Bitcoin Redux explains what’s going wrong in the world of cryptocurrencies. The bitcoin exchanges are developing into a shadow banking system, which do not give their customers actual bitcoin but rather display a “balance” and allow them to transact with others. However if Alice sends Bob a bitcoin, and they’re both customers of the same exchange, it just adjusts their balances rather than doing anything on the blockchain. This is an e-money service, according to European law, but is the law enforced? Not where it matters. We’ve been looking at the details.
In March we wrote about how to trace stolen bitcoin, describing new tools that enable us to track crime proceeds on the blockchain with more precision than before. We waited for victims of bitcoin theft and fraud to come to us, so we could test our tools on real cases. However in most of them it was not clear that the victims had ever owned any bitcoin at all.
There are basically three ways you could try to hold a bitcoin. You could buy one from an exchange and get them to send it to a wallet you host yourself, but almost nobody does that.
You could buy one from an exchange and get the exchange to keep the keys for you, so that the asset was unique to you and they were only guarding it for you – just like when you buy gold and the bullion merchant then charges you a fee to guard your gold in his vault. If the merchant goes bust, you can turn up at the vault with your receipt and demand your gold back.
Or you could buy one from an exchange and have them owe you a bitcoin – just as when you put your money in the bank. The bank doesn’t have a stack of banknotes in the vault with your name on it; and if it goes bust you have to stand in line with the other creditors.
It seems that most people who buy bitcoin think that they’re operating under the gold merchant model, while most exchanges operate under the bank model. This raises a whole host of issues around solvency, liquidity, accounting practices, money laundering, risk and trust. The details matter, and the more we look at them, the worse it seems.
This paper will appear at the Workshop on the Economics of Information Security later this month. It contains eight recommendations for what governments should be doing to clean up this mess.
The FIPR 20th birthday seminar is taking place right now in the Cambridge Computer Lab, and the livestream is here.
I may or may not find time to liveblog the sessions in followups…
If you care about children’s rights, data protection or indeed about privacy in general, then I’d suggest you read this disturbing new report on what’s happening in Britain’s schools.
In an ideal world, schools should be actively preparing pupils to be empowered citizens in a digital world that is increasingly riddled with exploitative and coercive systems. Instead, the government is forcing schools to collect data that are then sold or given to firms that exploit it, with no meaningful consent. There is not even the normal right to request subject access to you can check whether the information about you is right and have it corrected if it’s wrong.
Yet the government has happily given the Daily Telegraph fully-identified pupil information so that it can do research, presumably on how private schools are better than government ones, or how grammar schools are better than comprehensives. You just could not make this up.
The detective work to uncover such abuses has been done by the NGO Defenddigitalme, who followed up some work we did a decade and more ago on the National Pupil Database in our Database State report and our earlier research on children’s databases. Defenddigitalme are campaigning for subject access rights, the deletion of nationality data, and a code of practice. Do read the report and if you think it’s outrageous, write to your MP and say so. Our elected representatives make a lot of noise about protecting children; time to call them on it.
On May 29th there will be a lively debate in Cambridge between people from NGOs and GCHQ, academia and Deepmind, the press and the Cabinet Office. Should governments be able to break the encryption on our phones? Are we entitled to any privacy for our health and social care records? And what can be done about fake news? If the Internet’s going to be censored, who do we trust to do it?
The occasion is the 20th birthday of the Foundation for Information Policy Research, which was launched on May 29th 1998 to campaign against what became the Regulation of Investigatory Powers Act. Tony Blair wanted to be able to treat all URLs as traffic data and collect everyone’s browsing history without a warrant; we fought back, and our “big browser” amendment defined traffic data to be only that part of the URL needed to identify the server. That set the boundary. Since then, FIPR has engaged in research and lobbying on export control, censorship, health privacy, electronic voting and much else.
After twenty years it’s time to take stock. It’s remarkable how little the debate has shifted despite everything moving online. The police and spooks still claim they need to break encryption but still can’t support that with real evidence. Health administrators still want to sell our medical records to drug companies without our consent. Governments still can’t get it together to police cybercrime, but want to censor the Internet for all sorts of other reasons. Laws around what can be said or sold online – around copyright, pornography and even election campaign funding – are still tussle spaces, only now the big beasts are Google and Facebook rather than the copyright lobby.
A historical perspective might perhaps be of some value in guiding future debates on policy. If you’d like to join in the discussion, book your free ticket here.
I’m at the world’s first conference on ethics in mathematics and will be speaking in half an hour. Here are my slides. I will be describing the course I teach to second-year computer scientists on Economics, Law and Ethics. Courses on ethics are mandatory for computer scientists while economics is mandatory for engineers; my innovation has been to combine them. My experience is that teaching them together adds real value. We can explain coherently why society needs rules via discussions of game theory, and then of network effects, asymmetric information and other market failures typical of the IT industry; we can then discuss the limitations of law and regulation; and this sets the stage for both principled and practical discussions of ethics.
Mark Zuckerberg tried to blame Cambridge University in his recent testimony before the US Senate, saying “We do need to understand whether there was something bad going on in Cambridge University overall, that will require a stronger action from us.”
The New Scientist invited me to write a rebuttal piece, and here it is.
Dr Kogan tried to get approval to use the data his company had collected from Facebook users in academic research. The psychology ethics committee refused permission, and when he appealed to the University Ethics Committee (declaration: I’m a member) this refusal was upheld. Although he’d got consent from the people who ran his app, the same could not be said of their Facebook “friends” from whom most of the data were collected.
The deceptive behaviour here has been by Facebook, which creates the illusion of privacy in order to get its users to share more data. There has been a lot of work on the economics and psychology of privacy over the past decade and we now understand the dynamics of advertising markets better than we used to.
One big question is the “privacy paradox”. Why do people say they care about privacy, yet behave otherwise? Part of the answer is about context; and part of it is about learning. Over time, more and more people are starting to pay attention to online privacy settings, despite attempts by Facebook and other online advertising firms to keep changing privacy settings to confuse people.
With luck, the Facebook scandal will be a “flashbulb moment” that will drive lots more people to start caring about their privacy online. It will certainly provide interesting new data to privacy researchers.
Making security sustainable is a piece I wrote for Communications of the ACM and has just appeared in the Privacy and security column of their March issue. Now that software is appearing in durable goods, such as cars and medical devices, that can kill us, software engineering will have to come of age.
The notion that software engineers are not responsible for things that go wrong will be laid to rest for good, and we will have to work out how to develop and maintain code that will go on working dependably for decades in environments that change and evolve. And as security becomes ever more about safety rather than just privacy, we will have sharper policy debates about surveillance, competition, and consumer protection.
Perhaps the biggest challenge will be durability. At present we have a hard time patching a phone that’s three years old. Yet the average age of a UK car at scrappage is about 14 years, and rising all the time; cars used to last 100,000 miles in the 1980s but now keep going for nearer 200,000. As the embedded carbon cost of a car is about equal to that of the fuel it will burn over its lifetime, we just can’t afford to scrap cars after five years, as do we laptops.
For durable safety-critical goods that incorporate software, the long-term software maintenance cost may become the limiting factor. Two things follow. First, software sustainability will be a big research challenge for computer scientists. Second, it will also be a major business opportunity for firms who can cut the cost.
This paper follows on from our earlier work for the European Commission on what happens to safety regulation in the future Internet of Things.
What Goes Around Comes Around is a chapter I wrote for a book by EPIC. What are America’s long-term national policy interests (and ours for that matter) in surveillance and privacy? The election of a president with a very short-term view makes this ever more important.
While Britain was top dog in the 19th century, we gave the world both technology (steamships, railways, telegraphs) and values (the abolition of slavery and child labour, not to mention universal education). America has given us the motor car, the Internet, and a rules-based international trading system – and may have perhaps one generation left in which to make a difference.
Lessig taught us that code is law. Similarly, architecture is policy. The architecture of the Internet, and the moral norms embedded in it, will be a huge part of America’s legacy, and the network effects that dominate the information industries could give that architecture great longevity.
So if America re-engineers the Internet so that US firms can microtarget foreign customers cheaply, so that US telcos can extract rents from foreign firms via service quality, and so that the NSA can more easily spy on people in places like Pakistan and Yemen, then in 50 years’ time the Chinese will use it to manipulate, tax and snoop on Americans. In 100 years’ time it might be India in pole position, and in 200 years the United States of Africa.
My book chapter explores this topic. What do the architecture of the Internet, and the network effects of the information industries, mean for politics in the longer term, and for human rights? Although the chapter appeared in 2015, I forgot to put it online at the time. So here it is now.
The Economist features face recognition on its front page, reporting that deep neural networks can now tell whether you’re straight or gay better than humans can just by looking at your face. The research they cite is a preprint, available here.
Its authors Kosinski and Wang downloaded thousands of photos from a dating site, ran them through a standard feature-extraction program, then classified gay vs straight using a standard statistical classifier, which they found could tell the men seeking men from the men seeking women. My students pretty well instantly called this out as selection bias; if gay men consider boyish faces to be cuter, then they will upload their most boyish photo. The paper authors suggest their finding may support a theory that sexuality is influenced by fetal testosterone levels, but when you don’t control for such biases your results may say more about social norms than about phenotypes.
Quite apart from the scientific value of the research, which is perhaps best assessed by specialists, I’m concerned with the ethics and privacy aspects. I am surprised that the paper doesn’t report having been through ethical review; the authors consider that photos on a dating website are public information and appear to assume that privacy issues simply do not arise.
Yet UK courts decided, in Campbell v Mirror, that privacy could be violated even by photos taken on the public street, and European courts have come to similar conclusions in I v Finland and elsewhere. For example, a Catholic woman is entitled to object to the use of her medical record in research on abortifacients and contraceptives even if the proposed use is fully anonymised and presents no privacy risk whatsoever. The dating site users would be similarly entitled to object to their photos being used in research to which they might have an ethical objection, even if they could not be identified from their photos. There are surely going to be people who object to research in any nature vs nurture debate, especially on a charged topic such as sexuality. And the whole point of the Economist’s coverage is that face-recognition technology is now good enough to work at population scale.
What do LBT readers think?
Back in March I gave an invited talk to the Cambridge University Ethics in Mathematics Society on the Crypto Wars. They have just put the video online here.
We spent much of the 1990s pushing back against attempts by the intelligence agencies to seize control of cryptography. From the Clipper Chip through the regulation of trusted third parties to export control, the agencies tried one trick after another to make us all less secure online, claiming that thanks to cryptography the world of intelligence was “going dark”. Quite the opposite was true; with communications moving online, with people starting to carry mobile phones everywhere, and with our communications and traffic data mostly handled by big firms who respond to warrants, law enforcement has never had it so good. Twenty years ago it cost over a thousand pounds a day to follow a suspect around, and weeks of work to map his contacts; Ed Snowden told us how nowadays an officer can get your location history with one click and your address book with another. In fact, searches through the contact patterns of whole populations are now routine.
The checks and balances that we thought had been built in to the RIP Act in 2000 after all our lobbying during the 1990s turned out to be ineffective. GCHQ simply broke the law and, after Snowden exposed them, Parliament passed the IP Act to declare that what they did was all right now. The Act allows the Home Secretary to give secret orders to tech companies to do anything they physically can to facilitate surveillance, thereby delighting our foreign competitors. And Brexit means the government thinks it can ignore the European Court of Justice, which has already ruled against some of the Act’s provisions. (Or perhaps Theresa May chose a hard Brexit because she doesn’t want the pesky court in the way.)
Yet we now see the Home Secretary repeating the old nonsense about decent people not needing privacy along with law enforcement officials on both sides of the Atlantic. Why doesn’t she just sign the technical capability notices she deems necessary and serve them?
In these fraught times it might be useful to recall how we got here. My talk to the Ethics in Mathematics Society was a personal memoir; there are many links on my web page to relevant documents.