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Papers associated with Bitcoin and related topics in law: Part XIV

This article was first published on Dr. Craig Wright’s blog, and we republished with permission from the author. Read Part 1Part 2, Part 3, Part 4, Part 5, Part 6, Part 7, Part 8, Part 9, Part 10, Part 11, Part 12, and Part 13.

I have looked at a number of papers where the authors are investigating or starting to question the concept of decentralization. Unfortunately, unlike Walch, who I have mentioned previously, the authors are taking the argument presented by ‘cypherpunks’ at face value.

In their argument, they have made the false assumption that Bitcoin and other related systems have developed through the creation of cypherpunk coding. This argument is false. I know; I created Bitcoin, so I know the history. Yet, despite the way Baran (1964) developed decentralization in packet switching as a means to develop resilient systems for the U.S. Army, the current mantra has moved towards the notion of political decentralization.

The additional error is based on the nature of decentralization as it was presented by Baran (1964), which, of course, can be forgiven, because the development of small-world networks (Watts & Strogatz, 1998) did not happen for another three decades. Consequently, to base the argument solely on what has happened in the past, and to not add additional understandings of network science, retains the erroneous belief that decentralization must be more expensive.

Bodó et al. (2021a) present an analysis of decentralization, looking at the advantages and disadvantages reported within the industry. Unfortunately, their approach fails to capture the underlying scientific nature of the system and delivers a report that captures the belief or aspirations of individuals within an industry. Unfortunately, it further compounds the misunderstanding of distributed and diverse networks, making claims that are provably false in assuming that the cost of maintaining nodes and providing bandwidth was higher in a distributed network than in a more centralized system. This assumption is important to be considered in my research, as demonstrating that decentralization leads to cost reductions, and not an increase in maintenance costs, will change the existing narrative and lower the cost of ownership of information systems for many businesses.

Bodó et al. (2021b, p. 10) create an argument around the concept of political decentralization. The case extends into noting how the distribution of power in political systems leads to arguments where “[d]ecentralisation and distribution are often assumed to remedy the potential abuse of power of coercive intermediaries through disintermediation.” In this analysis, economic concepts such as externalities and disintermediation are noted against experimentation in network science and the integration of concepts of market-based economies. In such an analysis, the multidisciplinary approach is introduced not to disintermediate the distinctions between the terms in different fields, but rather as a means to integrate the terminology.

Unfortunately, such an analysis seeks to integrate the principles of design engineering, the use of decentralized systems in disintermediating and reducing political power, and finally, a system promoted by those who have radically Marxist concepts, such as removing property rights over digital items. While the authors note that it is “likely that the revolution will not be radically decentralised” (Bodó et al., 2021b, p. 15), they have failed to note that the primary purpose of Bitcoin is aligned with producing a system of micropayments or with allowing “small casual transactions” (Wright, 2008, p. 1), thus undermining the value of their research. Instead of analyzing the nature of robust communications, the authors have attempted to integrate economic, political, and network decentralization, despite the significant and irreconcilable differences in the terms.

Nabben (2021, p. 1) says that “[t]he origins of decentralised technologies are often attributed to the Cypherpunks who pursued the development of privacy preserving tools against government surveillance.” Further, Nabben (2021, p. 1) mistakenly notes that “Cypherpunks played an important role in the invention of Bitcoin,” but understands that “this story is often conflated as the starting point of decentralized technologies.” In analyzing each of the papers, it seems that concepts such as “political decentralization” and the distinction between network resilience and the decentralization of computer systems are becoming more clear.

Yet, the authors remain under the sway of the false narrative promoted by cypherpunk activists. While each paper is starting to note the differences in the terminology associated with decentralization, the authors have not shared the background in history and primary source research that would be needed to determine how the terminology has been subverted. It is expected that over time, other researchers will begin to delve into the same issue, but for now, it can be seen that the narrative of decentralization is beginning to be questioned.

Annotated Bibliography

Bodó, B., Brekke, J. K., & Hoepman, J.-H. (2021a). Decentralization in the blockchain space. Internet Policy Review10(2).

Bodó et al. (2021a) investigate the origins of decentralized network topologies. Unfortunately, the authors have assumed that the descriptions of network topography promoted within the blockchain industry relate to the original paper by Baran (1964) or that such systems link to a social template structure. In analyzing decentralization, the authors look at a distributed network versus a centralized network and argue that the cost of maintaining individual nodes is higher in distributed systems because of the cost of network coordination. The same claim is frequently made by cypherpunk activists who argue for political decentralization.

Yet, the authors have misconstrued the nature of the system and have presented an argument that “[i]n distributed networks, individual nodes must also take care of their own security, and availability” (Bodó et al., 2021a, p. 6). This argument is premised on the cypherpunk concept of political decentralization, and ignores how a corporation can create a decentralized network through the wide distribution of servers run by the same entity. While overlooking this, the author notes that “blockchain networks have highly centralized forms of governance” (Bodó et al., 2021a, p. 7). So, the author equally presents an argument that follows the cypherpunk promotion of political decentralization while noting that governance and power structures are not decentralized.

The claim is then made that this presents an aspirational aspect of blockchain technology. Yet, no aspect of Bitcoin was promoted on the cypherpunk mailing list or in any way associated with such groups who have now taken over the promotion of this type of activity. Equally, there are no arguments for anti-state or anti-corporate activity within the Bitcoin white paper, yet it is noted as an aspirational goal and the design aim of any blockchain. Consequently, the authors have assumed the statements of cypherpunk “[p]roponents of disintermediation” who “hope that these same logics provide new tools for horizontal social coordination, and the removal of political, economic, or social intermediary institutions, previously fulfilling those tasks” have not misrepresented the nature of the system. Rather than investigating the source material, the author has assumed those with a financial interest in creating an alternative system act without bias or dishonesty. This assumption undermines the value of the paper.

Bodó, B., Brekke, J. K., & Hoepman, J.-H. (2021). Decentralization in the blockchain space. Internet Policy Review10(2).

Bodó et al. (2021b) have investigated the topic of decentralization. The authors note that Bitcoin and other distributed ledgers have promoted ideas within network science and that they extend beyond computer science into political discussions. The work correctly notes that “[t]he concept of decentralization traverses multiple contexts, fields and disciplines” (Bodó et al., 2021b, p. 2). Consequently, the authors use a multidisciplinary approach, starting with the technical definitions associated with network engineering and the development of decentralization as an aspect of communication science (Baran, 1964; Bodó et al., 2021b, p. 3).

The authors also demonstrate that decentralised and distributed technical systems have extended beyond computer science and into sociopolitical and economic realms. For example, the creation of BitTorrent and other peer-to-peer filesharing protocols was linked to the rise of political movements associated with arguments against copyright. Yet, the authors still failed to understand many concepts associated with distributed networks. For example, in arguing that “distributed networks are networks where every node has roughly the same number of connections (called edges) to other nodes” (Baran, 1964; Bodó et al., 2021b, p. 4), the authors have taken the image presented in the original packet switching paper by Baran (1964, p. 1) and introduced a necessity that did not exist in the original paper for nodes to be approximately equal.

The analysis moves away from redundancy and the ability to withstand disturbances, and argues that decentralization introduces coordination and fault-tolerant challenges. The paper makes the common error of treating systems such as Bitcoin as a distributed mesh, rather than a small-world network (Watts & Strogatz, 1998). Such an error introduces the problem of conflating network issues associated with resilience with the power relationships that apply to political theory. In this form, “the centralization/decentralization dichotomy is often framed in terms of power asymmetries” (Bodó et al., 2021b, p. 8). Yet, the purpose of the network is not to deliver the “claim of many decentralisation evangelists (such as some blockchain maximalists, and techno-libertarians), that decentralized, or distributed, non-hierarchical forms of organisation can, or indeed will abolish existing power structures within society” (Bodó et al., 2021b, p. 9). As the researchers note, such a concept “seems to be overly optimistic,” besides being outside the purpose of Bitcoin: delivering micropayments.

Nabben, K. (2021). Resilience as ‘Political Decentralization’: An Alternate History of the Cypherpunks Origins of Decentralised Technology (SSRN Scholarly Paper No. 3938626).

Nabben (2021) has investigated the development of decentralized technologies noting the origins of distributed computing and the early development of public key cryptography. The author correctly demonstrates how such technology was not created by cypherpunks and not developed to implement controls against governments. Rather, the argument was for resilience. Yet, as Nabben (2021, p. 6) notes, many believe that the “contribution of the Cypherpunks in this long history of decentralized, cryptographically secure technology was introducing the idea of resilience as not just architectural decentralization of digital infrastructure but political decentralization of the power to control it.”

Yet, such a contribution is not the unique domain of the cypherpunk movement. Rather, the arguments for political decentralization of power may be connected to far earlier socialist commentators, including Marx (Uniyal, 1988). Arguing that the cypherpunks developed such ideas into a unique political agenda misses the underlying influences of Marxist scholars and the concepts of anti-state politics associated with anarchy. Next, the paper documents the origins of distributed computing and the development of public key cryptography through military and intelligence research.

The discussion then moves into analyzing the link between the development of cryptography and the start of the cypherpunk movement. The launch of digital cash systems is associated with the development of DigiCash by David Chaum. This project is implied to represent the first digital cash and privacy system, while noting the development of bit gold by Nick Szabo and falsely attributing smart contracts to the same individual. Each of these assertions is false. The blog post concerning bit gold referenced a proof-of-concept idea that would never be developed or launched. Further, the idea of smart contracts merely concerned the implementation of systems that could be programmed based on electronic data interchange (EDI).

Drake et al. (1990) discussed the concept of automated contracting related to EDI over a decade before the blog post by Szabo. Other examples, such as military cargo management systems, existed earlier (Heard & Rozycki, 1985). Consequently, the documentation of the development of decentralization as a concept continues to downplay the role of government, falsely constructs the role of cypherpunk activists, and introduces a false dichotomy of technology versus politics. While the paper introduces an interesting story of how “the Cypherpunks transformed Baran’s concept of resilience via decentralization of infrastructure into a political goal for autonomous organization that was free from surveillance or co-option by a third-party, embracing their responsibility to “write code” and build tools that were “as resilient and cryptographically strong” as possible to ensure “freedom”” (Nabben, 2021, p. 8), the authors continue to follow a false mantra promoted by such groups.

The concept behind this paper is valuable. Yet, the authors demonstrate a lack of historical knowledge and fail to comprehend the need to adequately document the source material or investigate the claims made by those within the cypherpunk movement. And in assuming the material is correct, the authors have ignored the misrepresentations within the industry and continue promoting false concepts to create politically contentious outcomes. In doing so, the authors also conflate the introduction of systems that produce resilience by opening access to knowledge and bypassing intellectual property controls. Finally, it needs to be noted that democratizing information does not necessitate intellectual property theft as would be applied in using “decentralization in terms of ownership and governance over one’s own digital infrastructure” (Nabben, 2021, p. 8).

Baran, P. (1964). On Distributed Communications Networks. IEEE Transactions on Communications12(1), 1–9.
Bodó, B., Brekke, J. K., & Hoepman, J.-H. (2021a). Decentralisation in the blockchain space. Internet Policy Review10(2).
Bodó, B., Brekke, J. K., & Hoepman, J.-H. (2021b). Decentralisation: A multidisciplinary perspective. Internet Policy Review10(2).
Drake, D. J., Ciucci, J. A., & Milbrandt, B. (1990). Electronic Data Interchange in Procurement. LOGISTICS MANAGEMENT INST BETHESDA MD.
Heard, T. W., & Rozycki, R. F. (1985). DoD Cargo Management Systems. LOGISTICS MANAGEMENT INST BETHESDA MD.
Nabben, K. (2021). Resilience as ‘Political Decentralization’: An Alternate History of the Cypherpunks Origins of Decentralised Technology (SSRN Scholarly Paper No. 3938626).
Uniyal, L. (1988). A search for alternatives: Beyond decentralisation, Gandhi and Marx. India International Centre Quarterly15(1), 31–50.
Watts, D. J., & Strogatz, S. H. (1998). Collective dynamics of ‘small-world’networks. Nature393(6684), 440–442.
Wright, C. S. (2008). Bitcoin: A Peer-to-Peer Electronic Cash System. SSRN Electronic Journal.

This article was lightly edited for clarity purposes

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