Disclosure: Nothing in this blog should be taken as investment advice. Do your own research. This blog is supported by advertising and affiliate links... Links to products and/or services on this blog may include links to affiliate programs that provide commissions to this blog. All of the content in this blog is 100% my own opinion.
The concept of “third party doctrine” is often left out of discussions surrounding peer to peer blockchain applications and cryptocurrencies.
As such, a distinction in the argument against trusted third parties needs to be made…
As I wrote earlier, in defending trusted third parties, third parties can provide many benefits to individuals.
For example, banks, cellular providers, lenders, attorneys, accountants and even cryptocurrency trading platforms help people transact. The help they provide is to offer a platform that historically has made things easier for consumers.
Because of trusted third parties, consumers, most of the time anyway, don’t have to worry about the security of their savings accounts, know how a cellphone works to make a call, understand tax law on April 15th, or know what cold storage is… The trusted third parties do the heavy lifting.
Indeed, it is because of third party services that billion dollar businesses exist and the U.S. is the leading global consumer economy.
But that’s where the benefit of trusted third parties ends.
Third Party Doctrine
Most people in the U.S. believe that their personal information is private and that the police or government cannot gain access to it in an investigation of them without a warrant.
However, most people are not aware that third party doctrine in the U.S. is a legal, but unjustified, way to violate personal privacy rights and spy on individuals.
The Fourth Amendment to the United States Constitution enacted in 1792, states:
The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no Warrants shall issue, but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.
However, according to Wikipedia in Katz v. United States (1967), the United States Supreme Court established its reasonable expectation of privacy test.
In 1976 (United States v. Miller) and 1979 (Smith v. Maryland), the Court affirmed that “a person has no legitimate expectation of privacy in information he voluntarily turns over to third parties.”
Further, according to an article in The Atlantic:
In the Miller case, the Supreme Court had also found in favor of the government, writing:
The depositor takes the risk, in revealing his affairs to another, that the information will be conveyed by that person to the Government. This Court has held repeatedly that the Fourth Amendment does not prohibit the obtaining of information revealed to a third party and conveyed by him to Government authorities, even if the information is revealed on the assumption that it will be used only for a limited purpose and the confidence placed in the third party will not be betrayed.
The Miller and Smith decisions solidified what has since become known as the third-party doctrine.
It is “Third Party Doctrine” that is the cause célèbre of the blockchain community… And why blockchain proponents such as Nick Szabo love to call third parties “security holes“.
However, in Szabo’s article third party doctrine is not even mentioned… Which I think has led to confusion as to why third parties are problems and why blockchain should hold so much promise.
It’s not so much because third parties are themselves untrustworthy most of the time, or that they are always vulnerable to hacking or theft…
But that they are literally repositories of your private data that are currently not protected at all by the Fourth Amendment.