Government Attack Strategy

[db8393]

 I keep thinking it might be in the best interest of some large Central Bankers to try and destabilize bitcoin currency.


For example, the  bank starts printing lots of money and trading it for Bitcoins.  On the short term people trust the central bank currency and happily trade away their Bitcoins.  Then the bank destroys large volumes of bitcoins.  If people depended on stable currency (little deflation or inflation) wouldnt a valid attack be deflation? 

If this is a valid attack what happens in the source code to stabilize the currency in this situation?

I guess wild fluctuations in bitcoin price would cause crazy tulip bubbles right? You might have people getting a second mortgages to buy ATI video cards etc.    Or all of a sudden you are rich and others are poor and mad due to bad timing of a trade.

[ribuck]

If this is a valid attack what happens in the source code to stabilize the currency in this situation?

The source code does nothing about this!

If someone sells their bitcoins to the central bank because they prefer fiat currency to bitcoins, it's not my problem. And if the bank destroys those bitcoins, it's also not a problem for me.

Bitcoin is not for those who have drunk the "deflation is evil" Kool-Aid.

[db8393]

Doesnt it become a problem if you have trouble getting any coins because large central banks are buying them up?  Then yes, miners get rich.  But people cant use the currency.

If you cant get your hands on Bitcoins because Central banks are throwing them away, how do you use it?

[db8393]

Yeah, I guess I was thinking that wild fluctuations in Bitcoin value would mess everybody up.  But I think I am over thinking things.  It would probably cause more people to get in on the wild rise in value of bitcoins.   

I will put away the deflation kool-aid also.

[ribuck]

If you cant get your hands on Bitcoins because Central banks are throwing them away...

If a central bank did start destroying bitcoins, you wouldn't need to get your hands on so many bitcoins (to get the same spending power).

If a central bank or other organization wants to harm bitcoin, they will need to do it in ways other than by market forces. For example, by spreading a virus that steals people's wallets.

[marcus_of_augustus]

For example, by spreading a virus that steals people's wallets.

Tolsi is a virus from a central bank plot?

[Nefario]

This is one of the last things the authorites would do to stop bitcoin. Banning the protocol and bootstrap servers, while at the same time shutting down all the exchanges and arresting all the exchange operators would be much more effective.

That would cut down bitcoin usage to a fraction of it's normal level.

[myrkul]

Enforcing a port-block would trip things up for at least a day, until we organized a change of ports, during which time they could finalize the rest of the protocol ban, and do some door-kicking. that would probably hurt things a lot until it got set back up as a .onion service or on i2p. Even then, that's another barrier to entry, which would reduce the amount of "casual" users of bitcoins, and probably kill it's chances of mainstream support.

On the other hand, drug dealers, gun-runners, and other people who'd rather not attract the attention of governments would flock to bitcoin in even larger numbers, and bitcoin would then become the official currency of the black market. It's value (well, cost, due to the risk involved) in local currencies would skyrocket, allowing even those with a few coins to make a killing on their way out of bitcoin, freeing up more coins to run the underground trade. Bitcoin banking and exchange would become a very lucrative trade, for those willing to take the risk, and there always are, no matter the risk, some willing to take it, if the price is high enough.

So, in conclusion, the WORST thing they could do (from their point of view) is make it illegal and try to squash it. Either way, I think B-T-C spells doom for fiat currencies. It's just a matter of how fast and how rough the ride is.

[Nefario]

The convienience thing could be taken care of by distributing the client with i2p or tor, kind of like the tor bundle, which is really great. So yeah, unless that became a kind of default MO for bitcoun client such a thing would hurt, a lot.

So we really dont need to worry about them trying to disrupt our market with swings, thry'll be kicking down doors long before then.