<nettime> Julian Assange and Eric Schmit on Bitcoin, June 2011

[nettime's avid reader <nettime@kein.org>]

On the 23 of June, 2011 a secret five hour meeting took place between 
WikiLeaks publisher Julian Assange, who was under house arrest in rural 
UK at the time, and Google CEO Eric Schmidt.

Also in attendance was Jared Cohen, a former Secretary of State advisor 
to Hillary Clinton and Lisa Shields of the Council for Foreign Relations.

Schmidt and Cohen requested the meeting, they said, to discuss ideas for 
"The New Digital World", their forthcoming book to be published on April 
23, 2013.

We provide here a verbatim transcript of the majority of the meeting; a 
close reading, particularly of the latter half, is revealing.

http://wikileaks.org/Transcript-Meeting-Assange-Schmidt


<...>


JA: On the publishing end, the magnet links and so on are starting to 
come up. There's also a very nice little paper that I've seen in 
relation to Bitcoin, that... you know about Bitcoin?

ES: No.

JA: Okay, Bitcoin is something that evolved out of the cypherpunks a 
couple of years ago, and it is an alternative... it is a stateless currency.

JC: Yeah, I was reading about this just yesterday.

JA: And very important, actually. It has a few problems. But its 
innovations exceed its problems. Now there has been innovations along 
these lines in many different paths of digital currencies, anonymous, 
untraceable etc. People have been experimenting with over the past 20 
years. The Bitcoin actually has the balance and incentives right, and 
that is why it is starting to take off. The different combination of 
these things. No central nodes. It is all point to point. One does not 
need to trust any central mint. If we look at traditional currencies 
such as gold, we can see that they have sort of interesting properties 
that make them valuable as a medium of exchange. Gold is divisible, it 
is easy to chop up, actually out of all metals it is the easiest to chop 
up into fine segments. You can test relatively easily whether it is true 
or whether it is fake. You can take chopped up segments and you can put 
them back together by melting the gold. So that is what makes it a good 
medium of exchange and it is also a good medium of value store, because 
you can take it and put it in the ground and it is not going to decay 
like apples or steaks. The problems with traditional digital currencies 
on the internet is that you have to trust the mint not to print too much 
of it.

[laughter]

JA: And the incentives for the mint to keep printing are pretty high 
actually, because you can print free money. That means you need some 
kind of regulation. And if you're gonna have regulation then who is 
going to enforce the regulation, now all of a sudden you have sucked in 
the whole problem of the state into this issue, and political pushes 
here and there, and who can get control of the mint, push it one way or 
another, for particular purposes. Bitcoin instead has an algorithm where 
the anyone can create, anyone can be their own mint. They're basically 
just searching for collisions with hashes.. A simple way is... they are 
searching for a sequence of zero bits on the beginning of the thing. And 
you have to randomly search for, in order to do this. So there is a lot 
of computational work in order to do this. And each Bitcoin software 
that is distributed.. That work algorithmically increases as time goes 
by. So the difficulty in producing Bitcoins becomes harder and harder 
and harder as time goes by and it is built into the system.

ES: Right, right. That's interesting.

JA: Just like the difficulty in mining gold becomes harder and harder 
and harder and that is what makes people predict that there is not going 
to be a sudden amount of gold in the market, rather...

ES: To enforce the scarcity...

JA: Yeah, to enforce scarcity, and scarcity will go up as time goes by, 
and what does that mean for incentives in going into the Bitcoin system. 
That means that you should get into the Bitcoin system now. Early. You 
should be an early adopter. Because your Bitcoins are going to be worth 
a lot of money one day. So once you have a... and the Bitcoins are 
just... a Bitcoin address is just a big hash. It's a hash of a public 
key that you generate. So once you have this hash you can just advertise 
it to everyone, and people can send you Bitcoins, and there is people 
who have set up exchanges to convert from Bitcoin to US dollars and so 
on. And it solves a very interesting technical problem, which is how do 
you stop double spending?

All digital material can be cloned, almost zero costs, so if you have 
currency as a digital string of numbers, how do you stop me... I want to 
buy this piece of pasta.

[JA using lunch table objects]

JA: Here is my digital currency and, now I take a copy of it. And now I 
want to buy your bit of egg. And then you go... and now I want to buy 
your radish! And you go, what? I've already got that! What's going on 
here? There's been some fraud! So there's a synchronization problem. Who 
now has the coin? So there is a point to point.. a spread network with 
all these problems, some points of the network being faster, some points 
of the network being slower, multiple paths of communication, how do you 
solve this synchronization issue about who has the currency? And so this 
is to mind actually the real technical innovation for Bitcoin, it has 
done this using some hashtrees and then a delay time, and then CPU work 
has to be done in order to move one thing to another so information 
can't spread too fast etc. OK, so, once you have a system of currency 
that is easy to use like that, then you can start to use it for things 
that you want to be scarce. What is the example of some things that we 
want to be scarce? Well, domain names. Names. We want names to be 
scarce. We want short names to be scarce, otherwise if they are not 
scarce, if it doesn't take work to get them, as soon as you have a nice 
naming system, some arsehole is going to come along and register every 
short name themselves.

ES: Right. That's very interesting.

JA: So this Bitcoin replacement for DNS is precisely what I wanted and 
what I was theorizing about, which is not a DNS system, but rather short 
names... short bit of text to long bit of text tuple registering 
service. Cause that is the abstraction of domain names and all these 
problems solved. Yes, you have some something that you want to register 
that is short, and you want to couple that to something that is 
unmemorable and longer. So for example, the first amendment, that 
phrase, the "US first amendment", is a very short phrase, but it expands 
to a longer bit of text. So you take the hash of this text, and now you 
have got something that is intrinsically coupled to that which is 
unmemorable. But then you can register "US First Amendment" coupled to 
the hash. And that then means you have a structure where you can tell 
whether something has been published or unpublished, you can... one 
piece of human intellectual information can cite another one in a way 
that... can't be manipulated, and if it is censored the censorship can 
be found out. And if one place is censored, well you can scour the 
entire world for this hash, and no matter where you find you know it is 
what you wanted precisely!

ES: Right

JA: So that, in theory, then permits human beings to build up an 
intellectual scaffold where every citation, every reference to some 
other part of human intellectual content, is precise, and can be 
discovered if it exists out there anywhere at all, and is not dependent 
on any particular organization. So as a way of publishing this seems to 
be the most censorship resistant manner of publishing possible, because 
it is not dependent on any particular mechanism of publishing. You can 
be publishing through the post, you can be publishing on conventional 
websites, you can be publishing using Bittorrent, whatever, but the 
naming is consistent. And same is for... publishing is also a matter of 
transferring, you can... all you then have to do is, if you want to 
transfer something anonymously to someone else, one particular person, 
you encrypt the information with their key, and you publish it.

ES: Are you worried.. basically this entire system depends on basically 
irrevocable key structures. Are you worried that the key structures 
would fall apart?

JA: Well the hashing, in terms of the naming part, going to patterns--it 
doesn't depend on the key structure at all. In terms of Bitcoin has its 
own key structure and that's an independent thing, there is all sorts of 
problems with it. Hackers can come in and steal keys etc. And the same 
problems that you have with cash. Armored vans are needed to protect the 
cash etc. And there are some enhancements you can use to try and remove 
the incentives one way or another. You can introduce a subcurrency with 
fixed periods of expense. So you retract for one week or one day and a 
merchant will accept or not accept.

ES: The average person does not understand that RSA was broken into an 
awful lot of private keys involving commerce were taken,

JA: Yes

ES: so...

JA: The public key structure is a tremendous problem, so in the same way 
that domain name structures are a tremendous problem. The browser based 
public key system that we have for authenticating what websites you are 
going to, it is awful. It is truly awful. The number of people that have 
been licensed to mint keys is so tremendous.. there's one got bankrupted 
and got bought up cheaply by Russian companies, you can assume, I have 
been told actually that VeriSign, by people who are in the know, 
although I am not yet willing to go on the public record, cause I only 
have one source, just between you and me, one source that says that 
VeriSign has actually given keys to the US government. Not all, but a 
particular key. That's a big problem with the way things are 
authenticated presently. There are some traditional alternative 
approaches, like PGP has a web of trust. I don't think those things 
really work. What I think does work is something close to what SSH does, 
and that's probably the way forward. Which is it is opportunistic key 
registration. So there is part of your interaction, the first time you 
interact, you register your key, and then if you have a few points of 
keying or some kind of flood network, then you can see that well lots of 
people have seen that key many times in the past.









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