Thursday, October 24, 2013

How Bitcoin Will Get Neutralized by the Government

During a panel discussion, Bloomberg's Max Raskin, Berkeley Varitronics Systems CEO Scott Schober and FBI National Academy's Gene West discussed what the "Silk Road" bust means for Bitcoin and other possible online drug marketplaces.

The FBI agent West pointed out that the FBI is watching organizations that use Bitcoin for illegal activities, very closely. 

Curiously, West went with the spin that alleged Silk Road operator Ross Ulbricht was over his head by dealing with drug dealers. In fact, it did not appear that Ulbicht had any trouble with drug dealers. Where Ulbricht appears to have had problems is with FBI agents who were acting as drug dealers and drug buyers.He was over his head in thinking that the government couldn't track him down, given incentive and focus. Taking the government head on remains a very dangerous endeavor.

Raskin spewed out the spin that the Silk Road bust was good for Bitcoin because it moves Bitcoin away from the illegal activities arena (which is where I thought the supposed advantage of Bitcoin was) and will become an instrument, where buyers and sellers of Bitcoin are identified for the "legitimate" uses of Bitcoin.

In other words, Bitcoin will be nothing but a roller-coaster version of travelers checks/pay pal, where the government can pretty much track the flow of all bitcoins. The government will then disrupt Bitcoin activity at any point that it deems such activity unhealthy for the state. Bitcoin is not a solution, it is a trap.

Here's the video.


  1. Bitcoin is as private as cash - if you want it to be.

  2. I don't think it's any more possible for the government to control bitcoin than it is for the government to control BitTorrent file sharing. It's just not possible. Even if they shut down the exchanges, people will simply buy them locally using cash.

    Bitcoins are international, so the US has no jurisdiction overseas, and bitcoin wallets have absolutely no identifying information in them. Bitcoins can be electronically laundered, hidden and transferred without any communication taking place between individuals. The software is open source, so if they try to go after the Bitcoin clients, they will just pop right back up on a different server in some other country or on the darkweb. The state can hinder Bitcoins growth, but they can't stop it any more than they can stop the flow of illegal drugs into the country.

    The state has never successfully prohibited anything. Name one thing that the government has successfully prohibited. Prohibition doesn't work. You of all people should know that by now Robert.

    1. I know..I really like Robert's stuff but it amazes me how tightly he seems to keep his mind shut about Bitcoin. " Bitcoin will be nothing but a roller-coaster version of travelers checks/pay pal, where the government can pretty much track the flow of all bitcoins." I mean come on.

  3. The authorities have the tiger by the tail, but will it be a tiger they understand (eg. Liberty Reserve, e-Gold), or some sort of chupacabra that will change and adapt (eg. BitTorrent) faster than they can change and adapt? This is an open question, but I would put my money on Bitcoin.

    Large powerful centralized states are like slow moving giants swinging their huge clubs around, and decentralized technologies are more like ants eating the giant's lunch. A club is not the right tool if the giant wants to keep his lunch.

    The Silk Road, Mt. Gox, and many other Bitcoin enterprises are centralized in a way that the government knows how to deal with. These 1.0 version organizations will be smashed or co-opted by the state, and then replaced by 2.0 versions that are outside the comfort zone of of the state.

  4. In the battle between human innovators and regulatory pencil-necks, always back the innovators. Faith in regulation over innovation is a defining element of a Statist.

    1. So you think "human innovators" beat out "regulatory pencil-necks" at Silk Road?

    2. The pencil-necks are losing against Bitcoin. Silkroad was a blip.

    3. That is a relevant point. I think people underestimate the power of unlimited money in its ability to accomplish goals.

      We as libertarians love watching the failures of the state but at times can be blinded by our hate for it in coming to terms with its ability to conquer via blunt force.

      With enough money(printed, confiscated, etc.) you can accomplish a task no matter how inept or inefficient.

      So while it may be impossible for the state to stop Bitcoin in totality, it can make it very difficult for the average person to adopt it and by doing so the state has accomplished its goal.
      (I'm not anon @ 2:56 btw)

    4. > I think people underestimate the power of unlimited money in its ability to accomplish goals.

      The Cartel is losing its century-old magical power of unlimited money. Unlimited money now requires more effort than it used to. Bitcoin is limited money with less effort.

      Looking at it from a systems perspective, the efficient network that is Bitcoin will evolve past the increasingly inefficient network that is the Cartel.

      As an analogy, does anyone remember Gopher?:

      What killed Gopher was regulation. University of Minnesota decided to start charging a licensing fee in 1993 which allowed the latecomer unencumbered-of-regulation HTTP to come along and give us the web. The Cartel is gopher, Bitcoin is http.

      The State makes most of life difficult for the average person. That's an even better reason why those who can adopt Bitcoin should do so. The more people that adopt it, the easier it will be for the average person to use it.

      (I am anon@2:56)

  5. It is not hard to imagine that Bitcoin goes through a few major revisions, improving its privacy and secrecy, while a few world currencies have global crack-ups, and by the turn of this century a descendant of Bitcoin is a major player on world currency markets.

  6. This post makes absolutely no sense. Most people don't need the anonymity of bitcoin anyway because what they buy and sell is a part of the 'legit' economy, so how does the government shut down the 'legit' economy? Parts of the gov have already recognized legitimate uses for bitcoin, hedge funds are getting involved, a real economy is being built up around this. And the government is just going to shut it down because they say so? HOW?!!

    I think all you're showing (the author) is that you're incredibly biased, closed minded and ignorant on this topic. Get over yourself.

    1. How you ask? Well, the same way they have shut down Bittorrent.... oh wait..

      While doing the bidding of Hollywood campaign contributions, the US government has done everything within its power to keep people from sharing copyrighted material via Bittorrent - but with little to show for their efforts.