Lack of privacy

Happened to see a tweet from a lawyer and business law researcher:

“Presently and for thousands of years, individuals are/have been able to transact with cash anonymously, and do not need/have not needed to sign-up or provide their identity in order to make transactions with public money. Eliminating that capacity in the digital age is extreme.”

— Grey, Rohan. @rohangrey. Message thread. Twitter. 2022-01-20 at 21:50.

I wrote a personal Twitter thread about the problem of thinking cash would be anonymous.

• Problem with payments is that almost everything can (and will) be tracked, regardless of the original intentions. Paper money is not anonymous either, because every piece of paper has a serial number that is used to track who takes it from ATM, and where it ends up to. Tweet
• It would be naive to think that banks wouldn't keep track of who pours out pieces of paper from ATMs. Similarly, most bigger cash payments at grocery stores are validated by sending the serial number of a paper money to the banking systems. There is always tracking of usage flow. Tweet
• Cash is a contract between institutions. Organizational stability requires some level of tracking to maintain a stability of systems. Same applies to digital payment systems, regardless of what people call them. Question is mainly about who controls what, not about if it's done. Tweet

Rohan Grey reacted strongly:

1. not true of coins
2. only trackable once they return to banks

— Grey, Rohan. @rohangrey. Message thread. Twitter. 2022-02-01 at 19:22.

I tried to expand on the problems.

• Coins have very limited value. It costs tons of money to transport & count them. That cost is essentially limiting the risk of financial fraud. If same principle would be applied to digital ("distributed") systems, the cost of payment would be much bigger for small transactions. Tweet
• Serial numbers are validated with cash verification devices before shops accept cash bills (above certain amounts). Risk management allows small payments because it doesn't cause large volume losses. That doesn't apply to automated transactions because digital fraud is easier. Tweet

Rohan replied:

“Historically they were used for all sorts of denominations not just small denominations, and again, paper currency is only trackable at either end. Capacity for anonymous payments have historically been the norm not the exception”

— Grey, Rohan. @rohangrey. Message thread. Twitter. 2022-02-01 at 20:02.

I replied to him:

• Agreed, it was different historically. World changed. I do value the goal of keeping it possible for people to transfer value with certain amount of safety. Problem is in assumptions that tracking would be possible to avoid on digital systems. All network traffic is recorded. Tweet

Rohan had a (final?) word:

“Well paper money filled that role and while I agree there's definitely more trackability w notes v coins the former still has the capacity for anonymous tx's because banks cannot monitor it between ATM and when it comes back to them (if it does at all)”

— Grey, Rohan. @rohangrey. Message thread. Twitter. 2022-02-01 at 20:11.

…and:

“And as for the latter point, that's not true at a technical level just a policy one.”

— Grey, Rohan. @rohangrey. Message thread. Twitter. 2022-02-01 at 20:11.

I was too tired to argue.

On one level, he is right about historical status of cash privacy. On another, he is trying to preserve some level of ability for people to do value transactions without strict state control. But at the deeper level, there is a problem of being too optimistic about the current status of the money transfer systems, as essentially all digital transactions can be traced in one way or another.

There are various ways of following the path of transactions, and possibility of governments and banks allowing a true anonymity for regular people is really limited. Someone is always watching, whether we like it or not.

Monitoring is built-in to the core network technologies. All the way from the very business and legal processes underneath, to physical hardware, to data transfer stack, to network protocols, application protocols, user interfaces, and beyond. What is happening now on the consumer finance of digital assets companies is that people buy the hype & grey propaganda, while missing the obvious lack of legal & journalistic validation towards what are the true motivations behind the growth of new service providers.

We can hope for a different future, but it would be bad to expect that things would go the way we want things to go. Increased amount of conflicts between countries (on business, power, natural resources, technology, area control) are causing ripple effects on the amount of monitoring. Everyone is increasingly building more data-driven and data-informed systems for automating systems of control.

As world moves beyond the past, amount of data about human behaviours grow faster than ever before. Even when application-level traffic is encrypted, it is (almost) always possible to track at least part of the conversation by tapping the core network infrastructure, hardware, and end-user devices. We might expect some level of privacy from individual services, but larger question is whether the very hardware devices we use are trustworthy enough for anything serious?

There have been a lot of serious conversation about risks of hardware-level tracking and factory-installed hardware implants. Lot of hardware includes built-in software components, and there are always bugs (both as misfeatures, and monitoring). Regular people have little control over the devices they use, as there really aren’t that much of cost-effective options available.

Especially when talking about mobile devices, market is essentially run by a few large multi-national gigantic corporations, who essentially have control over most of the planet. Even while Android market is splintered to hundreds of brands, essentially most are connected to same types of core infrastructure services, even when people running them are different. Replacing one service with another isn’t going to fix the core issues when end-user devices are largely tracked and monitored already. Add to that mess a variety of ads-related badware and malware issues, and you have a world where mobile devices can’t ever be trusted completely. There is always a supply chain issue somewhere.

Anyway, lets hope for a better future, but not be fooled by the apparent misunderstandings on the rivers of digital world. Hope for the best, prepare for the worst.