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Bitcoin Politics

Will Legitimacy Spoil Bitcoin? 490

Posted by timothy from the biggest-portion-is-the-lion's-share dept.
New submitter F9rDT3ZE writes "Salon writer Andrew Leonard examines the U.S. Treasury's Financial Crimes Enforcement Network's (FinCEN) first 'guidance' regarding 'de-centralized virtual currencies,' noting that Bitcoin's supporters call it a 'currency of resistance,' while others suggest that 'the more popular Bitcoin gets, whether as a symbol of resistance or a perceived safe haven in financially troubled times, the more government attention it will inevitably draw, and the more inexorably it will be sucked into existing regulatory structures.'"
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Will Legitimacy Spoil Bitcoin? More

Will Legitimacy Spoil Bitcoin?

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  • That's the price you pay (Score:5, Insightful)

    by allaunjsilverfox2 ( 882195 ) on Sunday March 24, 2013 @06:38PM (#43265693) Homepage Journal
    No matter what you trade, if it has value, the state will look to control it's function.

    • Re:That's the price you pay (Score:5, Funny)

      by Anonymous Coward on Sunday March 24, 2013 @06:49PM (#43265757)

      If only we could put a tax on apostrophe's.

    • Don't you mean tax it?

      • That too. Indeed, those are a perfect matching pair: If you tax it, you have a good argument to control it (tax evasion), and if you control it, you have a good argument to tax it (in order to pay for the control). So no matter which one you introduce first, the other can easily be added.

        • Re:That's the price you pay (Score:5, Insightful)

          by demonlapin ( 527802 ) on Sunday March 24, 2013 @09:44PM (#43266853) Homepage Journal
          This is one of the central insights of a book entitled Seeing Like a State [amazon.com], basically that all sorts of disastrous policies have been implemented not because they were likely to be successful at solving some particular problem (e.g., Stalinist collectivization of agriculture gave peasants a certain area of land, regardless of its quality, rather than the traditional division of best-medium-poor lands in roughly equal quantities to each family in a village even though this made it almost impossible for an outsider to identify who owned what) but because they made people's actions more visible to the state and thus more controllable (and more easily taxed).

          • Re:That's the price you pay (Score:4, Insightful)

            by tehcyder ( 746570 ) on Monday March 25, 2013 @09:21AM (#43269803) Journal
            The alternative way of looking at that is that the State is simply the legislative and administrative expression of the democratic will of the People, and that if goods are to be owned jointly and equally by all the people, then of course you need to make sure that no one is sneaking more than their fair share; and that, even if you don't have a communistic system and there is still private property, you need to be able to identify assets for tax and redistribution.

            I don't imagine this interpretation will go down very well on slashdot.

    • Re:That's the price you pay (Score:5, Interesting)

      by Entropius ( 188861 ) on Sunday March 24, 2013 @07:50PM (#43266119)

      The idea of Bitcoin, I think, is to give up on the idea of asking the state nicely not to control something, and make something that the state, whether it wants to or not, can't control.

      • Bitcoin Legitimacy (Score:5, Interesting)

        by fyngyrz ( 762201 ) on Sunday March 24, 2013 @08:43PM (#43266431) Homepage Journal

        The idea of Bitcoin, I think, is to give up on the idea of asking the state nicely not to control something, and make something that the state, whether it wants to or not, can't control.

        That actually addresses the question in TFS: Will legitimacy spoil bitcoin?

        First, you have to achieve legitimacy. In the USA, the power of currency, essentially, belongs to the federal government. If they perceive a threat (or simply a challenge) to that power, what do you think they will do? Hint: It's going to be directly related to the term "legitimate."

        The thing about the assumption that the state "cannot" control something, is that it is almost always entirely wrong. This discovery is almost always accompanied by wailing and gnashing of teeth.

        There is only one condition under which the state cannot control: When the state itself has been dismantled. And there is absolutely no sign of such a thing, even well out on the horizon.

        Consequently, the answer to the question in TFS is: No. What's going to "spoil" bitcoin are actions of the state. Guaranteed. It won't be legitimacy, because that's permanently and irrevocably out of reach.

        • Re: (Score:2, Interesting)

          by Anonymous Coward

          How long would it take the NSA to destroy the bitcoin by devaluing it? Give you a hint, they build silicon to do whatever the hell it is they want to do. No problem hoarding bitcoins and then devaluing the currency in one huge move.

          • Re:Bitcoin Legitimacy (Score:5, Interesting)

            by paiute ( 550198 ) on Sunday March 24, 2013 @09:34PM (#43266781)

            How long would it take the NSA to destroy the bitcoin by devaluing it?

            Why would the NSA/CIA/ETC want to destroy a way for them to fund whatever they want wherever they want with a system they can game to be invisible to oversight? Hell, they probably funded the invention of bitcoin.

        • Bitcoins are unique based on a mathematical property. The state has about as much chance of controlling this as it has to declaring pi equal to three. This is a good thing.

          • Re: (Score:3)

            by fyngyrz ( 762201 )

            What you're completely missing is that they can, and are perfectly willing to, control you. Without the latter, the former become irrelevant. They have done this many times. They'll do it again.

            Let's cast your argument this way: Cocaine is based upon a natural property. The state has about as much chance of controlling this as it has to declaring Alcohol is non-inoxicating.

            Now lets look at how the state actually exerts control over cocaine. Do they attempt to revise the laws of nature?

            Oh, I see you're way a

        • Re: (Score:3, Funny)

          by Anonymous Coward

          The thing about the assumption that the state "cannot" control something, is that it is almost always entirely wrong. This discovery is almost always accompanied by wailing and gnashing of teeth.

          On the other hand, the assumption that the state "can" control something is also almost always entirely wrong. This discovery is also almost always accompanied by wailing and gnashing of teeth.

    • Re:That's the price you pay (Score:5, Interesting)

      by fuzzyfuzzyfungus ( 1223518 ) on Sunday March 24, 2013 @09:17PM (#43266683) Journal

      No matter what you trade, if it has value, the state will look to control it's function.

      So far, the main entanglements seem to occur because people what their bitcoins to be exchangeable with other currencies, particularly USD. Whether or not you think they are a terrible idea, the (copious) regulations that (sometimes, if you aren't big and important enough) cover bank-like institutions that deal in transactions large enough to be of money laundering concern aren't exactly new or surprising.

      It would be a bit more novel if they were to go after bitcoin-only transactions floating around in the aether; but if the bitcoin system is going to link to conventional currencies, it isn't a huge surprise that regulations from conventional currencies will start to apply at those links. Not wholly unlike connecting a VOIP system to the local POTS. There are some ghastly hellholes where the VOIP simply isn't legal at all(though fewer of those can back it up); but a lot more where you can do whatever you damn well please so long as it's VOIP only; but once you start interconnecting with the POTS system, you get all the exciting legacy regulations associated with the incumbent copper for the last 50 years.

    • No matter what you trade, if it has value, the state will look to control it's function.

      Everything that begins free and open inevitably evolves towards lame and bureaucratic as governments and big money corporations become involved. Or, rather, government gets involved at the request of big money corporations.

    • Then came the churches
      Then came the schools
      Then came the lawyers
      Then came the rules

  • there are malcontents in every era of man

    where they have a legitimate gripe that resonates across the masses, you get revolutions. where they have loony complaints that leaves people rolling their eyes, you get cranks

    bitcoin is the crank's currency. cranks don't do legitimacy

    so bitcoin will lose its lustre with those who launched it onto slashdot's front page for the past few years

    look out for the rise of the new utopian idealization project:

    "bytecoin", or "bitdollar"

    or heck, just go with "crankmoney"

    • "where they have a legitimate gripe that resonates across the masses, you get revolutions. where they have loony complaints that leaves people rolling their eyes, you get cranks"

      That would make Bitcoin a revolution.

  • Transactional Currency, not Safe Haven Storage (Score:4, Insightful)

    by billstewart ( 78916 ) on Sunday March 24, 2013 @06:50PM (#43265769) Journal

    Unlike gold or silver, bitcoins don't even have a vague amount of price stability that lets them be a store for value. They're purely transactional currency, designed to be hard enough to make that their value probably won't change very much very fast, but easy enough to make that the quantity can expand to support a growing market (at least for a while.) So they're useful for online drug deals, where the potential currency risk is a lot smaller than the profit from making convenient transactions possible, but they're not something that it makes sense to stash in your mattress as a hedge against inflation. Their value isn't backed by a useful commodity, like gold or oil, or by the ability of a government to tax its subjects, they're just backed by the fact that they're designed to be useful for some kinds of transactions that might not happen otherwise, and by the existence of exchanges where you can trade the things for cash at today's price, which is random but usually somewhat close to yesterday's.

    • easy enough to make that the quantity can expand to support a growing market

      Not even close. They are designed to be hard to make, to only be made at a pre-determined rate, and for new supplies to eventually run out. Bit-coins are designed to be limited in supply.

      • Re:Transactional Currency, not Safe Haven Storage (Score:4, Interesting)

        by mysidia ( 191772 ) on Sunday March 24, 2013 @08:46PM (#43266455)

        BTCs may have fewer risks than actual currencies, because while they are subject to competitive market forces; there is actually a cost to produce a BTC. There is guaranteed to be a finite amount of BTC that can ever be produced, as long as the Bitcoin network continues to function, and has not been subverted technologically. You can be relatively sure BTC will be a viable exchange medium into the future, absent governments banning it entirely.

        While I appreciate, that these are a couple of risks -- it could very well be that coins and cash currencies also have risks, even greater market risks than BTC -- resulting in BTC being a safer long-term storage, and currencies such as USD being a better idea for consumers for short-term exchange. They have a different set of risks: With USD, for example, the US treasury can print a large amount of money at any time; they can declare certain bills worthless; if money is in the bank, there is a chance that it could be seized without the knowledge of the account holder (until one day, when you really need that money and coincidentally some creditor or ID thief took it today...); there is a risk of identity theft (traditional currencies placed with a bank could be stolen -- because when you have physical dollars, they are easily stolen by physical thieves or fraudsters, and social engineering and insecure secrets such as SSN digits could be used against a bank to coerce them to make unauthorized transfers).

        The government may devalue the currency, through poor management. Your bank may change their policies, e.g. they may quietly start charging inactive account fees on your savings account.

        With BTC, your wallet kind of is your bank account as well, and you are not so reliant on a specific third party providing you a service -- to maintain the account terms, deposit interest rates, no maintenance fees, etc.

        Furthermore, your bank can make an accounting error, or an employeen can conduct a fraud in which the result is that money you did not spend is removed from your account. With BTC, you are assured this can't happen, without someone compromising cryptographic secrets that you can secure.

        With BTC, while the possibility of theft through malware exists, you don't need a bank, and you have control over how you secure the cryptographic secrets required to transfer your Bitcoins, without requiring a specific third party to act -- if you are sufficiently paranoid, you can divide bitcoins into as many accounts as you like, and very effectively eliminate the possibility of large theft; even "legal" theft, without you're knowing about it until the check bounces -- when some creditor decided to levy your bank account.

        Not even close. They are designed to be hard to make, to only be made at a pre-determined rate, and for new supplies to eventually run out. Bit-coins are designed to be limited in supply.

        Indeed.. under the current design, the eventual amount of bitcoins available is guaranteed to be finite.

        There are really only two forseeable long-term outcomes with regards to the value of bitcoins.... (1) They tend to become worth zero or less over time relative to their worth at previous times [either because of a flaw in the underlying crypto algorithms compromises the protocol, or, a significantly large number of people stop using the bitcoins, in sufficient number that Bitcoins become unusable as as an asset for trade/exchange, and therefore consumer demand for bitcoins eventually shrinks to a smaller amount at a given market clearing price] -- if there is a plentiful supply of people who have bitcoins (for example, through mining), and a very small amount of demanded product available for purchase that require Bitcoins to purchase, the demanded quantity for bitcoins will decrease, and they will eventually become worthless --- However, as long as there are demands for products that vendors will accept bitcoins for (ESPECIALLY services in demand for which v

      • Re: (Score:2)

        by Weezul ( 52464 )

        At present, BitCoin has "rampant inflation" in that each block makes a fair number. In theory, they'll near the 21M BTC limit eventually, but..

        Who controls the BitCoin protocol change vote? Ain't the people who own BitCoins. It's the people who mine BitCons. Why won't they simply vote themselves more BitCoins by removing the 21M BTC limit? Of course they'll do exactly that! duh! People always vote themselves free money.

        In fact, if BitCoin actually annoyed government inflationary policy, the governmen

        • That's not really true. Miners can collectively switch to a new client that supports whatever feature they want, but everyone else needs to run the same client in order for that to work.

          Otherwise the rest of the bitcoin network will refuse to confirm their transactions.

      • Re:Transactional Currency, not Safe Haven Storage (Score:4, Interesting)

        by gd2shoe ( 747932 ) on Sunday March 24, 2013 @08:58PM (#43266523) Journal

        Actually, they're designed to be relatively easy to make. It's an ingredient of the snake-oil part of bitcoin.

        People needed to use CPU cycles to "mine" them, thus they feel like they've accomplished something. They feel like they've contributed. They have earned something of value. It's a very nice, exciting, warm and fuzzy feeling. Having gotten something from nothing, they go from being skeptics, to converts.

        There is a semi-legitimate social (not technological) reason for this. If I say I wanted to start an online currency, but I'm starting with all the cash, nobody is going to buy from me. On the other hand, if I say that other-people-not-me are the originating parties, people don't assume it's a thinly veiled money grab.

        (To be perfectly clear, I do not believe Bit Coin to be a thinly veiled money grab. I do believe it to be ephemeral. I just can't figure out if it's unthinking zealotry, a complex scam, or an inevitable part of our zeitgeist - a word I swore I would never use.)

    • Re: (Score:2, Insightful)

      by Anonymous Coward

      Money hasn't been based off of gold or silver, or any "real" good for a while. The value of money is based off the faith that it can get you something real.
      en.wikipedia.org/wiki/Fiat_currency

      • Re:Transactional Currency, not Safe Haven Storage (Score:5, Interesting)

        by swalve ( 1980968 ) on Sunday March 24, 2013 @09:28PM (#43266741)
        There is nothing more real about the faith that you'll be able to exchange gold for things you need than that you will be able to exchange dollars. Every currency is based, at some point, on the belief that it will be able to be exchanged for something. It doesn't matter if that faith is direct, as with fiat currency, or indirect, as with metal backed currency. The dollar has been more stable since we got off gold. Yes, inflationary, but stable. That's a good thing. Our currency is worth what people think it is worth, instead of being pegged to the whims of the gold market.

    • Re: (Score:2, Insightful)

      by tsotha ( 720379 )
      Dollars aren't based on gold or silver either, and unlike bitcoins the decision to create dollars happens through a totally opaque process that has no basis in economic reality. If we had a commodity backed currency I would agree there's no need for bitcoins, but we don't. Dollars are backed by and endlessly increasing supply of debt, which guarantees huge fluctuations of (perceived) value over time.

      • Re:Transactional Currency, not Safe Haven Storage (Score:4, Insightful)

        by Anonymous Coward on Sunday March 24, 2013 @07:27PM (#43265967)

        You have a PROFOUND ignorance of economics, governance and politics.
        Or, you've been steeped in the Fox Network view of the world.

        • Or maybe you do...

        • Dollars *are* backed by debt. And that debt seemed to be ever increasing, at least up until 2007-ish when the housing market finally imploded.

          The Fed doesn't really control or constrain the supply of money, though many economists still believe that they do. It's the double entry book-keeping rules of the banking industry that predominantly create and control the supply of money. A new loan creates both a future obligation and current spending power that didn't exist before. Sure the bank has to find a small amount of money to meet their deposit insurance, liquidity and capital requirements, but that's tiny in comparison to the value of new loans.

          Since the level of debt is now such a huge factor in the economy, small accelerations and decelerations in the growth of debt have an enormous impact on the economy. And when everyone recently slammed on the debt brakes [typepad.com] the economy practically died.

    • One of the best features of science is that it allows us to make predictions.

      For example, to calculate the trajectory of a cannonball we do not need an almanac of cannonball weights cross-referenced by gunpowder loads and indexed by cannon type. We have a handful of formulas for the future behaviour of any projectile based on simple measurements - mass, force, air resistance, and so on. The formulas work for cannonballs as well as electrons as well as planets.

      The science of economics also brings us simple f

    • Aren't you essentially arguing that they are backed by the transactional value of the drug exchange? Which is to say it's backed not by a commodity but by a service.

    • So like all currency, if you want to hedge against inflation, you buy something that IS of real value and store that.
    • "but they're not something that it makes sense to stash in your mattress as a hedge against inflation"

      Actually they are. Bitcoin handles the problem of having enough value units by being highly divisible. So where inflationary currencies produce more currency bitcoin simply divides into smaller units for the typical transaction. At $70 for a BTC that already is no longer a full BTC. A typical transaction is likely a tenth of that or a few hundredths of that. Inflation requires central banks to loan out the

  • I think more regulation on Bitcoin trades can only serve to help protect people from Ponzi schemes. No, I'm not like those other people who call Bitcoin a Ponzi, they are not. However, the exchanges that are now springing up are amost a perfect recipe for one. Someone sets up an exchange, pople open accounts to which they deposit money to engage in bitcoin trading, exchange operators help themselves to funds, either for operational expenses or to line their pockets, and instead back the accounts with bit

  • Legitimacy (Score:5, Insightful)

    by Grashnak ( 1003791 ) on Sunday March 24, 2013 @07:13PM (#43265897)

    I can't question its legitimacy until I see some evidence that it has any.

  • Yes, of course. Otherwise people would be doing things without permission.

  • Quantum computing and bitcoins? (Score:3)

    by myowntrueself ( 607117 ) on Sunday March 24, 2013 @07:17PM (#43265919)

    http://www.scienceworldreport.com/articles/5759/20130323/lockhead-martin-quantum-computer-speeds-through-problems-millions-times-faster.htm [scienceworldreport.com]

    How fast could this thing mine bitcoins?

    If one were a major superpower with access to this tech and if it could be used to produce huge amounts of bitcoins... and if one wanted to destabilise the virtual currency...

    • Re:Quantum computing and bitcoins? (Score:4, Insightful)

      by Kal Zekdor ( 826142 ) <kal.zekdor@gmail.com> on Sunday March 24, 2013 @07:44PM (#43266083) Homepage

      The difficulty of mining bitcoins (and hence the speed that a given set of hardware mines bitcoins) is directly proportional to the amount of computing power mining bitcoins. If the amount of computational power in the system goes up, that means that (in the short term), the amount of bitcoins mined in a given period goes up. Every X number (I forget exactly how many) of blocks (the basic structure of bitcoin as a currency, currently each block "creates" 25 BTC, given to the block's solver. The amount of BTC earned per block is halved at distinct intervals, but that's not relevant here.), the bitcoin system (i.e., each client that is creating these blocks, as there is no central server) analyzes the length of time it took solve all X blocks. If that time is less than Y (again, don't recall the exact number, but I think it was a week), then the difficulty of mining blocks is increased by a proportional amount. If it was greater than Y, the difficulty is decreased.

      What this all means is that if someone were to bring an astronomical amount of computing power to bear on mining bitcoins, the difficulty of mining bitcoins would automatically compensate, and the addition of new bitcoins into the marketplace would proceed at the same rate. Granted, the person at the head of all this computing power would be the recipient of most new bitcoins, but the currency would not be destabilized (at least through computing power alone.) There would be other things said person could do to destabilize bitcoins, though, through either Financial or Technical means. They could hoard all BTC they mine, causing the price of BTC to rise. They could sell BTC they mine at ridiculously low prices, causing the price of BTC to plummet. If they comprise more than 60% or so of all computing directed at bitcoin mining, they could hijack the blockchain, and would be able to spend bitcoins they don't own, or double spend their own bitcoins.

      I'm fairly sure that anyone who attempts to hijack bitcoins through raw computing power would end up spending more on said computing power than they would earn from bitcoins. So unless a malicious billionaire or an intrepid hacker organization with a few supercomputers in their botnet decide one day that they really don't like bitcoins, it doesn't seem likely to happen.

    • The problem isn't mining the bitcoins, it's cracking the crypto which encodes how many bitcoins you own. Cryptographic currencies are a bet premised on the expectation that cracking capacities won't increase very fast.

  • bitcoin alternatives will emerge (Score:4, Interesting)

    by srk ( 49331 ) on Sunday March 24, 2013 @07:22PM (#43265941) Homepage

    I think that a bunch of alternatives to bitcoin will eventually emerge so if government regulates one virtual currency there are going to be other safe havens.

  • Assassination Politics [cryptome.org]., but does bitcoin have the necessary infrastructure?

  • It's all fun and games... (Score:4, Insightful)

    by gatkinso ( 15975 ) on Sunday March 24, 2013 @08:27PM (#43266353)

    ..until it becomes actual money.

    At that point the suits take control, and there is absolutely nothing you can do about it.

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