the very idea of the Dread Pirate Roberts moniker—an inherent danger that the wearer would become the mask. Unmoored, DPR sensed that he was in a state of becoming: NOB: what have you learned?DREAD: well, I’m also learning who I am. I don’t think this will be the hardest thing I’ll have to do.NOB: what could be harder?DREAD: I don’t know.DREAD: maybe I’ll be faced with a decision where lives of innocent people will depend on the outcome. As if seeking a makeshift moral compass among murderers, DPR asked Nob to let him know if he was abusing his authority. “That is what friends are for!” Nob replied. DPR confided to Inigo that one of his deepest fears was “being wildly successful” and “being corrupted by that power.” Nob also warned his online comrade about that power, how it could consume you. In his office, Force himself had put up a picture of Jesús Malverde, the Mexican narco-saint, as inspiration for Nob, and felt the pull of the folk hero bandit. He reminded DPR not to “lose yourself.” How could he not? Now astride a multimillion-dollar drug operation that he’d built in less than two years, Ross was no longer the tenderhearted soul who agonized over telling one lie to a young woman over a glass of wine. His diary had changed from a story about doubts and hopes to a catalog of hard-nosed empire-building. How the Feds Took Down the Silk Road Drug Wonderland Feds Arrest the Silk Road's ‘Dread Pirate Roberts’ The Most Dangerous People On the Internet Right Now The triumph of Silk Road confirmed its creator’s belief in his own myth. “What we are doing,” DPR wrote to his followers, “will have rippling effects for generations to come.” In June 2013 the site reached nearly 1 million registered accounts. And the Feds were nowhere in sight. Until one afternoon just around that same time, back in the New York FBI cybercrime office, when Tarbell and Kiernan leaned forward and finally saw something interesting on one of their screens. They’d been at it for weeks, farting into the same chair cushions in the Pit, running the Tor bundle on one monitor, staring at lists of numbers on another, when one of those numbers surprised them: 18.104.22.168. They looked at each other in disbelief—and then back at the terminal, which was displaying the true IP address of the Silk Road server. Read the story’s conclusion, “Part 2: The Fall,” here This article includes reporting by Nick Bilton, whose book on the Silk Road case will appear in 2016. This story appears in the May 2015 issue.
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