The Old Radical: How Bitcoin Is Being Destroyed

Julia Dixon on October 24, 2012

This piece was recently sent to me by “an old radical.” The message is perhaps a bit harsh, but I have to admit, all I can do is grimace and nod in agreement to this thesis… “Bitcoin and state banking systems are born enemies: only one can survive. If you are imagining that they can peacefully coexist, you are fooling yourself.”

I was a radical before most of you Bitcoin users were born. That doesn’t make me any better than you (hopefully I did a few things to make you better than myself), but it does give me a better perspective; time just works that way.

I’ve been watching the recent developments in the Bitcoin markets, and having seen this drama before (too many times), I thought I’d pass along a lesson. This will strike its target in some of you, but others of you are also likely to reject it, because it doesn’t match what you want to be true.

Here’s the lesson: Trying to go ‘legit’ will destroy the Bitcoin market.

For those of you who haven’t turned away, I’ll explain:

There’s nothing really wrong with Bitcoin itself. The developers are doing a nice job of addressing its problems and a heartening number of people have jumped up to create new tools and new services. No problem here.

The problem is that too many people in the Bitcoin market are thinking the old way.

Understand this: Bitcoin is a new thing – it is  not compatible with the old financial system.

Bitcoin and state banking systems are born enemies: only one can survive. If you are imagining that they can peacefully coexist, you are fooling yourself.

Bitcoin exposes the fraud that is state banking. If you think that politicians and bankers will calmly allow it to take over a significant percentage of world financial flows, you’re in denial. States will come after Bitcoin, and hard. They have no choice. Their money can only exist if there are no competitors.

Alan Greenspan may have done a lot of bad things, but he is not stupid. And before his adventures at the Fed, he wrote this:

(Under a fiat system), there is no way to protect savings from confiscation through inflation… If there were, the government would have to make its holding illegal, as was done in the case of gold.

What gold was then, Bitcoin is now… times five.

So, let me try this again: Going legit gives the state a handle to grab you with. ‘Legit’ means registered and regulated, doesn’t it? You have to tell them your name, where you live, and where you put your money, right? It means that they can control you whenever they want to.

There are two big reasons why Bitcoin people are tempted to go ‘legit’:

  1. They want to get mega-rich fast, like Mark Zuckerberg.
  2. They have been trained to be obedient and can’t unlearn it. They are compelled to believe that the government is basically good. It must just be one bad politician or one bad law.

#2 is what destroyed e-gold, and it looks like #1 is what killed GLBSE.

Because of GLBSE, Bitcoin is now being regarded as a currency and states will start to regulate it as one. That means that they’ll attack the public exchangers and force everyone possible to comply with their rules.

So… it’s time to man-up, or to crumble.

(Interestingly, there is often a larger percentage of women that “man-up” than men.)

Will you have the guts to do the right thing when the pressure is on? If yes, I applaud and honor you. If not, here are a few cheap excuses to use (after all, who wants to admit conditioning or cowardice):

  • Without the rule of law, everything would fall apart.
  • Without regulation, criminals would destroy everything.
  • Yes, regulation is coercive, but along with it comes a certain amount of public benefit!
  • I got ripped off, and someone has to fix it!
  • If I can’t sue someone, they can get away with ripping me off!
  • We can’t get people to use Bitcoin unless it’s authorized.
  • We need approval or we will forever remain a tiny market.

A significant number of Bitcoin people will say these things (and others), but the real truth will be that they are scared, or are still hoping to get mega-rich, or just can’t rip the “government is our friend” meme out of their heads. But mostly it will be fear.

We all feel fear of course, but some of us are determined enough to do the right thing, even when we’re afraid.

So, here’s a final tip: If you run into someone who can feel the fear and still do the right thing, don’t let go of them.

O.R.

Posted by Julia Dixon

Julia Dixon is the editor of DGCMagazine and is responsible for the quality of all content and produces a large amount of original content for the site. Julia holds a bachelor’s degree in Economics and is an avid student of Austrian monetary theory, with her favourite being the works of Murray Rothbard.

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17 Replies to “The Old Radical: How Bitcoin Is Being Destroyed”

  2. mrvision October 25, 2012 at 11:49 pm

    Nice. I feel exactly the same. Other bitcoiners are being naive when thinking there are not going to be consecuences. I’m going to keep your email, as I think i will need you in 1 year. I’m developing something.

  3. Julia October 26, 2012 at 12:58 am

    Ya, developments such as Bitcoin pull the rug out from underneath the current banking system and in doing so eliminate a massive source of income and power for both bankers and gov. So why would they just let that happen?

    You can even forget arguments involving politics, morality, economics, etc. and look at this simply from the point of view of power. Bitcoin seriously upsets the current power structure and I don’t think those in power have a habit of just quietly retiring to the county side when something new comes along! Sucks : (

    And if you’ve got a cool new project going, please do tell me about it!

  4. codrus October 26, 2012 at 8:50 pm

    This was a pleasure and delight to read. Thanks for sharing it Julia and pass alomg my respect to the author.

  6. painlord2k October 27, 2012 at 11:45 pm

    Bitcoin have some features that make it resilient to be shut down.
    The network is designed to be not censurable.
    It is true, they will try to kill it, because fiat money con not coexist with bitcoin or gold and silver money.
    But there are people that are not interested in respecting laws that would and will find the bitcoins very interesting. Just now there is only Silk Road. But how much time will pass before other “informal pharmacists” will decide to use bitcoins to settle their deals?
    The same laws in Europe and in USA make cash very cumbersome: the value of a 100$ bill is ridiculous (and it is the largest denomination in existence in the USA), the same is true for the EU in a lesser degree, as they are reducing the amount of money people can legally exchange in cash – Italy have a limit of 1000€ and they would like to reduce it to 50€ for payments in shops and around.
    So, with these limitations, people will be FORCED to move to something else like gold / silver / bitcoins if they want conduct their trades. If they need to keep it under the radar of the Law they will be even more inclined to use out of the radar ways like Bitcoins.
    What matter if the government make bitcoins illegal when they are used to buy illegal drugs or you need them to be paid out of the book?

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  9. mrvision October 30, 2012 at 4:38 pm

    Central Bank releases academic paper about Bitcoin and other currencies.

    http://www.ecb.europa.eu/pub/pdf/other/virtualcurrencyschemes201210en.pdf

    We’re no longer flying under the radar. Probably they’ll start preparing legislation soon.

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  12. Sebastian23452 December 9, 2012 at 5:08 pm

    What i dont understand is… how do you think bitcoin will live when governments decide to crack down?
    I mean government will attack exchangers, shops that accept bitcoins and even can try to attack nodes taking part in bitcoin network.
    That would lead to a big crash in bitcoin value first and then… bitcoins will have nearly no use then. Because you cant do much with it. So why should one hold or buy bitcoins when you cant use it much? Even now i have problems to explain my shop customers that they should buy bitcoins. Why buying bitcoins when you only need it at one shop? And when governments attack… why buy bitcoins when you cant use it in any shop? Or at least nearly no shop?

    I think some people think bitcoins can be hide, encrypted, tor’ed and so on. But at the end… when you cant use your bitcoins for much things… bitcoins will be dead.

    So im pretty sure… if governments want to kill bitcoins and make them illegal bitcoin wont have much choice. Most of the person wouldnt want to use an illegal currency anyway in fear of punishments.

  13. Julia December 9, 2012 at 10:10 pm

    -Sebastian23452

    I understand what you’re saying and I think to a certain extent your right. If Bitcoin were to become outright illegal, you would have to remove the ‘Bitcoin accepted here’ sticker from your shop window. And I do think there will be people who are scarred off it.

    When the crackdown happens the exchangers will be the first to go. This is why local bitcoin markets are so important http://www.dgcmagazine.com/shadow-life-necessary-conditions-for-the-long-term-success-of-bitcoin/ . I’m also hearing a lot about ripple.com being used as a decentralized bitcoin exchange, which could be very interesting.

    But as long as exchanging is still possible, Bitcoin will remain very useful for transferring funds (especially across boarders) no matter what the current exchange value.

    I also see it remaining very useful in the growing black markets (counter economy, underground economy, system-D…or whatever you want to call it!) around the world.

    I think how this will play out depends quite a lot on how popular Bitcoin has become when the crackdown happens. There may very well be lots of people who don’t feel that they are really doing anything wrong, and just choose to ignore the silly new rules. For example torrents and file sharing.

    I remain an optimist!

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