The idea of your bitcoin decisions being approved by your ISP is disturbing.
The idea that Bitcoin depends on
ISPs centrally controlled entities is much more disturbing.
Can an ISP decrypt an encoded packet transferring bitcoin or related info ? Cant we just add a level of encryption in our clients (if it is not already there) and bypass the chance of their snooping ?
They cannot decrypt it, but they can prevent it's transmission.
Yes, but only if they can notice it. As Adam Back says (in a different context) 'at the margins, steganography wins.'
The trouble is that while onion routing and such decreases the payload by a factor of in the single digits, steganography will do so at a much higher factor. For this reason I don't give two shits about what the theoretical capacity of a consumer-grade network connection might be for the purposes of supporting a distributed crypto-currency.
I do expect that at some point within my lifetime (which corresponds to how long I want my BTC stash to be usable) it will be policy to block any crypto which does not include a government accessible back-door. It's only due to the monumental efforts of the cypherpunk folks back in the 90's that we don't live under such a world today as I read things.
