The Satoshi Revolution: A Revolution of Rising Expectations.
Section 1 : The Trusted Third Party Problem
Chapter 3: Trying to Undo Satoshi
by Wendy McElroy

Exchanges – Exchanging Liberty for Convenience? (Chapter 3, Part 6)

The best “TTP” of all is one that does not exist, but the necessity for which has been eliminated by the protocol design, or which has been automated and distributed amongst the parties to a protocol. The latter strategy has given rise to the most promising areas of security protocol research including digital mixes, multiparty private computations, and Byzantine resiliant [sic] databases. These and similar implementations will be used to radically reduce the cost of current TTPs and to solve the many outstanding problems in privacy, integrity, property rights, and contract enforcement while minimizing the very high costs of creating and operating new TTP institutions.

—Nick Szabo

The utter brilliance of Satoshi Nakamoto’s insight into the “trusted third party” downside isn't obvious. neither is its importance to freedom. it's not just associate degree economic insight or a creative sidestepping of government; it's a key to human progress that's as crucial because the construct of property rights, freedom of speech, and freedom of faith.

First, it's necessary to on the face of it trouble Satoshi so as to reach a degree of total agreement.

Trusted third parties (TTPs) area unit intermediaries between 2 parties United Nations agency want to interact business however need somebody to administer the exchange, as within the case of the written agreement on a house. TTPs is associate degree pure smart as a result of they're a natural and valuable evolution at intervals a posh human society. As society grows on the far side barter, folks would like representatives whom they'll trust on the premise of private data, reputation, or the unconditional interest of the TTP. International transfers of cash, guarantees on loans, investment in start-ups…these area unit the things that permits businesses to ascertain and flourish.

There is a private side, as well. A trusty alternative will act as a guardian for folks United Nations agency area unit distant and incapacitated. this can be half and parcel of mortals needing one another.

The required third party is also a financial organization, a friend, associate degree lawyer, a friend, or a counseled intruder. it's not be too robust a press release to mention that a complicated economy couldn't exist while not their presence.

But that’s not what Satoshi meant by a TTP. He decried associate degree obscene perversion. TTPs are taken by government and born-again into a grotesque similitude of themselves. rather than being freely chosen by people supported their own self interest, they're “choices” mandated by government supported its desires. In alternative words, TTPs like central banks serve the govt at the expense of individuals United Nations agency area unit allegedly their customers United Nations agency area unit rumored, investigated, and prosecuted for conducting business with their own cash.

Central banks, and alternative varieties of finance, have born-again the huge price of TTPs into a variety of oppression. Years ago, I spoke to an acquaintance United Nations agency was visiting from a communist country. He aforementioned nobody opened a business there as a result of the method might take years and it needed volumes of work just to sell a loaf of bread to somebody. Loaves of bread still circulated, of course, as a result of the black market flourished outside of “official” channels; the commercialism and shopping for of products is that the basis of life itself. It can't be destroyed. It will solely be criminalized. That’s what government will to wealth and therefore the flow of community once it mandates United Nations agency or what is a TTP.

Cryptocurrency has thrown government for a loop. At first, it didn't perceive crypto and, so, it didn't take the development seriously. Finally, a glimmer of understanding occurred. Not of the technical dynamics, of course, however of the political and social implications. it had been and may be a threat. Governments not controlled the supplying of cash, and therefore the mandated TTPs into that it forced folks were being obsoleted.

Governments wish to regain management. Some ban cryptocurrency; others issue their own statist versions of it; several scramble to come back up with a mix of legal solutions. Mostly, politicians area unit simply scrambling. they're attempting to wrap their fists round the micromanagement of currency, that is that the key to group action.

How? it had been inevitable that a brand new variety of free-market cash would be used as one thing quite a variety of direct exchange, and it'd assume the numerous alternative roles cash performs, like speculation and currency exchange. suburbanized exchanges evolved to allow the role of crypto to expand while not destroying its initial price of privacy, obscurity and management by the individual. But, not like the people United Nations agency use them, these exchanges were and area unit visible. they're susceptible to attack by authorities.

There area unit 2 ways that to quash this expression of economic freedom, and each area unit getting used. suburbanized exchanges that operate while not the permission of presidency area unit prosecuted. Centralized exchanges that area unit authorized and controlled in abundant constant manner as banks area unit inspired. Eventually, the time can return once all peer-to-peer transactions are viewed as reprehensively suspect, whether or not or not they occur through exchanges.

It is the unbelievable contribution of Satoshi that he combined the importance of issue cash with the trusty third party “problem”. There has ne'er been a additional profound acknowledgement of the TTP downside to non-public freedom. it had been a ape-man that nobody else connected.

Current TTPs endanger people’s freedom as a result of they're currently associate degree arm of presidency, that Satoshi’s vision originated to avoid.

The fundamental feature of free-market third parties is that they facilitate the people United Nations agency voluntarily use them and area unit thought of to be customers. they supply a service on the free market. A crude and simplified take a look at of whether or not a TTP may be a service or a threat is to raise some queries. will the TTP build associate degree individual’s personal estate safer, or will it represent a risk thereto in any manner? area unit there a variety of free-market choices among that to decide on or area unit there monopoly establishments with which individuals area unit forced to deal so as to perform necessary monetary matters, such a world transfer? will the TTP serve the requirements of people or of the government?

Many people became thus wont to central banks and alternative government TTPs that they forget that “services” provided area unit presupposed to be “services,” instead of vehicles of oppression. True services don't confiscate or freeze accounts within the absence of stealing or fraud. they are doing not report transactions to hostile others, like rapacious governments. they are doing not demand intrusive data or refuse transfers to unapproved traders.

A valid trusty third party is sort of a money-changer within the perfect past days. He counts your currency with honesty; he checks the present conversion rate; he hands you the bills, and you go away. All parties, United Nations agency have any business being parties to a group action, area unit glad. The preceding example is simple, of course. however it captures one thing.

If government cannot management the supplying of cash, it must management its circulation. Governments notice they need lost their monopoly over currency. Their best move is to manage the circulation of each unit of wealth in society, whether or not or not it's created by them. And exchanges area unit the choke purpose at that they'll do thus. sadly, most exchanges area unit quite happy to become ersatz bureaucracies reciprocally for the official privileges they receive.

Prosperity is independence and freedom. I want wealth, privacy, and protection from authority to everybody in 2018.

[To be continuing next week.]