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Crypto for Change - Gatecrashing the Gatekeepers’ Party

Published on July 30th, 2014 by rotalumis

We all remember that kid at school who was strong or influential enough to decide who got to play ball or form part of the gang. That is a gatekeeper.

The gatekeepers of the adult world wield much greater power, of course. And yet, just like the class bully, they typically use their influence to get their way and exclude people or entities they dislike.

The problem with gatekeepers

In April 2014, Stefan Molyneux, came down heavily on political corruption and warmongering in an Amsterdam conference talk titled Bitcoin vs.Political Power. Right after he uploaded the talk to YouTube, Google suspended the eight-year-old YouTube account he had used to post over 1,500 other videos. They also denied him access to their other services. His Gmail, Google Drive, Google+ and all the information he kept there suddenly vanished.

Google eventually restored the accounts, but they did so at their sole discretion. Therein lies the problem: whenever a central authority or gatekeeper has full control of a system, there exists a strong potential for abuse.

Even an honest gatekeeper is at the mercy of higher powers.

By his own admission, Ladar Levison, who owned and ran the LavaBit encrypted email service, had complied with specific requests for information from the authorities in the past. Nevertheless, he was caught completely unawares when the FBI turned up at his door in the summer of 2013 with a court order demanding that he let them install surveillance equipment to monitor his entire network. Rather than betray the trust of his 410,000 users, including Edward Snowden, he decided to shut down LavaBit. That reaction prompted the FBI to demand the private encryption keys of all LavaBit users, in another blatant attempt on ordinary people's right to privacy.

Levison found the courage to protect his users and never provided the information, for which he was tried and judged to be in contempt of court. Yet he is the exception by far, and it clearly makes no sense to trust people or corporations to do the right thing, even when it goes against their interests. This is especially true when there are alternative solutions. Those who value freedom and privacy are clearly better off using systems designed from the ground up to guarantee that those values are upheld.

Similar stories of gatekeepers willingly overstepping their bounds or being coerced to do so abound in a variety of areas. In future Crypto for Change articles we will be examining how projects like MaidSafe, BitMessage and others are working to create services where there is no gatekeeper in charge (because there cannot be one to start with) and where individual users are able to exercise full and exclusive control over their part of the system.

To set the groundwork for those discussions, let us look at the first gatekeepers to see their power challenged by the coming of cryptocurrencies and related technologies: the traditional financial services sector.

The big, bad boys banks

If you have ever used PayPal to store or process any significant amount of money, you must have wondered at some point what you would do if they ever decided to freeze your funds or close your account.

A quick search will turn up countless horror stories of small-time online merchants whose PayPal accounts were frozen for up to six months, often without a proper explanation. Such heavy-handedness has crippled many a legitimate business and others have even had to close because of the resulting financial ordeal. While PayPal might do good a job of being the "Safer, easier way to pay" (depending on who you ask), BBC One Watchdog observed last year that it is often ironically hard to get your money when you want it.

In much the same way, merchants who rely on the financial services of traditional banking institutions operate in constant fear that these services might be suddenly withheld for whatever reason.

It is not only businesses that are denied the right to transact freely by banks and payment processors, however.

In 2012, Time Magazine reported that over 10% of American households did not have a checking account, often not out of choice. In addition, it said that up to one third of the US population could not access the full range of financial services. Unbanked or underbanked Americans have to pay through the nose to perform everyday financial transactions, just like those who want to send money to unbanked people in developing nations have to pay exorbitant fees to Western Union and other remittance service providers. It is, of course, usually the poorest who are worst affected because the banks see them as too risky or not profitable, but they are not the only ones. People who have faced financial troubles, no matter how temporary, can also have a hard time getting accepted back into the banking system, even after they have got back up on their feet.

Such is the way the financial gatekeepers wield their power, but there is worse.

In an assault on freedom of the press, PayPal has blocked payments to Wikileaks ever since the journalistic non-profit organization released over 250,000 sensitive US diplomatic cables in 2010. VISA, MasterCard and several others continue to do likewise. Payment processors are able to exercise this kind of extra-judicial censorship because they have traditionally stood right between people with money and the causes they want to support.

Sidelining self-appointed gatekeepers

The turning point came when Wikileaks started asking for Bitcoin donations in 2011. These were still early days for the fledgling cryptocurrency, but Bitcoin, as well as the distributed blockchain technology it is built on, were already proving their worth as a solution to the gatekeeper problem.

If you are new to Bitcoin technology, this article is an excellent and easy explanation of how it works under the hood. Instead of keeping transaction and accounting data in a central ledger, as traditional systems do, the Bitcoin network stores multiple copies of that data on computers all around the world. This makes it practically impossible for any central authority to ban or shut down Bitcoin because there is no single person or entity they can go after.

Similarly, Bitcoin has no accounts that can be shut down and this makes it hard for anyone to confiscate or freeze your funds, provided you use the system as originally intended and have full and exclusive control of your private keys.

Besides, bitcoin transactions are processed and verified by a network of miners distributed worldwide. This makes it very difficult to obtain the network consensus necessary to reject or reverse any transaction, even if it were possible to identify the sender or recipient of the funds.

No permission required

The short of the story is that Wikileaks did not have to ask anyone permission to start receiving and sending bitcoins because there is indeed no one who can grant or deny that permission. There were no fights, no threats, no violence.

Nothing at all like this:

The aggressive traditional banking system was not overthrown in any sort of adult equivalent of a playground scuffle. The banks were simply sidelined.

For the first time in the history of money, people could bypass both gatekeeper and gate because the gate was no longer the only point of access. This brand new technological invention of the distributed blockchain had irreparably torn down the fence. Satoshi Nakamoto and the Bitcoin community gatecrashed the financial gatekeepers' party and invited the guests to join in the fun outside on the Bitcoin kerb, where everyone was welcome and nobody could be made to leave.

Slamming gates shut

Of course, the biggest financial party is still over at the Fiat Currency Frat House. That is primarily Dollar House, after all, and the large banking institutions still hold the keys because it is their house.

Some banks and financial institutions are actually fighting back against Bitcoin in the only ways they know: either by lobbying higher powers or by shutting the door on account-holders associated with cryptocurrency.

However, when anyone says that the gatekeepers will be able to retain control of the gates and that, "Emerging payment players' biggest challenge is acquiring and nurturing active customers," they are conveniently forgetting that these active customers will come.

In fact, there are millions and billions of them spread around the world, mobile phone in hand, patiently waiting for the technology to mature.

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