Bitcoin

Bitcoin: Can a Cryptocurrency Divided Against Itself Stand?

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Vice's "Motherboard" section skylarks about the possibility of regulations destroying the fungibility of bitcoin by making it so there are "legal" bitcoin and "illegal" ones, for which it uses the culturally traditional but kinda weird locution of "white" and "black" bitcoin.

Here's why some people think so:

The white coins would be currency that's circulated through the regulated system; black coins would be coins still off the authorities' radar…

….New York's proposed "BitLicense," rules for how businesses should incorporate bitcoin, released last week, would ostensibly purge illicit bitcoin-driven activity and security problems to attract venture capitalists that were previously hesitant to invest in the volatile technology. A "sanitized" bitcoin could finally appeal to the masses, advocates claim.

But others argue that as it stands, the strict rules could wind up choking bitcoin startups throughout the state, and set a dangerous precedent. At issue is the existing "know your customer" (KYC) laws. Under these regulations, services must keep all customers' physical addresses and identifying information. Third-party bitcoin platforms like Coinbase and BitPay already comply with these requirements.

But BitLicense takes it one step further, requiring that companies also keep identity records of parties their customers sell bitcoins to, or buy bitcoins from. In other words, it would effectively mean customers can't do business with anyone unless the government knows who it is.

This raises a host of concerns, from the associated cost of compliance to financial surveillance. It's given rise to the fear that these stringent conditions would produce two classes of coins: those used by regulated institutions, adhering to de-anonymizing rules, and those that continue to operate in the crypto Wild West.

And once the currency is integrated into the regulated system, it would be difficult, if not impossible, to get out. White coins would be tied to institutions that require identifying information. Law enforcement could ask to know where the bitcoins are headed and where they come from. They'd bounce around inside these verified institutions, but would have no means of escape. ….

Black coins would be the remaining bitcoins that don't fall into this loop—the unregistered coins operating free outside the system. As the theory goes, these black coins would be harder to maintain and more versatile to use, and could grow more valuable than their traditional counterparts over time.

Like censorship and the Internet, one hopes that the blockchain will recognize licensing as damage, and route around it.

I wrote the other week about the proposed New York regulations that prompted these worries.

I wrote in April about how the cryptos and the legals would both likely find a usable future for themselves in the world of bitcoin, no matter what the Feds do.

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  1. Can we stop pretending that bitcoin has anything more than a snowball’s chance in Hell of usurping the hegemony of the dollar? If bitcoin ever developed enough value and acceptance that it would, I remain convinced that the American government would actually go as far as to turn off the nation’s Internet backbone (Constitutionally or not) than to allow such an existential threat to Bretton Woods II to continue.

    1. I think the IMF already plans the death of the Dollar.

      To be replaced by the IMF’s currency notes.

      China and Russia also have plans to kill the Dollar.

      Plus the FED is working over time to get the dollar to jump off a cliff.

      Bitcoin has a lot of wiggle room to be a player.

      And it offers a shit load more then what the IMF, China and Russia and the FED have to offer.

      1. I agree with you, but the fact is bitcoin doesn’t have an army. The ruble, yuan/RMB, petrodollar, etc. do.

        And that’s the difference.

        1. Gold doesn’t have an army…neither does silver.

          And those are actual physical things that government can get their hands on if they wanted to.

          How the hell can the government get its hands on a torrent network?

          And the US government is pretty damn split on the subject. You have California legalizing it as legal currency and house reps making fun of other house reps for trying to outlaw it….The IRS has already said it property.

          It would take some serious back peddling and even greater political will to pull back on bitcoin train. I do not see the government being able to pull it off.

          1. Gold doesn’t have an army…neither does silver.

            Really? I was under the impression that the army had all the gold.

            Still, the answer to your question about “getting its hands on a torrent network” is by shutting the whole thing down. If you think the government isn’t willing or capable of such a disruption, then I would ask you to consider the almost 20-year campaign of blowing to Kingdom Come any oil-producing nation that has even hinted at pegging the oil bourse to another currency.

            1. the almost 20-year campaign of blowing to Kingdom Come any oil-producing nation that has even hinted at pegging the oil bourse to another currency.

              Oh Christ this bullshit. Yeah it’s all a conspiracy right. Except they forgot to bomb Iran when they started accepting Euros…which proved a massive blunder for Iran.

              The USG is never going to turn off the internet. That’s completely laughably insane. When MaidSafe comes out, they won’t even be able to spy on it.

              1. The USG is never going to turn off the internet. That’s completely laughably insane.

                Why are you always wrong?

                1. Only thing in the article even close to what you describe: The protocols govern shutting down wireless networks to prevent the remote detonation of bombs.

                  Is the entire internet a wireless network? Does this capability mean the USG can shut down all wireless internets or just a few? You should probably read the articles you cite more closely before rubbing out your prepper-erection.

                  1. That’s only one aspect of the proposed protocols. I assumed you were well-read enough about the subject. As usual, you prove my assumption incorrect.

                    Furthermore, considering I was a campus representative for the ARI when you were still shitting your diapers, I find it amusing that you, of all people, poo-poo the ramifications of Bretton Woods II. It seems you stopped reading at Atlas Shrugged and never got around to reading Capitalism: The Unknown Ideal?

                    1. Tunisia, Egypt, and Libya could do it but these were/are police states of far worse severity than America. So far, I’ve only seen evidence that this is technically feasible in some police states but that doesn’t mean it would here. Also: The Protecting Cyberspace as a National Asset Act of 2010 expired at the end of the 2009-2010 Congress without receiving a vote from either chamber.

                      Ah. Details.

                      It seems you stopped reading at Atlas Shrugged and never got around to reading Capitalism: The Unknown Ideal?

                      Not reading the former, am about to read the latter. Does Rand go all Illumanati Troofer like you do with the Secret Wars for Oil BS that is impossible to disprove? I really hope not. That will cut down my enjoyment significantly.

                      you, of all people, poo-poo the ramifications of Bretton Woods II.

                      Not believing your Illuminati Troofer BS =/= trivializing Bretton-Woods.

                    2. Does Rand go all Illumanati Troofer like you do with the Secret Wars for Oil BS that is impossible to disprove?

                      That you resort to constructing a straw man is proof enough that you acquiesce to my arguments.

                      Nevertheless, I think you’ll enjoy CTUI. It was either in CTUI or Peikoff’s The Ominous Parallels: The End of Freedom in America (ZOMG! Fascist Illuminati Conspiracy theory!) that Rand writes of Nixon taking the dollar off the gold standard with (and I’m paraphrasing now as I don’t have it in front of me) ‘the people of New York shouldn’t be able to sleep at night knowing that tomorrow their money will be worth nothing’. And if you can’t see the connection between Nixon taking the dollar off the gold standard in ’71 and Kissinger’s ’73 deal with Saudi Arabia and the rest of OPEC to only sell oil in dollars, then you are the very definition of a dullard.

                    3. if you can’t see the connection between Nixon taking the dollar off the gold standard in ’71 and Kissinger’s ’73 deal with Saudi Arabia and the rest of OPEC to only sell oil in dollars, then you are the very definition of a dullard.

                      Yeah what kind of dullard asks for extraordinary evidence to back up extraordinary claims? It’s just not possible that oil is denominated in dollars because Uncle Buck is perceived to be the best option.

            2. Really? I was under the impression that the army had all the gold.

              Speaking of that, I was looking at our L candidate for governor and she has this on her website:

              Send the Texas Rangers to bring our Texas gold back from New York.

              Which is… awesome.

            3. I would ask you to consider the almost 20-year campaign of blowing to Kingdom Come any oil-producing nation that has even hinted at pegging the oil bourse to another currency.

              There is probably some merit to that. I know the US goes to war over oil. That said a bunch of people off in far off lands is different the US citizens who are on the news talking up Bitcoin.

              Even Noam Chomsky recognizes that the US treats its citizens and their rights way better then it treats foreign powers.

              1. I know the US goes to war over oil

                In the same way Truthers know that the USG carried out 9/11.

                The USG won’t even open up its own lands to drilling ex ANWR. America has never ever gone to war for oil and saying otherwise is retarded.

                  1. How vague and conveniently impossible to disprove. Alternative theory: the USD was just the best currency around to denominate in.

                    1. Alternative theory: the USD was just the best currency around to denominate in.

                      Why?

                    2. Why?

                      The dollar is the most convertible currency in the world, by free choice of the world, and has been for a long time.

                      Indeed, for many decades dollars have been the alternative to state-controlled currencies providing liquidity for black markets and communicating real market prices – exactly the thing BTC’ers envision the crypto-currencies will someday do.

                      The fact Iranians and Venezuelans today hoard and value dollars despite best efforts of their respective regimes proves the contention. Nobody hoards yuan, yen, or even Euros – but everybody the world over loves Mr. Franklin. That’s no conspiracy.

                    3. Another argument that they chose the dollar for convenience is China.

                      If you go to a trade show in China, they will either quote prices in USD or in Yuan.

                      They used to exclusively quote in USD, but when their currency started appreciating, some switched to Yuan.

                      They don’t have a price list for pesos and pounds and rubles and shekels…just dollars.

                      And maybe Euros in some cases, but I’ve priced in Euros and its pretty volatile actually. In fact, I priced in Euros to a European company and we made very high profits until they figured that out and demanded prices in USD!

                  2. Money is fungible. Currency of exchange for petro trading makes literally no difference.

                1. In the same way Truthers know that the USG carried out 9/11.

                  If you don’t believe the US goes to war over oil then you are the same thing as those flat earthers!!!

                  Hyperbole!
                  Hyperbole!

                  Hyperbole for ALL!

          2. How the hell can the government get its hands on a torrent network?

            they don’t. they just regulate the buyers and sellers of things. Easy peasy.

            1. Not easy if 3D printing gets off the ground. Hell, local government can’t even stop Uber.

    2. I remain convinced that the American government would actually go as far as to turn off the nation’s Internet backbone

      They won’t try, and it won’t matter.

      http://techcrunch.com/2014/07/23/maidsafe/

      1. Why is maidsafe better then i2p or Tor?

        I don’t understand the hub bub.

        Also why didn’t they just make the safecoin to start with? Seems like one of those vaporware coins with lots of promises to jack up the price but never materialize.

        1. 1) Maidsafe is better than Tor because it will also allow data storage and using other people’s computer resources. It’s different from i2p because, I think, the network can react and adapt. It automatically makes encrypted copies of the files you want to store on the network. The network can also ‘sense’ an attack, like DDOS, and shut it down. Read the article it’s really good.

          2) Safecoin is supposed to let you buy resources from the network. It will be a cryptocurrency backed by an entire unseizable network of computers. The Maidsafe network isn’t released yet so no SafeCoin but a ‘token’ for them was sold earlier to raise funds.

          1. MaidSafe is interesting idea, a good idea. But just reading the techcrunch article I’d think a better implementation of such a scheme (I think) would be having the Comcasts of the world put a processor and hard-drive into the routers they connect their customers to internet service with – then those become the distributed datacenter, and said peeps get a discount on their internet bill if they use said widget-router.

            Bandwidth consumption etc. would be fixed and invisible to customers’ actual infrastructure, and being implemented on a purpose-designed consistent platform (hardware, software, firmware – the whole stack) means far better reliability and consistency vs. some shitty TSR or whatever running on customer PC/tablet/pick-a-gadget with all the attendant issues such a scheme invites.

            1. I’d think a better implementation of such a scheme (I think) would be having the Comcasts of the world put a processor and hard-drive into the routers

              err…i think the safecoin idea is so no central party or parties can stop it or shut it down.

              Even if the comcasts of the world play nice the governments over them can always force them to do bad things.

      2. I remain convinced that the American government would actually go as far as to turn off the nation’s Internet backbone

        Turning off internet backbone turns off dollar economy along with the cryptos. No ‘net means no NASDAQ, no Citibank, no ATM. They’d have to surgically go after specific P2P’s, a far different proposition. Not even the People’s Proxy in the PRC can do that, not even close.

        1. Thanks for mentioning the PRC. If they can’t or won’t stop the internet, the USG can’t. Also, the political price of turning off the internet is even worse than the economic price. It isn’t happening. Preppers WANT a disaster.

  2. California voted to make Bitcoin legal currency.

    Perhaps there is a nice rivalry between NY and California going on here.

  3. As the theory goes, these black coins would be harder to maintain and more versatile to use, and could grow more valuable than their traditional counterparts over time.

    It seems pretty easy for a White coin to escape into the black coin sphere. A person can just download a wallet and do it on their own PC.

    I don’t believe the above scenario would ever happen but in that scenario it would seem that white coins would be the more valuable as they can do the stuff black coins can do and do the stuff the white coins can do. It would be the black coins which would have hard time moving around.

    It seems whoever wrote that does not know how bitcoin works.

    1. I should also note there are already real cryto currencies called Whitecoin and Blackcoin.

      My favorite is Anoncoin..but right now it is kind of worthless.

  4. BTC is not going to be divided into White and Black, it’s going to compete with bazillions of alts, and their diversity makes them unstoppable.

    1. I can see all the Bitcoins leaving NY.

      Or at least never being used there to buy stuff…online or otherwise.

      People would still own it there i guess but they would use exchanges like BTCe or coin exchanges that don’t use fiat currency so don’t have Know Your Customer regs and they just trade in BTC and altcoins.

      1. They’ll use it to buy stuff but it will all be off the books.

        1. I’d be curious to know how much stuff, and how well you could live by buying things from sellers who are ‘off the books’.

  5. One thing that will be interesting is to see how Coinbase reacts.

    They are probably the easiest way to buy Bitcoins…most of their consumer base rely on being able to move bitcoins in and out of coinbase into their own wallets or to buy stuff or whatever. No questions asked.

    Would not surprise me if coinbase just blacks out NY…or just requires NY users to be hassled and leaves everyone else alone with their bitcoin transfers.

  6. It’s entirely true that Bitcoins haven’t been confiscated in any cases as yet: but the supposition is that Bitcoins will indeed be declared to have a value and so therefore can be seized. Earlier cases have decided that frequent flier miles, pig and equine semen, baseball cards, have been declared things of value that can be seized so while Bitcoins may indeed be just a series of 1 s and 0 s the fact that they can be exchanged for things of value means that they too have value. Thus the Feds can indeed confiscate them.

    When the mega state is in its death throes, that’s when it becomes the most dangerous.

    1. Anyone want to explain to me how the Feds could seize my BTC?

      Unless they steal the passphrase from my brain, I still got them.

      1. Of course, this is assuming you arent storing your BTC with some other entity.

        1. There is also issue with finite supply of BTC. As people die, lose their passphrase, or get BTC seized, BTC liquidity shrinks and shrinks.

          In only a few years BTC growth will be negative as mining gets more difficult relative to factors I mentioned, and the blockchain will be stupid-huge.

          BTC has some serious technical problems that way. I like to think of BTC as the Myspace of cryptos, but the ‘winner’ Facebook-coin is yet to arrive, and will make that proverbial Zuckerburg and friends fucking RICH. I wonder what it will be.

          1. I think you nailed it with the first sentence of the last paragraph, but I think there might already be Facebooks of crypto. DarkCoin is promising.

            Apparently the finite supply can actually be tinkered with if the open-source developers agree. The BlockChain is a far worse problem it will get way too big. DarkCoin and some others only keep a record of who hold the coin and who they got it from. No blockchain bloat and it’s far less traceable, like digital cash.

        2. Is there a way to make backups of your BTC? So you can have multiple redundant storage options in case one storage method gets seized?

          1. Is there a way to make backups of your BTC? So you can have multiple redundant storage options in case one storage method gets seized?

            See here:
            https://en.bitcoin.it/wiki/Backingup_your_wallet

            1. Isn’t your wallet technically on the blockchain?

              And all you really need is your wallet’s address and a private key to rebuild/access it?

              I thought that is how paper wallets are able to work?

  7. Sometimes man you jsut have to roll with the punches.

    http://www.AnonToolz.tk

    1. If you can’t beat ’em with punches, throw a tackle or two at ’em.

      http://www.sbnation.com/lookit…..hahha-sure

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