Started Hosted Blog

Started Hosted Blog

Recently my blog that I hosted myself at k-lenz.name/LB for close to 20 years went down with a database error.

I considered investing some time to find and fix the error. Then I decided I would rather use that time to start over with this new hosted blog.

Leave the technical side to people who know what they are doing and pay a small amount of money.

I will probably figure out how to point the old address to this new one. I will also need to figure out how to deal with all the old content.

Book Review: How to Avoid a Climate Disaster, by Bill Gates

Written in 2020, the first thing sticking out was that there is no mention of the European Green Deal. I am not sure why.

Another thing is that Gates is calling readers to run for office in an election. I am not aware of any political office Gates is running for himself. Maybe he thinks it is not the most efficient use of his time to work as a President of the United States, which is what I assume he would choose if he followed his own advice here.

The main solution he proposes is to get more technical options developed faster. Gates’ own efforts at helping with new nuclear technology are an example of that.

To get more development faster, he wants more tax dollars and more private sector activity. I found the idea of having companies work with each other more expressed on page 222 especially interesting, since that is the basic idea I am advocating for too. In my view, oil companies should work together to set up a production schedule similar to the Bitcoin production schedule. Have production reduced by half every four years. Then lean back and watch the price and your profits skyrocket, while saving the planet from a climate disaster at the same time.

I also liked the market based thinking in much of the book. If you want to achieve zero carbon, it would seem to be a good idea to have a market for carbon removal. Said market has received some boosts lately, but is still in its infancy.

As Gates notes, there are 51 billions of tons of CO2 equivalent now emitted each year. In contrast, until the recent announcements in April, the world collectively has only financed removing 10,000 tons, ever. That changed for the better, with several projects investing large sums, but it is still far less than necessary in the long term.

If you develop technology to remove carbon from the air directly, who is going to buy that?

And if I buy 1 ton of carbon removal from some vendor or other, will I be able to sell that 1 ton removal on a secondary market 20 years from now to someone else, when the market is established and the price of 1 ton of removal is much higher?

Or could I sell that 1 ton of removal to the European Central Bank one week later for whatever I just paid, like the ECB is doing with bonds emitted by European Union Member States? How would such a transaction even work?

The answer to these questions is that they do not work right now. There is no way to sell now to the ECB or twenty years later to Bill Gates (in that case turning a profit from the transaction).

I think that should change. I wonder if there are some smart people who could figure out how to use Bitcoin for this purpose. Or in the alternative prove that it is impossible to do.

Book Review: The Cryptopians, by Laura Shin

This book was released on 22.2.2022, which is a date with a lot of numbers 2 in it. That is a good fit to its topic, the 2nd best blockchain by market cap, the Ethereum project.

I liked reading this book and recommend it to anyone interested in the space.

I have a very low opinion of Ethereum, which was strongly influenced by the “DAO” hack and other glaring problems. As such I found the detail about that particular episode useful.

But it was also interesting to note what the whole Ethereum idea was supposed to be about in the first place. Enabling more use cases by having a more complex and variable system.

Bitcoin in is more limited. It does one thing well, securing funds on the base layer. Digital gold with wings, immutable, borderless, peer-to-peer, with a reliable inflation schedule. You may need something else for other use cases.

Reading all the details about that DAO hack, I was reminded again why I don’t trust Ethereum at all. It is amazing how they left the door so wide open for anyone to steal any amount of funds.

I was less convinced by the parallel disclosure by the author on the name of a person she thinks was the DAO hacker. That disclosure requires the hacker being dumb enough to name his GRIN wallet with a string making it easy to identify him. Not something you would want to do if you are using a privacy enhanced blockchain in the first place and have strong incentives to make sure third parties are unable to identify you. At best this is a theory of having that person being framed by the real hacker, since the real hacker of course would be interested in pointing to someone else.

Who is Pierre Poilevre?

He just announced running for Prime Minister of Canada. I noticed because Samson Mow retweeted that announcement. As did over 10,000 others in the first hour.

Including me.

I am not a Canadian citizen, so I do not have a vote. But I do have a chance to participate in the Twitter Internet vote on who and what deserves attention.

I do not know much about this candidate, except a recent speech on the history of money he gave in the Canadian Parliament. That attracted already some attention.

If he wins, maybe Canada can start competing with El Salvador for the future of finance.

Ban Cars Before Bitcoin

Some people want to ban Bitcoin mining because it uses much energy, increasing the safety of the system to levels no other blockchain has.

As far as global warming is the motivation for that, the impact would be limited compared to banning gasoline cars.

That is because much more people use cars than use Bitcoin. And because gasoline cars use 100 percent fossil fuel, while the majority of Bitcoin mining is from renewable energy, giving a boost to renewable energy projects in the process.

Any emissions in connection with Bitcoin mining are not caused by the ASIC machines doing the mining. They are caused by the fossil fuel power plants producing the electricity. It is a good idea to phase out fossil fuel power generation. That is the cause of CO2 emissions, not whatever use is made of the electricity.

Fort Knox is Everywhere

I had an opportunity to discuss my ideas on solving global warming yesterday. I got a cool reception.

One of the questions to my presentation was left without answer, for lack of time. So I write a couple of lines here instead.

I was talking about the recent discussion on requiring permission to use electricity in a specific way to operate a computer. Some people think that others should not be allowed to use electricity for bitcoin mining.

The recent hearing at the United States House of Representatives, calls for a ban on mining in the EU. and discussions on a ban in Russia are in the headlines. China actually made mining illegal last year, leading to a large drop in the hash rate and relocation of industry to other countries. The Bitcoin ecosystem needed about half a year to recover from that particular ban.

The object of measures like these is to save energy and do something about global warming. The effect is to weaken Bitcoin security.

In the Bitcoin security model, using a lot of energy means it is difficult to attack. You would need large amounts of energy and mining machines to do so. You would be able to make more profit by staying honest.

The effect of measures like the Chinese ban was to decrease security for a while. As long as there is no ban in all countries and the bans are not enforced completely, there will always be mining.

My point here is a comparison to gold. With gold, securing the gold bars requires building safes, like in Fort Knox. The United States Bullion Depository located there currently holds about 4580 tons of gold, secured by a fortified vault building and the United States Army post located next door.

The Bitcoin hash rate is the equivalent of that. But the difference is that gold security is not independent of location. You can mine and contribute to the hash rate anywhere. There is no need to concentrate your efforts at one location.

You can also mine anytime, 24/365. Bitcoin is a source of electricity demand that is always available, without a need to build power lines.

That is an excellent match for renewable energy projects. Since a couple of years ago, renewable energy is the cheapest option, which means that Bitcoin miners will seek it. The latest Global Mining Council report shows that renewable energy shares are very high in the industry, beating even Germany and the United States.

If you get in the business of banning some industry or other for their energy use, it does not make much sense to ban the cleanest one first. There are lots of other industries and countries that need to improve vastly before they achieve Bitcoin levels of renewable energy share.

And Bitcoin is part of the solution, not part of the problem. It works like a world wide feed-in tariff for renewable energy projects, accelerating the move away from fossil fuels. If you worry about global warming, the last thing you want to ban is the biggest and most reliable customer of renewable energy projects. A customer that can switch demand on and off at any time and does not require building any power lines.

You Have My Permission to Solve Global Warming

But not that of the EU Commission. At least not yet.

I am talking about the solution of giving fossil fuel producers the power of scaling down production in a coordinated way.

For example, if oil production was already scheduled as bitcoin production is (cutting production by half every four years), obviously emissions would go down fast. Oil left in the ground can’t cause CO2 emissions.

Obviously that would be very good news for the owners of those oil resources, since they would go up massively in value.

So these producers have a massive incentive to introduce some kind of schedule.

Unfortunately, that might be in violation of antitrust rules, which were introduced to a world which had no reason to worry about producing too much oil. For example, the Standard Oil case of the American Supreme Court was decided in 1911.

It follows that these antitrust rules are blocking this solution. It follows that they must stand back. Solving global warming is much more important than keeping gasoline prices low for consumers. Drivers should switch to electric vehicles anyway. Rising gasoline prices are a good thing to accelerate that change, not something that should be fought with antitrust law.

So here is my permission. Anyone who sets up a coordinated production plan for oil can be certain that I am not going after them for antitrust law violations.

I am sorry to say that the EU Commission, which actually has the power to enforce antitrust rules, has not issued a similar declaration.

So the oil industry might still need to find some way to deal with antitrust law before they can go ahead and solve the problem.

One way would be to fight. Tell the EU that they can go ahead and start some antitrust procedure or other. Tell them too that as a consequence, no oil from companies affected by such a move will be sold to the EU, so as to stop that oil from influencing the EU market (the pretext the EU uses to order all producers world wide to follow their rulebook).

Another way to fight would be to found some companies for the purpose. Give them some of the oil resources and have them start production schedules on those resources as a model case. Watch as the EU Commission makes fools of themselves by fighting this scheme while pretending to care about global warming. Use the precedent of winning that fight for expanding the scheme to the whole industry.

Bitcoin may be useful in any such scheme.

For one, it is an accounting scheme that can be trusted by all participants.

It may also be very useful to distribute and trade the production rights. It should be not too difficult to figure out exactly how to do that.

Anyway, the main problem is to get the road blocks from antitrust law out of the way. Bitcoin is not necessary for that and can not help much either.

But once the EU commission (and other antitrust enforcers) join me in giving permission to actually solving the problem, progress might be very fast.

Bitcoin to the Rescue

El Salvador will issue a Bitcoin Bond with the ticker symbol EBB1. Half of the money (500 million dollars) will be used to buy and hold bitcoins, the other half for infrastructure investments, with geothermal energy from a volcano and bitcoin mining the main focus.

Investors in the bond will get the option of permanent residence in the soon to be founded “Bitcoin City”. There will be no taxes there, especially no capital gains tax, which may be of interest to hodlers.

El Salvador is first to the market with such a Bitcoin Bond. The point I want to make here: Nobody needed to develop a new technology to issue it. They could just plug into the existing Bitcoin network to enable this innovation.

I think the same may be true for the problem of global warming. That just hit hard in the United States, with a historic hurricane leaving whole towns destroyed. It may be time to take this threat seriously and deploy a solution that works.

Can Bitcoin come to the rescue? Is the solution already there and it is only a question to intelligently use Bitcoin?

Of course it is already easy to see that Bitcoin mining will contribute to the solution, as opposed to contributing to the problem. That is because mining needs to use the cheapest energy. The cheapest energy already is renewable. It follows that miners will use renewable energy and that deployment of renewable energy will be faster in a world that has Bitcoin as a reliable source of demand that can be switched on and off easily anywhere on the planet. It is just like a world wide feed-in tariff.

El Salvador will use some of their volcano energy from the Bitcoin Bonds to mine bitcoins, which will give them an easy option to export that energy to the world.

That is the easy part.

Now for the interesting question. Can Bitcoin already be used to fairly distribute the right to mine fossil fuels?

Those rights are not distributed fairly to begin with. Some countries like Saudi Arabia and the United States won in the lottery and got huge resources. Others like Japan drew a zero and can’t drill for oil in the first place.

The best way to make sure that CO2 emissions from fossil fuel don’t happen is to leave the stuff in the ground. OPEC has tried to help for a couple of decades. So all we need is an efficient cap on production set by OPEC or some other entity.

When setting that cap, it is also easy to see that Bitcoin serves as a model for radical reduction. Have a long term plan for drilling the remaining treasure. Maybe just use the Bitcoin model of halving production every couple of years.

Can Bitcoin do that already or is is necessary to develop some new technology?

I think it can. The only remaining problem is that of how to deploy the solution.

I will start with first principles. One is that we don’t wait for new technology. This is a moral and legal problem, not one of developing some new altcoin.

One of the most famous and important aspects of Bitcoin is the limit on production. Only 21 million coins ever.

Of course it would be trivial to change that number and have more coins. The only thing that prevents that from happening is that people don’t want such a change. That is not a question of software technology, but a moral and legal question.

In exactly the same way one could imagine a world where there are limits on production of fossil fuel and those limits are backed by the will of humanity to have them. The question of how to administrate those limits and how to distribute the production rights fairly would not be a question of software development.

Let’s start with oil as a sample case. There is already OPEC. Imagine OPEC deciding on a production schedule for the next hundred years, based on radical production reduction. For simplicity make that halving production every four years.

Once that is in place and working, the question of who gets to use that energy for what purpose would be left to the market. Just like it is today.

Obviously prices would be going up massively. That might be popular with oil producers and holders of reserves.

But how to distribute the production rights fairly?

With Bitcoin, it is just a big lottery. Mining is a lottery. Each hash is a ticket, and who wins is just a game of chance. Just like the original distribution of oil resources between countries.

One could imagine issuing some new altcoin for this purpose. Let the mining of that altcoin decide on who gets to produce what oil.

That however would go against the principle of using only the existing Bitcoin network, just like El Salvador just plugged into that for their Bond project.

This has been done before when allocating emission rights under the EU Emission Trade System. That just looked at historic emissions. In the same way, the original allocation of production rights may just be based on historic production shares.

Can that be done just with Bitcoin?

For example, have the UN issue some colored coins in appropriate number. Distribute those to producing countries according to their market share.

Then require them to send those coins to a burn address as proof of production rights. Have a metric on how much must be burned per 1000 barrels.

Lets just start with a simple example. Production in 2020 was down because of the corona crisis. There were 88,391 thousand barrels per day produced, which works out to 32.351,106 over 366 days. So if you set the rate to one satoshi per 100 barrels, all of the world production would easily fit into one single colored coin.

The United States had the biggest share of that at 19.51 million barrel per day, which translates to 19,510 thousand per day, or 7,140,660 thousand over 366 days. So the United States would get that amount of satoshis from the colored coin and be required to burn such amount for proof of production rights. It would be their job to fairly distribute those production rights between individual producers.

After the next halving, they would only receive 3,570,330, assuming that production numbers not change before the date relevant for the halving decision.

Bitcoin would bring a couple of things to the table in this scenario. For one, it is impossible to hack Bitcoin or to change transaction records. Since there will still be plenty of ways to attack the connection between actual production and proof of production rights, it will be useful not having to worry about the safety of the base layer.

It is also useful that the blockchain is a public ledger, so everybody could easily check if the numbers add up and who actually reported what.

Also sending colored coins to a burning address would be proof of destroying them. And that would be a good symbolic fit to the fact that producing one barrel of oil destroys one barrel of the remaining planetary reserves.

That is all for the moment. This was just a simple thought experiment on the question if Bitcoin can already solve the problem without any further software development.

There may be some problems left in actually pulling this off, but those are legal and moral questions.

Reduce Oil Production

There is another climate conference going on in Glasgow. Maybe this one will lead to results.

One thing I hear is that the American Secretary of State is asking Saudi Arabia to pump more oil.

If that appeal is successful, there will be more oil on the market. More oil on the market means more oil burned.

I heard somewhere that burning oil is part of the climate problem and we need to reduce it.

Prices of oil have gone up a bit this year. I think that is a good thing and we need much more of that. Higher prices means less demand for gas cars and more for electric vehicles, which in turn means a faster transition to renewable energy.

So I for one want Saudi Arabia and the other oil producers to reduce their production schedule in a predictable and radical way. A 50% reduction every four years like in the Bitcoin production schedule seems a reasonable and well balanced way to handle things.

It is really very simple. If you want to stop the climate emergency, you need to phase out fossil fuels. For that you need to start by reducing production. For the long term stability of markets, you need a long term dependable production schedule with large reduction steps.

Asking for the opposite at the occasion of this climate conference raises some doubts about whether the American government is willing to actually solve this problem.

Book Review: Privacy and Identity Issues in Financial Transactions, by Carolin Kaiser

I am reading this excellent 2018 dissertation on a well deserved recommendation by Simon Lelieveldt. It is an extensive discussion of money laundering and data protection human rights standards. The main thesis of the book is that anti money laundering law is not compatible with basic human rights standards. I approve. For the very least, there is an urgent need to draw some red lines to limit the system to something reasonable.

Also there is a need to stop it from growing uncontrolled. I will not discuss recent Commission proposals on reforming the system with a view to Bitcoin here. But if it is true that the present system is already overreaching, one would of course need to oppose any extension of the mass surveillance.

The book discusses some of the history of the system, which started with the 1970 Bank Secrecy Act in the United States. I could not find a discussion of the 1974 Supreme Court case California Bankers Assn. v Shultz in the relevant section (chapter 2 d. i.). I think it is important in this context for its dissenting opinions. The reasons stated there seem still valid, and much more so in the present context. I did learn that the administrative law provisions were in force much earlier than any criminal law, which came only in 1986.

I also think mentioning the 1998 United States v. Bajakajian case might have been of interest, since the Supreme Court ruled that the government may not confiscate undeclared cash a traveler carries in his luggage for failure to report it. This is in direct contrast to what happened in the 2017 CJEU El Dakkak case, where failure to fill out a form resulted in the French government seizing $1,607650 held by a traveler only in transit with no intention to actually enter the EU.

The whole system is a relatively new idea, having only about 50 years of history. Even patent law and antitrust have a longer history than that.

I also could not find any pointers to the fabulous successes in crime solution and prevention in those 50 years of history in this book. To be fair, the author discusses this and could not find any either. She writes in the introduction (and later in chapter 2 on page 112) that “the continually increasing extent of anti-money laundering measures, both in scope and severity, is so far not rewarded by any measurable success”. If someone writes a 667 page book about money laundering and can’t find any “measurable success”, I for one am inclined to think that is because there is nothing to find there. The whole thing is based on thin air.

Chapter 2 contains an interesting analysis of the data protection rules of the EU AML directive. Again, those rules don’t exist. The only provision is in Article 41 (4), which says that contrary to usual standards of data protection law, data subjects have no right to know what is known about them.

The reason given for that is that if they knew, the fight against money laundering would get less effective. That reason is not convincing. For one, the rules are not effective in the first place, as noted above. And of course all criminals know exactly that the banks store all their transactions. Telling them about individual data sets does not change anything.

Chapter three discusses Bitcoin and starts badly with calling it “underground banking”, “shadow banking” and saying that “virtual currencies easily elude attempts at regulation”. What is the point of discussing Bitcoin regulation if it is impossible to begin with? And how is Bitcoin “banking”, shadow or underground, if by design there is no bank involved?

The author then states (at footnote 441) that Bitcoin is not a currency at all since it is not issued by a central bank and no jurisdiction guarantees it value. That changed recently, with El Salvador the first in line. Any old definitions of currency that rely on the status of legal tender became dubious at that point.

The author then asserts (page 138) that Satoshi Nakamoto disappeared “several months” after releasing Bitcoin. In fact that happened after April 26th, 2011, which is “several months” after January 2009 if you count the number 16 as several.

On page 147, the author quotes the price of one bitcoin as $15,048 on January 3, 2018. That was only three years ago now.

As the author explains correctly, Bitcoin is not anonymous, but pseudonymous. It requires some thought and expertise to make sure that transactions are not traced to any individual. That makes the use of Bitcoin much less attractive for criminals than cash. All Bitcoin transactions come with records stored forever in the public blockchain. No transactions in cash come with any records.

When discussing proposals for the 5th AML Directive (which was not yet enacted at the time of the writing) the author states that the idea of a voluntary register of self-identified users is “likely to fail”. I am not sure why. Citizens are asked to declare income for tax purposes every year. Not all of those declarations are incomplete or false. In the same way, one could imagine imposing self-reporting requirements for Bitcoin balances. It may be open to some more discussion if that is a good idea and if that would actually work.

The following chapter 5 gives a good overview of present European data protection law. One thing that stood out to me: The technical possibilities to defeat privacy are increasing all the time. You can take a picture of someone in public and search the Internet to reach their social media presence, making it possible to learn their name from their face.

Again, this chapter finds that there are no meaningful measures against mass surveillance in EU data protection law. So we have mass surveillance set up with no measurable success and no limits in data protection law.

The discussion of anonymity in Bitcoin in Chapter 6 suffers from talking about “wallets” when speaking about addresses. A wallet is a piece of software designed to interact with private and public keys (addresses) on the blockchain. An address is the result of a transaction, also called UTXO (unspent transaction output). The blockchain only contains addresses, not wallets.

The discussion of virtual currencies in Chapter 7 is especially valuable. As the author notes, it is quite possible to identify holders of Bitcoin addresses by several methods, one of them being looking at the IP address a transaction originated from. Others may be having the other party of the transaction cooperate, or having law enforcement infiltrate a criminal organization. Once the link between a name and an address is established, the transaction can be traced completely.

One thing I want to add: When using a bank, a criminal would know exactly that his transactions are watched. When using Bitcoin, they might assume to be not watched, while they actually are. That may be a decisive advantage for law enforcement in some situation. And said advantage is impossible with banks.

Chapter 8 brings a useful overview on relevant European case law as a basis for asserting that the money laundering Directive is in violation of the principle of proportionality in the following chapter.

That chapter has a discussion of the shaky legal basis for the EU legislating on what is clearly law of criminal procedure by pretending to be regulating the internal market. Of course any measures obliging financial institutions to collect and share data about their costumers has some influence on the competition between these institutions. But that is not the point of the system. The point of the system is to catch more criminals, and therefore the reliance on the internal market general clause is misguided. That was even more true when the Directive was first enacted in 1991, at which point in time the power of the EU to make criminal law was even less clear.

The author then elaborates some more on the lack of effectiveness. Citing the reports of the German FIU (the agency in charge of receiving the information from banks), she finds that there are very few convictions resulting from these reports and that there is no measurable impact on the predicate offenses (the crime the whole thing is supposed to decrease). The picture is even clearer with anti-terrorist financing, where there was no conviction resulting and the FIU was reduced to celebrating it as a success that one suspect was prevented from receiving insurance for a car.

Again, if there is no measurable success in preventing crime, the answer if that interest trumps the public interest in not having every one watched all the time is self-evident.

That becomes even more evident if one remembers that the Directive is supposed to be enacted for internal market purposes, avoiding differences in costs for banks. Taking that at its face value instead of the excuse for a otherwise not existing power to regulate would mean that the question is if that objective is achieved.

One would probably need to concede that an uniform standard for all banks actually will achieve the aim of achieving uniform compliance cost for the sector. But obviously the analysis in the next step (is it worth all of the effort if you disregard crime prevention) becomes a very different one.

That next step is central to the book. The author notes 17 different reasons why the result is not worth the effort.

That seems a bit one-sided. I share the idea that AML law is running amok (alliteration intended) and that there needs to be some kind of limit. But does the other side really lose 17 to zero? Is there nothing one could reasonably state for their position?

Theoretically speaking, it seems to make sense that investigation authorities can solve more crime if they have access to more data. If every citizen had a chip implanted in their skull recording their movements and everything they saw and heard, police work would get easier. So if the state could see every movement of funds (cash included), one would expect this to be useful for police work.

To deal with that idea, it is important that the whole AML thing is a new invention. Humans have used cash for thousands of years. All crime before 1970 was solved without recourse to AML instruments, and most of it is still solved without such recourse.

While it is certainly true that there may be some theoretical usefulness in addressing crime deriving from AML regulation, that is not enough. One would need to show a drastic difference in crime levels compared to the absence of AML measures to justify all that effort. As mentioned before, this has not been shown.

While there clearly is a need for limits of AML, the reverse is true as well. I for one would not like to see a financial system where people are free to run dark web assassination markets and it is completely impossible for anyone to do anything about that. Fortunately with Bitcoin, that is not true. While cash is not traceable, Bitcoin payments are stored forever in a public blockchain.

Anyway, if you think as I do and the author does, that current AML law has gone too far, it would be necessary to point out what exactly the legislator may be allowed to do without violating basic human rights. It appears the message of this book is only negative.

The first concern the author has with the current legislation is that it is a form of mass surveillance. Bruce Schneier called that “wholesale surveillance”, made possible by the declining cost of data storage. That is also what motivates me personally the most to disagree with telecommunication data storage and the AML legislation.

There are no exceptions. The state wants all the data, all the time.

Another concern raised by the author that impressed me was number four. The fact that the central concept of “suspicious transactions” is lacking a definition and is left to the authors of the software automatically issuing reports. That software is not open to the public but rather treated as a business secret. Such lack of transparency makes the transaction reports itself suspicious under human rights standards.

The following number five points out that there is a complete lack of protection for sensitive data in the money laundering Directive, in contrast to Article 10 of the Police and Criminal Justice Authorities Directive on data protection. The money laundering Directive completely ignores the need for special protection on sensitive data.

The concern number seven the author raises is the cost of the whole exercise to financial institutions. This point is not very convincing; but this is a good occasion to recall that the basis for this legislation is being worried about these costs might differ between Member States, which would in turn distort competition in the internal market.

So how high exactly are these costs? And how much did this Directive contribute to leveling the playing field? More important, how much electricity is wasted watching all citizens all the time and producing all these suspicious reports? How much CO2 is emitted because of that energy waste? The recent “European Green Deal” policy calls for more attention to these matters. Can we really afford to waste all that energy on a system without any measurable success?

Readers aware of the current discussion on Bitcoin will understand that I am alluding to assertions that Bitcoin mining uses too much energy. And turning that talking point right back at the supporters of the present system.

Concern number fifteen is about the retention period of relevant data, which is set to five years, calculated from the end of the business relation with a customer. Business relations with banks often last for a lifetime, which means effectively storage forever in most cases. In contrast, when talking about telecommunications data retention mandates even six months was regarded as being too long.

I have left out a couple of the seventeen concerns. The author then sums up and concludes that the AML Directive should be ruled invalid by the CJEU, as the data retention Directive was before. That would be in conflict with positions of the FATF, but said positions would need to be adapted accordingly.

I agree with that conclusion.

And I would like to turn around the argument a bit. One can ask if this mass surveillance is necessary in a democratic society. But one can also ask if one would be comfortable with the state having these powers if it is not sure that standards of democracy are kept up.

The United States came close to a coup ending democratic elections of leaders in January of this year. Some EU Member States are under review for deficient rule of law values.

Democracy is fragile. Mass surveillance installed in Germany in 1921 (if there was the technology at the time) would of course have been used by the Gestapo to find Jews in 1937. Don’t install harmful and useless mass surveillance systems assuming the government stays benevolent.

The B-Word

I just watched the Youtube record of a conversation between Elon Musk, Jack Dorsey, and Cathie Wood titled “the B-Word”, moderated by Square Crypto lead Steve Lee.

I learned that Twitter still does not take Bitcoin as a payment for advertising. Musk asked Dorsey to think about doing that. And that Musk is considering taking it again at Tesla, since he seems satisfied that earlier conditions about CO2 emissions from mining dropping below 50% are met and things are improving.

There also was much consensus on people needing to own their keys. Use non-custodial ways to own your coins.

That is interesting since the EU Commission just published draft laws to push for more custodial Bitcoin use with their new money laundering framework.

They basically want to have the government informed about all payments, as it is with banks. Bitcoin does not need to use banks. If people keep their keys to themselves as was the consensus in this particular conversation, there are no intermediaries that can be targeted by anti-money-laundering legislation. That in turn means that it may be difficult to achieve the dream of having the government get all the data on all the citizens without a warrant and without limits.

I for one have no problem with that.

On the contrary. Those surveilling powers are always only increasing. I am not convinced that it was a good idea to let the government win at the Supreme Court in 1974 and introduce this system in the first place. And I certainly don’t believe in a society where the government gets to know everything about everyone without a warrant.

The reason for the Supreme Court majority to let the government get away with this was that claims of customers were premature, since they did not show actually having sent over $10,000 and that anyway, they disclosed their records voluntarily to their banks.

But with bitcoins under control of individuals, there is no such disclosure to any financial service provider. So if the government gets wholesale access to that information, there is really no way around requiring a warrant, which in turn removes the basis for treating anyone in sight as a criminal by default.

I recall that the surveillance fans lost at the European Court of Justice in 2014 when the fight was about recording all citizens’ communication traffic records. That was about six months worth of data. This latest proposal wants to oblige financial institutions to keep records for five years.

Maybe it is time for another challenge to the idea of the state knowing everything about everybody. The dissents in the above Supreme Court case are a good starting point for the discussion.