How Bitcoin dies?

[flix]

This article is very wrong, but very interesting. It addresses an issue that has come up with almost all previous attempts at digital currencies: an all out government attack.

I want to bring it up because even 'though Bitcoin is designed to withstand precisely this sort of attack and survive, a bit of contingency planning on our part can help make that attack be even more ineffective and less traumatic, as well as spare a lot of hardship to some of those most exposed (especially in the US). In fact I'm pretty sure that one of the reasons for the creation of the Bitcoin Foundation is to make the legal defense of those most vulnerable easier.

http://unqualified-reservations.blogspot.com.es/2013/01/how-bitcoin-dies.html

1: A DOJ indictment is unsealed which names everyone on Planet Three who operates, or has ever operated, or perhaps who has ever even breathed on, a BTC/USD exchange, as a criminal defendant.

2: The BTC/USD price falls to 0 and remains there.  BTC are permanently worthless.  Everyone who was involved in the Bitcoin market and was holding BTC when the indictments were unsealed feels burned.  Everyone who got out feels lucky.  Many who escape prosecution, in fact, feel lucky.  And BTC is remembered as an epic bubble.

We have precedents enough for both types of attack. See (http://en.wikipedia.org/wiki/E-gold) e-gold (and the many exchanges which existed around it) or the Liberty Dollar (http://en.wikipedia.org/wiki/Liberty_dollar) for a good example of how much harm the DOJ can do.

See the London Gold Pool (http://en.wikipedia.org/wiki/London_Gold_Pool) for how the attack can be carried out for years on the price front.

The combination of both could be very harmful, even if there are workarounds. They would be incapable of destroying Bitcoin, but they could certainly drive it underground and delay mainstream adoption for a long, long time.

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[giszmo]

The fact that US government could crush bitcoin in no time and the fact that they did not do it despite the fact that it clearly made it onto just about every agency's agenda is proof enough for me that Bitcoin already has the blessing of the US government.

(If you doubt that Bitcoin can still be destroyed, please put into relation the $250,000 economy to the $50,000,000,000 printed every month and what a tiny fraction it would take to pay 1000 smart guys to hack every garage shop bitcoin business, buy 20PH/s ASICS, launch child porn portals operating with bitcoin, etc. The window to shut Bitcoin down will not close until the Bitcoin market value is some orders of magnitude higher.)

[matthewh3]

We need to move more bitcoin services to eepsites (I2p) and Onion (Tor) sites plus services.

[flix]

Here is Jon Matonis' answer:

Government Ban On Bitcoin Would Fail Miserably
http://www.financialsense.com/contributors/jon-matonis/government-ban-on-bitcoin-would-fail-miserably

I maintain that a government ban on bitcoin would be about as effective as alcohol prohibition was in the 1920s. Government prohibition doesn't even do a good job of keeping drugs out of prisons. The demand for an item, in this case digital cash with user-defined levels of privacy, does not simply evaporate in the face of a jurisdictional ban. One could even make the case that it becomes stronger because an official recognition that Bitcoin is not only a "renegade" currency but a "so-effective-it-had-to-be-banned" currency would imbue the cryptographic money with larger than life qualities.

I mean, just try stopping something like this:
https://localbitcoins.com/

[flix]

The fact that US government could crush bitcoin in no time and the fact that they did not do it despite the fact that it clearly made it onto just about every agency's agenda is proof enough for me that Bitcoin already has the blessing of the US government.

(If you doubt that Bitcoin can still be destroyed, please put into relation the $250,000 economy to the $50,000,000,000 printed every month and what a tiny fraction it would take to pay 1000 smart guys to hack every garage shop bitcoin business, buy 20PH/s ASICS, launch child porn portals operating with bitcoin, etc. The window to shut Bitcoin down will not close until the Bitcoin market value is some orders of magnitude higher.)

Right now that Bitcoin is a relative unkown, with < 1 Mn users, an attack would probably help (with publicity) more than hurt.

Once Bitcoin reaches critical mass (1-5 million users and 2Bn mkt cap) the defense mechanisms (legal, network size and redundancy, number of exchanges and worldwide presence, etc, etc) will be very strong and the only viable way to successfully attack will be hugely expensive and will carry a massive poison pill. (After all, the blockchain has hydra-like qualities)

Bitcoin does not have the USG blessing, it's just that they are always sooo slow to act. The genius behind Bitcoin is that it is not worth attacking when it is small and vulnerable, and it is extremely resilient once it becomes big enough.

[giszmo]

The fact that US government could crush bitcoin in no time and the fact that they did not do it despite the fact that it clearly made it onto just about every agency's agenda is proof enough for me that Bitcoin already has the blessing of the US government.

(If you doubt that Bitcoin can still be destroyed, please put into relation the $250,000 economy to the $50,000,000,000 printed every month and what a tiny fraction it would take to pay 1000 smart guys to hack every garage shop bitcoin business, buy 20PH/s ASICS, launch child porn portals operating with bitcoin, etc. The window to shut Bitcoin down will not close until the Bitcoin market value is some orders of magnitude higher.)

Right now that Bitcoin is a relative unkown, with < 1 Mn users, an attack would probably help (with publicity) more than hurt.

Once Bitcoin reaches critical mass (1-5 million users and 2Bn mkt cap) the defense mechanisms (legal, network size and redundancy, number of exchanges and worldwide presence, etc, etc) will be very strong and the only viable way to successfully attack will be hugely expensive and will carry a massive poison pill. (After all, the blockchain has hydra-like qualities)

Bitcoin does not have the USG blessing, it's just that they are always sooo slow to act. The genius behind Bitcoin is that it is not worth attacking when it is small and vulnerable, and it is extremely resilient once it becomes big enough.

I wish you were right but I highly doubt it. For 100 million dollars you can build more ASICS than it takes for a 50% attack. For another 100 million dollars you can create 500 fake bitcoin businesses that scam the hell out of its users. With another 100 million dollars you can pay 1000 hackers for one year to make the bitcoin experience as painful as possible to those that run legitimate bitcoin businesses. With another 100 million dollars you can run a dirt campaign about child porn, drugs and head hunters that are all fueled by bitcoin and if that is not enough, attach one or two 0s to above numbers. It doesn't hurt when you can print those dollars.

[Deafboy]

As matthewh3 said, we need to go dark. Because no matter what, some people will always take bitcoins (unless the fatal flaw in system is discovered) for exchange of something. IF the services and infrastructure is created and secured before SHTF, we have a huge advantage. If not, USD price of BTC will fall near zero for sure, but will recover after some time on black market.

you can pay 1000 hackers for one year to make the bitcoin experience as painful as possible

Yeah... and not a single one of them is going to leak anything.

[John (John K.)]

Bitcoin does not only exist in USA. A ban by the US government would at best hamper Bitcoin, or at least do nothing.

[imanikin]

My prediction remains that if and when the banks and gov's go against B, they will buy out or "nationalize" >51% of the largest pools and miners.

That way they can change the fundamental rules and turn B into a p2p FedPal.

They may not want to completely destroy it for the same reason they let Tor go from the gov use into the wild, knowing what the masses could do with it. B will be useful to the gov's for clandestine ops the same way Tor is. 

[matthewh3]

As matthewh3 said, we need to go dark. Because no matter what, some people will always take bitcoins (unless the fatal flaw in system is discovered) for exchange of something. IF the services and infrastructure is created and secured before SHTF, we have a huge advantage. If not, USD price of BTC will fall near zero for sure, but will recover after some time on black market.

you can pay 1000 hackers for one year to make the bitcoin experience as painful as possible

Yeah... and not a single one of them is going to leak anything.

There is a I2p bitcoin app/fork being developed - http://www.reddit.com/r/Bitcoin/comments/18684y/bitcoin_has_a_i2p_darknetdeepnet_port_proxy/ - there is also a large bounty for its development.

[notig]

Bitcoin could be killed with the terrorist card. The terrorist card essentially allows a government to do anything it wants. If the government simply said "you are a terrorist or you are aiding and abetting them if you use bitcoin" then not many people would use it. There was just some news article about how the president can kill any american citizen with a drone attack if they think you are a terrorist or something. We are in a neverending war because governments used terrorism. It plays off the psychological fears of people and empowers governments. It's their perfect ally.

[imanikin]

There is a I2p bitcoin app/fork being developed - http://www.reddit.com/r/Bitcoin/comments/18684y/bitcoin_has_a_i2p_darknetdeepnet_port_proxy/ - there is also a large bounty for its development.

I haven't tried it yet, but if i understand right, our guys already have this going on:
https://bitcointalk.org/index.php?topic=138588.new;boardseen#new

[Roger_Murdock]

My prediction remains that if and when the banks and gov's go against B, they will buy out or "nationalize" >51% of the largest pools and miners.

That way they can change the fundamental rules and turn B into a p2p FedPal.

Bitcoin is a consensus-based system NOT a democracy. If you acquire 51% hashing power, that gives you a lot of power, but contrary to what some people seem to think, it doesn't give you unlimited power. If you attempt to "change the fundamental rules," you won't end up with 51% control of Bitcoin. You'll end up with 100% control of FedPal. In that scenario, I'll stick with Bitcoin.

[matthewh3]

There is a I2p bitcoin app/fork being developed - http://www.reddit.com/r/Bitcoin/comments/18684y/bitcoin_has_a_i2p_darknetdeepnet_port_proxy/ - there is also a large bounty for its development.

I haven't tried it yet, but if i understand right, our guys already have this going on:
https://bitcointalk.org/index.php?topic=138588.new;boardseen#new

Very cool but Chrome translator is not the best.

[imanikin]

...If you attempt to "change the fundamental rules," you won't end up with 51% control of Bitcoin. You'll end up with 100% control of FedPal. In that scenario, I'll stick with Bitcoin.

Agreed, but who will constitute Bitcoin's mining and processing power, if the largest miners keep getting "nationalized"? And how many people besides you will stick with Bitcoin then?

[Anon136]

the centralized nature of exchanges is bitcoins greatest weakness at this point. If i am not mistaken however ripple will provide us with a decentralized exchange mechanism. If this is the case and this feature is infact implemented in ripple than it could make the whole argument put forward in this blog moot.

[21after2]

The genius behind Bitcoin is that it is not worth attacking when it is small and vulnerable, and it is extremely resilient once it becomes big enough.

Excellent summary of what I feel is the US government's current stance on Bitcoin. In the US, at least, Bitcoin is not big enough of a "problem" for them to waste time and resources on. My hope is that Bitcoin will have shed most of the misconception surrounding its use by the time that it does become big enough for them to deal with. Maybe it'll see acceptance instead of condemnation. Or, at the least, apathy on their part.

[kiba]

Bitcoin will die when we become so rich that we don't need money anymore! Instead, bitcoin will be a retired technology.

[kiba]

The genius behind Bitcoin is that it is not worth attacking when it is small and vulnerable, and it is extremely resilient once it becomes big enough.

Excellent summary of what I feel is the US government's current stance on Bitcoin. In the US, at least, Bitcoin is not big enough of a "problem" for them to waste time and resources on. My hope is that Bitcoin will have shed most of the misconception surrounding its use by the time that it does become big enough for them to deal with. Maybe it'll see acceptance instead of condemnation. Or, at the least, apathy on their part.

Do they even know it's there?! Maybe the CIA knows it, or a couple of senators know it...but everyone will be like "What's bitcoin?"

[21after2]

The genius behind Bitcoin is that it is not worth attacking when it is small and vulnerable, and it is extremely resilient once it becomes big enough.

Excellent summary of what I feel is the US government's current stance on Bitcoin. In the US, at least, Bitcoin is not big enough of a "problem" for them to waste time and resources on. My hope is that Bitcoin will have shed most of the misconception surrounding its use by the time that it does become big enough for them to deal with. Maybe it'll see acceptance instead of condemnation. Or, at the least, apathy on their part.

Do they even know it's there?! Maybe the CIA knows it, or a couple of senators know it...but everyone will be like "What's bitcoin?"

Didn't someone here on the forums post an FBI file containing a general Bitcoin analysis? At any rate, your post is kind of what I mean: most people in the government don't have a clue what it is and the few who do probably don't think of it as a threat right now.