Bitcoin Forum

Hey guys, I'm not sure if this has been discussed before or not and I can't seem to find anything in regards to it. While governments have been talking about regulation of bitcoin and people worry about the government interfering with it, bitcoin seems to be extremely difficult to regulate or even attempt to regulate. My question is, if for instance, if the US government decided it wanted to destroy the bitcoin network wouldn't it be possible for them to do so by artificially destroying the value of bitcoins? Suppose they buy millions of dollars worth of bitcoins off of an exchange and then sell them for pennies. While the price when they purchase the coins will skyrocket when they start to sell them for pennies the price will drop to nothing - making mining not profitable and pretty much destroying the network. This would allow them to "regulate" bitcoin by destroying it's value. Is this theory even remotely possible or am I completely missing something?

You're not the contents of your wallet.
And bitcoin is not its value in dollars. ! ;)

If Bitcoin has an intrinsic value, it should be unaffected by such pumping and dumping.
They buy a million dollars of Bitcoin, that pumps the price up, they sell a million dollars worth fir thing, that dumps the price down.
At the end, nothing has changed, except they have 'donated' a million dollars to Bitcoin owners.

Besides making some lucky people really rich, wouldn't it make mining not profitable? If I understand how the system works, without mining the entire network is shut down. If a majority of miners stop mining and the difficulty remains the same for the few people who are still mining, doesn't that render the network "dead" if you will? Perhaps i don't understand where the value of bitcoins to USD comes from.

It would slow down the network for a while, as miners stop mining, but the miners will simply start buying up those penny bitcoins instead of spending their electricity money on mining. Some math:

Let's assume the market is perfectly liquid, and there isn't a shortage of sellers on the market, so buying and selling itself does not affect the price (in reality, as coins are bought, each successive coin is more expensive, until coins available on the market dry up, and the price is extremely high)

$100Mil worth of bitcoin bought at $140/BTC -> Gov now has 714,285 bitcoins
Gov starts selling coins for $0.01 each. Total amount needed to buy everything they have to sell is 714,285/100 = $7,142.85
Bitcoin miners themselves spend, what, a few $100k worth on electricity a day? If they see that price, they will stop mining, and that $7k in coins will get snapped up *instantly*.

Let's say gov sells it for $1usd. That's still only $71,428.50 worth for people to buy up. Government would have to buy billions of dollars worth (currently impossible), and sell for not too low prices just to make the effect be more than a momentary blip. in the market.

I think technical attacks would be much more affordable.

If you can stop BTC from working or hinder it's operations the value of it is lowered. So just invest in hardware and use it in harmful ways...

There is really quite a lot of options and multiple attack routes if you start thinking about it. Why not just write more of those nice viruses to destroy wallets, ddos the online services and maybe even nodes in network...

Thanks for the insight. That makes a lot more sense now. I know there aren't billions of dollars worth of bitcoins available, but the US gov definitely has the resources to spend that kind of money.


I was thinking more along the lines of a "legal" way to bring down the network. Virsus's and DDOS aren't exactly legal.

Umm, since when has USA government cared about what is legal? It's war on terrorism, anything goes...

If they do it, it's legal for them... Or at least the consequences are very minor...

My point is, if they did do something illegal that was as blatant as what you're suggesting, there would be lawsuits and i don't think the consequences would be very minor. The war on terrorism aka the patriot act aka the enabling acts(**caugh** facists **caugh**) was passed by congress and is deemed "legal".

if it went up due to a massive buy up by government.. people will make mega profit.

then when sold off for pennies those that made profit would now be able to double up or multiply their holdings.. then within a couple days the price will stabilise back to around the $120 value.. and the government are a couple billion dollars worse off..

ramps and dumps normally stabilise back to the price they were before the action occured.

as for the desire to take over bitcoin, i can think of a few small countries with a smaller GDP that the US government could waste a few billion on to take control not just of a currency, but of the land and people of that country. take the british virgin islands less then 1 billion and right next to the american virgin islands, thats more ripe for the picking then what bitcoin is.

so i personally see no threat of the US or any government wasting funds for something that materialistically is just a 2 day ramp and dump...

What the intrinsic value r u talking about?

Any Government initiative should involve mining BTC at a loss (printed) fiat. In the case of USD, as the currency devalues btc will gain in value.

As far as Jo-miner part in this event then expect QQ all the way to the poor house.

Not gonna happen.  It would be the end of that civil servant or politician's career if bitcoin recovered.  And probably impossible to justify the cost a priori because the question "how can you guarantee it DOES not recover?" is unanswerable.  It would basically just end up giving bitcoiners a lot of capital that they could then use on bitcoin related projects...

The worst thing the government could do which would completely destroy Bitcoin (and I do so hope that there are no government or federal reserve agents reading this and passing it along to their bosses to be hailed as heros for destroying Bitcoin) is to pour billions of dollars into buying bitcoins.

If they were to skyrocket the price to say $10k-$100k each, then nobody would be able to afford them and Bitcoin would begin a slow fall toward uselessness. And if they were to go so far as to drive the price up to, say, a million dollars each Bitcoin, then Bitcoin would cease to exist immediately.

Please do not let the federal reserve in on this secret. I would hate to see the price of a single bitcoin worth a million dollars tomorrow. Do not question the logic of this, I have done much research and know this to be true.

yes well said

I'll sell my coins for a cool million. Then I'll buy some for a few hundreds or thousands.

I will sell first to government 1b 1M$ then quit bitcoin business.  ;D ;D

Heh, almost everyone dreams to sell their bitcoins for dollars...

One of the protections against this is the rise of competing altcoins. In my estimation there will be many new coins that emerge gaining popularity with the mainstream consumer. Having these multiple competing coins in circulation will lesson the impact of an attack on a single coin.

In essence, supporting alternative coins is supporting Bitcoin.

Frankly, the U.S. government would be quite stupid to do anything like that. It would be much cheaper and easier to enact some really tough regulation. The government can say a drug is legal or not, or can impose registration, like for owning a car or a gun.

Wink wink nudge nudge :)

LOL! That was funny :) I almost fell for it, mainly because I actually hear such arguments against bitcoin stated legitimately.

i would think a more devious tactic would be if the us government forked the bitcoin client to create an alt coin we'll call them "safetycoins" since the us government is very fond of replacing the word "Oppression" with the word "Safety".  So then they would premine the whole safetycoin blockchain and give them away as part of a stimulus plan.  Then you could exchange each safety coin with fiat at your local post office for a rate of like 500 bucks each.  They could even put a nice backdoor into the algorhtym that tracks the ip of every wallet.  The general public would just see free money and be all over it.

That would just be the government giving away free money, and would not affect Bitcoin in any way, since the reason people use it is 1) decentralized 2) open source 3) anonymous.