madrid presentation (digital currency summit 2015-04-23)
TRANSCRIPT
A M L / C F T
p r i v a c y
b i g d a t a
DIGITALIDENTITY
s e c u r i t y
Redef in ing
FINTECHMONEY
Of the 7 bi l l ion people al ive on the
planet, 1 . 1 B I L L I O N subsist below
the international ly accepted extreme-
poverty l ine of $1.25 A DAY .
The Economist
IDENTITYLAW ENFORCEMENT
96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
browser
tokens
rewards
WOW
Ripple Protocol
EGold
Bitcoin
Protocol
Ven
Ripple XRP
Litecoin
Linden Dollars
Entropia Universe
Online
Exchanges
Altcoin Explosion
Regulated
Exchanges
Beenz
Flooz
Colored Coin
Smart Contracts
Ethereum
Square Cash
Amazon Coin
Sovereign Coin
Real Estate
Equities
Derivatives
?
B i t c o i n O p e n S o u r c e P r o t o c o l S o l v e s
D o u b l e S p e n d P r o b l e m v i a O p e n L e d g e r
PEER
PEER PEER
PEER
PEER
PEER
PEER
PEERPEER
PEER
PEERPEER
PEER
PEER
PEER
PEER
PEER
PEER
PEER
PEER
PEER
PEER
PEER
PEER
PEER PEER
PEER
PEER
PEER
PEER
PEER
PEER
PEER
NO central authority or f inancial institution in control
M AT H - E N F O R C E D T R U S T
REVOLUTIONARY
Every transaction that has ever occurred
in the history of the Bitcoin economy is
publ ic ly viewable in the an open ledger
cal led BLOCKCHAIN .
Privacy without anonymity
Pseudonymity
REVOLUTIONARY
identity + payment
identity + payment
CONSUMER privacy protected
MERCHANTno chargebacks / fraud
Payment only
PARADIGMSCHALLENGED
t rus t secur i ty
cus tody cont ro l
A M L / C F TTODAY
- national security and crime deterrence are top public policy
priorities
- unintended consequence → selective inclusion facilitates
fiscal surveillance but creates financial exclusion of
underprivileged
- stick over carrot (heavy hand)
- anonymity and privacy are anathema
TOMORROW
- carrot over stick (lighter hand)
- measure proportion and results
- layered, zero-knowledge, identity systems could meet both
law enforcement and civil liberties goals
I D E N T I T YTODAY
- Countries have the monopoly over a person’s identity (mostly,
for fiscal reasons)
- Not all countries have reliable identification systems
- Government-issued IDs are not necessarily effective in
deterring crime/unmistakably identifying humans
TOMORROW
- Alternative identity systems that transcend borders and
facilitate identification of previously disenfranchised persons
- Identity systems that balance both transparency and privacy
(ID3/Windhover Principles)
“ Yo u r I P a d d r e s s i s y o u r
‘ i n t e r n a t i o n a l ’ i d e n t i t y c a r d ”
P R I VA C Y
TODAY
- Radical transparency jeopardizes privacy
- Slowly being eroded via tax compliance regulations, elimination
of secrecy havens, digitization of money
TOMORROW
- Leverage zero-knowledge proof technology → tokenization
(Windhover Principles)
- Privacy without anonymity = pseudonymity (first payment; then,
identity)
B I G D A TA
“With a bit of data mining, my concern is that
[companies & the government] will get a lot of
information. The things people are doing to protect
themselves today are pretty naive compared to the
kinds of clever data mining tricks that exist. I’m
worried that a lot of people are doing things that are
leaving a permanent history and will then
inadvertently leave some trace that reveals their actual
identity.
Matt Green
Anonymous
Untraceable
“Invisible to law enforcement and the taxman”
• The entire history of Bitcoin transactions is publicly available.
• “Using an appropriate network representation, it is possible
to associate many public-keys with each other, and with
external identifying information.”
• “Large centralized services such as the exchanges and wallet
services are capable of identifying and tracking
considerable portions of user activity.”
A n A n a l y s i s o f A n o n y m i t y i n t h e B i t c o i n S y s t e m – B i t c o i n i s N o tA n o n y m o u s
by Fergal Reid and Martin Harrigan (2011)
• The demonstrated centrality of these services makes it difficult for even highly
motivated individuals— e.g., thieves or others attracted to the anonymity
properties of Bitcoin—to stay completely anonymous, provided they are
interested in cashing out by converting to fiat money (or even other virtual
currencies).
• The increasing dominance of a small number of Bitcoin institutions (most notably
services that perform currency exchange), coupled with the public nature of
transactions and our ability to label monetary flows to major institutions, ultimately
makes Bitcoin unattractive today for high-volume illicit use such as money
laundering.
• A well and fairly regulated virtual currency industry makes it exceedingly difficult
for bad actors to use the system for illicit activities.
A F i s t f u l o f B i t c o i n s
by Sarah Meiklejohn et al (2013)
Anonymous
Untraceable
“Invisible to law enforcement and the taxman”
Myths
enhanced surveillance and control
S E C U R I T Y
TODAY
- role-based access control
- Digital tokens are bearer instruments: lose the key,
lose the asset forever
- Information security risks increase with digitization
TOMORROW
- customer-centric custody and security (via multi-
signature escrow)
A M L / C F T
p r i v a c y
b i g d a t a
DIGITALIDENTITY
s e c u r i t y
Redef in ing
MUST
WANT
CAN
© 2015 Juan Llanos
WANT – MUST = CAN
RETHINKREDEFINEREINVENT
INNOVATE& Reinvent the World
INFLUENCEPublic Policy
IMPLEMENTMandatory Rules
© 2015 Juan Llanos
INNOVATE
IMPLEMENTClientelism
Inflexibility
Exclusion
Inequality
© 2015 Juan Llanos
We innovate within
outdated, inflexible,
anachronistic legal and
regulatory frameworks
INNOVATE
INFLUENCEDisarray
Capture
Recklessness
Chaos
© 2015 Juan Llanos
We innovate and influence
policy to accommodate
our interests, but we really
don’t implement effective
controls.
IMPLEMENT INFLUENCE
Monopoly
Entropy
Ossification
Irrelevance
© 2015 Juan Llanos
We stay where we are
because we don’t have
an innovation-friendly
environment
INNOVATE& Reinvent the World
INFLUENCEPublic Policy
IMPLEMENTMandatory Rules
© 2015 Juan Llanos
Responsible
Evolution
@JuanLlanos
Thank you!