Essays

Will Bitcoin Be Tamed, Made Less Private?

bitcoin-circuit-board-680x400

INTRODUCTORY NOTE by John I. Johnson: This is an interesting piece by Kyle Torpey about Bitcoin. I think his comparison with Tor is enlightening.

I’ve added some comments of my own in square brackets because the author is using circumlocutions, is not a native English speaker, or is just not a good writer — I don’t know which.

As a side comment, it’s clear that Bitcoin is not as anonymous as many people think, and that governments are evaluating its potential use. They certainly have not condemned it out of hand. Furthermore, there is a movement afoot by governments and businessmen to impose regulations and eliminate or restrict anonymity. Assuming Bitcoin or a successor survives and becomes more widely utilized, this is certainly what will happen. Indeed, it is happening now.

In my view, Bitcoin is not a currency (not yet, anyway). I would classify it as a “digital asset” due to its extreme price volatility. (One function of money is to serve as a stable store of value.) It resembles gold or stocks (equities) more than money. However, it can be used for financial payments, whereas gold and equities virtually never are.

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How Governments Subsidize Bitcoin’s Usefulness and the Bitcoin Price

by Kyle Torpey

DOES BITCOIN have Government to thank for its existence?

Since Bitcoin is mostly needed in situations where fungibility is a must, it isn’t much of a stretch to say that governments essentially subsidize the usefulness of Bitcoin because government-backed restrictions and censorship on financial transactions are a major factor in the need for a fungible bearer ecash.

This gets to the question of when it makes sense to use a blockchain. Are they still useful [would there be any point to Bitcoin] in a world where governments allow[ed] anonymous ecash to exist on a large scale? “It may only make sense when the regulatory environment allows it to make sense,” Chris DeRose, host of Bitcoin Uncensored, noted. [Another way of saying “Probably not.”]

Peter Todd, Bitcoin Core contributor, put this thought experiment another way: Would Tor be interesting or useful if governments didn’t wiretap their citizens? The answer here is obviously yes because governments are not the only “adversaries” in the world. The Tor Project has a list of the types of people who use the anonymizing network on their website.

While there may be some use cases of bitcoin that don’t involve getting around government regulations, it’s clear that these government-avoiding use cases are what propelled Bitcoin to what it is today. Bitcoin first rose in popularity due to Silk Road and the financial blockade on Wikileaks.

Silk Road allowed Bitcoin users to buy and sell goods and services that had been criminalized by various governments around the world [it was largely a drug dealing operation; as Ron Paul noted, the government didn’t have any trouble shutting it down despite it being Bitcoin-based], while Wikileaks is a journalistic organization that runs on donations — strictly via Bitcoin during the financial blockade. [Andrew Anglin’s Daily Stormer Web site is being subjected to death by a thousand cuts; he is already hemmed in on many, many levels. Financially he only survives now on cash donations and Bitcoin; the Jews have shut off every other avenue for voluntary donations. Their ability to do this easily and without any blowback is deadly to our race.]

When asked about the importance of fungibility in Bitcoin, Todd said, “Yeah, I think that’s Bitcoin’s main use case there. If you didn’t have that as a need, you could just go use PayPal.

“The most clever thing governments could do to kill Bitcoin is make anonymous, electronic cash,” Todd added.

Of course, it’s also true that there’s plenty of room for improvement in terms of Bitcoin’s fungibility. New privacy improvements, such as Confidential Transactions, may eventually offer assistance here. JoinMarket, a market for CoinJoin transactions, is another project that is already helping users gain more effective privacy on the blockchain right now.

It’s unclear whether Bitcoin would have taken the digital world by storm if these sorts of use cases didn’t exist early on in the technology’s development. The level of distrust in the world’s financial system at the time (and to this day) also couldn’t have hurt.

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Source: Author

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