The Day Bitcoin Was Hacked

In the ninth year of Satoshi, at 9:30am UTC on a cold February morning, Bitcoin was hacked. The hacker (or hackers) found a way to take advantage of a command in Satoshi’s original code. Then, using some very impressive number-crunching power, they played man-in-the-middle and intercepted transactions as they approached the big Bitcoin miners.


In the ninth year of Satoshi, at 9:30am UTC on a cold February morning, Bitcoin was hacked.

The hacker (or hackers) found a way to take advantage of a command in Satoshi’s original code. Then, using some very impressive number-crunching power, they played man-in-the-middle and intercepted transactions as they approached the big Bitcoin miners.

But this required more than impressive number crunching – it required world-class intelligence, as well as access to dozens of major routers. This, however, didn’t become clear for a few hours. During that time, tens of thousands of bitcoins were stolen.

Whoever hacked Bitcoin had access to secret backdoors in the big commercial routers – backdoors that weren’t supposed to exist. A few ex-employees of the big router company had once tried to speak out on this subject, but they had been quickly silenced. (This wasn’t known till later either.)

By the time dawn broke in New York, bitcoiners in Japan, Korea, and all across Europe were in a panic. A couple of dozen key Americans were being roused as well. The old cypherpunk channels were busy for the first time in many years.

A hasty meeting was called in the oldest darknet chat room, and a moratorium was called on all Bitcoin mining (transaction processing), beginning immediately. Only two significant miners refused to acknowledge the move, but they were just being asses on principle. In any event, they joined the moratorium half an hour later. No transactions would be recognized.

Bitcoin had stopped.

It took just over an hour for the big financial sites to figure out what was happening, followed by a roar of victory that crossed continents. Central banks, Wall Streeters, and gold bugs joined together, rejoicing that their joint enemy… the curse that they all wanted to bury… the upstart that had thrown confusion into their lives… was dead. Many of them literally jumped, screamed, danced, and stomped their feet.

Comment boards erupted with glee. “Buttcoin is dead!” “Buh-bye TwitCoin losers!” and much worse were posted, over and over and over.

Several thousand neophyte bitcoiners panicked and tried to dump every coin they could on the exchanges, but the exchanges closed as well. The result of this was that the price for Bitcoin, was, for all practical purposes, zero.

At this, the enemies of Bitcoin let out an even bigger cheer than before. Their world view had been restored. Whereas they had been looking like fools – repetitively pronouncing Bitcoin dead as it inexplicably refused to die – it was now the bitcoiners who were the fools. The haters spewed a river of venom, with vigor and with glee.

A couple of dozen cryptocurrency scam artists emptied their bank accounts during that day, cleared out of their apartments, and headed to unknown addresses. They knew an opportunity when they saw one. And so they took advantage of the confusion, getting away before anyone could call the law down on them.

But it wasn’t just the scammers; at least as many Zuckerberg wannabes started looking for new ways to get amorally rich as quickly as possible.

The old chat room, however, remained choked with traffic. Literally dozens of Bitcoin developers, enemy miners, and altcoin developers had been sharing their findings. New information was deposited in the main chat room, while an old cryptographer summarized it all in a second room (where solutions were being discussed) and cross-posted conclusions between the two. In a third room the best programmers divided the code between themselves and hunkered down to find the vulnerability.

It took them all four hours.

An hour after that, a patch was being tested.

Three hours and four versions of the patch later, all agreed that it was ready.

At midnight in London (0:00 UTC), every major Bitcoin miner turned back on, and by agreement (an agreement they all kept), they restarted from block number 684273, which was the last complete block before the hack.

Bitcoin – to the shock and horror of the crypto-hate community – was back. In the end, only a handful of people lost money (mostly by providing products during the hack), and only one of those businesses failed. Bitcoin’s price (as measured in dollars, etc.) lagged for a few days and then returned to its previous trajectory.

Many of the altcoins remained shut for a day or two more, simply because they had less skilled manpower to throw at the problem. But soon enough they came back too, with the exceptions of the scammers who had run away and the get-rich-quickers who had wandered away.

The haters went right back to hating.

* * * * *

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  • Such a tour de force, so many ideas. And I am amazed at the courage to write such a book, that challenges so many people’s conceptions.
  • There were so many points where it was hard to read, I was so choked up.
  • Holy moly! I was familiar with most of the themes presented in A Lodging of Wayfaring Men, but I am still trying to wrap my head around the concepts you presented at the end of this one.

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* * * * *

Paul Rosenberg

If You Love Bitcoin, Promote Good Altcoins


Bitcoin spawns strong emotions in people, once they wrap their minds around it. And for good reason, of course: Bitcoin is the future, being born in our midst.

One of the ways this goes off the rails, however, is when people think about Bitcoin in the old way. In particular, they think of the crypto-economy as if it were a zero-sum game. They fear the altcoins (Litecoin, Ethereum and the rest) as competitors… that if the altcoins do well, they’ll steal Bitcoin’s thunder.

If you’re ever tempted to think that way, please reject it and leave it behind. That’s the past struggling against the future, right inside your head.

What we are building is not a monument to Bitcoin and Satoshi, but a new economy… a better, freer, less criminal economy. And please understand, Bitcoin alone cannot do the job. Bitcoin isn’t magic; it’s a tool.

Consider this:

The value of all BTC in existence is $66 billion or so. That’s tiny compared to any major currency. Also consider that the Visa system handles tens of thousands of transactions per second. Bitcoin itself is never going to do that – it’s not that kind of system. Other cryptocurrencies will have to be built for that purpose… or, more likely, they’ll solve that problem in new ways.

What is required is to build a new crypto-economy around Bitcoin. That is where we should be headed, and it will be very good for Bitcoin, which will end up as the central settlement currency between all the new, more specialized cryptocurrencies.

And so, if we want Bitcoin to thrive… and, more importantly, if we want the crypto-economy to thrive… we should be promoting quality altcoins.

Yes, some of the altcoins are plainly scams. Some people will be burned by them. But the good ones are not only good, but necessary.

Check out the currencies you’ll help; make sure they are honest and properly managed. Find the best one or two you can and get involved if possible. (That’s how you’ll really know if they’re good or not.) After that, get busy putting them into the world.

Yes, make money on them if you can, but don’t ever let yourself get dragged into a money-primary mindset. That’s the old world re-asserting itself, with its scarcity-centric mentality. That’s what cryptocurrencies are leading us away from.


Start thinking the new way and start ditching the old way. Scarcity is dying, and one currency need not dominate all others.

If you love Bitcoin, start building a righteous, futuristic economy around it.

* * * * *

A book that generates comments like these, from actual readers, might be worth your time:

  • I just finished reading The Breaking Dawn and found it to be one of the most thought-provoking, amazing books I have ever read… It will be hard to read another book now that I’ve read this book… I want everyone to read it.
  • Such a tour de force, so many ideas. And I am amazed at the courage to write such a book, that challenges so many people’s conceptions.
  • There were so many points where it was hard to read, I was so choked up.
  • Holy moly! I was familiar with most of the themes presented in A Lodging of Wayfaring Men, but I am still trying to wrap my head around the concepts you presented at the end of this one.

Get it at Amazon ($18.95) or on Kindle: ($5.99)


* * * * *

Paul Rosenberg

ROSC 4: The Sanitarium

When I walked into our latest TCM lunch, I saw a few new members, two of whom were young women. That made me feel good, because there had been a flaw in most 20th century liberty movements, in that they never drew many women. Liberation movements of the past featured lots of women, many of whom showed more courage than the men.
So, I took it as a healthy sign that women were showing up at our lunch, as indeed they do at Bitcoin meetups.
The group discussed a new ridesharing service that seemed to be an improvement (Libre Taxi) and decided that they were worth checking out. Nikos volunteered for the job, and the rest of us gave him a list of things to look into. After that, we moved into a discussion of recent events in the cryptocurrency world.
But through all of this one of the young women, Esther, jumped in with questions, mostly directed to me, on side subjects. That was odd. And they were odd questions like, “Why do people care about beauty?” and, “Have you ever spent time with mentally challenged people?” She was polite and tried to avoid derailing the main conversation, but she clearly had some alternative purpose. So, I answered her as best I could and waited to see where she was headed.
I soon found that she was going nowhere I had imagined.
As the meeting broke up, she asked me to stay and talk, and so I did. We sat at the empty end of the bar.
“I had reasons to ask you those questions,” she said.
“I was pretty sure of that,” I responded, offering a small smile, which she returned ever so briefly. Then she handed me a card that read: Mueller Sanitarium for the Chronically Ill.
“That’s where I live,” she added. “Myself, my mother, and about dozen others. We want you to come help us.”
I was lost and could only reply, “I’d be glad to help, but I’m not a doctor.”
“That’s okay,” she said. “We’re not really sick.”
And if that wasn’t enough to send my mind reeling, she added that the people at the sanitarium already liked me.
“How’s that?” I squeezed out.
She explained that they had seen an article I wrote on children being tortured in schools a few years back. And for that, they trusted me.
“That’s very nice,” I said, “but I’m entirely lost here, Esther. What is this sanitarium and what would you like me to do? And I should add that I have very limited time these days. It’s stretching it for me to make these lunches.”
“I know,” she said, “but once I explain, I think you’ll make at least a bit of time.”
I nodded and waited for her to continue. And what a story she told.
The residents of the sanitarium, Esther explained, had once called themselves “The Rejects.” I immediately stiffened, displaying my objection. No one should accept such a verdict; it’s an offense to human dignity itself.
“They no longer use that,” she added, “but I want you to understand this. These are people who are very homely or physically deformed… the kinds of people who were tortured in schools, pointed at, and insulted all their lives. Either that or tucked away in an asylum, where they’d simply be housed till they died.”
“And they really have their own place, where they live together?”
“They do,” she assured me. “The sanitarium sign, even if it’s false, provides protection for them. Behind it they’re not bothered, and they can live without torment.”
She was right; I very definitely wanted to help these people. I immediately made an appointment to see them, but I needed more information. This was a wild story, and I needed to understand it.
Esther began by explaining herself. “My mom,” she said, “is a very homely woman. She never once had a man who was interested in her.”
“I’m sorry,” I injected.
“We all are,” she said, “but there was nothing to be done about it, and so, after decades of crying, blaming God, hating the world, and hating herself, she found that she was still a human being with choices, thoughts, and dreams. She decided that she could either wallow for the rest of her life in the same old pool of pain or she could start living out of her inner self, which wasn’t ugly if she didn’t want it to be.
“And that,” she said with her first real smile, “is how I came into the world.”
Esther’s mother, as it turns out, had been one of the early customers for in vitro fertilization. She had always wanted a child and wasn’t yet past the age limit for pregnancy, and so she decided to do what she wanted. She found the appropriate doctor, picked the best looking sperm donor she could find, and had her baby. (Here I should add that Esther turned out to be an attractive young lady.)
Esther was raised at the Sanitarium and mainly homeschooled there. She went off to college for a few years and then returned. Now she’s setting up businesses for the residents… which became necessary because their bank account, after nearly 30 years, was finally running out. But even more than that, Esther told me, “They’ve learned, slowly, that they can do most of the things pretty people do… and now they want to do them.”

More to Come

I’m already running long for a weekly post, so I’ll stop here. But there is definitely more to come.

* * * * *

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  • Such a tour de force, so many ideas. And I am amazed at the courage to write such a book, that challenges so many people’s conceptions.
  • There were so many points where it was hard to read, I was so choked up.
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* * * * *

Paul Rosenberg

Financial Repression Is Here, and Bitcoin Is the Only Escape


When I warned about bankers planning “financial repression” back in 2014, I wasn’t sure how long it would be before it arrived, or where. And when I wrote about the banning of cash last February, I was worried that the money monopolists were accelerating toward open repression.

Unfortunately, it turns out that they were in a hurry and have now withdrawn all currency worth more than a few dollars (US$1.50) in India. New currency has been promised, but the old notes were withdrawn without the new ones being ready. So, we’ll call that an “effective” and possibly a “temporary” ban on cash.

Bear in mind please, that India is a very populous country (more so than the US and Europe combined), and not one where nearly everyone already has debit cards. So, this makes a powerful test case.

On top of that, the banning of cash is being threatened all across the Western world. Cash purchases over €1,000 (US$1,050) are already banned in France. At this point, we have to accept that the elite are serious, that they mean to take away our cash and rather sooner than later.

Moreover, I want to repeat something from the 2014 article, where you can find a link to the source. This is what the IMF has been discussing in their own words:

The claim… that advanced countries do not need to resort to… debt restructurings… capital controls and other forms of financial repression… is at odds with the historical track record…

So, let’s get over the denial phase. Take a hard look at what they’ve done in India and France, and bear in mind that these people don’t simply stop short of their goal, nor are they burdened by empathy.

Where Do We Go Now?

Your decision will be your own of course; I don’t claim to be a financial advisor. But I can tell you what’s going on and what it signifies.

Escaping financial repression has typically been done via these means:

Precious metals. Gold and silver have inherent value. No act of politics can change that. However, political systems – especially when empowered by mass surveillance – are great at stealing everyone’s gold. Just look at what Franklin Roosevelt did, long before any kind of serious surveillance. His thieving worked very well. Moreover, moving precious metals across borders is far harder now than it was then.

Bear in mind that I’m a fan of silver and gold; they are honest money. But gargantuan government armed with mass surveillance will greatly reduce their usefulness. Already, moves are afoot to ban gold in the EU.

Cash. I’m also a fan of cash. It has no value of its own of course, but it can be used privately, more or less everywhere. The problem is that it looks like it will be banned. A few end runs are possible, such as using postal money orders instead of cash, but I wouldn’t plan on them lasting.

Barter. Barter is useful and honest, but there’s a reason we use currency: It’s far more convenient.

Offshore commerce. Again, a fine way to conduct affairs, but mass surveillance plus EU and US bullying of nearly all the world’s banks has made this only a partial solution. It’s best used as part of a well-rounded Plan B.

These are the traditional ways to escape financial repression, but they’re not looking very good at this point.

And that leaves Bitcoin.

Anti-Elite Money

If you’re not familiar, please understand that Bitcoin is not based on existing currency models. Bitcoin is different to the point of being alien… it’s from outside. It came to us from the realm of the cypherpunks.

Bitcoin and other cryptocurrencies are built on the opposite principle of the status quo. They allow no place for a central controller. That makes them anathema to the current monetary regime.

Because Bitcoin and its children are thoroughly foreign to the existing financial monopolies, they are the one remaining way to escape them. 15 years of mass, unquestioning compliance have locked the status quo tight.

It seems, however, that repressed Indians are starting to figure this out. (And probably some of the Chinese as well.) As a result, the exchange rate of Bitcoin has risen significantly.

Do It Right or Stay Home

Please remember that Bitcoin has to be used properly to be secure. (We have a full report.) If not, it’s the most transparent currency in the world and does not escape repression.

And yes, good security will require you to use adult-level encryption, not just a smart phone app. If you can’t bring yourself to do that, don’t even try.

So, you’ll have to make your own choices, but it seems clear to me that cryptocurrencies and a few other types of digital currencies are the last path around repression. To use them, however, you’ll have to exert your own will, choose something besides the easiest path, and act in ways that haven’t been approved by authority.

I wish you control of the money you earned.

* * * * *

A book that generates comments like these, from actual readers, might be worth your time:

  • I just finished reading The Breaking Dawn and found it to be one of the most thought-provoking, amazing books I have ever read… It will be hard to read another book now that I’ve read this book… I want everyone to read it.

  • Such a tour de force, so many ideas. And I am amazed at the courage to write such a book, that challenges so many people’s conceptions.

  • There were so many points where it was hard to read, I was so choked up.

  • Holy moly! I was familiar with most of the themes presented in A Lodging of Wayfaring Men, but I am still trying to wrap my head around the concepts you presented at the end of this one.

Get it at Amazon ($18.95) or on Kindle: ($5.99)


* * * * *

Paul Rosenberg

What’s New at the Bitcoin Colony

As I’ve mentioned in the past, Bitcoin is an invasion into the status quo. It is not a modification of the dominant financial system or even an extension of it… it’s a Klingon colony that dropped to Earth in 2009.

As I’ve also mentioned in the past, what matters about Bitcoin is not the technology itself (which is fascinating but not perfect), and it’s certainly not the dollar exchange rate. What matters about Bitcoin are the thousands of young people who have grasped its meaning, and who get up every morning excited to do something with it.

So today I want to show you some of the new developments that are coming from the Bitcoin colony. These aren’t the only new developments, but they are among the most important of them, and they help to paint a picture of what’s emerging.

First, however, I should extend my thanks to Velas Commerce, the Bitcoin and e-commerce consultants who kindly shared material with me.


If all goes as planned, Ethereum will become an expanded cryptocurrency. Like Bitcoin, Ethereum is a network with its own blockchain (public ledger) and its own currency, the Ether.

Unlike Bitcoin, Ethereum is designed to interact with other computers. That makes all sorts of automated contracts possible. Internal company data, contract specifications, outside data inputs, time and date, and so on, can all be coordinated and money (Ethers) distributed automatically. Some of the programs being built for the Ethereum network sound like they’ve come out of a sci-fi movie, including decentralized autonomous corporations, or DACs.

Ethereum creates self-enforcing contracts. These can get very interesting once you consider the number of devices that can be controlled through an Internet connection. TVs, car keys, hotel room keys, etc. Imagine a rental car where your key simply stops working if you stop paying the hourly fee.

DACs (or sometimes DAOs, decentralized autonomous organizations) are businesses or organizations that run themselves. This is essentially a group of people working together for a specific goal, but instead of their interactions being governed by a corporate framework, they’re governed by code running on the Ethereum network. Such a framework may be too rigid for many uses, but a massive time saver for others.

Ethereum is written to be as simple, open, and flexible as possible to allow for unaccounted future uses, which makes it one of the more interesting new technologies.

Ethereum can be used now but is still in development and likely won’t be used commercially until sometime later this year.


OpenBazaar is eBay the service, without eBay the company. Anyone can join and buy or sell goods and services. Like Bitcoin, OpenBazaar isn’t owned or controlled by anyone; it’s a network of peers that operates with no middleman.

What makes this technology especially interesting is its use of conflict-resolution technologies. With escrow and legal agreement built in, these resolution technologies will encourage trade that likely would otherwise never occur, due to concerns over fraud or the difficulties involved with multiple legal jurisdictions.

In addition to escrow and arbitration, OpenBazaar uses multisignature (“multisig”) Bitcoin transactions to prevent fraud. This ability has always been built in to Bitcoin, but it has seldom been used.

In a multisig transaction, bitcoins are sent to a special address that will hold the funds and only release them when a majority of the parties involved sign off on the transaction. Generally these transactions are two or three, meaning that two of the three parties involved must agree on where the funds should be sent.

Using OpenBazaar, the three parties involved would be the buyer, seller, and escrow. The funds are sent by the buyer to a unique multisig address and stored there until the buyer and seller have completed the transaction successfully and sign off on the transfer of funds to the seller. If there’s a dispute and the buyer and seller cannot agree on where the funds should be sent, the escrow (perhaps influenced by the decision of an arbitrator) has the deciding vote.

This conflict-resolution system along with a reputation system have the potential to give people enough confidence to trade without reliance on existing legal systems.

OpenBazaar is up and running now, and a variety of goods and services can be bought there today. However, the software is still being tested; a completed version is scheduled for release in early 2015.


One of the biggest concerns with Bitcoin is that it has serious privacy issues. Bitcoin is the most transparent currency ever created. If you don’t take steps to protect your privacy when using Bitcoin, anyone anywhere can view your entire transaction history. SilentVault offers a solution to the Bitcoin privacy issue. It also facilitates trade in other currencies, including gold and silver.

SilentVault is a wallet application that allows users to bring in cryptocurrencies (currently Bitcoin and Litecoin), then to spend them “silently,” or “off chain” (not recorded on the transparent ledger/blockchain).

What you hold and trade with your SilentVault wallet are vouchers representing assets, not the assets themselves. While this is obvious for gold or silver, which are not digital assets, the distinction is important for Bitcoin. The wallet contains vouchers, which are cryptographically signed, digital bearer certificates that are analogous to coins.

These vouchers can be traded and exchanged with other SilentVault wallet users privately, securely, and in a peer-to-peer fashion. The system can also be used as an exchange, as you can trade vouchers backed by different assets (bitcoin, gold, silver, etc.) with fellow users.

SilentVault systems are built using privacy and security-focused software. All communications are made within private servers with no public-facing IP addresses. End-to-end encryption is used so that even SilentVault can’t monitor chats or view the contents of users’ wallets.

SilentVault is available for use today.


Open-Transactions and its commercial version Monetas provide tools for what you would think of as normal financial transactions, checks, invoices, etc., in a cryptographically secure and distributed fashion. However, it also includes many nontraditional financial transactions such as online cash-like transactions, issuing currencies, commodity trades, and smart contracts.

Unlike Bitcoin or Ethereum, Open-Transactions is server-based software. This has some advantages—it’s faster and cheaper—but it’s not as resilient as Bitcoin. The Open-Transactions developers imagine a trustless system of federated servers where there are a wide variety of servers available and they are nearly incapable of fraudulent behavior.

Bitcoin’s and Open-Transactions’ very different system designs make them very complementary to each other. Bitcoin works well but doesn’t currently have the scalability, wide variety of features, or speed that Open-Transactions can provide. Open-Transactions and Monetas are integrating a number of Bitcoin features, such as security features for Bitcoin exchanges. You can think of Open-Transactions as providing financial services around Bitcoin—for example, facilitating trades from gold to bitcoin and back or supporting off-chain transactions.

Like all of our examples, Open-Transactions exists outside the traditional banking system; however, it provides an impressive selection of financial tools. This has the potential to allow someone who is “unbanked” to use banking tools or even become an international commodities trader. As Open-Transactions’ commercial incarnation, Monetas, says, they are “launching the financial inclusion revolution.”

Open-Transactions is an ongoing open-source development project. The commercial version of the software, Monetas, is currently developing mobile phone apps as well as commercial products that should be available soon.

Paul Rosenberg

This article was originally published by Casey Research.

Whether You Love It or Hate It, You’re Missing What Really Matters About Bitcoin


Bitcoin made big news over the past year or so, when the price spiked and made some people rich. The possibility of fast money always generates a lot of commotion, and it certainly did this time.

Personally, I didn’t want the price of Bitcoin to spike; it grabbed people’s attention for all the wrong reasons. Cryptocurrencies—of which Bitcoin is the first, the best known, and currently the most important—are a revolution in commerce. But they are also much more than that.

Bitcoin is an intrusion into a stasis-oriented world: the child of radical concepts and cryptography, birthed by confirmed outsiders. This is a new and different thing, not a slightly different financial tool.

But even this is not what matters most about Bitcoin.

Enter the Bitcoin Kids

The Bitcoin blockchain—a decentralized public ledger for the transfer of assets—is truly a ground-breaking development, but that’s not the key factor here.

The ability to utterly bypass the Fed, SWIFT, and the rest of the money monopoly is the answer to a hard-money advocate’s fondest dreams, yet even this isn’t the thing that really matters.

What matters are the people whom I call, affectionately, “the Bitcoin kids.” This is a very loose grouping of thousands of people, mostly fairly young and widely dispersed, who are thoroughly committed to the cryptocurrency revolution and all that it entails.

What the uninitiated don’t understand is that these people are not just trading bitcoins; they are busy developing a whole new generation of products and services—things like Silent Vault, Monetas, Etherium, and many others. Lots of them are involved in 3D printing, and some, in the maker movement. Others are involved in humanitarian efforts like BitcoinNotBombs.

These young people are not terrified at the prospect of failing at a new venture. Rather, they are picking spots, jumping in, and getting to work. And if a venture of theirs does fail, they pick themselves up and start over.

Please bear in mind that if I wanted to, I could list a number of problems in the world of Bitcoin. I could further explain a number of attacks and potential attacks on Bitcoin. This is not an entirely invulnerable technology, and I am not holding it up as perfection. But those problems don’t belong in the center of this picture either. The Bitcoin kids are adaptable and stand a good chance of side-stepping or overcoming the attacks that will come upon them.

The Anti-Geezer Photo

Older folks are sometimes too touchy about the things that young people do. For example, take a look at this photo:


Seeing a kid in a mask and with a scarf around his head, it’s easy to call him silly. (Before throwing any stones, though, we really should remember all the stupid things we did at twenty.) But again, that is beside the point—look at this kid’s sign:

The corrupt fear us.

The honest support us.

The heroic join us.

Think about the thoughts and commitments behind those words. These young people are claiming righteousness and honesty and heroism. What better ideals could we possibly want our children and grandchildren to champion?

And here’s another thought for older folks:

If you think the Bitcoin kids are being impulsive and erratic, get involved and help them. If you think they’re discounting the attacks they’ll face, fill the gap and prepare them for those attacks. Sitting on the sidelines and finding fault is primarily a way of defending your own inaction. If you think these young people lack experience and depth of understanding, roll up your pants, wade into the surf, and start delivering it to them. Show them by doing.

The New Way

Let me give you an example of the attitude these young people are displaying. One of them, Julia Tourianski, wrote this:

Just like the Internet gave information back to the people, Bitcoin will give financial freedom back to the people. But that’s only the first step… Bitcoin will allow us to shape the world without having to ask for permission. We declare Bitcoin’s independence. Bitcoin is sovereignty. Bitcoin is renaissance. Bitcoin is ours. Bitcoin is.

These young people believe precisely what Thomas Paine told the disobedient and rebellious American colonials of 1776:

We have it in our power to begin the world over again.

The Bitcoin kids believe that they have the power to begin the world over again, and that’s a very powerful thing all by itself. Furthermore—and this is of supreme importance—they are acting on that belief every day… thousands of them. They are not waiting around for public opinion to support them, they are not waiting for “the masses to rise up,” and they are certainly not waiting for permission. They are getting up each day, inserting their will into the world, and building a cryptocurrency economy… and building a new world thereby.

Most of us have long known that the current world system was corrupt and devolutionary. We’ve been trying to thrive in spite of it, biding our time, and wondering when things would ever start to change.

I’m here to tell you that things have started to change. Bitcoin is at the center of it, and the Bitcoin kids are the key. We can fight it, join it, dance, mourn, or simply defend our ignorance, but the time we’ve been waiting for stands before us, right now.

Paul Rosenberg

This article was originally published by Casey Research.

Coming for Your Accounts: Solutions

planBAfter running last week’s article (They’re Coming for Your Accounts), we received a number of questions about how to actually protect oneself. So, this week I’d like to address that subject.

First Words

I need to make an important point before I proceed, however: I am not involved in the financial industry, and I do not know the many rules that apply to IRAs, 401(k)s, and so on.

So, please understand that I’m speaking in rough terms and that you’ll need to apply all my suggestions to your own situation intelligently. I simply do not have precise advice to give you.

But with that said, here are some suggestions:

Partial, Multiple, and Incremental Solutions

Solutions to financial problems do not have to be all or nothing. If you think that IRAs are ripe for picking (as I do), then you can begin by ceasing to fund them. Take your money as regular income, pay taxes on it if you must, and put it to use as you see fit. That money will no longer be in the “first grab” pile.

If you do something like this, you will be slowly moving your assets out of easy government control. And if you hold your earnings in the form of cash, rather than in a bank account, it becomes very difficult for a government to seize.

Everyone will have their own opinions and risk estimates, but in my opinion, money left in registered accounts is becoming riskier than cash that is thoughtfully stored.

There is also the common issue of spouses disagreeing on what to do: One thinks registered accounts are a risk; the other doesn’t. While these situations are difficult, they don’t have to be as dramatic as we make them. We can simply do several things at once: Leave the 401(k) as it is, but start putting new money into silver and gold. Or create an offshore structure and fund it bit by bit, instead of continually funding the government retirement account.

There’s no reason we have to go 100% in any single direction; We can go several ways at once. Better to do this than to fight and make our lives miserable; money should make our lives better, not worse. It is useful and important, but not that important.

Warning Bells

Whatever your plans may be, it’s a good idea to have a backup plan: “If they do X, we’ll do Z.” What you’d like to do ideally is to not get hurt too badly when the alarm bell is rung.

So, I’d suggest that you keep the least money in the place that’s likely to be hit first. And in my opinion, that will be the place that’s easiest for a desperate government to loot.

I gave several examples last week of what has been happening, so that would be a good place to begin your analysis. And remember that predators always hit the softest target first.

Specific Options

Here are several options for keeping your money under your own, personal control:

Cash: Still easy enough to get, and easy to store. Theft is always a concern, but when governments start stealing directly from bank accounts – as they did last year in Cyrpus – which is the lesser risk?

Gold and silver: Very similar to cash, but with two differences: During normal times, it may need to be exchanged for local currency, which is an added expense. In bad times, however, local currency becomes worthless, and the metals retain their full value. There are many local coin dealers that make purchasing silver and gold easy.

Bitcoin: While new, sometimes volatile (though not recently), and not universally accepted, Bitcoin is easy to get, easy to use, and easy to secure. And it remains solely under your control. In addition, cryptocurrencies can be used internationally without expense or permission.

Invest in local businesses: We covered the specifics of this in FMP #19, but investing locally diversifies your risk, while still giving you the ability to oversee your investment. And it helps your neighbors directly, rather than giving Washington and Wall Street a skim on all your investments.

Offshore structures: Holding your money in another country is a very large speed bump to your local government. Yes, if you’re a real criminal, the other country will give up your money promptly, but such places are dependent upon foreign bank accounts, and they will not want to scare their customers away by giving up their money without a fight.

Furthermore, offshore structures are not terribly expensive to obtain. You’ll want to use a professional to do the work for you (it’s too hard to do yourself), but the expense is not as bad as you may think.

Offshore real estate: Offshore real estate, I am told (please verify for yourself), does not have to be declared to the US government.

Breaking Inertia

The most fundamental need in situations like this is to break the inertia that entangles us. That inertia moves always in the direction of compliance with authority and a mute servility.

What matters most to us is that we leave the camp of the perpetually obedient and start acting in the world according to our own judgment. In the end, that’s the only way to live our own lives (financial and otherwise), rather than “being lived” by outside forces.

Paul Rosenberg

Bitcoin Is a Revolution, Not an Investment

bitcoin revolutionIt has been interesting to see large numbers of people pay attention to Bitcoin in the past year or so. The reason for that attention was the exchange price of Bitcoin, which made a lot of early adopters wealthy. (One of the few times when the right guys got rich.)

The idea of getting rich quick always sells, and it did this time too. Along with it came a lot of investment talk, complaints about volatility, well-publicized government raids, central bank reports, and threats from tax men.

What most of these people missed was that Bitcoin is not a traditional financial instrument and doesn’t fit into the categories of traditional finance. Bitcoin – cryptocurrency – is a new thing. It’s a radical, revolutionary thing. As long as you try to categorize Bitcoin with traditional financial tools, you’ll never really understand it.

Bitcoin Comes From Outside

Lots of people talk about “outside the box,” but many of them would run from anything that was truly outside of the box. Such people may be interested in Bitcoin because of price gains, but only because they don’t understand how radical it really is.

Bitcoin, you see, is not an adaptation based on existing currencies, nor can it be understood that way. Bitcoin is from outside – from the realm of anti-establishment radicals.

In particular, Bitcoin comes from the cypherpunks, a group of crypto-anarchists and anarco-capitalists. They began to flourish in the early 1990s, as cryptography merged with the new Internet and they realized they could “wall-off” areas of cyberspace from the coercive intrusions of governments. Here are a few quotes from these folks:

We don’t much care if you don’t approve of the software we write. We know that software can’t be destroyed and that a widely dispersed system can’t be shut down.

Governments of the Industrial World, you weary giants of flesh and steel, I come from Cyberspace, the new home of Mind. On behalf of the future, I ask you of the past to leave us alone. You are not welcome among us.

Encryption, digital money, anonymous networks, digital pseudonyms, zero knowledge, reputations, information markets, black markets, collapse of governments.

A specter is haunting the modern world, the specter of crypto anarchy.

Arise, you have nothing to lose but your barbed wire fences!

These are not financial people trying to invent a new kind of currency that’s going to make them rich – these are radicals who want to build a new world. And that’s exactly what Bitcoin is: a radical tool for building a new world.

Bitcoin was birthed on the cypherpunk mailing list, by the way. One of the list members, someone named Wei Dai, outlined the structure of cryptocurrencies in 1998, ten years before Satoshi Nakamoto wrote his program.

What’s so interesting about the current moment is that the concept of cryptocurrency is challenging people to think about what they truly believe. Do they really love the status quo? Or is it just something they accepted because they saw no alternative?

Because once people really understand Bitcoin, they also understand that it is built on the opposite principle of the status quo. Bitcoin has no place for a central controller, no tool allowing an enforcer to override anyone’s transactions, no mechanism of coercion at all. That makes cryptocurrency anathema to the current monetary regime and to every ruling regime.

People who come to understand Bitcoin also learn this, and it can be a real challenge for them.

And What Now?

Well, several things are going on now, all at the same time. Here’s my list:

  • The old regime – banking, law enforcement, tax-gatherers – are trying to harness Bitcoin and build tools of control into or around it.
  • Military and intel agencies are figuring out how to shut down Bitcoin traffic without killing the Internet altogether. The big tech companies have become their sycophants and are following their masters’ will.
  • Certain financial operators (“reasonable” types) are trying to subvert Bitcoin and make it acceptable to the powers-that-be.
  • People outside the G20 financial monolith are beginning to see the utility of Bitcoin. It is much cheaper, easier, and faster than Western Union, bank wires, or credit cards. It’s also far easier to transmit over distance than cash. A cab driver in Zaire doesn’t give a hoot whether the Western banking cartel hates Bitcoin; if it works for his customers, he’ll use it.
  • New projects like Ethereum, Dark Wallet, BitWasp and many others are popping up regularly. The innovations are not stopping.

What comes of this is anyone’s guess, but one thing is clear: The genie is out of the bottle;  everyone knows that cryptocurrencies work, and work well. Even if Bitcoin is brought down, new adaptations will follow it in a steady stream.

The revolution is here, now. Fight it, join it, dance, mourn, or just play dumb; it’s your choice.

Paul Rosenberg

A Report from Middle America

middle americaI was recently involved in a day of meetings with small business owners in the American Midwest. It was both encouraging and sad at the same time.

What I Found First

Overall, I found a large room full of productive human beings. It was uplifting. Most of these people were between thirty and seventy years old, more men than women, and they were all productive people, the kind who get up early every day, make sure that complex systems are producing properly, fix anything that is broken or near breaking, plan for the future, cooperate with large numbers of other people, and then go home at the end of the day and love their families.

If all the world lived like these people, we’d be halfway to a paradise by now. And that was a thought that made me sad.

Why? Because these people – by any standard of decency – should be left alone to create their better world. But instead, they are forcibly tied to wasteful, parasitic, and destructive systems. Half or more of their earnings are taken from them every year. Their actions are restricted by their moral inferiors. They live less than half the rewarding lives they should be enjoying, and for no defensible reason.

The Other Things

Beyond my overall happy/sad impressions, I found quite a few particular things:

  • These people would have preferred to discuss the practical particulars of their businesses – tools, materials, technical obstacles and solutions, and so on. But instead, they were forced to discuss government compliance. Almost every subject discussed from the front of the room dealt with government regulations. Most of the subjects discussed on the sides involved tools, equipment, business strategies and so on.
  • Dealing with employees is a major issue, especially involving the immigration police. These people are justifiably concerned with fines and indictments, just from hiring employees who are clearly long-time Americans. (That is, not Hispanics or other recent immigrants.) A few of the comments I heard:

“Good luck trying to explain that to an ICE agent.”

“Do NOT waive the 72 hour waiting period.”

“Do NOT allow them to enter your facility or inspect anything without authorization from counsel.”

  • Nearly all of these people agreed that government in America is out of control, abusive, and oppositional to their happiness. I think that’s a positive opinion, since it reflects reality, meaning that they have stopped looking at the world through myth-colored glasses. The sad part of that is…
  • These (good) people don’t know what to do about it. The system they grew up believing was their friend has turned against them. They’ve gathered the considerable courage required to face that, but they don’t know what to do next. They are working within the system as they can, trying to avoid its hazards, but don’t see any clear alternative – and no path of escape. They’d like to do other things, but they also need to feed their kids, and don’t know what to do about it all.
  • Bitcoin is spreading everywhere. One of these business owners, in a very rural area, has built a Bitcoin mining operation. And not only Bitcoin, he is also mining for the other cryptocurrencies. And, he’s telling everyone else about it. I was surprised (and pleased) by this, since this meeting had absolutely nothing to do with computers, economics, or anything else that usually connects to cryptocurrencies. This man simply saw a great opportunity and jumped on it.

All In All

All in all, I came away from the day more confident in the future than I had been the day before.

We are exposed to so many horror stories every day. The images thrust upon us show a world filled with danger and discouragement. The reality, however – once you remove yourself from the newsfeed – is that there are a lot of very decent people who are generally doing the right things.

Our job now is to define newer and better ways to live and to spread that information to as many good people as we can. And to remind them they DO have the right to live good, happy, prosperous lives.

Please do everything you can along these lines. Thanks.

Paul Rosenberg