The rise of e-currencies: How bitcoins and their ilk could save — or destroy! — the world

Published in the Portland Phoenix and the Providence Phoenix

Bitcoins, and other e-currencies along similar lines, are all the rage these days — and everyone’s talking about them as if they know what bitcoins actually are, or do, or something. It won’t surprise you to learn that most people know only part of the picture, and most of those hardly understand the part they know.

In fairness, bitcoins are a challenging concept to understand. But we here at the Phoenix are always up for a challenge, so we’ll break it down for you. First, we’ll have an explanation of what bitcoins are, what they’re not, and what they make possible. Then we’ve assembled a set of arguments that explain how and why bitcoins are both the end of the world as we know it, and the next step to saving the world we love so well.

A useful point to start is to note that the word bitcoin, when used with a lowercase b, refers to the units of currency; when capitalized, Bitcoin refers to a software and the Internet-based communications methods used to track and exchange them. There are also other e-currencies, such as litecoin; all of them use the basic structure and concepts underlying the Bitcoin system, and differ only in the most arcane of technical details. They’re also not nearly as popular, nor as widely accepted — in part because bitcoins got there first.

Something from nothingDuring, and in the wake of, the 2008 financial crisis, the institutions we had relied on to ensure economic stability turned on us. Several deeply concerning and fundamental facts about the world’s currency became widely apparent:

>>Banks can’t be trusted Not only are they often working in opposition to their depositors’ best interests, but they gambled with other people’s money, lost, and then asked for government bailouts to pay off the debt.

>>Governments can’t be trusted Rather than protecting their people’s interests, governments sometimes see their citizens as just another cash source. In March 2013, faced with an impending economic collapse, the government of Cyprus confiscated 10 percent of all the money held in accounts in that country’s banks.

>>And anyway, money’s value is imaginary Governments, including the United States, can create massive amounts of new money out of thin air, and give it to whomever they want (usually the banks, as opposed to the people). This has always been true, but politicians and other financial experts no longer seem to worry that regular people object.

>>Still, money is an inescapable, integral part of our daily lives It’s a very flexible medium of exchange, which I can accept in remuneration for (to pick an example) my reporting and writing and spend in a grocery store in exchange for food.

Some people had expressed those concerns long before the 2008 meltdown; afterward, more people understood them much more clearly.

Out of these problems came a seemingly simple solution: Create another currency, not beholden to a government, and find a way to store it safely without banks.

Of course, it turns out those are two very hard things to do, while still preserving the confidence and security we expect from a monetary system. The most difficult problem is how to prevent counterfeiting — which is of course far easier with a digital item than a physical one (as the movie and music industries have learned, to their dismay).

Government currency — and even most other alternative currencies (such as time-dollars) — have a centralized authority that can verify the authenticity of money. In the United States, it’s the Federal Reserve. Replacing this system with another one that also required central authority and verification made the whole exercise moot. The real goal was to decentralize verification, while still ensuring nobody copied e-currency and, effectively, spent it twice.

In late 2008 and into 2009, a person or group going by the name of Satoshi Nakamoto proposed a system called Bitcoin, offering a solution to the double-spending problem that was ingenious for its simplicity: The central authority keeping track of transactions should be the public at large, and the ledger should be available online to all who asked.

But that created another pair of questions: How to get the hundreds, even thousands, of different computers storing their own copies of the ledger to agree on when to update it, and what changes to add when updating?

Bitcoin offered an elegant solution to this problem, too. Whenever anyone wants to spend a bitcoin, they broadcast that intent to the network of ledger-keepers via the Internet. As each request comes in, each ledger-keeper computer checks its copy of the official record, to ensure that the spender’s identity is valid, that she actually has the correct amount available, and that she hasn’t spent it elsewhere already. If it looks good, each ledger-keeper adds the transaction to its own list of approved transactions that need to be added to its ledger in the next update. The ledger-keepers communicate about their individual approved lists; if a majority of them agree, the transaction is finalized and added to the shared official ledger. These checks and updates happen in computer software and encrypted communications across the Internet, and take only a few minutes.

Adding strength to this system is the fact that anyone can install the software on their computer to make it a ledger-keeper, receive their own copy of the ledger, and contribute to validation and verification of transactions. The ledger itself is fully public, showing which accounts sent how many bitcoins to which other accounts, and when.

Of course this raises the question of privacy. One of the things people like about physical cash is that it’s not particularly traceable. Bills have serial numbers, but most people don’t pay attention to those details, and it would be terribly hard to track any substantial sum. (See wheresgeorge.com for an example of trying to track dollar bills’ physical movements.)

Because it’s so central to our lives (we don’t typically want to broadcast which doctors we go to, how often, nor how much we pay them, for instance) privacy is also a cornerstone of traditional electronic payments: We trust the merchants and banks to keep our information away from wrongdoers. (The recent, and ongoing, revelations about card-system hacking at Target offer a warning against being too trusting that way.) At the very least, though, merchants and banks don’t publish their transactions online for all to see.

But that is exactly what the Bitcoin system proposed doing.

Satoshi Nakamoto had a solution for this, too: Every account would have a pseudonym in this new currency system, and everyone could create and use as many accounts (and pseudonyms) as they wanted. The ledger would store the pseudonyms of the sender and receiver (not their real identities), and the ledger-keeping software would confirm through secure encrypted communication that the people using those pseudonyms were the people who had created them, by comparing digital signatures stored when the account was created against the digital signature presented during a transaction. (For those who wish to dig deeper into how a publicly available ledger can store a signature in a way that is truly secured so only one person can sign it, look into public-key cryptography. There’s enough reading online to occupy the rest of your days.)

This seemed to solve all the problems that had faced digital currency: quick and easy transaction approvals, protection against counterfeiting and double-spending, privacy protections for buyers and sellers, and avoidance of a central authority that could steal everything on a whim.

The next trick was getting people to actually use it.

Bit-miningIn 2009, Satoshi Nakamoto released a software program, also called Bitcoin, that for the first time allowed users who installed it on their computers to begin operating as ledger-keepers on the fledgling Bitcoin network. The software was open-source, meaning anyone who wants to can read the actual programming code it uses, which lets tech-savvy types check to ensure the software does only what it says it does, and nothing else nefarious or bothersome (such as stealing your passwords or using your computer to send spam emails).

To encourage broad distribution of the software, and most importantly, large numbers of copies of its ledger, the system includes a reward for those people who offer their computers to serve as ledger-keepers. At the moment, those people receive, on occasion (based on an extremely complicated mathematical formula), some new bitcoins. This process is somewhat confusingly called “mining,” which is meant to evoke the idea that by doing some work (keeping the ledger, checking new transactions, and updating the ledger), new bitcoins are discovered, as one might mine a precious metal.

At any given moment, the number of ledger-keepers varies. People connect their computers to the internet and disconnect them; people turn off the Bitcoin software and turn it back on again. The system doesn’t care, as long as there are several connected, and there are lots.

It’s an analogy of convenience, and only works to a point; we advise not getting too caught up in mining or ledger-keeping. (If you’re a programmer with thousands of actual dollars just lying around, there’s plenty to learn and do along those lines; if not, best not to worry, but instead to know that large numbers of independent, security-minded, anti-fraud experts have checked out the system and been satisfied that it’s safe and secure, protected by the principles of mathematics that underlie computer cryptography and secure transmission of information. Also, it’s useful to know that when the rare problems have been found, they’ve been fixed quickly, easily, and without harm to innocent parties.)

Now, and increasingly into the future, those who spend the time, energy, expertise, and real-world expense (in electricity and computing power) to keep the ledger are paid not by “mined” bitcoins — the 21-millionth and final bitcoin will be mined in about the year 2140 — but by small fees added on top of ordinary everyday bitcoin transactions. There are somewhere around 12 million bitcoins in circulation right now.

Once the network was established, with several copies of the transaction ledger in place and the ledger-keeper programs communicating with each other, it became possible to actually spend bitcoins. That’s where you come in — and where the promise and problems all begin.

Money by numbersA bitcoin is, in reality, nothing more than a few pieces of electronic data. You can do silly things like print them out on pages of paper, or engrave them into metal (and people have), but their only useful form is electronic.

There are, for all practical purposes, only two ways to get bitcoins. First, you can buy them, in online exchanges that will take your dollars and give you bitcoins, the same way you might give your dollars to a bank in exchange for euros or yen before an overseas trip. (The exchange rate varies, just like those other currencies; its highest ever was in December, at over $1200 per bitcoin. The current price is around $800, though you can buy smaller increments without purchasing an entire bitcoin.)

Second, you can sell a product or service that’s desired by people, and accept bitcoins as payment. (You’ll likely have to accept other forms of payment too, just like stores that take cash, checks, and credit cards.) When you have a customer who wants to buy using bitcoins, you accept the payment. Simple as that. Among the major players already accepting bitcoins are online retail giants Tiger Direct and Overstock.com; so does the Sacramento Kings basketball team. EBay is considering accepting bitcoin bids and payments.

(The aforementioned “mining” is the third way to get bitcoins, and it’s extremely technical, expensive, and not particularly accessible to regular people. I’ve tried it, wouldn’t recommend it, and it’s generally accepted as appropriate only for techie types with a lot of actual dollars (and time) on their hands. Think of this system as the equivalent of the US Mint — it makes the actual physical money and enables a particular economic system, but we don’t know how and shouldn’t try it at home. There is one significant difference: Only a finite number of bitcoins can ever be made, unlike the almighty unlimited dollar.)

To truly understand how the Bitcoin system works, and where its strengths and weaknesses lie, we have to look at the mechanics of how money changes hands.

First, there’s the cash method, which is obvious. I give you a dollar bill, and you give me something I want in exchange. It’s immediate, private (nobody other than the two of us know it happened), and secure (you and I have both looked at the bill and agree it is a real dollar and not counterfeit). It also has the potential to be anonymous; even if you know the face of the person you handed a dollar to at the toll plaza, you have no idea what their name is, and they don’t know you either. If you ran into each other tomorrow, you probably wouldn’t recognize each other.

Next is the electronic method, which includes checks, credit cards, wire transfers, and pretty much everything else. In that situation, I have account data (sometimes printed on a check or magnetically encoded on a credit card) that connects me to a pile of dollars held electronically in a bank somewhere. I give you that information and the authorization to deduct one dollar from that pile, in exchange for which you give me something I want.

It seems simple, and is often instantaneous, but it’s actually very complicated  — and expensive. When I swipe a debit card at a store, for example, the merchant’s machine has to read the code and transmit it securely to a central authority, which checks its database to see which bank I’m with, and then contacts that bank to ask if I have a dollar available in my pile. The bank isn’t going to answer that question for just anyone — it should only answer it for me or people I authorize — so it needs to be sure the request is coming from a legitimate user. This can be done a few ways, one of which is to ask for my PIN code, which I have established secretly with the bank in advance. I enter my PIN, which is then transmitted and verified, and then my bank responds by saying (I hope) that I do have a dollar available. Because it has received authorization from me (in the form of my PIN), my bank also sends a message along telling the store that it will transfer the dollar to the merchant’s account.

The cost adds up. Each of those steps takes electricity; some of them require specific equipment (the card-swiper, PIN-entry device, for example); others require high-speed data networks. Of course, the banks charge for their services, and for playing the middle-man in this transaction. And since every step is recorded electronically, it’s hard to keep transactions untraceable or anonymous.

The Bitcoin system throws all of that away, leaving an interaction much more like the cash transaction, but handled electronically — making it unnecessary to carry around large amounts of cash, as well as enabling transactions across distances.

Bitcoin will destroy the worldGovernments don’t like cash; it’s hard to trace, anonymous, and secure. Digital cash (which is essentially what bitcoins are) is even worse: It can travel instantly anywhere, and lacks things like serial numbers that can allow tracking, even after the fact.

Financial writer Cameron Keng posted on forbes.com the charge that “Bitcoin represents more of the same short-sighted capitalism that got us into this mess, minus the accountability.” (Of course, the accountability was laughable.)

Software engineer and writer Alex Payne has called the Bitcoin system “a marriage of dubious technology and questionable economics wrapped up in a crypto-libertarian political agenda,” which encompasses pretty much all of the criticisms of bitcoins.

He’s not talking about the time-tested technology of public-key cryptography, which the Bitcoin system uses to verify identities. Rather he’s expressing concern about the nature of the public ledger and the software by which it is maintained and updated. It is true that this arrangement is entirely new — it is, in fact, the major breakthrough of the Bitcoin system. And it’s true that it has flaws: In August 2010, someone figured out a way to spend the same coin multiple times; that counterfeiting attempt was detected, stopped, and reversed, but it does suggest there may be other vulnerabilities yet undiscovered.

The economics question is based on the concept of “money supply,” which is a tool by which centralized economies influence key aspects of their markets, such as interest rates. When the US Federal Reserve wants to lower interest rates, for example, it creates money out of thin air and then offers it cheaply to banks. If it wants to raise interest rates, it takes money out of circulation.

New York Times economics writer Paul Krugman wrote that having a currency with a limited total supply of money encourages hoarding, not spending, because scarcity makes the currency more valuable. (This is true, but it ignores the fact that bitcoins are almost infinitely indivisible into fractions far smaller than pennies, so while the total supply of money is limited at the top, it is effectively unlimited in terms of how many people can have, use, and exchange bitcoins.)

The “crypto-libertarian political agenda” Payne scorns calls attention to the perspective of some bitcoin fans: Because it’s new, because it’s independent of governments, and because it’s Internet-based, some people have expressed hope that bitcoins will help them avoid taxation, regulation, or other outside meddling. Libertarian-in-chief Ron Paul has called bitcoins potential “destroyers of the dollar,” and plenty of libertarian types are excited about the idea of a currency that is not tied to any particular government.

Regulators in the United States and elsewhere are paying attention, and issuing statements about how they will treat bitcoins. (It varies significantly by country;  the United States said it would pay attention when dollars and bitcoins started to be interchanged — which is already happening, thereby beginning to attract government scrutiny.) Of course, government regulation and taxation helps pay for things like roads and fire departments, as well as limiting crime.

And oh yes, the crime. An online site called Silk Road is perhaps the poster child for the sort of crime made easier by verifiable (but anonymous) transactions over the Internet between total strangers. A clearinghouse for all sorts of illegal drugs, it was shut down by the FBI late last year; bitcoins were its currency. There is also a site that purportedly allows people to commission assassinations and pay via bitcoin. And of course there are plenty of other examples of ways bitcoins can be used nefariously.

There are other weaknesses: Transactions in bitcoins are not reversible in the way credit-card charges can be disputed and reversed. Of course refunds are possible, but only from the person you gave the money to. If an item is not as advertised, or never arrives, there is no third party available to handle a complaint or refund a buyer’s money.

And there are the costs. Running the ledger-keeping computers takes electricity, and the more computers are part of the network, the more it will require. It’s a fair claim, but usually avoids the fact that government money systems are also expensive: Pennies, for example, cost more than two cents each to mint. Printing dollars is more cost-effective: each new $100 bill costs just over 12 cents.

Of course, all this technology means bitcoins are not quite as populist as supporters might have you believe. Sure, they’re not beholden to governments, but to even use one you have to install a program on your computer to store and track your bitcoin holdings; when you do that, you’ll encounter all kinds of notices and alerts telling you that if you lose or forget the password to your Bitcoin-holding account, the bitcoins themselves will be lost forever, These are not the sorts of messages that embolden non-tech-savvy types to continue and engage with the system.

Bitcoin will save the worldDespite all of those problems and potential downfalls, there is a lot of promise, much of it based on a key distinction, made by money-technology writer David Wolman (a college friend of mine) in Wired magazine: There are two ways to use the word bitcoin.

First is as a unit of currency and exchange, as in “This item costs 1.2 bitcoins.”

And there is significant promise in this arena. Chris Dixon, a venture-capitalist investor in Silicon Valley, notes that the payment industry is massive, with people paying $500 billion a year in fees just to move their money from one place to another. Distributing the work of handling transactions, and reducing identity fraud in the bargain, could substantially reduce those fees.

For most people, bitcoins would be an easy intermediary. They could buy bitcoins with dollars, send the bitcoins somewhere else cheaply, and the recipient would convert the bitcoins into their own local currency. Using the Bitcoin system would solve the problems of high-cost transactions that sometimes take days to process, especially in the massive sector that is remittances to developing countries from workers in developed countries who send huge chunks of their earnings home.

For people who worry about government overreaching its power a bit more, it solves the problem of having someone else control their money, with the ability to seize or freeze it. And using bitcoins could help avoid the issues that arose when major payment-processing companies were pressured by the US government to stop transferring funds to WikiLeaks, in an attempt to deprive that whistleblower organization of financial support.

As several security researchers have pointed out — and a goodly number of self-appointed investigative teams have proven — Bitcoin is not anonymous. In fact, it’s barely pseudonymous. After the feds shut down Silk Road, the site’s bitcoins were consolidated in one account. Since all the transactions are public, it didn’t take much effort to go from reading the FBI media announcements saying 26,000 bitcoins had been seized, to checking the ledger to watch as a brand-new account suddenly filled up with just that amount.

(This led to a hilariously ironic development: Because all the transactions are public in the ledger, and because there’s an option to send a message with a payment, all sorts of anti-government types started sending the feds tiny amounts of bitcoin — yes, giving the feds their money, just for the privilege of sending them a rude message.)

But beyond these financial advantages, there is another way to think about, and use, Bitcoin.

The Bitcoin system is, Wolman writes, “more than just a currency; it’s an open-source protocol.”

Marc Andreesen, co-author of the very first web-browser program and now a venture capitalist, wrote recently in the New York Times that Bitcoin is a major development, solving a longstanding problem: “how to establish trust between otherwise unrelated parties over an untrusted network like the Internet. The practical consequence of solving this problem is that Bitcoin gives us, for the first time, a way for one Internet user to transfer a unique piece of digital property to another Internet user, such that the transfer is guaranteed to be safe and secure, everyone knows that the transfer has taken place, and nobody can challenge the legitimacy of the transfer. The consequences of this breakthrough are hard to overstate.”

And they are just being explored. Trumpeted by Wired as an “NSA-Proof Twitter,” a new system called Twister has emerged, combining the encryption and identity confirmation of Bitcoin with the peer-to-peer connection-management system of BitTorrent (which allows multiple computers to exchange information rapidly and efficiently over the Internet) to create a vastly distributed social network that cannot be taken down by malicious governments or corporations. This would be a great boon to people in places like Iran or San Francisco, where authorities have shut down access to Twitter in an attempt to quell public protests. Other uses are just being imagined now, and will no doubt be developed and tested soon. 

You are being watched: Government surveillance is broad, deep, and dangerous

Published in the Portland Phoenix and the Providence Phoenix

The government is collecting every kind of digital communications information about you — not just the so-called "metadata" of the location, participating phone numbers, and duration of every single telephone call made in the United States, but also the content of those phone conversations, and of emails, online chats and instant messages, and text messages.

Thanks to brave leakers and reporters who have revealed the details of two major programs, one collecting telephone information, and the other vacuuming up terabytes of data from major Internet companies (Facebook, Google, Microsoft, Yahoo, and more), we know all of those things are happening, with the possible — and only possible — exception of recording the phone calls. A former FBI agent told CNN back in May that phone conversations were being captured. The Associated Press was blunt in a June 15 report, paraphrasing Bruce Schneier, a cryptographer and computer-security expert: "Just assume the government collects everything." (For an overview, see sidebar, "PRISM Primer," by Deirdre Fulton.)

Now that we know for sure that we live in a surveillance state, where do we go from here? Of course, some people will say they already expected as much, or believed so. These new revelations aren't for them — they're for everyone else, who didn't think the Panopticon had truly arrived. But now the United States itself has become 18th-century thinker Jeremy Bentham's architectural wonder of a prison, in which inmates can be observed at each and every moment, without being sure whether they are in fact being watched just now.

Rather than dismissing the alarms about government surveillance, the public at large can no longer ignore or wish away its presence. Those fearmongerers who were rudely dismissed should take heart from The Daily Show, which in the wake of the revelations about NSA spying has introduced a new segment: "Good News! You're Not Paranoid."

PRIVACY=TRUE SELF

First, a brief discussion about the importance of privacy. Many people dismiss it, saying things like "I have nothing to hide." Beyond the oft-cited "right to be left alone" definition offered by Supreme Court Associate Justice Louis Brandeis in 1928, privacy is nothing less than the right to actually be yourself.

Surveillance — intrusion on privacy — affects human psychology and action. It is the ultimate infringement on personal freedom, because it exploits an instinctual weakness of humans. When we're in private, we do things freely, as our true selves; when we're being watched, we change our behavior.

The principle Bentham articulated in 1787 is simple: "Observation and fear of detection ensures compliance," as author Charlie Canning summarized it. Think about it yourself (privately): Is there absolutely nothing you would do differently in your entire life if your partner, parent, child, boss, and best friend were watching at all times? Now expand that audience to include the only power that can by the force of arms deprive you of your freedom — the government. (There are several other important related problems; see sidebar "Debunking 'Nothing to Hide.'")

Of course, there are plenty of regular, law-abiding people who will respond, "I don't do anything wrong, so they won't watch me, and there's nothing to catch me doing." But in his 2011 book Three Felonies A Day: How the Feds Target the Innocent, civil-liberties lawyer (and occasional Phoenix contributor) Harvey Silverglate details exactly how misguided that sense of security can be. Making the argument that federal laws are overbroad, loosely interpreted, and aggressively prosecuted, Silverglate describes case after case in which innocent citizens doing their very best to behave within the law accidentally came to the attention of federal authorities — largely through personal misfortune, such as running out of gas when riding a snowmobile on US Forest Service land — and were charged with, and convicted of, felonies.

Let's just say it straight: If a federal prosecutor wants to find something you've done wrong, there's probably something that could qualify. Your main hopes to avoid prosecution are: 1) avoiding coming to authorities' attention, and 2) depriving the authorities of information that could be used against you. Since the first is mainly a matter of chance, it's best to focus on the second — which is, plainly put, privacy. How, exactly, should we do that? In her sidebar ("Counterveillance 101"), Deirdre Fulton outlines some strategies.

DOING THE NSA'S BIDDING

As best we can tell, the government is not doing direct collection of the information it's using. Rather, the NSA and the FBI are demanding — at times with the help of judges in the secret Foreign Intelligence Surveillance Court — that private companies disclose data those firms have already collected from us. We have offered up that information willingly in almost every case, often in exchange for services we like, such as connections with distant friends, or directions to the nearest gas station.

There are two key differences between this and what the government is doing. First is transparency: do we know the information is being collected, and by whom? And second, what could the people who have the data do with it? The specter of being tracked just by our cellphones is very real — and requires no snooping on conversations. (See sidebar, "Metadata matters.")

That said, corporate data-mining is pretty open. Most of those companies tell us — even if it's buried pages into a software license agreement — they're collecting data, and most of them make it fairly obvious they do so. For example, when we connect to Facebook, it's right in front of us that the site knows our own information and that of our friends. And we know, when we sign up for customer-loyalty programs, that we're being tracked in exchange for discounts or special deals.

And what companies can do with the data is pretty limited (or so we think). Of course, they could publish it — but apart from the fact that Facebook in particular offers publication as a benefit of its service, it's worth noting the effectiveness of public backlashes against Facebook's periodic attempts to relax privacy controls. That outcry is a limit on intentional corporate misuse of the data — and if the data is stolen or otherwise gets out unintentionally, federal and state laws offer recourse to those whose private data is compromised.

Which is not to say that corporations' use of our personal information is not invasive. But it is less of an affront because we know it's happening, assist in the data-collection process, have some recourse if policies change, and are limited in our vulnerability — at least companies can't lock us up!

Government data-mining, by contrast, is secret — until it's revealed by leakers who face prosecution for telling the truth. And the government's power is sweeping, including literal deprivation of freedom, or even life itself, through prosecution and punishment. Public outcry can only change things when we know what's happening — but too often officials hide behind the concept of classified information, even when they're involving corporations in the info-vacuum. And the so-called "public servants" are bought and paid for by special interests that conflict with our own.

Beyond being deprived of the information we need to make good decisions about our government's actions, we can't even fight back against telecom firms, which are forced to comply and protected from repercussions. A June 11 Huffington Post report details the millions of dollars spent by AT&T, Verizon, and Sprint from 2002 to 2012, including a combined $55 million on lobbying relating to the Foreign Intelligence Surveillance Act. And sure enough, the companies have gotten federal legislation enacted that gives them total retroactive legal immunity from civil lawsuits related to their participation in government surveillance programs. The immunity has been attacked, but repeal efforts have failed.

HAVING A PUBLIC CONVERSATION

It's easy to laugh about how ineffective this surveillance system might be, especially in certain cases: How did they miss the Boston-bombing Tsarnaev brothers? Why can't the feds locate NSA leaker Edward Snowden in a worldwide manhunt? "Agency Busy Spying on Three Hundred Million People Failed to Notice One Dude Working For It," wrote the New Yorker satirist Andy Borowitz. But to point out flaws, even arrogance, in the concept that data can tell us everything is to miss the point that our leaders apparently think data is all-seeing, and have taken it upon themselves to gather it without real oversight.

The biggest problem with this whole surveillance mess is that it was secret. We simply have not, as a democratic society, had the conversation about what kinds of freedoms and privacies we are willing to give up in exchange for what kinds of safety and security. As President Barack Obama put it in his false dichotomy June 7, "you can't have 100 percent security and then also have 100 percent privacy."

Nobody's asking for such a thing (nevermind that both concepts are unquantifiable) — we're asking for a clear and transparent balance between security and privacy, a balance arrived at through a public debate, both in Americans' own lives and in Congress. (Also useful would be a conversation through the courts; at present, only government attorneys are permitted to appear at the Foreign Intelligence Surveillance Court's secret hearings, removing any possibility that government claims could be challenged or questioned.)

But it's hard to talk about the details of these programs without security clearances; whether it should be or not, most of this work is classified. That's where a post-9/11 recommendation that has finally borne fruit comes in.

The Privacy and Civil Liberties Oversight Board was suggested in the list of recommendations from the 9/11 Commission report, back in 2004, and was created by Congress later that year. It was never truly funded or staffed, but after a 2008 change in its authorizing law, and after years of Congressional and delays from the Bush and Obama administrations, its chairman was finally confirmed by the Senate on May 7 of this year.

That man, David Medine, has said his board will investigate the NSA program — after a classified briefing on June 11, he told the Associated Press "further questions are warranted." In addition to meeting with Obama and officials in the intelligence community, the board will also hold a public meeting slated for July 9, "that would bring together academics, experts and advocates to explore issues raised by the national surveillance programs," the Washington Post wrote on June 21.

But then again, perhaps these surveillance programs do keep us safer. As Stephen Colbert said of our enemies: "They hate us for our freedoms. The less freedom we have, the less likely they are to attack us."

There's a comforting thought.



Debunking 'nothing to hide'

'NO SECRETS' DOESN'T MEAN 'NO PROBLEM'

• Apart from the fact that you do have things to hide — or wasn't it you who posted nudie pics of yourself and your beloved online? (and was it really for the sake of living a transparent life?) — the claim that people have "nothing to hide" and that, therefore, government surveillance must be okay, is torn to pieces by George Washington University law professor Daniel Solove's 2011 book Nothing to Hide: The False Tradeoff Between Privacy and Security (Yale University Press).

Solove argues that the problems of government surveillance go well beyond the watching and collecting. While most debate about privacy centers on themes along the lines of the all-seeing telescreens in George Orwell's 1984, Solove says a better example is Franz Kafka's The Trial, a chillingly prescient early 19th-century novel about a man arrested but not told why, and whose attempts to find explanation only result in vague information that he is being investigated by some authority for some unknown transgression.

"Government information-gathering programs are problematic even if no information that people want to hide is uncovered," Solove writes. "In The Trial, the problem is not inhibited behavior but rather a suffocating powerlessness and vulnerability created by the court system's use of personal data and its denial to the protagonist of any knowledge of or participation in the process. The harms are bureaucratic ones — indifference, error, abuse, frustration, and lack of transparency and accountability."

Beyond that, claiming "nothing to hide," Solove points out, suggests that what's hidden is bad, wrong, or illegal. But "Surveillance . . . can inhibit such lawful activities as free speech, free association, and other First Amendment rights essential for democracy," he writes.

There is also the key question of whether people own their own data. "Many government national-security measures involve maintaining a huge database of information that individuals cannot access," Solove writes. "Indeed, because they involve national security, the very existence of these programs is often kept secret." Calling this collection a "due-process problem," in which citizens are denied power over themselves and their information, Solove says this creates "a power imbalance between people and the government. . . . This issue isn't about what information people want to hide but about the power and the structure of government."

Solove also notes a key vulnerability that even law-abiding citizens have to government misinterpretation. "For example, suppose government officials learn that a person has bought a number of books on how to manufacture methamphetamine. That information makes them suspect that he's building a meth lab. What is missing from the records is the full story: The person is writing a novel about a character who makes meth. . . . Should he have to worry about government scrutiny of all his purchases and actions? He might not want to have to worry about how everything he does will be perceived by officials nervously monitoring for criminal activity. He might not want to have a computer flag him as suspicious because he has an unusual pattern of behavior."

So it's not that you have nothing to hide. It's that revealing all would leave you naked and powerless before the fearsome strength of the government — which is the very opposite of freedom.

_JI



'Metadata' matters

FOUR CALLS OR TEXTS CAN ID YOU

• If your concern is focused on whether the government is listening to your phone conversations, you're worrying about the wrong thing. Cellphone "metadata" — whom you call, when, from where, and how often — is much more interesting, and much more invasive than whether someone hears you say, "Hi. It's me. Can you please get milk?"

A study published in the online academic journal Scientific Reports in March details exactly how just four pieces of "spatio-temporal" data can "uniquely identify 95 percent of . . . individuals" without hearing any phone conversations or reading any text messages.

Researchers at the Massachusetts Institute of Technology, Harvard University, Catholic University in Belgium, and the Complex Systems Institute in Chile studied cellphone company data covering 1.5 million people's calls over 15 months. The data provided did not contain callers' names or addresses; it included only the time and location of the connecting cellular antenna each time a phone received or sent a call or text message.

By charting the series of antenna connections over time, the researchers were able to construct a map of each phone's movement, which they called a "mobility trace." In 95 percent of the traces, just four points of time-location data were needed to tell that trace uniquely apart from the others in the large dataset. (The most difficult traces to focus in on needed only 11 locations before becoming unique.)

While the study does admit that additional, outside, data would be needed to connect a mobility trace to a person's name, the researchers observe that many pieces of location information are a matter of public record (such as property ownership files), are disclosed voluntarily through online check-ins (Facebook, Foursquare), or are easily searchable (business addresses).

In an example offered on Democracy Now on June 12, cybersecurity expert Susan Landau said this: "When Sun Microsystems was bought by Oracle, there were a number of calls that weekend before. One can imagine just the trail of calls. First the CEO of Sun and the CEO of Oracle talk to each other. Then probably they both talk to their chief counsels. Then maybe they talk to each other again, then to other people in charge. And the calls go back and forth very quickly, very tightly. You know what's going to happen. You know what the announcement is going to be on Monday morning, even though you haven't heard the content of the calls."

And even without a name attached, drawing a picture of events is simple, Landau said: "The metadata of a phone call tells what you do as opposed to what you say. If you call from the hospital . . . and then later in the day the doctor calls you, and then you call the surgeon, and then when you're at the surgeon's office you call your family, it's pretty clear, just looking at that pattern of calls, that there's been some bad news."

Bad news is right.

_JI

Celestial Update: This brief transit

Published in the Portland Phoenix, the Boston Phoenix, and the Providence Phoenix

Back in the 18th century, observing the Transit of Venus took a ridiculous amount of effort, involving ships, draft animals, wagons with wooden wheels, and telescopes made by the best optics engineer in the world. Today — say it with me — there's an app for that.

In 1716, Edmond Halley (yes, the comet guy) asked the world scientific community to mount massive expeditions in 1761 and 1769 to watch Venus cross in front of the Sun. He expected that by comparing the observations from different points around the globe (called parallax), astronomers would be able to calculate the Earth's distance from the Sun.

As detailed in historian Andrea Wulf's recent book, Chasing Venus: The Race to Measure the Heavens (Knopf), European nations (and the American colonies) took Halley up on his proposal in 1761 and again in 1769, sending astronomers to the far reaches of the planet.

The expeditions took years, and assembling the results and making the calculations took even longer. It wasn't until 1771 that the British Royal Society was ready to declare a result: 93,726,900 miles. That's less than one percent different than the present calculation of 92,960,000 miles.

We don't need your help measuring anymore, but if you want to attempt to re-enact just the observational challenges (for long, dangerous journeys, you're on your own), visit transitofvenus.org and download the free app, for iPhone and Android. It'll give you some simulated runs so you can perfect your timing, and be ready to go. (See below for your local observatory's viewing activity.)

You should take this opportunity — it's the last chance you'll have to see the Transit of Venus. (You caught the last one, in 2004, right? Yeah, neither did we.) The last pair happened in December 1874 and December 1882, and the next will be in December 2117 and December 2125. So mark your calendars.

Transit of Venus | dome show + viewing in the field (weather permitting) | Southworth Planetarium, 96 Falmouth St, Portland | June 5 @ 5 pm | Free | 207.780.4249 | TransitOfVenus.org

Transit of Venus | live telecast | Museum of Natural History and Planetarium at Roger Williams Park, 1000 Elmwood Ave, Providence | June 5 @ 6 pm | $8, under 12 free | 401.331.8575 x36 | TransitOfVenus.org

Transit of Venus | viewing + live telecast | Harvard-Smithsonian Center for Astrophysics, 60 Garden St, Cambridge | June 5 @ 5 pm | free | 617.495.7461 | harbor cruise + viewing in the field (weather permitting) | Spectacle Island (ferries from Long Wharf), Boston Harbor | June 5 @ 5 pm | free | 617.222.6999 | TransitOfVenus.org

The power of texting: Mobile phones and alternative currencies are changing how the whole world pays for everything

Published in the Portland Phoenix, the Boston Phoenix, and the Providence Phoenix

Money — crispy banknotes and jangly coins — is as old-fashioned as, well, mechanical typewriters. We all know what a typewriter is, and some of us — in a pinch— might even be able to operate one. But by and large, typewriters are quaint cultural artifacts fit for exhibiting in museums or selling at flea markets.

And so it is with greenbacks, cash, money.

Music has been digitized; so have movies, books, and most of the commodities we call media. And whether we recognize it or not, the way we buy and sell things, be it a cup of coffee or an automobile, is likewise being transformed and revolutionized.

Two recent books, Robert Neuwirth's Stealth of Nations (Pantheon) and David Wolman's The End of Money (Da Capo), show us different aspects of that transformation. It's a world with prices charged in prepaid cell-phone airtime minutes, and with earnings transferred from urban workers to rural dwellers in seconds over phone-to-phone money-transfer services like Kenya's wildly popular M-Pesa.

Wolman, who reads at the Harvard Book Store on Tuesday, March 6, at 7 pm, shows us that physical currency (paper banknotes and metal coins) are disappearing in the West, where savvy consumers walk around with PayPal and Google Wallet apps in their pockets — and in the world's poorest places, where even a very rudimentary flip-phone can send money safely across miles of rugged terrain, or let a tiny streetside tinkerer open a bank account.

Neuwirth, for his part, visits unlicensed and unregulated markets around the developing world and explores how they avoid government regulation while conducting massive import-export and street-market sales operations. While much of his book is about the cash-only model that has dominated what he calls the "informal economy," various scenes throughout his reporting illustrate the ubiquity of money-enhanced cell phones in even the poorest slums and villages.

Given their overlapping — and mutually enlightening — viewpoints on how money can and soon will be used by regular people the world over, the Phoenix got the two authors together by telephone. They talk about how mobile phones are the basis of a coming revolution in how money is stored, transferred, saved, and spent.

BASED ON WHAT YOU'VE READ OF AND ABOUT EACH OTHER'S WORK, I WONDER IF YOU HAVE ANY INITIAL THOUGHTS ABOUT THE OTHER'S BOOK, OR PREMISES.

ROBERT NEUWIRTH I'll start by saying there's cool congruencies and some differences. Being contentious by nature, I'll start with the differences. I think I'm writing about the people who avoid the tracked and scrutinized economy of the bitmap dollar, if you will. And so in my view, from what I gleaned from David's book, whether or not money as a physical form (the germ-ridden bills) disappears, there are going to be people who find alternative ways of doing business. And the folks that I've written about in my most recent book definitely depend on that kind of strategy, and I think for them it doesn't matter whether money stays in the physical form or not, they're going to find ways of doing business that get around all the reporting requirements.

DAVID WOLMAN I remember somewhere you said, Robert, that a lot of this economic activity is about flying under the radar of government. My thinking on that right away is, 'Well yes — except that most of it is conducted with the currency issued by the government.' So, in that sense, are the actors in the shadow markets of the world given a leg up by sovereign currencies in physical form versus electronic form? Or are they eager to see new, alternative ways to transact, whether it's with alternative currencies or whether it's trading in airtime minutes — which you write a bunch about, and which I touched on some in my book? I think you're absolutely right, this issue of commerce conducted under the radar and unreported, that will persist whether or not we finally put cash in the grave. But I find much more tantalizing the question of who might be helped once we put cash in the grave. It may be that the poor and the innovators who are involved in these shadow markets could do really well if they're, for example, moving faster to mobile payments than necessarily having to store and secure a little lockbox of their earnings there at the umbrella market.

It almost reminds me of these clowns who say get the federal government off my Medicare, in that they're not totally separate from the government in that they are using the government-issued currency. It's quite at a distance, it's true — they're not reporting, they're not paying taxes — but they're still —

RN They're patronizing the sovereign currency, exactly.

DW Exactly. And they all depend on it. I don't say that in a kill-the-Fed conspiracy theorist sense of it, but it's thought-provoking at least.

RN You brought up something interesting, which I actually didn't think about for the future. One of the biggest problems that the transnational merchants who are involved in the informal economy face is dealing with the devilish exchange rates, and the way in which a falling dollar and rising yuan can kill trade in a third country that's using the dollar and yuan to convert its sovereign currency into dollars, and then convert dollars into yuan to buy things from China and ship them back home. If there were something that kept its value and could be universally exchanged, such as mobile-phone credit or frequent-flier miles or something like that, that would definitely benefit the folks in the underground because they are definitely looking for ways they don't lose out on exchange rates.

DW In talking about the war on cash or the onslaught on cash, part of cash's death is by a thousand cuts. This is being inflicted by new technologies — mobile money and trading in M-Pesa in Kenya and all of that. But there is this whole other front in the war being conducted in the alternative-virtual-community-currencies world. And that's what you are talking about, that does go far beyond Disney Dollars and airline miles. People kind of have a knee-jerk response to the idea, thinking it's kind of kooky, in a way . . . but they work and they do hold a lot of promise for people in the developing world who have an interest now in challenging government's monopoly on issuing currency. I don't think that means we should pooh-pooh national currencies to the extent that we deny the incredible prosperity they have helped societies to build over the last century or more. But if you look at the euro crisis right now . . . I think there are strong arguments to be made that our wallets, and more specifically our financial lives, might not be hurt if we had not just other payment options, but other currencies. The key is, can you keep the exchange rate smooth and fluid like you're saying, because all this alternative currency stuff sounds like a crazy hassle, far less convenient than cash on the surface. I think the mobile phone can help us skirt around that if it can be programmed to help us conduct these exchanges in real time on the fly, even out there in the slums of Delhi.

RN One of the questions I have for you, since I haven't researched alternative currencies, David, is: I read some stuff about the Swiss alternative currency that's used by small businesses, and most of the alternative currencies I have looked into are pegged in some way to the national currency. I am wondering whether that is the norm right now, or do you see people breaking away from that?

DW I think the peg adds an aura of authenticity; you don't necessarily have to have it, but it doesn't really hurt them to be exchangeable, Maybe the way some alternative-currency innovators will get around that is if they are trading for example units of electricity, because that has "real" value in the physicists' sense of it — not in the gold enthusiast's sense of real value. It's a constant. This is really hard and heady stuff, but if we could ever find a way to be trading in kilowatts, it's going to take the same amount of electricity to light up a light bulb next week as it is 30 years from now, so that's real value that we can understand and we can predict. In that sense, I don't think you really need the peg, but for some of these other ones, again, going back to this idea of a rainbow of currencies at your disposal. If you can balance between Linden dollars and Bitcoin and Facebook credits and Malawi kwacha, why not do so? They're all floating anyway, and this is a much more macro point but it's all about accepting the faith of how currency and how money works, and if you've decided to believe in the value of Bitcoin or you've decided to believe in the value of Linden dollars, then you're on board already, so why not accept the changeability?

KEY TO THIS COMMERCE SUCCEEDING IS THE ISSUE OF TRUST. THERE'S GOT TO BE TRUST IN THE VALUE OF WHATEVER IT IS THAT'S BEING EXCHANGED — A CERTAIN NUMBER OF KILOWATTS OR A CERTAIN NUMBER OF OUNCES OF GOLD. WHAT YOU'RE SAYING IS THAT THE GOVERNMENT IS PROVIDING A CERTAIN AMOUNT OF LEGITIMACY OR BASELINE TRUST. HOW DO WE CREATE SOMETHING THAT IS TRUSTED SO THAT YOU CAN EXCHANGE IT, WHATEVER THE UNITS ARE, FOR AN UMBRELLA IN THE STREETS OF BRAZIL?

DW Number one is to acknowledge the incredible success of national currencies, just because they have achieved that universal acceptability that you're talking about. That universal fungibility — you can apply those funds to almost any use. For all of those operatives in the underworld economy or System D — I love that by the way — it's pretty interesting that, in a way, governments have let them down so much, but not necessarily when it comes to providing them with a means of transaction or a medium of exchange. This is where, Robert, you should chime in and hit this one out of the park. That enormous community is full of innovators. They are going to be the ones who see value in other types of currency and can start to apply them. We've seen this totally organically happen with trading airtime minutes as a currency. That is an alternative currency now that people in the developing world are using to transact and buy things — not just talking time for their phones — because they're so widely accepted, because they're all over the place, because they're easy to work with, and because they're a lot safer than cash. I see that as a single example of what I suspect could be a lot of different alternative currencies sprouting up in the developing world. But, again, Robert, correct me if I'm wrong —

RN Well, first of all, just on the example you bring up, although I used cash to buy it, I transacted a low-level bribe in mobile-phone airtime when I went to the Alaba market in Lagos, Nigeria. The merchant that I spoke with basically said, "Why should I help you? And before I help you, buy me airtime." So, I gave him airtime — it was a tiny increment of airtime in relative terms, but that was what greased the wheels to get me to the leadership of the Alaba International Market. He didn't want the cash. I could have given him the cash, but he wanted the airtime.

DW Oh my God, this is like music to my ears. This is music to my ears, I love it.

RN I do think that there's a lot of potential for airtime. I do think the issue of trust is a difficult one, but I could certainly see the trust that has been generated in certain informal markets being leveraged up to run their own kind of alternative currency. Cru Da Vinci Cinco de Marzo in Brazil, or Alaba International in Lagos, could leverage the trust that people have of their merchants to create their own currency, and basically run their markets either in cash or in their own currency. That would be a way of furthering the market, and jacking up the amount of trade that they could do. It would also mean that if you buy Alaba currency or Alaba units or whatever they would be, you would have to continue shopping in Alaba if you have any left over, so you couldn't go to some other market, which would lock people in, which I think the merchants would really like.

DW This also gets at premium on utility, among these people who in many ways who are just getting by. Robert, you mentioned this in your recent Wired interview [, that these people don't think of themselves as underground operatives. They're generating income so they can take care of their families and put food on the table. That segment of the population will jump to options that provide increased efficiency in their economic lives, or the corollary to that is reduced friction in their economic lives. And that's why the airtime minutes thing is so popular, and for example the mobile-money stuff that is so popular in many parts of Africa now, especially the M-Pesa program that just took off like wildfire in Kenya. I hate the business-speak of this turn of phrase, but it's real: the value proposition of it is so clear to those people.

For us, we can toggle between cash and electronic money fairly freely and we don't really sense that friction quite as much. But people over there, it's just so glaringly apparent.

RN I was going to ask you, do you think that frictionless environment will change over time? The guy you wrote about in India, the transactor, if you will, of all these mobile apparatuses that create savings accounts with the State Bank of India, he's collecting a fee, right?

DW Right.

RN I've noticed here in the States that sometimes when I try to make a payment electronically, transfer funds from my bank to somewhere else, suddenly credit-card companies want to charge me, for that. So instead of what started out as a frictionless place where you're not getting interrupted by these excess fees — which basically make it more cumbersome and more difficult and more like cash, if you will — you're getting extra fees put on. I see the same thing going on at gas stations, where if you want to gas up a car, you can now pay less if you pay in cash and more if you're paying electronically. Do you think it's natural that the people who administer these things — because right now they're being administered by for-profit entities — are going to ramp up the fees, which take away the very benefit of the frictionless environment that is supposed to be so much better.

DW I think it'll be a cost-benefit analysis for each case. My book is not a Valentine to the credit-card companies. Their outrageous fees are a huge problem. But I actually think that as the question of cash's shelf life comes into the sunlight, maybe people will actually scrutinize the operations of credit-card companies more as they learn about and demand better payment options that don't charge such steep fees.

But more specifically, back to the guy in India whose company is sort of the "software" between the mobile-phone user in the poor slums and the no-frills bank account at the State Bank of India. There's a guy who I write about in the slums who I was talking to at a local pharmacy while he was doing a transaction, about the value proposition of this thing that he's doing. He's depositing some cash in his bank account by just taking some earnings after repairing somebody's radio and he walked across the street, and with a little bit of texting from him and from the pharmacy owner, suddenly that money is now in his bank account.

I asked him about the concerns that everybody here in the States asks me about. Which is, are you worried about hackers and identity theft? And if financial crime is just as bad, if not much worse, than physical crime, why are you trusting them so much? And then I'm also asking about the fee, because this company, Eko India Financial, they get a fee skimmed off the top of his transaction. Which is a super-modest transaction, by the way, and a super-modest fee. And he looked at me like I was from the moon! He said the benefit of this compared to what his financial life was like previously is just so unquestionable. Specifically on the remittances front. He was one of those people who had to ride a bus for a day and a half to go give money to family members in the countryside. And to come back is another day and a half. That's three days of lost income generation. It's the bus fee. It's risking what might happen to his shop while he's away, his merchandise.

So for him it was so much better. You're right that the fees and things are cause for concern. But I'd like to think that everyday consumers will be like this guy, Sonu Kumar, and see the benefit of it. And if they don't see the benefit, or if the fee is way too high for them, well, then they'll just walk down the street to somebody else who's offering a better payment option. I hope.

RN It may also be that the benefits for them will outweigh fees, but the fees are still going to be in aggregate terms low, but in percentage terms maybe pretty high, the same way that Procter & Gamble charges a lot more for a single sachet of Downy fabric softener than they do for a huge 23-pound box. But the single-sachet people are willing to pay the higher profit margin on the single sachet, because that's all they can afford and they want that Downy fabric softener.

I'm not saying that's wrong, I'm just saying that the fee may wind up, once again, being more onerous on the poor people, even though it's still a benefit to them because it outweighs standing on line at the bank or taking the bus for three days across India to go see mom.

DW I think that also cuts to the core of how we feel, ethically or emotionally, about the role of money or the role of payments. Is the currency is like a utility, or something the government should be providing to all of us? And processing a payment — is it fair to charge a four-percent fee to process a payment when really the merchant and the consumer are doing their part in that transaction to help grow the economy anyway?

RN There is an interesting argument to be made that the payment processing could be nationalized. And then done for free.

DW You just invited all kinds of hate mail from the Big Brother types — who have been writing me non-stop, by the way.

RN What's the difference between Big Brother doing it or the big kahuna of American Express doing it? It's still a large entity with interests in controlling and monitoring our behavior.

DW I think that's totally fair. Another way to say that is, as another economist who wrote a review on a book had said, "People trust governments more than they trust banks." Which isn't saying much, but it's true. I think that's fair, and I'm not eager to dismiss that anxiety because I feel it, too. I don't think it's just American Express, though, it's American Express, Visa, MasterCard, Discover, PayPal —

RN Oh yes, yes.

DW — and a whole host of new payment processors, square from this guy Jack Dorsey from Twitter is coming on. I think they will eat at the fees of the credit-card companies in a pretty substantial way. It's promoting innovation, and it's up to the consumer to go find the start-ups that are behaving more ethically, toward them and with their money.

RN It would be really interesting to see some of the "fixers" who operate between China and Africa for instance, coming up with their own way of solving the exchange-rate problem, by trying to have an African hawala system, where money gets transferred without the currency transaction that destroys a tremendous amount of value in the African currencies. Where somehow without all the profit centers with each transaction so that they can just do it once, and send their money there, and their money is there when they get to China.

YOU GUYS ARE BOTH NOT ONLY TALKING ABOUT ALTERNATE METHODS OF PAYMENT, I.E., CREDIT CARDS OR CASH, WHICH WOULD BE TRANSACTED IN DOLLARS OR EUROS OR POUNDS. BUT YOU'RE ALSO TALKING ABOUT COMPETINGCURRENCIES SO, I COULD PAY YOU BY PHONE IN AIRTIME MINUTES, OR BY THE HAWALA SYSTEM, IN SOME OTHER UNIT.

DW I have a nice anecdote, which gets past the wonky talk. The ability to bounce between currencies is going to be fabulous for people in ways they can't even conceive, and I think it strikes at the heart of this question of what is real value. The example in the book is you have an upcoming family trip to Disney World, so maybe you want to get paid in Disney Dollars from someone, so much so that you would be offering a discount on the actual price of the thing, if they are willing to pay you in Disney Dollars.

RN The difficulty with all of this in my thinking of it, is the universal acceptance of the thing. So, for instance, I can see that everyone on the MTN or Globacom or other network in Nigeria being able to trade minutes. The problem is how do you trade minutes with China Mobile? The costs are different, and so you still need a unit of exchange and you're still dealing with a kind of currency, it's just virtual, it's airtime.

DW Or it's a US dollar even. Part of my thesis isn't to get rid of national currency, I mean I bring up the idea, but it's more to get rid of the analog, physical representations of it. Maybe to bounce from MTN airtime minutes to China Mobile, you want to go through a national currency because they've achieved this great level of universal acceptability, and that's just not so bad.

RN The fallacy of that is that not every national currency has achieved universal acceptability. That's why the Nigerian merchants have to convert their naira into dollars and their dollars into yuan, because the Chinese won't accept naira. And presumably there are a lot of other currencies, most African countries' for instance, that China is not interested in transacting currency exchanges in. They might take rand, maybe, but I'm not even sure they convert rand.

DW I like hearing this from you because it gives me the sense, I hope, that you liked the chapter in the book about Iceland and questioning the relationship between a sovereign currency and a sovereign state, and does it really make sense to have every single country have its own currency? No one wants to hold Malawi kwacha as a source of wealth, let alone the Chinese aren't going to accept it as payment for anything. So these are tricky questions, but then of course you turn it right on its head and look what happened in the Eurozone with the consolidation of national currencies and now these central bankers can't really do anything but write white papers at home because they don't have any tools at their disposal to help remedy their economies in Italy and Spain and Portugal.

RN If you're going to have a transnational currency, you need in some way a transnational government. What was the old line, disarmament requires world government? It's very tricky, the currency issues are very tricky. I'm certainly willing to pay you some gigantic stones from Yap if it goes on, but I don't think in our lifetimes the national currencies are going anywhere.

DW I don't think so, either, but I think there will be some further consolidation, but I'm not denominating my child's very modest college fund in Thai baht or anything like that.

RW No, I certainly concede that argument.

A REALLY INTERESTING THING THERE IS THIS IDEA OF CURRENCY AND GOVERNMENT. OBVIOUSLY YOU'RE TALKING ABOUT THAI BHAT AND DOLLARS. WHO IS THE "GOVERNMENT" OR GOVERNING AUTHORITY OF AIRTIME MINUTES? IS IT THE COMPANY? WHO WOULD DEFINE OR DEFEND THE VALUES OF THE UNITS BEING TRADED?

DW I think what you are hinting at is that, if airtime minutes are a currency in this way, the issuing authority of the currency is really the company. It's a private entity and is that safe and okay? I think there are real concerns about that because steering the money supply is a tricky game. And so with airtime minutes as a currency, you imagine some people out there right now may be sitting on a mountain of wealth denominated in airtime minutes. But what if for whatever reason, the issuer of those airtime minutes — MTN or someone — was just suddenly giving them away for free? With an oversupply of this form of money it hyperinflates it overnight. Now people who actually sold clothing and cows based on the idea that this is a safe thing, now they're hosed. Their value goes up in smoke.

But the machinations are just the same as regards swings in value of national currencies. But the central bank of a government has more tools at its disposal to try and keep the economy in check and control the money supply. This is the big fear, whether it's airtime minutes or even Ithaca Hours, but it doesn't make it any less real of a form of money. I think your concern about who is safeguarding that money supply is a real one because it's a private corporate entity, and not necessarily a government, which circles back to that idea that people seem to trust governments more than banks or let's say big telecom companies — which maybe isn't saying so much, but it does say something.

I ALSO WONDER ABOUT NOT JUST THE TRUST IN THE MONEY SUPPLY, BUT ACCOUNTABILITY. IF CHINA MOBILE WANTED TO CHANGE THE PRICES THAT IT CHARGED FOR ITS AIRTIME MINUTES, LET'S ASSUME THAT BETWEEN THREE AND 12 PEOPLE NEED TO SIGN OFF ON THAT DECISION AT THE HIGHEST LEVEL TO MAKE IT SO. WHO ARE THOSE PEOPLE? WE DON'T EVEN KNOW THEIR NAMES — AS OPPOSED TO GOVERNMENT. EVEN THOUGH THERE'S A CERTAIN AMOUNT OF UN-ACCOUNTABILITY OR DELAYED ACCOUNTABILITY BUILT INTO THE FED, FOR EXAMPLE OR THE WESTERN EUROPEAN CENTRAL BANKING SYSTEM, THERE'S SOME. WE KNOW WHO BEN BERNANKE IS AND OUR REPRESENTATIVES CAN GO HOLLER AT HIM, IF THEY WANT TO. WE HAVE THAT RIGHT, WE HAVE A LITTLE BIT OF TRANSPARENCY. ISN'T THAT THE REASON PEOPLE TRUST GOVERNMENTS MORE THAN THEY TRUST BANKS?

DW I think so. Or at least I think that's the idea. The worrier in me says you're exactly right, the top-brass China Mobile could be that could just be horrible increasing the fees like that and nobody knows who they are and can go after them. But the technologist in me, without sounding too much like a Pollyanna, would hope that there are just enough options in the future when it comes to varying forms of currency that if people found they're getting charged too much for such-and-such that they would just jump. They would jump to another currency, another national currency maybe, or whether it's kilowatt hours, or airtime minutes of another carrier or something like that. I know that sounds a little bit simplistic, but we could see enough start-up activity and technology activity to make those options available. But if we don't, I think you're right. How do we know that these businesses will act for the benefit of the masses, and not necessarily for themselves? That doesn't bode well.

ROBERT, IMAGINE THERE IS SOMEONE IN GUANGZHOU WHO HAS 10,000 AIRTIME MINUTES. THAT'S PROBABLY A LOW NUMBER OF WHAT SOME OF THESE PEOPLE'S BALANCES ARE LIKE. WHAT IF THEY SWAP AND THEN THEY HAVE TO TAKE PAYMENTS IN MULTIPLE TYPES OF AIRTIME MINUTES? THAT BRINGS BACK THE FRICTION THAT THEY'RE TRYING TO ESCAPE.

RN There are all sorts of problems built into it, but I would argue that some of these things could benefit by starting on the local level and then seeing whether they scale up. For instance, I can see a particularly vibrant and big street market having some alternative payment system. Whether it would be mobile-phone minutes or something else really almost doesn't matter, but I can see them doing that, and trying to do that in the way that avoids the kinds of fluctuations that you're talking about. Then, once it's accepted on that local level, they can see how that would interact with other kinds of operations. It's not automatic that everyone trusts each other anyway. The Chinese merchants don't necessarily trust the African merchants, so what they trust is the trusted currency right now. For instance, I could see in China where a Nigerian merchant could pay his fixers (the either African or Chinese guys who take him around to different factories to see where he can get stuff manufactured), I could see that merchant paying in mobile-phone credit or some other kind of alternative currency. To scale that up to some sort of larger transnational kind of thing, I think would be much more difficult.

DW You're exactly right, Robert, about this stuff being born at the community level, and in a lot of ways there isn't a huge need early on for it to expand further, and in many ways, that's what this whole idea of community currencies is about. It's sort of like the "eat local" movement. So you want to use your Ithaca Hours locally, or you want to use you MTN airtime minutes locally within that city, or region or country, but if it has an exchange rate to the dollar or something else then for those who do need to jump out to buy something from overseas, or transact overseas, they can, but they don't really have much of a need or a motivation to locally (especially if they get a little bit of a discount by transacting with this local currency that is there to kind of hyper-drive local commerce).

HOW WOULD THAT AFFECT THE INTER-RELATIONSHIPS? ROBERT, YOU TALK A LOT ABOUT THE CHINA-AFRICA TRADE. THERE ARE LOTS AND LOTS OF PEOPLE WHO ARE IN AFRICA, IN THEIR VARIOUS COUNTRIES, WHO NEVER LEAVE THEIR COUNTRIES OR NEVER GO FAR FROM THEIR VILLAGES — AND NEVERTHELESS ARE BUYING DOWNY OR RADIOS OR CELL PHONES THAT COME FROM OTHER COUNTRIES.

RN Most of the time the deal starts with someone who goes. So there is an African guy who goes to China — or an African woman. The relationships are made face-to-face, initially. Once you develop trust face-to-face then everything is possible. But it's really based on the trust you can develop in person. In that way, it's no different from what I did. If I called up a Nigerian merchant who does business with China and just tried to ask him questions over the phone, he'd never answer me. So what I had to do was go there. I had to show up and develop trust with people and give them a reason why they could think that I'd be honestly presenting what they do with a degree of dignity for them. And so as long as they can do that then whatever alternate currency they are willing to transact in would be probably fine. I mean if China Mobile offered an M-Pesa type service, I'm sure that the African merchants who did business with Linda Chan — who I mentioned my book who is a relatively small-scale dealer in auto parts in Guangzhou (and when I say relatively small-scale, it's more than a million dollars a year, but that's still small scale compared to some major factories) — with the merchants that she knows she would then be willing to accept payment that way because she would trust the merchants would be open and aboveboard because she knows them and they come recommended by people that she knows.

SO THAT'S WHERE YOU GET SOMETHING STANDING IN, AT LEAST IN PART, FOR THE TRUST THAT COMES FROM — AS DAVID SUGGESTED AT THE VERY BEGINNING — A GOVERNMENT-ISSUED PIECE OF PAPER.

DW The magic of it. Maybe it's because I'm not an economist but it doesn't cease to amaze me.

WHERE DO YOU GUYS SEE THESE THINGS LEADING? WHERE ARE THE INTERSECTIONS BETWEEN THESE FORMALIZED SYSTEMS IN THIS INFORMAL WORLD?

RN Yeah, I mean, so far, money is a formalized system, right? And that's what everyone has trusted to be the medium of exchange. And I'm not sure there's going to be any kind of haphazard medium of exchange. I think that markets may look at these kinds of things and determine that you can make a better profit using them than doing business with suitcases full of cash. But I'm not necessarily sure that there's any non-formal entity that is going to be able to develop that kind of huge amount of trust. The company in Paraguay that dealt with smuggling computers and peripherals into Paraguay and then smuggling them out into Brazil did handshake deals worth millions of dollars with American companies. But of course the reason was because those companies had trust in them and because ultimately the payment was made in dollars. So I don't necessarily see that changing.

DW I have to bolt in a minute here. Believe it or not, I have to get a rental car to go to Seattle.

RN How are you paying for that?

DW Plastic. I don't adore them but I'm like you, I travel a lot, I like the airline miles, even though I know it's a gimmick to keep their hooks into me, there is some value in it. And it's quick and I don't want to have cash on me.