I don't like the idea of governments holding millions of Bitcoins.

[d5000]

Note that users don't have to follow the latest version, because of that.

If the change is a potential fork, then users have to follow or they will fork away to another chain, which will in this case be considered an "altcoin" by the governments, and all coins they own on this chain will be sold (they could even cite legal justifications, i.e. that by law they are only allowed to hold "FATF-compliant" coins).
I wrote already that my (layman) idea such a thing could be implemented is like checkpoints were handled. If a miner finds a block containing a transaction from or to a sanctioned address, it will then be simply invalid by the standard Core client protocol.

People can of course use the original protocol but then they will trigger the fork from this block on.

It is more likely to see some evil soft-fork being accepted, than any hard-fork.

In my last post I wrote that such a change would be probably possible as a soft fork, because it's a "tightening of rules". I think however this doesn't change the logic behind this attack scenario.

It's still an unlikely scenario but not completely impossible. I think if countries implement BTC as reserve on a large scale then the probability could be as high as 5%.

Then go on, just sell it. For a successful transaction, you need two sides: the seller, and the buyer. People will simply dump their govBTC for real BTC, just like they did in 2017,

If Bitcoin manages, even with state intervention, to hold up censorship resistance as a core value and most users/holders really are conscient about that, then your scenario is possible. This was also my argument in a similar thread about an "evil ETF fork".

The problem is that states holding millions could scare much more with such a threat than ETFs holding the same amount, because ETFs always have to take into account their customers, which could run to a competitor if they believe an ETF investment company behaves in a wrong way.

States instead could say: "ok, the FATF is forcing us to sell our Bitcoins on the non-compliant chain, because otherwise we will be added to the gray list", and dump everything very fast.

I said already that I don't believe that ("the real") Bitcoin would die in such an event, but it could lose a lot of trust and value, and in an extreme case this could be used e.g. for 51% attacks, amplifying volatility and pushing back Bitcoin potentially by decades.

@stompix: Ok, I was guiding myself by the population and not GDP (and with that in mind the current $5-6k holdings would correspond more to something like 300k BTC for the US). But of course GDP is also a valid indicator for such a calculation. And even by population we would come into regions like 6 million BTC if every state followed El Salvador's strategy. You then may be right, El Salvador's holdings are already quite large.

[Z-tight]

OFAC already does that. They have a list of "sanctioned" addresses that they are forcing the American miners to "censor".

And are the mining pools blacklisting these sanctioned addresses? I don't think so. The last time i read about a mining pool filtering addresses and their tx's on the grounds of OFAC sanctions was last year, and it was F2pool. Though if i remember correctly, they backtracked on that decision, whenever miners start sanctioning addresses, that could spell trouble for the BTC network.

OFAC is Office of Foreign Assets Control, an agency of the U.S. Treasury Department. F2Pool is a Chinese mining pool in Beijing, China. The pools they enforce OFAC nonsense on are mainly the American miners and mining pools like the MARA pool which is probably what you had in mind.

I do know what OFAC is, and i also know that F2Pool is a mining pool based in Beijing, China. However, i said what i said based on this topic^[1] which i read in the forum many months ago about F2Pool filtering tx's based on OFAC sanctions, even when they are not a mining pool based in the U.S.

[1] https://bitcointalk.org/index.php?topic=5475157.0

[nakamura12]

If government will start buying bitcoin and hold it then it will only make bitcoin's price increase more so if they don't want the price to increase too much so that acquiring more bitcoin will cost more and more money so they should sell the bitcoin that they seized. I'd say the same thing as the others about not liking about the government owning a lot of bitcoin either by being bought or being seized from platforms.

[tread93]

Some Bitcoiners seem to be enthusiastic about plans by politicians to buy or hold big amounts of Bitcoin as part of a "strategic reserve". In particular, Kennedy's announcement that in the (extremely unlikely) case he wins the US election he could buy up to four million Bitcoins as a strategic reserve.

I don't like this idea for the following reason:

States holding such a big amount could interfere too much into Bitcoin's power equilibrium.

Let's see the following hypothetical scenario:

- The US buys 1-2 million BTC, other states/central banks like the ECB, China and India follow, and together they hold let's say 5-7 million (about 25%-35% of all existing Bitcoins).
- Now the FATF sets up a new "recommendation" that a blacklist for "sanctioned" Bitcoin addresses (like those already implemented in Tether and other stablecoins) would be desirable.
- As almost all states obey the FATF's guidelines, together they pressure Bitcoin Core team to implement a blacklist for "sanctioned" Bitcoin addresses which miners have to obey, or alternatively build an own Bitcoin client with a modified protocol.
- This would of course need a hard fork. But they have a lot of coins, so they can increase pressure by threatening to sell all Bitcoins on the chain which does not follow the hard fork. This has a precedent: it's what Ethereum did when they pressured for the hard fork rewinding the TheDAO hack in 2016.

A similar scenario was already discussed for ETFs. But ETFs would never hold so many coins as some are desiring for states/governments to hold, and also their customers could react, so for ETFs I don't see this danger. Up to 1 million, even 2 millions of BTC hold be states/governments/central banks would still not be something to be worried about. But if all bigger states try to buy millions, then it could become really dangerous.

I don't think Bitcoin would "die" in such a scenario, but I think it could lose a lot of value and confidence. And the scenario is not that unlikely to be ignored.

What do you think? I added a poll also with an intermediate scenario like the one announced by Trump, which would lead to a couple of hundred thousands of BTC hold by states, but not millions.

Well, you are seeing this from one angle and failing to see it from another angle, the dangers you talked about are there just as you have described it, but did you even bother a bit to ask yourself, what it will take to buy up to 2 million or more bitcoin from the open market? Even buying 50,000 bitcoin can drive the price of bitcoin up high to the roof, not to talk of buying up to 1 or 2 million bitcoins, buying up to this mentioned about of bitcoin, I can tell you will drive the price of bitcoin to nothing less than a million Dollar, now think about what will happen when one have to spend up to a million dollars just to own 1 bitcoin, and you need like 1 million bitcoins, and remember the more you buying, the more expensive it gets.

This is why I think it's not really all that easy for any individual or governments to own up to 2 million bitcoins without them emptying their reserve or treasury.

I think it would definitely be an uphill battle to get this done, I can definitely see the government buying a lot of bitcoin but 1 million coins? Thats a lot! Maybe a couple hundred thousand I can see them buying in the start and adding more gradually but i'm not sure if they would just do one huge purchase all at once. It surely will be interesting to see what happens.

[vapourminer]

governments are as free to buy/sell/mine all the btc they want, just like any other entity. and they always have been.

its a feature, not a bug. so why worry now?

[DooMAD]

its a feature, not a bug. so why worry now?

Because US politics are fucking terrifying   

[legiteum]

Live by the sword, die by the sword.

Asking US taxpayers to help pump the price of Bitcoin means that US taxpayers are going to want something for their money.

It means that now Bitcoin is political, and thus its fate will be decided not among technical people and informed investors, but among pundits, politicians, and ordinary people who don't know anything about Bitcoin.

The billionaire Bitcoin whales that have made 2024 a "Bitcoin election" are the beginning of the end for Bitcoin. Before, most Americans didn't much care what Bitcoin did or didn't do because it didn't affect them.

Now it's a political football, and there are billions of dollars in taxpayer money at stake.

Perhaps the Republicans are going to use Bitcoin to fund political corruption, funneling billions of dollars to their top donors in exchange for Trump not tanking the price of Bitcoin by selling off the reserve.

Or perhaps the Republicans will simply ban Bitcoin because it can be used to pay for all of the abortions they are going to make illegal.

Or Democrats may well respond to Republican corruption with blanket bans on Bitcoin and other cryptos, basically ending all of this.

The people in the Bitcoin community begging the US government for special favors (aka "Bitcoin reserve" and "legal tender status") are short-sighed and foolish, and will ruin the market for all of us.

[Smack That Ace]

In fact, those who love bitcoin not only for the profits it brings but also for its decentralized nature are aware of the harmful effects of governments or organizations participating in buying and holding bitcoin. But as we know and have stated, bitcoin is for everyone, so we have no reason to complain or prevent governments and institutions from holding bitcoin.

I believe most don't like this but the truth is we can do nothing but adapt and should only look at the more positive aspects. Since worrying won't solve the problem, why should we worry?

[BlackHatCoiner]

The people in the Bitcoin community begging the US government for special favors (aka "Bitcoin reserve" and "legal tender status") are short-sighed and foolish, and will ruin the market for all of us.

If these markets are so fragile and dependent on an election, then the sooner they collapse, the better. But they aren't. The whole point of cryptocurrencies like Bitcoin is that they cannot be corrupted. You can keep spreading FUD all you want, but the network won't budge. Bitcoin has been banned before, it is currently banned in some places, and it will likely be banned again in the future. Yet, it remains stronger than ever.

Tick-tack, next block.

Code:

$ bitcoin-cli getblockchaininfo
{
  "chain": "main",
  "blocks": 855106,
  "headers": 855106,
  "bestblockhash": "000000000000000000021b74304eb3b7d90a6202a17c954186c6cafeb1139408",
  "difficulty": 90666502495565.78,
  "time": 1722614622,
  "mediantime": 1722611999,
  "verificationprogress": 0.9999976618200123,
  "initialblockdownload": false,
  "chainwork": "000000000000000000000000000000000000000086ccbea14ab24add3830a6d2",
  "size_on_disk": 671063798737,
  "pruned": false,
  "warnings": ""
}

[legiteum]

The people in the Bitcoin community begging the US government for special favors (aka "Bitcoin reserve" and "legal tender status") are short-sighed and foolish, and will ruin the market for all of us.

If these markets are so fragile and dependent on an election, then the sooner they collapse, the better. But they aren't. The whole point of cryptocurrencies like Bitcoin is that they cannot be corrupted. You can keep spreading FUD all you want, but the network won't budge. Bitcoin has been banned before, it is currently banned in some places, and it will likely be banned again in the future. Yet, it remains stronger than ever.

Nobody will care if "the blockchain can't be corrupted" if the price retreats to $1000 because Trump outlaws it in the US favor of his own coin.

Indeed, I suspect what you mean by "stronger than ever" is that the price of Bitcoin is near its all-time high. That's certainly how almost anybody reading what you wrote would interpret it. But if Bitcoin dropped by 90% tomorrow, would you still say it is "stronger than ever"? Maybe you and a few hard-cores (who obviously don't have any significant portion of their wealth connected to Bitcoin) might say so, but almost nobody would agree with you.

Bitcoin's is not a good way to avoid the government (use Monera et. al. for that) and it is not a good way to transact in a mainstream way (use a credit card for that) and it is not a way to transact quickly, cheaply and privately (use Haypenny currencies for that).

Bitcoin's only actual unique value, monetarily, is it's price. In other words, people will pay a lot of money for Bitcoin only because they think they will get a return on investment.

And since almost all holders of Bitcoin only care about the price, it means that any entity who controls the price, e.g. the US government, effectively controls the Bitcoin community.

Put it another way, if Trump were elected and said, "give me control of the Bitcoin network or I'll crush the price of Bitcoin using the full power of the US government" then... almost all holders of Bitcoin would agree to his demands.

This is why it's foolish to drag the government into Bitcoin, and today's billionaire Bitcoin whales are doing.

[BlackHatCoiner]

And I'm telling you, these "price crushes" have happened before too. Sometimes, it was China, being China. Then, India prohibited banks from providing services to crypto-exchanges. Then, Turkey, same thing. Then, Russia entered the chat. The US government has impacted the price as well, just not by banning it.

Countless of times the governments around the world have impacted the price. Recently, Germany sold 50,000 bitcoin and sent the price to $55k. Now, we're back at where we were before. You cannot stop the inevitable. If the US government buys 4M bitcoin, the price will, without doubt, skyrocket. If they ever threaten the Bitcoin holders that they'll "dump their bags", then that's after all these unreal gains.

[legiteum]

Countless of times the governments around the world have impacted the price. Recently, Germany sold 50,000 bitcoin and sent the price to $55k. Now, we're back at where we were before. You cannot stop the inevitable. If the US government buys 4M bitcoin, the price will, without doubt, skyrocket. If they ever threaten the Bitcoin holders that they'll "dump their bags", then that's after all these unreal gains.

But that paragraph itself is self-contradictory. You start by saying governments can effect the price of Bitcoin, but then say governments cannot effect the price of Bitcoin. Which is it?

And are you really trying to say that if Trump banned Bitcoin and replaced it with his own coin, and enforced that with the full power of the US government, that... wouldn't effect the price of Bitcoin? Are you serious?

For what it's worth, I really do wish most Bitcoin holders--especially the big ones with billions to donate to politicians--thought the same way you think. But they clearly don't, which is why millions of dollars of "pro-Bitcoin" lobbying is going on this election cycle.

[m2017]

Some Bitcoiners seem to be enthusiastic about plans by politicians to buy or hold big amounts of Bitcoin as part of a "strategic reserve".

Bitcoiners have long dreamed of large institutional investors "entering" the cryptoindustry. And now it has happened.

In particular, Kennedy's announcement that in the (extremely unlikely) case he wins the US election he could buy up to four million Bitcoins as a strategic reserve.

This is 19% of all bitcoins in the world (actually, even more due to lost btc) or 1/5. This is an extremely impressive number.

I don't like this idea for the following reason:

States holding such a big amount could interfere too much into Bitcoin's power equilibrium.

The more people that bitcoin is distributed among, the better it will be for the BTC-community. Concentrating a large amount of btc in the hands of governments as a reserve will effectively take a huge portion of bitcoin out of circulation.

Let's see the following hypothetical scenario:

- The US buys 1-2 million BTC, other states/central banks like the ECB, China and India follow, and together they hold let's say 5-7 million (about 25%-35% of all existing Bitcoins).

The US actions will cause a "chain reaction" and almost all countries will follow their example. This will certainly cause an explosive growth in the price of bitcoin, but it will no longer be possible to talk about any financial freedom with the help of btc.

- Now the FATF sets up a new "recommendation" that a blacklist for "sanctioned" Bitcoin addresses (like those already implemented in Tether and other stablecoins) would be desirable.

Yes, it may turn out that btc addresses (except government ones) will become "marked" and no one will want to interact with them.

- As almost all states obey the FATF's guidelines, together they pressure Bitcoin Core team to implement a blacklist for "sanctioned" Bitcoin addresses which miners have to obey, or alternatively build an own Bitcoin client with a modified protocol.

The arrival of government investors will certainly create pressure on the developers of bitcoin, because their money will end up in the BTC-system, the security of which they will want to control.

- This would of course need a hard fork. But they have a lot of coins, so they can increase pressure by threatening to sell all Bitcoins on the chain which does not follow the hard fork. This has a precedent: it's what Ethereum did when they pressured for the hard fork rewinding the TheDAO hack in 2016.

Or an alternative: additional emission of bitcoin bitcoin's fork. I won't guess how, but governments have motives to influence the development of bitcoin.

I don't think Bitcoin would "die" in such a scenario, but I think it could lose a lot of value and confidence. And the scenario is not that unlikely to be ignored.

But bitcoin can change in such a way that we ourselves will not want to interact with this asset in any way.

[Woodie]

One positive from this is the government will need to pump in money into BTC which means price will go up and as a shareholder they would want the best for their investment, but playing Villian with their blacklist requests would be bad idea for them especially that it's taxpayers money at play...

But reading the OP and adding some imagination to the scenario makes this government crypto interest a scary situation and it's very much possible for them to want to be in the driver's seat to be able to blacklist/freeze users funds for persons of interest and this is not the financial freedom we subscribed to...

[BlackHatCoiner]

But that paragraph itself is self-contradictory.

Then, you completely missed my point. I never said the governments cannot influence the price. What I said is that you cannot stop the inevitable. Bitcoin has been attacked so many times already, which is even funny to claim that a government can "crush Bitcoin".

What I also said is that, just as it can influence it negatively, it can influence it positively. For instance, if the US buys 4 million Bitcoin and then sells them all with the intention of "crushing" the market, we would simply end up back where we started.

As for "Trump coin", lol. That's definitely going to happen. It didn't happen last time, because... he was busy pumping Bitcoin?

[dezoel]

Finally, someone raised this topic; it's something I had been thinking about as well, especially after Trump's statements regarding cryptocurrencies. The OP's concern is valid; the hypothetical scenario being discussed is a plausible one. Governments have the ability to acquire significant amounts of bitcoin, which raises valid concerns about the decentralization of cryptocurrencies. Bitcoin's nature is decentralized; that's true, but how decentralized can we claim it is after 20% to 30% of Bitcoin is under government ownership? What would happen in the scenario of blacklisted addresses?

Unfortunately, from how I see things, it's a plausible scenario that we might face in the upcoming future.

We just need to consider the fact that the more they buy the more price goes up, meaning that they can't keep on buying it forever, it won't work that way and it wouldn't benefit them at all. We need to just consider how they would have to spend a lot more money than they normally would like if they were some normal citizen.

Even Elon Musk, who just has 300 billion NETWORTH, not even money, dude had to take out 40 billion loan from others to get twitter, and he managed to make bitcoin go into a big bull run, and this dude is just some rich person with no money, his words made that possible. Imagine what if US government decides to buy, they spend four times on military alone than what Elon musk worths, these are all liquid cash, they can spend a trillion on it if they want to, would be stupid but they are capable that's the point, nobody else is capable of that.

This is why if they want to buy, the price would go up even from just the news of it alone, and they would have to pay a huge amount just to get it. I think it won't happen, but if it ever happens, I think I like the idea of it, because holding 1+ million bitcoin would be near impossible, or would make us go to 500k+ per bitcoin very quickly.

[legiteum]

But that paragraph itself is self-contradictory.

Then, you completely missed my point. I never said the governments cannot influence the price. What I said is that you cannot stop the inevitable. Bitcoin has been attacked so many times already, which is even funny to claim that a government can "crush Bitcoin".

So you are saying that no matter what the US does, no matter what laws they pass here, no matter what alternative they force on their citizens--and through foreign policy, on the citizens of most of the developed world--you are saying that no matter what... the price of Bitcoin will go up. Forever. Inevitably.

Okay. Good luck with that. I remember, back in the day, when people told me that Microsoft's dominance of the computer market will never ever be broken. Before that, way way back in the day, they told that IBMs' dominance would never be broken. Ever ever, they said. Impossible, they said.

I guess what I'm saying is, that when you get to be an old grizzled tech guy like me, you... see a lot of things come and go over the years...

As for Trump, you will note that Bitcoin is, in this election, for the fist time, a political football that can be milked by politicians for billons of dollars in grift. That wasn't the case in 2016. Introducing Bitcoin to Trump, like the billionaire Bitcoin whales have done this election cycle, may well prove to be quite a fateful decision on their part. Like introducing bootlegging to the Mafia...

This is why if they want to buy, the price would go up even from just the news of it alone, and they would have to pay a huge amount just to get it. I think it won't happen, but if it ever happens, I think I like the idea of it, because holding 1+ million bitcoin would be near impossible, or would make us go to 500k+ per bitcoin very quickly.

Basically what you are saying is that the US would not need to buy very much Bitcoin in order to effectively take control of the market. I agree, and its important to emphasize that mere words from the US president could send the price of Bitcoin crashing--without them needing to buy a single coin.

Since Bitcoin has no inherent unique practical value, it's entire price is based around it's perception of continued price appreciation. If that perception vanishes, then so does its price.

[BlackHatCoiner]

So you are saying that no matter what the US does, no matter what laws they pass here, no matter what alternative they force on their citizens--and through foreign policy, on the citizens of most of the developed world--you are saying that no matter what... the price of Bitcoin will go up. Forever. Inevitably.

"Forever" is a very long time. But, for a few thousand years perhaps, that's pretty much it, yes. Unless an entity launches a successful attack to the protocol.

Is it too optimistic? Maybe. But, then again, what's gold doing in the last few centuries?

[yhiaali3]

In fact, this may be one of Trump's most important plans if he wins the presidency. He has explicitly stated that he wants to make the United States "the Bitcoin superpower in the world", by buying more and more Bitcoin and not selling confiscated Bitcoin, in addition to American mining all remaining Bitcoins, as he stated before.

Although everyone cheered for this statements, I see it as not good at all and contains hidden intentions of control and centralization.

[BITCOIN4X]

The government seems to have a hidden mission regarding its efforts to hold thousands to hundreds of thousands of bitcoin. Of course, that much bitcoin could have a negative impact if it were sold simultaneously and as a result the price of bitcoin would actually fall. Governments can test market forces when they have hundreds of thousands of bitcoins in their hands, so perhaps that's their goal for bitcoin users to lose confidence in bitcoin over time.

I have seen how the German government is completely unconcerned with the impact of their massive sales of confiscated bitcoins. That could happen again in the future if there are a lot of bitcoins held by any government. Other centralized entities could also have a negative impact on the market if they have a lot of bitcoin, but might some limits be in place?