From: tcmay@got.net (Timothy C. May)
Date: Thu, 15 Aug 1996 06:05:44 +0800
To: cypherpunks@toad.com
Subject: Re: Anguilla - A DataHaven?
Message-ID: <ae374e570c02100454e7@[205.199.118.202]>
MIME-Version: 1.0
Content-Type: text/plain



Vince Cate has written several things in the past couple of days about the
situation in Anguilla; actually, I think we've learned more about the
operation of his service in the last few days than we have in the past year
or so. Some  instructive points, and some worries.

This message contains:

* discussion of the situation Vince describes

* what I surmise to be some of the behind the scenes realpolitik

* the role of physical vs. cyberspace data havens


Rather than respond point by point to one of Vince's messages, I'll first
make a few general points, free-form:

1. As I have said, I admire what Vince has done. Evolutionary learning
can't happen without experiments and tests, so his experiment is important.

2. If Vince ends up moving in a direction different from that of operating
a traditional (!) data haven, I will not be very surprised. Were I in his
position, I might well do the same thing. (Lots of reasons, issues....)\

3. Vince seems to be a in a somewhat precarious position, awaiting renewal
of a one-year work permit. In any country, this is a shaky basis for
continuing a project. I certainly don't know what his relationship is to
the local authorities, but I sure know I'd feel constrained if I were up
for renewal like this. (Consider how the U.S. refuses to renew visas for
"undesirables," including writers whose writings the establishment
dislikes, AIDS activists, anarchists (!!!), etc.)

4. The small size of Anguilla--I surmise and feel--works against operating
the kind of "data haven" many of us feel could exist. Given that data
havens will have all sorts of unusual, undesirable, and subversive
materials, this "small community" will probably react unfavorably to any
publicity generated. (And it's in the nature of some of these customers to
"advertise" themselves flamboyantly--unlike Swiss banking--so as to
generate customers...this pretty much guarantees that there will be stories
like "Anguilla--New Source for Neo-Nazi Material!")

5. In the U.S., there are 250 million people, extensive support networks
for protecting free speech (much as we like to focus on the suppression
cases), and a legal system that really does make it pretty hard for a
bureaucrat or even the President to pick up a phone and have a business he
doesn't like shut down. I surmise, given the size of Anguilla and the
non-constitutional basis of its government, etc., that it _might_ be a lot
easier for a bureaucrat or the Governor-General, or whomever, to seriously
disrupt any business by a few phone calls. I don't know this for a fact,
but I suspect it to be true.

(The closest I've been to Anguilla is the Bahamas, and it is reported to be
seriously corrupt. I can't imagine a data haven surviving there if the
Ruling Families decided they didn't like it.)

6. So, what does this mean? It means, I believe, that small Carribbean
islands are likely to be poor choices for data havens. The more "civilized"
they are, ironically, the poorer a choice they are. (Think: pirate islands,
where "anything goes," so long as the right payoffs are made.)

7. Multidimensionality. With banking havens, there is basically only a
single degree of freedom to consider, at least insofar as deciding which
policies to consider. That is, over a period of many decades a banking
industry arises in some country (Switzerland, Austria, Lichtenstein, etc.),
with bankers, vaults, protocols for deposit and withdrawal, etc. And with
lots of fees to lubricate the whole system, provided payoffs to various
officials and royals, etc. Contrast this with a small data haven (a new
industry) in a small country, with operating margins that are razor-thin
(given the pricing structure Vince announced, I doubt Taxbomber and other
customers were paying enough to ensure a flow of payoffs to the Ruling
Families of Anguilla and the various officials that need to look the other
way).

8. That is, how will a data haven handle situations where diverse "threats"
and "abominations" are traced to the haven? Bomb information, pornography,
child porn, trade secrets, pyramid schemes, and so on? (Vince can of course
say to each of these: "Not what I want," but he may find that such ad hoc
declarations chase away most of his business...)

9. In summary, I applaud Vince's experiment. But I wouldn't call it a data
haven, based on what I've seen. Maybe a tax haven, but even this I have yet
to see much evidence for (Vince is not free to disclose who his customers
are, of course, so we are somewhat isolated.). I will say that if the only
goal is to avoid sales tax and/or income taxes, operating out of Anguilla
may not be ideal. After all, suppose there's a dispute (a la Taxbomber): is
one supposed to fly to Anguilla, hire local attorneys, and sue in the local
courts? The tens of thousands of dollars this would cost would likely swamp
any tax savings.....depends on a lot of factors, but I think you all see
the point.

Well, I've written enough. Vince asked me a few specific questions, so I'll
briefly answer:

>Tim, we would all be very happy if you were to locate a country that could
>be the site of the ideal datahaven, and finance a couple cypherpunks to
>setup there.  It would be a big help to our cause.  Could you do this?

Yes and no. Yes, if a good business opportunity presented itself, with
reasonable payback, good ideological basis, and without too many
entanglements (e.g., having to fly to Country A to check on my investment
too often). No, in that there is no "liquid market" in such investment
opportunities. That is, I can't just say "Send me your plans and how much
money you want." I might consider partly funding a venture by people
well-known to me, but, so far, no such possibilities have presented
themselves.

>In the mean time, people may have to exist in cyberspace (like
>www.taxbomber.com) without having a totally secure physical location.
>This is not the end of the world, or really even that painful.  If done
>right you could be down for only an hour - just long enough for
>nameservers to change.  Taxbomber is now setup to do it very fast next
>time, if the need ever comes.  Tim, I think you have even advocated this
>approach, not stressing the physical location, just the cyberspace
>location.  No?

Yes, I agree. I actually wrote my "Crypto Anarchist Manifesto" in mid-1988,
just a month or so before reading Sterling's "Islands in the Net," which
was focussed on physical data havens (he may've been the one to coin the
term, actually). My thinking was already heavily influenced by Vinge's
"True Names," and Chaum's work on untraceable digital cash (1985) was
well-known to me (for reasons I've written about elsewhere), so I tended to
view data havens as not being tied to physical communities where the local
potentates could revoke work permits, visas, travel permits, business
licenses, etc.

The Anguilla Experiment is certainly not changing this opinion.

(And Stephenson's "Snow Crash." in 1992, further popularized this vision of
cyberspace havens....I can't say he devised any new forms that some of us
hadn't already been thinking about, but he sure did make it a more vivid
vision through his evocative fiction.)

What the form of these "cyberspace data havens" might take is unclear.
Several pieces of technology are missing, just as they were missing four
years ago when one of the early list members contacted me to tell me how
easy it would be to set up a data haven with computers. (It wasn't easy
then, and it ain't easy now. The pieces that are missing are the
reifications of protocols we talk about a lot....mere encryption and
authentication are only the starting points, and look at how hard it's been
just to get _them_ deployed.)


--Tim May

Boycott "Big Brother Inside" software!
We got computers, we're tapping phone lines, we know that that ain't allowed.
---------:---------:---------:---------:---------:---------:---------:----
Timothy C. May              | Crypto Anarchy: encryption, digital money,
tcmay@got.net  408-728-0152 | anonymous networks, digital pseudonyms, zero
W.A.S.T.E.: Corralitos, CA  | knowledge, reputations, information markets,
Licensed Ontologist         | black markets, collapse of governments.
"National borders aren't even speed bumps on the information superhighway."