Chuck Schumer’s New War on Bitcoin

New York Senator Chuck Schumer probably occupies a top place in the libertarian axis of evil. A bigot, a religious fanatic, a nanny-state totalitarian and a crook, Schumer epitomizes the libertarian critique against political authority. This is a man who is accustomed to barking orders at a servile populace, a man who counts intimidation and threats to be among his preferred methods of executing governance. So this video and story of Schumer’s outrage over Silk Road and Bitcoin, likely facilitated by a recent Gawker article, is vintage Chuck. Conjure moral outrage, summon the TV cameras, bark orders…

But, unfortunately for Chuck, this ain’t Four Loco. Ordering the Feds to shutdown the website and “seize the domain” was comedic display of Mussolini buffoonery. I suppose it’s sad that no one in the press corp had the technical wherewithal to challenge Schumer’s stupidity, but it’s amusing that Schumer’s aide, the one that set up the TOR client to access the site, didn’t have the cojones to prevent Chuck from looking like a moron. But then again, I suppose it’s probably career suicide to stand between Schumer’s moral outrage and a TV camera.

Silk Road is running as a TOR hidden service on the TOR P2P tunneling network. This means it’s being run from someone’s anonymous box that generally can’t be identified. It can be anywhere in the world. Anyone who downloads the TOR software can setup a hidden service. There’s no “domain name” to seize here and the only way to stop this sort of thing (at least until the “Internet Kill Switch Bill” is enacted) is to ban the TOR protocol outright, which would counter the government’s interests because: (i) it would cast the US in a bad authoritarian light (ii) more importantly, it’s used by US intelligence organs as a secure communications tunneling network with international assets. After all, it was the US government that originally developed it, and it was released into the wild because it’s useless, like any other P2P network, without a robust number of nodes. In particular, here, a TOR network of nodes consisting of just the spies, informants and US bureaucrats would be “stick out like a sore thumb” tunnel; these tunnels need lots of “noise,” that is, lots and lots of other tunnels to be effective. Also, of course, if the software was “classified,” there would be an obvious distribution problem of getting the software into the hands of the intelligence assets, a vulnerability(which could be exploited, because the acquisition method of the software could be compromised and tracked) that, combined with the “stick out like a sore thumb” intelligence-only tunnels, would make TOR useless. And this is why the US government released TOR into the wild.

Chuck hasn’t gotten the memo on TOR yet, but I imagine he will get the intelligence organ “sit down” on that. It’s not TOR that’s the threat, it’s Bitcoin. Schumer called Bitcoin a “money laundering mechanism;” certainly he is ready to take the lead in Senate hearings to foster drafting new legislation that would outlaw any unauthorized crypto-currency. However, the government, particularly the intelligence organs, is a bit ahead of Schumer in that the CIA is sponsoring a presentation by the Bitcoin lead developer.

Hitherto, the problem of crypto-currencies, in terms of being any threat to the State, was the need of a central authority to regulate against fraud. Anyone can define an electronic coin as a ledger/chain of digital signatures. One obvious problem is how to prevent Agent A, who is wishing to transfer ownership of the coin for a good/service, to simultaneously use the same coin to buy something from Agent B and Agent C, that is, more or less simultaneously digitally sign over the coin to Agent B and Agent C. This problem would seem to require a central authority to referee between A’s transaction with B and A’s transaction with C.

The Bitcoin algorithm, from I gather reading the technical whitepaper, solves the problem of transaction verification by incentivizing every node in the Bitcoin network to race for verification of outstanding transactions. In other words, every node is in competition to serve as the clearinghouse for the current existing block of unverified transactions. The verification is done by timestamp. All transactions are broadcast to all nodes, but in a P2P network, Node X’s timestamp for the current unverified transactions may be differ than Node Y’s timestamp for the same. The timestamp verification that wins out, that is the node that wins the clearinghouse game, depends on that node solving a “proof of work concept” that is able to solve a difficult mathematical problem of converting a hash representation of it’s own block into a required leading zero-bit format. The winning node then broadcasts it’s time stamp block to all nodes that readjust accordingly. The winning node is awarded a certain amount of bitcoins which serves as the first transaction in the next block of unverified transactions that will need to be verified.

Bitcoin is able to use competition to resolve the clearinghouse problem(clearinghouse nodes are incentivized by new coin creation). It ingeniously self-corrects for the introduction of cpu power by making the mathematical work of proof problem geometrically more difficult. This allows scalability without monopoly capture, but it does create a division of labor scenario where clearinghouse nodes invest in GPU cycles over CPU cycles(the investment in GPU cycles allows the system to handle the clearinghouse needs of an expanding system). However, the system constraints cap the total coin creation which means that clearinghouse nodes will eventually only compete over transaction fees.

The question concerning Bitcoin is two-fold: (i) can it survive a coordinated hacker attack (ii) can it survive government censorship/banning. We are probably about to find out about (ii). The thing about the US is that it is not a hard censorship regime; it’s a soft censorship regime. An actual honest-to-god crypto currency, however, is it’s worst nightmare. The US government will release something like TOR into the wild, but it would never release something like Bitcoin into the wild.


Conspiracy Theory

I’m not a 9-11 truther but I have become an “Anthrax Truther.” Without doubt, there is a government conspiracy regarding the anthrax attacks that occurred in the immediate aftermath of 9-11. For all the talk about WMD and al-Qaeda implementing a WMD attack, the distribution of high-quality, military-grade anthrax through the US postal system remains the only example of an actual WMD attack. Attempts to pin the attack on stooges/patsies have failed miserably, lending credibility to the speculation of a government cover-up.

The reason that the Obama Admin, at this point, won’t release a photo of the slain Bin Laden is because it wants to avoid an inflamed discussion regarding the fact that this was an “execution” operation. Of course, this strategy is actually backfiring. But there is a larger context that should be considered here. If the “Anthrax attacks” were still a matter of open investigation, you would think that a premium would have been placed on capturing the great al-Qaeda mastermind alive for interrogation. After all, we are repeatedly propagandized that the great existential threat is al-Qaeda + WMD; and, at this point, the only example of such a WMD attack is this anthrax attack that occurred simultaneously with 9-11. The statistical probability that these were random, independent events is minuscule.

The fact that Bin Laden was executed tells us all we need to know about the relative “threat” of al-Qaeda + WMD…

Bin Laden Dead. War on Terror Lives On.

“It was a bright cold day in April, and the clocks were striking thirteen.”

Nineteen Eighty-Four

What is now only be called a “small team of Americans,” likely the CIA, killed Bin Laden in a shootout in Abbottabad, Pakistan. This was no “smokeout” from a Cave. The Bin Laden “residence” is being described as a “compound,” or even a mansion. And apparently, the compound has a Google Map.

When the news began to trickle out, the Georgetown bar set looks to have emptied out of the taverns and marched impromptu to the White House with cheers and theatrics one would associate with the Redskins winning the Superbowl. Ah, but this game has no end. Important commentators reminded us that Bin laden had long ago ceased having any operational capacity with al-Qaeda and now was only a symbolic figure. Concerned government officials announced heightened “terror levels” and warned against the possibility of al-Qaeda retaliatory operations. Meanwhile pundits speculated about revived Obama poll numbers against the backdrop of the growing, gathering crowd chanting “USA!,USA!” in front of the White House.

Perhaps in a day or two, or maybe in a week, when the “euphoria” begins to wane in the press corp, the touchy subject of US-Pakistan relations might come to the fore given that Pakistani government wasn’t informed of this operation until after the fact.

And, of course, not everyone is cheering. And perceptions of just who is the terrorist differ. Former Guantanamo Bay detainee Mamdouh Habib is one of those not cheering. Upon learning the news, he is quoted as saying:

“America is the war on terror, George Bush is the war on Terror….What, you think with Osama bin Laden dying there won’t be war any more?”

Atlas “Cha-Ching”

I have never bought into the left-wing Hollywood Conspiracy theory. The idea of left-wing Shakespeare is nonsense. In other words, the theater, as an institution, has more or less retained immunity from “modern dialectics.” The theater is not the University.

In reality, the only apparent “Hollywood Dialectics” in play regarding a project’s “green-light status” is the typical necessity of context being mere pretext for the same love story. The art of “the pitch” is reducing your saga to a love story–in two paragraphs or less. The projects that don’t follow this “dialectical formula” are the ones that have difficulty getting the green light. I imagine even Griffin Mill would be stumped by Atlas Shrugged.

In any event, the “Galt Speech” has already been cinematically depicted on the big screen. And the actor who delivered it managed to win an academy award for his performance. Just in case you need a hint.

Things I’m afraid of, things I’m not afraid of

Writes Pulitzer-Prize winning cartoonist Tom Toles:

You can wish all you want to be left alone to live your life free of the heated breath of big government, but come on, get rid of government and what you’ll be feeling is the heated breath of ever-larger corporations and the forces of globalization. Look around. You don’t raise your own food on the family farm or tan your own leather anymore. There are huge forces sloshing around now, and you aren’t going to be immune from them, no matter HOW loud you turn up your TV. The easy, heady days of the great American rocket ride of postwar America are as over as Leave it to Beaver. Ward Cleaver rule-of-thumbery doesn’t cut it anymore.

I’m not afraid of civilization, of I, Pencil, or I, Toaster.

I’ll tell you what I am afraid of, however. I’m afraid of DoubleThink that always underlies authoritarian governments. DoubleThink is the acceptance of two mutually contradictory beliefs without cognitive dissonance. And I’m seeing it in full display here by Tom Toles. In one cartoon, he editorializes about government captured by elites. In commentary directly below that, he editorializes about the need for an end of ideology and government of elites to run our lives for our own protection.

In other words:

We need elites to guard government against a government of elites

This is Orwellian. Of course, there can be no ideology. The rhetoric needs to be toned down. Chuck Schumer and Tom Coburn need to join hands in conciliation. Unfurl the banners, look at Screen, Dear Leader’s speech, never has such glory been seen.

This is why you have permanent wars, the largest collection of intelligence apparatuses in human history, laws that give privileged status to public officials, domestic spy drones in the hands of Barney Fife, privileged investor classes, and a domestic security gestapo subjecting public travel and assembly to security scans and gropings. And I could go on and on and on….

Is Nineteen Eighty Four a warning or an operations manual?

H/T: b-psycho

The Nation Apologizes…Sort Of

An update to this previous post, Playing the Kevin Bacon Game within the Libertarian Movement.

Katrina vanden Heuvel pens an apology to John Tyner.

Ames’ and Levine’s article didn’t directly call Tyner a plant, and they didn’t say that he was funded by the Koch brothers. Nonetheless, their article gave that impression–by placing Tyner in the article’s lead and by using a generally disparaging tone to refer to him. The article also used innuendo to cast doubt on Tyner’s motives, and when Tyner denied any connections to lobbyists and to Koch-funded organizations in an interview, we printed his denial–but we didn’t press hard enough to get clarity on his actions and intentions. We should have stopped and done just that, and if Tyner’s story checked out, we should have removed him from the piece.
Citizens from across the political spectrum are right to call out the TSA’s invasive procedures and the threat to civil liberties they represent. We have long opposed, and exposed, the continuing encroachments of the national security state, though we also think that those who applauded each sacrifice of liberty for security under the Bush administration should expect to be regarded with skepticism if the presence of a Democrat in the White House suddenly prompts libertarian concerns. As John Tyner pointed out, this issue “isn’t Republican and it isn’t Democratic.” It is also simply a fact that the backlash against TSA procedures has led to calls for racial profiling and for the privatization of the agency.

vanden Heuvel, however, fails to apologize to George Donnelly, Pete Eyre or Meg McLain. Each has subsequently penned a response to The Nation’s accusations of being a Koch stoogie.

George Donnelly: I am not a Kochtopus
Pete Eyre: Mark Ames,A Rebuttal
Meg McLain

vanden Heuvel is correct in pointing out it is legitimate to critically vet those “who applauded each sacrifice of liberty for security under the Bush administration should expect to be regarded with skepticism if the presence of a Democrat in the White House suddenly prompts libertarian concerns.” And it certainly is valid to point out there are those who are using the TSA outrage as a pretext to forward their own profiling or privatization schemes. However, neither hypocrisy nor opportunism characterizes the broad libertarian movement in regard to TSA or the larger context of the National Security State. But it is certainly clear that Ames and Levine, and in particular, Ames, has a crawl up his ass via vis libertarianism which has produced a stenchy egg for The Nation when it decided to publish this opinion journalism masquerading as investigative journalism.

Paul Krugman: Death Panels and Sales Taxes will Save Us

Paul Krugman, a month or two ago, suggested that sometimes you need “a Hitler or a Hirohito” to end depressions. To some, this was interpreted as Krugman advocating the occasional need for war. Krugman’s defenders, most notably Brad Delong, came to his defense, mocking the inconsiderable, unsophisticated minds who could construe such a thing. Krugman clarified his remarks in this post Economics Is not a Morality Play.

The point is that it would have been much better if the Depression had been ended with massive spending on useful things, on roads and railroads and schools and parks. But the political consensus for spending on a sufficient scale never materialized; we needed Hitler and Hirohito instead.

Translation: We only need war if the political consensus fails to match my policy preferences.

The totally batshit insane Neanderthals obviously stand corrected.

Krugman continues to lend his considerable, nuanced expertise on other compelling issues, such as the debt. In this post, Default Is In Our Stars, Krugman argues that the effective outcome of the current private debt is “significant default.” The “clean” way is through inflation. The “ugly” way is through bankruptcy. However, to those of simple minds, after wading through the fallacy of composition regarding the paradox of thrift, another paradox may be afoot here. This is the paradox of “People aren’t as Fucking Stupid as Paul Krugman thinks they are.” This paradox manifests itself by the astonishing fact that a monetary policy dedicated toward effective default of private debt via inflation leads to a lack of lending/investment into a deadbeat economy; instead resources are diverted into inflation hedges. In economic jargon, we call this the “Paradox of Stagflation.”

Of course, the “Paradox of Stagflation” is only held by the “totally batshit insane.” Krugman, one of the chief progenitors of American partisan politics being a struggle between the forces of scientific reality vs mindless ideology, easily foils the apparent empirical reality of the “paradox of stagflation” by typically throwing up some 1930’s economic charts and blaming current empirical reality on the lack of political consensus around his interpretation of said charts. Oh, the insanity…

On the issue of public debt, Krugman used ABC’s “This Week” to argue that the problem can only be solved by “Death Panels” and VAT taxes. This is a provocative statement in that he seems to be validating the Palin critique. Krugman used this blog post, Death Panels and Sales Taxes, to clarify what he meant. Of course, by “Death Panels,” he only meant Medicare rationing end-of-life medical care. Whew, without that clarification, one may have gotten the impression he was actually referring to Palin’s “Death Panels,” which were Efficiency Boards rationing end-of-life medical care for dear ole Grandma. It’s nuance like this that makes you appreciate the distinction between “scientific reality vs mindless ideology.”

Let us sum up Mr. Social Democrat, Paul Krugman’s political prescriptions: Inflation, Death, and Taxes. Now that’s a winner. Of course, if we fail to see it Krugman’s way, if we fail to form a political consensus around Krugman’s preferences, well, then, there is always “a Hitler or a Hirohito.”