Why Gary North Is Wrong About Bitcoin

gary north bitcoinI like Gary North. I appreciate his work and I spent a very pleasant hour hanging out with him at FreedomFest a few years back. We have mutual friends. I saw the headline for his anti-Bitcoin article but didn’t take time to read it until we got several emails asking about it.

So, with respect that is due, here’s why Gary is wrong, point by point:

Ponzi Economics

I’ll quote Gary in italics, then respond in a plain font. The section titles are his.

… someone who no one has ever heard of before announces that he has discovered a way to make money. In the case of Bitcoins [sic], the claim is literal.

First, whether we’ve heard of him or not is meaningless, and here Gary sets a negative, suspicious tone.

Second, Satoshi didn’t say he could “make money,” he created a program that would verify cryptocurrency. That’s not really the same.

He made this money out of digits. He made it out of nothing. Think “Federal Reserve wanna-be.”

Money out of digits isn’t true at all. Bitcoin is money made with cryptography – with mathematics. And as much as I like Gary’s preferred gold and silver, mathematics is eternal, built into the very nature of the universe. That’s hardly a soft foundation. Those who don’t understand mathematics may jump to the conclusion that Bitcoin is “unbacked,” but that position is simply ignorant.

Likewise, to call Bitcoin a Fed wannabe is opposite to the truth. Bitcoin is the Anti-Fed.

The individual who sells the Ponzi scheme makes money by siphoning off a large share of the money coming in… The money was siphoned off from the beginning. Somebody owned a good percentage of the original digits. Then, by telling his story, this individual created demand for all of the digits.

And Gary knows this how? (Suspicion is not a proof.) If fact, he can’t know it, and that’s one of the beauties of the currency – there are no names attached.

And how was the money “siphoned off”? Someone, we don’t know who, started mining bitcoins, a fairly difficult process. In other words, they worked to get it, just like people work to get gold out of the ground. Gold miners and early Bitcoin miners – in identical fashion – made big initial finds. Shall we despise and accuse them for it?

Lastly, Satoshi did NOT “tell his story” or “create demand.” Satoshi disappeared. Gary can guess that Satoshi is working under some other name now, but he has no way of knowing that.

The coins will never be the money of the future. This is my main argument.

“I know what will happen in the future” is very poor logic and is very far from compelling.

The Austrian Theory of Money’s Origins

Gary begins by quoting old definitions of money. There is nothing particularly wrong with those definitions, but are they supposed to negate progress for all time? To freeze the world in place? Should they make any new adaptation evil? I hardly think that was their intent.

Here is the central fact of money. Money is the product of the market process. It arises out of an unplanned, decentralized process. This takes time. It takes a lot of time. It spreads slowly, as new people discover it as a tool of production, because it increases the size of the market for all goods and services.

Bitcoin is nothing but the operation of market forces – there is zero coercion involved.

Bitcoin is utterly decentralized – there is no center at all.

Bitcoin is utterly unplanned – it involves a million people, all doing their own thing.

As for speed, the Bitcoin idea was created in the 1990s and has been implemented for almost five years. How slow is slow enough?

No one says, “I think I’ll invent a new form of money.”

Yes, they do! That’s precisely what the first person to use gold did!

Bitcoins Are Not Money

Admittedly, those who got in early on this Ponzi scheme are doing very well. They will probably continue to do well for a time.

Honestly, this reads like an appeal to envy.

As more people hear about this investment, which is justified in terms of its future potential as money, more people will buy it… [like] late investors in Charles Ponzi’s scheme thought they were buying into the arbitrage potential of foreign postage stamps.

I’m sure some people will think of Bitcoin as an investment (which it is not) or that it is an arbitrage vehicle (which it is not) and will do stupid things. Some people always do stupid things. So what?

I and many others have been saying that Bitcoin is a cryptocurrency, not an investment. We’ve also warned incessantly that it is new and has enemies. In a How to Use Bitcoin report we issued just last week, we said “This is not a place for the timid,” and, “There are no guarantees.”

Bitcoins are not an alternative currency. They are something you buy in the midst of a mania, and you will sell at some point in order to get back your money.

Here we see something sad and ironic: a man who hates the Fed, trying to ruin the one tool that can actually slay the Fed.

Bitcoin is not important because its price is rising – it’s important because it takes the control of money away from the cartel.

Concern with the dollar equivalent is a fetish, a distraction. The purpose of Bitcoin – the intent of Satoshi – is not to play price games, but to dis-empower the fiat cartel.

Just Say No

In order for Bitcoins [sic] to become an alternative currency, there will have to be millions of users of the currency.

Umm… there are, or at least soon will be. Everything new starts from zero.

They will have to develop in a market on their merit as money.

Perhaps Gary is unaware, but tens of thousands of people are using Bitcoin precisely because it is better money. Consider sending money to your cousin in Manila via a bank wire or Western Union; then compare that to sending Bitcoin.

What Goes Up, Comes Down

… the market will unravel. It will unravel for the same reason that all Ponzi schemes have unraveled: not enough new buyers. When the new buyers do not show up in great numbers, the holders will start to dump them.

There have been several “crashes” already, and the majority of Bitcoin holders sat firm – because they actually USE the currency and want to continue using it.

Furthermore, “buyers” is mostly a misnomer, applying only to the most ignorant Bitcoin holders.

This mania is going to be the stuff of best-selling books. This is going to be this stuff of Ph.D. dissertations in economics and psychology. This is going to be the equivalent of Mackay’s book, Extraordinary Popular Delusions and the Madness of Crowds.

Translation: “People will make fun of you!”

Conclusion

Anytime that anybody tries to sell you an investment, you have to look at it on this basis: “What are the future benefits that this investment will give final consumers?”

Again, Bitcoin is NOT an investment. And the benefit it gives is obvious: it’s better currency.

There is no economic justification of buying Bitcoins [sic] as an alternative currency.

A million of us have learned differently. All you have to do is try: Send a hundred dollars by Western Union, then send them by Bitcoin. Compare.

it was impossible as an economic concept from the beginning. The Austrian theory of money shows why.

I know Austrians who disagree.

I do not invest in capital that has no economic justification other than the greater fool theory.

So, Bitcoin users are “fools”? Hardly a charitable position to take.

My Conclusion

It’s a tragic thing: Precious metals people have been complaining about the Fed and the fiat currency cartel for decades. Then comes a tool that empowers them to both ruin the cartel and to free their precious metals… and they do their very best to destroy it.

I find the arguments in Gary’s piece to be misleading and wholly unconvincing, and I hope my reasoning is fairly clear.

But, all that said, take a look at both and make up your own mind.

Paul Rosenberg
FreemansPerspective.com

Here come the “Purity Police”

purity policeIf I happen to be near Jay’s bar on a Tuesday afternoon, I try to stop in. That’s when my friends from the cypherpunk days are likely to be there. We always had meetings in Jay’s back room at 6:30 on Tuesdays (though most of us got their earlier). We had Ethernet cables, good Internet connections (for the time), and a private place to talk.

Last Tuesday, I stopped by and sat at the bar to talk to Jay. I don’t actually drink very much, so I ordered my usual, a tonic and lime. Jay’s getting older and slower these days, but he’s still grumpy and kind-hearted at the same time. It’s an odd but endearing mix.

Anyway, as Jay and I discussed our families, I saw a guy from the old days walk in. And honestly, I rather dreaded seeing him. This guy, James, was all-complaint, all the time. After a while, I avoided him. He was smart and very well read, but he always talked about what other people were doing wrong.

But, it had been a lot of years, so I walked over and said hello. I soon found out that James hadn’t really changed.

Instead of running networks and living in an old, dark apartment, he was now working in a finance company and living in the suburbs. He had actually been married for a year or two, but that didn’t work out.

I offered my condolences on the marriage and tried to move toward happy subjects, but I got no farther than mentioning how excited I was about Bitcoin. Before I could start a second sentence, he was telling me about attacks that could be made on Bitcoin, flaws with the mining process and how Satoshi (the original architect) should have written the program.

“Yes,” I said, “a lot of that is true, but the Bitcoin economy includes ten thousand bright, young, motivated people – adaptive people – and that’s a very powerful thing.”

James wasn’t impressed. He went on to describe, in intricate detail, why the philosophy underlying Bitcoin wasn’t quite right. I was ready to write the guy off permanently and leave, when he excused himself and went to the bathroom.

Jay walked over. “The guy talks too much, eh?”

“Yeah, Jay, and always a long list of complaints.”

“Yeah, I see guys like him sometimes. All talk and no do.” James was returning and Jay moved away, wiping the bar. And then I realized what James had made himself: the purity police, a Soviet style political officer.

He could and would tell you where everyone else was missing it, but Jay was right – he was all talk and no do. The truth was, he didn’t have the courage to act. He never took any risks and never acted in the real, physical world.

James substituted talking for doing. And to prove himself potent, he painted himself as a righteous avenger. He appointed himself to the job of certifying who was technically correct, libertarian enough and rational enough.

So, rather than giving this guy a chance to point out everyone’s flaws, I started asking questions about his life: friends, family, and so on.

What I learned was tragic. This guy had alienated nearly everyone in his life, except his now-elderly mother. He was living alone, unhappy in his miserable but stable job. I stopped inquiring. The guy is a downer, but by bringing up the topics, I was causing him pain for no payoff. I said that I needed to go and headed out, waving at Jay as I went.

I thought about James all the way home. This guy had loads of talent. He could have done any number of things and had a rewarding life, but he never did. Instead, he spends his evenings on Internet chat boards, exposing every flaw he can find (or imagine) in other people’s work.

Honestly, I wish I had understood the problem when we were young – I could have pushed him to do things – small things first, then bigger things once he had built up some courage.

Being able to discern right and wrong is important but only as a precursor to action.

Acting changes us in crucial ways, and this guy never tasted that. Instead, he stagnated and became bitter.

Rather than gathering the courage to take a risk and act – for something good, for anything good – James became a political officer, the purity police. And he was ruined by it.

So pick your spot, my friends, and then act. Start small if you want, but break your inertia and take action.

I don’t even mind people acting wrongly at first, because once they’re actually doing something, their direction can be corrected. But the person who never breaks their inertia – who never stands up and acts – he or she degrades.

There is magic in doing. There’s none in endless talking.

Paul Rosenberg
FreemansPerspective.com

Is Bitcoin More Dangerous than “Cartel Money”?

bitcoin cartel moneyI’m going to use a couple of passages from the Bible (the original set of moral standards for our Western civilization), followed by an examination of both Bitcoin and cartel money, to see how they hold up in comparison.

As for my use of the term “cartel money,” it’s the best short description I know for the dollars, euros, yen (and so on) that we use in our daily commerce. They are produced by secretive and monopolistic groups of private banks. That rather precisely matches the definition of cartel.

Principle #1: For wherein you judge another, you condemn yourself; for you who judge practice the same things.

I think by now we have all heard the big accusation against Bitcoin – that it is used for “money laundering” – made especially by the money cartels (the European Central Bank first).

First off, that doesn’t make sense to me. A currency is supposed to be neutral – that is its purpose. So, accusing a currency of money laundering is like jailing a knife for murder. But, that’s not precisely the point we’re addressing here.

Rather, the question is: do the cartels do the same thing that they condemn?

You bet they do!

Read this story on HSBC. Then read this one on Wachovia. These banks laundered hundreds of billions of dollars – knowingly – for violent drug lords. And it gets worse: No one from either bank went to jail. Neither bank was shut down. Neither bank suffered more than a minor fine.

So, how much of a concern can money laundering really be to the cartels and their politician partners? Clearly none, or very close to none.

And, since the cartels accuse Bitcoin of being used for bad things, let’s be clear about the situation: Every mafioso on the planet uses cartel money. So do all the drug smugglers, terrorists, and pornographers.

Does Bitcoin accuse the money cartels? Nope. Bitcoin has no official operators to speak for it at all.

It is true that many Bitcoin users accuse the cartels of being manipulators, but, at least for now, there is no Bitcoin cartel that is even capable of manipulating the currency.

So, round one goes to Bitcoin: The cartels very clearly condemn themselves, and Bitcoin clearly does not.

Principle #2: Everyone who does evil hates the light, and does not come to the light, lest his deeds should be exposed. But he who does what is true comes to the light.

When Bitcoin creator Satoshi Nakamoto posted his Bitcoin paper in 2008, he laid everything open for all to see. Then he wrote the Bitcoin program and left it “open source,” so anyone could see the programming.

The process of creating cartel money, on the other hand, is mostly hidden, purposely confused, and isn’t even taught to most Econ majors. And if you think that’s just my opinion, here’s one from the esteemed economist John Kenneth Galbraith:

The study of money, above all other fields in economics, is one in which complexity is used to disguise truth or to evade truth, not to reveal it.

The argument is made, of course, that the process of creating dollars, etc. is very complicated, and that people don’t understand it because of that.

I don’t think that’s true, but even so, let’s compare it to Bitcoin: Making bitcoins is also complex, but Bitcoin enthusiasts have been working night and day to explain their new currency and how it works. I’ve seen them cornering people at birthday parties, trying to make them understand.

Round two goes to Bitcoin also. Bitcoin wants to be seen and known, and the cartels surely do not.

It all comes down to the reason “why.”

Satoshi Nakamoto began the original Bitcoin document by saying that he wanted to, “allow online payments to be sent directly from one party to another without going through a financial institution.” He goes on to say that he was creating,

an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party.

In other words, Satoshi wanted to remove the necessity of one man ruling another in the area of money. Furthermore, he did it, then went away.

As for the motives of the cartel, we can’t really tell. The visible heads of the Federal Reserve are certainly not the owners of the Federal Reserve, and the US government refuses to reveal the names of the owners.

Perhaps the closest real examination of their motives comes from a renowned professor who worked for them for a few years. Professor Carroll Quigley of Georgetown – and a major influence on none other than Bill Clinton, wrote this in his book Tragedy & Hope:

The powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent private meetings and conferences. The apex of the system was to be the Bank for International Settlements in Basle, Switzerland, a private bank owned and controlled by the world’s central banks which were themselves private corporations. Each central bank… sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent rewards in the business world.

So, was Quigley right? I have no solid proof that he is, but he would be an awfully hard witness to impeach. One substantiation that comes to mind is a recent comment by Illinois Senator Dick Durbin. In the midst of a political fight, he complained, “The banks own the Senate.”

That’s not really proof either, but it is interesting.

You can make up your own mind on the banks, but Satoshi’s motives are fairly well beyond question.

I think it is clear that from a moral standpoint, Bitcoin is far, far better than cartel money. (As are silver and gold.)

So, the next time you hear someone calling Bitcoin dangerous and evil, don’t let them get away with it!

Paul Rosenberg
FreemansPerspective.com

Silk Road Died, Bitcoin Crashed. So why am I so happy?

silk roadYou may have heard that Silk Road – the truly free online market – was taken down today, by the FBI. In response, the price of Bitcoin crashed 24%.

Yet here I am – just a few hours later, feeling very optimistic. Why? Because the philosophy of freedom just showed itself to be massively stronger than statism and its “don’t think, just obey” philosophy.

Here’s What Happened

As I was finishing my lunch, I saw a story posted on the takedown/crash. I did a bit of checking and conversed with a friend, and then hustled over to a place I know where crypto-anarchists hang out online.

These guys were already talking about replacing Silk Road, and doing a better job of it.

Forget about the drugs aspect of this – I don’t care for drugs and neither do the people I listened in on – they just want to build free markets.

Contrast that to a financial site, where I found a couple of Bitcoin haters, a Fed trying to supercharge as much fear as he/she could, and several people trying to buy Bitcoin at its lows, or lamenting that they were out of extra cash to buy right away.

But here’s the interesting part: In the face of an orchestrated attack (and you can be sure that the Feds arranged the day’s events for maximum fear – that’s what they do), even these people, within minutes, were walking forward, not backward.

A Better Philosophy Wins Out

Arguably, the greatest triumph of a new philosophy has to be that of the early Christians (of the 1st, 2nd and 3rd centuries AD), they simply would not be stopped, no matter what was thrown at them.

And why wouldn’t they turn back? Because the Roman way was ridiculous and barbaric. Their gods were vile, vain, sometimes stupid and often cruel. Who wants to worship that? These Christians – whatever their faults or virtues – had found a God who loved them, who wished to help and enlighten them, who said they were meant to be free and prosperous.

Which way would you choose?

The Romans persecuted them and sometimes killed them, but they would not be turned around. These people chose the better philosophy, and in the end, they won.

Today, I saw the same thing, wrapped in modern circumstances.

Freedom-minded people are not stopping, are not abandoning their views. And why should they? Shall we go back to the idiocy and self-contradictory life of worshiping the state? Of pretending that robbery is somehow – magically – not robbery when the government does it?

Our minds have been removed from the state’s intimidation and conditioning. Shall we go back to believing lies and repeating vapid slogans for the rest of our lives?

There are real reasons why individuals move from bondage to liberty, but very seldom the reverse.

The Bottom Line Facts

At the end of all the discussions, all the fears, all the questions, all of the explaining to newbs and concerned friends, stand these facts:

Our philosophy is better than theirs. We offer men and women truth, understanding, compassion (the real kind), and strong, direct relationships. The state offers punishment, fear, an occasional promise of plunder, and intrusion into every relationship in your life.

Our people are better than theirs. Not because we were born better, but because finding and living according to truth produces better people than blind obedience and fear of the lash.

We are not quitting. We can’t. We won’t.

Yes, there may be bruises and even blood along the way, but like the first Christians, our people do not turn back – they continue regardless.

We’ve come out of the state’s cultivated darkness, and we are moving into more and more light. Why would we want to go back to where we were? Even if we tried to do it, could we really stick with it? Could our minds really fit back into their old restraints?

This is why freedom will win, my friends: The genie is out of the bottle, and the Internet has spread the message to the four corners of the Earth. It’s a better message. It produces better people.

And in the end, we will win.

Paul Rosenberg
FreemansPerspective.com

Paul Rosenberg’s Interview with Ben Stone of BadQuaker.com

Paul Rosenberg interview BadQuaker.comBen Stone of BadQuaker.com recently talked to our very own Paul Rosenberg on a wide range of topics ranging from threats to Bitcoin to human nature, the New World Order to Biblical anarchy.

Click here to listen to the interview (opens in a new window on the BadQuaker.com site).

[BadqQaker.com is a web site owned and managed by the friends, family, and supporters of Ben Stone.]

Could an Inside Sneak Attack on Bitcoin Destroy It?

attack on bitcoinThis is important.

I’ve been warning about an outside attack on Bitcoin for some time, but the biggest threat may come from inside: from people who profess to love Bitcoin.

The people I’m talking about don’t love Bitcoin itself, and they don’t love the freedom it brings, no matter what they say. Instead they love the money they hope to make by becoming the new techno-riche: successors to Zuckerberg, Gates and the rest. (Yes, that’s an unfair thing for me to say, but I’d also be willing to bet large on it.)

The people I refer to are a neo-plutocracy – insiders who wish to institutionalise Bitcoin, making billions for themselves while turning it into just another version of PayPal.

The Attack on Bitcoin begins…

One long-time bitcoiner has been warning for some time that this group controls the Bitcoin Foundation. He describes them as “regulatory statists.” He has analyzed their backtalks since their beginning and has been telling anyone who would listen that they wished to politically co-opt the Bitcoin market.

At last weekend’s Bitcoin conference, he was proved correct.

Robert Wenzel of economicpolicyjournal.com reported this, directly from the conference:

The most important vibe I am picking up at the event is that there are many money players who want to get Bitcoin up and running and are willing to play by government rules, that is, register all accounts they open and take down the name, DOB and social security number of Bitcoin buyers and sellers… Many of these players argue that it is impossible to battle the government, [one developer] told me that “It is a period to build the baby and not send it to war.”

No sooner than that passed my screen, I got an article entitled Winklevoss twins on Bitcoin: Time to work with the Feds. The article quotes Cameron Winklevoss (one of the Facebook twins) saying this at the conference:

I don’t think anyone wants a fight – I think everyone here wants to build Bitcoin, to work with regulators, cooperation is really the way forward.

Let’s be clear about this:

Bitcoin is a new thing. If it is forced into the old mold of politics, regulation and control, it will become just another tool of an oligarchy. And the prospective Bitcoin oligarchy are precisely those people who wish to shove Bitcoin, against its nature, into the same old statist, plutocratic mold. The result would be a few dozen insiders getting very rich and leaving the rest of us back where we started.

Regardless of the new plutocracy’s creative justifications and their fear-based scenarios, Bitcoin will be neutered and co-opted by governments and bankers if they get their way.

This is the largest single threat facing Bitcoin at the present time. Fear and greed work, and corruption follows with them.

I am not alone in this, by the way. Bitcoin expert Mike Gogulski has come to the same conclusion, writing “the Bitcoin Foundation is TOXIC and must dissolve.”

An unnamed “old radical” warned about precisely this in 2012.

The inside threat to Bitcoin and therefore an insider attack on Bitcoin is real, and was on open display over this past weekend.

What do to

If bitcoiners are serious about human liberty – as opposed to the same old crap in a new wrapper – they must turn hard against this neo-Plutocracy and their promises of an easy way out. Nothing great comes easy, and important things are more often killed by their supposed friends than by their enemies.

I will close with a comment Martin Luther once made to a young assistant who was asking God to save them from their enemies. Please take it to heart:

We can handle our enemies. God save us from our friends.

Paul Rosenberg
FreemansPerspective.com

The Bitcoin Threat: Real or False?

bitcoin threatAn increasing number of people have complained about governments and central banks in recent years, even using the word “tyranny” to describe them. They are, of course, called names in the establishment press: conspiracy theorists, mainly.

Calling someone a name, however, does not erase their argument (at least not among rational people) and both the governments and the big banks stand accused.

Up till now, however, these accusations were never accepted by the general public. The average guy really didn’t want to hear about the evils of government money. After all, that was the only thing he had ever used to buy food, clothes, gasoline, cars, and so on. He didn’t want to acknowledge the accusations because he feared what might happen to him without his usual money.

Now, however, we have a brand new currency (called Bitcoin) available to us: something radically different. This gives us a new way to directly address the subject of monetary tyranny, providing a clear test for the governments and money masters of the world:

If they are truly NOT tyrannical, they will leave this new currency alone.

If they ARE tyrannical, they will attack the new currency because it eats into their scam.

In other words, Bitcoin is a test for “the powers that be.” The way they deal with this new method of exchange will reveal their true nature.

If they ignore Bitcoin, they refute the charges of tyranny. If they attack it, they verify those charges.

After all, what honest reason could there be to attack an inherently peaceful tool for transferring value?

Prospective Reasons

Reasons to attack Bitcoin have recently appeared in the “public square.” Here are the three most popular ones, each followed with some analysis:

It can be used for money laundering.

Of course it can be used for money laundering — ANY currency can be used for money laundering. Currencies are neutral — that is their purpose! Currencies are valuable precisely because they can be exchanged for anything else — that’s why we use them!

Moreover, dollars and Euros and Pounds are used for money laundering every day. Consider the recent money laundering crimes of HSBC and Wachovia/Wells Fargo. These banks laundered hundreds of billions of dollars for violent drug cartels. And consider that this amount of laundered money is several hundred times the value of every Bitcoin in existence.

No one from either bank went to jail. Neither bank was shut down. Neither bank suffered more than a minor fine. So, how much of a concern can money laundering really be to governments and banks? Clearly not much.

But, since they accuse Bitcoin of being used for bad things, let’s be clear about the situation:

  • Every mafioso uses government money.
  • Every drug smuggler uses government money.
  • Every terrorist uses government money.
  • Every pornographer uses government money.
  • Every criminal of every type uses government money.

They also use the telephone system and the mail and banks and a wide variety of government services. But government money is good and Bitcoin is bad?

The argument fails.

It could destabilize the current system.

A tiny, new currency is a threat to the long-established king of the hill? Comparing Bitcoin to dollars, Euros and Yen is like comparing an ant to a dinosaur. This is a threat?

Please understand also that no one is forcing anyone to use Bitcoin. If you don’t think it’s a great idea, you don’t have to use it. If its price movements (relative to dollars) bother you, you don’t have to use it. How is that destabilizing to the current system? It is entirely separate.

And what of the current system? It was falling apart on its own before the Bitcoin program was ever written. And I could go on at length on the insane levels of government debt, hundreds of trillions in derivatives, rehypothecation, and innocent people being forced to bail-out failed banks.

The current system has massive problems, but none of them can be blamed on Bitcoin.

This argument fails also.

Bitcoin provides no customer protection.

Well, no, it doesn’t. Bitcoin is a currency, not a legal system.

What is implied by this argument is that the government banking system does protect customers. That is an outright lie. People are ripped-off via the banking system every day. And more than that, consider what happened just a month ago in Cyprus: Thousands of innocent people were ripped-off BY the banking system — purposely — all at once and without recourse. This argument is, really, an insult to one’s intelligence.

And I should add something else: If Bitcoin is used properly, the crime of identity theft (a big problem with government money) vanishes – there is no identity available to be stolen.

So, again, the argument fails. Only those people who believe anything a government says will buy it.

In the End

In the end, it is said, we judge ourselves. Bitcoin has now put governments and banks in the position of judging themselves. They will write their own verdicts.

It should be interesting to watch.

The Bitcoin Threat: Real or False by Paul Rosenberg
FreemansPerspective.com

Bitcoin Should Get Ready For an Attack

bitcoinBitcoin – poorly understood and frequently talked about ignorantly – is a wonderful new financial tool… and a very timely one. But because of its virtues, it is about to be attacked.

But before I explain how, why, and my recommended responses, let me get everyone up to speed on what this stuff really is:

  • Bitcoin is digital cash. You do not get an account, you get a wallet. Holding Bitcoin on a computer is the same as holding government money in your wallet.
  • Bitcoin is distributed. There is no central office and no central computer… anywhere.
  • Bitcoin can’t be printed up, like national currencies. It has to be ‘mined’, and this requires special computers, lots of calculations, electricity and a bit of luck. It’s neither free nor easy.
  • Bitcoin is limited. Only 21 million of these things can ever exist, and they can only be mined on a very specific schedule. (About 11 million exist now.)
  • Bitcoin can’t be changed. Bitcoin is a specific computer program and cannot be changed by any single party. It is a specific set of rules cast into a computer program, and since that program is open source, it can be checked by anyone to assure that there are no secret back doors.
  • Bitcoin is pseudonymous. Every transaction is recorded, but real names are not. While it is not properly anonymous, it can be used anonymously if you do simple things like never using the same address twice. (There are even ‘laundries’.)
  • Bitcoins are oblivious to borders, laws or rules. This is simply computer code – nothing else matters.

Why The Fiat Masters Must Attack Bitcoin

I say that Bitcoin will be attacked for the simple reason that it is the anti-fiat currency… and a lot of very powerful people have their entire kingdoms built upon fiat currency and its central banking game.

It is actually very similar to gold and silver in its overall effect: If Bitcoin, or gold, or silver – or any combination thereof – ever became dominant, no one could play games with the world’s money and skim from millions of people at once… or run welfare states in defiance of economic reality.

The bankers do not want to lose their positions, and if they let this alternative currency take over, they will. So, they will have to attack. In fact, I am sure as I can be that they are doing it already.

I should add that there are socialist types who love this development because it could destroy the greedy bankers, but I don’t expect them to deter the attacks to any significant extent.

The Attacks

It is important to understand that the system is not invulnerable. It’s certainly not easy to attack (like a Cyprus bank account), but attacks both small and large are possible.

I’m not going to describe large attacks, as I don’t want to give anyone ideas. You can either believe me that they are possible, or not. These big attacks, however, would not be easy, and would have side-effects. So, I don’t expect to see them first. First, Bitcoin’s enemies have to win the PR war.

There was a great line in the movie Gladiator that applies right now:

You have a great name. Before they destroy you, they will have to destroy your name.

I’m not sure it’s fair to say that Bitcoin has a great name among the general populace, but it certainly does among the best and brightest of the younger generations. And this great name is spreading rapidly in places like Cyprus, and among people who fear a Cyprus-style mass theft coming to their area.

Gold and silver are the traditional ways of avoiding predation, but trying to cross a national border with precious metals these days is to invite theft and punishment. (This was not much of a problem before the 20th century.) Bitcoin, on the other hand, can be moved world-wide, instantly, from the comfort of your chair.

So, the first attacks will be combined with a PR war. The point will be to scare people away. “You’ll get ripped-off!” will be their emphatic meme.

Do not underestimate fear, by the way: Humans are hard-wired to over-respond to it. Fear works, which is why power-mongers always use it. And these people also own, influence or control the broadcasting systems that consume nearly all of the Western world’s attention.

So, the first attacks will be those that we are already seeing: Malicious hackers breaking into whatever clustered systems they can and stealing. (Or running Distributed Denial of Service [DDoS] attacks.) They are attacking exchangers, wallet hosting services, and so on – anything largish that can be hit. They are already publicizing these attacks, but I expect more and better.

The coming attacks will be publicized rapidly – with stories and releases prepared ahead of time – and will paint the worst possible picture. Afterwards it will be seen that the first loss estimates were wildly high, but that won’t matter to the people who see the headlines on the evening news. Joe and Jane Obedient will believe the worst.

This is all manipulation, obviously, since people are being ripped-off in government money, on gigantic scales: millions of thefts at once. Heck, every productive person in the West has about half their earnings taken from them every year in the form of taxes, not to mention the 5-10% they lose every year in the form of inflation. To compare these things to a few stolen wallets is a sick joke. But, such is the state of the West at this sad moment: The large abusers are sanctified and the innovators are demonized.

What to Do About It

Here’s my list:

  1. Be prepared. Don’t let it shake you. Don’t compromise your beliefs.
  2. Tell others to prepare. Tell people to expect attacks and a PR war. Tell them to upgrade their security and to be personally ready. Bitcoin will be called all sorts of things: A Ponzi, a fraud, a tool for terrorists, a threat to civilization, and so on. It’s not fun to have those accusations hurled in your face, so expect it and get ready for it.
  3. Prepare for the worst. At some point we may need an alternative to the government-owned Internet. Setting up our own systems will not be hard or expensive, but it will require action on our parts. Learn about mesh networks (PDF) and packet radio. Those who can code should think about writing new high-latency protocols, or reviving old ones like FidoNet.
  4. Do not rely on Internet exchangers. We should all be grateful to Bitcoin Exchange Mt. Gox and the others, but they are vulnerable and will soon enough be compromised or shut. The future lies with over the counter (OTC) exchangers.
  5. Keep having fun! Bitcoin has been a gas – don’t let go of that. Adapt, improvise, overcome! Yes, there will be more bad days from here on, but don’t let them steal your joy for any length of time. Hold to the good, reject the fear. Do what resonates within you; do what makes you feel good and creative and productive.

Paul Rosenberg
FreemansPerspective.com