Why Isn't Bitcoin Banned Everywhere?
hackernoon.com
hackernoon.com
Essentially, you want to guarantee a way for governments to be able to track every transaction, this would be the way to do it.
That being said, I am not anti bitcoin, I just don't see it as a privacy thing.
Of course it is 20x less efficient than tracking Bitcoins, and requires input sources from several places, but it’s fun to know that even banknotes are quite easily traceable.
The value only exists because someone else is willing to exchange it for goods or services.
That brings me to why your point is wrong: sovereign currencies are backed by governments and that means that there is some intrinsic demand because that currency is used to pay taxes and is paid to civil servants, contractors, etc. In all but the worst run countries that has a substantial anchoring effect. Bitcoin has nothing like that, which is one reason why it’s so volatile – which is great for a speculator but not anyone writing contracts with values set in BTC.
Most of the traded gold sits in a vault and is never touched as then it would need to be retested for purity or something. Sure, if the economy would crash to the point that gold-as-an-investment-instrument is worthless, you could take it out of the vault and sell it for industrial use, so it has at least some intrinsic value, but I doubt it would retain a lot of its value if everyone tried doing that.
In contrast, Bitcoin’s hashes have no industrial or aesthetic value and they’re not even linked to the concept. If Ethereum becomes more popular, cryptocurrencies could be successful as a concept even if Bitcoin speculators have millions of dollars worth of inputs nobody wants to buy. Since there are almost no situations where someone has no other options for a transaction, it’s really for the network to collapse if the price drops below the mining threshold - the number of people who are going to pay a premium to avoid PayPal/Square, wire transfers, etc. is unlikely to be enough to support an intentionally inefficient architecture.
It's hard for me to just accept the fact that hype drives demand, and demand sets the price. The hype can be a meme or be seemingly ignorant of better alternatives, but it doesn't matter the speculative feedback loop can apparently irrationally sustain itself for a long time.
I really wonder what the next major recession is going to look like.
You could however make "accepting" coinjoined UTXO's illegal, but the lightning network fixes this (you can use coinjoined coins to open channels, lightning payments do not know the payer).
If a government decides you need to do full kyc to buy a coffee, then it might be time to emigrate :D
The more likely scenario would be that it's treated like cash. You're not going to be questioned for using it to buy coffee, but if you decide to buy a house with a sack of cash they'll start asking questions.
And it's not like the government couldn't fine the businesses equal to say, 1.5x the amount transferred from the blacklisted address.
If you come up with some way to cheat the tax man, the tax man will come up with a way to make you pay interest and penalties. One man can evade all of the taxes, and all people can evade some of the taxes, but all people can't evade all of the taxes. The state always wins and will always take as much of a cut of the economy as it wants to.
So Ecuador [1] and every member of the Eurozone are powerless? As well as practically every revolutionary force in history? What about governments when we were on the gold standard?
> If I have billions of dollars worth of BTC I may start paying men with guns to defend me from the other men with guns, well then we have a power struggle
This works equally well with your holding Bitcoins or dollars or renmimbi. Wealth conveys power. Whether it is held in gold or Bitcoin or Amazon stock is irrelevant.
Gold standard reflected sound monetary policy and kept government misallocations in check. Since moving to the fiat standard, governments have unleashed record spending. Bitcoin is exposing what happens to the money as a result of the monetary expansion.
Bitcoin has replaced gold, and those of us who have adopted a BTC standard will have separated in prosperity levels from our fiat based peers within a generation or two.
What you’re describing is true of any asset that appreciates in value. The wealth confers power. That it is a currency is irrelevant.
If the U.S. switched its legal tender to Bitcoin tomorrow, it would change how we borrow and spend. But it would be no more of a shock to the system than a balanced budget amendment on the Treasury and the Fed. (Less, in fact, since the U.S. on Bitcoin could still deficit spend.)
Is saving more of your income worth living in Africa, South America or South Asia? There have been proposals for a Global Minimum Tax which is pretty scary.
There are also alternative ways to redistribute wealth from individuals to a centralised state. The Great Reset seems to go in this direction.
People with incomes that high have too much to lose in a revolution. Also, part of being filthy rich is living wherever you want without having to worry about the cost, which is why most rich people live in the most expensive locales in first world countries.
AFAIK the real tax rate at the time wasn't anywhere near that because there were tons of exemptions/deductions.
What percentage of the population was affected?
Sure. But this has almost nothing to do with which currency is used.
The state always wins and will always take as much of a cut of the economy as it wants to.
I binged on David Graeber last year. I so appreciate criticisms of the Liberal tradition from outside of the Liberal (left vs right) sphere. It's like only being able to appreciate the forest once you get out of the forest.
Anyway. Graeber asks a lot of hard questions. Such as "What is money?" And provides historical precedents which may lead to answers. Like prior relationships between money, currency, debt, empire, military, markets, capitalism.
For a long time, governments minted gold (or whatever) into currency. Then we adopted some kind of virtual currency, so now there's more money than their is actual currency. (Which, humorously, is not first time in history.)
More recently, non government systems like bitcoin are minting electricity into currency. I don't really care that "there's no there there". Meaning the lack of a physical existence (eg gold or unobtainium or whatever) doesn't bother me.
However, I am concerned that there's no big ass military compelling everyone to treat bitcoin as a fiat currency. Until then, bitcoin is just an escrow or collectible.
A very, very fragile escrow.
It feels like the tulip bulb craze. aka Castles in the sky. Bitcoin's preceived value is held up by everyone's belief that they can sell their holdings to the next sucker.
Which is fine. Until it isn't.
What happens when the inevitable shock happens? When there's the equivalent of a run on the bank? When everyone tries to "withdraw" by converting bitcoin to US dollars at the same time?
Who's gonna step in and stabilize the system?
Right now, no one.
So then all that currency, minted bitcoin, just goes up in smoke. Poof.
We've seen this story play out so many times.
-It's a speculative bubble, that will cause a transfer of wealth from the poor to rich(I.E. Hedge funds will find a way to front run)
- It uses a ton of energy, with the climate accords they could get many countries to ban it at once. Why should a few bitcoin holders be allowed to destroy the plant.
Whether these arguments hold water or not( I think they both do) They both at least make sense and the majority of people can understand them.
Quite so. After all, every other store of value is mostly owned by the ruling class. The way to neutralize the threat of a new store of value is simply to own it. I don't think it is too late for that. Elites already own 6.5% of the total supply: https://bitcointreasuries.org/
If Bitcoin started a new shadow financial system, then so did collectible card games and Ebay.
As I understand it, it is designed to be easily verifiable by any participant. How is it designed to be traceable?
(I’m personally increasingly convinced that the U.S. dollar’s reserve currency status no longer benefits America [2].)
[1] https://en.m.wikipedia.org/wiki/Currency_of_Ecuador
[2] https://carnegieendowment.org/chinafinancialmarkets/56856
And btc is not really anonymous.
The government does not need monetary policy to be in charge. They need firepower and a monopoly on law enforcement.
I also don't think it's so much as "governments don't care about people storing wealth" so much as "it's not storing wealth." It's not worth as much as you think it is, and it's not that good at storing wealth (I will accept that it may be a decent high-risk opportunity for growth). The current $1 trillion market cap is calculated by assuming all of the 18.65 million BTC ever mined could be sold at the current asking price. But they can't be, because the order books aren't that deep and never will be, plus there are a lot of mined BTC that are in wallets with lost keys. It's probably still worth more than some small countries, but BTC definitely isn't worth $1 trillion. And when you consider BTC as a store of wealth, gold is a way better choice. I don't want my store of wealth to be experiencing gargantuan shifts in value over a few weeks.
It might sound like I'm shitting on BTC. I'm not, I think it's a cool experiment. I like the idea of being able to transfer money to friends without fees, and I'm glad that crypto helps keep banks honest. It was certainly novel. If I were to shit on anyone, it would be cryptocurrency bros that are full of themselves and think that their one thing is going to turn the world upside down. I'm for BTC as long as people don't get too hung up about it and instead we see BTC as helping us figure out ways to do financial things better.
You can say that about literally any asset because "market cap" doesn't mean "liquidation price".
Is this a relevant factor considering that many assets are trading several times above this price floor? In other words, if you bought $5000 worth of shares in a highly overvalued company (eg. GME or TSLA), and the bubble pops, is it really much consolation to you that there's a price floor of $100 rather than $0?
>That is why the term "Bitcoin market cap" is BS. There is nothing to capitalise.
This is technically correct in the sense that "market cap" is only defined for companies (according to wikipedia at least), so you could say that it's wrong to quote the "market cap" for anything other than companies (cryptocurrency, precious metals, commodities, houses).
Yes. But the market can stay "irrational" for a long time. Many people have won the greater fool game over the years.
>This is technically correct in the sense that "market cap" is only defined for companies.
Market cap is a measure of the total equity of company as priced in the stock market. Since nobody can own the "Bitcoin network" like they can own a shares of a company "market cap" is nonsense when used as a term to describe the value of the Bitcoin network. There is no underlying equity to capitalise at any price.
1. BTC is a proxy for gold and greatly relieves pressure on gold prices and the money-center banks and sovereigns accumulating/trading gold.
2. BTC circumvents capital controls in countries where those with the power to stop BTC are using it move funds into free market economies; and those free market economies are happy to see the outflows from adversarial regimes.
3. BTC (and crypto in general) expands global liquidity without the need to print even more USD/EUR/RMB.
4. A failure/crash of BTC - should it occur - would result in a flight to USD/US Treasuries and the like. If you're looking for a possible conspiratorial outcome - look here.
5. Massive money supply growth has laid bare the need for an alternative currency, and even USGOV/EU/CCP recognizes the need.
You tell me why/how it is breaking the "government's monopoly on monetary policy, since it's your example.
I don't know what kind of taxes and fees are in Germany, but where I live you must pay property tax, medical fees, sales tax, drivers licence fee, income tax all in the government's currency. If you don't pay these fees your property will be seized and you will be put in jail. You must use the government's currency. If you value your freedom and property you have no choice.
Therefore, you are not subject to government monetary policy (on your savings) because you would only convert what you needed to at the point when you have to pay for the services.
What's your point?
All they have to do is purchase JUST enough that they don't care which way it flips.
If you take the argument one level deeper, you might come to the conclusion that nearly all rational participants in politics will purchase some amount of it. And if the price rises while this happens, they may personally feel like supporting it rather than destroying it.
And since the price will rise while this happens, well, it becomes a bit of a self-fulfilling prophecy.
Examples where the zero 'paper'value is reflected in what the tokens represent: Zimbabwe and Confederate banknotes, share certificates in non-existent companies, deeds to nationalised land, etc.
BitCoin is really just a set of numbers, no different to the very simplistic "2 + 2", and having no more intrinsic value than that.
This still poses the question: what about anonymity enhanced cryptocurrencies like zcash? Why are these legal?
Furthermore why are unhosted wallets legal as well? It seems like FinCEN is fine with them so far and do not treat them like VASPs (so not affected by the travel rule). Why?
[1] Is Bitcoin Legal?
https://www.investopedia.com/ask/answers/121515/bitcoin-lega...
[2] Legality of bitcoin by country or territory
https://en.wikipedia.org/wiki/Legality_of_bitcoin_by_country...
Another thought is that there are ~200 countries. Some of them survive only on illegal funds. Will it be possible to ban this thing completely?
They already do mandate it which is why they don't see it as a threat. It's called taxes, fees, and fines. In the US you can only pay those in dollars so there's your demand for their own currency.
retail gas in US: one year ago: 2.41. Today: 2.86.
So yes, compared to some major asset classes that are omitted from consumer inflation calculations, gas is "cheap".
sp500 going from 2500 to 4000 in the same year is 60%. Yes, a 20% price hike compared to a 60% price hike makes for a cheaper outcome in the end, when gas is "compared to some major asset classes", in my example the US stocks. Why is this so difficult?
Use some of your purchasing power on an economics book.
I am very hopeful about Ethereum 2.0. But as the article says, it seems that if it really starts to have high transaction rates that make it compete as real money or even see things like distributed autonomous organizations take off, governments will probably protect their turf.
Here are a couple of fantasy scenarios. First, maybe government will just not be able to effectively ban Ethereum, despite trying. And a new era of decentralization and effective and fair international cooperation flourishes.
Or two, maybe instead of WWIII, countries decide to work together to create a new international system, based on a shared currency built on Ethereum and tied to a comprehensive decentralized resource tracking system (possibly bringing in other distributed protocols). Designed to ensure food, housing, sustainability, and security security for the global populace and cut back on runaway inequality. It will be a new type of economics, more sophisticated and based on sustainable practices rather than infinite growth.
Well I did say they were fantasies.
Why do you think a deflationary currency built on staking assets would reduce inequality?
But I did mention other decentralized technologies. What I was proposing was a massive social-technological engineering task rather than a complete solution.
But it seems obvious that the economic tools we are working with are severely outdated and insufficient.
Money is one of the earliest technologies. It is also one of the most successful because of its ability to allocate power and resources in a way that facilitates both cooperation and hierarchy.
But its form is quite dated. It needs to become a high technology. Some of the "socialistic" ideals (such as food and housing security) are nearly undeniable, if you have moved on from Social Darwinism (which many have not unfortunately).
But socialists have traditionally failed to appreciate the great success of money, the necessity of evolution and freedom, and robustness of dynamic networks over centralized systems.
We have technologies that are sophisticated enough that we can have dynamic evolving systems but still have housing security and limit inequality while remaining sustainable. But we aren't going to be able to do that with old-fashioned traditional money or by banning money or some central control system. To accomplish our goals we need to make society into a high-technology by integrating our innovations properly.
"And now here we are in a world of high information technology — and people think it’s smart, nay cutting-edge, to create a sort of virtual currency whose creation requires wasting real resources in a way Adam Smith considered foolish and outmoded in 1776."
Whatever the high-tech economic mechanism will be, bitcoin doesn't seem likely to be it.
Ethereum is what happens when you keep evolving the idea of Bitcoin. Bitcoin is what happens when you freeze the idea.
But I will say that despite the wastefulness and other flaws of Bitcoin, at least it uses math to verify the ledger, rather than relying on authority and private entities to distribute points without any real verification.
Money is just a points system used to distribute control over resources. The main advantage of cryptocurrency is that it uses math to verify that people are not cheating in their points distribution.
It is untenable to ban such a thing in "free" societies and have people still buy in to the idea that they are free.
From the perspective of a "pioneering early adopter", Bitcoin does not seem volatile. Instead, it seems like prices across the board are going down and everything is getting cheaper.
The effect on me is that since my saving is rewarded, I'm now way better at saving. I've stopped making irrational, impulse purchases. I'm far more in tune with my spending.
I'm also able to keep the purchasing power I earn from working. This beats the hell out of losing it slowly.
Volatility hasn't been a problem for me.
If I awoke from a fever dream with the unbreakable government-proof cryptography currency paper scribbled on a legal pad I’d burn it.
In fact its extremely easy to go after users seeing as its a public ledger and all that. You can claim some laundering schemes will protect users but any significant movement of money will be trackable unless your opsec is perfect.
Eradicating Bitcoin wouldn’t be that hard. Publicly committing to repeatedly launching 51% attacks is well within the budget of many governments. It would singularly destroy the currency without even requiring criminal statute. Hell, I think the President could do it without permission from Congress.
But why? Why do that? Bitcoin threatens nobody. It underwrites a lot of wealth. And voters don’t care about it.
I agree with you! It wouldn't stop it though, just like prohibition didn't stop alcohol consumption. If anything, it would make the system more resilient over time. Besides, the governments would want to retain some control through exchanges, rather than lose all control and possible tax benefits, etc.
The better question is why they’d want to. For example, the U.S. government doesn’t have an ideological crusade – pay your taxes, follow anti-money laundering laws, etc. and they don’t care.
You could also ban mining if you wanted to, though that's slightly more difficult to enforce.
edit: after your clarification, you can easily use tor, IP addresses can be easily changed, miner's don't have to use the same IP address, they can solve the block wherever they want and broadcast it from wherever they want. There is even satellite blockchain connections now.
At exchange level, that's what I mean by on-ramp and off-ramp, that would only push exchanges to decentralized platforms and to black markets.
Which is why I really doubt the gov would ban it. Especially now that many gov members understand it somewhat (Gary Gensler, head of SEC, used to teach blockchain course at MIT, many senators are publicly holding, etc).
But regardless, BTC was very much alive when it was trading at 1$, so I wouldn't really equate dead/alive with price, it would just hinder adoption.
Anybody who is trained in economics who thinks Bitcoin is a serious useful, thing as opposed to an Ponzi is probably somebody who has a financial, professional, or social interest in Bitcoin "succeeding." See regulatory capture. For the past 20 years regulators have been basically asleep in a lot of areas in America. They woke a bit after the financial crisis 10 years ago but "too big to fail" and bailing out the banks (moral hazard) showed they were not serious about doing anything unpopular but salutary. Likewise now regulators are tolerant or supportive of blockchain bullshit simply because it is popular.
Similar thing has gone on with driverless cars. The technology is obviously not economically viable (much less technically) and yet at every step in the way has been enabled by regulators. State DMVs should never have issued autonomous car permits, because the technology is bullshit. Yeah I am sure after billions of dollars of sunk costs Waymo can navigate some geofenced area of Phoenix / Chandler. So what? Were is the "innovation" if the "AI" driver is more expensive and less universal than a human driver? If autonomous navigation is a tractable problem why not ships, planes, trains before cars? Planes have more degrees of freedom so are less likely to hit something in seconds if they make a mistake. Same for ships. Trains are bound to rails. Cars have to stay on the road but the road is not systemically cleared (as rails are) and there is nothing mechanically binding the car to the road. Driverless cars are the hardest vehicle class to automate, and yet they were taken seriously. When people will drive a cab for under $10 a hour I don't see how AI that costs 10s of thousands of dollars to do a worse job can compete.
When money is cheap, bullshit proliferates.
We're not talking about ivory here, which has an incredibly elaborate and difficult-to-hide supply chain (and even at that, is still sometimes smuggled).
We're talking about permissionless network traffic. Blocks can be broadcast via shortwave if necessary (of course this will be slow, but not too slow for the 'store of value' use case).
Have we lost all sense of the difficulty of censoring the internet?
I'm astonished at the way this is hand-waved:
> Remember, if governments truly believed Bitcoin were a threat, they would outlaw it and shut down cryptocurrency exchanges. This would crater prices and liquidity. It would not be the end of Bitcoin of course, but it would be the end of Bitcoin’s dream of displacing gold.
...what? Is there any example of government banning something and that thing later appearing in an illicit market at a lower price? I can't think of one.
I am, however, confident, that irrespective of the number of holders, that the price will go up. I don't understand your last point at all. It seems to me to be the same as suggesting that in the presence of cannabis prohibition that the price will decrease because people will choose to use other medicines and psychoactives. The two are only distantly related; fewer users does not imply a lower price.