The pirates of the 21st century (Translation)

[Pelle Braendgaard]

This article recently ran in Die Zeit in Germany about Cyber Punks. 

I was ofcourse misquoted in the article, see my detraction about what was 
wrong:
http://talk.org/archives/000193.html

http://www.zeit.de/2003/50/Cypherpunks (original in German)
http://talk.org/archives/000211.html (This Translation.
CYBERSPACE
 The pirates of the 21st century

Fighting against terror, police and secret services are establishing the 
surveillance state. But a group of computer geniuses is waging data war on 
authorities. A report from the world of encrypted messages.

By Thomas Fischermann (translated by Veronika Leluschko)

The art of power is the art of disappearing. (Paul Virilio)

The computer in the ZEIT office just reported the reception of a town clerk’s 
e-mail. That man is an important informer for this story. One who has a 
certain reputation among the cryptographers, the inventor and user of 
electronic hiding and encrypting techniques. But that town clerk’s e-mail 
cannot simply be opened by clicking on it. It took a couple of minutes until 
the computer was accepted in the “Lasseiz Faire City”, an underground 
network, hiding deep underneath the surface of the internet, only to be 
entered with the right code words.

On first sight, the Lasseiz Faire City doesn’t look different from many other 
websites on the internet. One may send e-mails, post messages on a message 
board and visit chatrooms. But here, different form the usual internet, 
surfers can be assured of their anonymity. Nobody will intercept their 
messages. A series of techniques, some 25 years ago only available to secret 
services, encrypt electronic messages beyond recognition, let them dash 
around the globe as supposedly meaningless data dust, covering over all 
traces on their long journey.

The town clerk’s message starts with “aANQR1DBw04D/NSEz31qI+8QEADwytY”, that’s 
“Cyphertext”. A mathematically encrypted message, only to be read by its 
receiver. A few mouse clicks, a password, and finally something readable 
appears on the screen. “Thomas, let me think about those questions. I’’l get 
back to you tomorrow.”
 
 Welcome to the mysterious world of Cypherpunks! It was in May 1992, when Eric 
Hughes went to see his friend Tim May in Santa Cruz, California – and ended 
up staying there for three days, chatting away. That time, Hughes was in his 
late 20s and a gifted mathematician from UC Berkeley; May was 10 years older, 
a former physicist at the Intel chip company, having “retired” a couple of 
years ago thanks to a huge shareholder package. It was obvious that the two 
scientists got along together well: they shared a similar taste for Western 
gear and cool sunglasses, a fascination for computer techniques and more than 
a healthy amount of paranoia. Most of all, they shared political convictions.

Both regarded themselves associated with the libertarians, the supporters of 
an ultraliberal ideology, quite widely spread among the white American middle 
class. Libertarian Americans are facing the state in a particularly sceptical 
way, which concerns police as well as tax-collectors. Many of them would like 
to completely abolish states including their taxes and authorities and leave 
the power to the free market. That was the vigorous subject the two friends 
were discussing during their talk marathon that month of May. It wouldn’t be 
worth mentioning if the duo hadn’t been convinced of holding the key to their 
political dreams in their own hands. 
 
 In fall 1992, May and Hughes created a loose association of like-minded 
people which lead to one of the most unusual — and most obscure political 
movements of all times. They called themselves Cypherpunks, based on a 
science fiction style that had become popular around the end of the 19th 
century. They were a conglomeration of highly decorated scientists and 
dreamers, computer geniuses and political activists, lawyers and also 
criminals. They wanted to be rebels in cyberspace, those guys in sneakers and 
T-Shirts wanted to change the world, using their laptops as weapons. They 
would gather for fortuitous “physical meetings”, their Cypherpunk mailinglist 
would raise to one of the hottest internet debating places with almost 2000 
subscribers. They wanted to be the technical elite, creating the 
infrastructure for a utopian, lawless cyberspace. And today, just 10 years 
later and after the terror attacks of 9/11, some of them see their hour come: 
as the last bastion against a society of surveillance.

In the early 90s, the internet economy as we know it today, was still in its 
infancy. But among the technicians’ avantgarde Hughes and May frequented, 
visions of a a digital future had already quite progressed: People on the 
American west coast were already discussing how electronic mail would replace 
all paper mailings in and between companies, that all money and shares 
transfers should be moved from classical banking to cyberspace, that products 
such as music, movies and news should, one day, only be delivered via data 
processing. More and more parts of our work and spare time would happen in 
front of a screen. 
 That time, a hand full of books and essays appeared, like “The sovereign 
individual”, describing someone who organizes his life and business in 
cyberspace, allowing no state to govern him. An organization called Laissez 
Faire City opened a provisional office in Costa Rica, wanting to offer some 
sort of virtual citizenship. Political terms like cyberanarchy and virtual 
regions managed to make their way into seminars of political sciences and law 
schools. Wasn’t it a children’s game to smuggle all those data, messages and 
products past governmental eavesdroppers and controllers, past all those 
police, tax-collectors and customs officials? Would such an unregulated, 
lawless cyberspace be able to force the hated states to their knees?

One might have thought about such ideologies what he wanted. Tim May once 
openly declared that cryptography would also be advantageous for murderers 
and terrorists, for racists, kidnappers and hijackers. That would be the 
inevitable and necessary evil side of the new freedom, he said. ‘Cypherpunks 
break the laws they don’t like”, the founders autocratically wrote in one of 
their pamphlets. But, one way or the other, it seemed to be technically 
feasible to the experts and even unavoidable.

In the 70s and 80s, methods for extreme data encryption had already slipped 
out of the hands of the secret services. Powerless, military and police could 
only watch how programmes like Pretty Good Privacy (PGP) were spread all over 
the world in the 90s, unable to be hacked with acceptable effort and expense 
- not even with the help of the secret services’ own supercomputers. 
“Cypherpunks will write programs”, so Eric Hughes’ battle cry which he wrote 
in a manifesto of the newly founded group. They would establish secret 
electronic mailboxes, found electronic banks and deal with electronic money, 
simply create a network of highly encrypted communication. “The change will 
not arise in a political but in a technical way” co-founder Tim May added.

“Governments in the industrial world, you tired giants made of flesh and 
steel”. This is how, a couple of years later, John Perry Barlow began his 
Declaration of Independence in Cyberspace. The rancher, former Grateful Dead 
songwriter and passionate fighter for civil rights had become an icon of the 
movement. “Where we gather, you have no sovereignty anymore.”
 
 Lima, May 2003. Caryn Mladen had prepared her trip to Peru perfectly. Her 
luggage looked quite unusual for a Canadian tourist, though: laptops, 
adapters, computer software. A list with names of groups of the civil rights 
movement that have gotten in trouble with police or political opponents. 
“Peru has a history as a particularly well organized surveillance state”, 
says the 38-year-old lawyer from Toronto, telling about her 2.5 week long 
undercover trip. “Although it’s now a democratic country, many old forces are 
still working. Nobody knows if the old surveillance systems are still in use 
and who uses them.”
 
 Ms Caryn is a computer expert with extensive knowledge of data protection. 
She has written books about computers and is the author of a news column. She 
has hitch-hiked through Africa and travelled Syria during the first Gulf War 
(“I felt safer there than in New York City”) and studied massage techniques 
from the Far East.

Recently, she says, “I just needed something new, a new challenge. Then, in 
December 2001, it just happened.” They were five like-minded people, all of 
them fascinated by data protection and encryption techniques. Three lawyers, 
a medical doctor and a computer specialist with contacts to the Cypherpunk 
scene. They called themselves Privaterra and wanted to do foreign 
(development-) aid in an unusual way. They would provide civil rights 
fighters in developing countries with modern instruments of encryption 
techniques - the weapons of the Crypto movement.

Meanwhile the group has been to several countries in South- and Central 
America, like-minded people in various African countries. “The needs are 
often very different,” says the activist, “many groups have such little 
technical knowledge, they first of all need things like a virus protection 
program.” Computers, e-mail and the internet have, for a long time, become an 
indispensable tool for human rights fighters all over the world - an 
indispensable tool in the search for political prisoners and for coordinating 
campaigns. The disadvantage is, though, that these organizations’ computers 
now host the addresses of activists, confidential mail and other body of 
evidence.

Ms Caryn and her friends have taught dozens of civil rights fighters how to 
encrypt such data, how to hide them on the hard disk or stock them in a safe 
place in the far cyberspace - just in case that a computer gets confiscated 
by the police or disappears in a “burglary”. They taught civil rights 
fighters how to protect themselves from being attacked by hostile hackers who 
often also work for secret services. They taught them how to encrypt messages 
and how to find their way into secret communication networks, cleverly 
installed underneath the surface of the internet by crypto activists, instead 
of sending a regular e-mail that can be read by everybody like a postcard.

“Who are the opponents we’re fighting against?” A question Ms Caryn has asked 
frequently. She didn't always get an answer. Sometimes it’s governments, 
sometimes former governments’ loyal members who continue working underground. 
Privaterra is helped by amnesty international, Human Rights Watch and other 
human rights movements when choosing their “clients” to make sure that the 
instruments aren’t handed over to the wrong people.

About ten years after the Cypherpunks’ foundation meeting some of their 
political dreams have come closer to reality than ever before. Data 
encryption that no curious state official can hack anymore, in Peru or at the 
American snooping service NSA? Many such techniques are today available for 
everybody on the internet. Software forges like Martus Software or 
Hacktivismo have even written custom-made programs on the internet for 
political activists and civil rights movements. Nonetheless Caryn and her 
traveling data rebels had to make a painful recognition: The technology might 
work, but a much bigger problem is the application. “Those people are no 
computer experts, and we can’t make them computer experts” says Caryn. “But 
these groups cannot risk to make mistakes - their communication has to be 
100% bugproof.”

“Most of the people we work with have extremely good reasons for privacy” she 
says. Death threats, unannounced raids in dawn, unexplained burglaries in the 
organizations’ offices. A Privaterra “client”, “somewhere in Central 
America”, was later found murdered. Only a couple of weeks ago, the 
Vietnamese activist Pham Hong Son was sentenced to 13 years in jail for 
“espionage” because he had exchanged e-mails with international democracy 
groups. “This is not an amusing adventure, most of all we have to be careful 
not to harm anybody”, says one of Caryn’s co-workers. A couple of years ago, 
when China built a wall around the entire Chinese internet and had police 
control all internet cafés in Peking, a team of Cypherpunks immediately wrote 
a program to break through the virtual wall. But after a short time of 
enthusiasm they withdraw it, because the use of the program left suspicious 
traces on the internet - which represented an even bigger source of trouble.

Las Vegas, August 2003. Once a year the walls of the Alexis Park Congress 
Center are covered with black cloth. Bouncers guard the doors, the police 
sends out special forces and allegedly even international secret services 
reconnoitre the terrain. A motley crowd of hackers invades the Nevada desert: 
it’s DefCon, the biggest convention for all those who know about penetrating 
others’ computer systems. Hordes of computer geeks populate the congress 
halls and the deck chairs around the swimming pool, pale guys in T-Shirts and 
enormous sandals, trendy hipsters with fantasy haircuts. Many of the guests 
still have quite pimpled faces. Computer kids.

The speaker entering the stage is in his late 30s. Wearing a suit and T-Shirt 
and a gray floppy hat he may not quite fit into the surrounding. Also his 
public is older and more serious looking than the huge amount of computer 
kids. In the middle row a few FBI agents have mingled with the public, 
expectantly folding their arms. No surprise considering the title of his 
speech: Punish the collaborators! is Bill Scannell’s subject. He is a veteran 
on these meetings: a confessed Cypherpunk, although not very knowledgeable in 
technology. The power-speaker and chainsmoker Scannell has become famous as 
the mouthpiece of a bunch of cryptography companies - for example The Bunker, 
the company who bought an entire nuclear blast-proof bunker in the West of 
England and, since then, extols it as a particularly safe data storage place. 
Today he is playing his preferred role: the self-declared civil rights 
fighter and troublemaker. “We must prevent George Bush and John Ashcroft from 
making the US a society of observation and surveillance’ says Scannell. He 
quickly talks himself into a fury and receives mixed reactions - defiant 
applauding, a few outraged listeners are leaving the conference hall. “We 
must make life hell for those who want to take away the freedom of our 
constitution from us!”

Maybe it’s due to Bill Scannell’s personal history that he is so concerned 
about privacy and data protection. Scannell has worked as a spy in 
East-Berlin, then as a journalist in countries formerly belonging to the 
Eastern bloc. He claims having experienced “how things are going in 
totalitarian countries. I was always proud of the freedom an American enjoys 
in America.”

When, in February, the American airline Delta offered to test an extensive 
passenger surveillance system of the American government “I blew a fuse”, 
says Scannell. A few days later he started a protest-website, requesting 
boycott and attacking personally the Delta chief manager; he toured American 
talk shows and attended the Delta general meeting. The company ended up 
withdrawing its original plan. At the moment he is working on a similar 
website against the flight booking system Galileo. “These things don’t help 
at all to fight terrorism” Scannell says. “They are an instrument of 
prosecutors for all kind of goals.”

Scannell claims it a “fundamental right” to travel through the country without 
being detected. This has become more difficult since the terror attacks, but, 
when he has enough extra-time for his check-in, he quarrels with the security 
staff; he gets a kick out of buying a bus- or railway ticket under a false 
name (“Joe Cypherpunk”). “Recently I was at the airport, talking to my sister 
on the phone, about politics, and I spoke out clearly some personal points of 
view” he says. “Then I noticed everybody was staring at me as if I were a 
terrorist. That moment I realized that, in this country, we are beginning to 
be afraid to speak out freely what we think.”

The early Cypherpunks considered it a law of nature that the internet era will 
simply deprive the authorities of power, that, one day, they will just 
capitulate and be quiet. But two years after 9/11 the “tired giants of flesh 
and steel” are regaining their strength. Only a few weeks after the terror 
attacks Bush arranged for new laws. He even established an “Administration 
for Cyberspace Security”. Rumors could be heard that encryption techniques 
deriving from hacker and cypherpunk forges had helped bin Laden’s kamikaze 
pilots plan their attacks, that people like the Cypherpunks were even 
partially responsible for 9/11.
 It is, of course, an old contentious issue in the debate about data 
protection if encryption techniques are in fact a civil right or only a 
support for terrorists, rascals and drug dealers, if they are a modern 
equivalent for a sealed envelope or a “product equivalent to weapons”, as the 
US government decided at times. Is there a perfect balance between freedom 
and security? The core around Tim May and Phil Zimmermann, the inventor of 
the encryption program PGP, stuck to it after 9/11: protection for criminals 
and terrorists is a necessary price to pay. Nobody could stop the movement 
anyway. And weren’t there enough legitimate applications for the new 
technology? Protection for “cypher dissidents” in China or Burma – and even 
in America, where, for example, some groups are planning to publish the names 
of “missing people” in Guantánamo Bay, fearing political repercussions, who 
knows whether they are right or wrong? “If cryptography is prohibited, then 
only the criminals have cryptography” Phil Zimmermann occasionally declared 
succinctly.

After 9/11 and the following hunt for more security, such remarks hardly found 
sympathizers. Many law keepers and security services sensed their chance to 
create facts. Step by step the rights of police and secret services to tap 
phone calls are extended, authorities connect their data banks, more and more 
they are given the right to access data banks of private companies – in 
America, in Europe and in other parts of the world. “Few people have 
understood that a surveillance like in Orwell’s Big Brother isn’t reduced to 
the world of books and movies anymore” says Barry Steinhart, the data 
protection expert of the civil rights movement Civil Liberties Union.

However, it was not the first shock of 9/11 burying the Cypherpunk founders’ 
mantra of the “inevitability” of unlimited privacy. It was the technical 
development itself. The explosive spreading of computer technology and 
internet in the industrial countries was followed by an explosion of spying 
programs, an explosion of surveillance cameras in streets and on airports, 
biometrical recognition techniques and loads more of other technologies. More 
and higher performing computer systems apparently became the snoopers’ 
advantage.

Never before companies, national authorities and obstinate internet 
researchers could find out so much about anyone – thanks to the internet that 
once should bring unlimited freedom, as Cypherpunks had been dreaming. “You 
have zero privacy anyway”, Scott McNealy, head of the Californian computer 
company Sun Microsystems said a couple of years ago. “Deal with it.”

New York City, October 2003. The head waiter lifted his eyebrows for a second 
as Jo, John and Sean entered his noble seafood restaurant in sneakers and 
casual outfit. The three people in their mid-thirties and with gawky 
Westcoast attitude look a bit different from the serious business people who 
usually have lunch here. But how can the waiter know that he is confronted 
with three future government leaders?

“Has the dream of an anonymous, stateless Cyberspace burst?” That’s the 
question Sean asks. Leaning back, he repeats the sentence, then takes a 
moment of reflection. Sean is clearly the man for the big answers, he’s the 
leader of the group. A stocky young guy with a fat, round face. "It’s all 
there, burglar-proof mathematical proceedings, anonymous e-mail-programs, 
anonymous websurfing, even anonymous exchange platforms. But one of the big 
problems is: Nobody uses these things! They are only reserved for a small 
elite.”

When Sean Hastings speaks about a small elite one thing is clear: he himself 
and his friends count among them. Hastings is a Cypherpunk. None of the sworn 
founding members, but a gifted young computer programmer with a rebel’s 
heart, who would just love to scare the hell out of the nation-states. “But, 
don’t write that I’m a Cypherpunk” he corrects immediately. “I don’t like to 
be put in a drawer. Just write that I sympathize pretty much with the 
Cypherpunks’ philosophy.”

Hastings has reached cult status. In the late 90s he found an old book called 
How to start your own country. A couple of months later he bought a number of 
computer servers and installed them on a rusty air defense station from WWII, 
a few miles from the East coast of England (in the middle of the North Sea), 
opening the “first public data paradise in the world”. Hastings claimed that 
these computers were not controlled by anybody. In 1967, the retired officer 
Paddy Roy Bates “conquered” and declared independent the deserted military 
station. Bates once expelled the Royal Navy with well-aimed shots across the 
bow. (here is a pun which cannot be translated. T.F. writes “Schüsse vor den 
Bug”, which literally means “shots against the bow”, but mainly “to severely 
offend someone”.)

Since then, Bates considers himself “Prince of Sealand” and, for a couple of 
years, Hastings was his official national entrepreneur. Hastings, his wife Jo 
and a hand full of seamen hackers squeezed themselves into windowless cabins, 
and they all were very discreet. The Prince kept his paws off the computers 
and Hastings told nobody who used his servers to stock data base and 
websites. 
 After all, Sealand was supposed to guarantee absolute data inviolability for 
the first time in history.

“Throughout many discussions we had agreed that an anonymous cyberspace needs 
a certain amount of physical safety,” says Hastings. It may be more and more 
difficult to hack encrypted messages, electronic “magic hats” may become more 
and more efficient. But somewhere in the world, on some computer, all these 
secret data must be stored and be fed into the internet. Somewhere out there 
the world’s mystery-mongers are sitting in front of their computers, knowing 
how to get to see their messages in plain text – discreet and secluded 
entrepreneurs from Kiev, tax evaders from the USA, secret online gamblers 
from Brussels, unfaithful guys from Vienna, dealers of illegal nude pictures 
from Bogotá and drug dealers from Lucerne. And everywhere unpleasant states 
can cut off lines, confiscate hard disks or sentence their owners to hand out 
keys. When a couple of years ago, during the Internet security fair RSA, a 
young blasé programmer was listing all the “ultrasafe” protection programs of 
his computer, one of the police representatives blew his top: ”So what if I 
kick down your door and hold a gun to your head? Are your data still safe 
then?”

Even Sealand, says Hastings, couldn’t have made the Cypherpunks’ dreams safe 
and secure. “It only really works when we have computers all over the world 
and distribute encrypted data in little bits on all those systems.” That’s 
why he is already planning a new data paradise: a gigantic swimming island in 
the international waters near Gibraltar. “Maybe we establish a completely new 
form of life down there” he dreams. He has created a website about “Life on 
the sea”. Details about the business plans are not yet available, but 
Hastings says he has already hired engineers and found financing sources. The 
young nation would also have “arms for self-defense” on board. 
“Water-to-air-rockets” she will employ, says his wife Jo and laughs. A joke? 
That’s not really clear.

“By the way, I’m not gonna move there“ Jo adds, and Sean nods with a sour 
grin. Obviously this is not the first time the subject is discussed 
controversially at the Hastings’. “She’ll probably come to visit, Sean says.” 
Back in the Sealand cabins, the stateless guys had to shower with caught rain 
water for months, for security reasons they never could sleep on deck and the 
steady buzzing of the diesel generators made sleep almost impossible. “After 
Sealand I’ve got all I ever needed concerning life on weird marine 
constructions” says Jo.

How about crypto rebels who don’t live on far-away islands or rusty platforms 
in the ocean? What do they do? Several of his colleagues say that Tim May has 
withdrawn from public and now lives as a bearded hermit, owning an impressive 
arsenal of weapons -– a statement May neither denies nor confirms. A 
well-known crypto-pioneer from the American East coast is said to do 
additional work for the Mafia, providing them with programs for highly 
encrypted and unforgeable betting systems. The Cypherpunk founding member Jim 
Bell from Vancouver even became the first official “crypto criminal” in 2001: 
A judge decided that Bell’s confused essay with the title “Assassination 
Politics” was tantamount to a call for attacks. Bell had developed an 
encrypted betting system with digital currency and guaranteed anonymity. 
Participants could guess the decease of certain tax officers in the Vancouver 
area; the one who came closest to the actual time of death won the jackpot.

“Many (Cypherpunks) aren’t even connected anymore to the libertarian 
ideology”, says an insider. “The only thing they have in common seems to be 
the conviction that data protection is a good thing.” Numerous Cypherpunks 
don’t even call themselves Cypherpunks anymore, also for the weird 
self-portrayal of some of the founders. Some of the rebels even seem rather 
bourgeois today.

There are a couple of companies offering programs and systems for anonymous 
websurfing and e-mailing, safe from being spied by authorities and employers 
and protected against the maniac data collecting as it is done by advertising 
companies. Those systems are developed with the crypto rebels’ technologies 
and sometimes operated by confessed Cypherpunks. They have names like Zero 
Knowledge, Hushmail, Anonymizer or ZipLip. A New Yorker company called 
iPrivacy even wanted to anonymize the trade of goods on the internet; the 
clients could have done their shopping on the internet without delivering 
their identity, with iPrivacy organizing the transactions and shipment 
anonymously. Not even the delivering companies would have known a client’s 
identity. But meanwhile iPrivacy has gotten bankrupt, many of such companies 
are having severe economic difficulties, due to the low demand for their 
supplies.

Due to that situation, a number of activists associated with the Cypherpunks 
have, during the last years, switched from programming to debating. “Many 
Cypherpunks have become missionaries, seeing themselves as educators, their 
task being the enlightenment of the public,” says a founding member.

Meanwhile there is a huge amount of academic projects, such as the OpenNet 
initiative at Harvard, Cambridge and the University of Toronto: they 
regularly produce a summary about internet censorship all over the world.

The Electronic Frontier Foundation (EFF), founded in 1990 by a hand full of 
encryption activists, is today a political think tank and one of the loudest 
voices when it comes to debating data protection in the USA. The group also 
employs lawyers to help hackers, data protectors and encryption artists – and 
forced American secret services to hand over encryption techniques or to take 
them off their list of “weapons” banned from export.

For most private users the data protection programs are still too expensive 
and too complicated. The company Anonymizer in San Diego asks $30 or more per 
year for “anonymous websurfing” -– with the disadvantage that web pages take 
longer to load, in many situations a couple of extra clicks are necessary. 
Easy to use music exchange programs like Napster and Kazaa have enormous 
success, whereas complicated Cypherpunk alternatives like Moio Nation never 
really caught on. Is the data protectors’ cause rather a cultural than a 
technical task? “Most people still accept the internet the way it is” says 
John Perry Barlow, author of the above mentioned “Decleration of Independence 
in Cyberspace”. “We still don’t have the killer application” adds Lee Tien, a 
law expert at EFF.

Panama City, October 2003. Sandy Sandfort’s office is located in a white 
painted apartment building with rows of balconies. Sandy’s balcony can easily 
be made out from the sidewalk: the one with the gigantic satellite dish in 
front of the window. Sandy Sandfort is in sunny Panama City for work, not for 
vacation. “Verax Inc.” says the sign at his door. Inside the bare room a few 
desks, a couch, a number of computers, a buzzing fan. “We’re a 
post-venture-capital-business”, says the director of the company and laughs. 
A company that has got no starting capital except for the money Sandy raised 
on a private basis. If things go as planned, Sandy Sandfort expects to make 
history in his spartan office. A new payment system for online purchases is 
supposed to arise in Panama City. A kind of central bank with a new kind of 
electronic money, permitting superdiscreet, supersafe payments via internet. 
One of the oldest dreams of the Cypherpunk community is planned to become 
real – economic freedom on the internet.

Sandy Sandfort is today 57 years old. He has worked as a lawyer in Arizona and 
as an English teacher. In Costa Rica he was the star of a soap opera (“I was 
the bad guy”). He was also part of the first members of the Cypherpunk 
movement. Since last year he lives in Panama, and he had good reasons for 
moving there: The payment system he intends to create could never be run 
legally in the USA.

 New payment systems for the internet – for activists of encryption techniques 
this has always been considered the royal discipline. Loads of web pages have 
been filled with concepts for a new currency, with the Internet-Dollar and 
eGold, with pre-paid internet currency to be bought at kiosks and elaborate 
money laundering methods. They were supposed to put an end to the control by 
tax offices and other authorities. Numerous elegant schemes for virtual 
exchange circles and digital cash have been developed for a long time, many 
of them are considered more elegant and better thought-out than Sandy’s 
Neuclear system. But: they never were of economic success.

Sandy sees his advantage in a different aspect: beside the payment system, his 
Verax Inc. includes its own “killer application”. Sandy Sandfort also knows 
quite well the gambling scene – not the traditional Roulette or Canasta in 
casinos, but cyber-gambling on the internet. For many years gambling websites 
have been part of the most important income sources in the digital economy, 
but they have one problem: in many countries they are illegal.

Many criminal prosecutor offices, among them those in the USA, search their 
citizens’ credit card billings for suspicious transactions with cyber 
casinos. No surprise that many gamblers all over the world are longing for an 
alternative.
 “We want to become the new payment system on the internet“, says Sandy 
Sandfort, rocking back and forth on his rickety desk chair as if suddenly he 
couldn’t wait for things to happen. “A system people don’t have trouble with 
when purchasing gambling chips, weapons or whatever it may be.” Simply 
spoken: clients will transfer money to Verax, via bank, postal money order or 
even in cash. Verax grants them funds and, from this time on, they can start 
gambling in online casinos. In Panama there is no law prohibiting this 
procedure. Only Sandfort and his colleagues will know a gambler’s real 
identity; new crypto-technologies will make sure that the gambler’s anonymity 
is guaranteed and prevent from fraud.

But what happens if, one day, the American authorities forbid money transfers 
to Verax as they forbad transfers to casinos in the past? Sandy laughs. 
“That’s why we want to make sure as soon as possible that our payment system 
is accepted by as many online dealers as possible, also by hotels, travel 
agencies, maybe one day even by Amazon.com. Our system will make it 
impossible to retrace on what exactly a client spent his money. He always can 
deny having spent it on cyber gambling.”

Once the payment system is running, Sandfort perhaps wants to licence it for 
other providers. His programmer, Pelle, a 33-year-old Dane, has already 
developed plenty of ideas on the subject. “Neuclear works like very old 
exchange systems, but is operated with high-tech-methods”, he says. 
“Theoretically, you can create any kind of currency with this system. If you 
want to, create a cyber currency, based upon gold as security. Or, even 
better, on opium. I would laugh my head off if someone would try that”. A 
joke. Pelle is already working on a version of his banking program that isn’t 
placed on only one computer, but distributed on many, many single computers 
all over the world. Once that works, which banking laws could be applicable 
here after all? Is this the hour of birth of perfect digital financial oases 
in cyberspace? Parallel economic areas, where all trade and gambling business 
can be hidden for good?

 “Well, you know, that’s the problem with all Cypherpunks,” says Sandy 
Sandfort. “They have this vision of totally disappearing in a parallel world. 
Most of the time the world doesn’t work that way.” Sandfort walks over to his 
desk and points at the ceiling: “Look, I could sit right here with the best 
and most secure software in the world -– and then some spy or the police 
could have built a tiny little camera in the lamp, recording everything I 
write. Believe me, we will continue making progress, but you’ll never be 
completely invisible in cyberspace.” 
 © DIE ZEIT 12/04/2003 No.50
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