Samourai Wallet's Story and Digital Freedom
Recently, a widely used privacy-centered Bitcoin wallet called Samourai got shut down by the US feds, and the team behind it were arrested on, you guessed it, money laundering charges. They were running a CoinJoin service (which is not the same as a mixer!) which the authorities deemed to be an unlicensed money transmitting business. This raised alarm bells for everyone in the crypto sphere, and understandably so. Afterall, if coordinating CoinJoin is considered a money transmitting business, then what isn't? Are miners money transmitters too? What about node operators? It can be argued that all of these parties facilitate them pesky cryptocurrency transactions in one way or another.
But this article is not about the logical fallacies of regulators. Not even about whether they stem from legitimate ignorance or from malice. I want to raise a more fundamental issue about the way we think about cryptocurrency and similar technologies. Law enforcement, guided by politicians and people of influence in governments around the world, will not change the way it operates. Or, it is at the very least naive to rely on them changing. And it seems to me a lot of us fail to internalize that fact, which is ever so tragic in its consequences.
Rationally, if an adversary (in this case, the governments who want to exert control on us) will eventually use all resources at its disposal to hurt you, it is optimal strategy for you to in turn use all your resources to prevent them from doing it. This is basic game theory, if you can even call it that. And yet, faced with governments increasingly cracking down on digital freedom, we settle for half measures in the form of transparent blockchains and centralized protocols trying to eyewash its users into calling it DeFi, because hey, it runs on this well-established smart contract chain. And while the latter is often done in the name of transaction speed, low fees, and overall good UX, the same cannot always be said about the former. Let's be honest, waiting ten minutes to send a transaction or paying a $40 fee to send a few hundred dollars worth of a token is a real problem, and anyone trying to tell you otherwise is probably an underdiversified maxi.
So what should we do instead? The answer to this question is surprisingly trivial. The hard part is the execution, although a lot of the necessary work has quietly been done by some wonderful people often staying out of the public eye. Work, the result of which are, just to name a few: mixnets like Tor and i2p, Monero and its developments in transaction privacy and blockchain scalability, and trustless atomic swaps between different blockchains. A lot of these things we take for granted, but also don't use the full potential of.
Thus, the solution is to build out technology which is resilient to government action by design. That means anonymous, decentralized, and private by default. All three of these properties are crucial: lacking just one is enough to leave the door open to crackdowns and persecution. Without decentralization, law enforcement and legislators have an easy target to attack, and easy justification for doing so. Think criminals, money laundering, financing of terrorism and all of the classic post- Patriot Act talking points. Strong decentralization is necessary to make repression against node operators and service providers ineffective. And without anonymity and privacy by default, it is not only possible for adversaries to target specific users in order to "send a message", but also very real for them to repress against those users who choose to opt into said optional privacy, "You have nothing to hide" being the crown argument of moral chantage in these cases.
Now, what I've just said may seem obvious, but ask yourself this: does the current crypto landscape reflect this reasoning? Forgive me if I say it does not. So what surprises me the most is that people are surprised when events like the Samourai Wallet arrests happen. It's a natural, obvious consequence of how it functioned! You can't walk into the lion's den and expect not to be attacked.
Open your eyes, crypto people!