libertarians

Ignore the State’s Coming Blockchain Grab. Be Happy Libertarians

A May 30th article in the Atlantic declared, “Cryptocurrency Might be a Path to Authoritarianism. Extreme libertarians built blockchain to decentralize government and corporate power. It could consolidate their control instead.” 

Also read: SEC Eyes Initial Coin Offerings for Regulatory Oversight

The article distorts important points but it raises a valid concern.Ignore the State's Coming Blockchain Grab. Be Happy Libertarians Namely, bitcoin and the blockchain have “attracted banks, governments, and corporations.” A digital currency under their control could be a stride toward a cashless society in which all white market transactions are tracked by avaricious banks, states and corporations. It could usher in unprecedented financial control.

No wonder savvy politicians like Putin are fascinated by cryptocurrencies…that is, as long as the stumbling block of pseudonymity can be removed. Putin has been meeting with the founder of Ethereum with the reported goal of making some form of ether Russia’s national cryptocurrency. Statists have awoken to the power of the blockchain which would make their usurpation of money and power more efficient.

Cryptocurrencies allow individuals to sidestep the state. Can states also use them to impose economic and social control on individuals? To some degree, of course they can. Technology is extremely adaptable. But converting bitcoin into a tool of the state encounters a stiff barrier. Government-issued currency (fiat) and the institutions attending it (central banks) are designed to serve the state and social control. Bitcoin is designed to serve individuals and freedom. The “square block in a round hole” problem arises.

Distortions within the article

The article’s main distortions should be addressed in order to set context.

The problem ascribed to Bitcoin is nothing new. Almost all technology can increase both individual freedom and state control. The printing press decentralized ideas and truth but the state used it to mass produce propaganda. Guns give individuals direct control over self-defense but the state used them to compel obedience. In most cases, the benefit to individuals far outweighs the benefit to the state.

The original developer and coders of Bitcoin were Ignore the State's Coming Blockchain Grab. Be Happy Libertariansanarchists. They did not seek “to decentralize government,” as the Atlantic article states, but to render it irrelevant. The irrelevance of the state was designed into the core of Bitcoin’s protocol. Eliminating “both nation-states and corporations” may be impossible, as the article suggests, but this is not the goal of Bitcoin. Instead, it is a practical strategy or tool by which individuals can eliminate the need for states and corporations.

The Atlantic seems to assume that a currency is a currency is a currency. They all perform the same function. In one sense, that’s true. A free-market currency is an economic tool of exchange and anything people accept for goods and services is valid: sea shells, tulips, gems, commodities, metals, shark teeth… As an economist friend states, “If a dog eats it, it’s dog food.” Generally speaking, however, a ‘good’ currency has several characteristics including wide acceptance, low-to-no inflation, divisibility and durability. But the exchanging individuals remain the sole arbitrators of what is currency, good or poor.

Outside a free-market context, however, not all currencies perform the same function.

Whom Does Fiat Serve and How?

Statist goals are built into the dynamic of fiat currency. Fiat is currency issued by a central authority that artificially and unilaterally increases its volume at will. The inflation reduces the value of every unit of fiat in circulation and gradually increases the cost of goods. The first ones to receive the additional currency – that is, the state, the banks, the elite – benefit because prices have not yet responded by rising. Those who are last – the average person – suffers by having his wealth diluted even as his costs rise.

The root problem with conventional currency is all the trust that’s required to make it work. Satoshi Nakamoto said:

The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust.

Fiat is a poor currency for most individuals because it includes hidden ‘fees’ such as inflation. To ensure that fiat is preferred, therefore, the state declares a monopoly on the issuance and validity of currency. Competition is either prohibited or absorbed through regulation.

Monopoly and inflation are common features of a currency that serves the state. Other common aspects include:

  • Little to no transparency, as reflected in refusing to audit the Fed.
  • A push for total transparency of those who use the system.
  • Extreme centralization of monetary supply and policy.
  • Few brakes on support for financial cronies, as in Obama’s bank bail-out.
  • Currency value – that is, interest rates – set by bureaucrats.
  • No accountability as the dearth of financial elites in prison proves.

Whom Does Bitcoin Serve and How?

Bitcoin was designed as a protocol and a transfer mechanism that allows individuals to avoid “trusted” third parties, such as central banks. Instead, individuals deal directly with each other in a manner similar to barter but which also preserves the advantages of currency. Bitcoin empowers and liberates individuals who no longer require the ‘services’ of the state. In short, it serves the individual.

The key features of bitcoin are antithetical to those of state currency. They include:

  • The absence of monopoly.
  • No inflation of the currency supply.
  • Transparency with an open ledger and open source.
  • Pseudonymity for users.
  • Extreme decentralization of use.
  • Associated institutions supported on a voluntary, individual basis.
  • A free market currency value.
  • Dramatically reduced need for accountability.

For the blockchain to truly serve the state, its current dynamic must morph into its mirror opposite.

Conclusion

Central banks exist to regulate the flow of money and financial information in order to benefit the state and themselves at the expense of individuals. They want to preserve the status quo while exploiting the advantages of blockchains and digital currencies. Only time and real-world applications will show whether a freedom tool can be used to strengthen statism, and to what extent.

Two central banking policies will Ignore the State's Coming Blockchain Grab. Be Happy Libertariansbe emphasized in the attempt to usurp Bitcoin: the claim of monopoly and the stripping of privacy from users. Monopoly will be enforced by regulation and by privileges extended to the compliant while harsh punishments confront the non-compliant. Privacy is likely to be stripped away by exchanges that mimic central banks and by smart money. The latter is digital currency that can be used in transactions only if specific embedded conditions are met. One condition will probably be the full disclosure of users’ identities and details of their transactions. This will give central banks control of assets and information flow, taking it from individuals. Traditional peer-to-peer exchanges will be pushed toward gray or black markets.

A confrontation between freedom and statism in this area may seem inevitable. The financial commentator Zero Hedge explained ‘why’. “Bitcoin’s success has promoted the conversation as to how central banks can keep up, and take advantage of the technology in order to keep their monetary games going and further kicking the ‘fiat currency can’ down the road. Central banks now want in on their own adulterated version of blockchain. It seems they have realized that they must embrace it in order to prevent their own demise.”

The secret to short circuiting the state’s usurpation may be to avoid the confrontation; after all, the state is likely to win. Ignore it instead. To the extent possible, pursue the original intent of Satoshi. Render the state irrelevant by finding ways to not need its services, to not need its presence in your life.

Are you prepared for governments to try to usurp blockchain technology? What is your plan of action or defense? Share your thoughts below!


Images courtesy of Shutterstock, bazaarbay.org, and notbeinggoverned.com


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  • Its easy to ignore someone until they shoot you in the face. Burstcoin for the win!!

    • Sometimes the best way to address the state is to ignore it…in an informed and cautious manner. If you are informed and cautious enough, then the likelihood of a gun in your face is very low. The fear of a gun in your face is the state’s greatest weapon against you. Not the gun itself.

  • arbb

    If countries ban “non-state” cryptocurrencies from legal commerce and simultaneously ban fiat wire transfers to foreign countries who don’t, then I guess it could be a problem.

    • I think that is coming, arbb. But I think it is years away and prudent people can plan.

      • John Dozier

        Plus it will be so difficult to do because people will just utilize VPN and encryption to use it anyhow, I understand many will not have the computer access for that but that is rapidly changing as well. I believe any government control will always be limited because they are so behind the ball. Not to mention how people are fed up with corruption in these governments as well. I know I am.

  • Another great article and should be placed in your Library. I love that you concluded to the peeling back the veil of anonymity. There are very few places that protect anonymity. Your Full Wallet can be sniffed and or seized. Third Party exchanges will be forced to reveal. Products and methods will have to grow with the threat of the great unveiling that is bound to occur. Great Article!

    • Thanks Patrick! Are you keeping up with the latest news from Coinbase? I use Coinbase as a weathervane for other compliant exchanges. They’ve frozen — translation: confiscated — the #freeRoss (Ulbricht) account after it received 16.5 bitcoins. Now the account is unable to pay lawyers to work on Ross’ behalf. Despicable and outright theft. Please…if anyone reading this post has an account at an exchange, transfer everything into a wallet on your hard drive or something equivalent.

      • Yes, I do have an account there and I deactivated months ago. Ulbricht should be free. The Feds know if Ulbricht cannot defend himself and roll through the process of unsealing the investigation, they can keep the court out of the Public eye. All we have out here is claims and leaks and not real tangible proof. I am not sure the Jury ever saw real unedited proof. Ulbricht’s appeals will be valid until an unsealing of the investigation and timeline are given in a public way. From what I can tell out here, Ulbricht still has his right to Appeal. And, has his right to have others collect the funding for his defense outside of his penalties. The penalties phase of his trial have to be fought off as well. Obstructing his funding sources is a dirty tactic the Feds use in many many areas of seizure for just the purpose of disabling a defense and appeal. A penalty phase will delineate what and when to seize. If they include his Family then somebody trustworthy has to get involved and unfortunately it is usually a Lawyer. The Lawyers have risks and pressure applied to them as well. A crypto fund to an address or addresses where only a few close friends with good knowledge of crypto and the case have the passphrase would be ideal. If a document exists with all that information, it could be seized. Its a pickle, but solvable with the right actors. The US Justice Department views cryptocurrency as a way to avoid trace-ability of a legal source and will come after it and will not stop until Congress controls them. We have a long way to go here in the US in protecting cryptography as a right and inherent to oneself and protected from intrusion.

  • milmacrs

    The state can only control Bitcoin exchanges. A bitcoin-only economy cannot be controlled by the state. It is up to the people to build it. If and when merchants see the advantages of using crypto, the state may be ignored. Those advantages need to be demonstrated, highlighted, emphasized, stressed. For instance, Bitcoin payments and settlements have no holidays, weekends business hours or timezones. Ths fact alone brings very positive consequences to a business’ cash flow. I don’t see this and many other advantages of Bitcoin mentioned very often.

    • But… the state could realistically create regulations requiring merchants (or any other state authorized business) who accept cryptocurrencies to provide full disclosure of all customers’ identities and details of their transactions on each person who does business with them.

      • John Dozier

        Very few people are using bitcoin for buying things so that would go nowhere fast

        • milmacrs

          This is probably changing fast as Japanese merchants start your massively accept Bitcoin. And Bitcoin ATMs are multiplying faster than before. It-so coming. But a Bitcoin only economy will take many years to consolidate, I guess

          • John Dozier

            I agree and with the new ways of paying with bitcoin visa cards like Wirex and Bitpay have now it can only get better!

        • I use it to buy all of my crypto-farm parts online. Power Supplies, Power components, the miners, PC components, cables, frames. A very popular place with egg in its name is a real great place to start.

        • Brad R

          (Dammit, caught by the URL filter again.)

          That’s starting to change. A few years ago I bought plane tickets with bitcoin (at cheapair; as far as I know they still take bitcoin). I’ve bought computer parts and electronics.

          There’s an important role here for those (such as myself) who still have a foot in both worlds. On a recent trip I met some people who were traveling with bitcoin. We were at a shop that didn’t accept bitcoin, so I paid for their purchase and they credited me with the equivalent bitcoin. Now, from one point of view the merchant didn’t accept bitcoin, so that shouldn’t count. From the other point of view, they successfully made a purchase with bitcoin, so that should count. The more people like me walking around, the more bitcoin will be used for buying things. (And yes, I know this is a transitional phase, while we’re waiting for merchants to catch up and start accepting bitcoin directly. Which many are.)

      • milmacrs

        Which they will deliver if they want to. The state will be no longer able to fine them or freeze their accounts. They will keep their money and continue trading. The only way to stop them will be, like said in another comment, shoot them in the face

        • The state can also control the internet and monitor it with total surveillance. Almost all the precautions you can take to ensure anonymity are vulnerable to state probing. It is a race between freedom and the state. Maybe it has always been and maybe it will always be. I don’t disagree with your contention that bitcoin is winning. BTW, I don’t think shooting anyone in the face is a social solution. I’m echo the SF writer (and friend) L. Neil Smith who advocates capital punishment only when a violent crime is in progress and preferably through the hands of the intended victim.

          • milmacrs

            Yes, definitely. If we reach a stage where government shoots merchants to stop them because they are trading with Bitcoin., thar’s really the end of a civilized society.

  • Dbt123

    Excellent journalism Wendy…very refreshing to be pointing out the truth in an age of make believe on steroids. Thank you.

  • John Dozier

    So refreshing to read an article written by someone who is knowledgeable of cryptocurrency and blockchain technology. I get so tired of reading the articles by so called experts who pontificate on bitcoin. Bitcoin is here to stay and will keep growing. It is like that huge snowball going down a hill getting bigger and bigger, Now to big to stop!! Any attempts to do so will only drive bitcoin into greater cryptology and into the deep web You just simply can not control it because as fast as they try just as fast will alternative ways blossom to derail their efforts.

    • Thanks for the comment, John. The fellow who introduced me to bitcoin several years ago — Michael Goldstein whom everyone affectionately calls Bitstein — he and I used to dispute about whether the state could “close” bitcoin down. He said “no way” and I came to agree absolutely. They can harm individuals, no question, but the incredible innovation and imagination of those involved in this revolution is astounding and will evolve solutions I cannot currently dream of. It is wonderful to be on a wild ride that is also a good ride.

      • John Dozier

        So very well put! I can see why you are a writer!

  • TerryBrock

    Another well-done article, Wendy. The state is realizing this is a serious game-changer and they must “do something” (as governments are prone to try). This is a time for ever-vigilant learning about what is happening. Thank you for being such a good teacher for us!

    • Terry…thank you. Appreciated. And it spurs me on to plunge right into the next article which is such a legal morass that I don’t quite understand it…but I will by this evening. I am so pleased to have found bitcoin, a word I use as a generic for all cryptocurrencies. They make me feel young because they make me feel hopeful.

      • TerryBrock

        I agree and can relate to that “feel young” atmosphere that emanates in the crypto world. I also enjoy the healthy market competition of bitcoin (the granddaddy of cryptocurrencies) and the many alt-coins. The competition is vibrant and robust which brings out better solutions. Yes, I love bitcoin, and look forward to more happening in the cryptocurrencies space. Keep up the good work, Wendy!

  • Ian O’Neill

    The essence of the situation, and its hope, I believe, lies in the ‘square block in the round hole’ aspect of blockchain technology regarding its suitability as an instrument of state control. Prior to Bitcoin, the opposite condition existed for banks and governments. Paper money a.k.a. the printing press took control of money from kings and put it in the hands of bankers. Now it is highly likely digital technology is wresting control of money from banks and putting it in the hands of individuals, fundamentally.