The Blockchain Debate Podcast

Motion: Blockchain analysis companies are bad for bitcoin (Alex Gladstein vs. Dave Jevans)

August 27, 2020 Richard Yan, Alex Gladstein, Dave Jevans Episode 15
The Blockchain Debate Podcast
Motion: Blockchain analysis companies are bad for bitcoin (Alex Gladstein vs. Dave Jevans)
Chapters
The Blockchain Debate Podcast
Motion: Blockchain analysis companies are bad for bitcoin (Alex Gladstein vs. Dave Jevans)
Aug 27, 2020 Episode 15
Richard Yan, Alex Gladstein, Dave Jevans

Guests:

Alex Gladstein (@gladstein)
Dave Jevans (@davejevans)

Host:

Richard Yan (@gentso09)

Today’s motion is “Blockchain analysis companies are bad for bitcoin.”

Blockchain analysis companies are effectively on-chain detectives. They help exchanges and other financial institutions detect and monitor money-laundering activities and therefore stay in compliance. They also help law enforcement do financial investigations.

But their tools may also be useful for repressive regimes in spying on financial behavior of their citizens, in hopes of crushing political dissidents.

Today’s debater includes someone from the Human Rights Foundation, who is very passionate about bitcoin’s financial liberating cause, and someone that started one of the largest blockchain analysis companies, who believes their tools help bitcoin and what it stands for.

If you’re into crypto and like to hear two sides of the story, be sure to also check out our previous episodes. We’ve featured some of the best known thinkers in the crypto space.

If you would like to debate or want to nominate someone, please DM me at @blockdebate on Twitter.

Please note that nothing in our podcast should be construed as financial advice.

Source of select items discussed in the debate:



Show Notes Transcript

Guests:

Alex Gladstein (@gladstein)
Dave Jevans (@davejevans)

Host:

Richard Yan (@gentso09)

Today’s motion is “Blockchain analysis companies are bad for bitcoin.”

Blockchain analysis companies are effectively on-chain detectives. They help exchanges and other financial institutions detect and monitor money-laundering activities and therefore stay in compliance. They also help law enforcement do financial investigations.

But their tools may also be useful for repressive regimes in spying on financial behavior of their citizens, in hopes of crushing political dissidents.

Today’s debater includes someone from the Human Rights Foundation, who is very passionate about bitcoin’s financial liberating cause, and someone that started one of the largest blockchain analysis companies, who believes their tools help bitcoin and what it stands for.

If you’re into crypto and like to hear two sides of the story, be sure to also check out our previous episodes. We’ve featured some of the best known thinkers in the crypto space.

If you would like to debate or want to nominate someone, please DM me at @blockdebate on Twitter.

Please note that nothing in our podcast should be construed as financial advice.

Source of select items discussed in the debate:



Richard:

Welcome to another episode of blockchain debate podcast, where consensus is optional, but proof of thought is required. I'm your host Richard Yan. Today's motion is blockchain analysis companies are bad for Bitcoin blockchain analysis companies are effectively on-chain detectives. They help exchanges and other financial institutions detect and monitor money laundering activities, and therefore stay in compliance. They also help law enforcement do financial investigations, but their tools may also be useful for repressive regimes in spying on financial behavior of their citizens in hopes of crushing political dissidents. Today's debaters include someone from the human rights foundation who is very passionate about Bitcoin's financial liberating costs and someone that started one of the largest blockchain analysis companies who believes their tools help Bitcoin and what it stands for. If you're into crypto and like to hear two sides of the story, be sure to also check out our previous episodes. We featured some of the best-known thinkers in the crypto space. If you would like to debate or want to nominate someone, please DM me @BlockDebate On Twitter. Please note that nothing in our podcast should be construed as financial advice. I hope you enjoy listening to this debate . Let's dive right in! Welcome to the debate. Consensus optional proof of thought required. I'm your host Richard Yan. Today's motion: Blockchain analysis companies are bad for Bitcoin. To my metaphorical left is Alex Gladstein arguing for the motion. He agrees that blockchain analysis companies are bad for Bitcoin, to my metaphorical, right is Dave Jevans' arguing against the motion, he disagrees that blocking analysis companies are bad for Bitcoin, Alex and Dave, I'm super excited to have you join the show. Welcome.

Dave:

Hello Richard.

Alex:

Hello.

Richard:

Here's the bio for the two debaters. Alex is chief strategy officer at the human rights foundation. He has also served as vice president of strategy for the Oslo freedom forum since its inception in 2009 in his work, Alex has connected hundreds of dissidents and civil society groups with business leaders, technologists, journalists, philanthropists, p olicymakers, and artists to promote free and open societies. He co-authored The Little Bitcoin Book in 2019. Dave is the founder and CEO of CipherTrace one of the big three blockchain analysis companies. Previously David had spent decades building network security companies with multiple exits, a few interesting facts in the nineties, Dave attended monthly cyberpunk meetups in Palo Alto. He also hired Nick Sabo to help with Ironkey, which is one of Dave's previous businesses is USB product. We normally have three rounds, opening statements, host questions and audience questions. Currently our Twitter poll shows that 70% disagree with the motion. That means 70% disagree that blockchain analysis firms are bad for Bitcoin. After the release of this recording, we'll also have a post debate poll between the two posts , the debater with a bigger change in percentage of votes in his or her favor wins the debate. Okay, Alex, please, go ahead and get started with your opening statement.

Alex:

Thank you for having me on and Dave, thanks for being willing to wrestle here. I think it's important that we have this conversation. So obviously I'm coming at this from the perspective of being a human rights advocate and being someone who sees value in Bitcoin for what it can mean as a tool for freedom for people, not necessarily as an investment, although that's sort of intertwined , and not as a you know, new, exciting, shiny object for wall street, but as a true parallel economy for the people of the world. And that's why I believe that blockchain analysis companies are bad for Bitcoin. I actually would suggest that people call blockchain analysis companies, financial surveillance companies, because that's what they do. And that way we can have like an honest conversation about this industry. So about the financial surveillance industry, the reason why financial surveillance companies are bad for Bitcoin is because this is a longterm game. There was a stunning article in the Atlantic that came out today that I really suggest everybody listening/reads. And the title is: China is what Orwell feared. And the subtitle is Xi Jinping is using artificial intelligence to enhance his government's totalitarian control and he's exporting this technology to regimes around the world and this trend, this trend in governments, basically being able to become closer to two omniscient essentially to sort of all knowing and all seeing through technology is what Bitcoin is a hedge against in my mind, in the way that I see Bitcoin functioning around the world, Bitcoin is a way to challenge this trend of increasing state surveillance. It can fight big brother. It can fight surveillance capitalism and anything that makes Bitcoin less private or effective is bad for Bitcoin. So from a global sense companies like Dave's , you know, they can operate in democracies. They can operate in dictatorships about 4.3 billion people in the world operate in a dictatorship , and whether or not Dave's company would, would work with those governments. I'm sure his competitors will. So there's some of financial surveillance company that's going to be willing to work for a dictator and is going to be willing to punish human rights, activists and dissonance . And I think that that is, is obviously bad for Bitcoin. We want Bitcoin to be , you know, as private as possible and as effective as a human rights tool as possible for folks and people building this sort of like KYC compliance government, a f riendly, ki nd of Bitcoin ecosystem are, are bad for Bitcoin. I mean, they're, they're basically hurting one of its most important traits, which is it s a bility to be used as a parallel economy. Even in the United States, even in a democracy like the US I really feel like you should have, you should need constitutionally a warrant to spy on my financial transactions, data and activity. I realized we do have the bank secrecy act, but amounts under $10,000 are technically supposed to be private between me and my, my financial institution, but they're not supposed to be that information is not supposed to be given to the government. But if Dave and financial surveillance companies get their way, even that gets washed away. And even these little micro transactions , anything that's not on the blockchain becomes fair game for the NSA or the US government, or I would argue much worse dictatorships to learn about. And finally, I would just want to make the point that financial surveillance companies are pretty useless unless they can pair at Bitcoin and other cryptocurrency addresses to identities. And that's not super easy to do. And you basically have to do that by collaborating with a financial institution, like for example, a cryptocurrency change. If I just send Bitcoin to my friend, I mean, there's no chance Dave's gonna figure that out. That's not, that's not decipherable. But if I buy Bitcoin on Coinbase and I've KYC with Coinbase and I've given them all my information , and then I withdraw to an address, okay , now Coinbase knows that that's mine. And then that's information , that, that companies that are in the financial surveillance industry can have, Coinbase uses, you know, these different data sets from those companies to further enhance its ability to know what's going on. And they will ultimately, a s they onboard a lot of users, u h, unfortunately they'll start s orta cracking down on like w hat sort of considered bad activity. And, you know, you m ake be able to make an argument that in the United States, reasonable people can figure out what's bad activity, but the fact is most people don't live in the United States. There are billions of people who live under dictatorships where , y ou know, the government is basically g onna say bad activities, anything that a dissident or an activist is going to do. So again, I just to conclude the opening statement, I think that anything that makes Bitcoin less private or effective, which financial surveillance companies do is bad for Bitcoin. Bitcoin is a tool of human rights and we need to oppose, financial surveillance companies by building technology that makes them ineffective. It 's, it's really our only hope because as long as they can make a living doing what they're doing, they're go ing t o d o it. So that's how I'll start.

Richard:

Okay. Great. Sounds pretty convincing to me. So, Dave, I think you got your hands full. Please start with your opening statment.

Dave:

Thank you, Alex. I'm going to take the opposing view, which is, I will argue that Bitcoin analytics are crucial to the survival of Bitcoin and other cryptocurrencies. I've got three points to make on this. And then I look forward to the debate. Tomorrow, if Bitcoin somehow became untraceable, either through t echnical logical means or everybody in the public sphere and the commercial sphere gave up within six to eight months, at least 30 countries would ban cryptocurrencies, which would represent 95% of Bitcoin trading volume. Bitcoin would crash from $10,000 to $1, and it w ould be relegated to jurisdictions with limited access to Fiat payments, rendering Bitcoin, virtually useless. Point number two: Bitcoin analytics actually help the u nderbanked in repressive regimes, to discuss this point in the question and answer. Many regimes, are receiving aid across the world. This has a lot of corruption in it. If we can use Bitcoin and other cryptocurrencies to deliver aid directly to the organizations, and for example, Sub-Saharan Africa, to deliver that aid, to be able to trace it, to make sure that the aid is delivered to the organizations and individuals that it's designated to and is not appropriated buyer repressive regimes. And it's not appropriated by corrupt politicians. This is viewed by many in the human rights and the aid community as a very strong, positive. Point number three: Bitcoin analytics do not identify individuals. So if you've ever used a Bitcoin analytic tool, you will know that it does not identify individuals. It does not allow targeting of individuals. What it does is it empowers individuals to be able to get legal recourse if their funds are stolen, if they were victims of fraud, it identifies where funds were sent to as far as a company or a criminal agency, it does not provide individual identifying information. It not contain personally identifiable information. This is a, j ust something that people maybe don't understand about Bitcoin analytics. Thank you.

Richard:

Okay, Alex, We can either, have you respond directly to what Dave is saying? Or I'm happy to start round two where I will start asking some, It's your call?

Alex:

Yeah. I'd love to just briefly respond to his three points if that's okay.

Richard:

Okay, sure . Go ahead.

Alex:

Yeah. So for the first point, I'm not sure if this is backed by historical evidence. So you say that, you know, if we didn't have analytics, then governments would ban Bitcoin. You said at least 30 countries will ban Bitcoin and the price would crash. So in 2017, the world's largest country banned its citizens from basically buying Bitcoin and other cryptocurrency. I'm talking about China, of course, in October, 2017. Cause they, you know, one of the, one of the theories was they didn't, they weren't comfortable with it. They didn't know what was going on inside Bitcoin. So what happened? Well , the b an was not effective. It was not enforceable. They had to walk it back to the point where now Bitcoin is now legally protected property in China and the price d oubled. So I have, I just don't see history bearing this out that if we could no longer have analytics that Bitcoin's price would crash. I don't see any history on that one, no evidence on that one. Number two, that Bitcoin analytics helped the under-banked and authoritarian regimes. You're basically saying that we could use Bitcoin if it was really traceable to deliver aid. I mean, I would say that like I agree that Bitcoin could be used in foreign. I've even written about this, that Bitcoin could be a really effective f oreign a id tool to do peer to peer for aids, as opposed to having to go through third party organizations like the Red Cross, which spend a lot of money on, you know, unfortunately bureaucracy, you know, you could just donate directly to the person in need, but you don't need mass surveillance and de -a nonymization of users to do that. You can, you can just pick up the phone and call the person and: Hey, did you get it? Okay . I mean, you can, you as the center, you know you're gonna know who , what the receiver's address is, and you're going to see the coins go, at least that Bitcoin, there's no need to hire a third party company to spy on that activity. So I just failed to see how this is going to be helpful. If anything, again, it's super dangerous for authoritarian regimes to have , f inancial surveillance capabilities, as they do in China today, t hat's that's the whole point of Bitcoin is that we can provide a system in a world where they don't have those capabilities where there's really nothing they can do. Third point, Bitcoin analytics don't identify individuals. So you say that like it empowers individuals, well, maybe in this round tw o, I'd love to hear Dave talk about how it works, i n a company or a government using Dav e's se rvices to help ID where funds were sent to, i n a criminal act. For example, as he mentioned, I'd love to hear him talk through that and explain how a government would even know if Bitcoin analytics don't identify individuals and how does anybody know what address is criminal and what address is legitimate. I'd love to hear him explain that.

Richard:

Okay, great. So Dave, you can go ahead and follow up with Alex's point now, too, if you want.

Dave:

So let me take the last one first, which is identification of individuals and how blockchain analytics actually work. So there is no personal identifiable information collected in blockchain analytics. I think CipherTrace as well as I'm sure most of the other companies out there do not collect information from their customers, do not collect information about individuals. We have no names, no phone numbers, any of that information, no account numbers or any of that. It's really about looking at where funds flow to and where funds came from. Now, how do you identify criminal activity, many ways to do this? Sometimes it's reported. So someone says: Hey, my stuff got stolen. And that is widely accepted in the Bitcoin community. There are quite a number of groups that , operate blacklists that are operated by most of exchanges. They engage with them to , blacklist funds to freeze them, etcetera. There's also the surveillance of the criminal marketplaces. So the money laundering services, dark net markets, the major vendors in that space, ransomware vendors, who's doing the ransomware, ransomware operators. Where's that data going to where the funds flowing to, who's consolidating that information so that the information is really about getting information from , the internet, getting information from private sources that will report fraud, theft, etcetera. So helping individuals and companies w ho've been defrauded, they could be exchanges. I t could be individuals, they could be groups of companies or groups of individuals looking at ransomware feeds and, and investigating that and looking at dark markets where you've got a weapons being sold and bought, you've got a bank accounts being bought and sold. You've got credit card information dumps being bought and sold. You've got child exploitation information..

Alex:

Right, Yeah, totally. I got it. So you're just maintaining that, like essentially when you work with a company, for example, an exchange or a government, they are basically like: hey, CipherTrace or Dave , here's an address, you know, you're basically saying they don't give you a name or any information about the person they're asking you to look into. Okay. Well, you know, to me, that's kind of like a paper tiger, it doesn't really matter to a human rights activist who's being de-anonymized, whether or not it's a, it's a financial surveillance company doing it, or a f inancial surveillance company working in tandem with th e g overnment. I mean, you're an arm of, whoever's asking you to carry out these orders. So I don't really think you can hide behind the fact that you're claiming you only do part of the procedure, especially because there are a f inancial surveillance companies that do do the whole kitten caboodle, maybe not yours but I can assure you the ones in China and Russia and all these dictatorships do our fu ll service de-anonymization clinics. Um, ma ybe you guys are, you kn o w, f eeling like you're more moral or you operate under a different rule set, cau se yo u're in a democracy. But I can assure you that that's not going to be the case for your brethren abroad, unfortunately.

Dave:

I can't answer for people around the world who are doing whatever they're doing. I can only answer for, you know, the overall industry and meant what we're doing, but yes, you can certainly tie individual identification. So let's say you're a government and you have access to all of the banking information at every bank. You're an authoritarian government. You have every access to every credit card transaction, every PayPal transaction, every wire transfer, every , i nternet communication. I mean, tracing Bi tcoin's y o ur l ast worry.

Alex:

Well, can we actually, for the listeners, could you let's just use the Twitter, the recent Twitter, a scam as an example. So let's say you're on this case , you guys have been, you know, Twitter calls you and says: Hey, you know, we wan t to kn ow where these coins are going. I m e an, I find it hard to believe that the only thing you guys are goin g to d o is, you know..

Dave:

By the way, Twitter doesn't care where the coins are going, you know that, right? Like they only care about how their APIs are secure.

Alex:

Whatever. Let's just use it as an example. Maybe , t he person who sent the c oins mistakenly cares, somebody hires you or someone like you, right. So y ou h ave identified where the coins went. I mean, is it really useful for you to go back to your client and say: yeah, here it's at this address. I mean, I feel like they're g oing t o want to know more than that. They're going to want to know. Is that address u p finance address? Is it attached to an individual? So tell me, how do you connect the pieces? Who does that?

Dave:

Yeah. Well, we'll tell them if it's at a certain exchange or

Alex:

You can't know that without violating what you said before that you don't know anything about who owns these addresses either you do it , or you don't.

Dave:

No, there's a difference between knowing if you bought your mattress at target, or if you know your name, address, and how much you paid at target, there's a difference, Alex. There is a difference did you, did target process a credit card transaction from you or is there, you know, do we know broadly in a public space that you purchased a mattress, three cans of Oreos and some chips at target when you went there and therefore you're like at risk of heart disease, there is a real difference. So what we can tell you is, you know, what that stuff was bought at target, that's it. And if you want to go and follow due legal process, which is globally acknowledged and is obviously different in every country, then you have the right to go do. So for example, we get people every day who say, man, my Bitcoin got ripped off my mom's savings, my savings, etcetera there, I think there's a human right. Basically to be able to get your stuff processed and be able to see if there's any legal diligence that can be done. Now, it follows all due diligence.

Alex:

Okay. Hold on, hold on. I appreciate the point you're making. So how do you know that the address belongs to Binance? How would CipherTrace knows?. Do you have a list where you're like, here are all the address? I mean, I just want to find out, like, what, how are you pairing an address to , to an institution that owns that address? I don't understand, if you don't know anything about that , how do you do that.

Dave:

Well, we do that through our own analytic processes, where we are able to look at addresses that we know belong, and then we put them into various algorithms to correlate them and come up with a extremely high probability rate that they are same with smart contracts. You can look at smart contracts and go, okay, well, these smart contracts, 98% of them from a certain exchange go through this contract, etcetera. So there's lots of different algorithms that are built around, you know, for example, peeling transactions, etcetera, etcetera, etcetera. So a lot of technology and a lot of analysis goes into it to create high rates of positivity with low false positives. But again, it does not identify individuals that identifies where their money went to if they got defrauded, scammed.

Alex:

Okay. So you're saying your services could only be useful in , in the case that someone has taken something like Bitcoin and withdrawn at a company or an institution. You , you guys are completely useless if it's just peer to peer stuff. Is that something you're willing to say?

Dave:

I wouldn't say it's useless, but we certainly don't focus on it. I mean, we provide no analytics that would identify an individual or a cluster of things. I mean, we can say anyone can do a cluster analysis and say, all these addresses belong to a certain..

Alex:

Right. But you do admit that your company has value . Let's just pretend with this Twitter thing. If you guys were the ones that cracked the case , i t would be, let's say some exchange, someone hired you and an exchange to figure out what happened. And you guys figured out that this particular address you w ove through all t h e movements and motions of the Bitcoin and you settled that it arrived at Binance's ...

Dave:

You can find it on our blog.

Alex:

Right? Exactly. That's what I'm hinting at. So you can claim that you don't, I mean, you can kind of have this claim. Okay. I understand that you don't de-identify, you don't de-anonymize anyone, but you are you without you, the process couldn't happen. Like all the Binance has to do is get on the phone with you or email you or whatever. However, you guys communicate and they have to see that you've : Hey, that address that came in at 12:30 PM yesterday with that much Bitcoin. Yeah. That's like this criminal. And then Binance gets to decide what to do. Do we freeze that person ?

Dave:

You're making assumptions?

Alex:

No, no I'm saying Binance does that, but, but they can't do that without you, your value prop is precisely helping them identify that person. That there's no, you can't get out of this. You're part of that process. You can say that your hands are tied, but.

Dave:

If an exchange is a subscriber to CipherTrace, then they check every transaction coming in and out. We will give them a risk score about, do you want to look at it or not? And if we say this is coming from somebody who had all their bitcoins stolen, we will give them a risk score and they will go, it'll get blogged . It'll go into their compliance department. And their compliance department will have a team of people who will go look at it and say: "Oh, this is looks like it's been reported as stolen. Let's look at it. Maybe we should choose to freeze the account and ask the account holder what's going on? Why are they receiving stolen funds?" And then it gives the opportunity for the person who had their funds stolen to work with law enforcement in their country and wherever Binance, which division they're working with, or whoever the exchange is to subpoena records. And the law enforcement goes through its usual legal lengthy process to go through all of the legal process, get grand jury to issue a subpoena that all goes through law enforcement. The customer doesn't know what we don't know it. And law enforcement go through it and figure out, okay, this is the KYC of that person. We have nothing to do with that. They, we just give them like.

Alex:

Right, so in the case of the Twitter scam, the guy posted, or the girl, whoever it was, I guess we don't know yet entirely, but they posted an address. Okay . So like, we all saw that like a bunch of Bitcoin went in there and then, you know, we saw later thanks to companies like you, right. Or people at home who are doing what you're doing, but just in an open source way , that, Oh, well, t hey, they tried to kind of mix some of it, but it sort of ended up at this, at this address at this exchange. So you're basically saying that's the value prop of your c ompany's helping, people trace funds. So all I'm saying is that when you..

Dave:

One of them , we do a lot of things, but that's certainly one of them. Yeah.

Alex:

Well, when you do your whole third point was the Bitcoin analytics companies or financial surveillance companies don't identify individuals. I got it . I think that, I think that's a paper tiger. I think you help identify individuals because without you, if you were to be believed, then exchanges and people pursuing their lost funds would not be able to identify the individuals.

Dave:

Remember Alex said that they don't know the individuals either. Right? So the exchange knows their individual customers with the exchange ...

Alex:

Have you tried to sign up with Coinbase or Square? They ask you for your driver's license. So whoever has that account at Coinbase, they know everything about that person.

Dave:

How many exchanges have you signed up for?

Alex:

More than one, I'll put it that way.

Dave:

Mines is more than 200, 300 or 400. So I have some data on it. But yes, I agree with you, but they understand who you are.

Alex:

What are you, are you debating that they don't collect KYC information? I mean..

Dave:

I'm just saying that the variation is quite wide around the world, but so they understand who you are. All we're saying is that it's at this exchange, you know, go through the legal process. If you want to get your funds recovered, here's who the person is to call. We're providing a phone book. Did the yellow pages put the phone companies at jeopardy? I don't think so. We're just basically saying here's where you go to apply due legal process to get your funds back or to deal with the criminal investigation.

Richard:

Gentlemen, I think that there's a bigger, more fundamental issue that should probably be debated here. I think what we can probably agree on here is that CipherTrace and these other financial analysis, blockchain analysis companies basically provide some kind of tool that ends up being used by certain regimes or institutions to de-anonymize. Now, some companies might do a lot of anonymization on behalf of their clients. Some blockchain analysis companies do very little, which seems to be the case for CipherTrace here. But I think the bigger question here is why is de-anonymization bad? Now I myself can sort of understand both sides of the argument, but government's cracked down child pornographers, human traffickers and so on and so forth. And they really can use the help of de-anonymization tools. On the other hand, you also have regimes that will suppress dissidents that will, that will put certain people in jail when they are fighting for democracy in these countries. And they rely on to you anonymization tools . So it sounds like it's a double edged sword, but I think the bigger debates here isn't necessarily about whether the blockchain analysis tool is a piece of puzzle. It's a piece in this big puzzle of de-anonymization, but rather the de-anonymization effort itself, the pros and cons associated with it. How do we see whether the pros outweigh the cons or vice versa? Is this something that you guys want to engage?

Dave:

In my view on it, as you know, I'm an ex cipher punk, I got into digital currencies i n 99. I got interested in 2000. I met the DigiCash guys, the Eagle guys, you know, the zero knowledge folks who, y ou k now, are long gone, but their technology lives on a nd Z-cash. I've been involved in this space for some time I got into Bitcoin in 2011, I'm a privacy advocate. But on the other hand, there's the reality of it, which is, you k now, governments have figured it out and they have a long history of applying financial investigation and financial tracking. This is not new. It goes back. Not only centuries, it doesn't go back to the Renaissance, which we can talk about i n the Medici and all their records. It goes back over 2000 years. So this is not new. What we want to make sure is that this technology preserves as much privacy as possible, but gives us the ability to comply with regulations and help people who have, who have been defrauded. That's my view on it.

Alex:

Yeah. Well, when you, when you lay it out like that saying: Hey, we should have as much privacy as possible and then use the word, but, you know, we're all supposed to be trained to ignore everything you said before the word, but right. So the reality is that compliance is g oing t o mean that the government wants a b ackdoor into every a nd every transaction. That's their ultimate, what their goal is. And you guys are a tool for t hem getting there. You basically say that, you know, governments have figured it out. We should sort of give up. I disagree. I think actually they have a really hard time figuring out what's going on in Bitcoin. I' ll j u st c i te a recent example in Russia. The opposition movement, the democracy movement in Russia, which is a dictatorship ruled by Vladimir Putin. Who's been in power for more than 20 years and relentlessly jails, activists and dissidents. The opposition movement has started to collect funds using Bitcoin. And the government has actually said in public that they have a hard time , figuring out what's going on with Bitcoin. They can't figure out exactly what, you know, where the funds are that are being donated to Navalny and on t he other opposition activists, and this is such a powerful, p iece of evidence. This is such a powerful reality that it actually makes t h e legacy system, b e t ter for activists. Because the gov ernment basically says, Hey, if w e crack down on the, on their bank accounts and o n l egacy financial products, and t h eir traditional access, then they're just going to go and use Bitcoin. We'll have no clue. What's gonna, we'l l h ave no clue what's going on there. So they've actually started to like, loosen their general financial restrictions on activists and dissidents. So the fact that Bitcoin makes it harder for governments to understand what's going on is so important. It's like the thing we need to preserve. And in a hundred years, it's, what's going to matter. We, you know, compliance and onboarding people to Bitcoin, and none of that, stuff's going to matter. Eventually Bitcoin will win out. It has number, go up technology. It's a scarce asset that people are going to need in the future. It doesn't need any marketing. It doesn't need your help. It doesn't need the help of chain analysis companies it's that it doesn't in a hundred years, Bitcoin will be around and it'll be very powerful and it won't need anyone's help to get there. It'll be valuable because it's the only decentralized digital scarce asset in the world. And less than 1% of humans know about it now. And its value is $11,000. So, you know, what's it going to be like when 50% of the world knows about it? I think a lot more powerful than that and anything that's gonna damage Bitcoin's privacy or ability to act as this sort of parallel economy, I think is bad for Bitcoin. So yeah, I mean, that's my belief.

Dave:

I mean, Alex, I, you, look, I agree with you, but you are putting words into my mouth. I didn't say things like , you know, we want to kowtow to governments or anything like that. You said that, so I didn't say that ...

Alex:

Sorry, I didn't mean to do that. Which part?

Dave:

You said several statements that I didn't say so that's okay. But just, you know, you need to understand my perspective on this, which is, you know, I can be pro privacy or, you know, what, here's what I could do. I could , I had to make a decision, which was government regulations coming down and it's driven by old school bankers. So I have two choices, do nothing and let them go do whatever they want to do, or get engaged and try to be a bridge between the crypto community and what we want to achieve. And the regulations where they control 99.9% of the funds transfer and the armies and the cops around the world. And so I chose to step into that breach , which is I'll stand up for it and say, you know, I'll take it. So let's get involved with the regulators. Let's try to teach them that the stuff that they're doing around cryptocurrency regulation is not helpful. It's not the right way. There's way, better ways to do that . That preserve privacy, that preserve your mission, which is stopping countered , you know , stopping terrorist, financing, weapons of mass destruction, anti money laundering, child pornography, all that stuff. We can affect that in ways that don't not to the way that you're doing it. So that's, that's what we've done is try to step into that breach. Trust me, it's not the most profitable way to do it. But it is how we've looked at it at CipherTrace which is let's step into the breach and try to be a bridge between what's happening around the world with regulation and what we want to achieve in crypto.

Alex:

Right. But there's another option. You could just not do any financial surveillance or you could devote your career to building privacy technology that protects individuals. I mean, it's not like there's not like there are other options for you guys. You don't have to

Dave:

No privacy technologies. We work every week with the team at Zcash. We work every week or two with the team on Monero. We are working with these guys. We, you know. Yeah, sure. But I mean, at the end of the day, if Fiat rails get cut off to cryptocurrency, then the whole thing's largely done. We are not at a point where we have a viable cryptocurrency economy where I can pay my mortgage, my car insurance, or anything else in crypto one day, maybe we'll get there. That's great. But right now we're not Fiat conversion rails are important. They're crucial to cryptocurrency being viable and somebody's gotta step in and help bridge that gap because otherwise we're going to get trampled by the regulators.

Alex:

So that's a great point. I actually want to , r eact to that. This is what everybody in this industry says in the blockchain analysis, chain analysis, financial surveillance, whatever you want to call it, they say like, without us, you know the activity wither and die, the reality is around the world. Bitcoin is a parallel economy. It's a shadow economy. It's people are using this in a peer to peer way, completely outside the existing financial system. The only reason you'd want to use Bitcoin today, for example, for remittances is if you didn't have a bank account or didn't want to deal with the financial system. So the idea that like we need blockchain companies so that we can be compliant and use Bitcoin, I think falls apart. I mean, the whole point of using Bitcoin is that we're going around this. What you're seeing is true for people who want to invest in Bitcoin as a speculative store of value, to which, you know, what, like they don't really matter. That's not really the point of Bitcoin. Yes, people I think will get rich of course, over time off this asset, because it's so valuable, but it's ideological reason for existing is not to get wall street rich. It's in fact, it's to overthrow wall street and to overthrow government control over money. I mean, this is a very radical technology that certainly doesn't need a compliance department. This is a technology that allows people to go around authoritarianism and oppression and people will find a way just because it's going to be harder for people to, to sell Bitcoin into Fiat. If, for example, the US government banned it outright. I mean have you seen how the war on drugs has worked? There would be all kinds of amazing black markets in the United States for the sale and the purchasing a Bitcoin just as they were in China during that one month when it was illegal, just as there were for years in India, when the government threatened to ban it entirely until recently the Supreme court actually said, no, you can't do that. So we have on record, large governments trying to ban the thing and failing. So I just think that's a bad argument that if you guys don't exist, like it would fail. I think it actually Bitcoin exists to help overthrow the current financial regime, not to be nice and play nice with it.

Dave:

Well , I'm, I have my ideas, but I didn't see you in 1995 when DigiCash and E-cash w ere trying to get going. And they had relationships with Mark Twain bank i n the United States and Deutsche bank i n Europe. And they were trying to get electronic cash to get funded by banks so that you could get cash in and cash out. Right?

Alex:

Why did they fail?

Dave:

Because the banks wouldn't adopt it. One of the fundamental innovations of Bitcoin, other than the blockchain and the reward system that was created by the mining infrastructure, absolute freaking genius, right? And the blockchain absolute genius was the innovation around exchanges, which creates a distributed environment to interact with Fiat currencies. So if you could not buy cryptocurrency and you could not settle cryptocurrency, we would be still sitting here without Finney's hobby project, right? Like what happened and what changed was that the distributed nature of exchanges allowed the exchange of monetary instruments from fiat into cryptocurrency. There would be no, Bitcoin is $10,000. It would be no Bitcoins at dollar , you know , Bitcoin's 11. So the integration of the financial infrastructure into Bitcoin is crucial for it to actually function.

Alex:

This is it's actually kind of fitting that you would you would point out the example of E-cash projects in the 1990s, and you're right. I wasn't around for that, but I do know why they failed and you're right. They couldn't get the banks to agree. Banks and governments are never going to agree entirely with what Bitcoin presents. This is a confiscation resistance, censorship resistant, permissionless global, a borderless digitally scarce asset that can't be manipulated or controlled. Why would they ever agree to that? The only way that this thing is going to be adopted is it wins on its own terms. So I think on the contrary, in the early days of Bitcoin , the reason why it has its spread in many circles, wasn't, what's certainly not because banks adopted it. It was because it grew on the black market.You know, there are ways around the financial system in countries like Indonesia and the Philippines and Nigeria and Venezuela. And that's where you see activity and people adopting Bitcoin, not at the banks. I mean, the United in the United States, Bitcoin's at $11,000. And it wasn't even until a couple of days ago that banks even were allowed by the US government to conceivably even hold Bitcoin for their customers. So banks have played zero role in this, and there's actually a slogan. It's a little profane, but the slogan and Bitcoin is Bitcoin because banks , I mean , the banks are not supposed to be part of the future of money. I mean..

Dave:

How do you even explain that Signature bank has over 400 cryptocurrency companies as customers , how do you how do you explain the millennium bank who has hundreds of cryptocurrency companies as customers in the United States? There are over 600 companies that are banked in the United States by at least three mid market banks. And then there's a bunch on the big banks. How do you explain that?

Alex:

Obviously, yes. There are many banks that service the cryptocurrency industry

Dave:

Well, the silver gate came out last week and said, well, this cryptocurrency, thing's awesome. They have over 400 customers as well. Yeah ,

Alex:

Yeah . But the success, again, the success of Bitcoin is not, it's not because of banks like that . This is you have to understand the longterm goal of this technology is to allow people to be their own bank. And look in a hundred years, will there'll be banks. Of course, there'll be banks. Because not, everybody's going to want to be a self custody, you know , do self custody, they're going to want to hire people and pay them to hold onto some of their assets. And you're already seeing what the beautiful part is with Bitcoin. You're already seeing companies like Casa come out and help you do that on your own. So you don't have to go to a bank. And I think those solutions are gonna be easier and easier and easier as we move forward. But to suggest that like Bitcoin has been successful because of financial regulation and banking, I think is really dishonest. I mean, Bitcoin's been successful despite all of that stuff.

Dave:

I mean, I would fundamentally disagree. I would like to plot the price of Bitcoin versus the number of banks that have adopted it. And we can do that at another time.

Alex:

I think you may have a very American centric view of this. I mean, again, remember when Bitcoin doubled in price from 3000 to 6,000, that was when it was banned by the world's largest dictatorship in China. So, I mean, no bank was allowed to do anything officially did . You could go to a fricking political prison yeah .

Dave:

But it got Off shore to Hong Kong. And then eventually got off shore to Singapore.

Alex:

Exactly, bitcoin is a global borderless technology that can't be controlled. S o, the more that you guys try to de- anonymize what's happening on the chain and s ervice governments and corporations to help them control the network. That's bad for Bitcoin that hurts i ts value proposition. Just to go back to the motion.

Dave:

Disagree completely. I think that in a realistic world where there are 200 governments that are, have very strong history of financial controls that have woken up to cryptocurrencies and that they're gonna do stuff and they are doing it. And they're working with the financial action task force, the bat of who I with constantly, I mean, this is not going away so we can take a very philosophical view with it. And I'm a hundred percent aligned with you, Alex, I'm a hundred percent. We should be able to have anonymous transactions all the time, but that's just not the world that we live in. And so what we need to do is broker a conversation with the regulators and preserve financial privacy as much as possible. So for example..

Alex:

Wait, I have to respond to that piece. I agree with you. This is not going away. It would be very naive to think that governments or corporations are going to look at Bitcoin and just sort of say: Oh, whatever, we'll just let it run. Its course, they're going to attack it. They're going to try and control it. Right. You and I have a different philosophy. You say we should negotiate and maybe you'll be right, maybe in a handful of countries, maybe in Denmark, maybe in Switzerland, maybe even in that, in the grand old United States of America, maybe you'll find sympathetic regulators that are willing to actually negotiate with you and protect the rights of citizens. I'm not even going to say that that..

Dave:

By the way, that's one of the most restrictive regimes in the planet around cryptocurrency, just so you know..

Alex:

That's not good for your argument then because there's only a handful of advanced democracies in the world where citizens have the right and ability to push back on government over-regulation, and to actually protect themselves. Those would be in Northern Europe, you'd find a couple of them in South America and in stadia, Canada, United States, Australia, etc. You know, as well as anyone else that there's only a few hundred million people who live in these kinds of countries. Most of the world lives under dictatorships and authoritarian regimes. So they're not going to be able to negotiate with their rulers anything. There will be no digital privacy in their future. So I would argue that for humanity, from a global perspective, the answer is not to try and negotiate. The answer is to make technology that makes chain analysis and financial surveillance impossible. So that's what HRF is doing. We're trying to create an open source software fund to make technologies like coin swap possible that destroy link heuristics so that you guys won't be able to do your job anymore. That's the goal. So I would say to anyone who wants to promote Bitcoin and wants to see Bitcoin succeed in the future, they should support people like Chris Belcher, who ultimately are going to bring an end to the blockchain analytics industry. That that's the goal.

Richard:

Okay. Gentlemen, let's switch gears just a little bit. So I remember seeing Alex debate with the gentlemen from Elliptic at the mainnet event at, by Massari. And so there was a discussion about future privacy mechanisms coming on board. So the question is, will built in privacy mechanisms, such as taproot render financial surveillance, tech useless. If so, what business decisions will be made by b lockchain analysis firms to stay relevant. And so I think there's two parts to this, right? So the first question is how soon i s taproot coming and whether that will basically render b lockchain analysis, not very useful.

Alex:

We don't need taproot for coin swap, just so you know .

Richard:

Okay. Okay. So it's basically same question, right. But then the question number two was , I guess maybe this is more for you than Dave when that happens, what blockchain analysis firms will be doing to stay relevant or, are you guys not concerned with this privacy mechanism coming on board?

Alex:

I think we always have to be concerned. They're always going to find a new way. Like currently, I don't know what Dave's going to say. He probably can't eat probably can't reveal the full extent of what they're doing, but there's not a whole lot, as far as we know, with regard to tracing stuff on second layer, Bitcoin technologies, two examples would be lightening and liquid. Liquid is less of a concern to me because it's kind of a corporate product, but it does use confidential transactions, which are not really traceable. So that's one thing that's kind of interesting and unless I'm less bullish on that, just because I it's kind of a corporate product again, it's not really human rights tool. So I'm gonna put that aside for a second. But lightning network is a different beast to surveil as I'm sure Dave can tell you and you have to use a different.. You can't use obviously chain heuristics. You have to look at like the pattern of data going across different nodes. It's sorta like the Tor network in the way. You would try to manipulate it by taking ownership of like a large number of nodes in the network. So it's a different strategy, but I'm sure there's plans to do that. But they haven't really started yet. But that's how they'll adapt so that , you know, as soon as , lightning becomes robust, you know, these chain analysis companies will try to adapt and they'll try to start taking the orders of their clients, whether it's the US government or Coinbase or whatever, to try and identify, you know, help them identify people. Unlike just like people. There are companies that help the US government try to identify people who are using the tour internet browser. It's no different, but I just want to say that like, what people are working on right now is to make Bitcoin itself more private and less traceable, and it doesn't need any of these fancy upgrades. It can be done right now. So through a mix of chummy and coin joins and pay join and coin swap in the next 12 to 18 months, you can see open source wallets that make chain analysis basically useless. So we don't need taproot for that. Tactic will make it much better. I think there's reason to believe that the taproot upgrade, which has several different things in it will make it much harder to, to identify what, what transactions are multi-signature transactions, which ones are single signature transactions. It'll make it harder to figure out what's a lightened payment. What's not. So it'll be good, but we don't need that to fluster the current system. There's already really good work being done. But I wouldn't, I wouldn't expect them to give up. Maybe Dave can tell us about his plans for surveilling lightning .

Richard:

Dave, would you like to respond?

Dave:

Oh, I'm not going to a pine on the relative technical arguments around taproot. Or the addition of Schnorr signatures into Bitcoin or lightning network. These are all clearly technical challenges as Monero all I can say on that is we're just dealing in the, in the world of where we add in regulatory compliance. How do we make that as privacy preserving as possible? We work with the, you know, the Z-cash team and Monero team almost every week. Here's one thing the existence of cryptocurrency analytics helps drive the innovation and privacy technologies and that's a darn good thing. We want to help drive that, you know, that's that it's a give and take, which is we want to make sure that there's privacy technologies just as people, not us CipherTrace, but just as people, we all make sure that there's as much privacy technology out there so that people have easy accessibility to it, fungibility around it. I mean, it's a good thing. I also think that making it technically hard for people to get to is also a good thing because the people who really need it will do it and dumb bad guys. Won't I don't want pedophiles getting access to it. I don't want people who are kidnapping people and extorting their families to get access to it. I don't want people who are selling weapons of mass destruction to blow people up, get access to it. But honestly, I think it's very important. I think it's good to have this debate around the, you know, the dynamics of privacy and the ability to de-anonymize certain things. But again, it's not about d-anonymizing people. It's allowing people who are going to do it anyway to give them tools. And also, you know, we provide restitution for people all the time. Who've had their stuff stolen, but I do like this dynamic of, you know, pushing the envelope on privacy. I think it's a great thing.

Alex:

That is in a way true. I mean, you could say that financial surveillance is good for Bitcoin and human rights because it forces people to become more private, but you have to understand that's a lot like saying that like the secret is that's a lot like trying to say that the secret police or the Stasi , was good for people because it forced them to figure out better ways of speaking you know, in different secret language.

Dave:

No , it's about saying the media, the open media is good, but remember you'd like, you have to think about your right to privacy, right? So if you , you have no really appreciable expectation that you would have privacy. If you speak something in a public forum like a park, well , you have no expectation of privacy. If you speak something in a public forum, like a blockchain. So that's just a fact and cryptocurrency tracing companies have nothing, you know? I mean, we're not adding anything to that. That's just what it is. You've made that decision to publish your transactions out there . Fine. Now..

Alex:

You're saying that should be open for business or should shouldn't that phone call be just restricted to me the recipient and the telecom company.

Dave:

Absolutely. Nobody intercepts your phone calls

Alex:

That not true though, because the US government has done warrantless wiretaps on phone calls. So what you guys are doing is warrantless financial wire tapping.

Dave:

That is absolutely not true and you know it.

Alex:

That's definitely true. You didn't get a warrant for looking at every single person's data that you guys have in your dataset.

Dave:

It's published on the internet, Google map of data, a data leak of every transaction that's been done across multiple blockchains. What are you talking about? It's public information.

Alex:

That information is useless to you unless you've got a little bit of information about who started that transaction.

Dave:

Not about who started. It's not about any of that. It's about, there's plenty of public resources that there's plenty of companies out there who are, or Bitcoin and other cryptocurrency service providers who publish their addresses and go like, here's our hot wallet here for cold wallet. Here's how we tag our addresses. I mean that stuff's all public, gathering public information and consolidating in a format that helps people when they get ripped off. When there's financial crime, I don't think that's a bad thing. We can disagree. That's fine. I mean, I'm not expecting us to agree, but that's just my position on it is if we don't identify individuals, if we don't identify names, phone numbers, addresses IP addresses or any of that stuff about individuals, but we help people to get their money back when it's stolen or help governments to basically agree to the social contract that we're in, which is we agree that terrorist is bad. We agree that stealing kids and raping them as bad, we agree that certain drug trafficking is bad. That's a social context that we're in. Then I think that's fine.

Alex:

Two points. Number one, just to finish the point about your argument, that what you're doing, this new argument you presented at the end here, that what you're doing is actually good. Cause it makes Bitcoin stronger. Privacy companies were already doing that. Every single privacy company in Bitcoin has a little research unit. So we don't need you or other people doing financial surveillance. We have people studying weaknesses in the blockchain, so we don't need you guys making money off the government and other clients. We already got a protective mechanism so that I don't think that argument is very good, but to go back to the warrantless wiretapping piece , y ou're right, like in as much as, you know, it's not like I doubt you guys are g onna get hired to go after somebody who posted on Twitter, their address, and then told someone else where they sent it. I mean, you don't have to hire a chain analysis company for that. What you would need to hire a chain analysis company for is if you need more information than what's just available from sitting on my couch, on the blockchain , if I can just sit here and use a block Explorer, you don't need to pay a lot of money to a chain analysis company. The only reason I would need to pay any money to a company like yours is for special traits and tax and information that you guys have relationships with, different exchanges and things like that. If I could just do sit here at home and look at the blockchain, I'm not going to pay a big contract for that. People are paying you for your ability to like leverage relationships. As you said, you have this big database of like addresses that are relevant on exchanges and things like that. So again, you guys, I think, you know, when you do your work, you are part and parcel of process that violates in countries where it is constitutionally protected by giving information about financial flows to the government or other authorities without judicial process. I mean, that's just the way I view it. Maybe you disagree.

Dave:

I absolutely disagree with you Alex, and that's fine to disagree. But I think knowing that funds flowed from one place to a, a commercial entity that is licensed in a jurisdiction that has a requirement to report, to be able to know that it went there so that you can file..

Alex:

Bank secrecy act is only over 10,000 us. It's not, it doesn't cover small transactions.

Dave:

We don't have , that's fine. And you know , the other thing we have to talk about..

Alex:

And you are saying you refuse to take you are gonna say on record, you refuse to take any inquiries below the BSA limit.

Dave:

No , we don't. We don't do any of that. We don't, by the way, also, people don't hire us to say, like, as you said, somebody hires you to chase this thing. Like that's not our business. You have some misconceptions about how the business works.

Alex:

So you would not be involved in , tracking criminal activity on the blockchain. What are you talking about? That's what, that's your value proposition?

Dave:

You said that people hire you , you to go and say, who's this guy and what are they doing? And where are they doing it from?

Alex:

Well, no, they already know that. No, no, we already covered this. They know everybody who is on there. Who's one of their customers. They need to know which of them is associated with the Address that you guys are gonna figure it out. So as a team, you'll work together to de-anonymouse these people.

Dave:

We don't work as a team. We give that information to the victims of..

Alex:

Hey, by company , you guys are profit making business. Of course you work as a team. I mean, you could call it anything you want, but it's a collaboration. I mean, they take your services, they take the information they have on their clients, and then they pinpoint people and then they freeze the accounts of those people. So for example, like if I was Binance and I want it to freeze the accounts of anybody using Wasabi at Bitcoin mixing service, I could work with a chain analysis company to figure that out. And then through a chain analysis company, I can freeze the accounts of people who are using privacy tech, but that's that's teamwork, man.

Dave:

I mean, that's nobody does that, but yes, that's theoretically possible.

Alex:

Binance definitely did that. It's on record. They froze the accounts of people who are using Wassabi in their service. Now it was in conjunction with the Plustoken scam , but I'm just saying,

Dave:

Right I mean , where people lost over $500 million. So if you want to argue that people should be able to lose $500 million and have no recourse to any kind of recovery, any kind of legal recourse, they can't have the courts operate on it, then that's fine. I mean, that's your point of view without look it's kind of like, How would they do it without any course of evidence?

Alex:

Here's just a meta story. After 9/11, we were led to believe that we needed to give up our rights with the Patriot act so that the government could do things like master surveillance to stop terrorists. In reality, these programs have violated the privacy of millions of Americans and they've caught very few bad guys. If then there was a story in the New York times last year that said after hundreds of millions of dollars of expenditures in warrantless mass surveillance programs, basically zero people had been caught. Okay. So what had happened is the violation, the mass violation of privacy and human rights of millions and millions of people with no benefit to society. This is what mass surveillance does. Okay. So I think that we can solve financial crime and terrorism and we can fight kidnappings in anything we want through a reasonable, you know, like , investigative police work and detective work. They should not have access to, they should not have access to mass financial surveillance.

Dave:

It's not mass, Alex. It's basically saying here's w hat w e know..

Alex:

But you're even denying that you even know the names on these, on these accounts. So of course it's mass . So of course it's mass surveillance. You can't even differentiate.

Dave:

It's going to be mass surveillance, put your stuff on, out on the internet. It's going to be mass surveillance. I mean, put your stuff on Facebook. It's going to be mass surveillance. Yes. We don't do mass surveillance. It's bad for Bitcoin. Just stop. It would be way better if you guys didn't do what you're doing. I mean.

Alex:

We'll stop and we'll let the, you know, the Russians do it. No, the Russians are already doing it, but the Americans don't need to do it. That's the difference between the Americans and the Russians. Oh man.

Dave:

Here's the thing. Like let's also look at the future. Like when you look at the travel rule what's going on with FATF, what's going with fencing . I mean, this is mouse nuts compared to that. So let's get engaged on the real issue here, which is that's a million times more invasive than what we're talking about. Because we're basically saying your money went to this exchange or that exchange or went through that money laundering service.

Alex:

You are saying, you guys will not. I don't understand. You're saying you oppose the travel real legislation. You won't work with clients who ask you to help with that. What do you mean?

Dave:

I'm just saying that, like you got to compare, like what's going on now to what's happening. We need to get together as an industry and work on this and not be divisive about it. Because there's a reality out there which is governments have woken up to cryptocurrencies and we need to work together to preserve I'm on your side. We need to get cryptocurrencies to be protected as much as possible, but having an argument, cryptocurrency analytics that provides the recourse for people to recover their funds, that got scammed that also we're doing, you know, in some extents , bad stuff. That's..

Alex:

Well, I think something that's important for the listeners to understand is that FATF is one of these alphabet soup organizations like the UN human rights council, the world health organization FATF is not just Europe and America. Okay. FATF has Turkey, the Chinese communist party, Russia on it. So FATF is going to be a very authoritarian organization. That's going to turn the screws on financial privacy. There's going to be no negotiating with FATF in the far future. FATF will have every possible law on the books to try and stop any sort of financial flow that it can identify. Except of course, if you're part of the Davos elite, in which case they aren't going to prosecute you. So we'll continue to have this absurd double standard system where the rich get richer and never go to prison and middle class and poor people get in trouble. That's like the ultimate goal of FATF is to preserve the existing system with cryptocurrencies. So that's why..

Dave:

Have you attend of meeting in person? Are you sure about that?

Alex:

Well, I don't know. I , all I said is that FATF includes dictatorships on it. So I don't know.. I am Expert on dictatorship

Dave:

The object was to keep people for? I think you said that. Yeah.

Alex:

And by that for sure, 100%, it is to keep people like it is to keep people like Erdogan in Turkey and Xi Jinping in China. And the rulers that be in power FATF is, is no different than any other alphabet soup organization in that, in that context. And just to finish the point, this is why it's so important to not practice financial surveillance and blockchain analytics. Like don't give them any more help than they are that make them do it by themselves. Instead spend your career and time and energy helping make Bitcoin more free and private. And so we can fight these people. The good news is open source Bitcoin code is unstoppable. So once coin s wap, for example gets widespread enough. I mean, there's not a whole lot. They can do. So. I mean, n ow's the time to really double down and invest in this area as opposed to helping governments, track people down, which is just not super helpful and i t's bad for Bitcoin.

Dave:

Well, I mean I agree on tracking people down, but I mean, I think unless you've actually attended a FATF meeting and met with the people and understand actually how the organization works, and have dealt with them and recognized that FATF is not a regulator, right, FATF has no data. FATF is a group of people who meet in Paris once every, you know, six months to talk about this stuff and help set regulatory constraints for countries, they all have to implement their own regulation .

Alex:

One of the representatives of FATF is running a concentration camp system in China with millions of Muslims in it. These are not nice people, my friend, I'm sorry,

Dave:

FATF in China might be running one, but FATF is not ...

Alex:

No, just to be clear, one of the delegates in that room is , that person part belongs to a political party. That's running a concentration camp in China

Dave:

So I mean..

Alex:

Sure. Yeah. I'm not here to defend the US government. Trust me,

Dave:

There's 190 countries who are part of that FATF .Yes. There's 37 members and nine are , and then there's two who represent a whole bunch of other areas, but you basically that large scale representation from 190 countries. So yes, every bad thing that has ever been done certainly has been done by a member country of FATF . That is true.

Alex:

Because it's FATF it's of course, as an enemy of Bitcoin. So anything that helps FATF if it's bad for Bitcoin,

Dave:

They're not an enemy . I don't agree with their approach. Just so you know..

Alex:

Do you think FATF is a friend of Bitcoin?

Dave:

And I wouldn't say they're, I wouldn't say they're a friend either. I mean, I think there's a lot more friendly organizations. I think the importance of engaging with FATF is to be able to give them a better perspective on how to accomplish their goals without breaking the way that cryptocurrency works. And so my engagement with them, look, I don't get paid to work with FATF. You know, I do it because I want to make sure cryptocurrency thrives and we all get it. And, but there's a reality, right? Like someone's got to work with these guys.

Alex:

Yeah. But it doesn't mean that you're a good person. Good organization. I mean, did you can, you can do as much financial surveillance as you want. I just, I'm not going to let you stand here and say, it's good for Bitcoin. I mean, you could go, you can work for it . You could be a weapons contractor for all I care. I mean, I don't care.

Dave:

Yeah. But I mean.

Richard:

Dave and Alex here, I reel back to the page just a little bit. So I want to bring in an audience question and then I want you guys to put in your concluding remarks. So the audience question is someone is wondering what is the difference between the various blockchain analysis companies out there in terms of the, sort of the services they provide? How does your company differentiate yourself from the others? So there you go, David.

Dave:

Well, thank you. The difference between various blockchain analysis companies, I think it's going to be the background, their focus, how they work with the open community, how they work with regulators, what is the actual foundation of the company? So did they come from a cyber punk Bitcoin background and they're trying to negotiate the nasty waters between regulators and our vision of an open cryptocurrency or are they just simply trying to do analysis and make money on it?

Richard:

Okay, perfect. Well, thank you Dave. So Alex, I'll let you go first with your concluding remarks .

Alex:

Sure. So , again, you know, we talk about the motion here. We talk about the fact that I'm saying that blockchain analytics companies are bad for Bitcoin , or as I like to call them financial surveillance companies. Ultimately, the reason why I say they're bad for Bitcoin and Bitcoin, I do agree as many things. I mean the coin is the price. Bitcoin is the adoption. Bitcoin is people being able to use it. I agree about all these things, but the ultimate reason why blockchain analytics companies are bad for Bitcoin is because their tools of the very mechanisms and organizations and institutions that Bitcoin was meant to disrupt. They are relics of a previous age where a small group of people control the economy. They are the claws and hooks of this, this institution in its dying days, trying to hold onto its power. They are an arm of the Chinese communist party and arm of the US government , an arm of mr Putin. They are like the way, one of the ways, one of the key ways in which these dictators and other kinds of governments and corporations are trying to apply their old methods of surveillance and control onto a new kind of technology. So undoubtedly Bitcoin and blockchain analytics companies are bad for Bitcoin. If they didn't exist. these dictators and corporations and governments would have a harder time understanding what's happening and Bitcoin would be a stronger tool for freedom. And that's going to be true in 10 years, 30 years, a hundred years, y ou know, Bitcoin again, is t he number go up technology does not need a marketing department, does not need a compliance to do well. Bitcoin survives in spite of compliance, Bitcoin is built to thrive outside of government control. Bitcoin is built to thrive. Literally if it's illegal, that's where it's supposed to shine is if it's not allowed. So we don't need compliance. We don't need blockchain analytics companies. All they are are tools of those empowered and Bitcoin exists as a tool for the powerless. So blockchain analytics companies, or as I like to call them financial surveillance companies are bad for Bitcoin.

Richard:

Okay. Dave, the floor is yours for the concluding remarks.

Dave:

Thank you, sir. A lex, thank you for so much for the great conversation today. I would argue t hat counterpoint, which is a financial analytics you could call It financial surveillance, but big blockchain analytics are actually crucial for the survival of Bitcoin and cryptocurrencies moving forward. What is important is to preserve user privacy as much as possible. And I think that that we can preserve user privacy. We do it today. I see no m ovements against it. It is about empowering Bitcoin and other cryptocurrencies to flourish any world, which certainly is controlled by financial institutions and governments. But we need Bitcoin to flourish and to survive and to thrive and Bitcoin analytics and blockchain analytics and broader case do not jeopardize financial privacy of anybody. They h elp people recover their funds. They help us comply with regulations. They help us deal with the reality of it, which is we're not g oing t o overthrow the financial institutions. I wish we were, but we're not going to. So let's thrive inside of the community and let's create a world where we can still have P2P payments that are safe, secure, and private. But when they go to the Fiat payment rails, let's make sure that it's easy and safe for people to do it. And that everybody agrees. And we end up with a very safe, system that has financial privacy for P2P payments. But when you get to the rails, there's going to be some amount of KYC and analytics. And that's just a fact.

Richard:

Great. Thank you. So listeners, we would love to hear from you and to have you joined the debate via Twitter, definitely vote in the post debate poll and also feel free to leave your comments. We look forward to seeing you in future episodes of the blockchain debate podcast, consensus, optional proof of thought required. Thank you very much, Dave and Alex for joining today's show.

Alex:

Goodbye. Thanks for having me.

Dave:

Oh, thanks Richard. Thanks for having this great debate.

Richard:

Thanks again to Alex and Dave for coming on. To summarize Alex believes that blockchain analysis companies either conduct financial surveillance or enable financial surveillance by others, which he believes is a huge net negative for society. He thinks this is especially bad for citizens of countries with repressive regimes. These companies indirectly harm Bitcoin users and our tools for Bitcoin hating governments. Therefore they're bad for Bitcoin. Dave believes that without blockchain analysis firms, governments will fatally attack Bitcoin. And even if that does not happen, governments will build out these blockchain analysis technologies themselves. Anyway. So blockchain analysis companies have a chance to work with them while somehow helping them do the right thing in preserving financial privacy for quote unquote, the good people and these efforts will make Bitcoin stronger as a result. What was your takeaway from the debate? Don't forget to vote in our post debate, Twitter poll. This will be live for a few days after the release of this episode and feel free to say hi or post feedback for our show on Twitter. If you like the show, don't hesitate to give us five stars on iTunes or wherever you listen to this and be sure to check out our other episodes with a variety of debate topics: Bitcoin's store of value status, the legitimacy of smart contracts, DeFi, POW versus POS, and so on. Thanks for joining us on the debate today. I'm your host Richard Yan. And my Twitter is @Gentso09. Our show's Twitter is @BlockDebate. See you at our next debate!