By Robert Wenzel
I have argued here at EPJ that Bitcoin is not a libertarian currency. I make this argument because of the following:
1. It is very easy to track bitcoins and attempting to cover your tracks so that bitcoin transactions are not linked to you, or a chain of yourtransactions, requires steps that could result in finding oneself in traps set by the government, say by using tumblers, or require extremely difficult steps be taken, which the average person is not going to take. Further, I expect that all such methods will be made illegal by the government at some point and thus expose any users of such methods to extreme risk.
2. At the point of a retail transaction, a retailer will know that a Bitcoin user is using bitcoins. Thus, it is a point of regulation where in the future a Bitcoin user could be forced to identify himself to the retailer, thus anonymity is removed from another direction.
For a currency to be a libertarian currency, it must overcome these two impediments. It must be difficult, if not impossible, for government to monitor. It must be an instrument that does not link to other transactions, as Bitcoin does through its blockchain, and it must not be detectable as a method of payment that stands out from other transactions. In other words, if I walk into a Macy's and buy something using some monetary instrument, I do not want my use of that instrument to trigger any actions by Macy's to identify me.
Bitcoin fails on these fronts. At present, physical currency, although not perfect, matches up well in defeating these impediments. It is not going to work for a large transaction because the government will require that a retailer fill out currency reporting forms for cash purchases of automobiles etc., but for most everyday transactions it does match up well with the requirements of non-trackability and not signalling an unusual transaction to a retailer.
Any new currency would have to improve on these advantages of cold hard cash to be considered a libertarian advancing currency. I have no idea what such a money would look like, but I do know that it is not Bitcoin.
As for now, the large percentage of unbanked individuals (SEE: 1 in 10 New Yorkers Doesn’t Have a Bank Account), who make using cash a regular experience of retailers, are doing much more from a libertarian perspective of keeping a non-trackable currency in the system than a bunch of misguided, over enthusiastic, computer whiz kids and other Bitcoin fanboys.
This doesn't mean that the government wouldn't love to force the unbankede into a trackable system, but they haven't been able to do so yet.
Anyone attempting to come up with a libertarian monetary instrument should focus on creating an instrument that improves upon cash and not turn a blind eye to the weaknesses of Bitcoin.
Robert Wenzel is Editor & Publisher of EconomicPolicyJournal.com and author of The Fed Flunks: My Speech at the New York Federal Reserve Bank.
I have a million points I want to make about this bad article.
ReplyDelete1) Bitcoin is not turn-key enough, therefore it's not a libertarian currency? (ie, people are too lazy and cowardly to figure out how to use it securely so FORGET THAT)
2) You necessarily give up information whenever you trade in-person and Bitcoin is no exception to that.
3) The continued use of Bitcoin in society will decrease the "weirdness" of receiving money in Bitcoin at which point it becomes like cash - not worth noticing. This is a trend worth propagating.
4) The US Govt cannot do a single thing to stop the advancement of anonymity tools, decentralized exchanges, distributed marketplaces, cryptographic tumblers, etc etc. These tools are not built by IBM and Google. They are built by explicit crypto-anarchists across the world trying to dismantle the state through alternatives. There is no pressure the US Govt can apply to these "tools" if it could even figure out who made them and where. They will exist because the Internet exists and the US govt is powerless to stop it just as its powerless to stop peer-to-peer file-sharing (I mean, massive copyright infringements).
5) Anonymity is far easier to gain when buying online - which Bitcoin happens to be the best currency with which to do that.
6) Your repetition of the phrase "trackable system" demonstrates that you are out of touch with the technology. New cryptocurrencies, new platforms, new tumblers, and new wallets (Darkcoin, Ethereum, CoinJoin, DarkWallet) either already exist or are being made to interrupt tracking.
7) Bitcoin is essentially a platform, not a currency. Using Bitcoin is investing in the peer-to-peer community for further improvement and development. It's not a static program that was released and that's it! Bitcoin is dynamic, it grows. And it currently commands some of the brightest minds of the world. This project isn't done. You are taking the Luddite libertarian perspective the same way people did with the Internet in the 90s.
This article is a classic case of the author not doing enough research. Sadly this lack of research is resulting in the slowing down of libertarian values becoming mainstream, so I take great offense to it.
ReplyDeleteTo argue that the "average user" is not going to take any anonymity steps is a red herring; They won't have to once further iterations of wallet technology come along and make it effortless, perhaps even the default settings, to do so. Dark Wallet proves that its' possible now, wait until the generation of wallets after that...
Making them illegal would slow down adoption in the country that does so, of course. But there's over 200 other countries and most of those won't know what a bitcoin is up until the day their legal tender is in hyperinflation over it. Besides, so far all US laws have become more protective of, not belligerent towards, bitcoin. The time it takes to get to any direct confrontation is very likely too far of a head start for public adoption to be stopped by some such law.
As for the point about being forced to ID yourself to a merchant, I know for certain I'd take my business elsewhere, as would pretty much any real libertarian. If a law comes about forcing it to be so, see my point 1 paragraph above.
In short, bitcoin is the perfect currency, and you are completely wrong about both of your worries.
It may be that a gov-mandated cashless society, with intent to stifle System D, might create the environment necessary for the widespread acceptance of a private currency. System D's need would be met by something trustworthy within that vast and growing framework. A good read on this subject can be found in the book, "Good Money: Birmingham Button Makers, the Royal Mint, and the Beginnings of Modern Coinage, 1775-1821".
ReplyDeleteWhatever form the private currency takes, its ultimate test will be whether it's accepted by cops and politicians for bribe purposes.