Submitted by our Contributing Editor Bob Hettinga as his choice of best article of month found on Internet. Note that the JIBC Editorial Board reserves an unrestricted right to shorten any original document submitted for publication.

Robert Hettinga rah@shipwright.com
44 Farquhar Street, Boston, MA 02131 USA (617) 958-3971

James A. Donald.

James A. Donald describes himself as a "netizen." This article first appeared on the cypherpunks list.

At 07:26 AM 5/5/96 -0400, Duncan Frissell wrote:
Even though the population of those who regularly violate federal tax laws is smaller (20 million?) the records show that even for this population the odds of being convicted are approximately the odds of being murdered.
http://www.trac.syr.edu/tracirs/analysis/IRS019page.html

Now if the state had to compel everyone to write a check for ten thousand dollars every quarter, or to make little trip to the IRS with a brown paper bag full of hundred dollar bills, there would be massive tax resistance, massive state violence to enforce taxes, and the many individual violent conflicts with the state would swiftly become collective armed revolution.

The state can get away with this extraordinary and exorbitant tax rate, because for the most part it does not apply coercion directly to individual people. Instead it disrupts the large scale institutions that we have created to facilitate large scale cooperation.

Now it is easy to coerce the transactions in physical marketplace, or a physical large scale factory or office, because the state can easily find the market place and see what people are doing in it, far easier than it can find individual people and see what each person is doing overall, and if people do not play by the state's rules it can easily send in the bad boys to close down the marketplace.

Thus the state obstructs the large scale specialization of labor, and charges us a high price to participate in that specialization.

The state can do this effectively because such specialization depends on large numbers of people regularly meeting face to face in recognizable physical places: company offices, stock exchanges, and the like. The state can extract this tax because it can send the bad boys into any such meeting place and close it down.

It is this, rather than direct coercion of taxpayers that enables it to charge such savage and extraordinary taxes. Any attempt to directly coerce taxpayers on this scale would swiftly lead to rivers of blood.

Electronic marketplaces are less easy to coerce. Note how states find themselves largely powerless before the international money market. This has caused a substantial retreat of the state in many countries throughout the world.

The socialists complain because the World bank asks the Ukraine and Belarus to be slightly less socialist, but the international money market will not touch such governments with a ten foot pole, while it will roll over like a puppy for governments such as Estonia and Tunisia which really are dismantling socialism.

The challenge then is to move the meetings that make specialization of labor possible to the net, thus making us less easy for the state to coerce.

The anarcho socialists have one half of an important truth: In order to smash the state, we must first transform capitalism.

Right now not much is happening.

Ecash today is rather like email eight years ago. You had a bunch of email systems none of which would talk to each other and none of which were very easy to use and all of which cost too much.

Most good groupware, for example source code control programs, is designed, perhaps intentionally, in ways that make it only useful for intranets, not for WANs. That is to say only useful inside the kind of corporations that presently exist. Also, to be useful in a post corporate economy, a source code control tool would need to have better view control, since the boss cannot simply announce. "OK, we are now in alpha, so we shall now have feature freeze on the product." Instead somebody has to announce "I have constructed and will maintain a feature frozen buildable source code view." We would be vastly further ahead on PGP 3.0 and on ecash if we had a tool like that.

How then did we solve the email problem?

Eventually, on the internet, the custom and expectation grew up that you did not charge for delivering mail to your customers, largely due to the influence, and the moral and political outlook, of the IETF.

Problem solved: Nothing to negotiate; Nothing to be metered. Turned out it was a moral and political problem, not a pricing problem. Now right now we are in the same pickle with electronic transactions as we once were with email. We have a bunch of proprietary systems with proprietary software and proprietary money that do not talk to each other.

Worse, anonymous ecash is patented by Chaum. This is an algorithm for how people structure promises to pay, and is therefor even less well suited to be intellectual property than most software patents. As a result anyone who wants to make an agreement with Chaum to implement anonymous electronic cash faces a lot of cost and delay. Such agreements are difficult to make and implement.

What we need in addition to our existing electronic cash mechanisms is a general mechanism for exchanging and transferring promises to pay, so that Betty can exchange a promise by John to pay in system X for a promise by Sam to pay in system Y. Such a system must make every man their own bank and their own credit agency, and must not be tied to any one proprietary institution that issues promises to pay.

Now once we have that, it will cobble all the different ecash systems together, just as the internet cobbled all the email systems together, and we will start to make some real progress in moving the institutions that facilitate large scale specialization of labor to the net. Right now nothing much is happening, despite the fact that several big names have issued ecash systems.

Now in order to create such a system we need a patent free public key system: (Rabin will be free from the DH patent in one year) and we need a satisfactory public key management system, one that can couple to standard databases. Lots of folk are twiddling their thumbs waiting for Phil Zimmermann to issue the PGP 3.0 key management system. Possibly someone will issue a PGP key management system that works with the Microsoft Crypt API. The Microsoft default key management system is crummy, and is limited to keys small enough for the NSA to break.

So guys, that is the plan: We destroy the state through higher mathematics. We do this by replacing the current institutional mechanisms of corporations with cryptographic mechanisms. This will give more people the opportunity to evade and resist taxes.