Weary giants of flesh and steel

John Perry Barlow's spirit lives on in cryptocurrency and blockchain tech

Our weekly opinion piece and overview View this email in your browser   CoinDesk Weekly is sponsored by  February 11, 2018 Electronic Frontiersman John Perry Barlow, who died this week, fought for an open internet. The values he stood for should continue to inspire the cryptocurrency and blockchain innovators building the new digital economy. Read more in the THE TAKEAWAY below.   TOP TRENDS ON COINDESK 'HODL' on the Hill The U.S. Senate Banking Committee held the most significant public hearing on cryptocurrency in years, not only because it featured the two top financial market regulators but also because of the generally open, innovation-friendly tenor of the proceedings. True, Securities and Exchange Commission chairman Jay Clayton and Commodity Futures Trading Commission chief J. Christopher Giancarlo spoke of the inadequacies of the current state-by-state "patchwork" of regulations for crypto businesses and reiterated their support for potential new federal legislation. That could be a double-edged sword for entrepreneurs in this space. On the one hand, getting licensed in 50 states is expensive and cumbersome, so replacing that hodgepodge with one set of rules would be more efficient. On the other hand, there's the adage, "better the devil you do know than the devil you don't." And for the die-hard cypherpunks and crypto-anarchists who pioneered this technology, the regulators are all devils anyway – whether they're in Washington or Albany or Sacramento is irrelevant.  All of that said, there was little in the way of FUD at the hearing, unless you count the brief discussion of Venezuela's plans for a sanctions-circumventing cryptocurrency. Giancarlo even explained to the lawmakers what HODL means and pointed out that without bitcoin, there'd be no distributed ledger technology – something that certain enterprise blockchain vendors couldn't be bothered to acknowledge a few years ago. He also pointed out that bitcoin's volatility pales when compared to some of the derivatives his agency regulates, such as those tied to the VIX index. Topping it all off, his prepared remarks contained the Hippocratic Oath's principle of "do no harm." Clayton was a tad frostier, throwing shade on the ICO boom (and the lawyers involved). But to be fair, there's been a lot more envelope-pushing on matters under the SEC's jurisdiction than on the CFTC's turf.  Your Show of Shows The mood was similarly upbeat at Yahoo Finance's cryptocurrency conference in New York, recent price corrections notwithstanding. Regulation was spoken of as a fact of life rather than an existential threat, though that may be partly a function of the speaker lineup, which was heavy on startup CEOs and institutional investors and light on technologists or provacateurs.  At the event, Giancarlo's colleague, CFTC Commissioner Brian Quintenz, urged the industry to form a self-regulatory organization along the lines of the U.S Financial Regulatory Industry Authority or the National Futures Association. For those so inclined, he noted that there are blueprints available, in the form of standards published by the International Organization of Securities Commissions – you can find them here and here. (Caution: Neither is quite as inspiring a read as the Satoshi white paper.) Also during the Yahoo conference: Salient warnings were issued to noob investors about the importance of doing one's research before putting money down; and for the pros, new pro tools were unveiled, such as a diversified "large cap" cryptocurrency fund from Digital Currency Group's Grayscale. (Disclosure: CoinDesk is a subsidiary of DCG.) See all CoinDesk stories ⭐ COINDESK SPONSOR ⭐ At Cryptolobal, we mine a diverse portfolio of cryptocurrencies from one of Canada's largest and most efficient mining operations. CryptoGlobal. We Power the Blockchain. CryptoGlobal is listed on the TSX Venture exchange under the symbol CPTO. Learn More   QUOTE OF THE WEEK "We owe it this new generation to respect their enthusiasm about virtual currencies with a thoughtful and balanced response, not a dismissive one."  – J. Christopher Giancarlo, chairman of the Commodity Futures Trading Commission, at the Senate hearing. THE TAKEAWAY "You have no sovereignty where we gather. We have no elected government, nor are we likely to have one..." The "we" John Perry Barlow referred to in his 1996 essay "A Declaration of the Independence of Cyberspace" was a then-emerging, global community of internet users. But you'd be hard pressed to find a subset of that community who took the ethos to heart more than the pioneers of cryptocurrency and blockchain technology. For better or for worse. Barlow, who died this week at the age of 70, was a towering figure among digital-rights advocates, an early champion of a permissionless internet – something users may take for granted today but was not necessarily a guaranteed outcome in 1990, when he co-founded the Electronic Frontier Foundation.  A longtime lyricist for the Grateful Dead, Barlow envisioned cyberspace as "a world that all may enter without privilege or prejudice accorded by race, economic power, military force, or station of birth ... where anyone, anywhere may express his or her beliefs, no matter how singular, without fear of being coerced into silence or conformity." While Barlow's work focused on freedom of expression and privacy of communications (he also helped found the Freedom of the Press Foundation in 2012), the principles he stood for arguably animate bitcoin and other cryptocurrencies, which are designed to be censorship-resistant, anonymous and open to all comers. For example, anyone with a working internet connection, no matter who or where they are, can download the basic software and use a bitcoin wallet to transfer value to anyone else who has one, no matter who or where they are. No middleman can veto the transaction. Likewise, anyone can contribute code to an open-source project; other members of the community will accept or reject their work according to merit, not status or credentials.  "In some ways, the best of bitcoin, and blockchain technology in general, adheres to that vision of personal freedom and liberty" that Barlow espoused, said Patrick Murck, a fellow at the Berkman Klein Center for Internet & Society at Harvard University. Like Barlow, bitcoiners see the internet as "a new kind of place" where "the old rules don't have to apply," added Murck, who also practices law at Cooley LLP and was a founder of the Bitcoin Foundation, one of the industry's earliest advocacy groups. "I'd like to think to some extent that what we're seeing is people trying to realize that vision he articulated in some small way," Murck went on. "Bitcoin is very connected to that story of the internet." Barlow was no Pollyanna, however, and while optimistic overall about digital technologies' potential to improve people's lives, he also acknowledged the downsides and cautioned against binary "good or bad?" thinking about the subject. "You are designing the architecture of liberty and enslavement, both, in these tools that are being derived around the blockchain and other things like it," Barlow told a gathering of technologists and entrepreneurs at Stanford University in 2015. "What you do and the ways in which you do it will have long-lasting effects." I had the privilege of attending that conference, and I'll never forget what Barlow said about the value of online anonymity. "I feel the same way about anonymity as I do about guns," said the cattle rancher and onetime Republican. "It may be useful to have in the closet if the government gets out of control." Speaking of governments, bitcoin and its descendants have been testing the limits of the independence Barlow declared for cyberspace. The core protocols aren't and probably can't be regulated by any state, but the on-ramps, where fiat currency is converted to crypto and back, can and are. Likewise, Bitcoin addresses are pseudonymous, but licensed crypto exchanges require users to identify themselves. And while initial coin offerings can solicit funds from users across the globe, in the U.S. they are regarded as subject to Depression-era securities laws, as Securities and Exchange Commission chairman Jay Clayton made very clear during the recent Senate hearing.   The common thread is that the "weary giants of flesh and steel," as Barlow memorably described the world's governments, tend to reassert their authority at the borders between cyberspace and meatspace. where the new decentralized networks touch the incumbent centralized ones. "If you're constructing a system that really is tethered to the existing institutions of the old world, you're going to be bound by the rules of the old world," Murck said. "That's where we're seeing regulation." On the other hand, "no one's saying you can't run a bitcoin node," an activity that's endogenous to bitcoin.   Today's web 3.0 projects, such as Filecoin, Blockstack and Sia, seek to create networks that truly would live entirely in the new world, he noted, but whether they succeed is yet to be determined. Quite apart from whether it is feasible to create a self-contained virtual realm where the physical world's "legal concepts of property, expression, identity, movement, and context do not apply," as Barlow put it, some would question whether it's even desirable. These skeptics will point to the uglier uses of cryptocurrency, such as ransomware or assassination markets – not to mention online abominations in general, like revenge porn and mug-shot blackmail sites – as evidence that without some regulation, a freewheeling internet inevitably degenerates into a Hobbesian war of all against all. But without condoning any of those vile activities, they need to be weighed against the benefits to humanity: of enabling like-minded people to form communities irrespective of geography; of opening access to knowledge for those inclined to learn without making them sit in a classroom six hours a day; of allowing peers on different continents to trade with each other as easily as if they were standing face-to-face in a bazaar. I strongly suspect the cost-benefit analysis would come out in favor of an open internet and an open financial system. So let Barlow's words continue to be an inspiration to the builders of a new digital economy. Be careful, though. Those giants of flesh and steel may be weary, but they have guns. – Marc Hochstein Share Tweet Beyond CoinDesk... OTHERS ARE TALKING ABOUT Forbes debuts its list of the richest people in crypto. Hope they all have bodyguards. "We have 30 employees and 25 job openings." Crain's New York Business takes a look at the Big Apple's gangbusters blockchain startup scene. "My potential pension." The Washington Post profiles a crypto consultant in Kentucky who advises ordinary people on how to invest in bitcoin.  WHAT WE'VE BEEN UP TO We are excited to have Jack Dorsey, Co-Founder, CEO & Chairman of Square, talking about the benefits of a more democratized global financial system at Consensus 2018. Learn more here. We're hosting a webinar with B2C2 on Tuesday at 8:30AM EST. We'll be talking about the state of cryptocurrency capital markets and where things are headed over the next five years. Registration is 100% free. Register here. Send feedback on this newsletter to marc@coindesk.com or tweet @MarcHochstein. And of course follow us on Twitter @CoinDesk.  Thanks, as always, for reading. Until next week ... Copyright © 2018 CoinDesk, All rights reserved. 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