The debate on whether Britain should leave the EU has largely ignored a factor of huge importance to the tech industry – network effects.
So I’ve written an article on what Brexit means for the tech industry from the viewpoint of information economics.
Network effects mean that the value of a transaction often depends on how many other people make similar transactions. They make our industry prone to monopolies. They ensure that the UK, with 1% of world population and 3% of GDP, has little influence on tech markets, which are mostly global. But the EU has real clout; Silicon Valley sees it as the world privacy regulator, as Washington doesn’t care and no-one else is big enough to matter. And most of the other regulations that IT people find annoying, from IP laws to export controls, are also embedded in international treaties. We can’t just tear up the annoying “red tape”, as the Brexit crowd suggest.
Brexit would not only diminish our influence on the laws that affect tech – many of which reflect negative network effects. It would make startups more expensive, so UK firms would have a harder time exploiting the positive network effects that are often the key to success. And it would damage the successful tech clusters we do have in Cambridge and in London.
Tech clusters need a number of things to thrive; and it’s not just technical network effects that matter, but labour-market network effects too. And there’s quite a lot of research on that. As good engineers can earn good money and live wherever we want, we congregate in places that are good places to live. They are always open and liberal places, where it’s fine to be from an ethnic minority, or an immigrant, or gay. What would the world’s best and brightest engineers think about moving to Britain if we vote for xenophobia on Thursday?
The article is in Computer Weekly, and there’s also a pdf here.
I’m liveblogging the Workshop on Security and Human Behaviour which is being held in Harvard. The programme is here. For background, see the liveblogs for SHB 2008-15 which are linked here and here. Blog posts summarising the talks at the workshop sessions will appear as followups below.
We recently reported that the Commissioner of the Met, Sir Bernard Hogan-Howe, said that banks should not refund fraud victims as this would just make people careless with their passwords and antivirus. The banks’ desire to blame fraud victims if they can, to avoid refunding them, is rational enough, but for a police chief to support them was disgraceful. Thirty years ago, a chief constable might have said that rape victims had themselves to blame for wearing nice clothes; if he were to say that nowadays, he’d be sacked. Hogan-Howe’s view of bank fraud is just as uninformed, and just as offensive to victims.
Our spooky friends at Cheltenham have joined the party. The Register reports a story in the Financial Times (behind a paywall) which says GCHQ believes that “companies must do more to try and encourage their customers to improve their cyber security standards. Customers using outdated software – sometimes riddled with vulnerabilities that hackers can exploit – are a weak link in the UK’s cyber defences.” There is no mention of the banks’ own outdated technology, or of GCHQ’s role in keeping consumer software vulnerable.
The elegant scribblers at the Financial Times are under the impression that “At present, banks routinely cover the cost of fraud, regardless of blame.” So they clearly are not regular readers of Light Blue Touchpaper.
The spooks are slightly more cautious; according to the FT, GCHQ “has told the private sector it will not take responsibility for regulatory failings”. I’m sure the banks will heave a big sigh of relief that their cosy relationship with the police, the ombudsman and the FCA will not be disturbed.
We will have to change our security-economics teaching material so we don’t just talk about the case where “Alice guards a system and Bob pays the costs of failure”, but also this new case where “Alice guards a system, and bribes the government to compel Bob to pay the costs of failure.” Now we know how Hogan-Howe is paid off; the banks pay for his Dedicated Card and Payment Crime Unit. But how are they paying off GCHQ, and what else are they getting as part of the deal?
Commissioner Hogan-Howe of the Met said on Thursday that the banks should not refund fraud victims because it “rewards” them for being lax about internet security. This was too much to pass up, so I wrote a letter to the editor of the Times, which has just been published. As the Times is behind a paywall, here is the text.
Sir, Sir Bernard Hogan-Howe argues that banks should not refund online fraud victims as this would make people careless with their passwords and anti-virus software (p1, March 24, and letters Mar 25 & 26). This is called secondary victimisation. Thirty years ago, a chief constable might have said that rape victims had themselves to blame for wearing nice clothes; if he were to say that nowadays, he’d be sacked. Hogan-Howe’s view of bank fraud is just as uninformed, and just as offensive to victims.
About 5 percent of computers running Windows are infected with malware, and common bank fraud malware such as Zeus lets the fraudster redirect transactions. You think you’re paying £150 to your electricity bill, while the malware is actually sending £9000 to Russia. The average person is helpless against this; everything seems normal, and antivirus products usually only detect it afterwards.
Much of the blame lies with the banks, who let the users of potentially infected computers make large payments instantly, rather than after a day or two, as used to be the case. They take this risk because regulators let them dump much of the cost of the resulting fraud on customers.
The elephant in the room is that the Met has been claiming for years that property crime is falling, when in fact it’s just going online like everything else. We’re now starting to get better crime figures; it’s time we got better policing, and better bank regulation too.
Ross Anderson FRS FREng
Professor of Security Engineering
University of Cambridge
I will be trying to liveblog Financial Cryptography 2016, which is the twentieth anniversary of the conference. The opening keynote was by David Chaum, who invented digital cash over thirty years ago. From then until the first FC people believed that cryptography could enable commerce and also protect privacy; since then pessimism has slowly set in, and sometimes it seems that although we’re still fighting tactical battles, we’ve lost the war. Since Snowden people have little faith in online privacy, and now we see Tim Cook in a position to decide which seventy phones to open. Is there a way to fight back against a global adversary whose policy is “full take”, and where traffic data can be taken with no legal restraint whatsoever? That is now the threat model for designers of anonymity systems. He argues that in addition to a large anonymity set, a future social media system will need a fixed set of servers in order to keep end-to-end latency within what chat users expect. As with DNS we should have servers operated by (say ten) different principals; unlike in that case we don’t want to have most of the independent parties financed by the US government. The root servers could be implemented as unattended seismic observatories, as reported by Simmons in the arms control context; such devices are fairly easy to tamper-proof.
The crypto problem is how to do multi-jurisdiction message processing that protects not just content but also metadata. Systems like Tor cost latency, while multi-party computation costs a lot of cycles. His new design, PrivaTegrity, takes low-latency crypto building blocks then layers on top of them transaction protocols with large anonymity sets. The key component is c-Mix, whose spec up as an eprint here. There’s a precomputation using homomorphic encryption to set up paths and keys; in real-time operations each participating phone has a shared secret with each mix server so things can run at chat speed. A PrivaTegrity message is four c-Mix batches that use the same permutation. Message models supported include not just chat but publishing short anonymous messages, providing an untraceable return address so people can contact you anonymously, group chat, and limiting sybils by preventing more than one pseudonym being used. (There are enduring pseudonyms with valuable credentials.) It can handle large payloads using private information retrieval, and also do pseudonymous digital transactions with a latency of two seconds rather than the hour or so that bitcoin takes. The anonymous payment system has the property that the payer has proof of what he paid to whom, while the recipient has no proof of who paid him; that’s exactly what corrupt officials, money launderers and the like don’t want, but exactly what we do want from the viewpoint of consumer protection. He sees PrivaTegrity as the foundation of a “polyculture” of secure computing from multiple vendors that could be outside the control of governments once more. In questions, Adi Shamir questioned whether such an ecosystem was consistent with the reality of pervasive software vulnerabilities, regardless of the strength of the cryptography.
I will try to liveblog later sessions as followups to this post.
This morning at 0930 the Joint Committee on the IP Bill is launching its report. As one of the witnesses who appeared before it, I got an embargoed copy yesterday.
The report s deeply disappointing; even that of the Intelligence and Security Committee (whom we tended to dismiss as government catspaws) is more vigorous. The MPs and peers on the Joint Committee have given the spooks all they wanted, while recommending tweaks and polishes here and there to some of the more obvious hooks and sharp edges.
The committee supports comms data retention, despite acknowledging that multiple courts have found this contrary to EU and human-rights law, and the fact that there are cases in the pipeline. It supports extending retention from big telcos offering a public service to private operators and even coffee shops. It support greatly extending comms data to ICRs; although it does call for more clarity on the definition, it give the Home Office lots of wriggle room by saying that a clear definition is hard if you want to catch all the things that bad people might do in the future. (Presumably a coffee shop served with an ICR order will have no choice but to install a government-approved black box. or just pipe everything to Cheltenham.) It welcomes the government decision to build and operate a request filter – essentially the comms database for which the Home Office has been trying to get parliamentary approval since the days of Jacqui Smith (and which Snowden told us they just built anyway). It comes up with the rather startling justification that this will help privacy as the police may have access to less stuff (though of course the spooks, including our 5eyes partners and others, will have more). It wants end-to-end encrypted stuff to be made available unless it’s “not practicable to do so”, which presumably means that the Home Secretary can order Apple to add her public key quietly to your keyring to get at your Facetime video chats. That has been a key goal of the FBI in Crypto War 2; a Home Office witness openly acknowledged it.
The comparison with the USA is stark. There, all three branches of government realised they’d gone too far after Snowden. President Obama set up the NSA review group, and implemented most of its recommendations by executive order; the judiciary made changes to the procedures of the FISA Court; and Congress failed to renew the data retention provisions in the Patriot Act (aided by the judiciary). Yet here in Britain the response is just to take Henry VIII powers to legalise all the illegal things that GCHQ had been up to, and hope that the European courts won’t strike the law down yet again.
People concerned for freedom and privacy will just have to hope the contrary. The net effect of the minor amendments proposed by the joint committee will be to make it even harder to get any meaningful amendments as the Bill makes its way through Parliament, and we’ll end up having to rely on the European courts to trim it back.
For more, see Scrambling for Safety, a conference we held last month in London on the bill and whose video is now online, and last week’s Cambridge symposium for a more detailed analysis.
I’m in a symposium at Churchill College on the Investigatory Powers Bill. It’s organised by John Naughton and I’ll be speaking later on equipment interference, a topic on which I wrote an expert report for the recent IP Tribunal case brought by Privacy International. Meanwhile I’ll try to liveblog the event in followups to this post.
Your browser contains a few hundred root certificates. Many of them were put there by governments; two (Verisign and Comodo) are there because so many merchants trust them that they’ve become ‘too big to fail’. This is a bit like where people buy the platform with the most software – a pattern of behaviour that let IBM and then Microsoft dominate our industry in turn. But this is not how trust should work; it leads to many failures, some of them invisible.
What’s missing is a mechanism where trust derives from users, rather than from vendors, merchants or states. After all, the power of a religion stems from the people who believe in it, not from the government. Entities with godlike powers that are foisted on us by others and can work silently against us are not gods, but demons. What can we do to exorcise them?
Do You Believe in Tinker Bell? The Social Externalities of Trust explores how we can crowdsource trust. Tor bridges help censorship victims access the Internet freely, and there are not enough of them. We want to motivate lots of people to provide them, and the best providers are simply those who help the most victims. So trust should flow from the support of the users, and it should be hard for powerful third parties to pervert. Perhaps a useful mascot is Tinker Bell, the fairy in Peter Pan, whose power waxes and wanes with the number of children who believe in her.
Today I’m at the tenth Scrambling for Safety which is being held at Kings College London. Sorry, all the tickets are sold out, but there is a video feed available from the Open Rights Group website.
This afternoon at 4.30 I have been invited to give evidence in Parliament to the Joint Select Committee on the Investigatory Powers Bill.
This follows evidence I gave on the technical aspects of the bill to the Science and Technology Committee on November 10th; see video and documents. Of particular interest may be comments by my Cambridge colleague Richard Clayton; an analysis by my UCL colleague George Danezis; the ORG wiki; and finally the text of the bill itself.
While the USA has reacted to the Snowden revelations by restraining the NSA in various ways, the UK reaction appears to be the opposite. Do we really want to follow countries like China, Russia and Kazakhstan, and take the risk that we’ll tip countries like Brazil and India into following our lead? If the Internet fragments into national islands, that will not only do grave harm to the world economy, but make life a lot harder for GCHQ too.