New Book Tackles Blockchain Privacy Issues

Innovation, Interviews, Regulation | July 25, 2017 By:

Property and privacy are facing a digital crisis, claims professor Joshua A.T. Fairfield. He addresses those issues in “OWNED: Property, Privacy, and the New Digital Serfdom” (Cambridge University Press), a compelling new book that examines these issues, along with the potential impact of blockchain, cryptocurrency and smart technology.

We no longer control our smartphones or software-enabled devices, Fairfield argues. Instead, we are effectively owned by the content and software companies that control them. In the coming decade, if we do not take back our ownership rights, the advent of self-driving cars and smart homes may risk us becoming digital peasants, owned by overreaching software and advertising companies and government entities.

Fairfield talked with Block Tribune about his book and the concepts behind it.

BLOCK TRIBUNE: What was the genesis of this book? Was there a triggering event?

JOSHUA A.T. FAIRFIELD: Well, I suppose the original triggering event was playing games when I was a teenager and watching people sink thousands of dollars into virtual items, goods, worlds, houses, and thinking that those items had very real market value, had very real attachment value to the people who had spent years building up those assets, but had no legal protection whatsoever. That striked me as tremendously inefficient, that people wanted to own those things. They wanted to control those things, but they lived in constant fear that the game gods would take them away at a whim, or hold them hostage for increased payments. Indeed, at one point, Blizzard Entertainment, the makers of World of Warcraft, wrote in one of their Securities and Exchange Commission filings that people should invest in Blizzard Games because their players were trapped, because they would have to give up all of their property and their community in order to leave the game.

Then I noticed, as I grew up, that the rules that had made that problem, that had caused that problem, the intellectual property rules, were being brought out of things like video games and into real life. I noticed that farmers were being told that they didn’t own their tractors the same way that video game players in the early 2000’s had been told they didn’t own their magic swords.

It seems to me that that sickness was spreading. Wherever it spread, it was attacking private property ownership, and taking away people’s ability to do what they wanted to do, and build the environments they wanted to build, and build wealth if they wanted to do that, or create a home if they wanted to do that. That was the real genesis of the book was watching the rules that had denied basic ownership in virtual worlds in the early 2000’s, watching those rules spread to a context that was never meant for them.

It spread to real life, so to speak, where the same arguments were being asserted to tell people, “Hey, you don’t own your tractor. You just licensed the software in it.” Or, “Hey, you don’t own your smartphone. You just licensed the software in it and we can take all of your information away from you at the push of a button if we want to. We can take your Kindle collection away from you at the push of a button if we want to. We can take your movie collection away from you at the push of a button if we want to. More, we can use your own property, your own devices to spy on you, to take your data.”

They don’t have to take your book collection, or your movie collection, or your magic swords, or your tractor away from you entirely. They can just watch every way that they use it and then try to monetize that.


BLOCK TRIBUNE: Why is society moving in this direction?

JOSHUA A.T. FAIRFIELD:  I think one answer is that we gave it the opportunity to. Badly-written laws gave people an opportunity. The big opportunity was to use overreaching intellectual property laws to control everyday objects. The intellectual property laws gave us the opportunity.

The question is, what’s the incentive? The incentive was money. I’ve got no problem with making a profit. We chose to monetize the internet along advertising lines instead of people paying for access. There’s nothing wrong with that, either, as long as it’s consensual. But the combination of those two things meant that companies could use the software embedded in our devices to take information about us for advertising purposes without our consent or knowledge.

BLOCK TRIBUNE: It seems like we’re almost moving into this world without a choice, though, in many respects. Yes, you can put down the Kindle and pick up a paper book now, but that may not be an option in the future, and there are many other instances. Your thoughts on that?

JOSHUA A.T. FAIRFIELD:  I think that information access has to be available to people. I’m not making a statement that it should be made available free of cost or that it should be somehow made as free as air and water. But I do think that it needs to be available, the private connections, the ability to get information, to use our devices without being spied on, is really important.

For example, you can think of trying to buy something from a seller like Amazon as a game of poker, right? You know how much you’re willing to pay for it. They know how much they’re willing to sell it for. The whole game is to see if each of you can walk away feeling like you got a good deal. But if they can spy on you to read your cards, then it’s like playing a game of economic poker against somebody who can see your cards, and you’re not going to win. I think there are real costs to this way of organizing society where we can’t win, in a sense, because our ownership of the resources that we need to be able to negotiate, to bargain, those are being replaced or spied on by the internet service providers, or the manufacturers, or the advertisers.

BLOCK TRIBUNE: What are the dangers of the blockchain and cryptocurrency sector regarding privacy and property rights?

JOSHUA A.T. FAIRFIELD:  This is really simple. A software provider is like a feudal king. They own the software and everyone else is their servant, their serf. We all just license the software. What that means is that the owner of the software becomes this centralization point where everything has to flow through them, all the information has to flow through them in a very direct way.

A couple of years ago my Motorola phone started sending a lot of important information directly to Google servers without my permission. This is when Google still owned Motorola. Crypotcurrencies, at least some of them, pushed back hard against that centralization and saying, “No, we don’t need centralized servers to have digital property.”

Back in the video game days, if you wanted a magic sword, the magic sword was a listing in a centralized database kept by the game god. In a modern context, if we want a Kindle book, notice that I’ve described it by the central authority. Amazon is the one that keeps a list of who has the licenses to which books. Apple does the same. They have a central database of who has the licenses to which movies, musics, songs, books. But we don’t have to run property databases like that. We can run them in a decentralized manner. If we do, we remove the power of the digital, feudal king, the person who stands at the middle, and with a push of a button take our property away from us.

There’s nobody that can take your bitcoin away from you. There are lots of other problems with bitcoin. I’m not a bitcoin evangelist. I don’t know that bitcoin is necessarily going to survive. I think there are some other very interesting currencies that are popping up. But the key thing is that you’re no longer a peasant in the bitcoin system. There’s nobody standing above you saying, “Hey, if you want to use what you just bought, you still have to say, Mother, may I.” That, to me, is the real value.

It also, the decentralization, helps us with privacy because if there’s no central owner of the database, if there’s no central authority looking down and managing these things through digital rights management, then there’s also no temptation to misuse intellectual property laws to lock owners out of their devices and to turn their devices into surveillance sensors. Again, no central authority, no ability to centrally surveil and monetize our information.

BLOCK TRIBUNE: Regarding the blockchain, I’ve seen mentions how it could provide flexibility on information on things like ticketing, what you called monitoring economic wealth for price discrimination. Have you seen that trend developing? What, if anything, can be done about it from an individual standpoint?

JOSHUA A.T. FAIRFIELD: Can you explain a little more the nature of the specific concern? Because there’s a couple of related issues. Are you talking about the trackability of the blockchain and data mining in order to determine individual wealth?

BLOCK TRIBUNE: The danger in that is, with all this information available, that you could be paying more than the guy next to you? Which we already see in the airlines.


BLOCK TRIBUNE: But it could be based on their determination of your private wealth. Next thing you know, the person is paying far more than anyone else because there’s information out there that’s publicly available as to their economic health.

JOSHUA A.T. FAIRFIELD:  The idea is then that because the blockchain is so visible that people would be able to data mine it and engage in increased price discrimination?


JOSHUA A.T. FAIRFIELD:  Yeah. I don’t think that’s trivial. In fact, I was involved with a company that — not involved with, but speaking over the past couple of days with a company that is attempting to bring certain financial products to market based on the blockchain. They were being stopped by the regulators because the regulators felt that there wasn’t enough surveillance of the bitcoin markets.

I find it deeply ironic that on the one hand, those of us who know the technology think that it’s a little too transparent for our sanity, and those regulators that don’t know the technology think that it’s not transparent enough. I’ll just raise that irony. It’s really causing entrepreneurs a lot of hassle right now.

BLOCK TRIBUNE: Europe passed a law that’s called The Right to Be Forgotten. Do we need that on a universal basis?

JOSHUA A.T. FAIRFIELD: No. We can’t have it. That said, there’s nothing wrong with telling a website to de-list a certain search criteria. I know that Google would disagree with me on that, but we can’t propertize information. We can’t say that, “Information about me is my property such that I can reach out and stop you from saying certain things about me.”

We can, however, assert control over the devices and the sensors around us to stop them from spying on us. That’s very different. But there’s no way that I can stop you from saying, “Hey, Josh Fairfield wrote a wonderful book,” which is obviously what I hope everyone says. Or saying, “Josh Fairfield doesn’t know what he’s talking about.” That’s not information I own.

I think that propertizing that kind of information is dangerous. What we can do is stop the extraction of the information at its point of entry. Our smart devices are the eyes and ears of the internet. We need to own them so that we can tell them to stop spying on us.

BLOCK TRIBUNE: Are paper records necessary in some cases?

JOSHUA A.T. FAIRFIELD: Paper is really cool technology. We’re only beginning to understand how deeply that’s true. I read a joke one time saying, “Hey, we’ve got this new e-leading technology. It’s called a book. It’s got an infinite power supply. It works in ambient light. It never shuts down. It never reboots.” Paper can serve as a really good backup. That said, I think that blockchain has a determinative record of truth, will do a lot to replace one key element of paper, which is its backup function.

What I’m hearing from banks, or other financial institutions exploring blockchain projects, is that they don’t necessarily want the mining resistance of the chain. They’d far rather use much cheaper consensus chains where they all vett each other to make sure that everybody who’s contributing to the chain is a good actor.

What they do love is the irreversibility of the chain. They love the idea that it’s a record of truth, that nobody can go back, that nobody can fake later on. I think that’s a place where I’m seeing a number of businesses building. I think it’s a good basis on which to build a range of completely new blockchain technologies that aren’t really talking about currency or identity at all. They’re just simply talking about records of truth. In that sense, I think with blockchain we may not have ended up replacing money. I think we may have ended up replacing paper.

BLOCK TRIBUNE: Technology columnist, Walter Mossberg, in his final column, talked about having sensors everywhere, which is part of the theme of your book. If somebody wants to get out of that matrix, what recommendations do you have?

JOSHUA A.T. FAIRFIELD: Hack your phone, is the first thing. The phone is the single biggest multipurpose computing device that also brings a lot of the strengths and weaknesses of wearable technology. It’s not, of course, fully wearable, but it’s pretty close.

If you can hack your phone, if you can restrict the flow of information on and off of it … By hacking your phone, I just mean simply remove its current operating system and put something like CyanogenMod on it. What that does is that replaces the software that the manufacturer has put on, which has been systematically designed to extract your data for their economic benefit, and you replace it with a fully-functional system that’s open source and does not have that set of incentives.

The second thing is, without overreacting, to think hard about what you care about. Are you worried that your data will be extracted by advertisers? You’re going to have to do some things, for example, to defeat traffic analysis. A simple virtual private network often does a lot to help there.

If you’re concerned about the security of your financial holdings, a lot of people have gotten on the bandwagon of recommending cryptocurrency and that sort of thing. I’m not certain that cryptocurrency, as an investment, is more stable than other regulated products. If you’re not worried about surveillance, then it’s a relative decision. You’re just going to have to decide how worried are you about the price volatility in bitcoin versus price volatility in other assets.

Finally, I think if you want to get off of that line, you may want to, for now, still consider buying things that you can truly own. I hate to say that because we all desperately need information technologies. As you started the interview, we can’t just turn off our internet access in response to the overreaching of software companies. We can’t just flip the switch. That’s not going to work, but if you want to own something for now, you need to realize that if you buy software-enabled versions of that, you quite likely don’t. I think that’s what farmers are finding out, to their rage.

I think the last bit is that although … And I have to be very careful about calls for political action. I don’t want to get involved in the current, toxic political environment, but both sides of the aisle, every political persuasion in America, supports private property ownership. Right-to-repair bills, right-to-hack bills, right-to-modify bills are very popular with both parties.

I think that a number of states have pushed forward with right-to-repair bills, with right-to-modify bills. I know that the Librarian of Congress has done good work in opening up exceptions to the Digital Millennium Copyright Act, which permits people to hack and modify their smartphones, to hack and modify their cars. That was another big fight. Major capital investments like tractors are still not on that list.

This is a heavily-lobbied fight because the companies that manufacture the products, the cars, want to lock out independent repair shops. They want to lock out individual owners from being able to modify and repair their own devices because that’s a revenue stream for them. But this isn’t a political fight in the normal sense. It’s not a fight between Democrats and Republicans. It’s a fight between people who think that private property ownership is a good idea, that the American Dream is a good idea, and people who think that a few digital barons ought to own all of the wealth, and the rest of us should be digital serfs.

BLOCK TRIBUNE: Are there any individual politicians in particular that are fighting this fight?

JOSHUA A.T. FAIRFIELD: There are on both sides. Not currently in the federal Congress. What I would encourage people to do is check their local state legislatures for right-to-repair bills. Those are the people to get in contact with.

BLOCK TRIBUNE: There a number of companies that are trying to create digital identity products now. Do you foresee a shakeout? At what point? Then what will happen to the data in the event of that shakeout?

JOSHUA A.T. FAIRFIELD: That’s a hard question to answer. Previously, the Federal Trade Commission has taken an active role in restricting the transfer of consumer databases following a company’s dissolution. That said, it’s only done so traditionally on the basis of promises that the company has made. If the company has told those that used its product, “We will not disclose this information,” then the FTC has stepped in to enforce that promise.

However, companies learned to not make that promise. Because of that then, it seems unlikely in the current climate that the FTC will pursue an enforcement action. They would have to do so under what’s called their unfairness jurisprudence. They would have to say that it’s unfair instead of saying it’s deceptive, which was much easier for them to say. Under deceptiveness, they just argued, “You promised you wouldn’t transfer this information and then you did.” Under unfairness, they would have to say a lot more, which I won’t go into here.
The disintegration of identity products has caused a lot of damage, but I don’t think our regulatory system is anywhere in place to be able to handle that disintegration adequately. For now, I would hope that people would be extremely cautious about what information they invest in identity products.

BLOCK TRIBUNE: For people who have children, is there anything that can be done early in their lives in order to insulate them somewhat from these concerns?

JOSHUA A.T. FAIRFIELD:  Yeah, that’s hard. There are two conflicting things that children need to do. They need to build a verifiable, trustworthy, online identity, and they need to systematically deceive the entities that do not look out for their economic best interest.

For example, I have four daughters. We are very careful to have them construct a social media presence that is healthy and useful for them, then a false social media presence to feed information to companies that do not have their economic best interest at heart. That can be tiring, but I think after a while, it can become second nature.