Pegged Cryptocurrencies and Credibility – Crypto Insider (press release) (blog)

The high volatility of exchange value is one barrier to the mass adoption of cryptocurrencies. But for those that have sought to address this with pegged exchange rates, success has been hard to find. Not impossible, though.

Though such currencies seek to eliminate the exchange-rate issue while enjoying the same ease and low-cost of Bitcoin transactions, its been argued that pegging to, say, the dollar, also pegs the currency to the vagaries of institutions like the US Government and Federal Reserve.

The advent of Blockchain 2.0 has enabled the launching of a variety of new digital assets, including currencies pegged to fiat currencies and to gold. Last month saw New Zealand cryptocurrency exchange Cryptopia announce New Zealands first cryptocurrency which will be pegged to the New Zealand dollar.

The main success so far is that of Tether, which is pegged to the US dollar and offers crypto versions of three currencies, known as: USDT, EURT and JPYT. Tether maintains its peg by keeping the US Dollar equivalent of all USDT value in reserves at all times.

Launched in early 2015, Tether has largely kept the peg in place since then. That is, until late April when it crumbled due to issues with the Taiwanese banks they use for receiving and sending USD withdrawals. All incoming international wires to Tether were blocked and refused by the banks. Since then, however, the value of USDT has rallied from $0.93, and it now trades at $1.02.

Other pegged cryptocurrencies have fared less well. CoinoUSD, NuBits, and BitUSD all eschewed the traditional currency pegging method of the holding of reserves in physical dollars or dollar-denominated debt securities.

CoinoUSD began trading in December 2014 and reached a market capitalization plateau of $2.7 million in early 2016. However, it shut down shortly after due to a glitch which flooded customers with free CoinoUSD units, making it impossible to maintain the exchange value at $1.

NuBits are notable for being the first decentralized cryptocurrency to maintain a $1 peg for a period of one year, having accomplished it in September 2015. However, in June 2016, NuBits suffered a devaluation crisis, with the price falling to 20 cents when its rate-pegging mechanism failed. Although the price later returned to par, today NuBits shows very little market activity.

BitUSD is built on the blockchain platform of the cryptocurrency BitSharesX. BitUSD uses a novel pegging system, involving BitShares, that so far has proven robust. The price of 1BitUSD has hovered around $1 and has not experienced any lasting devaluation. However, in part due to the declining use of BitShares, BitUSDs clientele went into serious decline not long after launch. In late April, however, there has been sudden renewed interest which has seen its market cap surge from below $110,000 to a high of just under $2.4m.

Tether slowly built its market cap and started 2017 at just below $10m. Since then it has also enjoyed a surge. Presently, it has reached its current high of $107m and is the outstanding dollar-pegged cryptocurrency.

Despite its surge in popularity, there is still a long way to go for all cryptocurrencies, of course, which have still to experience a full business and credit cycle. Bitcoin price volatility may eventually flatten out when digital currency becomes more widely accepted, but that is still a long way off.

Meanwhile, Tether offers that sought after exchange stability, but questions remain over its decision of a hard peg maintaining a value different to how the market would value it which has already failed.

Perhaps the greatest value of dollar-pegged cryptocurrencies is that they provide a gauge to how much of the demand for cryptocurrencies is transactional versus speculative.

Picture from Pixabay.

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Pegged Cryptocurrencies and Credibility - Crypto Insider (press release) (blog)

He was an ardent WikiLeaks supporter. Then he got to know Julian Assange. – Vox

Andrew OHagan was an ardent supporter of WikiLeaks, or at least the romanticized idea of it, when he began ghostwriting Julian Assanges autobiography in January 2011. OHagan, one of Britains finest contemporary essayists, is passionate about speaking truth to power. He believed the world needed a transparency organization exposing powers lies and abuses, such as those committed by the American and British militaries during the invasions of Iraq and Afghanistan.

After years of in-depth conversations with Assange, OHagan came to believe that Assange had sabotaged the transparency agenda. The biography project collapsed before Assange moved into the Ecuadorian Embassy during August 2012, but OHagan tried to help Assange until late 2013.

In March 2014, OHagan published a 92-page essay in the London Review of Books, arguing that Assange expended all his ire on the journalists who had tried to work with him and who had basic sympathy for his political position. He would go into these interminable Herzog-like monologues.

OHagans account of Assange is superb, and frequently hilarious. Julian scorns all attempts at social graces, OHagan writes. He marches through doors and leave women in his wake. He talks over everybody. And all his life he has depended on being the impish one, the eccentric one, the boy with a bag full of Einstein who enjoyed climbing trees. But as a forty-year old, thats less charming. There are so many quotable lines. His pride could engulf the room in flames.

OHagans new book, The Secret Life, collects the Assange piece and two of OHagans more recent, detailed essays on modern times: The Invention of Ronald Pinn (about crime on the internet) and The Satoshi Affair (about Craig Wright, the Australian who claims he invented Bitcoin).

In a world where everybody can be anybody, where being real is no big deal, I wanted to work back to the human problems, and that is what drives these stories, OHagan writes in the books foreword. The internet offers a secret life to everybody, but how it happens, and who controls it, stirred me to write these stories.

The Secret Life is timely now, as WikiLeaks and Assange essentially one and the same thing are prominent in the headlines. This week, Assange tweeted support of an alleged NSA whistleblower who leaked documents to the Intercept. And Assange himself could be charged by the US government for publishing leaked documents.

And then there are the sexual assault charges that Assange has been facing since 2010: Sweden recently announced that it is dropping its investigation. I can conclude, based on the evidence, that probable cause for this crime still exists, Marianne Ny, the lead prosecutor in Sweden, told reporters. But because Assange has refused to cooperate with the investigation for seven years and continues to hide in the Ecuadorian Embassy they cant continue investigating.

OHagan and I talked about the Swedish allegations, Assanges similarities with Donald Trump, and whether Ghosting was OHagans own Apocalypse Now. Our conversation, which has been edited and condensed, also covers Russia, Afghanistan, and the problem with cyber-libertarianism.

Your Ghosting insider reporting is riveting and beautifully penned; I could quote half the thing. Julian once told you, Every good story needs a Judas. I would have been tempted to reply, Does that make you Jesus then? He seems to have a messiah complex.

Look at so many of Julians offhand remarks; you dont have to be Dr. Freud to see a power and victim complex. One minute hes Jesus; the next minute hes saying, I want you to be my chief of staff, positioning himself as the president. Every other day, hes something of that sort. Were he an executive in a company, he wouldve been fired for a combination of mania and ineffective leadership very early.

As would Trump, by this point. They share this too. Theyre both embarrassingly mono-mined leaders with such a gigantic chasm where their empathy should be. The idea that each of these men are not only leaders but see themselves as being sui generis, one-off leaders of mankind, is absolutely flabbergasting self-delusion. They cant speak to people. The idea of weakness obsesses them. Again and again, they fail to lead.

Whats with [Assanges] post-election shilling for Trumpism, and his taking the side of the neo-fascist Front National in the French election?

I think its one of the weaknesses of the libertarian tradition: that they will go to bed with anyone, metaphorically.

Julian has always claimed the relationship of WikiLeaks to its sources as being an invisible one, including to me. Look at his recent comments on the character of the sources. Its not Russia, I can say categorically! he says. How can he say that if he doesnt know? In other words, he is freely aware of the sources in both cases. And freely employing his skills as a selector and editor of materials; hes shaping the material and shaping its public perception.

I feel absolutely bamboozled that anyone would be as naive to imagine that promoting Donald Trump, seemingly in league with Russian forces, would be a freedom-fighting act. This is the kind of person Julian decides to campaign for. And it is baffling and ruinous to the cause, his cause.

James Ball, WikiLeaks former spokesman, writes that WikiLeaks has never had a problem with Russia. As in, they never objected to the Putin regimes operations?

James has strong sources for that; I do concur with that view. The idea that the gay-hating, misogynistic, criminal-industrial complex of Putin represents freedom against the flawed model of the United States is naive to the point of madness. And yet WikiLeaks has never had a problem with Putin, as James says.

He is thin-skinned, conspiratorial, untruthful, narcissistic, and he thinks he owns the material he conduits, you describe Assange, abusive and monstrous in his pursuit of the truth that interests him he is probably a little mad, sad, and bad. Any further thoughts since you wrote those words?

Well, what has struck me very powerfully has been that many of those feelings that I left him with several years ago have, if anything, proved correct in the long term. I wrote those lines before his association with Donald Trump. I wrote them before the persistence of his staying in the Ecuadorian Embassy, rather than doing what I always suggested, which was to step out and answer all questions relating to the Swedish matter and clearing his name that way. Sadly, I now feel his name will never be cleared.

The suspension of that investigation which he claimed to be a victory is not a victory for him. Nor for the women who raised the questions. Hes exhausted an investigation by not appearing before it. Thats an unfortunate circumstance for someone whos interested in being a champion of truth.

I happen to have read the affidavits by the two women, the accusers in that case. I happen to think they were very weak. All the more reason, I felt, for him to go to Sweden and subject himself to as far-reaching a questioning and a process as possible.

He had an opportunity to clear his name in a situation where the case against him was tremendously weak, in my opinion. And he failed! And not only failed but he committed what I think is an ethically disastrous act by conflating the request to answer those questions with the pursuit of him for espionage charges in the United States.

The conflation of two separate issues has been a disaster for him. Its been a sleight of hand morally that has robbed him of his previously high standing in my head. To stand in the balcony as he did, with his fist raised, as a freedom fighter, having beat the system and speaking of how he will not forgive is evidence of a man continuing to conflate these two separate issues.

He was not on the balcony in a victory in a freedom fight. He simply eluded questions that were being put to him on behalf of two women who claimed they had been raped. The whole universe of WikiLeaks fanatics or people who are already on his side no matter what; support leaches away from him at that point. And anyone with any degree of public relations sense would have told him that.

In early 2016, you predicted Donald Trump had a strong shot at winning the presidency.

Here we are now what a basic level of stupidity and desperation. Richard Nixon is Aristotle compared to Donald Trump. Its abominable. How could we live in a world that goes from Obama to Trump being elected president back to back?

Were already in the footholds of an impeachment. Trump cannot survive his levels of carelessness. I learned from the years pavement-pounding writing The Secret Lifes stories that one of the things that binds these figures is their carelessness.

Its what somebody like Assange and somebody like Trump have in common: You get into a room, and they just run at the mouth. Theyre so confident and self-involved they dont understand that there are degrees of difference, of opinion, of experience. Theyre mono-minded, and they dont listen. Ultimately theyre careless. Trump doesnt have the character to be president; carelessness will bring him down. Assange is similar, up to the present minute: His confidence, and his old fear of appearing weak, is fatal.

How might The Secret Life surprise readers?

The biggest surprise for me with these stories was the discovery that you can still find things as a writer that cant be found in the crowdsourced world of online nonfiction. That old gladiatorial contact between a single writer and his or her subject can still be thrilling. It was thrilling to me, anyhow. And I think it might allow readers to see how writing itself can unearth truths.

You wrote a scary essay on child jihadis. And The Illuminations, the novel about British Capt. Luke Campbell in Afghanistan. Both draw from your on-the-ground experience of that war as a reporter. What do you think will happen in Afghanistan during the next five years?

It will fall into the hands of extremists. When I was there, I visited a girls school where the kids were trying to greet modernity through education. The Taliban came along and poisoned their drinking water. We failed those girls. We fail them every day. It was a lousy war because were pleasing ourselves in the way we prosecuted it; we understood nothing; we made things worse.

The Secret Life reveals that Assange wanted his biography to read like Ayn Rand. You persuasively argue that cyber-libertarianism, favoring no restrictions on the internet trade of weapons and hard drugs, is dangerous.

Wanting to throw stones through glass windows is an exciting notion. Particularly if behind those windows are corrupt officials, lying systems, deeply flawed institutions that have caused destruction. But when you look at the programs of so many of those cyber-libertarians, theyre actually just nihilistic; they dont believe in any sort of society beyond the slightly autistic, involuted society of the web.

And thats what I really wanted to investigate when I set out to write this book. I find them right-wing. Their freedom is a slightly crazed form of freedom where anything is allowed, anything should be free. Nothing should be ordered. Those instincts led you to a place of an involuted chaos, of anarchy, where the monster ends up being in charge. They think its freedom; I dont. I just think its preparation for totalitarianism. George Orwell kept his eye on this all his career.

Speaking of great writers, Leo Tolstoy is one of your favorite (and most influential) writers. What do you think of his line Everybody wants a revolution, but nobody wants to change their bad behavior?

I like that. Someday someone will write a great novel about the distance revolutionaries maintain between their ambitions for society and their ambitions for themselves. Many of those Ive known love humanity, but they dont really like people.

You also write columns for [the] New York Times Magazine, where youve praised technologys improvements to lives. Are you optimistic about AI and the future?

I think life is just better because of technology. Im not nostalgic for some imagined period of innocent bliss. Its just nicer being able to order your carrots online and nicer being able to get information so quickly. AI is likely to be the biggest subject to have taken flight during our lifetime. It will change human experience and daily life immeasurably. And I cant wait.

You recently wrote a lovely tribute to Bob Silvers, the New York Review of Books late editor. What do you think about the future of editors and journalism?

People will always want people to say something upbraiding and excellent. Its like human conversation: We all like our computers, we all like bars, and we dont always want to sit there alone, talking to ourselves. Its lovely to think that someone might turn up and say an unexpected thing, things that will make your day, and for me the need for that will always be like the need for water. Lets just say we irrigate the soul by means of each other, or we die before our time.

Have you communicated with Assange since your initial essay came out in the London Review of Books during March 2014?

Im a great adherent of freedom of the press, like he is. In late 2013, I sent him the news that I would be exercising my freedom as a writer, speaking about our long relationship. This was three years after my ghostwriting interactions with him began. I made it known to him that this would be the end, goodbye from me, because there was never a possibility of Julian being able to accept others version of history rather than his, sustained in his own mind.

It was like trying to write a book with Mr. Kurtz, you write about Assange in Ghosting a reference to Marlon Brandos difficult, perplexing character in Apocalypse Now. Was this your Apocalypse Now project?

It was a bit like that. And the smell of napalm I can tell you from hard-won experience is slightly better than the smell of Julian in the morning.

Alexander Bisley is a regular Vox contributor. He previously wrote about Julian Assange in 2013.

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He was an ardent WikiLeaks supporter. Then he got to know Julian Assange. - Vox

WikiLeaks: Washington Was Aware of Qatar, Saudi Arabia Backing Terrorists – Sputnik International

REUTERS/ Francois Lenoir

"We need touse our diplomatic and more traditional intelligence assets tobring pressure onthe governments ofQatar and Saudi Arabia, which are providing clandestine financial and logistic support toISIL [Daesh] and other radical Sunni groups inthe region," the letter read.

The document also mentioned the ongoing competition betweenDoha and Riyadh "to dominate the Sunni world."

On Monday, Saudi Arabia, Bahrain, the United Arab Emirates and Egypt announced a break indiplomatic relations withQatar, accusing Doha ofdestabilizing the situation inthe Middle East and supporting terrorist organizations, including the Muslim Brotherhood terror group (outlawed inRussia). The authorities ofeastern Libya, Yemen, aswell asthe Maldives subsequently also announced the severance ofrelations withQatar.

AFP 2017/ KHALED AL-SAYYED

The military conflict inSyria has been ongoing since2011 withgovernment fighting againstvarious opposition and militants groups, including Daesh. The influence ofDaesh inIraq has significantly increased in2014 when the terrorists captured the country's major city ofMosul afterinvading fromSyria. The operation toliberate the city is currently carried outby the Iraqi and US-led coalition forces.

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WikiLeaks: Washington Was Aware of Qatar, Saudi Arabia Backing Terrorists - Sputnik International

Reality Winner? Really? – The Daily Caller

My job is to read as much news as I can in a day and then make it somewhat more entertaining for my reader(s). Some days are easy, and some days arent so easy. And then theres today, when the top story in America is about a leaker of Top Secret documents who is literally named Reality Winner. Im not sure yet what sort of day this is.

Chuck The Boss Ross reports:

The 25-year-old woman who stole Top Secret documents from the National Security Agency and leaked them to The Intercept appears to be a supporter of Bernie Sanders and other progressive icons, such as Bill Maher and Michael Moore.

Reality Leigh Winners apparent social media footprint also shows that she is a supporter of other liberal causes, including the Womens March and the Islamic Society of North America, the Muslim civil rights group

Winner was indicted in federal court on Monday after she allegedly stole classified documents from her employer, Pluribus International, a defense contractor that does work for the NSA from its offices in Augusta, Ga.

Some say we need to send all the millennials to Gitmo. This is a perfect example of why thats not such a bad idea. Weve raised an entire generation of Americans who think that rules and laws dont apply to them. Unfortunately for this young woman, her name is Reality Winner and not Hillary Clinton, so shes actually being charged with her very obvious crime.

But, because this is 2017, she will now be lionized by the left. Hell, if they can make a hero out of Bradley Manning, they can make a hero out of anybody. The same people who howled at a county clerk in Kentucky for following her Christian conscience on gay marriage will defend this young lady for following her conscience on their religion. She hates the same people and things they do, so shes one of them. No enemies on the left.

My advice to young Ms. Winner is to declare that shes now a man. Make everyone else change their pronoun usage at the drop of a hat. Then, just wait for another Democrat to get elected president and commute her sentence. Go with what works.

She wouldnt even have to change her name, like Manning did. As weve all learned, Reality knows no gender.

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Reality Winner? Really? - The Daily Caller

How Does Reality Winner Compare To Edward Snowden After Leaking NSA Documents? – International Business Times

A 25-year-old government contractor was arrested Tuesday after providing a top secret NSA document to the news website The Intercept, reports NBC News. The document is from May 5.

The document is an analysis of Russian intelligence efforts to undermine the 2016 U.S. presidential election. It doesnt detail a direct link to any votes being changed, but does outline a concerted and deeper effort than previously known. The analysis describes a technique called spear phishing, where spoof e-mails invite user to click on links or open attachments that contain malicious software. The attacks targeted an election software company and 122 local election officials.

Read:Edward Snowden Reacts To WikiLeaks' Vault 7 Dump, Calls CIA Documents 'Authentic'

This is in direct opposition to what Russian President Vladimir has claimed, saying that the Russian state has not been involved in any kind of hacking.

The leaker, a government contractor named Reality Leigh Winner, was charged with gathering, transmitting or losing defense information in U.S. District Court in Georgia. The federal complaint accuses Winner of unlawfully transmit(ing) the intelligence reporting to an online news outlet.

Winner worked for Pluribus International Corporation in Georgia. CNN reportedThursdaythat her mother said she had never praised past leakers such as Edward Snowden and wasnt particularly political. She also spent six months in the military.

Winner had a top secret clearance for documents and faces up to 10 years in prison.

The Snowden case differs from Winner in several key components.

While we dont know if Winner took more than the one document, Snowden took thousands, at least seven thousand of which have been published, according to Business Insider.

Snowden was also careful to leave his job as a contractor at Booz Allen Hamilton in Hawaii and flee to China before releasing the documents, putting him out of reach of authorities. Both are charged with violating the espionage act.

Read:Why The US Wants To Arrest Julian Assange, WikiLeaks Founder, A Matter Jeff Sessions Called 'A Priority'

Both leakers, however, are working with journalist Glenn Greenwald. The Intercept was founded in 2013 by Greenwald. Snowden worked with Greenwald while he was reporting for British newspaper The Guardian. Both leakers took information related to the NSA, but Snowdens had far greater reach and impact.

President Donald Trump has been very vocal about his disdain for leakers, especially on Twitter. He often parlays news stories by going after leakers as the real story.

Reality Winner poses in a photo posted to her Instagram account Photo: REUTERS

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How Does Reality Winner Compare To Edward Snowden After Leaking NSA Documents? - International Business Times

Japan close to ushering in new wave of mass surveillance … – The Japan Times

MOSCOW Edward Snowden, who exposed the existence of highly invasive U.S. surveillance programs in 2013, warned this week that Japan might be moving closer to achieving sweeping surveillance of ordinary citizens with a bill that gives the police highly invasive surveillance powers in the name of counterterrorism.

This is the beginning of a new wave of mass surveillance in Japan, the 33-year-old American said in an exclusive interview from his exile in Russia, referring to Japans conspiracy bill, which has stirred controversy at home and abroad as having the potential to undermine civil liberties.

The consequences could be even graver when combined with XKEYSCORE, a wide-reaching U.S. data collection tool that was exposed by the former National Security Agency contractor. Snowden also gave credence to the authenticity of new NSA papers exposed by The Intercept website earlier this year that showed the secretive spy agency has already shared the surveillance tool with Japan.

The warning from the intelligence expert is his latest regarding the Japanese governments effort to push the divisive conspiracy bill through the Diet. It criminalizes the planning of and the preparatory actions for 277 serious crimes.

In an open letter to Prime Minister Shinzo Abe in mid-May, a U.N. special rapporteur on the right to privacy stated that the conspiracy bill could lead to undue restrictions on privacy and freedom of expression because of its potential for widespread use and abuse a claim Abes government strongly denies.

Snowden said he agrees with the U.N.-appointed expert, Joseph Cannataci, because the bill is not well explained and raises concerns that the government may have intentions other than its stated goal of cracking down on terrorism and organized crime ahead of the 2020 Tokyo Olympics.

The conspiracy law, proposed by the government, focuses on terrorism and everything else that is not related to terrorism things like taking plants from the forestry reserve, he said. And the only real understandable answer (to the governments desire to pass the legislation) . . . is that this is a bill that authorizes the use of surveillance in new ways because now everyone can be a criminal.

Based on his experience of using XKEYSCORE, Snowden said the authorities will eventually be able to intercept everyones communications, including people who are organizing political movements or protests, and put them in a bucket.

The records would be simply pulled out of the bucket whenever necessary and the public would not be able to know whether the activities are being undertaken legally or secretly by the government because there are no sufficient legal safeguards in the bill, Snowden said.

Snowden finds the current situation in Japan reminiscent of what he went through in the United States after the terrorist attacks on Sept. 11, 2001.

In passing the Patriot Act, which strengthened the U.S. governments investigative powers in the wake of the attacks, the U.S. government said similar things to what the Japanese government is saying now, such as these powers are not going to be targeted against ordinary citizens and were only interested in finding al-Qaida and terrorists, according to Snowden.

But within a few short years of the Patriot Act being enacted, the U.S. government was using the law secretly to collect the phone records of everyone in the United States, and everyone around the world who they could access through the largest phone companies in the United States, Snowden said, referring to the revelations made in 2013 from the top secret NSA documents he leaked.

Even though it sacrifices civil liberties, mass surveillance is ineffective, Snowden said. The U.S. governments privacy watchdog concluded in its 2014 report that the NSAs massive telephone records program showed minimal value in safeguarding America from terrorism and that it must be terminated.

Snowden said Japan should insert strong guarantees into the conspiracy bill to protect human rights and privacy and ensure those guarantees are not enforced through the words of politicians but through the actions of courts.

This means in advance of surveillance, in all cases the government should seek an individualized warrant, and individualized authorization that this surveillance is lawful and appropriate in relationship to the threat thats presented by the police, he said.

He also said allowing a government to get into the habit of collecting the communications of everyone through powerful surveillance tools could dangerously change the relationship between the public and the government to something resembling subject and ruler rather than a partnership, which is how it should be in a democracy.

Arguably, the Japanese public may not make much of what Snowden views as the rise of untargeted and indiscriminate mass surveillance, thinking everyday people have nothing to hide or to fear.

But he insists that privacy is not about something to hide but about protecting an open and free society where people can be different and have their own ideas.

Freedom of speech would not mean much if people didnt have the space to figure out what they want to say, or the room to share their views with others they trust so they can develop them before introducing them into the context of the world, he said.

When you say I dont care about privacy, because Ive nothing to hide, thats no different than saying you dont care about freedom of speech, because youve nothing to say, he added.

Snowden said toward the end of the more than 100-minute interview at a hotel in Moscow that living in exile is not a lifestyle that anyone chooses voluntarily. He hopes to return home while continuing to have active exchanges online with people in various countries.

The beautiful thing about today is that I can be in every corner of the world every night. I speak at U.S. universities every month. Its important to understand that I dont really live in Moscow. I live on the internet, he said.

Snowden showed no regrets about taking the risk of becoming a whistle-blower and being painted by his home country as a criminal or traitor, facing espionage charges at home for his historic document leak.

Its scary as hell, but its worth it. Because if we dont do it, if we see the truth of crimes or corruption in government, and we dont say something about it, were not just making the world worse for our children, were making the world worse for us, and were making ourselves worse, he said.

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Japan close to ushering in new wave of mass surveillance ... - The Japan Times

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Enterprise Encryption Solutions - Data at Rest and Data in ...

Enigma: Why the fight to break Nazi encryption still matters – CNET

This is the Enigma machine that enabled secret Nazi communications. Efforts to break that encoding system ultimately helped make D-Day possible.

It was night when three British sailors and a 16-year-old canteen assistant boarded a sinking U-boat off the coast of Egypt. A spotlight shone on them from the HMS Petard, the Royal Navy destroyer that had hunted down the German submarine and now slowly circled the vessel. The U-boat's commander lay dead below the hatch as water poured in from a crack in the hull.

The four men began searching the ship, but not for survivors. They were looking for codebooks.

These red-covered guides were vital to breaking a diabolical code that made Nazi radio messages unintelligible. The Germans had been using a typewriter-like machine to encrypt their communications. They called it Enigma and were sure the code was unbreakable.

The British were determined to prove them wrong.

Wading past bodies through slowly rising water, First Lieutenant Anthony Fasson, Able Seamen Colin Grazier and Kenneth Lacroix, and young Tommy Brown found the captain's quarters and began searching drawers and breaking into cabinets. They found two codebooks written in red, water-soluble ink: the Short Weather Cipher, used to condense weather reports into a seven-letter message, and the Short Signal Book, used to report convoy sightings, along with other documents.

While Grazier and Fasson continued to search below, Brown carried the books up the ladder of the sub's conning tower to a waiting boat. They were racing against time as seawater poured into the submarine.

On his third trip up the ladder, Brown called for his shipmates to come up, too -- but it was too late. U-559 sank before Fasson and Grazier could escape that night in October 1942. As Hugh Sebag-Montefiore recounts in "Enigma: The Battle for the Code," their bravery helped changed the course of World War II.

The U-boat codes created by Enigma were especially hard to break, and the Allies found themselves locked out for weeks or months at a time. But several months after they recovered the codebooks from U-559 -- on March 19, 1943 -- cryptographers stationed in Britain's Bletchley Park broke through into U-boats' Enigma-coded messages and were never fully locked out again.

From then on, their efforts only improved. By September of that year, the Allies were reading encrypted U-boat messages within 24 hours of intercepting them. The breakthrough allowed the Allies to decrypt detailed field messages on German defenses in Normandy, the site of the impending D-Day invasion. And the machines themselves advanced the world's technology -- pushing forward ideas about computer programming and memory.

"I'd call it the key to computing," says Ralph Simpson, a retired computer expert and amateur Enigma historian.

The years since have given us a cat-and-mouse game between codebreakers and cryptographers, with each side trying to outwit the other. Those battles are still raging. But they're no longer confined to blackboards and spinning rotors on crude computers. They move at the speed of electrons flowing through your computer's processor.

Today's computer-enabled encryption -- technology that scrambles what unauthorized viewers see -- is so complex that computers can't break it unless it's been used incorrectly. It's so powerful that the US government and others have tried to legally require tech companies to unlock their own encryption, as was the case with Apple and the government last year over a terrorist's locked iPhone.

And today's encryption is so useful that dissidents, spies and terrorists rely on it to protect their conversations.

The innovation won't stop. Future advances in quantum computing might be able to crack even perfectly implemented encryption. That's led mathematicians to pre-emptively try to make encryption even stronger.

It's a cycle without end in sight.

Before the internet wove its way into our lives, encryption was pretty much something businesses and governments used to protect sensitive data, like financial documents and Social Security records.

"Mostly it was banks, diplomatic services and the military who used cryptography throughout history," says Bill Burr, a retired cryptographer from the US National Institute of Standards and Technology.

The internet increased the use of encryption, as business and governments sent information over networks that hackers and spies could easily intercept. But few regular people went out of their way to use encryption as part of daily life. Maybe your paranoid friend would encrypt his email, forcing you to use extra software to read it.

That changed after disclosures by former NSA contractor Edward Snowden, who in the summer of 2013 revealed the existence of government mass surveillance programs designed to collect reams of information from everything -- our emails, calls and texts. Though we were told the programs weren't designed to target Americans, the disclosures forced us to ask how much information we want to put on the internet -- and potentially expose.

The tech industry has tried to address the problem by offering us another option: encrypting as much of our lives as we can.

What's made this possible was the Engima, and the men, women, mathematicians, computer scientists and linguists who ultimately beat it.

This is their story.

The Enigma has a surprisingly understated design for being such a deadly tool. It could easily be mistaken for a typewriter with a few extra parts, housed in a plain wooden box.

Lifting the lid of an Enigma, a German operator saw what might on first glance seem like two typewriters squished together. One set of keys, closest to the operator, was the actual keyboard to be typed on.

Above it was a second set of keys, laid out just like the keyboard. But when you type on the real keyboard, these letters light up. Type an "a" on the normal keyboard, for example, and "x" lights up above.

So if you start typing a word, each letter lights up in code.

This was Enigma's genius. The German operators didn't need to understand the complex math or electronics that scrambled what they typed on the keyboard. All they knew was that typing "H-E-L-L-O" would light up as "X-T-Y-A-E," for example. And that's the message they sent around.

This jumbling of letters changed each day at midnight, when Nazi commanders would send new settings that Enigma operators would use to turn dials and change the plugs on a board below the keys, all designed to match the day's code. Without the code, the message couldn't be unscrambled.

Enigma was so sophisticated it amounted to what's now called a 76-bit encryption key. One example of how complex it was: typing the same letters together, like "H-H" (for Heil Hitler") could result in two different letters, like "L-N."

That type of complexity made the machines impossible to break by hand, Simpson says.

How impossible? If you gave 100,000 operators each their own Enigma machine, and they spent 24 hours a day, 7 days a week testing a new setting every second, "it would take twice the age of the universe to break the code," Simpson says.

Obviously, codebreaking by hand wasn't going to cut it.

"Because we now have machine encryption for the first time, it took a machine to break it," Simpson says.

Equally fascinating is that Nazi military leaders knew, in theory, that someone could develop a machine-assisted way to speed up their code cracking. But they didn't believe their enemies would put in the time and resources needed.

They were wrong.

14

See Alan Turing's lost notes, found in the walls of Bletchley Park 70 years later

Of course, the UK was very motivated to break the Enigma. German U-boats were sinking hundreds of British ships, costing thousands of lives and choking the country off from vital supplies being shipped from the United States and Canada. What's more, the country was desperate for any advantage in the early days of the war, filled with German bombing campaigns and fears of a land invasion.

So resources, manpower and the lives of sailors like Fasson and Glazier were poured into cracking the Enigma codes. The first result of these efforts was the Bombe.

Custom-designed by British mathematicians like Alan Turing, Bombes were about the size of three vending machines stacked side by side, with a series of spinning rotators connected in the back by a 26-way cable. They were based on the Polish "Bomba" codebreaking machine, which the Poles were forced to abandon in 1939, after their country was invaded by Germany.

Housed at a secretive intelligence program on the grounds of manor house Bletchley Park, less than 50 miles outside of London, and other nearby installations, the Bombes were run by teams of Navy women.

Each of the Bombe's rotators had letters on it and, as they spun, the machine tested possible solutions to a given Enigma code much faster than a human could.

Researchers like Turing and his team were able to make the Bombes more efficient by using "pinched" codebooks from U-boats and other clues, eliminating thousands of possible solutions.

"If we understand the book, we then know what the submarines are likely to say," says David Kenyon, a research historian at the Bletchley Park Trust.

Breaking into the U-boat's "Shark" code in 1943 set in motion a series of dominoes that ultimately led to the Nazi defeat. Intercepted U-boat messages made the Allies better at sinking the vessels, which contributed to the German Navy's decision to pull its U-boats out of the Atlantic later that year, Kenyon says. That respite allowed the Allies to prepare for D-Day in 1944 and to end the war in 1945.

While codebreaking alone didn't win World War II, it was one of the most powerful weapons invented for that purpose.

"There was no point in the Second World War where the outcome was a foregone conclusion," Kenyon says. There's no telling what might have happened "if you took away any of the factors that were working in the Allies' favor."

35

Photo Tour of Bletchley Park

The work done on the Bombes and other codebreaking machines didn't just aid in the fight against the Nazis. They proved theories about computer programming and data storage, the lifeblood of today's modern computers.

One of these breakthroughs came when the Joseph Desch of the US Navy found a way to speed up the Bombe. The machines could only run so fast, because operators read the results of the codebreaking analysis right off of the wheels themselves. Go any faster and the wheels would spin right past the correct answer.

Desch's solution was a primitive form of digital memory. When the Bombe came upon the correct answer, electrical relays would detect and record it. That let the US Bombes spin more than 17 times faster than the British Bombes.

Then there was Colossus. This machine -- designed not to break Enigma, but rather the more sophisticated Lorenz codes used by the German High Command -- advanced vacuum tube tech that later came to power the world's first true computers, like the ENIAC and Mark-1, and then the first generation of IBM mainframes.

To create a codebreaking machine powerful enough to crack Lorenz, British engineer Tommy Flowers found a way to run more than 2,000 vacuum tubes at once. While it had been theorized this approach could power a programmable computer, Flowers was the first to make it happen.

Flowers himself didn't get a chance to push this technology to its next logical conclusion. But Turing and other Bletchley alums worked at the University of Manchester after the war, creating the Ferranti Mark 1 -- a programmable computer run with vacuum tubes.

That the work at Bletchley showed up later in the first general-purpose computers doesn't surprise Burr. The codebreakers were able to fully understand the workings of Enigma and the Lorenz code create machines to break them at a time when the principles of computing only existed in theory.

"It's hard for me to imagine people smart enough to do that," says Burr, who's an expert in cryptography.

In terms of global politics, encryption was pretty straightforward during World War II. One nation tapped its linguists and mathematicians -- and relied on the heroism of men who boarded sinking U-boats -- to crack the encryption tech of an enemy force.

The world's gotten a lot more complicated since then.

Just as in World War II, law enforcement and spy agencies today try to read the communications of criminals, terrorists and spies. But now that almost everyone uses encryption, a government's ability to break it doesn't just worry our country's enemies -- it concerns us, too.

And despite the advances in computing and encryption since Bletchley Park, we haven't come close to agreeing on when it's okay to break encryption.

Case in point: the 2016 conflict between Apple and the US Federal Bureau of Investigation. The FBI wanted Apple's help breaking into the iPhone of a suspected terrorist, but Apple argued that this could put everyone who uses an iPhone at risk.

Burr, who saw the inside of public controversies over the government breaking encryption during his time at the National Institute of Standards and Technology, says there's no clear path forward.

"There's just a big dilemma there," he says. Creating ways to break encryption "will weaken the actual strength of your security against bad guys of ability. And you have to count among those the state actors and pretty sophisticated and organized criminals."

In their laser-focused effort to crack Nazi encryption, codebreakers like Turing and soldiers like Fasson and Grazier were unlikely to have imagined a world like this. But here it is: the catch-22 of computerized encryption. And it's not going away anytime soon.

Special Reports: CNET's in-depth features in one place.

Tech Enabled: CNET chronicles tech's role in providing new kinds of accessibility.

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Enigma: Why the fight to break Nazi encryption still matters - CNET

Hungary’s CryptTalk boosted by encryption controversy – Financial Times

In his modest office in one of Budapests innovation parks, Szabolcs Kun reels off an eclectic list of clients: law firms, commodity traders, television celebrities and dealers in gemstones and precious metals.

Oh, and we recently got an inquiry from a top European football club, he adds.

All want the same thing: completely secure telephone calls.

Football club managers are like commodity traders: both deal in very expensive goods and have to negotiate [by phone], says Mr Kun, a 34-year-old IT entrepreneur, whose start-up CryptTalk is one of the products making a name for itself in Hungarys growing technology sector.

It was energy traders in Hungary who, in 2010, first alerted Mr Kun to the increasing threat of phone tapping. They found prices would mysteriously move against them after agreeing a deal on the phone, he says.

Mr Kun and Attila Megyeri, his business partner, were experienced telecommunications engineers. As more clients found evidence of eavesdropping, they turned their attention to security when communicating by telephone.

They wanted to provide a software solution, so that customers would not need to buy a second phone or additional gadget to increase security.

Even more importantly they wanted to make sure the software did not have a so-called back door that would allow governments or hackers to circumvent security measures. Traditional telecom providers typically offer secure telephony and call encryption through a central server, which generates and stores encryption keys.

This is legally mandated so the secret services can monitor calls [when justified], says Mr Kun. But it is also a back door into your system. Even if [it exists] for good control purposes, that door can be opened by the bad guys, for industrial espionage.

To circumvent this risk, the pair used so-called peer-to-peer encryption, whereby calls and messages are scrambled from handset to handset using software based on a complex algorithm. This generates an encryption code shared only between caller and receiver.

The Achilles heel of such systems is the delay in calls typically of two seconds duration that is caused by the encryption-decryption process and can frustrate users. With their specialist knowledge of telephony and many hours of hard work, Mr Kun and his partner eliminated this lag.

The two founders have won backing from a clutch of private investors to finance their vehicle, Arenim Technologies. Angel investors are still the most common way for Hungarian start-ups to raise funding, with 37 per cent of start-ups using this route for finance, according to the European Startup Monitor, a study conducted by start-up associations around Europe.

Arenim was registered in Stockholm while the development team remained in Budapest.

After a long review, we chose Sweden. It has the best privacy laws...Its where the rights to free speech and such stuff are important, Mr Kun says.

Sweden also has more liberal export regulations than Hungary, where licences are needed to sell security software outside the EU.

Designed to work with Apples iPhone, they quietly launched their CryptTalk app in 2014.

This is a solution with no back door, without any special hardware and, very importantly, even we, the vendors, cannot decrypt calls made using CryptTalk, Mr Kun says. If my engineer goes crazy, or gets a big offer from a bad guy heres $1m, but help me [eavesdrop] even in that situation, CryptTalk cannot be hacked.

Two audits undertaken by NCC Group, a UK-based cyber security and risk mitigation company, in 2015 and 2017, support this claim.

CryptTalk was found to be secured to a very good standard and no practically exploitable vulnerabilities were found, NCC wrote.

Commercial progress, though, has been modest: CryptTalk has attracted 15,000 users, half from within Hungary, with revenues last year totalling 0.4m. Prices start from 19.99 per month for a subscription.

Gyuri Karady, Arenims business development director, says that a slow start is typical for a new product like this. He argues that businesses, while spending huge sums on computer security, typically fail to show the same concern over their phone calls.

Most corporates dont seem to have caught on that they are at risk, he says.

Arenim Technologies 25 staff are now focused on launching an Android-based version of CryptTalk later this year, followed by a drive for international sales.

CryptTalk was at the centre of controversy in March last year when, as part of Hungarys war on terror, a government official threatened to ban secure communications providers, including CryptTalk, for thwarting eavesdropping operations.

In an ironic twist, the very same week the Hungarian Innovation Association a state-supported body championed by the government awarded the annual prize for start-up innovation to Arenim Technologies in recognition of CryptTalk.

The hubbub died down after the government decided not to enact the ban.

Mr Kun says he is willing to co-operate on legitimate security concerns with any state including, if necessary, closing a users account. But, he says: So far, [we have had] zero official request from authorities or governments of any kind to co-operate with them or provide them data.

Publicity surrounding the governments threat to CryptTalk last year had a positive effect on sales. Extensive media coverage in the region and globally, led to a surge in users, which jumped 20 per cent from 8,000 to 9,600 in one month.

It shows the Hungarian government does support start-ups, says Mr Kun. We couldnt have paid for this [kind of] marketing.

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Hungary's CryptTalk boosted by encryption controversy - Financial Times

We want to limit use of e2e encryption, confirms UK minister – TechCrunch

The UK government has once again amped up its attacks on tech platforms use of end-to-end encryption, and called for International co-operation to regulate the Internet so that it cannot be used as a safe space for extremists to communicate and spread propaganda online.

The comments by UK Prime Minister, Theresa May, and Home Secretary, Amber Rudd, come in the wake of another domestic terrorist attack, the third since March, after a group of terrorists used a van to plow down pedestrians in London Bridge on Saturday evening, before going on a knife rampage attacking people in streets and bars.

Speaking outside Downing Street yesterday, May swung the finger of blame at big Internet companies criticizing platform giants for providing safe spaces for extremists to spread messages of hate online.

Early reports have suggested the attackers may have used YouTube to access extremist videos.

We cannot allow this ideology the safe space it needs to breed. Yet that is precisely what the internet and the big companies that provide internet-based services provide, May said. We need to work with allied, democratic governments to reach international agreements that regulate cyberspace to prevent the spread of extremism and terrorist planning. And we need to do everything we can at home to reduce the risks of extremism online.

We need to deprive the extremists of their safe spaces online, she added.

Speaking in an interview on ITVs Peston on Sunday program yesterday, UK Home Secretary Amber Rudd further fleshed out the prime ministers comments. She said the government wants to do more to stop the way young men are being groomed into radicalization online including getting tech companies to do moreto take down extremist material, and also to limit access to end-to-end encryption.

Rudd also attacked tech firms use of encryption in the wake of the Westminster terror attack in March, although the first round of meetings she held with Internet companies including Facebook, Google and Twitter in the wake of that earlier attack apparently focused on pushing for them to develop tech tools to automatically identify extremist content and block it before it is widely disseminated.

The prime minister also made a push for international co-operation on online extremism during the G7 summit last month coming away with a joint statement to put pressure on tech firms to do more. We want companies to develop tools to identify and remove harmful materials automatically, May said then.

Though it is far from clear whether this geopolitical push will translate into anything more than a few headlines given tech firms are already using and developing tools for automating takedowns. And the G7 nations apparently did not ink any specific policy proposals such as on co-ordinated fines for social media takedown failures.

On the extremist content front, pressure has certainly been growing across Europe for tech platforms to do more including proposals such as a draft law in Germany which does suggestfines of up to50 million for social media firms that fail to promptly takedown illegal hate speech, for example. While last month a UK parliamentary committee urged the government to consider a similar approach and UK ministers are apparently open to the idea.

But the notion of the UK being able to secure international agreement on harmonizing content regulation online across borders seems entirely fanciful given different legal regimes vis-a-vis free speech, with the US having constitutional protections for hate speech vs hate speech being illegal in certain European countries, for example.

Again, these comments in the immediate aftermath of an attack seem mostly aimed at diverting attention from tougher political questions including over domestic police resourcing; over UK ally Saudi Arabias financial support for extremism; and why known hate preachers were apparently allowed to continue broadcasting their message in the UK

Blaming social media platforms is politically convenient but intellectually lazy, tweeted professor Peter Neumann, director of theInternational Centre for the Study of Radicalisation and Political Violence. Most jihadists are now using end-to-end encrypted messenger platforms e.g. Telegram. This has not solved problem, just made it different.

Responding to the governments comments in a statement, Facebooks Simon Milner, UK director of policy, said: We want to provide a service where people feel safe. That means we do not allow groups or people that engage in terrorist activity, or posts that express support for terrorism. We want Facebook to be a hostile environment for terrorists. Using a combination of technology and human review, we work aggressively to remove terrorist content from our platform as soon as we become aware of it and if we become aware of an emergency involving imminent harm to someones safety, we notify law enforcement. Online extremism can only be tackled with strong partnerships. We have long collaborated with policymakers, civil society, and others in the tech industry, and we are committed to continuing this important work together.

Facebook has faced wider criticism of its approach to content moderation in recent months and last month announced it would be adding an additional 3,000 staff to its team of reviewers, bringing the global total to 7,500.

In another reaction statement Twitters UK head of public policy, Nick Pickles, added: Terrorist content has no place on Twitter. We continue to expand the use of technology as part of a systematic approach to removing this type of content. We will never stop working to stay one step ahead and will continue to engage with our partners across industry, government, civil society and academia.

Twitter details how many terrorism-related accounts it suspends in its Transparency Report the vast majority of which it says it identifies using its own tools, rather than relying on user reports.

On the controversial topic of limiting end-to-end encryption, a report in The Sun newspaper last month suggested a re-elected Conservative government would prioritize a decryption law to force social media platforms which are using e2e encryption to effectively backdoor these systems so that they could hand over decrypted data when served a warrant.

The core legislation for this decrypt law already exists, aka the Investigatory Powers Act which was passed at the end of last year. Following the General Election on June 8, a new UK Parliament will just need to agree the supplementary technical capability regulation which places a legal obligation on ISPs and communication service providers to maintain the necessary capability to be able to provide decrypted data on request (albeit, without providing technical detail on how any of this will happen in practice).

Given Rudds comments now on limiting e2e encryption it seems clear the preferred route for an incoming Conservative UK government will be to pressure tech firms not to use strong encryption to safeguard user data in backed up by the legal muscle of the country having what has been widely interpreted as a decrypt law.

However such moves will clearly undermine online security at a time when the risks of doing so are becoming increasingly clear. As crypto expert Bruce Schneier told usrecently, the only way for the UK government to get the access it wants is to destroy everyones security.

Moreover, a domestic decrypt law is unlikely to have any impact on e2e encrypted services such as Telegram which are not based in the UK, and would therefore surely not consider themselves bound by UK legal jurisdiction.

And even if the UK government forced ISPs and app stores to block access to all services that do not comply with its decryption requirements, there would still be workarounds for terrorists to continue accessing strongly encrypted services. Even as law-abiding users of mainstream tech platforms risk having their security undermined by political pressure on strong encryption.

Commenting on the governments planned Internet crackdown, the Open Rights Group had this to say: It is disappointing that in the aftermath of this attack, the governments response appears to focus on the regulation of the Internet and encryption. This could be a very risky approach. If successful, Theresa May could push these vile networks into even darker corners of the web, where they will be even harder to observe.

But we should not be distracted: the Internet and companies like Facebook are not a cause of this hatred and violence, but tools that can be abused. While governments and companies should take sensible measures to stop abuse, attempts to control the Internet is not the simple solution that Theresa May is claiming.

Meanwhile, asked about his support for encryption back in September 2015given the risks of his messaging platform being used by terrorists Telegram founder Pavel Durov said: I think that privacy, ultimately, and our right for privacy is more important than our fear of bad things happening, like terrorism Ultimately the ISIS will always find a way to communicate within themselves. And if any means of communication turns out to be not secure for them, then they switch to another one. So I dont think were actually taking part in this activities. I dont think we should feel guilty about this. I still think were doing the right thing protecting our users privacy.

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We want to limit use of e2e encryption, confirms UK minister - TechCrunch