Episode 121 of the Public Key podcast is here !! With the evolution of AI and the questioning of authenticity during the time of presidential elections, it is getting increasingly more important that data and files are unable to be corrupted and not controlled by a centralized party. In this episode, renowned cryptocurrency and civil liberties attorney, Marta Belcher (President & Chair, Filecoin Foundation) shares insights into decentralized storage, crypto policy and privacy in the digital asset age.
You can listen or subscribe now on Spotify, Apple, or Audible. Keep reading for a full preview of episode 121.
Public Key Episode 121: Deploying IPFS in Space and Civil Liberties and Privacy In Crypto
With the evolution and the capabilities of AI and the questioning of authenticity during the time of Presidential elections, it is getting increasingly more important that data and files are unable to be corrupted and not controlled by a centralized party.
In this episode, Ian Andrews (CMO, Chainalysis) speaks with renowned cryptocurrency and civil liberties attorney, Marta Belcher (President & Chair, Filecoin Foundation).
It’s a timely discussion that traverses the innovations and societal impacts of decentralized technologies and how Filecoin and IPFS’s decentralized storage solutions are at the forefront of what could be an International shift to securing information.
Marta provides exclusive insights into the incredible collaboration with Lockheed Martin deploying IPFS in space and she shares her insights on the recent advances in crypto policy, discussing the importance of the FIT21 bill and the complexities of privacy and content moderation in the digital age.
Quote of the episode
“You’re putting users in control of their data. You’re giving them an alternative to big tech. Instead of having just a few companies storing this data, you can have many copies of data all over the world.” – Marta Belcher (President & Chair, Filecoin Foundation)
Minute-by-minute episode breakdown
2 | Marta Belcher’s journey into Bitcoin, cryptocurrency and civil liberties
4 | Introduction to IPFS and the benefits of decentralized file storage
12 | Understanding the scale of Filecoin and the amount of data and type of data being stored
16 | Filecoin and IPFS technology demonstrated in space with Lockheed Martin
21 | Dealing with decentralized content moderation on web3 platforms
27 | Crypto policy shifts and legal battles unfolding in USA with the FIT21 Bill and the introduction of the Digital Asset Anti-Money Laundering Act
31 | Insights into the debate on privacy vs. anonymity when it relates to cryptocurrency
Related resources
Check out more resources provided by Chainalysis that perfectly complement this episode of the Public Key.
- Website: Filecoin Foundation: On a mission to preserve humanity’s most important information
- Website: Filecoin: Decentralized storage network designed to store humanity’s most important information
- Report: Chainalysis Money Laundering and Cryptocurrency Report (Available Now)
- Report: [REPORT PREVIEW] Malign Interference and Crypto: How Crypto Transaction Tracing Can Expose and Disrupt Malign Influence Efforts
- YouTube: Chainalysis YouTube page
- Twitter: Chainalysis Twitter: Building trust in blockchain
- Tik Tok: Building trust in #blockchains among people, businesses, and governments.
- Telegram: Chainalysis on Telegram
Speakers on today’s episode
- Ian Andrews * Host * (Chief Marketing Officer, Chainalysis)
- Marta Belcher (President & Chair, Filecoin Foundation)
This website may contain links to third-party sites that are not under the control of Chainalysis, Inc. or its affiliates (collectively “Chainalysis”). Access to such information does not imply association with, endorsement of, approval of, or recommendation by Chainalysis of the site or its operators, and Chainalysis is not responsible for the products, services, or other content hosted therein.
Our podcasts are for informational purposes only, and are not intended to provide legal, tax, financial, or investment advice. Listeners should consult their own advisors before making these types of decisions. Chainalysis has no responsibility or liability for any decision made or any other acts or omissions in connection with your use of this material.
Chainalysis does not guarantee or warrant the accuracy, completeness, timeliness, suitability or validity of the information in any particular podcast and will not be responsible for any claim attributable to errors, omissions, or other inaccuracies of any part of such material.
Unless stated otherwise, reference to any specific product or entity does not constitute an endorsement or recommendation by Chainalysis. The views expressed by guests are their own and their appearance on the program does not imply an endorsement of them or any entity they represent. Views and opinions expressed by Chainalysis employees are those of the employees and do not necessarily reflect the views of the company.
Transcript
Ian:
Hey everyone. Welcome to another episode of Public Key. This is your host, Ian Andrews. Today I’m joined by Marta Belcher. She has more jobs than anyone I know in Web3. She is a cryptocurrency and civil liberties attorney, president and chair of the Filecoin Foundation, also GC and head of policy of Protocol Labs, as well as a number of other roles. Marta, welcome to the show.
Marta:
Thank you so much for having me. I’m so delighted to be here.
Ian:
Now, you have been in the world of cryptocurrency for a long time. I love to start off with hearing people’s crypto origin story. Tell us how did you get into this space?
Marta:
Well, I am a civil liberties attorney, as you mentioned, and … Actually, let me start that over.
I started out as a attorney focused on technology and civil liberties. And for me, the thing that was really appealing to cryptocurrency when I first heard about it back in 2015 was the ability of cryptocurrency to really import the civil liberties protections of cash into the online world. So the resistance to surveillance, resistance to censorship, privacy, those things were really appealing to me.
And so I ended up being a lawyer at the time, back in 2015, focusing on cryptocurrency. There weren’t that many lawyers at the time focusing on crypto. I guess back then it was really just Bitcoin, not even cryptocurrency. And really got to work with a lot of amazing early teams working in the space. And was able to ultimately work really closely with the team that was developing Filecoin and ended up much more in the Filecoin extended universe. But really, it’s been an amazing nine years working in the cryptocurrency space.
Ian:
Nine years makes you very much an OG in the world of crypto. Congratulations on that. What type of law were you practicing when you first started encountering crypto? Was it general business or was it more focused on intellectual property? Or how were you helping some of these early teams when you first got into the space?
Marta:
Actually, my title at my law firm ended up becoming attorney, blockchain and emerging technologies. So I think I may be the only person who’s ever had that title, certainly at that firm, maybe at any firm, which was fantastic to be able to really focus on blockchain and emerging technologies. Previously, I had done a lot of work for organizations like Project Gutenberg, Public Knowledge, Center for Democracy and Technology.
I had submitted briefs in the Supreme Court and appellate courts on all sorts of different technology and civil liberties issues. And I also practiced intellectual property law and had done copyright, trademark, and patent cases for all sorts of technology companies, including Apple and Samsung among others. So really focused on technology and really got enamored with this particular technology.
Ian:
That’s amazing. Take us back to the early days of Filecoin and Protocol Labs. I think I really only started learning about IPFS in the context of NFTs, where people are like, “Oh yeah, we can store some aspect of this digital art and we can make it last forever.” And I was like, “Oh, that’s a pretty novel concept.” There’s few people that I think really think about permanent storage of digital information. Where did that come from? What was the genesis origin point of that concept?
Marta:
So IPFS was developed well before I was working in the Filecoin universe and well before Filecoin was a thing back in around 2014. IPFS stands for the InterPlanetary File System. It’s basically a way of doing decentralized file storage and networking that enables you to look for data based on what it is rather than where it is. So the idea with IPFS is basically that every piece of content gets a content ID. And you can actually look for that content ID and instead of looking for data in a particular location in a particular place.
So on today’s centralized internet, when you’re going to a website say, or trying to retrieve data, what’s actually happening is you’re going to a particular server in a particular location and retrieving data from there. But it’s totally possible that that data could be corrupted or it might have been changed, or it may not be there.
So the analogy I like to use for IPFS is imagine that you just read a really good book and you tell your friend that they should go get that book by going to the New York Public Library on the third floor, second shelf from the left, two books over. That’s kind of how today’s internet works, you go to a particular location to retrieve data. But it doesn’t really make sense because the book you might’ve had in your backpack. Or maybe you would’ve been able to get it much more easily at a local bookstore. Or maybe you get there and it’s not there. Or maybe you get there and someone tore a page out. It doesn’t really make sense.
And so the way that IPFS works is instead of doing that, you say, “I just read this really great book and here’s the title of the book.” And then you can actually go and get that book from wherever is closest. If you already have a copy, you already have a copy. If it’s at your local library, you get it from there. So that’s really how IPFS works is each particular piece of content has a particular content ID, and that’s how you actually are able to retrieve the data. So it’s a much better way of doing networking.
Ian:
It’s such an interesting concept when you start to apply it to this realm of civil liberties. I hear a lot about, although I haven’t personally experienced the differences in the internet, when you go someplace like China or you go into Russia or you go into Iran, the information that we take for granted, like Wikipedia or tons of other popular sites, common news, it isn’t available.
And so in my head, I start to think about IPFS being a potential solution for this, where there’s a more universal storage layer that perhaps starts to get around some of the restrictions imposed by more oppressive governments. I’m curious your thoughts on that. I mean, I must imagine you spend a lot more time thinking about this than I have.
Marta:
Yeah, absolutely. I mean, I think there are so many benefits to doing networking in this way. And as you mentioned, resistance to censorship is one reason that IPFS is important. It’s also, in many ways, just a better way of doing file storage and doing networking. And particularly when you then add Filecoin on top of it and suddenly you have an incentive layer on top of IPFS where people are actually incentivized to reliably store data over time, what you really get is a shift away from today’s centralized internet model.
It sounds niche, but actually this is really about the future of the internet, because today’s internet is centralized, which means that the vast majority of data is really being stored by just three companies, Amazon, Microsoft, and Google. So there are these single points of failure, and you realize that when you have AWS go out and then all these websites go down and people’s toasters stop working. And it really means that we live our lives through just a handful of corporations, and we have no choice but to trust them with our data. And they really have unilateral control over what we can do and say online.
And so with IPFS and with Filecoin, there’s this alternative where you can use cryptocurrency’s programmability to basically create this decentralized file storage network where files are stored reliably over time. You can think of it like Airbnb for file storage. You’re renting out your extra digital storage space to people who are paying you to store their files or pieces of their files. There’s a computer program that’s checking and saying, “Are you storing those files? If so, you’re getting paid in Filecoin.”
And that really is a foundational technology for the next generation of the web because instead of having just a few companies storing this data, you can have many copies of data all over the world. You’re putting users in control of their data. You’re giving them an alternative to big tech. And you’re allowing them to store files all over the world so that even if some devices fail, that data is going to remain available. So it’s a much better foundation for, as we say, humanity’s most important information.
Ian:
Tell us about how big IPFS is today. How much data is being stored? How many people are participating? Because I would imagine for the folks who are a little more technical listening to the program, this idea of relying on a random individual with a home server to store their most important information is maybe a little bit scary on the surface. But I think some more context here would get people pretty interested because I find the scale that you’ve been able to reach pretty incredible.
Marta:
It’s a little more complicated than this, so I’m oversimplifying a little bit, but you can really think of it as the data being potentially chopped up and encrypted and stored in many different places in a way where it is not necessarily true that the person storing the file would be able to read the file. You can think of it like being able to put many pieces of something where only the file owner can actually put all the pieces back together. So less scary than it sounds depending on how you decide to do file storage using the Filecoin network.
I remember before we launched Filecoin, there was this question of would we ever reach an exabyte of storage capacity, because that was just a huge amount of data. And we very, very quickly, I mean, it was just shockingly quickly went one exabyte, two exabyte, three exabytes, four exabytes, and the amount of storage capacity on the Filecoin network is enough to store all of the written works since the beginning of recorded history to today 10 times over. It’s just a huge amount of data storage space.
And for us, it’s also not just the amount of storage, but also the types of data sets that are being preserved. So that storage space is really being used to preserve humanity’s most important information. So this includes things like open data sets that were created by NASA or NIH or other government data sets. It also includes scientific data. For example, CERN uses the Filecoin network to store Large Hadron Collider data.
It also includes data for human rights defenders because it’s really important for some data to make sure you have many, many copies, there aren’t single points of failure. For example, Starling Lab, which is a project of Stanford and USC, both stores USC Shoah Foundation’s genocide survivor testimony videos on the Filecoin network, and also recently submitted evidence of Russian war crimes in Ukraine to the International Criminal Court.
Because not only can you reliably store data and make sure that it’s there, but you can also prove that it hasn’t been tampered with because each piece of content has a unique content ID. If you change anything about the data, you change the content ID. So it’s also particularly great for being able to show that data hasn’t been tampered with. And that was one example of where that actually hits in the real world.
So all sorts of really amazing data that’s being preserved on the Filecoin network and just really, really cool use cases, anything from government data to scientific data sets to human rights data.
Ian:
It’s incredible to hear about the use cases and the people who have actually adopted it. And I think I saw a stat on the website, you’ve now passed two exabytes worth of data on the network.
Marta:
So that’s the amount of data actually stored on the network. And then there’s the actual data capacity, which is even larger.
Ian:
That’s incredible. For anyone that’s not sure what an exabyte is, it’s a billion gigabytes, and your iPhone has a few hundred gigabytes probably depending on the model that you have. So 2 billion of those actively being stored on the Filecoin network today.
So you mentioned that Filecoin plays an important role here because this is how people who are providing storage get paid. So I would assume that this is how if I wanted to store some documents on the network, I would need to buy some Filecoin. And who am I paying? I know how to use Amazon and S3. There’s a company there. I sign up for an account. If I want to use IPFS, walk me through what the process would be as a total novice, I’ve never done this before. Where do I begin?
Marta:
So lots of different options is the short answer. So first of all, one thing you can do is just use IPFS. IPFS is the technology that underlies Filecoin, but many people use IPFS without using Filecoin. So that is an option. IPFS was developed before Filecoin, and the issue was, well, if someone is storing a file on IPFS and they just take their hardware offline, then the file’s not available. So that’s not a great way of storing files because it’s not reliable. You’re relying on people to volunteer their storage capacity.
So one can just use IPFS, that’s totally possible. You can also use Filecoin, which is built on top of IPFS to solve that incentive problem. And the idea is there are storage providers all over the world. Those storage providers could be anything from individuals to whole companies. There are multimillion-dollar companies that are storage providers on the Filecoin network that have a lot of hardware space that’s available.
I compare it to Airbnb for file storage, people are renting out their storage space to other people. Those storage providers need to put up Filecoin as collateral. So if they were to stop storing your files, there would be a penalty for that, that collateral would go away. So that’s how you can know that your files are going to be stored reliably.
And then, again, it’s a little more complicated than this, but you can also have a situation where you’re using the programmability of cryptocurrency to be able to say, “Is it still being stored? It is. Okay, great.” Let’s be able to automatically compensate storage providers using Filecoin for storing files.
Ian:
And do I as a user pick a particular storage provider? Or is there a DAP type interface that’s hosted somewhere that I’m interacting with and it’s transparent to the end user that there’s a variety of different providers who are all over the world?
Marta:
So Filecoin, you can think of it as very infrastructure layer. There are multiple different options. One thing you could do is you could be working directly with storage providers making deals. That is something that you could do as an individual in theory, but for individual end users, it probably makes more sense to interact directly with an application that’s built on top of the Filecoin network.
And there are hundreds of applications built on top of Filecoin. You can think of things like Dropbox, but on Filecoin. As an individual, you wouldn’t necessarily, as an individual end user want to be directly using the Filecoin network. You might want to be using a little more user-friendly application built on top of it.
Ian:
Got it. Okay. And let’s say that I’m a big consumer of infrastructure. I want to run my website on top of Filecoin. And I know for example, there’s a lot of decentralized apps in the DeFi space that actually host their web front ends. I think they’re deployed on top of IPFS in some way. So I’m expecting a lot of users for my website. Is that an application that I could potentially run on the Filecoin network?
Marta:
Yeah, I mean, there’s all sorts of data that you can store. I think that for Filecoin versus IPFS, the place where Filecoin really has shined so far is for these enormous data sets, like really large, enormous sets of data. Things like, for example, I mentioned that CERN uses the Filecoin network for storage of Large Hadron Collider data. That’s the ATLAS Experiment at CERN. And also things like Berkeley’s Underground Physics Group, which just ends up with these massive, massive amounts of data. That’s really a great example of where Filecoin really can come in and play a huge role in making sure that data continues to be available and storing those really large data sets.
Ian:
Cool. Okay, that’s helpful. Now, before we started taping, you mentioned that there was this really awesome project that we definitely had to talk about, and it involved a collaboration, I think with Lockheed Martin. Tell us about this.
Marta:
Yes. So for about three years, Filecoin Foundation collaborated with Lockheed Martin Space to deploy the InterPlanetary File System in space. And earlier this year, we successfully completed our demo mission actually deploying IPFS in space, which is super exciting. This was my favorite personal project over the course of three years.
And as I mentioned, IPFS is actually called the InterPlanetary File System because from the beginning, it was envisioned that IPFS is actually a technology that could enable better networking in space. And the reason for that is that today’s centralized internet model doesn’t really work in space because in a centralized internet model, you’re retrieving data from a particular location in a particular server.
And on Earth that’s fine, there isn’t a huge delay no matter where that data is stored. But once you get out to the Moon, there’s a multi second delay if you have to go back and forth to retrieve data from Earth. Once you get out to Mars, there’s a multi minute delay if you have to retrieve data from Earth. So it doesn’t really make sense to go back and forth every time you want to retrieve data.
It makes much more sense to look for data based on what it is based on a particular content ID, and then to pull that data from wherever is closest. So if you already downloaded that data and you look for that content ID, you’ll pull it from your own device. If there’s a passing satellite that has it, it’ll pull it from there. If a different lunar station has it, it’ll pull it from there. It makes a lot more sense to do networking in that way.
And then in addition to that, one of the challenges with storing data in space is that data is super easily corrupted by radiation or storage hardware is damaged by debris or whatever it is. And so again, if you’re storing data in a particular location with a centralized internet model, and when you go to look for that data, you’re looking for that data in a particular place, then there’s only one place you can retrieve it from. And if it’s been corrupted, it’s been corrupted.
So it makes way more sense to basically say, let me store whatever, 10 copies of this thing. And if nine of them are corrupted, it doesn’t matter. When I look for that content ID, it’ll just pull it from the one that hasn’t been corrupted. So it makes a lot more sense to do it that way.
And then finally, I mentioned that because everything has a content ID, if a piece of content is altered, then that content ID will be different as a result. And so that means that with IPFS, you can authenticate that data has never been tampered with. And so, one of the use cases is if you have a satellite that’s taking photographs from space and then you actually transmit that data using IPFS, you can cryptographically verify that those satellite images have never been tampered with.
And so what we did is we worked with Lockheed Martin Space over three years to develop an implementation of IPFS that worked on satellites. And we successfully did a demonstration mission that deployed IPFS in space, sent data back and forth. We sent back and forth the IPFS white paper as well as a picture of the Filecoin Foundation’s mascot, which is a corgi, and sent those back and forth from Earth to space using Lockheed Martin’s SmartSat technology. And we’re able to demonstrate how this technology works and how it can really be the basis of networking in the future space economy.
Ian:
What a cool project. That is amazing. Congratulations on that. Now, where does it go from here? Should we expect more satellites in space running IPFS? Is Starlink going to add IPFS soon?
Marta:
I sure hope so. The implementation of IPFS for space that we developed is open source and so anyone can use it. And we really do think that as networking and space is really taking off, this technology is actually the best technology to use for networking in space. It’s way better than using a centralized internet model. And so our hope is that from here, we’re going to have projects and governments and government projects and private projects in space that use IPFS when they’re developing networking in space.
I remember when we were first talking about this with Lockheed Martin, it sounded super crazy because networking in space was not at that time a thing. And it’s really only in, I remember back in late 2020, there was this announcement that Nokia was doing this partnership to do networking on the Moon. And it really wasn’t until around that time that networking in space was really being talked about and really being developed. And I think we really are at a moment in time where the future of what networking in space is going to look like is being defined. And I hope that IPFS will be a big part of that.
Ian:
That’s incredible. I want to shift gears a little bit to a different topic that I’m very curious about. So we’re seeing lots of Web2 internet content platforms where there’s a debate about Section 230 and this exemption for what I’ll call internet publishers who say, “Oh, we’re not publishers, we’re just a platform and we’re not responsible for the content that’s deployed on our platform.” But then they inevitably end up moderating that content in some way where it’s violence or it’s hate speech.
I would have to imagine that your organization finds itself in similar battles because you’ve got this promise of decentralized permissionless storage technology. It’s attractive not only to all the legitimate uses that you described, but also probably some controversial and maybe even illegal ones. How do you approach that problem?
Marta:
Yeah, so let me actually just quickly pull up the … One second. There’s actually a specific thing I want to reference for this question.
Ian:
Sure.
Marta:
Sorry, one sec.
Ian:
Yeah, no worries. Take your time.
Marta:
Okay, awesome. Yeah. Okay, great.
So one of the things that is super cool about Filecoin and IPFS is that because it’s open source technology, there are all sorts of companies and projects and teams that can build tools on top of those networks, including tools that actually allow for doing content moderation in this new decentralized way at scale on top of the Filecoin network and IPFS.
So for example, there’s a team called Murmuration Labs, which is actually run by the former general counsel of Medium who’s a content policy expert who’s developing content policy tools. And it’s, again, a little more complicated than this, but you can think of it like storage providers and others as well, including nonprofits, other NGOs, can create lists of content IDs that should be blocked.
And instead of having a central intermediary that does content moderation, you can have content moderation managed at a node by node level based on subscribing to these lists using these tools. And so it’s a really interesting way of doing content moderation in a way that is fit for purpose for a decentralized model instead of having to rely on a centralized company to do content moderation at scale.
Ian:
So Filecoin Foundation would never block somebody from the network or kick somebody off, but a storage provider who’s building on top of the Filecoin network can have their own moderation policies and actually then open source those and other people on the network may or may not choose to subscribe. But there are cases where people, either users have been blocked or content’s been removed or prevented from upload in the first place?
Marta:
Yeah. So Filecoin Foundation is just the governance body for the network. We don’t have control over the Filecoin network. We are the governance body. We support the community and the ecosystem. We’re not in control of the technology. It’s fully open source. There are thousands of storage providers, network participants, developers. So certainly Filecoin Foundation does not play a role there.
There are different ways that you can do content moderation on these technologies. You can do it at a storage provider level or with IPFS, for example, you can do it at a gateway level. You can think of IPFS gateways almost like browsers. And so individual gateways, which are almost like browsers can actually do their own content moderation and decide what they want to block or not block.
And so definitely there’s lots of content moderation that happens at a gateway level. And one thing that’s actually really interesting about doing content moderation in that way is on a centralized internet where you’re looking for data in a particular place. If you block a certain piece of data, you’ve blocked that piece of data, but there might be a hundred other copies of it all over. If you block a content ID at a gateway level, then it’s not going to pull up that content no matter where it’s stored.
So it’s actually in many ways, a more effective way of doing content moderation when you’re blocking content IDs at a gateway level than today’s centralized model. And because you’re doing it in a decentralized way, it’s not a centralized intermediary that’s making all of those decisions.
Ian:
I think I’m following, but just so I’m clear, who does make the decisions? There’s somebody making a decision at the end of the day that says this piece of content is bad and they add it to that gateway list or somewhere else. Who’s doing that?
Marta:
Gateway operators can ultimately make those decisions. So there are operators of gateways who get to decide what is going to be blocked and what is not.
Ian:
And who operates the gateways. Are those also companies or individuals or both?
Marta:
There are many gateways. Some of them are operated by companies. For example, Cloudflare has a IPFS gateway as just one example.
Ian:
Okay, so that makes sense. So Cloudflare, I know in their non-Web3 business, they’ve certainly made decisions to remove content that was harmful hate speech, violence-inducing. So it would make sense that if something like that were to show up on IPFS, I could imagine them adding it to the blocked list on the gateway. Interesting. I just find the whole space of content moderation such a hard-to-solve problem that I wanted to make sure we touched on that topic.
Now, you’ve been very active in the broader crypto policy world. I think you’ve testified in front of Congress a few times. What’s your perspective on what’s been unfolding over the last few months in Washington? Because it seems like there are changes afoot in the US approach to crypto policy. Bitcoin ETFs got approved as we’re taping this. It seems like the Ethereum ETFs are maybe going to get approved.
The House and Senate voted to overturn SAB 121, which would’ve potentially opened up banks, traditional banks’ custody in crypto. Biden vetoed that just in the last week or so. What do you think about what’s going on? It feels like what was totally frozen in terms of a policy perspective is now maybe unblocked and things could happen here.
Marta:
For me, I think the most significant moment from the past few months policy-wise was the House passing the Financial Innovation and Technology for the 21st Century Act, FIT21 with bipartisan support. It was really, really amazing to see all the support from both sides of the aisle. To me, this is a huge, huge, huge win for the crypto space.
It is very important that the issue of when and under what circumstances cryptocurrencies are treated as commodities versus securities versus something else is clarified. It’s absolutely critical for the ability for the industry to continue to operate in the United States. And so this bill, in my view, is absolutely critical for the future of crypto in the US.
I testified in favor of the bill early on when it was being developed, and I think it’s hard to overstate how important this piece of legislation is. And now that it has passed the House, certainly it will have changes and edits on the Senate side, but I really think that people in the industry need to rally behind this bill because it fixes a really important existential problem in the cryptocurrency space.
And I do think that one thing we’ve seen in the industry has been a lot of quibbles over perceived imperfections or things that could be better. I think there’s definitely an opportunity to address those in the Senate side. But I would definitely encourage everyone in the industry to ultimately support this piece of legislation because it’s absolutely critical.
Ian:
For people that maybe aren’t following the inner workings of Capitol Hill as closely as you do, give us the highlights of the FIT21 bill and what that would change from the current state as it relates to crypto regulation.
Marta:
So the bill really clarifies under what circumstances a cryptocurrency would be treated as a security and under what circumstances it would be treated as a commodity. And that’s really crucial for people to have clarity on so they really can understand how cryptocurrencies should be regulated.
Ian:
And this is obviously the existential challenge of the industry right now because the position of the SEC is that everything outside of Bitcoin and maybe Ethereum are probably securities, which I think creates interesting challenges for projects like yours, for example, with Filecoin, where I would assume you would position Filecoin as being not a security. But I think the SEC might potentially take the other side of that if challenged, their current stance, which I would assume would create a lot of complexity for anybody wanting to use the network.
Marta:
Yeah, the SEC is currently taking the position effectively that effectively everything other than Bitcoin and Ethereum is a security, which is a totally untenable position. Just to give an example, the whole point of cryptocurrencies is that you can do peer-to-peer transactions is that you can program your money.
You could say something like, “For every second of a song that I play, automatically transfer a millionth of a cent to the songwriter.” And that can happen instantly and automatically across the world with no intermediaries in between us as though I’m handing you a millionth of a cent. That peer-to-peer technology is the core of cryptocurrency. Or you can program your money to say, “Hey, is this file still being stored? Okay, it is. Great. Then transfer one one millionth of a Filecoin.”
So that programmability really relies on this peer-to-peer technology. If suddenly you’re saying, “Well, actually what we need to do is if you want to trade this cryptocurrency, you need to go through a broker dealer,” it totally undermines the ability to do things in a peer-to-peer way, which is the point of the technology in my view.
Ian:
It totally changes the interaction model for sure, and adds a lot of complexity that is probably unnecessary when I think about what Filecoin is doing. It wouldn’t make any sense for me to have to go to my E*TRADE account to buy some Filecoins so I could upload some content that I wanted to store for a while. That’s a largely unnecessary step there.
So if FIT21 is maybe the best piece of proposed legislation that’s sitting on the congressional docket right now, where do you see the potential landmines? What are the ones that people should really be watching out for and if they’re politically inclined reaching out to their congressmen and senators to encourage them not to vote for it?
Marta:
Okay, so back in 2022, Senator Warren introduced what was called the Digital Asset Anti-Money Laundering Act. And this is something that would impose really broad surveillance and registration requirements on almost all participants in blockchain networks. And that includes software developers, miners, wallet creators, and effectively ban any privacy-enhancing technologies in blockchain networks.
So this is a bill that would be an absolute disaster for the cryptocurrency space and is something that I wrote a op-ed for CoinDesk back in 2022 about. There wasn’t that much attention around it at the time, and since 2022, this bill has been reintroduced. There have been the potential of some of this language in this bill to evolve and be added to other bills, including potential omnibus must-pass bills, which is how you get things like the infrastructure bill had some pretty problematic sections related to cryptocurrency, but it was in this giant must-pass bill. So there it went.
So I think that language in that bill in all of its various forms and the ways that it evolves is something that I think is going to continue to be very problematic and difficult. And we must certainly hope that it does not end up in a must-pass omnibus bill anytime in the future
Ian:
As a civil liberties lawyer, I’m curious your opinion about this balance of privacy versus anonymity. And I’ll draw a distinction for you here. I think about our current financial system, no one has anonymity, but we all have a reasonable degree of privacy. If I go to the grocery store and I use my credit card to pay as I’m checking out, there’s a bunch of people that have intimate knowledge of what I bought.
The grocery store has a point of sale inventory system. Every item’s been scanned. They have a list. They probably link me into some customer master record. They know everything I’ve bought at the store. The credit card processor, they’re running fraud checks on that transaction in real time. My bank that the credit card’s issued through, they might also be running fraud checks to make sure my card wast stolen or cloned or something like that.
So there’s at least three or four parties that are maybe not directly involved in the transaction between me and the person operating the checkout, but have insight. So it’s not anonymous, but there is privacy. Everyone in the store doesn’t know my income or my credit card balance. They can’t see everything else I’ve ever bought with that credit card ever.
And when I think about cryptocurrency, the architecture didn’t really afford that degree of privacy like your wallet and all the transactions that you’ve ever done with that wallet and anything that’s held in the wallet is available for anyone to look at. And so initially we substituted this concept of anonymity as a maybe better or at least replacement for the lack of transaction level privacy.
And now over time we’ve got tools that, and just the nature of continuous interaction mean that the anonymity is really not there. What do you think about that? Is that good? It doesn’t seem like it would be good to have that loss of privacy. But full anonymity seems like it enables a criminal element, which would certainly be, if I take Senator Warren’s motivations at, if I give her the benefit of the doubt, I would say that there’s trying to stop that criminal element is where she’s coming from, even if the implementation is maybe the wrong approach given alternatives.
Marta:
Yeah, I have so much to say on this topic. Yes, this is an entirely other podcast because I have a lot of thoughts on privacy and civil liberties and cryptocurrency. Let me just say this. We shouldn’t ban a technology just because it could potentially enable crimes. We don’t ban cars because they’re used as getaway vehicles. And also, by the way, cash is used in crimes every day. So I think it’s really important to make that distinction.
I understand the reaction that folks have to cryptocurrency to think, “Oh, well, we’ll stop crime by banning cryptocurrency.” But as you said, one of the things about cryptocurrency is in many ways it is a terrible technology for committing crimes in large part because of the existence of Chainalysis.
Ian:
Thank you for the plug.
Marta:
Yeah. For example, when we had the Colonial Pipeline ransomware saga, the cryptocurrency was recovered I think within 24 hours. I mean, it was just incredibly quickly because you’re using this technology that is not in fact anonymous, but is pseudonymous. So that is my very high level short version. I have a much longer version for another podcast.
Ian:
Marta, this conversation has been fantastic. Thanks so much for joining us on Public Key. We’ll have to do another one of these sessions because I’ve got a long list of questions that I would love to get your thoughts on.
Marta:
Awesome. Thank you so much. It was so great to chat with you.