By Aenon Johnson for GlobalJusticeBlog.com.
The ability of internet users to conduct anonymous transactions and correspondence brings both benefits and dangers. One area worth specific thought is that of financial transactions. Internet commerce relies almost exclusively on financial institutions’ serving as trusted third parties to process electronic payments. This default third party system inherently suffers because it relies on a trust-based model, in which transactions must be reversible because financial institutions cannot avoid mediating disputes. These perpetually increasing mediation costs increase other related transactions costs, especially small, casual transactions. The demand for an electronic payment system based on cryptographic proof instead of trust spurred the creation of Bitcoin, an open-source electronic currency that utilizes a peer-to-peer network in order to evade a central, regulated, third-party authority. Bitcoin users transact with one another directly without the necessity of interaction with regulating intermediaries, or the middle-man.
The traditional banking model touts privacy by limiting access to information, both to the parties involved and the trusted third party. Financial institutions strive to protect customers’ information by keeping public keys anonymous. A public key is essentially an encryption key, when combined with a private key, is used to encrypt messages and digital signatures effectively. For example, a bank may see that someone is sending a specific amount of money to someone else, but, encryption keys prevent individuals and institutions from linking any one person’s transaction to another. Encryption effectively hides transactions between two people just as cash does.
This system is similar to the level of information released by stock exchanges, where the size and time of individual trades, deemed the tape, is made public while keeping the parties’ anonymity intact. For additional security, banks usually generate a new key pair for each new transaction to prevent the key from being linked to a common owner. However, financial institutions sometimes fail to prevent the exposure of the key, so the link could reveal other transactions belonging to the same owner.
Bitcoin champions a system for electronic transactions without relying on the trust of a single private financial institution. Bitcoin essentially uses a public ledger to successfully track Bitcoin transactions. This public ledger allows all Bitcoin users to participate in updating the ledger, thus eliminating the need to appoint a single person or entity to prevent fraud. The public ledger essentially treats each Bitcoin as a tangible currency, while permanently preserving the Bitcoin as a digital object.
In 2006 WikiLeaks, an international non-profit journalistic organization started to publish secret information, news leaks, and classified media from anonymous sources. This group released numerous documents, which had a significant impact on world politics. In 2010 WikiLeaks released secret U.S. diplomatic cables, which triggered aggressive retaliation from various powerful groups. Following the release of these cables, numerous major financial institutions blocked donations to WikiLeaks, which is its main revenue source. During this time, Bank of America, Visa, Visa Europe, MasterCard, PayPal, Amazon.com, and Western Union blocked all payments to WikiLeaks.
According to the European Commission, Visa and MasterCard controlled 95.5 percent of the payment card market, and thus prevented most customers in Europe from financially contributing to WikiLeaks. This monetary blockade reinforced the banking industry’s reputation as a powerful, politicized arm of Washington. In WikiLeaks’ own words, banning contributions to WikiLeaks set “a dangerous, oppressive and undemocratic precedent.”
With the absence of traditional payment avenues, WikiLeaks eventually accepted Bitcoin donations in June 2011. Bitcoin helped WikiLeaks survive the government/Wall Street clamp down on the site’s payment system. Today, Bitcoin successfully creates a globally available unregulated currency. This in turn creates a sort of global economy that isn’t beholden to the regulations and rules of various governments. While there are some benefits to this, the obvious drawbacks are that Bitcoin is easily used to evade treaties and sanctions, which is why groups such as Stormfront, a group of white supremacists and neo-Nazis, and the Islamic State use Bitcoin for donations. In addition, illicit drugs and people are also exchanged via Bitcoin.
While bitcoin is presently associated with many clandestine transactions, cryptocurrency, like Bitcoin, serves the important function of evading censorship by financial institutions and governments. Unfortunately, the Islamic State currently uses Bitcoin to further its cruel agenda, as well as to aid its friends in Iraq, Lebanon, Syria, and numerous other places. The Islamic State uses the internet as a tool of terrorism as it anonymously funds clandestine operations.
Despite this, various “hacktivist” organizations, with GhostSec at the head, currently try to disable neo-caliphate organizations via shutting down the terrorists’ cryptocurreny wallets. In some ways, closing the Islamic State’s cryptocurrency wallet is more effective than the global world’s collective physical assault on terrorist organizations with weapons and drone air strikes. Preventing terrorist organizations from purchasing or selling weapons and other items with crypotcurrency essentially slows their ever widening territorial growth and power.
When official global powers failed to curtail terrorist organizations in a physical sense, the online community stepped up to the plate. Individuals who care deeply about others all over the globe try to make the world a safer place, while simultaneously bolstering the anonymity of the internet community. For example, anonymous self-funded non-profit organizations have set up sites where individuals can report terrorist activities and threats while taking Bitcoin donations. At a time when the world’s collective fear of terrorist attacks is at an all time high, the internet, the ultimate global community, stands out by combatting terrorism in a new way.
Aenon Johnson is a 2016 JD candidate at the University of Utah SJ Quinney College of Law. She is a Swenson Natural Resources Scholar, CALI Award recipient, and is concurrently working toward the University of Utah Certificate in Environmental and Natural Resource Law. From 2014-2015 she served as the vice-president of Women’s Law Caucus, the secretary of Natural Resources Law Forum, and interned with Judge Ted Stewart at the US District Court. In her spare time, she enjoys spending time with her two dogs and wildflower hunting & pressing.
 Satoshi Nakamoto, Bitcoin: A peer-to-peer electronic cash system page 1.
 Satoshi Nakamoto, Bitcoin: A peer-to-peer electronic cash system page 6.
 Satoshi Nakamoto, Bitcoin: A peer-to-peer electronic cash system page 8.