A Coindesk article published this afternoon titled “4 Experts Agree: Craig Wright’s Latest Cryptography Claims Are ‘Nonsense’” does a nice job of illustrating two pervasive problems in today’s cryptocurrency zeitgeist:
The implications of the widely believed myth that cryptocurrency/blockchain operates outside of a legal context, and
The role that cryptocurrency media outlets have played in propagating falsehoods like this.
The gist of the Coindesk article is a strange hybrid of an “argumentum ad populum” logical fallacy, or the assertion that a proposition is true because many or most people believe it to be true, and an “argumentum ad verecundiam” logical fallacy, or an appeal to authority. What makes this hybrid fallacy especially strange is that Coindesk consulted four cryptographers to weigh in on the legal argument of a legal scholar, Craig Wright (see: Masters of Laws with Commendation in International Commercial Law, 2008, University of Northumbria at Newcastle). Perhaps this piece would be more accurately titled “4 Cryptographers Disagree with Legal Scholar on Legal Matter”?
The implications of this editorial decision extend beyond the headline and set a bizarre stage for the body of the piece where the two sides of the argument address separate issues. The claim in question is whether or not something can be signed without identity, which has implications on whether or not something can be meaningfully owned and transferred without identity. The “4 experts” cited in the piece appear in agreement that digital signatures can work without identity. Craig Wright (CSW) disagrees and suggests that, legally speaking, a signature is not a signature without an identity component. He is quoted from a recent interview saying,
“You cannot have a digital signature that is anonymous, by definition. Sorry...You can run a digital signature algorithm. It’s not signing a message...You either have to have an identity attribute or an identity to sign a message. Someone can’t go and say, ‘Hey, I’ve got a key, I’m signing.’ If you think that, you don’t understand digital signatures at all.’”
The frustrating part of this piece is that there is no real disagreement on what the cryptographers are saying. CSW is not contesting that a digital signature algorithm can produce the proper inputs and outputs. But because CSW is an expert in both cryptography and law, he is bringing something else to the argument that is never fully addressed by Coindesk’s “experts” (which is somewhat unsurprising since they are likely not also legal experts). Because digital signatures exist and function within an existing legal framework, the ability for an algorithm's inputs and outputs to compute is not the end of the story. Can a legal document be signed anonymously via an algorithm? And is a Bitcoin transaction a type of legal document?
The relevance of these legal questions can quickly become obvious to even a non-lawyer by the use of simple theoretical scenarios. Take, for example, this paragraph in the piece.
“Digital signatures are crucial to Bitcoin or any blockchain project. Every time bitcoin is sent from one person to another, behind the scenes a digital signature is created proving ownership and authorizing the transfer. It is impossible to send bitcoin without them. The user takes a private key (that presumably only they have access to), then produces a signature proving that they actually control the address and are the rightful owners of the bitcoin held by it.”
The last sentence is key. Implicit in this description of Bitcoin is the idea that one must control something in order to own it. This meme has been popularized within cryptocurrency in the expression “not your keys, not your coins.” Despite its popularity, this understanding of ownership is legally incorrect. To understand why, try porting this idea of “ownership” over to physical items in the real world where law is effectively universally accepted to play a role. If someone were to steal your car keys, they would then be able to “produce proof” that they can control the car. Likewise, unless you had backup keys, you would then lose the ability to provide this proof of control. Would this prove that the thief now owns your car? Of course not. So how would the rightful owner of the car be determined? Simple, through contracts and identity. What is the identity on the title of the car? How and when was it transferred to you? Was the thief’s identity ever associated with the car’s ownership? Perhaps the thief will argue that you sold him the car moments before accusing him of theft. Was this transfer documented? And if so were the documents properly signed? These are the types of questions that CSW was raising, not simple questions about if algorithms produce acceptable inputs and outputs.
The focus of the disagreement over signatures had to do with messages which were signed by early Bitcoin keys denouncing CSW as a fraud. The cryptographers seem flabbergasted that CSW would claim these messages were not signed since this is all public and the cryptography can be verified. Again, what they fail to understand is that CSW is making a legal point. If a message was anonymously “signed” saying “CSW does not own this Bitcoin”, it would have no bearing on whether CSW does or does not own that Bitcoin. While it might have a bearing on CSW being the sole controller of that Bitcoin, even this claim is not fool-proof. And to the broader point, even if it could conclusively prove that he did not control those Bitcoins, it would be meaningless in a discussion of ownership.
On this point, one of the expert cryptographers quoted in the piece claimed,
"There are only two possible explanations: Craig Wright does indeed own these 145 wallets and used them to sign a message claiming that he himself is a liar and a fraud. [Or,] Craig Wright is indeed a liar and a fraud and was exposed by one or more wallet-owners who did not appreciate him making false claims on their wallets.”
Leaving aside his lack of imagination for the other possibilities, this claim is again legally incorrect. Despite the mathematical properties of Bitcoin and its digital status as an asset, it is not exempt from the intuitive “car key” test of ownership.
Included in the piece is a written response from CSW. In it he cites relevant legal precedents and case law which support his legal understanding of what is required for a signature. In response the cryptographers suggest CSW is spouting “bullshit.” I encourage you to read CSW’s brief response for yourself. Given that there is no disagreement about the mathematical inputs and outputs discussion the expert cryptographers are having, which perspective seems more pragmatic legally: the cryptographers’ or CSW’s?
Unfortunately, the lack of nuance and one-sidedness of this Coindesk piece is illustrative of a pattern. The misunderstanding of law within the cryptocurrency space is not only widespread, it’s celebrated. Superficial and uncharitable misinterpretations of well reasoned counterpoints, like those demonstrated in this piece, are widely shared with their usual unsubtle and snide tone of “you don’t understand Bitcoin”. Perhaps the cryptocurrency consensus needs to understand more about law. Perhaps a more humble and curious cryptocurrency media would go a long way in remedying this problem.