From Tornado Cash to sustainable privacy panel | Valkenburgh -Lefteris-Fatemeh | W3PN Berlin Meetup

[Applause] and now I'm welcome on stage Peter from coin Center left teris you too uh please join as and Fatma please please please please um this third one will be tough uh whatever you want you can lay down like what will be the most comfortable for you um or maybe I will be this one for you um so we will exchange we have three mics but the third is not that suitable so first of all uh let me introduce uh wow uh now we will have a proper streaming um so it's speak play pleasure sorry uh for me to have people coming from the States from new you live here no no I mean like which district ah you see like uh we have pretty diverse uh sort of uh ways of getting to our events and what's important for this panel that um every year I guess there are critical topics with privacy and somehow it's the same topic again and again within the intersection uh legal issues uh or challenges and privacy itself uh how we interact with the governments uh governments across the world how we dependent on the foreign governments and stuff like that and at the same time um within larious example I want to tackle how what community could do to tackle those issues especially when it comes also to funding and here it really rhymes with af's talk on like how to uh found the project and at the same time one of the most uh often question within the Privacy Community was like what we could do within the tando case Samurai case you name them uh especially when those people they never been activists maybe they were just coding researching or doing marketing campaigns uh on Twitter uh Le rki FAS swarm uh Peter from Co Central a small Applause please uh and actually I have a super generic question but I I found it super important right now how you define decentralization do I really have to start okay so decentralization that's a very hard thing to Define um decentralization centralization is basically not relying on one Central Authority for something not having someone decide everything but in the concept of crypto and blockchain can be many different things but um it's uh it's not black and white this is probably the most important thing because uh there is there's many people who accuse a project saying okay this is not decentralized or this is decentralized do what they do and do not do do not do what these guys do uh this kind kind of um extreme views are actually hurtful to the concept of decentralization we should try to well Progressive decentralization is a term but I kind of hate it because it's almost always used to justify not um doing things the right way and doing taking shortcuts everywhere but uh decentralization is basically not not relying on one one person one entity um and it can be for many things it can be this centralization of development decentralization of governance decentralization of of of well governance is decision making yeah um I think the answer is very subjective and it's good that there is no one typical like definition for decentralization and this is by Design because this is a decentralized field and there is not one Authority that can Define it properly for me personally I would not distinguish decentralization with censorship resistance and permissionless so I think something is decentralized if it also has these two other features and obviously as you said it's on a spectrum um but uh if one needs permission or can be censored from a network then definitely this network does not is not decentralized at least in the way I understanded so we um at coin Center the people that read our website most are probably people at the SEC and finsen so when we make a public statement about what is decentralized we have to be careful because it it could influence people who want to bring prosecutions um that might be an optimistic view of our ability to influence people but it it's possible and so we try and be very careful and because of that we've always pushed for to me it's a nonsense to have a regulatory body like the SEC or the doj count the number of nodes or count the number of developers and have some sort of magic threshold where if there's like 50 plus one Suddenly It's sufficiently decentralized because those numbers are arbitrary and the actual accounting of whether this project has reached this magical threshold is going to be so chaotic and unpredictable and arbitrary that it just would lead to infinite prosecutorial discretion basically and we see this in legislation that's been proposed to Congress um in attempts to Define decentralization as some sort of robust test of sort of the number of participants and how Federated the power amongst the participants are so when we've written about this in the context of cryptocurrencies we said there's something very important that separates Bitcoin etherum and the follow on Innovations from web 2 we don't usually use the word web 3 because in the US it's especially become like an Andre and Horowitz buzzword in which case it's like not always credible um but what we say is look the big difference is anybody can participate in the protocol that adds data to The Ledger that writes and that can anyone can read from that ledger now it might be pseudo private because maybe you can only read one fact from The Ledger like there's no double spending you can't see addresses but anyone can write and read and anyone can write and read the software that powers the protocol so you've got basically two conditions you've got free and open source software that powers the Essential Elements of the protocol and you've got a competitive system of block creation and validation that anybody can participate in without getting some sort of credential from a centralized Authority so commonly available hardware for mining or a relatively well traded liquid token that you can purchase in order to stake that's our metric trick I think that does merge it a lot with this notion of permissionless but to us that's actually what's sort of fundamentally important in the discussions in in Washington DC and I often wish we weren't having a discussion about whether something's decentralized or not I want to have a discussion about whether it's permissionless we also make reference to sort of microeconomic theory which is the reason why it's important is not that there's actually 50 different competiting miners in the Bitcoin blockchain it's the fact that some somebody could with relative relatively low startup costs start participating in that system and so the system might not be competitive in the traditional economic sense but it's contestable which is an economic term the barriers to entry are low and so there's no Fiat there's no gating to participating fairly on this network that's what we would call decentralized for the things that matter and it's really more a concept of permissionless for us and then here in this industry we hear each year Revolution let's make Revolution and I'm like what kind of how it will look alike and then it leads to the how you would describe the nature of relationship between government or governments and the protocols and the people who are doing those protocols or Solutions like how you would Define some sort of your personal view on that relationship in between those sectors and specifically with that decentralization in between of between them okay good question um so how is um how are protocols connected to governments of nation state uh yeah okay all right yeah actually this is part of my talk tomorrow so thanks uh I have a talk tomorrow in dcon at 10:30 so I will talk more about that but the idea at least in my head of what uh protocols what the ethereum blockchain what the Bitcoin blockchain can um do for government is uh it can eliminate corruption and it can uh promote radical transparency of of of of government of bureaucracy um this is the good case if that happened if it was used because both so all of the protocols that we use in the main chains like Bitcoin and ethereum they are completely transparent there is no privacy at all there and that's good for uh government for um being able to see uh how something is decided how uh how something is funded where is your uh fund spent [Music] um but then there is the other scenario that is actually very dangerous and it's to move everything and have everybody completely visible on chain and that is um um totalitarian regimes s dream basically track everybody be able to see what everybody is doing so our technology has the power to create something beautiful but it also has the power to be used uh to create um I don't remember the name of the episode of Black Mirror but the one where they track everything and they see that you are paying with cbdc like thing uh yeah so that's I'm going to go back to the topic of censorship resistance because I think the tension right now between at least regulators and um the tech the the the crypto blockchain Tech that we're working on at least more on The Cypher Punk end uh of the spectrum is the drive of regulators to try to capture or control or have these networks comply somehow with their regulation um and the way that law and regulations know how to do is by finding these centralized points of control um from the blockchain perspective it could be seen as central point of failures uh but that that is up to people's discretion um to then Force the actors that have control over for instance the front end or um the project itself depending on where in the Inception of the project we are to make some design decision that would align the project with whatever these Regulators deem to be right and I think that the tornado cash case is a very good illustration of why this leads to very absurd um realities so for I think here it's interesting to put in parallel the situation of alexe um in Europe so in the Netherlands and um how the proceeding went for him and um the current uh outcome which is still pending the appeal so it's not final and uh compared to the other developers or co-founders that are in uh other jurisdictions and the fact that the laws so far at least seems to be very different for each of them and how they apply to them what they are supposed to do and the consequences that they suffer is also very different but we're talking about a technology that is supposed to be Global so who gets to decide like which authority which government gets to decide which way the technology has to go I think um this is a very legitimate question to ask ourselves whether um the project can decide very very I mean agreeably to um opt for one jurisdiction and be like okay I will follow whatever I like I think compliance means in the US which is still also an open question there are proceedings pendings against the sanctions against um tornado cash so it's not even clear whether these are legal or what one must do to comply with them um but for me it all boils down to surveillance so one can censor something that one can see if no one knows what's happening then there isn't much to censor other than to censor the whole thing um and as much as you would be at home sorry I'm taking a long time but it's my favorite topic um you're at home you close the curtain you can do and say whatever you want and as long as no one knows then no one can come after you then we can apply the same reasoning for blockchain technology and I think there's no way around privacy becoming a de facto once the technolog is Advanced enough because we should wouldn't be surveilled um by some subjective uh governments that like doesn't apply to us so governments and protocols um I have like a more libertarian Texan American perspective I'm not from Texas I'm from from New York um NTC but um I just want to be left alone um I don't we coin Center coin Center's mission is not to advocate for government usage of blockchains it's not to Advocate that governments should favor blockchains in the law it's honestly that we just want equal treatment and our constitutional rights because if we get equal treatment and our constitutional rights we can build these things how we want to build them and then they will be I think Superior to other systems out there Market forces will prevail and these technologies will hopefully do a lot of good in the world that might be a little naive but that's that's that's sort of the basic premise and so what do I mean by equal treatment well here's an interesting relationship between a government the US government and a protocol not any of our crypto protocols but the Swift interbank settlement Network do everyone show of hands if you know what Swift is yeah this is a good room so you know Swift handles billions of dollars in transactions globally and connects to Banks all over the world including in in sanctioned jurisdictions and they sometimes debank Banks when there are specific laws in Belgium that are passed to try and say you can no longer deal with this bank but for example when they connect an American who is a customer of Bank of America to a Cuban bank they don't end up liable for that American paying a sanctioned person in Cuba they will relay that message and they will not be directly liable for the content of their message and if you read their frequently asked questions website and their compliance page on sanctions they say sanctions is the responsibility at the end points we're a neutral Communications Network and of course they are and they need to be because the global economy would fall apart if we started you know having sort of several centralized points of control over something that's supposed to be a networked good interbank settlement you just grind the entire world economy to to a halt and there are some politicians now who seem to want to do this in the wake of the Russian invasion of Ukraine in Wake of the rising power of China so maybe it will all collapse but at least for the moment Swift gets this interesting favored status as a as a true Communications intermediary even though and I'll make this brief because now this I can just connect this to what we were just talking about even though they have 10 times more actual control and knowledge of the messages that they're relaying than Alexi and the Romans ever had with tornado cash so you you know I just want equal treatment with the Legacy Financial system they get a lot of slack and probably for good reasons sometimes and probably for very bad reasons other times I just want the rule of law equal treatment I also want the first amendment in the US which means developers who are building these tools the right way which is mostly just publishing software not engaging in a lot of trust me type conduct not doing a lot of icos and things like that they can't be regulated because they're actually engaged in expressive conduct and I also so like the Fourth Amendment which says that the government can't just Hoover up all my private data without a warrant before a judge which is how all mass surveillance works in the US which you might say well Peter your fourth amendment seems to be worth about and we're we're trying to change that and then returning to the question like what the community could do especially when many people are don't know how to S defend defend in terms of when they're participating in heatons for example or when and they are a part of that death Community uh like how you would Perce should they wear t-shirts like what kind of advocacy should be presented uh within the communities especially in the when on the background if you check coin desk or whatever big media writing within the industry they almost never write properly on privacy the last year especially when they were like funding they were writing yeah 100 Millions were poured into privacy protocol and then it reminds security um Market that usually when the heck is there the media highlights kind of like the nature of relationship with the market so generally speaking what people could do how do you think yeah good they can wear t-shirts I have wear one it's it's nice but um I cannot say anything about advocacy or legal or governments I have no no idea I'm just a developer uh they can actually though uh develop you know this is what cyer funks Cypher punks did um they wrote code and they still write code so you can write code that um respects people's privacy you can actually think about what um the data that your uh software is handling where are you sending it who are you sing it to um what kind of um um self sovereignty do you give over the data to the user so generally as as a developer because that's what I can say you really have to think and put privacy first uh build local applications that um use uh that allow the users to to uh own their own data and for the rest I guess I would just leave it to the guys who who deal with legal um I'm just a lawyer just a de um I I I think I would Echo what you just said building is the most important and once one builds like you have to also ask yourself the question of like why you make certain decisions in what what you're building and how will this have an broader impact on um the standards of the space and the behaviors that it enables so uh being interested in the philosophy of it in um sovereignity questions I think it's very important um and then just focus on building something I'm very excited about is um just going further within um just modular composable networks um I think this um would even bring more agency to the users if they can actually pick um what they want to interact with and uh then it would open instead of having one single type of software like usable and applicable to all um which is kind of a weird form of UNIF uniformization um although people are using these um networks are from everywhere in different cultures and have different values have something that everyone can op in out um I think that would be really interesting um but yeah I think you can talk about that see so I don't think we're at like a Grassroots moment yet where there's a lot of like on the ground call your call your representative in the legislature type situations because we're sort of we're we're we're just sort of holding on right now against an onslaught of lawsuits prosecutions and bad regulations and these are highly technical areas of sort of government machinery and so that's why we need organizations out there like coin Center but also like the de the um defi education fund and the blockchain association and I hope I don't know a lot about the EU landscape I hope there are more organizations like that in the EU but I I wouldn't be the one to know who to recommend because at the end of the day a lot of really important law about who's liable for building in this space about when you actually have a right to privacy over certain data or when you don't about when someone has to build a back door into a product the precedents that will set those laws are going to be set in a bunch of really bad court cases over the next few years some of them in the EU like Alexi perzov some of them in the US like the the Romans who are being accused of many different of three different crimes for building tornado cash and some of them will also be civil lawsuits so coin Center my organization is suing the US treasury not for holding the developers liable that that actually happened that prosecution happened later but simply to say it is inappropriate under us law to identify an immutable smart contract on the ethereum blockchain as something on the sanctioned list you don't have that power you have the power under the sanction laws to identify a foreign person or regime and the property of that foreign person or regime but software living on the ethereum blockchain that doesn't directly benefit anyone and isn't controlled by anyone isn't property of a sanctionable entity and so you can't actually do what you did with the tornado cach sanctions at least with respect to the immutable pools I think that's a winning argument the problem is that you're going to need a judge to understand you know what the hell I'm talking about when I say immutable smart contract in the ethereum blockchain and you're going to need a judge who's ready to stand up to the National Security concerns which have a tendency to make judges sort of defer to the executive branch in the US and so these cases need to be briefed super super well super clearly so that a judge in Florida like like in our case feels it personally understands why there are real privacy issues at stake this isn't just a tool for criminals and this is also about whether people are going to be allowed to build things of of fundamental value or not um and so support organizations that are bringing these lawsuits that are aiding the defense of the tornado cach developers and then the the one last thing I'll say is if you are a builder in this space please please build real things and no I'm Ser like I don't think I G given the the tone of this room I don't think I'm I'm talking to the right developers here but there's a lot of projects out there that claim to be decentralized claim to be censorship resistant claim CLA to be permissionless and it's all just garbage under the hood it might as well just be a mySQL database and that is a huge liability because the judge won't know that this person isn't representative of the entire space that there are good projects in the space and the judge might make a law based on that bad plaintiff that implicates the entire space so bad facts make bad law is the old old expression uh can I ask a question on this like uh as a builder basically um there is the US jurisdiction right then there is every single country in the EU being a different jurisdiction um having red as a completely non-legal person the indictment basically the English translation and then the machine translated thing that the Dutch authorities gave out it's scary it's really scary as hell because um at least to my I it doesn't make sense um but what's really scary is why would I or any other person actually build something of course it would be decentralized and it would be something that doesn't give me control but then if at least to my eyes when someone did this and just a random jurisdiction I mean I've only been to the Netherlands once and that was last year uh for uh supporting Alexis uh um I don't remember it was the yes it is Dam and I only been there for that I never knew much about the Netherlands before uh it can be another jurisdiction some other like I don't know Italy my my home country Greece they can just say okay hey come here we we grab you we have this law that gives us jurisdiction over your thing because I don't know you were born in Greece or something um how can someone actually build like this I would be too scared I would go completely in like I would not touch this with a 10 foot pole because it's even if we solve it in one jurisdiction then we'll get problems in another unless I don't know is there anything such as cross jurisdiction precedence I no I so the biggest problem is if if if if we lose these cases in the US the long arm of the us is going to reach everyone um everyone who they think is of sequence so if your privacy tool doesn't get used by anyone that might be okay but if it gets used by North Korea even just once for a substantial amount of money you're next right and it doesn't matter if you're in Greece or the Netherlands or there's a handful of places that don't have extradition and that are going to stand up to the US government or just hostile to the US government but maybe you don't want to live in those countries either so I you're right I I don't like if if I was a builder too I would be I would be extremely scared and I would probably not want to build right now I think that we can I I'm an optimist um but I think that we can win in the US on certain fundamental issues like if what you're doing is just publishing a GitHub repository you're not going to end up criminally liable now it might get harder in situations where you're also participating in a DA and there's a governance mechanism and there's a governance token and there's profits and there's a business concern that that is sort of masquerading as something decentralized it gets worse and worse and worse the more you layer on to that but like if if if we lose on in the US you are constitutionally protected to publish software in a repository that so any kind of software software that does things important things then we've just we've lost everything that America supposedly stood for I I know I'm in Berlin talking about America a lot but like that's that's my job that's the world I live live in and so like it's very important that we get this right we went down this road in the 1990s with the first crypto Wars when the US Government tried to use export control laws to ban the distribution of pgp and RSA and things like that and we won in the courts we didn't actually win a permanent Victory like the government kind of backed down and was like oh okay you know we won't put these really strict controls in place after all and the court said well there's no case in controversy anymore the government backed down so we mood it which is a really sneaky way of just like the government lives to fight another day the day is now and we need to win or the the the chilling effects of those decisions are going to make any reasonable minded builder in this space just not want to touch it with a 10-ft pole I agree um which brings me to the point I wanted to to add a detail I said everyone should build um that also so requires research is fine right publishing the code writing it it's fine launching a project fundraising for it like all of these things that become more centralized and would entail perhaps someone's liability needs proper legal research like jurisdiction shopping you can go and look around there are jurisdictions that are more Pro privacy than others there are ways to structure a pro project that would um protect um perhaps like some some of the features some of the people involved so this is very important the other thing is to cut that long arm of the US because is my time up no it's working so maybe I can I can use this one yes so yeah make sure that like first of all why should I be oppressed because North Korea decided to use a software like isn't enough that they're oppressing their own people and then why should I be here impacted by a decision in the United it stays like this whole situation now is kind of becoming very blurry and different than what we're used to with borders and jurisdictions and I think it's really time to make things clear and I'm really thankful for your work actually because it's very critical and important but regardless of that um I don't think that we should stop building we should just be more conscious of how we're doing it so that we don't end up in situations that like you the Builder will suffer but the whole Space too like we're seeing we're all impacted by whatever like lawsuit is happening uh actually to wrap it up I would ask you like let's say how really Builders could not fall into a trap of gloom and doom and just opt out like quit industry uh return to like a said we have all full-time jobs so maybe the job would be Simons whaton whatever Corporation and instead of that how you said conscious to be conscious like H how the conscious approach to building developing tooling and researching should be made in a nice Manner and what's actually again role uh of the legal Force here because I know that there are lots of legal people who actively support without being to corporate like I mean privacy Builders and that stuff in many chats and many behind the scene uh doing basically consultancy job uh how should it work in the sense of the conscious approach to building thanks uh yeah I'm not sure I understand the question uh so from a developer perspective what exactly is the question from developers perspective how you would consciously approach um building right now and this quasy hostile environment to on one hand take care about your emotions and just deliver stuff uh instead of spread paranoia within your team for example uh second would you go and participate Hons and build new tools would you share the knowledge with other people on yours maybe use case on privacy that is not hostile that much in that thing you want to say something give it a second U so I there's a couple of options in this hostile regulatory environment um one is sort of playing regulatory Arbitrage and trying to find jurisdictions that are a little bit friendlier there is a risk there that you still get extradited the us at the end of the day if your tool gets used by North Koreans um I think like like if if you if you want to be really careful build like Satoshi Satoshi did what he did and didn't end up liable for it not because he was an Anan I'm not saying like never never let anyone know who you are but he managed to build a protocol without ever doing any a dime of fundraising which is radical now maybe it's not repeatable there's a lot of like path dependency and the world we're in now just doesn't allow that because you know all of the meme coins get all of the the news cycles and the and like the enthusiasm and so there's no way to break into it any I don't know that's cynical but like all he did was publish a white paper and a software client and he ran it himself for a while that's a way to build that I don't see how you you can easily be found liable for just doing those things now it's very different when you have a business around that that has solicited Venture Capital money that had like these are all things that unfortunately are pointed out in the cash indictment they got VC investors there was a token now they don't mention that the token plummeted in value after North Korea used the damn tool so it's quite clear they didn't profit from North Korea using the tool but you know set that aside you have a dow that starts to do certain ancillary things around the immutable protocol every Gadget you add in order to spin the loop and get the network effects running is a potential liability so if you can build more like Satoshi build more like ex Satoshi now I want to caveat what I just said though because I don't want anyone to misunderstand that I think that say the Romans and Alexi are liable of the crimes they've been accused of because they did those other things like took VC money in the US you have a right to publish software even if you're a giant Agra business pharmaceutical Corporation with billions and billions in dollars in Revenue our first amendment opinions from the Supreme Court recently support big Pharma support uh website developers who don't want to make wedding websites for gay couples like we have a very broad theory of First Amendment rights in our country it doesn't matter if you're doing it for profit it doesn't matter if you actually like are writing a website instead of a book it's all protected we need to get crypto into that broad tent and that's the best way to protect this space but until we do that and maybe and maybe we fail to do that but until we do that build more likes Satoshi because the more you build like um binance the more you're just going to be an easy target with very few actual first amendment defenses and and rule of law defenses I'm I'm not sure if satosi didn't fund raise we're just not aware of it so this is also something to keep in mind like um I agree the the VC culture right now and how things are happening is very startup Silicon valy style um but this is also culturally quite far from where we come from um but I also think that even if satosi didn't build Bitcoin it would have happened anyway so there's also this this kind of time frame that we're discussing that like even now if we have roadblocks I don't think that we're never going to see like white spread privacy Tech on chain it's going to happen so how it's going to happen this is the question um and I agree with you like anonymity is a plus but then this is not necessarily something we should advocate for um I yeah that's this is it yeah uh I think I understand the question better now but um still I I would never so as a builder I would don't you know I have a family I don't want to go to jail as simple as that right uh even if I didn't have a family why would I want to have risk going to jail for what I like to do um so I I really would Advocate people going an on for for um privacy Tech but it would depend on what kind of thing it is if it is something that just is more privacy Centric I mean I don't think you have any problems if it is a mixer a coin mixer then yeah please like really then 100% be an Anon don't don't don't touch mixers with uh being a known person um but in general I I am also optimistic because I think that anons can um do stuff and I I would still trust uh to use their uh tooling so the optimistic view here is that even if someone um even if uh regulation even if we lose those cases no KN on wood there is no wood here um but um even if we lose those cases even if there regulatory um environment is extremely hostile both in Europe and the US still uh cyer punks will build and uh they will be anons sure and we will have privacy tools because uh we are not going to lose to the machine another point I think for me is really hopeful too is just looking at um other form of tech and that have similar roadblocks so um what happened to iron Schwarz trying to open knowledge to everyone make it free and then the fact that there is sop now everyone is using it in the US outside the US and it has brought so much knowledge to so many people who didn't have access the financial means the technology means whatever uh to this knowledge and it's super important I think um also disclaimer or caveat I think nobody here is um I'm I'm seing for everyone but correct me if I'm wrong is advocating for criminal uses us AG of the technology or is advocating for facilitating such criminal usage we're just talking about something very different and unfortunately these two things privacy or our right to have access to the technology um is usually put in contrast with this criminal usage but it doesn't have to be the case thanks a lot for sharing U your thoughts on the quite important topic here I think that uh there's a certain interesting trajectory that they collectives they developers they hakon and also like legal professionals and the researchers as well who kind of like play the same field to connect with each other with the same Market have this potency of helping each other and I think that within many events like this or like e Berlin hakon we would see much more uh interesting nature of collaboration when that knowledge also is spread out horizontally and generally speaking everyone helps each other instead of fighting in chats as we see those days it's not that productive thanks a lot for being with us today [Applause]