2013-05-31 Inc.com: What Liberty Reserve's Takedown (Doesn't) Mean For Bitcoin

[n8rwJeTt8TrrLKPa55eU]

The takedown of Liberty Reserve has plenty of people wondering about what will happen to Bitcoin. Here's why it could actually be a good thing.

http://www.inc.com/eric-markowitz/what-liberty-reserves-takedown-doesnt-mean-for-bitcoin.html

[BTCBuyer]

The takedown of Liberty Reserve has plenty of people wondering about what will happen to Bitcoin. Here's why it could actually be a good thing.

http://www.inc.com/eric-markowitz/what-liberty-reserves-takedown-doesnt-mean-for-bitcoin.html

n8rwJeTt8TrrLKPa55eU,

Thank you for posting that article. I have the same sentiment as the author, in that with the government's increased oversight on Bitcoin, it increases the validity of this virtual currency. I believe that around the time the government cracked down on Liberty Reserve, there was an increase in Bitcoin's price on the market.

I am interested to know at what point does increase scrutiny dampens support for the currency? Bitcoin is based on privacy of the user and the transactions that are involved. With increased scrutiny from the government, this might deflect supporters who would otherwise join the community, but out of fear for potential prosecution, decides to stay clear.

At the moment, I believe that Bitcoin is at the right balance between increased oversight from the government (which means that the currency is strong enough for the government to view as a potential threat to the economy) and privacy of the user. However with time, and the near-future law cases in the courtroom, Bitcoin might see a disruption in its pricing.

What are your thoughts on this point?

BTCBuyer Team.

[n8rwJeTt8TrrLKPa55eU]

The takedown of Liberty Reserve has plenty of people wondering about what will happen to Bitcoin. Here's why it could actually be a good thing.

http://www.inc.com/eric-markowitz/what-liberty-reserves-takedown-doesnt-mean-for-bitcoin.html

n8rwJeTt8TrrLKPa55eU,

Thank you for posting that article. I have the same sentiment as the author, in that with the government's increased oversight on Bitcoin, it increases the validity of this virtual currency. I believe that around the time the government cracked down on Liberty Reserve, there was an increase in Bitcoin's price on the market.

I am interested to know at what point does increase scrutiny dampens support for the currency? Bitcoin is based on privacy of the user and the transactions that are involved. With increased scrutiny from the government, this might deflect supporters who would otherwise join the community, but out of fear for potential prosecution, decides to stay clear.

At the moment, I believe that Bitcoin is at the right balance between increased oversight from the government (which means that the currency is strong enough for the government to view as a potential threat to the economy) and privacy of the user. However with time, and the near-future law cases in the courtroom, Bitcoin might see a disruption in its pricing.

What are your thoughts on this point?

BTCBuyer Team.

I think political disruptions/attacks are short-term negative but long-term positive.  They tend to make the system more resilient, motivate people to create decentralized workarounds, and generate publicity.  What doesn't kill you makes you stronger.  As per Taleb:

"For bitcoin to make it it needs to be banned by a few governments and critiqued by policy makers. Otherwise it will fade. #Antifragile."

Most countries outside of USA, China, and a few others do not have the technology or budget to effectively monitor Bitcoin usage or enforce any restrictions.  Even if major countries started a crackdown on private Bitcoin activities, once Bitcoin gains enough critical mass in the rest of the planet, it's game over.  Bitcoin is an unrelenting virus that never goes backwards: once a Bitcoin user, always a Bitcoin user AND always a Bitcoin evangelist.

Gold coin ownership was banned in the USA for 40 years between 1933 and 1975.  Price did not go down.  And creative people found many ways to buy gold, in spite of those completely unjustified & unconstitutional restrictions.

There is strong worldwide demand for undebaseable, private, trustworthy stores of value.  It's a demand that politicians themselves have created, through decades of economic mismanagement and overreach.  One way or another, legally or not, that demand will be satisfied.  Those that try to push back the tide, will ultimately be buried under a giant tsunami.

Nevertheless, more optimistically, similarly to what happened with the Internet, perhaps Bitcoin starts capturing enough awareness and value and dependencies that political attempts to constrain it start being seen as culturally & socially unacceptable.  This a distinct possibility in the next couple of years if things continue along the exponential growth curve.

[BTCBuyer]

The takedown of Liberty Reserve has plenty of people wondering about what will happen to Bitcoin. Here's why it could actually be a good thing.

http://www.inc.com/eric-markowitz/what-liberty-reserves-takedown-doesnt-mean-for-bitcoin.html

n8rwJeTt8TrrLKPa55eU,

Thank you for posting that article. I have the same sentiment as the author, in that with the government's increased oversight on Bitcoin, it increases the validity of this virtual currency. I believe that around the time the government cracked down on Liberty Reserve, there was an increase in Bitcoin's price on the market.

I am interested to know at what point does increase scrutiny dampens support for the currency? Bitcoin is based on privacy of the user and the transactions that are involved. With increased scrutiny from the government, this might deflect supporters who would otherwise join the community, but out of fear for potential prosecution, decides to stay clear.

At the moment, I believe that Bitcoin is at the right balance between increased oversight from the government (which means that the currency is strong enough for the government to view as a potential threat to the economy) and privacy of the user. However with time, and the near-future law cases in the courtroom, Bitcoin might see a disruption in its pricing.

What are your thoughts on this point?

BTCBuyer Team.

I think political disruptions/attacks are short-term negative but long-term positive.  They tend to make the system more resilient, motivate people to create decentralized workarounds, and generate publicity.  What doesn't kill you makes you stronger.  As per Taleb:

"For bitcoin to make it it needs to be banned by a few governments and critiqued by policy makers. Otherwise it will fade. #Antifragile."

Most countries outside of USA, China, and a few others do not have the technology or budget to effectively monitor Bitcoin usage or enforce any restrictions.  Even if major countries started a crackdown on private Bitcoin activities, once Bitcoin gains enough critical mass in the rest of the planet, it's game over.  Bitcoin is an unrelenting virus that never goes backwards: once a Bitcoin user, always a Bitcoin user AND always a Bitcoin evangelist.

Gold coin ownership was banned in the USA for 40 years between 1933 and 1975.  Price did not go down.  And creative people found many ways to buy gold, in spite of those completely unjustified & unconstitutional restrictions.

There is strong worldwide demand for undebaseable, private, trustworthy stores of value.  It's a demand that politicians themselves have created, through decades of economic mismanagement and overreach.  One way or another, legally or not, that demand will be satisfied.  Those that try to push back the tide, will ultimately be buried under a giant tsunami.

Nevertheless, more optimistically, similarly to what happened with the Internet, perhaps Bitcoin starts capturing enough awareness and value and dependencies that political attempts to constrain it start being seen as culturally & socially unacceptable.  This a distinct possibility in the next couple of years if things continue along the exponential growth curve.

I hope that it is the latter of your points, in that Bitcoin will become mainstream such that any push back would be outdated and taboo. I believe the public's view of Bitcoin will be determined by the growth and usage of this virtual currency. If our community develops into an area that persists in illegal activities and the black market, then the government will extend its arms into our wallets.

How should we promote this demand for trustworthy stores of value when there are competing interests between (1) individual autonomy and privacy (2) institutionalized protection? As Bitcoin develops, I see it more and more becoming a centralized and institutionalized currency, much like other currencies in existence. Would this not change the Bitcoin community, and therefore the root of what Bitcoin is about?

[lunarboy]

 Would this not change the Bitcoin community, and therefore the root of what Bitcoin is about?

Thats the 'He who laughs last' twist in the plot that will get them all in the end. The community, the rules, and the regulations may all change, but the protocol is an unmovable object. Pandoras box is well and truly open. There is absolutely nothing the authorities can do to stop people frictionlessly transferring their wealth to any point on the planet at any time, for next to nothing. With Zerocoin and other anonymising add-ons coming soon to we will be laughing last and for a very long time 

[n8rwJeTt8TrrLKPa55eU]

How should we promote this demand for trustworthy stores of value when there are competing interests between (1) individual autonomy and privacy (2) institutionalized protection? As Bitcoin develops, I see it more and more becoming a centralized and institutionalized currency, much like other currencies in existence. Would this not change the Bitcoin community, and therefore the root of what Bitcoin is about?

You're quite right, there is a tug-of-war.  The final result is unknown, there is past evidence from human history for divergent predictions.  Some well-meaning individual-rights revolutions end up being debased (e.g. USA mostly since 1913 and accelerating), others perhaps are more sustainable (the Internet?).  More former examples than the latter, unfortunately.

Perhaps there is no happy medium.  Possibly there can only be one "winning" position, which in the case of regulation would inevitably lead in short time to full-on whitelists and blacklists and address registrations, with transactional approval at the whim of central planners, i.e. Bitcoin as a less expensive PayPal.  Or maybe people, having tasted a bit if freedom and privacy via the current "unregulated" version of Bitcoin, will push governments back on the idea that 24/7 financial surveillance is a prerequisite for a secure society.

Those who would like to see the second outcome, should simply keep talking to people about Bitcoin and getting people to try it out for themselves.  We must get as many people as possible to understand that the status quo is not set in stone, that it's possible to have something better.  As little 50 years ago all transactions were fully private, there was no 3rd party snooping or vetting the gold/silver/copper/cash you gave to your neighbor or merchant.  We need people to get a taste of that mindset once again.

Or perhaps we will fragment and get two currencies of of it.  Maybe a fork within Bitcoin itself, or perhaps something like Ripple becomes an overground acceptable transactional medium, and some "classic" variant of Bitcoin remains in use as a black market currency.

Of course, the real wildcard in all of this (and in my opinion the most likely short-term accelerator of Bitcoin adoption as-is) would be further Cyprus-style events and the general unravelling of economies worldwide, maybe as early as this summer/fall but for sure at some point in the next 24 months.  Rather ironically, the people best evangelizing the need for private, undebaseable, trustworthy stores of wealth, are not Bitcoin enthusiasts but governments, so in that sense we're getting a very nice boost in that position without having to lift a finger.

[BTCBuyer]

Those who would like to see the second outcome, should simply keep talking to people about Bitcoin and getting people to try it out for themselves.  We must get as many people as possible to understand that the status quo is not set in stone, that it's possible to have something better.  As little 50 years ago all transactions were fully private, there was no 3rd party snooping or vetting the gold/silver/copper/cash you gave to your neighbor or merchant.  We need people to get a taste of that mindset once again.

Your comment about how little over 50 years ago, all transactions were fully private makes me think about the escrow remedy as a solution to fraud protection in the virtual currency world. In an attempt to bring trust into the bitcoin community, a 3rd party is introduced. I do understand the enticing demand for a trustworthy 3rd party to handle transactions. However, this appears to be a microcosm of the existing financial institutions. Slowly, I see bitcoin transforming into an institutionalized and well-regulated venue.

I do not know how to solve this dilemma between (1) autonomy and (2) trust and protection. Bitcoin escrow is the only current compromise that is brought forth in the community. However, this leans too much toward institutionalism and a 3rd party, than I would like.

I see potential in Bitcoin forums to be a platform for peer to peer transactions, much like that offered by craigslist, where there is no third party involvement, or the government's involvement. The market takes account of the supply and demand, and trust is built on an individualized basis.

Are there other alternative proposals for promoting trusty transactions in the Bitcoin community?

BTCbuyer Team.   

[n8rwJeTt8TrrLKPa55eU]

Those who would like to see the second outcome, should simply keep talking to people about Bitcoin and getting people to try it out for themselves.  We must get as many people as possible to understand that the status quo is not set in stone, that it's possible to have something better.  As little 50 years ago all transactions were fully private, there was no 3rd party snooping or vetting the gold/silver/copper/cash you gave to your neighbor or merchant.  We need people to get a taste of that mindset once again.

Your comment about how little over 50 years ago, all transactions were fully private makes me think about the escrow remedy as a solution to fraud protection in the virtual currency world. In an attempt to bring trust into the bitcoin community, a 3rd party is introduced. I do understand the enticing demand for a trustworthy 3rd party to handle transactions. However, this appears to be a microcosm of the existing financial institutions. Slowly, I see bitcoin transforming into an institutionalized and well-regulated venue.

I do not know how to solve this dilemma between (1) autonomy and (2) trust and protection. Bitcoin escrow is the only current compromise that is brought forth in the community. However, this leans too much toward institutionalism and a 3rd party, than I would like.

I see potential in Bitcoin forums to be a platform for peer to peer transactions, much like that offered by craigslist, where there is no third party involvement, or the government's involvement. The market takes account of the supply and demand, and trust is built on an individualized basis.

Are there other alternative proposals for promoting trusty transactions in the Bitcoin community?

BTCbuyer Team.   

A number of attempts have been made at providing general escrow services to the Bitcoin community but they all seem to fail.  If I recall correctly Gavin himself was working on such a project at some point.  I'd guess that the highest-volume escrow at the moment is probably Silk Road(!) but LocalBitcoins (https://localbitcoins.com/escrow_process_guide) and BitMit (https://www.bitmit.net/en/info/13/bitmit-bitcoin-escrow-service) are also apparently successfully acting as escrow agents (haven't tried any of these myself).

The Bitcoin protocol has bullt-in support for releasing payments in mutually satisfactory escrow outcomes:
https://en.bitcoin.it/wiki/Contracts#Example_2:_Escrow_and_dispute_mediation

But unfortunately that needs to be complemented with a trusted human mediator to guarantee fair resolution in the bad buyer/seller scenario.

Mediated scenarios could be discouraged via some type of mutually assured destruction algorithm, e.g.:

http://nashx.com/About

But there could always be fringe suicidal cases that can't be mathematically prevented.  Certainly Bitcoin would greatly benefit if someone cracks this nut and manages to somehow create an escrow service that requires no trust, and is watertight.  But realistically, we are going to need trusted mediators for the foreseeable future.  So someone will eventually build a successful business around that, but most likely starting from an already trusted identity where transactions that pass through must be provably insignificant compared to the value of its own reputation.

[ErisDiscordia]

On a different note, this bothers me a lot:

Mt. Gox announced new verification procedures that require users to offer more personal information when extracting real currency from their accounts.

I wish people would stop referring to fiat as REAL currency. I find that ridiculous on so many levels.

[aigeezer]

On a different note, this bothers me a lot:

Mt. Gox announced new verification procedures that require users to offer more personal information when extracting real currency from their accounts.

I wish people would stop referring to fiat as REAL currency. I find that ridiculous on so many levels.

I agree, but you can have the last laugh if you imagine they mean "real" as in the Portugese unit of fiat currency. The "real" was watered down by a factor of about 200 million to one over the years to reach its present stable form in the Euro (chuckle). This seems about normal for fiat. 

"The herd is always wrong" - old stockbrokers' saying, famously denied in a Forbes piece. Looks like we have to figure things out for ourselves. When I see someone talk about fiat as real money I smile to myself.