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Bitcoin Is an Existential Threat to the Modern Liberal State

100 points by dmitriy_ko 14y ago

danenania 14y ago
Well the so-called "Modern Liberal State" is an existential threat to humanity, so it seems fair to me.
mrb 14y ago
"The volume of transactions in Bitcoin is growing only slowly, relative to the massive increase in demand for the currency" The author states this without presenting data. He is wrong. In fact, data shows the opposite: - The exchange rate increase by 5x between February (low of $20) and March (high of $100) - BitPay alone recorded a merchant transaction volume increasing by 7.6x between February ($687k) and March ($5.2M): http://www.marketwatch.com/story/bitpay-eclipses-silk-road-in-bitcoin-sales-with-explosive-52m-march-2013-04-02 http://www.marketwatch.com/story/bitpay-eclipses-silk-road-i... (and this is just BitPay - there are many more Bitcoin-accepting vendors who make sales without using BitPay - so total transactions increased by a lot more than 7.6x, maybe 10x, 20x, who knows) Therefore the volume of transactions is increasing faster than the exchange rate. How can a Bloomberg article (edit: opinion piece) be so wrong about such a stupid simple fact that can be easily found? https://news.ycombinator.com/item?id=5499377 https://news.ycombinator.com/item?id=5499377 is right: a lot of journalists get a lot of facts wrong about Bitcoin. Edit: BitPay is not the only datapoint. Many other metrics and merchants generally show big increases in transaction volume in the short past: - Estimated volume of USD transactions (attempting to ignore "change"): http://blockchain.info/charts/estimated-transaction-volume-usd http://blockchain.info/charts/estimated-transaction-volume-u... - Silk Road going over 2 years from zero to $2 million/month of Bitcoin revenues: http://arstechnica.com/tech-policy/2012/08/study-estimates-2-million-a-month-in-bitcoin-drug-sales/ http://arstechnica.com/tech-policy/2012/08/study-estimates-2... - A bitcoin casino went from 0 to $0.5 million profits in 6 months: http://arstechnica.com/business/2013/01/bitcoin-based-casino-rakes-in-over-500000-profit-in-six-months/ http://arstechnica.com/business/2013/01/bitcoin-based-casino... - Etc
- lwat 14y ago
  Maybe bitpay is growing faster than other payment processors?
- dcc1 14y ago
  How is this for data? http://blockchain.info/charts/market-price http://blockchain.info/charts/market-price http://blockchain.info/charts/n-transactions http://blockchain.info/charts/n-transactions There is a big discrepancy between number of transactions and the value
  - mrb 14y ago
    Wrong graph. You need to look at the volume of transactions, not at the number of transactions: http://blockchain.info/charts/estimated-transaction-volume-usd http://blockchain.info/charts/estimated-transaction-volume-u... As you can see, the graph is similar to the market price.
    - dcc1 14y ago
      @MRB transaction volume is dependant on the price isnt it? If price goes up so does the volume?
      - mrb 14y ago
        Yes and this is my point. If the exchange rate doubles while the volume remains the same (say 100k BTC per day), then the economy is effectively increasing. It means people are spending twice the USD despite merchants halving their BTC prices (they generally index their BTC prices depending on the exchange rate).
- Guvante 14y ago
  > there are many more Bitcoin-accepting vendors who make sales without using BitPay Who have independent increases. If I accept bitcoins and I didn't see an increase in transactions, that decreases the total transaction volume change. You can't just look at one particular vendor and apply their results to the aggregate. And BitPay's numbers are odd, they reported an average transaction size of 10 bitcoins, that seems awfully large.
itistoday2 14y ago
What a gigantic piece of FUD. > How do governments collect taxes on transactions in Bitcoin? The answer is they don't, and they can't. Crypto-currency's strong protections on anonymity make it impossible for any state to know who is buying what, who is paying whom, who earns what, and who has what in savings. BS! The state seems to be surviving just fine with its "inability" to track who is buying what with cash, and it could easily require and enforce documentation of large purchases (such as houses, cars, etc. as it already does btw). > 2. Police:It would be almost impossible for states to detect certain crimes. One of the major alleged uses of Bitcoin -- though, of course, one can never truly know -- is buying illicit drugs. Ohhhh noooo!! Cry me a river!! You mean the batshit insane war on drugs that has destroyed countless lives will become even more ineffective than it already is?!? Please oh please, don't throw me into the briar patch! Every one of these points applies equally to cash. Might as well write a second article titled: "Cash: An Existential threat to the modern liberal state" BTW, there's nothing liberal about the war on drugs, the very existence of which is a cruel affront to basic human liberties. > In a world where many transactions are anonymous, it’s unclear how governments could even compile accurate economic data, without which macroeconomic policy is impossible. How exactly does having a public history of every transaction ever made somehow make it "impossible" to glean any useful economic data from it? Add to it knowledge of certain transactions (such as those that go through companies), and you start to get a pretty clear picture of exactly what's going on.
- mbetter 14y ago
  I'm not sure why that second sentence is there, it doesn't really make much sense. The rest of the point is valid, especially regarding money laundering.
  - guard-of-terra 14y ago
    Why should we ever care about money laundering when they didn't punish HSBC? They aren't serious about this issue, why should we care?
    - rayiner 14y ago
rd108 14y ago
I've been a bitcoin supporter. But there is a twinge in me that remembers government, properly set up, can often protect the weak from the strong. Extremely wealthy corporations and individuals moving around anonymous money would make it impossible to tax and impossible to know where political contributions were coming from. I don't know the answer-- I flip flop back and forth between total openness for everyone and total secrecy for everyone.
- hazov 14y ago
  On the contrary I believe, suppose bitcoin explodes national fiat currency as I saw a couple of guys wishing, once governments put some regulation, double booking accountting for companies who will have no incentive to avoid taxes and pay a lot later and the fact you can trace all transaction would kill any anonymity unless it remain a currency for black markets.
- Evbn 14y ago
  Lucky for you that bit coin is 100% non-anonymous, and every transaction is published to every entity in the economy.
hazov 14y ago
"which, for many of its libertarian-anarchist advocates, is the whole idea" The politics the community built around is for me the only reason why it sucks right now, the idea is interesting and it can certainly have some use. Selling all that I have. TL;DR: Well, the link speaks for itself: http://imgur.com/r/cringepics/gkLJswu http://imgur.com/r/cringepics/gkLJswu EDIT: Ultimately what I hate about it is that the almost anywhere you go do discuss it there's this tribal mentality of believers vs. deniers. What about those guys in 2009 that thought it was a good idea to work as a currency and does not care about libertarianism/keynesianism talk?
- waterlesscloud 14y ago
  I think of bitcoin the same way I think of the music of Led Zeppelin: I don't let the fans stand in the way of my appreciation of a good product.
- ferdo 14y ago
  Fail. “It’s very attractive to the libertarian viewpoint if we can explain it properly. I’m better with code than with words though.” Satoshi Nakamoto 14 Nov 2008
josephby 14y ago
"Taxation: How do governments collect taxes on transactions in Bitcoin? The answer is they don't, and they can't." Grossly misleading. You tax something at the point at which it gets exchanged into an externally viewable good or service. If either party refuses to disclose the value of the transaction, then the state just assigns one and uses its monopoly on force to collect. That said, an increasing dependence on opaque stores of value would likely shift taxation away from income and towards consumption.
matt_panaro 14y ago
I was just reading some posts about potential BitCoin issues: http://www.loper-os.org/?p=1009 http://www.loper-os.org/?p=1009 http://www.loper-os.org/?p=939 http://www.loper-os.org/?p=939 If the conclusions about the vulnerabilities of BitCoin are correct, then I'm not sure it can qualify as an "existential threat"
gojomo 14y ago
FTA: Taxation: How do governments collect taxes on transactions in Bitcoin? The answer is they don't, and they can't. Though many Bitcoin fans don't quite realize it, Bitcoin's radical transparency could in fact be a tax-collector's wet dream. Every public-key, balance, and transaction is public. A government that wants to coopt and efficiently tax Bitcoin could announce the following policy, based on the idea of 'tainted' or 'clean' balances: "You can make your Bitcoin legal inside our jurisdiction by registering your public keys. (No, we don't need your private keys.) All transactions between registered keys are great, just make sure they match up with your tax filings, because we can see the endpoints. "You should not receive money to your registered address(es) from an unregistered address. If you do, you can file a disclosure with 30 days, identifying the origin and nature of the transaction, paying all applicable taxes, and then the balance is yours to keep." "If you do not, the entire amount that's mixed with the unregistered-origin balance is subject to forfeit. Your registered keys with any such balance will be blacklisted, making your previously-registered balances unspendable until you come back into compliance." Any above-ground business would then stick with clean balances. Both clean and tainted coins could circulate in the same blockchain, but rarely mix... and would have different de facto values. (Would a clean or dirty satoshi be worth more? I'm not sure!) Trying to buy above-ground things with dirty money would face the same 'laundering challenge' as today: making it look like legitimate income via front operations. Except, the blockchain would be a perfect record of earlier related transactions. That means big-data traffic analysis, and occasional meatspace busts discovering the identities of unregistered keys, would create a very strong map of unsanctioned economic activity -- much better than is possible with physical cash.
- koenigdavidmj 14y ago
  > If you do, you can file a disclosure with 30 days, identifying the origin and nature of the transaction I smell a Fifth Amendment issue with doing this in the US.
  - wbl 14y ago
    The IRS already requires this for cash today.
lucb1e 14y ago
Reality check: billion-dollar company posts news message after news message about how a their-business-disrupting new technology is bad.
davidjohnstone 14y ago
Crypto-currencies might be, but I don't think Bitcoin is an existential threat to the modern liberal state. The anonymity that every mainstream article claims Bitcoin has is not nearly as strong as it's made out to be[1][2][3]. The built-in deflationary aspect of Bitcoin seems to prevent it from being used as a "serious" currency. Hiding money under your mattress should never be the optimal approach to making more money. (It might not prevent people from using the currency, but it's highly sub-optimal.) The fragility of the currency concerns me (by which I mean the way it's possible to lose massive amounts of money by losing a file or forgetting a password). Maybe this is a technical problem that will be solved with a more mature ecosystem, but I like the way that a real bank always has ways to access money when bad things happen (at least in a functioning banking system). This thread[4] documents the loss of about 70,000 Bitcoins, which is worth about ten million dollars today. Related to this, if somebody hacked the EFF's Twitter account and posted that they were accepting Bitcoin donations on some address, a lot of Bitcoins would disappear into somebodies wallet. You could argue that Bitcoin is a more perfect sort of system, but it's not without downsides. Maybe another crypto-currency will come along and solve these problems. I think I hope it does. But I don't see Bitcoin supplanting modern state-backed currencies. I find it hard to see Bitcoin being used more widely than by the idealogues, the speculators, and those who find utility in it (like Silk Road, but not just that). 1. http://arxiv.org/pdf/1107.4524.pdf http://arxiv.org/pdf/1107.4524.pdf 2. http://eprint.iacr.org/2012/584.pdf http://eprint.iacr.org/2012/584.pdf 3. https://en.bitcoin.it/wiki/Anonymity https://en.bitcoin.it/wiki/Anonymity 4. https://bitcointalk.org/index.php?topic=7253.0 https://bitcointalk.org/index.php?topic=7253.0
- sliverstorm 14y ago
  You could argue that Bitcoin is a more perfect sort of system Which could be exactly why it is wrong for humans- as we are more imperfect than perfect :)
- Evbn 14y ago
  Google doesn't lose your mail. BofA could keep track of your bit coins.
trotsky 14y ago
The only way you could think bitcoin is a threat to state revenue is by misunderstanding methods of taxation. Income and corporate taxes are determined almost entirely by self reporting and laws that shift tax burdens from one entity to another which require disclosure. It's relatively easy to evade taxes as long as you operate in a closed loop where no one reports even with modern financial instruments. The problem only comes when you want to use the money to buy things from taxpayers, which is, you know, most business. This is such a problem that money laundering is primarily concerned with finding ways to pay taxes not to avoid them, so that people can pay for houses and such. Bitcoin actually makes this far more difficult than USD because of the encoded transactional history - just ask anyone sitting on the large piles of stolen bitcoins that have yet to be retransfered. The methods of enforcement would change, for sure. But anyone who thinks that revenue offices would be unable to model monetary distribution via the blockchain hasn't been paying attention to what US security forces have been doing with the databases of how groups interact based on who they call (association graphs).
- skore 14y ago
  > just ask anyone sitting on the large piles of stolen bitcoins that have yet to be retransfered. Wow, I never thought about that. Very interesting! Does anybody have more insight into this?
  - eurleif 14y ago
    I wonder to what extent it may contribute to BitCoin's deflation: drug dealers make money on Silk Road, can't readily transfer it out of BitCoins, and probably think there's a good chance BitCoins will continue to become more valuable anyway, so they leave the money sitting in BitCoins.
    - skore 14y ago
      The other datapoint may be dead wallets. I think it's very likely there are a good number of wallets from the early days of bitcoin where mining was still possible with normal hardware. A lot of people probably tried bitcoin out, mined a couple (which would now be worth hundreds of dollars) and then lost their wallet because there was nothing you could really do with them. Makes me wonder whether we will ever see the day when people will try to fake ownership of dead wallets. It should be possible to figure out which wallets are dead. Not sure whether it's possible or feasible to fake ownership, though. Then again, if it IS possible and if the people who predict four digit dollar values for a single BTC end up being right, the incentive would surely be there.
bbbhn 14y ago
Wow, the financial press is falling in love with writing about Bitcoin. Now that it's been linked to Cyprus there's an increased probability of Bitcoin being discussed in reference to future Eurozone economic events. Which means more mainstream awareness & more potential adopters. I have a hard time seeing Bitcoin going away in the near future. Even if it's a bubble, and I have my doubts about that, odds are we have yet to reach the peak. It's political nature also holds a lot of potential. There are some very, very discontent people all over the world, both Western and non-Western. Segments of the Greek population have latched onto neo-nazism -- is it really that unrealistic that another desperate population might latch onto Bitcoin?
Apocryphon 14y ago
Bruce Sterling considered this, thirteen years ago: http://www.time.com/time/printout/0,8816,997255,00.html http://www.time.com/time/printout/0,8816,997255,00.html
deleted 14y ago
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baby 14y ago
With all those bitcoins thread on HN I'm waiting for a HN Poll to know if you guys have bitcoins or not.
Zigurd 14y ago
Bitcoin is analogous to gold. To the extent it is more of a "threat" than gold, it is because moving bitcoin across national borders is easier. You also don't have to assay it. This article is alarmism. There is no theory of how bitcoin will facilitate more tax evasion or transactions for contraband, than cash or, or bearer bonds, or gold do.
- Evbn 14y ago
  Do bearer bonds still exist? It thought they were replaced by electronic securities because, you know, their only unique purpose is for theft.
  - Zigurd 14y ago
    They are pretty much extinct in the US. Not because of theft, but because transaction in them are hard to track.
chrismealy 14y ago
No, it's not. The government can throw you in jail if you don't pay your taxes. Money is a get out of jail free card. That's what makes money valuable. http://en.wikipedia.org/wiki/Chartalism http://en.wikipedia.org/wiki/Chartalism
alexqgb 14y ago
The OP is not to be taken seriously, thanks to deep ignorance about how currency works in general, and how bitcoin works in particular. In 1998, Paul Krugman described the fatal flaw that will inevitably sink any currency that includes it; a flaw that Bitcoin's designers have overlooked. http://www.forbes.com/sites/pascalemmanuelgobry/2013/04/05/krugman-baby-sitting-co-op-bitcoin/ http://www.forbes.com/sites/pascalemmanuelgobry/2013/04/05/k... … So no, Bitcoin is not an "Existential threat to the Modern Liberal State". Not even close.
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skore 14y ago
Anybody else get the feeling that we see an increasing amount of articles where the author writes about what he or she thinks bitcoin is? It's like multiple, recursive generations of FUD.
JulianMorrison 14y ago
Macroeconomics is the part of this that isn't FUD. The BTC money supply will remain slightly deflationary regardless of what's in your national best interests. It's not unlike being in the Euro, except that we have pitiless automation playing the part of Germany. You might want to devalue, or print money to cover your pension obligations or restart a stagflation death-spiral, but BTC does not offer you any means to do this. The old way of maintaining control local macroeconomics was to demand that "you may use whatever variety of wooden doubloons you please, but you pay your taxes in USD". For simplicity, people use USD for everything. However if the economy starts to run on BTC, this rule's traction fails, USD becomes funny-money you buy at the government's gate, and its inflation saps the government rather than the taxpayer.

100 points by dmitriy_ko 14y ago

Well the so-called "Modern Liberal State" is an existential threat to humanity, so it seems fair to me.

mrb 14y ago

"The volume of transactions in Bitcoin is growing only slowly, relative to the massive increase in demand for the currency" The author states this without presenting data. He is wrong. In fact, data shows the opposite: - The exchange rate increase by 5x between February (low of $20) and March (high of $100) - BitPay alone recorded a merchant transaction volume increasing by 7.6x between February ($687k) and March ($5.2M): http://www.marketwatch.com/story/bitpay-eclipses-silk-road-in-bitcoin-sales-with-explosive-52m-march-2013-04-02 http://www.marketwatch.com/story/bitpay-eclipses-silk-road-i... (and this is just BitPay - there are many more Bitcoin-accepting vendors who make sales without using BitPay - so total transactions increased by a lot more than 7.6x, maybe 10x, 20x, who knows) Therefore the volume of transactions is increasing faster than the exchange rate. How can a Bloomberg article (edit: opinion piece) be so wrong about such a stupid simple fact that can be easily found? https://news.ycombinator.com/item?id=5499377 https://news.ycombinator.com/item?id=5499377 is right: a lot of journalists get a lot of facts wrong about Bitcoin. Edit: BitPay is not the only datapoint. Many other metrics and merchants generally show big increases in transaction volume in the short past: - Estimated volume of USD transactions (attempting to ignore "change"): http://blockchain.info/charts/estimated-transaction-volume-usd http://blockchain.info/charts/estimated-transaction-volume-u... - Silk Road going over 2 years from zero to $2 million/month of Bitcoin revenues: http://arstechnica.com/tech-policy/2012/08/study-estimates-2-million-a-month-in-bitcoin-drug-sales/ http://arstechnica.com/tech-policy/2012/08/study-estimates-2... - A bitcoin casino went from 0 to $0.5 million profits in 6 months: http://arstechnica.com/business/2013/01/bitcoin-based-casino-rakes-in-over-500000-profit-in-six-months/ http://arstechnica.com/business/2013/01/bitcoin-based-casino... - Etc

lwat 14y ago
Maybe bitpay is growing faster than other payment processors?
dcc1 14y ago
How is this for data? http://blockchain.info/charts/market-price http://blockchain.info/charts/market-price http://blockchain.info/charts/n-transactions http://blockchain.info/charts/n-transactions There is a big discrepancy between number of transactions and the value
- mrb 14y ago
  Wrong graph. You need to look at the volume of transactions, not at the number of transactions: http://blockchain.info/charts/estimated-transaction-volume-usd http://blockchain.info/charts/estimated-transaction-volume-u... As you can see, the graph is similar to the market price.
  - dcc1 14y ago
    @MRB transaction volume is dependant on the price isnt it? If price goes up so does the volume?
    - mrb 14y ago
      Yes and this is my point. If the exchange rate doubles while the volume remains the same (say 100k BTC per day), then the economy is effectively increasing. It means people are spending twice the USD despite merchants halving their BTC prices (they generally index their BTC prices depending on the exchange rate).
Guvante 14y ago
> there are many more Bitcoin-accepting vendors who make sales without using BitPay Who have independent increases. If I accept bitcoins and I didn't see an increase in transactions, that decreases the total transaction volume change. You can't just look at one particular vendor and apply their results to the aggregate. And BitPay's numbers are odd, they reported an average transaction size of 10 bitcoins, that seems awfully large.

itistoday2 14y ago

What a gigantic piece of FUD. > How do governments collect taxes on transactions in Bitcoin? The answer is they don't, and they can't. Crypto-currency's strong protections on anonymity make it impossible for any state to know who is buying what, who is paying whom, who earns what, and who has what in savings. BS! The state seems to be surviving just fine with its "inability" to track who is buying what with cash, and it could easily require and enforce documentation of large purchases (such as houses, cars, etc. as it already does btw). > 2. Police:It would be almost impossible for states to detect certain crimes. One of the major alleged uses of Bitcoin -- though, of course, one can never truly know -- is buying illicit drugs. Ohhhh noooo!! Cry me a river!! You mean the batshit insane war on drugs that has destroyed countless lives will become even more ineffective than it already is?!? Please oh please, don't throw me into the briar patch! Every one of these points applies equally to cash. Might as well write a second article titled: "Cash: An Existential threat to the modern liberal state" BTW, there's nothing liberal about the war on drugs, the very existence of which is a cruel affront to basic human liberties. > In a world where many transactions are anonymous, it’s unclear how governments could even compile accurate economic data, without which macroeconomic policy is impossible. How exactly does having a public history of every transaction ever made somehow make it "impossible" to glean any useful economic data from it? Add to it knowledge of certain transactions (such as those that go through companies), and you start to get a pretty clear picture of exactly what's going on.

mbetter 14y ago
I'm not sure why that second sentence is there, it doesn't really make much sense. The rest of the point is valid, especially regarding money laundering.
- guard-of-terra 14y ago
  Why should we ever care about money laundering when they didn't punish HSBC? They aren't serious about this issue, why should we care?
  - rayiner 14y ago

rd108 14y ago

I've been a bitcoin supporter. But there is a twinge in me that remembers government, properly set up, can often protect the weak from the strong. Extremely wealthy corporations and individuals moving around anonymous money would make it impossible to tax and impossible to know where political contributions were coming from. I don't know the answer-- I flip flop back and forth between total openness for everyone and total secrecy for everyone.

hazov 14y ago
On the contrary I believe, suppose bitcoin explodes national fiat currency as I saw a couple of guys wishing, once governments put some regulation, double booking accountting for companies who will have no incentive to avoid taxes and pay a lot later and the fact you can trace all transaction would kill any anonymity unless it remain a currency for black markets.
Evbn 14y ago
Lucky for you that bit coin is 100% non-anonymous, and every transaction is published to every entity in the economy.

hazov 14y ago

"which, for many of its libertarian-anarchist advocates, is the whole idea" The politics the community built around is for me the only reason why it sucks right now, the idea is interesting and it can certainly have some use. Selling all that I have. TL;DR: Well, the link speaks for itself: http://imgur.com/r/cringepics/gkLJswu http://imgur.com/r/cringepics/gkLJswu EDIT: Ultimately what I hate about it is that the almost anywhere you go do discuss it there's this tribal mentality of believers vs. deniers. What about those guys in 2009 that thought it was a good idea to work as a currency and does not care about libertarianism/keynesianism talk?

waterlesscloud 14y ago
I think of bitcoin the same way I think of the music of Led Zeppelin: I don't let the fans stand in the way of my appreciation of a good product.
ferdo 14y ago
Fail. “It’s very attractive to the libertarian viewpoint if we can explain it properly. I’m better with code than with words though.” Satoshi Nakamoto 14 Nov 2008

josephby 14y ago

"Taxation: How do governments collect taxes on transactions in Bitcoin? The answer is they don't, and they can't." Grossly misleading. You tax something at the point at which it gets exchanged into an externally viewable good or service. If either party refuses to disclose the value of the transaction, then the state just assigns one and uses its monopoly on force to collect. That said, an increasing dependence on opaque stores of value would likely shift taxation away from income and towards consumption.

matt_panaro 14y ago

I was just reading some posts about potential BitCoin issues: http://www.loper-os.org/?p=1009 http://www.loper-os.org/?p=1009 http://www.loper-os.org/?p=939 http://www.loper-os.org/?p=939 If the conclusions about the vulnerabilities of BitCoin are correct, then I'm not sure it can qualify as an "existential threat"

gojomo 14y ago

FTA: Taxation: How do governments collect taxes on transactions in Bitcoin? The answer is they don't, and they can't. Though many Bitcoin fans don't quite realize it, Bitcoin's radical transparency could in fact be a tax-collector's wet dream. Every public-key, balance, and transaction is public. A government that wants to coopt and efficiently tax Bitcoin could announce the following policy, based on the idea of 'tainted' or 'clean' balances: "You can make your Bitcoin legal inside our jurisdiction by registering your public keys. (No, we don't need your private keys.) All transactions between registered keys are great, just make sure they match up with your tax filings, because we can see the endpoints. "You should not receive money to your registered address(es) from an unregistered address. If you do, you can file a disclosure with 30 days, identifying the origin and nature of the transaction, paying all applicable taxes, and then the balance is yours to keep." "If you do not, the entire amount that's mixed with the unregistered-origin balance is subject to forfeit. Your registered keys with any such balance will be blacklisted, making your previously-registered balances unspendable until you come back into compliance." Any above-ground business would then stick with clean balances. Both clean and tainted coins could circulate in the same blockchain, but rarely mix... and would have different de facto values. (Would a clean or dirty satoshi be worth more? I'm not sure!) Trying to buy above-ground things with dirty money would face the same 'laundering challenge' as today: making it look like legitimate income via front operations. Except, the blockchain would be a perfect record of earlier related transactions. That means big-data traffic analysis, and occasional meatspace busts discovering the identities of unregistered keys, would create a very strong map of unsanctioned economic activity -- much better than is possible with physical cash.

koenigdavidmj 14y ago
> If you do, you can file a disclosure with 30 days, identifying the origin and nature of the transaction I smell a Fifth Amendment issue with doing this in the US.
- wbl 14y ago
  The IRS already requires this for cash today.

lucb1e 14y ago

Reality check: billion-dollar company posts news message after news message about how a their-business-disrupting new technology is bad.

davidjohnstone 14y ago

Crypto-currencies might be, but I don't think Bitcoin is an existential threat to the modern liberal state. The anonymity that every mainstream article claims Bitcoin has is not nearly as strong as it's made out to be[1][2][3]. The built-in deflationary aspect of Bitcoin seems to prevent it from being used as a "serious" currency. Hiding money under your mattress should never be the optimal approach to making more money. (It might not prevent people from using the currency, but it's highly sub-optimal.) The fragility of the currency concerns me (by which I mean the way it's possible to lose massive amounts of money by losing a file or forgetting a password). Maybe this is a technical problem that will be solved with a more mature ecosystem, but I like the way that a real bank always has ways to access money when bad things happen (at least in a functioning banking system). This thread[4] documents the loss of about 70,000 Bitcoins, which is worth about ten million dollars today. Related to this, if somebody hacked the EFF's Twitter account and posted that they were accepting Bitcoin donations on some address, a lot of Bitcoins would disappear into somebodies wallet. You could argue that Bitcoin is a more perfect sort of system, but it's not without downsides. Maybe another crypto-currency will come along and solve these problems. I think I hope it does. But I don't see Bitcoin supplanting modern state-backed currencies. I find it hard to see Bitcoin being used more widely than by the idealogues, the speculators, and those who find utility in it (like Silk Road, but not just that). 1. http://arxiv.org/pdf/1107.4524.pdf http://arxiv.org/pdf/1107.4524.pdf 2. http://eprint.iacr.org/2012/584.pdf http://eprint.iacr.org/2012/584.pdf 3. https://en.bitcoin.it/wiki/Anonymity https://en.bitcoin.it/wiki/Anonymity 4. https://bitcointalk.org/index.php?topic=7253.0 https://bitcointalk.org/index.php?topic=7253.0

sliverstorm 14y ago
You could argue that Bitcoin is a more perfect sort of system Which could be exactly why it is wrong for humans- as we are more imperfect than perfect :)
Evbn 14y ago
Google doesn't lose your mail. BofA could keep track of your bit coins.

trotsky 14y ago

The only way you could think bitcoin is a threat to state revenue is by misunderstanding methods of taxation. Income and corporate taxes are determined almost entirely by self reporting and laws that shift tax burdens from one entity to another which require disclosure. It's relatively easy to evade taxes as long as you operate in a closed loop where no one reports even with modern financial instruments. The problem only comes when you want to use the money to buy things from taxpayers, which is, you know, most business. This is such a problem that money laundering is primarily concerned with finding ways to pay taxes not to avoid them, so that people can pay for houses and such. Bitcoin actually makes this far more difficult than USD because of the encoded transactional history - just ask anyone sitting on the large piles of stolen bitcoins that have yet to be retransfered. The methods of enforcement would change, for sure. But anyone who thinks that revenue offices would be unable to model monetary distribution via the blockchain hasn't been paying attention to what US security forces have been doing with the databases of how groups interact based on who they call (association graphs).

skore 14y ago
> just ask anyone sitting on the large piles of stolen bitcoins that have yet to be retransfered. Wow, I never thought about that. Very interesting! Does anybody have more insight into this?
- eurleif 14y ago
  I wonder to what extent it may contribute to BitCoin's deflation: drug dealers make money on Silk Road, can't readily transfer it out of BitCoins, and probably think there's a good chance BitCoins will continue to become more valuable anyway, so they leave the money sitting in BitCoins.
  - skore 14y ago
    The other datapoint may be dead wallets. I think it's very likely there are a good number of wallets from the early days of bitcoin where mining was still possible with normal hardware. A lot of people probably tried bitcoin out, mined a couple (which would now be worth hundreds of dollars) and then lost their wallet because there was nothing you could really do with them. Makes me wonder whether we will ever see the day when people will try to fake ownership of dead wallets. It should be possible to figure out which wallets are dead. Not sure whether it's possible or feasible to fake ownership, though. Then again, if it IS possible and if the people who predict four digit dollar values for a single BTC end up being right, the incentive would surely be there.

bbbhn 14y ago

Wow, the financial press is falling in love with writing about Bitcoin. Now that it's been linked to Cyprus there's an increased probability of Bitcoin being discussed in reference to future Eurozone economic events. Which means more mainstream awareness & more potential adopters. I have a hard time seeing Bitcoin going away in the near future. Even if it's a bubble, and I have my doubts about that, odds are we have yet to reach the peak. It's political nature also holds a lot of potential. There are some very, very discontent people all over the world, both Western and non-Western. Segments of the Greek population have latched onto neo-nazism -- is it really that unrealistic that another desperate population might latch onto Bitcoin?

Apocryphon 14y ago

Bruce Sterling considered this, thirteen years ago: http://www.time.com/time/printout/0,8816,997255,00.html http://www.time.com/time/printout/0,8816,997255,00.html

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baby 14y ago

With all those bitcoins thread on HN I'm waiting for a HN Poll to know if you guys have bitcoins or not.

Zigurd 14y ago

Bitcoin is analogous to gold. To the extent it is more of a "threat" than gold, it is because moving bitcoin across national borders is easier. You also don't have to assay it. This article is alarmism. There is no theory of how bitcoin will facilitate more tax evasion or transactions for contraband, than cash or, or bearer bonds, or gold do.

Evbn 14y ago
Do bearer bonds still exist? It thought they were replaced by electronic securities because, you know, their only unique purpose is for theft.
- Zigurd 14y ago
  They are pretty much extinct in the US. Not because of theft, but because transaction in them are hard to track.

chrismealy 14y ago

No, it's not. The government can throw you in jail if you don't pay your taxes. Money is a get out of jail free card. That's what makes money valuable. http://en.wikipedia.org/wiki/Chartalism http://en.wikipedia.org/wiki/Chartalism

alexqgb 14y ago

The OP is not to be taken seriously, thanks to deep ignorance about how currency works in general, and how bitcoin works in particular. In 1998, Paul Krugman described the fatal flaw that will inevitably sink any currency that includes it; a flaw that Bitcoin's designers have overlooked. http://www.forbes.com/sites/pascalemmanuelgobry/2013/04/05/krugman-baby-sitting-co-op-bitcoin/ http://www.forbes.com/sites/pascalemmanuelgobry/2013/04/05/k... … So no, Bitcoin is not an "Existential threat to the Modern Liberal State". Not even close.

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skore 14y ago

Anybody else get the feeling that we see an increasing amount of articles where the author writes about what he or she thinks bitcoin is? It's like multiple, recursive generations of FUD.

JulianMorrison 14y ago

Macroeconomics is the part of this that isn't FUD. The BTC money supply will remain slightly deflationary regardless of what's in your national best interests. It's not unlike being in the Euro, except that we have pitiless automation playing the part of Germany. You might want to devalue, or print money to cover your pension obligations or restart a stagflation death-spiral, but BTC does not offer you any means to do this. The old way of maintaining control local macroeconomics was to demand that "you may use whatever variety of wooden doubloons you please, but you pay your taxes in USD". For simplicity, people use USD for everything. However if the economy starts to run on BTC, this rule's traction fails, USD becomes funny-money you buy at the government's gate, and its inflation saps the government rather than the taxpayer.