How the Physical and Digital Frontiers are Colliding

tl;dr: The ability for customs officials to search digital devices and seize data is a microcosm of the challenges that centralized societies face in dealing with the inevitable arrival of decentralized technologies.

As someone who travels domestically and internationally with some degree of frequency, an article claiming that Canada Border Services seizes lawyer’s phone, laptop for not sharing passwords, definitely caught my attention.

Like many of you, I have personal, social, and financial information on my phone and my laptop.

Personally, I would not be too keen on handing that over to a border official simply because s/he asked, no matter what country it is.

All that needs to happen is for someone who is only mildly corrupt to take a screenshot or write something down.

Then there’s an entirely new vector for attack for identity or financial theft. As the security folks would say, “a broader surface area.”

The risks increase as more and more people choose the option to carry crypto-assets on their phone or laptop.

Like carrying cash, crypto provides a degree of personal security when traveling. If your wallet/credit cards are stolen, you can’t withdraw cash from an ATM, or if the credit card networks don’t work, it’s a backup.

For people feeling oppressive regimes or hyperinflation, it’s a lifeboat.

However, that same lifeboat also poses risks to the established order.

For example, when you enter the US and other countries, you are asked if you are carrying more than $10,000 in cash. I don’t know for a fact, but I suspect this has to do with anti-money laundering efforts. Don’t get me wrong, I’m not in favor of making it easier for criminals to launder money.

At the same time, there are plenty of people who will want to carry more than $10,000 in crypto as they cross a border who aren’t criminals.

Technology Isn’t Good or Evil. It Just Is

I suppose this topic is on my mind because, to me, it is increasingly obvious that we are witnessing the birth pangs of an entirely new financial system.

While some are skeptical about the impact of blockchain because it “isn’t happening fast enough,” I guess my response is: “what’s fast enough?”

Bitcoin itself has grown from a market cap of $0 to over $200 billion in 10 years. Name one other start-up that has done that. Oh, and it happened with no marketing team or VC funding.

The “funding” for Bitcoin wasn’t financial.

It was emotional funding.

It comes in terms of the HODL rate.

HODL is the Bitcoin lingo for “Hold on for Dear Life” and refers to a willingness to stick it out through thick and thin.

The more people who HODL for the long-term, the wider the belief or “idea-virus” spreads, adding value to Bitcoin.

Eventually, the belief is that enough people will accept Bitcoin as a legitimate, alternative store of value, means of exchange, and unit of account.

Then, the HODLers will have completed their duty, maintaining the faith in the long-term and they will be able to release some of their coins in order to pay for the goods and services they want in their lives.

The incredible thing about Bitcoin is that you don’t have to guess about the HODL rate.

It’s all right there, out in the open.

$124 billion dollars of wealth has been stored on the bitcoin network, and not withdrawn, for an entire year.

Over 10.5 million bitcoin hasn’t moved in one year.

That’s about 60% of all bitcoin.

Hodling will turn bank accounts into the landlines of today, nonexistent.

— Rhythm (@Rhythmtrader) July 4, 2019

Though I am concerned about confirmation bias, you can literally watch the growth in the number of HODLers and the amount they are HODLing in real-time.

This is like watching birth and growth happen. Only thing is that it is just happening on a blockchain.

But the point of this section isn’t to evangelize Bitcoin or blockchain.

It’s to remind us that when it comes to technology, we don’t have to like it or hate it, but we do have to accept it.

Technology is neither serving us nor eating us. It is helping humanity to destroy and delude itself. It is also helping humanity to enlighten and exalt itself. And it is learning from us as it carries out both of these processes…

— Ben Goertzel (@bengoertzel) July 4, 2019

Facebook, Libra, and the Resistance

Ironically enough, the Libra (non)cryptocurrency is where the battle between the old financial order and the emerging financial order is starting to get fought.

In early July, House Democrats issued a letter to Facebook to halt Libra project. If you read it carefully, you can see that the existing financial/regulatory regime now has a better understanding of what the threat represents.

Naturally, they are using the old tools (“fighting the last war”) to try and stop it.

When it comes to Facebook/Libra, they might be successful (or they might not).

But when it comes to decentralized networks, in the long run, I believe they won’t be.

That doesn’t mean…”roll over and let anything happen.”

What it does mean is that the time to start thinking about:

“how do we achieve society’s objectives (whatever those are) given the arrival of this new technology?”

Sadly, I am doubtful that these questions will happen sooner rather than later. That just causes unnecessary suffering down the road.

Twenty years ago, it was obvious to anyone who was watching the arrival of the Internet and not paying attention solely to the excesses of the dot-com era, that the US manufacturing heartland was going to be emptied out because of low-cost communication networks.

No one did anything and look where it got us.

Not that I have the solution or even a proposed solution, but that doesn’t mean it’s not possible.

The Inevitable

I suppose that a lot of my thinking about these things was influenced by Kevin Kelley’s fantastic book, The Inevitable: Understanding the 12 Technological Forces That Will Shape Our Future.

As new problems arise, new technologies from a global workforce will emerge to meet them.

Given the growing propensity for border agents to search devices and for governments to increase surveillance, new tools will emerge.

One of them, for example, is “coin mixing.”

As you know, transactions on a blockchain are public by default.

With not too much effort, many advanced tracking companies such as Chain Analysis can connect a transaction to a person.

It’s understandable why a person or company would not want every one of their transactions known to every single person/entity with whom they do business.

Coin mixing is a service that allows people to “wash” their coins so that they still own the same number of Bitcoin or Ethereum and the integrity of the network is maintained but obfuscates the history of that individual wallet.

Wasabi Wallet is one that does this for Bitcoin and now there is one on Ethereum.

Again, we can bemoan the fact that this tech exists and that criminals will use it.

Or we can celebrate it because now dissidents in oppressive countries can reduce the amount of surveillance and censorship that their government will impose on them.

But we can’t ignore it or resist it.

We have to accept it.

Once we accept it, we have to find ways as a society to influence its direction for positive outcomes.

Which brings me back to border agents.

As these types of search and seizures become more and more commonplace, solutions will arrive for people who don’t want to give up all their data.

There will be a service for decentralized storage and backup so that I can wipe my devices when I go over a border and restore it from the other side.

Or, “dual boot” OSs where you can have a full instance of your phone with data and apps but that is limited to “safe for searching” so you can unlock your phone, show it to officials, and meanwhile have the sensitive stuff locked away behind a “hidden door.”

BitBox already provides this “panic room” feature.

I have no idea what the range of solutions/offerings will be. I just know they will come.

Which doesn’t mean that I want terrorists and criminals having free access to the US or any other country.

What it does mean is that we’re going to have to figure out new ways to identify the threat and divert it, without infringing on the privacy rights of individuals.

Not an easy task, but we may as well get started.


How the Physical and Digital Frontiers are Colliding was originally published in Data Driven Investor on Medium, where people are continuing the conversation by highlighting and responding to this story.