[Published at the Center for a Stateless Society, Dec. 10, 2015] 
In the wake of the recent terrorist attacks in Paris and 
around the U.S., sentiment among the governing class is turning 
powerfully against encryption.
Reuters reports
 an impending “crackdown” on Bitcoin in the EU. Other reports suggest 
France could inhibit Tor and free wi-fi at will. U.S. officials have 
taken the opportunity to go on the offensive against any form of 
encryption, with Senator Dianne Feinstein 
arguing encryption “ought to be able to be pierced.”
At the heart of the state’s fears is the loss of control it faces. In
 encryption, human beings have a tool to ensure security and privacy 
that is resistant to the escalation of force. Even after governments 
have taken out a warrant against someone, that person still has the 
ability to keep his information secret, subject to negotiation between 
himself and the state.
But officials correctly point out that child pornographers, drug 
dealers and terrorists can use encryption as a tool to keep vital 
information away from law enforcement. Its reliability and agnosticism, 
they claim, makes encryption a threat to public safety.
That creates a moral and philosophical dilemma for users and 
advocates of cryptographic technologies. We have an incredible tool at 
our disposal, but with the equal potential for legitimate use and abuse.
 Do we have the right to encrypt information regardless of government 
interests?
To answer this question, common law and statutory law are 
insufficient. With the improvements that blockchain technology could 
bring to 
the human condition,
 this is a deeper question with significant implications. The proper use
 of a disruptive technology that transcends borders should be considered
 outside of the normal philosophical channels when its existence is an 
affront to long-established political authority. Natural law and the 
fundamentals of the “social contract” provide better answers and a 
clearer direction.
The Surveillance State is Absolute
Rapid changes in information technology over the last two decades 
have created a banquet of easily acquired information about virtually 
everyone in the world. The world’s reliance on the internet has made 
normally private information incredibly easy to acquire. It has also 
made the existing social contract argument for government authority 
obsolete.
By the old nation-state system, a nation makes laws and protects 
rights within a certain geographical boundary. Those outside the 
boundary are neither subject to its jurisdiction, nor its protections.
But most international threats are now coming from non-state actors. 
The world has long since stabilized at the state level, but terrorist 
networks are waging peer-to-peer warfare, circumventing states in most 
cases by taking their political grievances directly to their citizens.
To combat this “denationalized” threat, states have exploited 
loopholes between these various “social contracts” that exist between 
states and their citizens. States may make some effort to respect the 
legal rights of their own citizens within their own borders; but rights 
do not tend to carry over to citizens of other countries. The Five Eyes 
Alliance is one glaring example, where states are widely believed to spy
 on each other’s citizens and share information so that each may 
circumvent their own domestic spying restrictions.
This trend is compounded by a lack of accountability. Control is difficult to enforce legislatively with widespread public 
apathy, and finding standing in court can be likewise 
impossible
 without information from behind the veil. The global surveillance state
 is expanding its reach beyond any practical restraint by legislatures, 
evolving into a highly fluid, rapidly adaptable information siphon. In 
that sense, it is becoming as “denationalized” as the threat it is 
trying to fight. As one NSA 
official
 succinctly put it: “It’s becoming a cliché that a permanent state of 
change is the new standard. It is the world we live in — navigating 
through continuous whitewater … lucky for us.”
Meanwhile the security state has used its powers to commit financial 
espionage, intimidate 
journalists and whistleblowers, and circumvent restrictions on information gathering for crimes 
unrelated to terrorism. According to cybersecurity expert 
Chris Soghoian,
 they continue to “prioritize their own foreign intelligence goals over 
the security of the Internet”, deliberately inserting exploits into 
vital security systems.
In light of this conflict of interests between the surveillance state
 and the citizen, the onus falls on the latter to protect his own 
privacy.
To break this down into a simple epistemology:
Political violence (war) is being denationalized.
The means of fighting political violence are being denationalized.
Since individual rights are at risk in war, the defense of rights should also be denationalized wherever possible.
States will not protect the privacy of foreign nationals because it 
would defeat the purpose of their job. They will continue to spy 
domestically because it’s easy to get away with. There aren’t enough 
Edward Snowdens out there to stop them. Their global reach leaves 
virtually no person’s privacy untouched. But this new paradigm isn’t 
just a reason to protect one’s own privacy. It invalidates the social 
contract and renders the prohibition of networked cryptographic 
alternatives morally impermissible.
The “Social Contract” Reconsidered
Since the decline of the “divine right of kings” doctrine, social 
contract theory has dominated the reasoning behind the coercion of the 
state. Its logic (like that of the “divine right” theory) has always 
been circular, but amenable to most people as a post-hoc rationale for 
their general approval of the role of the state in human affairs. For 
that reason, a careful reevaluation of the theory is necessary.
John Locke claimed in his 
Second Treatise on Government (1689)
 that the contract was the price of civilization: prehistoric humans, 
possessing natural rights of life, liberty and property sacrificed those
 rights to the state in order to create early civilization, reaping in 
turn the stability, security and prosperity that large societies make 
possible. Natural rights can then only be taken away legitimately by the
 state upon conviction of a crime through a rigorous process of law. As 
long as the state abides by the rules set by the contract and receives 
the continued support of the governed, so the argument goes, individuals
 have no right to subvert it to pursue their own interests.
But the growth of global information systems has created some new problems for the social contract.
The first problem is the collapse of reciprocity: According to Locke,
 the social contract necessitates the state and the citizen exercise 
mutual obligation toward each other, the state to protect rights, and 
the citizen to maintain the legitimacy of the state through voting, 
paying taxes and abiding by its rules. But with a networked surveillance
 apparatus not controlled by any single nation state acting in secret, 
the ballot box is unlikely to be of much help. This “
deep state” exists outside of the contract: it is its own entity and routinely violates privacy rights as a matter of course.
The second, and more important issue is one of consent. If 
individuals don’t want any part of this, do they have any recourse or 
are they bound to the terms of the contract? Locke acknowledged that 
individuals cannot be perpetually bound to any government, “every man 
being… naturally free, and nothing being able to put him into subjection
 to any earthly power but only his own consent.” Consent, he argued, 
could be tacit, but it was nonetheless vital. Non-consent could be 
expressed by abandoning the system and creating a new one. “Since the 
government has a direct jurisdiction only over the land”, Locke claimed,
 individuals are free to “begin a new one, in 
vacuis locis, in any part of the world, they can find free and unpossessed.”
There were also little “loopholes” in the contract created by the difficulty in determining consent. Locke 
noted
 that “EVERY MAN HATH A RIGHT TO… BE EXECUTIONER OF THE LAW OF NATURE” 
(caps all his) because “if by the law of nature every man hath not a 
power to punish offences against it … I see not how the magistrates of 
any community can punish an alien of another country; since, in 
reference to him, they can have no more power than what every man 
naturally may have over another.”
This is a key point. The Father of Classical Liberalism claimed that 
because social contracts did not reciprocate across national boundaries,
 any individual could morally punish a transgression against his own 
rights by a foreigner. This could of course easily translate to the 
peaceful defense of one’s privacy against some foreign government’s 
spying capabilities. Locke’s acknowledgement shows the weakness of the 
social contract argument when applied across national borders. It also 
shows the intellectual bind Locke found himself in in order to affirm 
that the contract requires consent to be valid.
Privacy and the Open Source Revolution
As I have 
argued 
previously, privacy should be considered a natural right if it can be 
considered a right at all. Individuals retain the right to use air-tight
 encryption as a defensive tool to protect their privacy against the 
failure of their legal and political systems. But if individuals are 
retaining their “state of nature” right to defend themselves against 
state dysfunction, they must create a new kind of “state” with multiple 
functions in order to defend those capabilities.
For example, the right to exchange value must necessarily accompany 
the right to procure a resource, or opponents could render that right 
functionally irrelevant. Open source encryption software is free and 
easy to come by for now. That could change if states make it illegal, 
requiring a risk premium for developers and high costs for consumers.
To counter this possibility and deter prohibition, a robust 
cryptocurrency trade would be necessary to keep people free in the event
 the state shut down people’s bank accounts or credit cards, as was the 
case when the U.S. government pressured credit companies to shut down 
Wikileaks’ finances. This means that denationalized cryptocurrencies 
like Bitcoin and Dash are an integral tool to preserve individual 
rights.
As former CIA officer and open-source advocate Robert David Steele 
noted,
 to function properly, open source systems must develop in tandem. “The 
open source ecology is made up of a wide range of opens — open farm 
technology, open source software, open hardware, open networks, open 
money, open small business technology, open patents – to name just a 
few. The key point is that they must all develop together, otherwise the
 existing system will isolate them into ineffectiveness.”
Cryptocurrency transactions, run through a trustless mixing system 
are virtually untraceable. We’re not just talking about private emails 
anymore, but the right to create a new, transparent, resilient framework
 of alternative institutions as the old ones succumb to their own 
opacity.
But cryptography may not just tear down the social contract in the 
negative sense — it could also rebuild it in a way that better defends 
individual rights.
The Social Contract and Land Rights
The natural rights were enumerated by Locke as life (the right to 
defend one’s person against physical threats), liberty (the right to act
 freely without interference from arbitrary authority) and estate (the 
right to retain property mixed with one’s labor). Property in particular
 is one space that is being redefined by technology, leaving open the 
possibility that the nation-state could be disintermediated from its 
traditional role of definer and defender of property rights.
Locke 
argued
 that in prehistory, the very first “social contracts” were formed when 
individuals ceded their land to governments in exchange for protection. 
All subsequent owners of that property, he claimed, enjoyed the 
protection of the state, and were thus bound to perpetuate its 
authority. The logic is circular, to put it mildly, but worth noting: he
 makes it clear that the Social Contract is justified because there was 
no practical alternative to define and protect land rights.
Governments were defined by the land they protected. Within their 
borders was a single “final arbiter” with a monopoly on violence to keep
 order. Many would argue this model provided stability and security for 
populations around the world and enabled the growth of economies of 
scale for centuries.
But if property rights can be established and defended without the 
state, dependence on government institutions could be broken. A major 
pillar of the old social contract could be replaced.
Securing property rights is a pillar of the new cryptographic 
governance. Projects like Factom are attempting to show the blockchain 
can be a substitute for government agencies in the developing world, 
functioning as the final word on property ownership without risk of 
corruption or alteration.
Similarly, other projects are being developed for reputation 
verification, and still more are revolutionizing how we think of notary 
and legal systems. Connectivity experiments like Bitnation are seeking 
to show these ideas can be converged and exercised together, functioning
 as a sort of alternative governance system enforced through 
cryptographic protocols and consensus.
With non-state record keeping a reality, enforcement mechanisms can 
be created. But their quality won’t be determined by their geographic 
origin. They could be competitive, transparent, overlapping systems 
available globally.
These technologies are still in their infancy. But theoretically, the
 capabilities are there. As the use of the blockchain and other 
cryptographic systems grows, they become more secure and reliable. Due 
to the malleability of the technology, they could also evolve greater 
and more useful capabilities over time.
What Does This All Mean?
As the NSA likes to point out, we live in a rapidly changing world. 
The legacy social contract is inadequate to protect individuals in an 
increasingly fluid global information system. The rapid development of 
technological capabilities that few in any legislature in the world 
understand are leaving the sluggish legislative process in the dust. 
Individuals cannot morally be compelled to sacrifice their own right of 
secure communication of ideas or private exchange of value without 
submission to a global security state they cannot control. The 
globalization of information necessitates individuals learn to employ 
open source, cryptographic systems to define their own social contracts 
in peaceful terms.
Since private, secure monetary transactions cannot be taxed except 
with the consent of the participants, this denationalization could 
expand the shadow economy over time. Advocates of cryptography can 
probably expect a backlash, including bans and even jail time in some 
parts of the world.
Ultimately, this experiment will likely prove that consent in 
democratic societies has always been manufactured. Locke twisted himself
 into knots trying to shoehorn the notion of consent into his Social 
Contract, an exercise largely abandoned by John Rawls and other modern 
theorists. But the new cryptographic governance introduces the 
possibility of real consent in governance for the first time. This could
 ultimately exonerate John Locke’s contributions to political thought.
There is a palpable inevitability to all this. Even major publications like the 
New York Times and 
The Atlantic
 have hypothesized the obsolescence of the nation state. The United 
States National Intelligence Council envisioned that in just 15 years a 
“nonstate world” could exist in which “governments had given up on real 
reforms and had subcontracted many responsibilities to outside parties, 
which then set up enclaves operating under their own laws.” Nonstate 
systems will likely develop increasing leverage to compete with legacy 
nation states. The 
New York Times acknowledged the scenario describes “much of how global society already operates.”
The real question is how difficult this transition will be. Most 
states around the world abhor any loss of authority and are likely to 
prohibit any capability they consider a threat. Bitcoin and other 
cryptographic technologies have been in their sights. In doing so, they 
drop any pretense of moral authority and act merely as animals in 
Locke’s “state of nature,” fighting more for self-preservation that the 
protection of natural rights. For the first time in history, a real 
social contract is a possibility within reach. We’d do well not to 
squander it.