Bitcoin

Cryptocurrencies vs. the State

Alternatives to government monopolies are very good things.

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House members summoned Facebook's Mark Zuckerberg to Washington, D.C., and grilled him—harshly—about his plan to create a new currency, Libra.

"Why should we trust you?!" asked Rep. Mike Doyle (D–Pa.).

I liked it when Zuckerberg said, "I actually don't know if Libra's going to work, but I believe that it's important to try new things."

He was right. That's very important.

The Libra would make it easier to transfer money anywhere in the world. It also promises stability. Its value would be based on a basket of currencies from different countries, which would protect Libra owners from inflation in any one country.

It's an idea that deserves a try.

But it may never be tried because the clueless politicians' threats of punitive regulation scared off many of its supporters.

Politicians want to crack down on Libra "because they're threatened by it," says tech reporter Naomi Brockwell in my new video. "This is going to be competition for the U.S. dollar. Government doesn't like competition."

Governments also like to control any money that we might use.

"Want to send money to Russia to a family member; it's going to be censored. You want to send money to a relief effort in Venezuela; it's going to be censored," says Brockwell. But if you use a cryptocurrency like Libra or Bitcoin, "your money will get through. That's an incredibly powerful tool that gives people the freedom to spend their money where they want to spend it."

Bitcoin is harder to stop than a currency like Libra would be because Bitcoin doesn't emanate from one company or government mint. There's no one owner of Bitcoin or most other cryptocurrencies.

"It is the first currency that is decentralized," Brockwell points out. "That's why it's still around, because they haven't been able to have these hearings, haven't been able to call the CEO of Bitcoin and say, 'cease and desist!' There is no server to unplug, no company to shut down, no CEO to throw in jail, so it persists! That's really exciting."

Digital currencies "live" on thousands of individuals' computers, so no government can stop them by pressuring any one company.

That's a reason they're valuable.

When Bitcoin started, it was worth virtually nothing. But two years ago, the price of one bitcoin reached $19,891. Then it crashed to $3,192. As I write, the price is $9,390.

That volatility deters many people from using Bitcoin as money, but to those of us who don't trust governments, Brockwell points out: "It is the only suitable money for free people."

Of course, many disagree.

"I think it's a gigantic classic pump and dump scheme," says investor Peter Schiff. "There's nothing to give Bitcoin value."

It's "a bubble," vulnerable to attacks from governments. "They can get banks and financial institutions to make it very difficult for Americans to use it."

Schiff doesn't claim we should count on dollar bills because he doesn't trust politicians either. He suggests people buy gold to hedge against politicians' irresponsibility.

"Gold has worked for thousands of years," says Schiff. Unlike Bitcoin, "gold has actual value. A huge industry needs gold: jewelry…consumer electronics, aerospace, and medicine."

I've hedged against the dollar by buying both gold and Bitcoin. My Bitcoin investment did better. But Schiff says I'm a fool if I don't sell it now.

I don't know which way prices will move. But I know that it's good to have alternatives to government-created currencies. The dollar's value is only backed by politicians' promises. I sure won't trust those.

Even when currency is stable, government can use its power over currency to censor people.

"The government decided that they didn't want WikiLeaks to receive donations, so they froze transactions," observes Brockwell. But they couldn't stop Bitcoin.

She says government has had "a monopoly on the money supply for a very long time, and now consumers finally have a choice. You can send bitcoin peer-to-peer to someone on the other side of the world almost instantly at very low cost, and it can't be censored. That's incredibly powerful."

It is.

Alternatives to government monopolies are very good things.

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  1. Alternatives to government monopolies are very good things.
    I can’t wait to see the government bootlickers argue against this self-evident concept.

    1. I can’t wait to read the Reason column arguing for private armies.

      Maybe Shikha could leave her comfortable upper-class Detroit suburb and do a glowing profile of the Michigan Militia.

      1. +1 Moxy Fruvous

        I wonder how many of you guys will get that.

      2. The Machinery of Freedom

        Privatizing national defense is in part 3, linked in the table of contents.

  2. “Alternatives to government monopolies are very good things.”

    Except when it comes to government itself where reason supports coercive monopolies over a free market. What I call a limited state.

  3. I suppose if Facebook can violate the terms of its user agreement, censor the speech of its users, restrain trade of its competitors, and prevent its employees from seeking employment elsewhere with abusive contract terms while Reason cheers uproariously, it makes good sense that they’d support Facebook implementing the old truck system too. One wonders if there’s literally anything at all Facebook could potentially do to offend libertarians. Perhaps refuse to participate in gay wedding ceremonies.

    1. By all means, demand your money back from Facebook! How much money have you spent buying the services of Facebook?

      Or boycott Facebook. That’s what I do. They do NOT censor MY speech! Ever!

      1. I’m not a Facebook user, but I still don’t applaud like a retarded chimp when they abuse their users and violate the terms of the agreement they made with them. In the same way that opposing the government doing something doesn’t mean you oppose it being done at all, it’s perfectly possible to look upon the deplorable business practices of a company with disdain without being their customer and without even necessarily demanding any action against them by authorities – although in the case of Facebook they absolutely should be held accountable for violating their own user agreement, which they do with impunity and have had all civil suits on the matter dismissed on 230 grounds, despite Reason’s assurance that 230 is never actually used in such a manner.

  4. “I actually don’t know if Libra’s going to work, but I believe that it’s important to try new things.”

    What you gonna do when Facebook takes all your libra away for calling someone “gay” on the computer?

    Bitcoin is really hard to do a bump with and until I can swipe a card in a stripper’s crack like one would a credit card I’m sticking with physical currency.

  5. I don’t trust Facebook one bit – a company that has openly admitted to experimenting on its users without their consent. Hello no to Libra, I’m sticking with Bitcoin.

  6. But if you use a cryptocurrency like Libra or Bitcoin, “your money will get through. That’s an incredibly powerful tool that gives people the freedom to spend their money where they want to spend it.”

    uhh. no. Bitcoin yes, Libra no. Libra is centralized, controlled by one entity (yes a consortium of private companies, controlled by governments, but one entity), and totally tied at the hip to fiat currencies of central banks. Bitcoin is not

    1. But the one interesting thing about Libra is that it seems to be leveraging different currencies against one another, as if the shock of one currency in the bundle collapsing would be absorbed by the others.

      I can’t imagine that the companies behind Libra actually intend it to be used for everyday transactions, kinda like XRP. I’m thinking Libra wants to eventually pitch itself as a type of reserve currency, which means that it could undermine the US Dollar, and what libertarian can’t get behind that? That’s really what this is all about in the end. There are no political solutions as far as the liberty movement is concerned, but what if we found a way to undermine the government’s funding mechanism (The Fed)?

  7. “Why should we trust you?!” asked Rep. Mike Doyle (D–Pa.).

    I should ask you the same, Mike.

  8. “I think it’s a gigantic classic pump and dump scheme” says investor Peter Schiff. “There’s nothing to give Bitcoin value.”

    Finally a voice of sanity. If you look at Bitcoin’s value over the past decade, it looks a lot like a digital version of gold. Users pay a high price for supposed anonymity.

    Of course, Schiff extols the virtues of gold in the next paragragh….

    1. Never read the bitcoin white paper , have you? There’s nothing anonymous about bitcoin, that’s why there are different privacy coins. Every bitcoin transaction is recorded on the blockchain for all to see. That’s why you don’t need trust with the blockchain. It can’t be manipulated. There’s 21 million end of story.

      Saying “bticoin has no value” displays a fundamental ignorance of what bitcoin actually is.

      Just give it a try. Go get $50 worth over at coinbase, send it to a wallet on your phone or desktop and buy something on amazon, or send it to friend.

  9. John Stossel and Naomi Brockwell are doing good work but both are terribly naive. Governments can and have criminalized cryptocurrencies, required individual and institutional reporting of all crypto- transactions and holdings, required crypto- exchanges to keep track of and report crypto-transactions and to identify their customers, etc.
    Governments tax cryptocurrency transactions and most people cannot understand how to comply with those tax regs, creating substantial risks of civil and/or criminal penalties.
    Brockwell is right: governments do not like competition. In fact, they will not allow competition which threatens their monopoly. They will take whatever steps they feel necessary to crush anyone who threatens their monopoly.
    Alternatives to government monopolies will only exist if they are allowed to exist – or if they are invisible or beyond reach.

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