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This is a thoughtful treatment of some of the issues. I worked on digital identity in govt, and sovereign identity is considered seriously there. The concepts i

This is a thoughtful treatment of some of the issues. I worked on digital identity in govt, and sovereign identity is considered seriously there. The concepts in the article force the question of what things like security, dystopian, and scalable mean, among others. If I were to articulate the gap in perspectives, it would be that it is between the engineering view of solving problems (e.g. Vitalik's "soul bound tokens") and managing them - that is, to extract value from a dynamic, in the case of existing legacy paper/card identity schemes today. Arguably, in a society, all value is created from risk, where someone takes on the risk of an outcome and someone pays them to hold it while reaping the benefits of whatever thing has exposure to the failure. It's imperfect on purpose, as it allows for flexibilty and non-binary failure modes, and it lets people manage (or extract value) from the shifting risk, where the result is an Economy. When you just solve a problem - let's say we had these perfect soul based tokens, where there was no ambiguity or repudiation for anything, you are depriving people of the very thing we have evolved to be good at, which is judge and collaborate to trade in risks. It's not desirable precisely because instinctually people get they don't want to become solved problems and known quantities. Digital identity is a very nuanced power struggle going on in the background within government and industry, as identity is the substrate to a certain type of economy, and who wouldn't want to be the controller of that? The better case is having ephemeral identities and just price in insurance to transactions, much like interest rates on credit, but less centralized, and with more exposure to volatility of real life - just like other crypto solutions. The people writing about this stuff in the crypto community are still sounding out some things for the first time, but just because they are doing so doesn't mean they are the first to consider them. When I worked on an actual govt digital identity and currency product, I pissed off the execs because I said their design didn't pass "the hookers and blow test," which is that if you can't use the payment and identity scheme for grey market transactions, nobody is going to adopt it. Not because they are vice ridden manaics, but because the human animal knows when it is in captivity and it will find ways to resist it. This is the same reason that central bank digital currencies are going to be an economically inferior good, and create dangerous black markets that produce the dystopian corruption that idealists seem to be trying to avoid, as 1/3 of people just aren't going to trust them. Sure, you can impose the schemes, but if you have ever spent time in an authoritarian regime, you know that the culture is completely debased and anything-goes behind closed doors becase the rules themselves are arbitrary and selectively enforced, because the arbitrariness creates a sense of illigitimacy where there is nothing to trust or believe. The stupidity of technocracies is illigitimate, and it breeds contempt and corruption. This may seem meta compared to the implementation details of some nerdy key management protocol, but I'd argue if you haven't thought these other parts through, crypto really is just some naive kids building a bike shed to fill with shaved yaks and thinking they're reinventing democracy and freedom.

skybrian 4y ago
I don't understand what you mean by "all value comes from risk." Could you give examples? I don't understand how, say, the value of some food you buy at a grocery store comes from risk. Also, you say that "instinctually people get they don't want to become solved problems and known quantities," but at least a large subset of the population wants to be famous. And it seems like being trusted by people you know has its benefits too?
- ev1 4y ago
  The way I think of it, risk of accident of the delivery truck, the risk of the farm getting their crops ruined, risk of insolvency or net x day term payments, risk of loans taken out to cover patented seeds, risk of expired food. If nobody wanted to take the risk to plant each time given the potential ROI, you wouldn't get grocery items? (I'd consider this a random example https://www.callifd.com/uploads/1/3/0/7/130789654/chili_pepper_shortage_2022.pdf https://www.callifd.com/uploads/1/3/0/7/130789654/chili_pepp...)
  - skybrian 4y ago
    Okay, but if you reduced or eliminated one of the risks, doesn’t the food still have the same value as before? It seems like the risk is something like a cost, to be optimized away if you can without reducing value. And it isn’t the only cost.
jirf_dev 4y ago
This is probably one of the most interesting comments I’ve ever read. Can you share more details about the digital identity and currency product you were working on and for which government was it intended for?
- motohagiography 4y ago
  Thx. I can be candid because I'm not talking about any institution or client in particular, but there has been more than one and less than six I've worked on directly as a security architect over the last 15-20 years. The details of the identity or currency aren't really that interesting, as if you understand federation protocols and maybe some standard cryptogrphic/security protocols with tokenization, the implementations are compositions of those. However, what I can say is that engineers are not lawyers, so we tend not to understand the regulatory systems in place, and the lawyers you would need to untangle this stuff aren't technologists. That's changing post-covid, where western governments in general are taking a "so sue me," approach to imposing technology and mandates over top of privacy norms and regulations, and there is a young generation of lawyers who grew up online (and with cryptocurrency, bitcoin is 11 years old now) who can pick up things like protocols. The vaccine passport system and covax was quite a gambit as it was an international digital id scheme intended to subsume other efforts that had stronger technical requirements. The central bank digital currency (CBDC) stuff we're hearing about now is an artifact of a few related factors, but what CBDCs are really going to look like in my opinion is the CUC in cuba, or a kind of government/public sector scrip, or the peso in argentina or venezuela that has an official dollar peg and price controls, but there's a huge grey market for USD. Reality is from a state perspective, power is zero sum and human suffering is just managable, and the technology changes of the last two decades have sidelined government as an authority, so they're all trying to reassert themselves. It's going to look clumsy and dumb and it will destroy a lot of wealth and value, but they don't care so long as they think they have secured the reins. Of course, nobody ever secures the reins so the demand for authority is infinite, but that doesn't stop anyone from trying. Economists, politicians and so-called experts who tell you they can manage an economy don't tell you the part where they run it in to the ground and rule over the ashes, as once you give them secured control, it doesn't matter how well it works. Their promises and arguments are to persuade you to give in to them, because their logic reduces to, if we have power, what do we need your consent and approval for? If I were hedging, I would figure out what the grey market commodities will be in response to a CBDC that doesn't pass the H&B test I described above. Precedents I would reference would be times in history where govts declare a "bank holiday" and replace bank deposits with treasury bills, or seize deposits of FX and reserve currencies and "buy" them from citizens with the new pegged currency with greater national controls. The scenario I speculate about is NZ/AU/CAN use a long weekend or "banking system outage," to replace citizen cash deposits with the new CBDC with the flick of a switch and the stroke of a pen, similar to India banning certain cash denominations and taking high denomination bills out of circulation. Assets that facilitate capital flight out of these places will be at a premium, imo. (good news for the art, wine, jewelry, collectables, precious metals, equine, super cars, and other portable alternative asset markets, imo. The big auction houses will probably do well this year.) Dark stuff, but you spend enough time in security, and everything is within a degree or two of these historic sea changes.

skybrian 4y ago

I don't understand what you mean by "all value comes from risk." Could you give examples? I don't understand how, say, the value of some food you buy at a grocery store comes from risk. Also, you say that "instinctually people get they don't want to become solved problems and known quantities," but at least a large subset of the population wants to be famous. And it seems like being trusted by people you know has its benefits too?

ev1 4y ago
The way I think of it, risk of accident of the delivery truck, the risk of the farm getting their crops ruined, risk of insolvency or net x day term payments, risk of loans taken out to cover patented seeds, risk of expired food. If nobody wanted to take the risk to plant each time given the potential ROI, you wouldn't get grocery items? (I'd consider this a random example https://www.callifd.com/uploads/1/3/0/7/130789654/chili_pepper_shortage_2022.pdf https://www.callifd.com/uploads/1/3/0/7/130789654/chili_pepp...)
- skybrian 4y ago
  Okay, but if you reduced or eliminated one of the risks, doesn’t the food still have the same value as before? It seems like the risk is something like a cost, to be optimized away if you can without reducing value. And it isn’t the only cost.

jirf_dev 4y ago

This is probably one of the most interesting comments I’ve ever read. Can you share more details about the digital identity and currency product you were working on and for which government was it intended for?

motohagiography 4y ago
Thx. I can be candid because I'm not talking about any institution or client in particular, but there has been more than one and less than six I've worked on directly as a security architect over the last 15-20 years. The details of the identity or currency aren't really that interesting, as if you understand federation protocols and maybe some standard cryptogrphic/security protocols with tokenization, the implementations are compositions of those. However, what I can say is that engineers are not lawyers, so we tend not to understand the regulatory systems in place, and the lawyers you would need to untangle this stuff aren't technologists. That's changing post-covid, where western governments in general are taking a "so sue me," approach to imposing technology and mandates over top of privacy norms and regulations, and there is a young generation of lawyers who grew up online (and with cryptocurrency, bitcoin is 11 years old now) who can pick up things like protocols. The vaccine passport system and covax was quite a gambit as it was an international digital id scheme intended to subsume other efforts that had stronger technical requirements. The central bank digital currency (CBDC) stuff we're hearing about now is an artifact of a few related factors, but what CBDCs are really going to look like in my opinion is the CUC in cuba, or a kind of government/public sector scrip, or the peso in argentina or venezuela that has an official dollar peg and price controls, but there's a huge grey market for USD. Reality is from a state perspective, power is zero sum and human suffering is just managable, and the technology changes of the last two decades have sidelined government as an authority, so they're all trying to reassert themselves. It's going to look clumsy and dumb and it will destroy a lot of wealth and value, but they don't care so long as they think they have secured the reins. Of course, nobody ever secures the reins so the demand for authority is infinite, but that doesn't stop anyone from trying. Economists, politicians and so-called experts who tell you they can manage an economy don't tell you the part where they run it in to the ground and rule over the ashes, as once you give them secured control, it doesn't matter how well it works. Their promises and arguments are to persuade you to give in to them, because their logic reduces to, if we have power, what do we need your consent and approval for? If I were hedging, I would figure out what the grey market commodities will be in response to a CBDC that doesn't pass the H&B test I described above. Precedents I would reference would be times in history where govts declare a "bank holiday" and replace bank deposits with treasury bills, or seize deposits of FX and reserve currencies and "buy" them from citizens with the new pegged currency with greater national controls. The scenario I speculate about is NZ/AU/CAN use a long weekend or "banking system outage," to replace citizen cash deposits with the new CBDC with the flick of a switch and the stroke of a pen, similar to India banning certain cash denominations and taking high denomination bills out of circulation. Assets that facilitate capital flight out of these places will be at a premium, imo. (good news for the art, wine, jewelry, collectables, precious metals, equine, super cars, and other portable alternative asset markets, imo. The big auction houses will probably do well this year.) Dark stuff, but you spend enough time in security, and everything is within a degree or two of these historic sea changes.