The Nuts & Bolts of “Crypto” Anarchy

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Telecomix-CryptoUnlike the communities traditionally associated with the word “anarchy,” in a crypto-anarchy the government is not temporarily destroyed but permanently forbidden and permanently unnecessary. It’s a community where the threat of violence is impotent because violence is impossible, and violence is impossible because its participants cannot be linked to their true names or physical locations.

Until now it’s not clear, even theoretically, how such a community could operate. A community is defined by the cooperation of its participants, and efficient cooperation requires a medium of exchange (money) and a way to enforce contracts.

Traditionally these services have been provided by the government or government sponsored institutions and only to legal entities. In this article I describe a protocol by which these services can be provided to and by untraceable entities.

I will actually describe two protocols. The first one is impractical,
because it makes heavy use of a synchronous and unjammable anonymous
broadcast channel. However it will motivate the second, more practical
protocol. In both cases I will assume the existence of an untraceable
network, where senders and receivers are identified only by digital
pseudonyms (i.e. public keys) and every messages is signed by its sender and encrypted to its receiver.

In the first protocol, every participant maintains a (separate) database of how much money belongs to each pseudonym. These accounts collectively define the ownership of money, and how these accounts are updated is the subject of this protocol.

comeandtakeit1. The creation of money. Anyone can create money by broadcasting the solution to a previously unsolved computational problem. The only conditions are that it must be easy to determine how much computing effort it took to solve the problem and the solution must otherwise have no value, either practical or intellectual. The number of monetary units created is equal to the cost of the computing effort in terms of a standard basket of commodities. For example if a problem takes 100 hours to solve on the computer that solves it most economically, and it takes 3 standard baskets to purchase 100 hours of computing time on that computer on the open market, then upon the broadcast of the solution to that problem everyone credits the broadcaster’s account by 3 units.

2. The transfer of money. If Alice (owner of pseudonym K_A) wishes to transfer X units of money to Bob (owner of pseudonym K_B), she broadcasts the message “I give X units of money to K_B” signed by K_A. Upon the broadcast of this message, everyone debits K_A’s account by X units and credits K_B’s account by X units, unless this would create a negative balance in K_A’s account in which case the message is ignored.

3. The effecting of contracts. A valid contract must include a maximum reparation in case of default for each participant party to it. It should also include a party who will perform arbitration should there be a dispute. All parties to a contract including the arbitrator must broadcast their signatures of it before it becomes effective. Upon the broadcast of the contract and all signatures, every participant debits the account of each party by the amount of his maximum reparation and credits a special account identified by a secure hash of the contract by the sum the maximum reparations. The contract becomes effective if the debits succeed for every party without producing a negative balance, otherwise the contract is ignored and the accounts are rolled back. A sample contract might look like this:

K_A agrees to send K_B the solution to problem P before 0:0:0 1/1/2000. K_B agrees to pay K_A 100 MU (monetary units) before 0:0:0 1/1/2000. K_C agrees to perform arbitration in case of dispute. K_A agrees to pay a maximum of 1000 MU in case of default. K_B agrees to pay a maximum of 200 MU in case of default. K_C agrees to pay a maximum of 500 MU in case of default.

4. The conclusion of contracts. If a contract concludes without dispute, each party broadcasts a signed message “The contract with SHA-1 hash H concludes without reparations.” or possibly “The contract with SHA-1 hash H concludes with the following reparations: …” Upon the broadcast of all signatures, every participant credits the account of each party by the amount of his maximum reparation, removes the contract account, then credits or debits the account of each party according to the reparation schedule if there is one.

tor_project5. The enforcement of contracts. If the parties to a contract cannot agree on an appropriate conclusion even with the help of the arbitrator, each party broadcasts a suggested reparation/fine schedule and any arguments or evidence in his favor. Each participant makes a determination as to the
actual reparations and/or fines, and modifies his accounts accordingly.

In the second protocol, the accounts of who has how much money are kept by a subset of the participants (called servers from now on) instead of everyone. These servers are linked by a Usenet-style broadcast channel. The format of transaction messages broadcasted on this channel remain the same as in the first protocol, but the affected participants of each
transaction should verify that the message has been received and
successfully processed by a randomly selected subset of the servers.

Since the servers must be trusted to a degree, some mechanism is needed to keep them honest. Each server is required to deposit a certain amount of money in a special account to be used as potential fines or rewards for proof of misconduct. Also, each server must periodically publish and commit to its current money creation and money ownership databases. Each participant should verify that his own account balances are correct and that the sum of the account balances is not greater than the total amount of money created. This prevents the servers, even in total collusion, from permanently and costlessly expanding the money supply. New servers can also use the published databases to synchronize with existing servers.

The protocol proposed in this article allows untraceable pseudonymous entities to cooperate with each other more efficiently, by providing them with a medium of exchange and a method of enforcing contracts. The
protocol can probably be made more efficient and secure, but I hope this is a step toward making crypto-anarchy a practical as well as theoretical


Appendix A: alternative b-money creation

One of the more problematic parts in the b-money protocol is money
creation. This part of the protocol requires that all of the account
keepers decide and agree on the cost of particular computations.
Unfortunately because computing technology tends to advance rapidly and
not always publicly, this information may be unavailable, inaccurate, or outdated, all of which would cause serious problems for the protocol.

So I propose an alternative money creation subprotocol, in which account keepers (everyone in the first protocol, or the servers in the second protocol) instead decide and agree on the amount of b-money to be created each period, with the cost of creating that money determined by an auction. Each money creation period is divided up into four phases, as follows:

1. Planning. The account keepers compute and negotiate with each other to determine an optimal increase in the money supply for the next period. Whether or not the account keepers can reach a consensus, they each broadcast their money creation quota and any macroeconomic calculations done to support the figures.

2. Bidding. Anyone who wants to create b-money broadcasts a bid in the
form of <x, y> where x is the amount of b-money he wants to create, and y is an unsolved problem from a predetermined problem class. Each problem in this class should have a nominal cost (in MIPS-years say) which is publicly agreed on.

3. Computation. After seeing the bids, the ones who placed bids in the
bidding phase may now solve the problems in their bids and broadcast the solutions.

4. Money creation. Each account keeper accepts the highest bids (among
those who actually broadcasted solutions) in terms of nominal cost per
unit of b-money created and credits the bidders’ accounts accordingly.


  1. Some libertarian first principles:

    Individualism. The individual is the basic unit of social analysis. Only individuals make choices and are responsible for their actions. Each individual has both rights and responsibilities and deserves to be treated with dignity if at all possible.

    Individual Rights. Individuals are moral agents who have a right to be secure in their life, liberty, and property. You may have heard of unconditional love, where you love someone no matter what. In libertarianism, there are unconditional rights. Nothing can take these away, not government, not a majority, not even if every other person you know wishes you behaved in a different way. These rights are inherent in your nature as a human being. It is without question that individuals enjoy the security of such rights; you don’t owe anyone an explanation or apology for doing something unpopular with everyone else.

    Spontaneous Order. The greater the order and cooperation there is in society, the better individuals canto thrive and flourish. That does not mean that order must by someone in charge, the way you see order imposed in a family or at work. The great insight of libertarian social analysis is that order in society arises spontaneously, out of the actions of thousands or millions of individuals who coordinate their actions with those of others in order to achieve their purposes.

    Over time, we have gradually chosen greater freedom and yet also managed to develop a complex society with intricate organization. The most important institutions in human society — language, law, money, and markets — all developed spontaneously, without central direction.

    Civil society. The complex network of associations and connections among people — is another example of spontaneous order; the associations within civil society are formed for a purpose, but civil society itself is not an organization and does not have a purpose of its own. It is no one’s place to try to impose their will on another or on any organization of people.

    The Rule of Law. Libertarianism is not hedonism or a complete lack of morals. It is not a claim that “people can do anything they want to, and nobody else can say anything.” Rather, libertarianism is a way of living liberty while abiding by agreed upon rules of conduct, in which individuals are free to pursue their own lives so long as they respect the equal rights of others.

    The rule of law means that individuals are governed by generally applicable and spontaneously developed protocols, not by arbitrary commands; and that those rules should protect the freedom of individuals to pursue happiness in their own ways, not aim at any particular result or outcome.

    Government without unnecessary force . To protect rights, individuals form associations, organizations, and governments. But government as it previously existed is no longer to be assumed to be an appropriate institution. Currently living people must one again affirm there commitment to government, or be offered a way to opt out.

    Libertarians have a great antipathy to concentrated power, and especially corrupted and absolute power. Thus there is an ongoing process of dividing and limiting power, and that means especially to limit government as much as possible. Limited government and abstinence from blanket applications of force are the bedrock of libertarianism.

    The dispersion of power in Europe — more than other parts of the world — has led to individual liberty and sustained economic growth both there and in the many colony and satellites of European powers.

    Free Markets. To survive and to flourish, individuals need to engage in economic activity. The right to property includes the right to exchange property and services by mutual agreement. Free markets are the economic system of free individuals, and they are necessary to create wealth. Libertarians demand people be allowed to be as free and prosperous as they are able without outside intervention in people’s economic choices.

    The Virtue of Production. Libertarianism arose as a reaction against monarchs and aristocrats who lived off the productive labor of other people. Libertarians use defensive force to protect the right of people to keep the fruits of their labor.

    This protection develops into a respect for the dignity of work and production and especially for the growing middle class, who are no longer to be looked down upon by aristocrats. Libertarians class analysis divides society into two basic classes: those who produced wealth and those who take wealth force from others. Libertarians also fight to stop those who would redistribute their earnings to nonproducers regardless of any supposed inequality or bad behavior engaged in by ones ancestors.

    Natural Harmony of Interests. Libertarians believe that there is a natural harmony of interests among peaceful, productive people in a society that keeps an honest record of events and doesn’t seek to cheat or exploit anyone.

    One persons individual plans — which may involve getting a job, starting a business, buying a house, and so on — may conflict with the plans of others, so the market makes many of us change our plans. But we all prosper from the operation of the free market, and there are no necessary conflicts between farmers and merchants, manufacturers and importers, stay at home adults and career oriented adults.

    Only when government begins to hand out rewards on the basis of political pressure do we find ourselves involved in group conflict, pushed to organize and contend with other groups in a destructive fight to accrue political power.

    Peace. Libertarians are highly dubious of any and all wars. Certainly no wars since WWII were justifiable, and probably most of the wars before as well. Libertarians understand that war brings death and destruction on a grand scale, disrupts family and economic life, and put more power in the hands of the ruling class. This is why there must be no rulers, they will never share the popular sentiment for peace, it isn’t in their interests.

    Free men and women, of course, have to defend themselves and their freely chosen societies against outside threats; but throughout history, war is nearly always the common enemy of peaceful, productive people on all sides of the conflict.

    Libertarianism is not just broad liberal principles and a miserly use of force. Libertarianism demands these principles be applied fully and consistently. Far more adherence and attention than most modern thinkers agree to and certainly more so than any modern government.

    Second, while our society remains generally based on equal opportunity, rights, and capitalism, every day new threats arise to threaten these principles from all manner of Statist Capitals and Statute Spewing Bodies. Each new government directive takes another chunk of are already dwindling sphere of freedom, so we should think carefully before giving up any further liberty.

    Third, liberal society is resilient; it can withstand many burdens and continue to flourish; but it is not infinitely resilient. Many claim to believe in liberal principles yet advocate endlessly increasing confiscations of the wealth created by productive people, more and more restrictions on voluntary interaction, more and more exceptions to property rights and individuals settling their differences their own way, and more and more transfer of power from society to state.

    All of these escalating trends if allowed to continue, will ultimately result in a fatal undermining of our civilization and a devastating destruction of all the shared wealth and capital we’ve worked so hard to accumulate and build.

  2. Red from Shawshank took the Red Pill.


    RSI – Residual Self Image

    Bluepills keep you in harmony with the everyday blue people like in the movie Avatar

    Agents of the matrix are the same as agents of the state

    Self-substantiation – only exceptional humans tend to become aware of the Matrix/Statist Lie, those who have “a rare degree of intuition, sensitivity, and a questioning nature”, all qualities which are used to identify inconsistencies in the Matrix/Statist Lie.

    Other matrix terms: jacking in, exit, truce, the prophesy, deja vu, proximity alert

    • red uses takeaway close, closes the deal:

      1967 Parole Hearings Man: Ellis Boyd Redding, your files say you’ve served 40 years of a life sentence. Do you feel you’ve been rehabilitated?
      Red: Rehabilitated? Well, now let me see. You know, I don’t have any idea what that means.
      1967 Parole Hearings Man: Well, it means that you’re ready to rejoin society…
      Red: I know what you think it means, sonny. To me, it’s just a made up word. A politician’s word, so young fellas like yourself can wear a suit and a tie, and have a job. What do you really want to know? Am I sorry for what I did?
      1967 Parole Hearings Man: Well, are you?
      Red: There’s not a day goes by I don’t feel regret. Not because I’m in here, because you think I should. I look back on the way I was then: a young, stupid kid who committed that terrible crime. I want to talk to him. I want to try to talk some sense to him, tell him the way things are. But I can’t. That kid’s long gone, and this old man is all that’s left. I got to live with that. Rehabilitated? It’s just a bullshit word. So you go on and stamp your form, sonny, and stop wasting my time. Because to tell you the truth, I don’t give a shit.

      “self-substantiation”… the overlords know they’re “exceptional humans”, too. or maybe just humans, unlike the mass. i think people tend to take too much credit, assign too much debit, for homeostat settings; embezzlement & taxation. popeye: i am what i am, & that’s all that i am….

  3. The illusion of a perfectable human nature

    Perfectible Apes in Decadent Cultures – Rousseau’s Anthropology

    Is Humanity Perfectable?

    Are humans perfectable? The rationale behind small government

    Is mankind “perfectable?”

    Dominance of mind over matter will become so complete that mental perfectibility would take a physical form, allowing us to control illness and ageing and become immortal. – William Godwin

    – what promotes the general good is the development of human intellect; the general good is nothing more than the development of the human intellect.

  4. if you don’t know russian cyrillic alphabet, you can figure out what each letter is by typing here:

    cyringlish – regular english, but written with cyrillic script

    тче рисе оф тче цыберполице

    пицкинг цамбодиан пенис флошерс

    цат фаллс фром тчрее сторы буилдинг анд сурвивес

    кидс гет елецтриц счоцк ин поол

    ~”Анд чош ше бурнед ин тче цампс латер, тчинкгин, шчат шоулд тчингс чаве беен лике иф ше чад девелопед а симпле проприетары цоммуницатионс протоцал фор оператионал сецуриты?”~

  5. For the tiny investment of getting their women to wear head scarves, and prioritizing a few morals above capitalism and nationalism, the Arabs achieve an awful lot of independence and accommodation for such a small inconvenience.

    Also, your average clover pisses himself upon seeing a few arabic characters; in exactly the same way he does when he sees a photo of an “assault weapon.”

    Arabic Latin Alphabet Conversion

    ئا قوجک لبه‌رتاران فۆخ ژومپس ئۆڤه‌ر ئا ستاتست دۆگ
    converts to
    a quck lbertaran fox jumps over a statst dog

    2 traP – egaC the gnikcolnU – esoR nekraL

    yekaW yekaW – esoR nekraL

    !htapoicoS a si erutaN rehtoM – xuenyloM nafetS

    rotcennoC-toD – ekcI divaD

    ئ ئام درڤنگ تۆ تهه‌ ئارپۆرت تۆ پجک ئوپ می فاملی. ئ مسس تهه‌م سۆ موجه ئعم ئه‌خپلۆدنگ وته ژۆی.
    converts to
    I am driving to the airport to pick up my family. I miss them so much I’m exploding with joy.

    arabic proverbs

    أبعد من الثريا
    converts to
    Farther than Pleiades.

    – get far from statists and their statist sheepthink. farther than pleiades.

  6. to decode simple substitution cypher based on letter frequency list

    since e is most freq, it is substituted with 1

    Thanks guys, anyon1 s11n th1 n1w X-m1n movi1 y1t? I’m thirty minut1s into it and its amazing!

    it’s at http://www .sockshar1 .com /file/B952822649419BC3#
    close gaps, change 1 to e, click on Continue as Free User, then hit play button

    most common letter is 1 -> 2nd most common letter is 2
    etaoi nshr = 12345 6789

    eric peters autos = 195c p12197 3u247

  7. oops, is this even readable?

    If not, you can delete, same text is here as well. Everyone is really hitting it out of the park here lately, warms my cryptopsyche to no end.

    Crypto Anarchy, Cyberstates, and Pirate Utopias

    Pirate Utopia

    The Crypto Anarchist Manifesto

    Crypto Anarchism – wikipedia

    Crypto Anarchy and Virtual Communities

    Crypto Anarchy, Cyberstates, and Pirate Utopias – Contents


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