A Curious Deliberation of Potential Government Overreach through the use of Blockchain for Mass Surveillance

by

W. Paul Alexander

for 

Better Call Paul 

(Author's Note:  I feel that I must explain that I am not against blockchain technology AT ALL.  Rather, I have been involved at the founding stages with some very large crypto projects, some of which I still serve as a senior marketing consultant for.  However, as with all super-powerful emerging technology, it is important to become a stalwart for freedom, liberty, and privacy against those -- usually oppressive government overreachers -- who would use the same technology for their sinister agendas. 

The scenarios described herein are, for the most part, an exercise of speculative fiction.  However, the Coinbase/IRS issue below actually occurred, and Coinbase complied with the governmental agency's (IRS) demand to turn over client personal information.  As Coinbase is a US-based provider of financial services, the USA PATRIOT Act requires them to employ a KYC process, which they do before allowing you to transact.  Since the government is now in possession of data which links anonymous cryptocurrency addresses with the identities of those who use them, it would only take the sharing of this data with surveillance-hungry parts of the deeper government bureaucracy to make the below scenarios a reality) 

Bitcoin's widespread adoption coupled with the breakthrough of blockchain technology is arguably the greatest achievement in the history of transactional capabilities of humanity. There can be no doubt now, as we close out 2019, that the past decade has been the decade of the blockchain.

However, as with any new groundbreaking and world-changing technology, it is critical to take a cautionary approach before giving said technology a cemented place of prominence within society. The reason for this is simple: Technology, for all of its benefits, can just as easily be used as a tool of evil and oppression as it can be used as a tool of freedom, privacy, and liberty. Either way, new technology enables us to do things that we have never done before, whether those intentions and actions are good or bad. To understand this, one simply has to look to the dual role of nuclear fission/fusion -- arguably one of the most advanced technological breakthroughs of all time -- in its role as both a "destroyer of worlds" as well as its place in peaceful energy generation. Using this maxim, it becomes easy to analyze the potentially negative impacts that blockchain technology could have on freedom and the restriction thereof.

Blockchain and Surveillance

Those of us who were around before social media can definitely remember the fervor and speed with which it was implemented on a global scale. People were blown away with this new way to connect to and communicate with friends and family in an always-on manner. Businesses saw new opportunities to get their corporate presence in front of existing and potential customers and clients. An entirely new world of connectivity had come into existence seemingly overnight. This new digital landscape, like blockchain technology, was completely unregulated. The Blockchain whitepaper and the mystery of Satoshi represented something completely nascent which proved to be an excellent network that enabled anonymous transactions.

The effect of the bitcoin revolution sparked alternatives such a litecoin, ethereum, Ripple, and Monero -- as well as thousands of other private, personal, and commercial "cryptocurrency" projects, as each new project was called.

Now, cutting edge cryptocurrency and similar "tokenizing" projects that aim to create transaction value for everything from your personal social media data to traffic highway toll systems.

The backbone behind digital currency as described in a general sense above, it the promise of verification of any transaction that could be a part of any future blockchain technology, such as in banking and mortgage financing at any time, simply by accessing the digital assets history (open source), commonly called "Block Explorer."

While much of this technology is still in very early alpha, the implications are already huge. The minute that governments begin to implement blockchain technology of any kind is the exact minute that the government will overreach. If those with less-than-pure motives ever find themselves in power, the blockchain itself becomes that largest, most accurate intelligence gathering tool ever imagined.

Coinbase and the Reason we Must Stay Vigilant 

Close to a 2 years ago (In February 2018), the IRS sent a summons to Coinbase demanding that the cryptocurrency buying/selling platform turn over personal information on thousands of users. This was the first US government intrusion into the cryptocurrency market -- the first widespread grab by a federal agency to determine who was using cryptocurrencies, with this being done under the auspices of determining the "tax liability" of these users.  Many Coinbase users have cried foul, but court challenges by the users that claim that the government is using this information for surveillance of the population, including this current case as of November 20, 2019, have all resulted in the court finding for the IRS. 

Here is the problem, and here is where it becomes Orwellian -- 

Once the IRS refers for criminal prosecution, Coinbase user data ends up in the hands of the Department of Justice, which means that it can be accessed by other law enforcement and intelligence agencies, most of which have a well-known history and current hunger for mass surveillance.  In the current case currently going through the courts, the IRS has went on record stating that the user's claim of being the target of government surveillance is nothing more than a made up fantasy and a conspiracy theory, feigning outrage at the fact that anyone would EVER made a claim that the government spies on its citizens.  This is the same government with life-felony charges pending against whistleblower Edward Snowden for disclosing that the government, in fact, spies on everything its citizens do, of course, and the make themselves look foolish by denying it.  However, with each new ruling that the judiciary makes in favor of the government, the more precedent there is for the government making mass seizures of data that customers thought would be encrypted and completely unknowable when they agreed to sign up for their account. 

But perhaps most chilling, by collecting user and account information from Coinbase, governments are able to link encrypted blockchain addresses with personal identities.  It would be a logical leap to build a system that could use this link to surveil and track citizens based on their crypto assets.  Let us also remember that Coinbase, in order to have any meaningful transaction take place, requires know your customer (KYC) verification in accordance with US law, which also requires users to link their bank account information to their Coinbase account.  This makes it possible not only to link a crypto address to a person but also to link a bank account to a crypto address by using the common factor linking the two -- the personal identity of the user. 

This means that, reconstructing this type of data, government actors could determine that the person with BTC address xxxxx, named John Smith, used his bank account number xxxxx to pay a cell phone bill for phone number xxxxx from his PayPal account (also linked to the bank account) with an email address of [email protected]. Each identifier makes the picture more complete, eventually resulting in a plausible way to track just about any person in the United States and abroad that uses blockchain address -- which is absolutely terrifying.  

How Will It End? 

This is not the first time that newly emerging technology with peaceful intentions by its creators has been used as a tool of evil.  IBM's brand new punched-card systems, the world found out, were surprisingly well-suited for keeping track of concentration camp prisoners in Nazi Germany, making sure that the "trains ran on time," so to speak.  Why would we think that a government hell-bent on nefarious surveillance of its citizenry, like the US is currently, would do anything other than fully exploit any system it were capable of exploiting to reach that goal?  Why do we continually think that "they would never do THAT!" -- only to act completely off-guard when they actually do the exact thing we say over and over they would never do.  

We ultimately do not know how this will end -- we can only hope that this technology can continue to be used for the advancement of privacy, not the complete and utter decimation of the same.