The Back of the Envelope (a blog)

The Free Net Project: a brief proposal

One of my hobbies is that I am a libertarian. Not just any libertarian, but a particular brand of libertarian – a free stater, or part of the Free State Project in New Hampshire.

The Free State Project was created by a Yale academic, Jason Sorens, back in 2012 with a simple premise: if one could assemble enough politically active people with a common, minority belief system – in this case, libertarians – and concentrate them in a small area, one could achieve meaningful political change that would be impossible through a traditional, nationwide strategy due to the predominance of the two-party system.

The Free State Project’s logo. The critter is a porcupine, the official animal of libertarianism.

The project selected New Hampshire as its target state. The Project set up a website which allowed people – of which I am one – to pledge that they would move to New Hampshire within five years of 20,000 people signing the pledge. In 2016, the threshold was met and the timer started.

Thousands of people have moved during that time. As to the results, well, it’s been pretty successful:

The Executive Branch is actively seeking to censor the viewpoints of American citizens

Today we learned that the Democrat administration is actively colluding with Facebook and other major technology companies to censor American internet users.

Responses from conservatives, moderates and libertarians alike have mainly consisted of calls to regulate Big Tech so that this sort of interference can’t happen, or some other kind of Beltway-compliant political resolution.

For an ordinary Internet user, taking on Big Government and Big Tech on their own terms, via their institutions and in accordance with their rules means the deck is stacked against you. You will certainly fail.

For example:

  • The government is now actively involved in censoring dissident viewpoints in the United States. If you give the government the power to regulate speech online – as many proposals call for – the government will use this power against any viewpoint which challenges the ruling class.
  • Facebook and Twitter are private property. Giving the power to the government to force them to host their philosophical opponents’ speech will necessarily involve giving government power to force us to host our philosophical opponents’ speech.
  • Even if we could secure passage of a law forcing social media companies to grant minority viewpoints equal access (and to be clear, I don’t think that outcome (a) is possible for at least four years, during which time many elections will be swayed by Big Tech’s influence, or (b) constitutionally permissible thereafter), such a rule would likely be limited in its effect, and enforcement would entail years of expensive litigation. Big Tech can afford legal fees. You cannot.
  • Censorship problems are not limited to social media. PayPal, Amazon, Uber, numerous banks, credit card companies and payment processors also engage in politically motivated censorship and/or denial of service which is not connected with terms of service violations. We need to address this, too.

Your arms are not long enough to box with God. You cannot beat the regime at its own game.

But what if we stopped playing the game entirely?

“There’s nothing more blue-pilled than thinking there is a path to liberty that isn’t physical concentration or a form of exit”

That line is from Jeremy Kauffman, of the LPNH and the Free State Project. The Free Staters have met with a considerable amount of political success using this formula. We may wish to try it ourselves.

The Free State Project recognizes that in order to achieve political change at scale as a minority, the effectiveness of one’s resources must be maximized to the fullest possible extent. This is achieved by removing your members from regions where their votes are and will always be ineffective and placing them in localities where their votes have an effect.

So it is online. The issue is that at the moment there is not a definite, pro-freedom ecosystem in place – a group of businesses which pledge their fealty to libertarian ideas much as corporate America seems to lately pledge its fealty to post-Marxist ones – where freedom-loving people can go and know, as a matter of certainty, that as long as they don’t break the law, their access to a full range of financial and network infrastructure is guaranteed, regardless of their political viewpoints.

An equally significant problem is that there is no coordination. Because Big Tech essentially controls the entire information space unchallenged, it is in a good position to prevent competitors from proliferating (app store bans) and keeping existing influencers reliant on its ecosystem for the engagement which is responsible for their income. Big Tech has scale; its users do not.

The problem is one which requires scale. Even if we could “fix” Twitter and Facebook, political censorship affects far more than just these two companies.

What is required in order to fully defeat the merger of state and corporate power represented by today’s announcement by the Biden Administration is a root-and-branch replacement of practically every business essential to American life.

A central aim of the project is to attract censorship resistant service providers. It will do this by verifying businesses’ ideological alignment to the aims of the Project, and directing Project members to those businesses. As the number of Project signatories increases, this will demonstrate to potential first-movers in each of these fields (to the extent that these businesses do not currently exist) that, if they pledge their loyalty to political neutrality and refuse to engage in state-suggested, but not legally mandated (thanks, First Amendment!) censorship, they will acquire millions of users overnight.

The Project should identify businesses in key sectors as targets for the migration and provide information about these businesses to prospective movers. Strategic categories of business should include:

  • Retail banking.
  • Acquiring banks for merchant credit card accounts.
  • Credit card rails.
  • Payment gateways and apps.
  • Cryptocurrency exchanges and fiat on/offramps.
  • Online video.
  • ISPs.
  • Mobile telephony.
  • Microblogging.
  • Social audio.
  • E-mail.
  • Hosting and DNS hosting.
  • Ridesharing.
  • Etc.

For each of these categories we will not need the entire marketplace to be pro-freedom to circumvent informal censorship. We just need a handful of companies in each category, who Project members could turn into instant category leaders.

The Free Net Project registry and pledge

The Free Net Project would look a lot like the Free State Project, but with a difference: instead of a mass migration across lines on a map, this would be a mass migration away from Big Tech. People would sign a pledge that upon a predetermined number of signatures being obtained, say 10 million, signatories of the pledge would, on or around the same date and time, delete their Big Tech accounts and solely do business with pro-freedom businesses.

The pledge would be modeled after that of the Free State Project and would read something like this:

  1. I pledge my solemn intent to only use the services of pro-freedom businesses with the Free Net Project.
  2. I pledge my solemn intent to cease using the services of companies which are complicit in the systematic censorship of law abiding people.
  3. I will work towards the creation of a society in which the maximum role of government is the protection of the individual rights to life, liberty, and property.

The project would maintain a registry of pro-freedom businesses and decentralized protocol systems, and links to their signup pages or download portals.

The principal objective of this exercise is to prove the naysayers wrong and show that a withdrawal from Big Tech is feasible:

  • Any business signing the pledge would be able to see how big their potential pool of customers would be. As that pool grew larger, so would there be a greater incentive for businesses to make the pledge, including existing businesses which may not have a pro-freedom ethos but want to get their hands on libertarian dollars.
  • For online influencers, as the number of signatories rises, they will acquire greater certainty that their influence will also survive the move. Applications could be built which could show Twitter and Facebook users how many of their followers have decided to make the pledge.
  • As numbers approach the 10 million target, naysayers who say it is impossible to make the move, and those calling for government regulation, will be silenced as it becomes apparent that a legal but non-legislative and non-litigious solution is the more viable approach.

And that’s that. Beating “Big Tech” doesn’t require us to get every person in the world, or even in the United States, to quit. It only requires a critical mass of the most interesting people and of ordinary users.

The Internet gives us all the ability to, at the click of a button, withdraw our business and our money from any business we choose. It also gives us the ability to advertise to entrepreneurs who would provide services on a nonpartisan basis that there are millions of us willing to bring about their success with our wallets. There is no law which says we cannot coordinate our activities to only give our business to businesses which share our politics. All we need is for that coordination to take place.

We’re never going to get Big Tech to change. Its value system, derived from the West Coast liberals who created it, is too entrenched. It’s high time that we stopped begging the government to save us and saved ourselves instead.

To that end,  to quote FSP founder Jason Sorens, “I’m hoping this project really becomes a decentralized affair – I don’t want to be a dictator of my own little club, and I don’t want your money.” If you’re the right person to run with this proposal, then by all means, run with it.

Postscript:

Thoughts on the Trump Deplatforming

See also: Open Access Publishing Platforms and Unlawful Threats, Republicans need to stop begging the government to protect them from internet censorship

Today Donald John Trump, the 45th and current President of the United States, was banned from Twitter on the grounds that the account presented a “risk of further incitement of violence.”

I offer no opinion as to POTUS’ speech. Calls to or encouragement of violence on Twitter are nothing new. Leaders and nations (and leaders of nations) call for violence on Twitter all the time, whether in the context of Ayatollah Khameni referring to the State of Israel as a “cancerous tumor…. that has to be… eradicated” or the Chinese government engaging in genocide denialism.

This tweet was subsequently deleted.

Closer to home, ordinary people everywhere across the political spectrum, when given a keyboard and an Internet connection, routinely prove capable of being utterly horrible.

This summer, when in fact people were burning rather a lot of things down, rather a lot of comments on Twitter called for various individuals to “burn” [various things, usually “it”] “down.” Indeed Twitter continues to platform an author of a book titled “In Defense of Rioting,” published during the peak of the 2020 summer riots which killed 25, shut down dozens of American cities and incurred billions of dollars in damage.

On the right people were no better, advocating the use of extreme force in extreme language. See e.g. Florida Rep. Matt Gaetz calling for American citizens to be “[hunted down] like we do those in the Middle East”:

Mind you, much of what the United States does in the Middle East these days is extrajudicial murder, particularly when we do it either directly with a drone strike, but also through our provision of precision-guided weaponry to local client states. Given the example our government sets in dispatching its enemies it is perhaps not so unsurprising that after even the most cursory search one can find a great many calls on ye internet for extrajudicial murder to be committed against our neighbors right here at home.

This stuff isn’t on some fringe platform like 4Chan, it’s on Twitter. And it’s not hard to find. Millions of Americans are cooped up in their houses calling for, or reading other people’s calls for, millions of other Americans to be dragged out and shot in broad daylight.

This is unhealthy. Hearing these things on television, in the classroom or the workplace would be unthinkable. Reading them online is routine. That these views are widely held is borne out by research: polling shows that the political right and left are both increasingly tolerant of the use of unlawful force to accomplish their political objectives.

Whatever this is, it pre-dates COVID-19; The Proud Boys (right wing) and Antifa (left wing) street gangs were mixing it up in American cities like Portland all year round, and the latest incident in D.C. is really a larger and more dramatic instance of street violence which has happened in D.C. for the past few weeks and the U.S. over the past several years.

As a libertarian, this troubles me. Last time I looked, we don’t execute people for rioting. (In many states the government doesn’t deliberately execute anyone at all, for any reason.) Kent State is rightly remembered as an atrocity because it was an atrocity, much like the Boston Massacre and Tiananmen Square were atrocities. If a line of policemen gunned down dozens of BLM supporters in Lafayette Square when the White House was first beseiged in June, that would have been an atrocity. So too would it have been if the Capitol Police gunned down the yahoos who stormed the Capitol building this week.

It is a sad commentary on our current state of affairs that we cannot agree that atrocities are bad in every case, even where philosophical opponents are concerned. It is a testament to the strength of our system, not a sign of weakness, that police allow public places to sometimes be overrun and that we then allow our constitutional guarantees of due process and a fair hearing to mete out justice in the aftermath. This indeed is happening now – as of this writing, 54 individuals have been arrested and if I had to guess hundreds more will be before the US Attorney is done handing out indictments.

Running a social media company is not easy. It is hard for the human mind to appreciate the difficulty for any organization to keep on top of a flow of speech being pumped out to the tune of five to ten thousand posts per second, as is the case on Twitter. Twitter’s moderation therefore kicks in after the fact: posts go up, and are later reviewed, and if found wanting, they come down. American law works much the same way; we do not impose so-called prior restraints on speech by subjecting speech to pre-approval or licensing, but rather we permit the speaker to make the decision as to what he or she wishes to say, subject to the condition that if the speech falls within one of a definite set of criminal or tortious categories, such as threatening, libel, conspiracy, or direct incitement, a penalty might be imposed.

The vast majority of data produced, and therefore speech produced, in the present day is online. In the context of COVID-19 virtually all speech of political importance is made online. The First Amendment protects that speech from interference from the state. It does not protect that speech from interference from private parties, including but not limited to the platforms who host it.

Most social media companies claim to be viewpoint-neutral and have policies which are ostensibly viewpoint neutral in order to attract the widest possible audiences to their platform. Long has it been alleged by American conservatives that these platforms are biased against them.

Long has it been alleged by American liberals that the conservatives’ allegations are untrue. We can confidently say that the banning of President Trump by most of the major players, paired with the continued tolerance of literal genocidaires from abroad, shows the conservative complaint is correct. Moderation policies are a smokescreen for political reality, which is that social media platforms were content to be more or less neutral when they were racking up KPIs in the run up to an IPO, but in the wake of mainstream commercial success they have become more (commercially) conservative to reflect the politics of their owner-operators, regulators, and advertisers. They cannot say this out loud without alienating vast swathes of their users, so they let the implementation of their policies say it for them tacitly.

In the United States, there is no legal problem here. Advocacy of the use of force or support for the use of force, without more, is protected by the First Amendment of the U.S. Constitution (see: Brandenburg v. Ohio); the type of speech we criminalize is specific, such as that which furthers an attempt, agrees a conspiracy, or is directed towards the production of imminent lawless action.

I do not think it is appropriate to describe what is happening to President Trump as de-platforming. He is a platform unto himself. Nor do I think that de-platforming people who are out of step with a platform’s own political consensus is a bad thing. For sure, a deplatforming has nothing to do with freedom of speech. Freedom of speech is a shield against state action.

Wherever the President might go, he will bring millions of users with him. This might be a good thing. Many of my closer friends, personal and on the Internet, are growing increasingly concerned that America is in an escalatory spiral of political violence. For this social media is being blamed.

If indeed this is true, the highest priority for our government and our corporations should not be scoring partisan political points or controlling the battlespace (which they are doing). It should be de-escalation (which they are not doing).

Twitter is not a neighborhood, its terms of service are not laws, its content moderators are not policemen, and its CEO is not a head of state. Yet it is the place many of us gather, a town square without grass, a coffee shop without tables, a park without benches, where we have conversations in public where not just anyone nearby, but anyone in the world can inadvertently stumble upon our words and object.

The result is that everyone is constantly strung out and fighting, surrounded by enemies real or imagined. Jack and Zuck built platforms that connected the world, but at the same time forced everyone to deal with people whose opinions they loathe and on terms they resent. Current proposed reforms to Section 230 of the Communications Decency Act would ossify this miserable state of affairs in law.

Our constitutional system was not designed to accommodate millions of belligerents constantly screaming at each other at the speed of light, as social media does now. Hoping to completely silence our philosophical opponents’ viewpoints is a fool’s errand; apart from being morally wrong and illegal, it is technically impossible, as the ability to spin up a server is the ability to host an online forum. Perhaps it is no bad thing if we embark on experiments to structure the Internet in such a way that unlike-minded people are kept further apart.

5 ways to get involved with Bitcoin without investing in Bitcoin

There are a lot of “new people” around in Bitcoin this week, understandably.

As someone who advises cryptocurrency projects – Bitcoin and non-Bitcoin – for a living, one of the things I don’t like to do is invest in this cryptocurrency or that one.

My reasons for this are simple: if I own a token my opinions about the token might be influenced by my position in the token, so to the extent I might hold any cryptocurrency those holdings shouldn’t be allowed to become material to the extent my advice would be affected.

We now are in a truly insane, face-ripping Bitcoin bull run, with new ATHs being breached on a daily and hourly basis. Logic dictates this cannot go on forever. That will not stop new participants in the cryptocurrency markets from thinking otherwise and thinking that they can call the top.

Over the centuries, many an amateur trader has been ruined by mortgaging their home or investing their children’s college tuition funds into speculative investment; Isaac Newton, arguably the most brilliant human being who ever lived, was utterly rekt in the South Sea Bubble after making a huge sum in a bull run and doubling down and reinvesting in the proceeds before a massive crash.

This isn’t to say Bitcoin is or isn’t a bubble or that it will or won’t be the victor in the battle of technologies and ideas which will determine the future of money. These are matters of debate about which reasonable and intelligent people can disagree. It is to say that the simple fact about investing is that (1) it is never risk-free and (2) you are not smarter than the bubble and if you give it enough opportunity, the bubble is going to beat you.

With that said, there are ways that you can “get into” Bitcoin without getting exposed to it. These are not financial bets but bets on the use of your time: an investment of energy with limited upside but no downside that will, if you later choose to invest, be of use to you, as you will have learned more about the field that you’re investing in than you would have otherwise, and maybe could pick up a useful skill or two along the way.

1. Read the White Paper.

The Bitcoin White Paper is the seminal document which touched off the cryptocurrency revolution 12 years ago.

A lot of folks in the crypto business say it’s a bad launching-off point for beginners to start with because it requires total newbies to get familiar with things they may have never heard of before such as hashes or digital signatures. I say if you don’t understand these things you won’t be able to understand the future, and although cryptography will be understood by our digitally native descendants as second nature, those of us unfamiliar with the concepts need to get acquainted with them pronto.

Additionally, I note two things about the Bitcoin White Paper which are notably absent from most of the cryptocurrency white papers which followed:

  1. The functions it claims to provide were present on the date the software was first released for public use.
  2. The paper is not a marketing document and was not selling a product or advertising a token sale.

Learning to distinguish between a technical paper and a sales pitch is an important skill. Learn it sooner rather than later.

If you read the White Paper, you will learn who this dude is supposed to be

2. Run a full node.

“WTF is a full node?” I hear you ask. Great question, and if you don’t know the answer, that’s reason enough to run a full node.

A full node is a computer that stores a copy of the Bitcoin blockchain. Nodes help to verify honest transactions. The more honest nodes there are, the more difficult the Bitcoin network is to corrupt. Right now there are tens of thousands of honest nodes.

You won’t want to run a full node on your own computer as (a) it will suck up CPU (b) it will devour 300 gigs of storage and (c) if it’s a full node, you’ll want to be leaving it turned on most of the time.

This doesn’t require a huge financial commitment with fancy hardware. Here’s my setup:

Computer mouse and AirPods shown for scale

Simple, right? Just a Raspberry Pi with some external storage. To get your own up and running:

  1. Get a Raspberry Pi 4 with relevant fixins. This starter kit with 8GB of RAM for $119 will be fine.
  2. You’ll also need to get some additional storage as the Pi doesn’t come with enough to store the whole blockchain. This here SanDisk 1TB MicroSD should do the trick. At $200 it’s the most important piece of the puzzle, but you’ll be glad to know you’re now done spending money.
  3. Start up the Pi and mount the external drive. If you don’t know how to do that because the only computer you’ve ever used is a MacBook Air, congratulations! You’ll get to experiment with the command line for the first time.
  4. Install the Bitcoin software.

Once you’ve done all that, congratulations! Without sending a single dollar to a cryptocurrency exchange, you’re providing a critical piece of network infrastructure for the global Bitcoin network, and you’ve acquired more familiarity with Bitcoin than 99.9% of the people who talk about it. Start teaching yourself to code too.

The benefit of doing all of this is that you literally lose nothing. You’re chipping in to the network and learning new skills you’ll never forget.

3. Get on social media and only listen to people who aren’t trying to sell you something.

There are lots of people on on social media who are responsible Bitcoin cheerleaders. Balaji Srinivasan, Jameson Lopp, Elizabeth Stark, Andreas Antonopoulos, Nic Carter, Caitlin Long, Izabella Kaminska, and Neeraj are some good voices to start with on Twitter.

If you’re interested in law and regulatory issues there are plenty of lawyers/legal scholars on that site too including Stephen Palley, Hailey Lennon, Lewis Cohen, Jake Chervinsky, Gabe Shapiro, Peter van Valkenburgh, Katherine Wu, and of course yours truly (also on Gab and @pjb on Soapbox and Clubhouse). (Full disclosure, Stephen and Hailey are my law partners.)

In the “skeptics” camp are a group of folks who Bitcoin cheerleaders would call curmudgeons, but who I would say simply have stronger views about downside risk. (I used to be one of them but I’ve since sold out.) The current leading skeptics include Tim Swanson, Cas Piancey, David Gerard, Amy Castor, Nouriel Roubini, and Bitfinexed. Cheerleaders are very well funded; skepticism is not, so follow them and people they follow to get a more balanced view.

4. Start reading the industry press.

I get my crypto journalism principally from four sources: The Block, CoinDesk, Decrypt, and CoinTelegraph.

5. Find a local MeetUp group.

The last and final step is really the best one. The folks I met in Bitcoin and Ethereum meetup groups and Skype rooms in 2013-14 wound up becoming professional colleagues, customers (when I was running a software company), clients (after I bounced back into the law), and some will be lifelong friends.

I’m cognizant COVID isn’t over yet, but it will be – soon – and once this is over I personally am very much looking forward to attending as many in-person events as I possibly can. There are meetup groups of Bitcoiners in your local area. Find the groups now, and when this COVID nonsense ends make a point of going to meet some of them. In the interim, you’ll probably be able to connect with these folks over other social media via those channels.

By virtue of the fact that you’re reading this blog post, you can be sure that people like you who share your interests about man, money and state are out there, and there are great conversations waiting to be had over a beer.

Have fun!

And that’s it!

Immersing myself in Bitcoinland nearly 8 years ago was the best decision I ever made. Nothing else even comes close. It has resulted in a very rewarding professional life. The space has grown by leaps and bounds, year on year, unceasingly. It will continue to do so until decentralized systems of all kinds have conquered the Earth, and put control over data and money where it belongs – back in the hands of the people. Today is as good a time to jump in as any.

After the STABLE Act, Coin Center’s blockchain node safe harbor is worth revisiting

Yesterday, Congresswoman and “Squad” member Rashida Tlaib sent cryptotwitter into a tizzy with the following proposal:

The bill’s academic/think tank proponents followed up with posts such as this:

There’s a lot to unpack here and a lot of crossed wires, mostly due to (I suspect) the fact that the proponents of the bill are MMT theorists and not engineers. Whilst they may have fairly elaborate theories about what function cryptocurrency serves (and in particular how it has the potential to undermine their macro strategy of money printer go brr) they may have a somewhat looser grip on how cryptocurrency actually works.

1. What the bill does

I preface this essay by saying that stablecoin issuers should be licensed. What sort of licence is anybody’s guess. Currently I should think a money transmitter licence would be the thing but there’s no reason in principle why an issuer shouldn’t go get a bank licence as well. 

The STABLE Act does way more than that, and appears to require any blockchain that runs stablecoin code to be licensed, among other things. For example:

  • The bill outlaws the issuance of a stablecoin otherwise than by “an insured depository instiution that is a member of the Federal Reserve System,” i.e. a bank.
  • The bill bans the issuance of stablecoins, provision of “stablecoin-related” services, or “otherwise engaging in any stablecoin-related commercial activity, including activity involving stablecoins issued by other persons, without obtaining written approval in advance… from the appropriate Federal banking agency.
  • The bill creates a requirement for preapproval, among other things, for “otherwise engaging in any stablecoin-related commercial activity.”

It’s a swing and a miss:

  • First, the largest stablecoins available in the marketplace – which shall remain nameless for the purposes of this blog post – have lists of compliance issues a mile long already. Adding another requirement doesn’t answer the question of how we get non-compliant stablecoins to adhere to the rules that currently exist.
  • Second, one of the stated purposes of this bill is to protect underserved communities from being discriminated against by stablecoin issuers. To this I would reply that any stablecoin issuer worth doing business with will operate in New York State and need to comply with the provisions of the NY Human Rights Law which prohibits discrimination. (For the disabled, I note also that the Second Circuit thinks that under Title III of the ADA there is no requirement for a “public accommodation” to have a physical location, so that aspect of equal access might also be covered by New York-based stablecoin providers.) Additonally, given the regulatory problems with some existing stablecoins and in particular their role as dollar liquidity providers for offshore exchanges with lax KYC that can’t get banking access, it is likely that those who would access stablecoin markets don’t need to be protected from denial of access to stablecoins, but rather they need to be protected from most of the stablecoins they are likely to encounter in the wild.
Gratuitous bitcoin-motherboard clip art. Licensed under the Pixabay licence
  • Third, the plain text of the bill presents the bizarre possibility, one which is apparently intended by the drafters, that node operation on any unlicensed chain which supported any stablecoin would be unlawful and, pursuant to 12 U.S. Code § 1833a, subject to fines of up to $1,000,000. Criminal penalties might also be possible. The rest of this post deals with this point.

2. Introducing the Ethereum Rule of Statutory Construction

Lawyers have these little critters called “canons of statutory construction” we use to interpret laws. For example, in England they have something called “the golden rule,” which basically means that when trying to understand what a law calls for, you give the statute its plain and ordinary meaning unless doing so would render the statute absurd. In the alternative there is an approach called the “purposive approach,” which is generally used to interpret indirectly-effective EU law, where interpretation of the rule is driven by the purpose for which the statute is drafted.

In America, by contrast, you may have heard of “textualism,” “originalism” or the “living Constitution” approach in recent Supreme Court hearings. It’s the same game, choosing which rules we use to understand language.

I propose one for cryptocurrency. I call it the Ethereum Rule, and it holds that “A law is to be given its plain and ordinary meaning unless it would require Ethereum (as it exists in 2020) to do [X] in the manner a corporation would, including but not limiting to applying for a licence, in which case the law is absurd.”

This bill appears to require just that. Although the definition of “stablecoin” in the Act seems to exclude cryptocurrencies like Ethereum, the issue isn’t that the definition is overbroad but that the bill seeks to force anyone engaging with stablecoins to do so under the aegis of the Federal Reserve System. Just read the plain language:

“it shall be unlawful for any person to… otherwise engage in any stablecoin-related commercial activity, including activity involving stablecoins issued by other persons, without obtaining written approval in advance… from the appropriate Federal banking agency”

This doesn’t leave a lot of wiggle room: “any” means “any,” and “any stablecoin-related commercial activity” is a broad brush when we consider that any user of any smart contract blockchain will be verifying stablecoin transactions to some extent.

Lest we think that we’re misreading the proposal, its own proponents publicly agree with this interpretation:

To this I respond with the Ethereum Rule of Statutory Construction. Ethereum has no central owners, forks regularly and is currently regulated as a commodity. If your law requires that kind of a system to get a bank charter, not only will the law fail to effectively control the blockchain, but the regulators tasked with enforcing it will have difficulty finding someone with standing to sign the application.

The STABLE Act says that blockchain users will be permitted to transact, if only they would first achieve the impossible. This is an absurd state of affairs, and a strong indication that, as-written, the STABLE Act would not make good law.

3. Would the STABLE Act actually make running a node illegal?

Of course, there is zero chance that the STABLE Act is going to become law during this Congress. However, coin people – and Ethereum people in particular – have been asking the question: what if it did?

The answer is not straightforward. Peter van Valkenburgh over at Coin Center says that the prohibition on “stablecoin-related commercial activity” hands-down applies to node operators or anyone running the Ethereum client:

The logical consequence of the bill is that if any person is running software that validates Dai or other stablecoin smart contracts they will, themselves, be violating the law unless they are a chartered bank.

Though a reasonable conclusion, and on balance likely the correct one, it is not a forgone one, since the current language of the STABLE Act – being both overbroad and imprecise – leaves plenty of scope to poke holes in it. For example, it is not clear whether operating a node gratis (as many full nodes do) counts as “stablecoin-related commercial activity” if done on a non-commercial basis. Seeing as nodes are not ordinarily compensated it is certainly conceivable that there will be situations where node operation is sub-commercial if not non-commercial. Research would be required to find the answer here.

Additionally, it is not immediately apparent to me that running a full node is “stablecoin-related commercial activity” given that many if not most cryptocurrency transactions don’t have a stablecoin component. The statute’s lack of specificity narrows its application. If it said “any commercial activity related to, or any communication which may facilitate, any stablecoin transaction” that would be one thing. But that’s not what the language says. Properly understood, Ethereum is a rail, and just as we don’t refer to the act of driving a car as being “jogging related” just because cars and joggers use the same roads, we shouldn’t refer to the act of running a node as “stablecoin related” just because stablecoin transactions are broadcast alongside all other transactions via devp2p. Again, more research would be needed to see whether a court would agree with that interpretation.

There is another matter, in that in my view the operator of a cryptocurrency node is capable of being a provider of an interactive computer service under a legislative provision known as Section 230 of the Communications Decency Act (47 U.S. Code 230(c)(1)). This law states in relevant part that providers of interactive computer services, properly “information content providers,” are not treated as the publisher or speaker of, and therefore have no liability for, content which third parties submit to their servers, subject to certain limited exceptions.

Coin Center has called, in the past, for a node operation safe harbor similar to Section 230. Since the blockchain is really little more than a published, cryptographically verifiable feed of transactions that have been authorized by the Bitcoin network (and other blockchains, the same for their corresponding native assets), I tend to think that it’s more likely than not that a blockchain application falls within the confines of Section 230. But I freely admit that whether a node operator qualifies for the exemption is an open question. The law defines an “information content provider” as a “system… provider that provides or enables computer access by multiple users to a computer server.” I’d have to do a little research to see if there are any precedents dealing with the question of what a “server” constitutes for this purpose, but at least at first glance there is an argument to be made that operating a full node on a blockchain, which in its essence is a distributed timestamp server, could qualify, at least insofar as it pertains to third party financial communications that are being relayed by that node.

Section 230, however, only confers immunity from state criminal law and civil actions. It has no effect on federal criminal law, and there are criminal sanctions in the FDI Act (see e.g. 12 U.S. Code § 1818(g)). To figure out whether a full node could be captured within the STABLE Act the first thing to do is read the statute and try to determine whether providing peer to peer network access services counts as “stablecoin-related commercial activity.” If not, then node operation is not captured by the statute and the analysis ends. If so, the next questions would be (a) whether node operators were covered by Section 230(c)(1) and (b) whether the STABLE Act impliedly narrowed or repealed Section 230’s application to node operators insofar as the nodes processed transactions related to stablecoins. After answering those questions the picture would be clearer.

In terms of the current federal picture, we know that providing network access services is not equivalent to money transmission, that FinCEN doesn’t consider node operation to be money transmission, and that for most federal crimes accessory liability requires heightened knowledge and participation of the kind we don’t usually ascribe to node operators. This is perhaps why, to the best of my knowledge, there have been no prosecutions for running a Bitcoin full node to date. 

Nor should there be, now or ever, and if American leadership in the crypto arena is to continue it might be worthwhile, given how wrongheaded the STABLE Act is – not on stablecoin licensure, as I think stablecoins are properly the subject of regulation, but on blockchain node licensure – to revisit Coin Center’s proposal for a blockchain node safe harbor that clearly and unambiguously accords blockchain nodes the status enjoyed by other online publishers.

Section 230’s most learned interpreter, Jeff Kosseff, titled his book on the provision “the twenty-six words that created the Internet.” I note for the record that none of Facebook, Google, Twitter or YouTube were founded in Europe. If America is to lead the decentralized Internet we would do well to look to Section 230 as an example of how to do Internet regulation the right way.

Republicans: stop begging the government to protect you from internet censorship

Lately there has been a veritable litany of stupidity emanating from Republicans and “conservatives” of all stripes who claim they are being censored by mainstream “big tech” companies like Twitter and Facebook.

Global social media companies face an almost impossible task with their moderation practices. In most cases, these companies have global operations. As a consequence, the companies tend to adhere to global standards.

Speaking as one admitted to practice law in the U.S. and in Europe, the United States has the most expansive speech laws in the entire world. Speech which is protected in the United States is, very often, illegal overseas. As a consequence, tech companies have had to adapt to overseas legal norms. In terms of crafting a company-wide policy which can be uniformly applied across its business, this usually means that they adhere to the lowest common denominator.

Facebook, e.g., has had to cave to requests to censor seditious libel from Pakistan. See e.g.

Upon a routine review of our actions, we determined that we restricted access to 17 items in error during this period, including 11 items that should have been deleted for violating the Community Standards and six items on which we should have taken no action. We have corrected these mistakes.

Twitter, for its part, has banned “offensive” accounts in Germany and the UK, and deleted Tweets at the behest of the French government:

Meanwhile, NPR’s Eleanor Beardsley reports from Paris that Twitter “has agreed to remove French-language anti-Semitic tweets that have flooded the micro-blogging site in recent days. The union of French Jewish students had said it would seek an injunction against Twitter if it did not remove offensive, anti-Jewish messages and photos that have proliferated since October 10.”

Apple, similarly, has restricted access to apps that are used by pro-democracy protestors in Hong Kong, including that of online news company Quartz:

News organization Quartz tells The Verge that Apple has removed its mobile app from the Chinese version of its App Store after complaints from the Chinese government. According to Quartz, this is due to the publication’s ongoing coverage of the Hong Kong protests, and the company says its entire website has also been blocked from being accessed in mainland China.

All of this speech – no matter how distasteful or offensive – is legal in the United States. So, Republicans, take note – this is not (necessarily) about you. Facebook and Twitter take sides all over the world. These companies censor anyone, anywhere. They have to do this by virtue of the fact that they have global operations and local staff.

Back at home, there is another dimension that these companies must consider: although the American government is legally barred from interfering with speech, and American litigants are precluded from suing companies for the speech expressed by their users, American activist groups which have significant influence in Silicon Valley, which shall remain nameless for the purposes of this exercise but which, suffice it to say, have been very successful in ensuring that individuals and companies on the right are denied access to mainstream technology platforms, exert considerable pressure on these companies in furtherance of their agendas. And companies respond. By way of example, the group Sleeping Giants successfully mounted an ad boycott campaign against Breitbart News; companies like Check My Ads offer services to companies who don’t want ad budgets being funnelled to groups and organizations they do not support.

When Twitter or Facebook bans a user or adopts a content policy as a result of public criticism – for example, Facebook’s platformwide ban on content pertaining to a particularly popular “conspiracy theory” which will also go nameless in this post – they are responding to public pressure, and revenue pressure, much in the same way that any other company would.

Wargaming the commercial response to a legislative amendment of Section 230

In the time it takes to repeal Section 230 or win an antitrust suit the GOP could lose three Presidential elections. If the President and everyone else opened accounts on newer technology platforms that expressly place free speech front and center in their moderation policies tomorrow, he would kneecap Twitter and Facebook forever.

There are three potential pathways for the future of this statute.

The first, most often tweeted by the President of the United States, is the repeal of Section 230.

This is, in my view, the least realistic and would likely result in the end of social media as a business. This is not an exaggeration; if platforms became liable for the speech of their speakers (as platforms are publishers in the plain and ordinary meaning of the word) any tortious speech by any person would expose the platform to liability as a principal. This is currently the situation in the UK which, I note, has a notice-and-takedown procedure similar to the U.S.’ DMCA notice-and-takedown procedure in Section 5 of that country’s Defamation Act 2013. The provision reads:

It is a defence for the operator to show that it was not the operator who posted the statement on the website.

(3)The defence is defeated if the claimant shows that—

(a)it was not possible for the claimant to identify the person who posted the statement,

(b)the claimant gave the operator a notice of complaint in relation to the statement, and

(c)the operator failed to respond to the notice of complaint in accordance with any provision contained in regulations.

Failure to respond to a notice of complaint in one of the prescribed methods results in the website operator becoming liable for defamation under UK law. I note the UK is not the home of any large social media companies and suggest for the purposes of this discussion that the absence of a Section 230-style safe harbor may be part of the reason.

A second pathway involves some kind of statutory reform. There are various proposals. Let’s just play it out to see what hurdles those proposals have to overcome in order to achieve the result that the whiny Republicans want.

Current situation is as follows: Twitter censors Alice. Alice sues Twitter. Twitter moves to dismiss on Section 230(c)(2). Case ends.

Now let’s say Section 230 is repealed: Twitter updates terms and conditions. Alice grants Twitter right to censor her. Twitter censors Alice. Alice sues Twitter. Twitter files motion to dismiss. Alice loses. Case ends.

Now let’s say Section 230 is reformed: Senator Josh Hawley passes reform bill that says Twitter must be “neutral,” whatever that means. Twitter updates terms stating that users consent to its non-neutrality. Twitter censors Alice. Alice sues Twitter.

Twitter moves to dismiss on the basis that “Hawley’s Law” is an unconstitutional prior restraint, a content based restriction on speech that is subject to strict scrutiny (default result: government loses) because it prevents Twitter from publishing what it chooses to publish on its publishing platform.

Yes, Twitter is a publisher. No, it doesn’t matter one whit for the purposes of Section 230.

In the alternative Twitter points to the updated contract.

Twitter might win on the constitutional claim. In terms of the breach of contract claim, no proposals for Section 230 that I have seen prevent the parties from contracting out or (in the alternative) indemnifying the website for liability arising from user speech (so e.g. if Joe Bloggs tweets a defamatory statement, and Twitter is sued, Twitter would then be able to recover its costs in defending the action from Joe Bloggs).

Under this scenario, where there were any possibility of Twitter becoming liable for user speech, Twitter would be very unlikely to permit users to create anonymous accounts, because it would want users to know (a) that it knows who they are and (b) that it knows where to find them in the event that Twitter finds itself on the receiving end of a defamation claim arising from that user’s speech.

Anonymity, lest we forget, is among the core rights protected by the First Amendment – see the EFF’s victory In Re: DMCA Complaint to Reddit.

This is the point where legally savvy Internet commenters are keen to remind us the First Amendment doesn’t bind Twitter. It binds the state. In my view it likely binds the American state in such a manner as to prohibit the American state’s interference with Twitter’s moderation rules, although if Section 230 “reform” proposals eventually led to that it would be an issue of first impression for the courts. But in terms of the extent to which web services’ moderation policies are coextensive with the First Amendment right, 230 reform – making platforms liable for speech – creates commercial and legal pressures on companies like Twitter which incentivize them to restrain the scope of permitted expression on their platforms, instead of expanding it.

The third pathway is to leave Section 230 alone.

Before proceeding with a reform proposal, the key question for anyone who would pass a law and believes in free speech should be this:

Does the proposal expand the scope of free expression on the Internet, or does it restrict it?

On balance, 230 reform that withdraws protections for technology companies probably winds up restricting free expression more than it expands it, because it will create commercial pressures to eliminate anonymous speech and expand the scope of moderation to remove more speech, speech which is less objectionable than that which is currently removed.

It also will act to increase compliance burdens, much as the European Union’s passage of the GDPR did, which will have the effect of “pulling up the ladder” behind existing Web behemoths to the detriment of smaller, newer competitors with moderation and content display policies more in line with the First and Fourth Amendment’s intentions (companies like Bitchute, LBRY, Minds, Gab, Parler, DuckDuckGo and Protonmail immediately come to mind as the credible challengers to the existing social, search and e-mail stacks).

“Section 230 reform” – government intervention – will be stymied by contract and First Amendment lawsuits. It will not make the Internet safer. It will not promote competition. It will not make the Internet freer. Reform proposals that fail to understand the commercial and foreign legal pressures that have led these companies to adopt the policies that they have are doomed to failure.

What is not doomed to failure – the one thing which has always worked when there is market demand for a service – is competition and innovation. That’s how we do things in America.

Facebook felled MySpace. One day, sooner or later, another company will take down Facebook. The best thing you can all do if you want to promote Internet freedom is to stop using Big Tech’s services and to use the services of American companies whose values align with your own.

Image licensed under the Pixabay License. Free for commercial use, no attribution required.