Dirty traitor to his country or heroically brave truth teller, Edward Snowden has been embraced, in large part, by the cryptocurrency community. His insights are often in line with broader ecosystem sentiment in bringing daylight to government ongoings, something the space has valued as far back as its cypherpunk orgins. He’s given a rather wonderful interview recently, and its included in the latest, and very rare nonfiction, edition of McSweeney’s. “
Snowden Explains Blockchain to His Lawyer — and the Rest of Us
Ben Wizner, Director, ACLU Speech, Privacy, and Technology Project recently published his interview with the exiled United States dissident and whistle-blower Edward Snowden. It’s actually a reprint from “The End of Trust,” in the latest edition of McSweeney’s. The issue contains more than two dozen writers, and advisers from the Electronic Frontier Foundation (EFF), covering topics of surveillance, technology, and privacy.
Snowden’s contribution is to explain the significance of crypto’s undergirding tech, blockchain, to his lawyer, Wizner. The attorney admits to hearing a lot about blockchain, but never really understanding it. “It’s basically just a new kind of database,” Snowden answered. “Imagine updates are always added to the end of it instead of messing with the old, preexisting entries — just as you could add new links to an old chain to make it longer — and you’re on the right track.”
He explained its current iteration extends from bitcoin the cryptocurrency, but, “in the last few months, we’ve seen efforts to put together all kind of records in these histories. Anything that needs to be memorialized and immutable. Health-care records, for example, but also deeds and contracts.”
A Fancy Way of Time-Stamping Things
“When you think about it at its most basic technological level, a blockchain is just a fancy way of time-stamping things in a manner that you can prove to posterity hasn’t been tampered with after the fact,” he continued. “It was a cypherpunk take on the old practice of taking a selfie with the day’s newspaper, to prove this new bitcoin blockchain hadn’t secretly been created months or years earlier,” to where Satoshi would have had a real advantage.
An early turn in the discussion is where the attorney describes Snowden’s explanation as a not very sexy. Wizner was expecting it be a lot more compelling. “Some of that is hype cycle,” Snowden confirmed, attributing the lawyer’s enthusiasm and curiosity to falling for media headlines. “Look, the reality is blockchains can theoretically be applied in many ways, but it’s important to understand that mechanically, we’re discussing a very, very simple concept, and therefore the applications are all variations on a single theme: verifiable accounting. Hot.”
Where the interesting part does arrive, however, is in the idea of blockchain protecting against information monopolies and, ultimately, censorship. “Imagine that instead of today’s world, where publicly important data is often held exclusively at GenericCorp LLC, which can and does play God with it at the public’s expense, it’s in a thousand places with a hundred jurisdictions. There is no takedown mechanism or other ‘let’s be evil’ button, and creating one requires a global consensus of, generally, at least 51 percent of the network in support of changing the rules,” Snowden detailed.
It’s Killer App is Money
The two discuss block creation and confirmation, hashing, and other technical aspects. But Snowden brings it back to the killer app of blockchain. “Money is, of course,” he clarified, “the best and most famous example of where blockchains have been proven to make sense.” Citing credit card process, he elaborates, “Right now, the old authorities like Visa and MasterCard can process tens of thousands of transactions a second, while Bitcoin can only handle about seven. But methods of compensating for that efficiency disadvantage are being worked on, and we’ll see transaction rates for blockchains improve in the next few years to a point where they’re no longer a core concern.”
On the idea of bitcoin, or crypto, having value, Snowden immediately answers with a comparison. “What makes a little piece of green paper worth anything? If you’re not cynical enough to say ‘men with guns,’ which are the reason legal tender is treated different from Monopoly money, you’re talking about scarcity and shared belief in the usefulness of the currency as a store of value or a means of exchange.”
A key aspect to a crypto’s value would have to do with anti-inflation rules. “Blockchain-based cryptocurrencies like Bitcoin have very limited fundamental value: at most, it’s a token that lets you save data into the blocks of their respective blockchains, forcing everybody participating in that blockchain to keep a copy of it for you,” he stressed. “But the scarcity of at least some cryptocurrencies is very real: as of today, no more than twenty-one million bitcoins will ever be created, and seventeen million have already been claimed. Competition to ‘mine’ the remaining few involves hundreds of millions of dollars’ worth of equipment and electricity, which economists like to claim are what really “backs” Bitcoin.”
Probably the most difficult aspect to understand about crypto “is the belief of a large population in their usefulness as a means of exchange. That belief is how cryptocurrencies move enormous amounts of money across the world electronically, without the involvement of banks, every single day. One day capital-B Bitcoin will be gone, but as long as there are people out there who want to be able to move money without banks, cryptocurrencies are likely to be valued,” Snowden mused.
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