Currency

The Alt-Currency Martyr

Before the feds feared bitcoin, they feared e-gold.

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In the mid-1990s, just before the arrival of PayPal and more than a decade before bitcoin, an oncologist from Florida named Douglas Jackson created a system by which people could send each other digital payment tokens backed by gold. Jackson's e-gold became the world's first truly successful digital currency, serving over half a million customers and doing billions of dollars' worth of business.

But after a decade of success, the feds came after him, raiding his company's office, taking computers, freezing bank accounts, and ultimately extracting a guilty plea for conspiring in an "unlicensed money transmitting business." Once trailblazing, e-gold was quickly forgotten, derailed first by legal hassles and then by the tsunami of interest in blockchain technology.

Now Jackson has uncovered information that he thinks can not only overturn his conviction, and thus ease the path to him restarting his business, but help wean alt-currency from what he regards as a ruinous addiction to Satoshi Nakamoto's brainchild. While the value the markets place on cryptocurrency keeps rising precipitously and no e-currency model closely emulating e-gold has grabbed significant market share in its wake, Jackson remains convinced that if he could only get back in the game, things would be very different. The guilty plea that he now insists was squeezed from him through government trickery blocks his doing legal business in the e-currency space.

"It's as if I'm the only person in the world not allowed to go and compete in this area where I'd pioneered the industry," he says. "It's like everything came off the rails and it's been a decade of unprecedented malinvestment."

Sending Gold Around the World

Most oncologists don't bandy about classic Austrian economics terms such as malinvestment. But Jackson in 1994 came across a Thomas Sowell article in Forbes celebrating the 50th anniversary of the publication of F.A. Hayek's Road to Serfdom. His newly minted interest in Hayek led him to the Laissez Faire Books catalog, and then he was off and running toward his dream of a universally usable, cheap, and easy way to exchange value across the globe that didn't depend on governments making wise monetary policy choices.

Though he had never taken an economics course and barely understood accounting or double-entry bookkeeping, Jackson was soon on a monetary mission to save civilization from itself. "Many of the worst real-world calamities, wars, in particular," he told Barron's in 2001, can "be causally traced back to economic dislocations—booms and busts—that in turn could be traced to monetary manipulations."

So Jackson created a system whereby anyone with access to the internet could transfer ownership of digital tokens backed 100 percent by, and transferable into, physical gold (or, later, its cash equivalent), which he either received in bailment from customers or bought in the usual world gold market and kept stored in his office. The company made money off transaction fees, at first a flat 1 percent, then for a time, Jackson says, "capped at the equivalent of 50 cents, very inexpensive."

Still later, "we refined the fees to a sliding scale formula," he says. "The 1 percent made no sense for micro-spends, and 50 cents was too generous for large spends." Eventually, the maximum fee, which kicked in for transactions amounting to more than about $200, was a gold equivalent which tended to be about $2 at the time. A referral program paid out 10 percent of the company's transaction fee to any new customer brought in.

Jackson "didn't have a clue" how to find customers at first, he now admits. He talked up e-gold on cypherpunk-oriented mailing lists and placed some print advertisements in libertarian-oriented publications (which will "probably go down in history as the dumbest, most opaque, confusing print ads ever," he now says) and even a radio ad on an NPR affiliate in his hometown of Melbourne, Florida.

But rather than just hard-money hoarders in the rich West, many of e-gold's customers turned out to be people, often from poorer countries, who were looking for a low-cost, low-hassle, and quick means to, say, send money back to family in India, shop online without a credit card in the Arab world, or sell goods without the fear of clawbacks from buyers that credit cards make possible.

"The only pathway to business success was to target high volume payment activities," Jackson explains: "Online retail, bill payment, and remittances of international guest workers."

E-gold started gaining media attention around 1999, then "2000 was the breakout year, when exponential growth was clearly evident," Jackson says. "By February 2000 we had processed only 50,000 payments. Two months later we'd doubled that and by October we passed the million mark." The gold coins, which were starting to make the office floor groan in Florida, were soon supplanted by gold bars stored in London and Dubai vaults.

In 2000, the e-gold project split its functions into two separate companies: E-gold, which managed digital e-gold accounts and made income solely from user fees; and Gold & Silver Reserve (G&SR), which exchanged currency for e-gold and was thus capable, in monetary policy terms, of engaging in "open market operations," expanding or contracting the overall supply of e-gold according to market demand.

This bifurcation of functions was vital to moving forward, Jackson says via email. "The model of would-be competitors entailed them buying and selling their medium themselves, effectively engaging in currency exchange. This exposed them to the risk of payment reversal…exchange rate risk…and perhaps even more importantly, if the provider of the system is also the one selling the medium, virtually all of them resort to touting it as an investment (gold is good! Blah blah) and independent providers of exchange are disinclined to compete with them." A consequence of separating those two functions was that "dozens of independent businesses found it in their economic interest to promote e-gold."

As Jackson later bragged in a July 2020 online essay, written as part of a public comment process launched by the Financial Stability Board (an international body providing analysis and advice about the global financial system), "e-gold went on by 2006 to serve active customers in over a hundred countries, settle 3 billion (USD-equiv.) worth of P2P payment per annum and amassing gold reserves surpassing those then backing the Canadian Dollar or Mexican Peso." At its zenith, the alt-currency was backed by 3.8 tons of real gold.

"To say Doug was pioneering," says Kevin Dowd, a Durham University professor of finance and economics who specializes in monetary alternatives and competing currencies, "is an absolute understatement." Dowd draws attention to e-gold's market-leading provision of digital payments not tied to any government's currency with "instantaneous trade at almost zero cost, and that almost 25 years ago."

'He Should Have Been on the Federal Payroll'

It was a matter of time before e-gold would catch the attention of the government, which does not take kindly to financial transactions that it cannot easily trace and tax. Jackson became aware early on that crooks, from credit card scammers to child porn purchasers, were sometimes using his system to bilk people and traffic in illicit goods. So he volunteered user information on suspected criminals to inspectors of various federal police agencies, most notably the U.S. Postal Service. Wired later reported that E-gold had become "one of law enforcement's most productive honey pots, providing information that helped lead to the arrest and conviction of some of the web's most wanted credit card thieves and hackers."

Unlike some of the cyber-anarchists who later promoted bitcoin or other cryptocurrencies, Jackson had no ideological or practical interest in helping people commit crimes or evade law enforcement. He even elided his own company's user agreement in cooperating with cops.

"While inaccurately depicted in the media as a system affording anonymity and hospitable to criminal activity," Jackson wrote in a 2020 memo about his ongoing legal conflict, "bad actors who believed this and elected to use e-gold as a platform for illicit activities commonly discovered that decision to be their career-ending, game-over mistake."

None of that was enough to protect e-gold from the feds. In December 2005, Jackson's home and offices were raided by the Secret Service and FBI, who took everything they could and froze the company's bank accounts. (The gold by then was safely bailed overseas and held in trust.)

Judge John M. Facciola, who signed the initial warrants, would complain in a later hearing that he'd been misled to believe he was granting warrants to break up some sort of child pornography ring. Though the actual charges against Jackson and his company would have nothing to do with child porn, that didn't stop prosecutors and the media from rumor-mongering about awful transactions taking place in the shadows.

"It never occurred to me in my wildest dreams," Facciola said in a hearing 13 days after the initial raid, "that far from operating surreptitiously, there have been negotiations with this company and the Internal Revenue Service as to…transmitting money and being subject to…the Bank Secrecy Act."

Jackson, his companies, and two of his partners were charged in April 2007 with conspiring to operate and operating an "unlicensed money transmitting business," conspiring to "launder monetary instruments," and violating D.C. law (though the companies were not located there) by transmitting money without a license in the District of Columbia.

Jackson says he sincerely did not believe his companies were required to register or be licensed as a money transmitter. This was not a crazy or purely self-serving thing to believe in 2007. Jackson cited contemporaneous Treasury Department reports that discuss both e-gold and money transmitter laws and do not reach the conclusion that the former is bound by the latter.

A 2007 Indiana University Maurer School of Law paper co-authored by Stephen T. Middlebrook, who was at the time senior counsel at the Treasury Department and co-chair of its Working Group on Electronic Payments Systems, observed that four federal statutes regarding money transmitting "all contain different definitions of 'money transmitter.'" (The paper came out between the indictment and the guilty plea in the e-gold case.)

"Because e-gold is operating outside the traditional realm of money transmitters," Middlebrook's paper continued, "it is necessary to explore the nuances of the statutory definitions in order to determine whether the laws encompass e-gold. The inconsistencies in the statutes…make advising clients who want to implement novel new payment mechanisms a difficult task."

As Jackson would insist, his company did not send money from one place or person to another, like Western Union: It merely shifted ownership shares of the technically nonmonetary physical commodity of gold. It did not make loans, so it wasn't a bank. Since E-gold did not deal in "currency or funds denominated in the currency of any country," then it should be exempt from statutes governing "money transmitting," Jackson's legal team argued. No actual regulatory agency had ever told them otherwise before the arrests.

Judge Rosemary Collyer of the U.S. District Court for the District of Columbia disagreed, ruling in response to a preliminary motion that the definition of "funds" should encompass the gold value controlled by Jackson's clients. After butting up against such judgments and shelling out millions in fines and legal defense, the e-gold defendants in July 2008 decided to plead guilty, in Jackson's case to money laundering and the operation of an unlicensed money transmitting business. He was sentenced to 300 hours of community service plus a 36-month supervised release, including a requirement to wear an ankle bracelet, with six months of it pure house arrest.

Judge Collyer in her sentencing memo seemed to understand that something other than perfidy was at issue, writing that "no doubt Dr. Jackson has respect for law" and that his "intent was not there to engage in illegal conduct." Collyer added that "there is no reason to shut down e-gold and G&SR, and every reason to have them come into legal compliance….Incarceration for Dr. Jackson would be counterproductive."

Economist Dowd argues that the whole prosecution was a mistake in the first place: "It was a remarkable 'own goal' for the U.S. government to go after [Jackson]. He was bringing in a steady stream of crooks." Dowd, who wrote a 2014 monograph for the Institute of Economic Affairs on government attempts to thwart alternative currencies, contends that Jackson "should have been on the federal payroll."

Death and Afterlife

E-gold, embattled, soldiered on after the 2005 raid, despite eventually losing over $4 million to fines and takings, with client holdings tied up in what would be yearslong unfreezing negotiations with the federal government. Jackson tried to keep the company afloat, doing a more thorough job vetting customers, locking out certain suspect nations entirely. But the guilty plea itself was a Catch-22, because someone with his felony record could not obtain the licenses necessary to function legally as a money transmitting business. In 2009, E-gold ceased operations.

But now a reprieve could potentially be on the way. Jackson learned a few years ago via a Florida Freedom of Information request that the government hid from him—illegally, he argues—potentially exculpatory evidence that could have changed the course of the case and dissuaded him from pleading guilty.

A draft legal opinion done for the Florida Office of Financial Regulation (OFR) in 2006 concluded that his companies were neither "funds transmitters" nor "foreign currency exchangers" under Florida law, that there is "no evidence that e-gold is money of the United States or of any other country which is designated as legal tender," and thus that "the activities of e-gold and G&SR are not subject to regulation through" Florida's relevant money transmitter regulations.

The federal indictment stated, despite the contrary draft opinion delivered by a state lawyer to Florida's OFR, that Jackson's companies "were required to be licensed…by the State of Florida." Jackson argues that the government's obligations under the Brady Rule, which requires that prosecutors dis-close possibly exculpatory evidence, dictate that the feds should have revealed this OFR opinion.

Had he known about it, Jackson says, he would have sought a similar opinion from the relevant regulatory agency in D.C., whose laws he was charged with breaking despite not being located there. He believes they would have agreed with Florida at the time and insists that, had the feds revealed the Florida OFR opinion, he would not have pleaded guilty in the first place.

Not only did Jackson not know about this opinion but neither the grand jury that indicted him nor the judge overseeing the case did either. The Secret Service, he discovered, had instructed the OFR to not communicate with Jackson or his associates at all.

Jackson filed a petition in July 2020 to overturn his conviction. While motions have been filed on both sides, no decision has come down as of press time.

In the wake of the original prosecution, many states have clarified that businesses such as E-gold, even if not actually shifting national currencies from one person to another, do fall under the regulatory aegis of money transmitting laws. The Treasury Department's Financial Crimes Enforcement Network ruled in 2011 that any digital currency facilitator involving U.S. citizens operating anywhere in the world is subject to all the domestic regulatory burdens of an official "money services business." Nowadays, even two citizens engaging in a private trade of bitcoin for dollars can wind up before a judge. And new Treasury Secretary Janet Yellen believes that "we really need to examine ways in which we can curtail" the use of cryptocurrency "and make sure that money laundering doesn't occur through those channels."

Regulatory authorities continue to have it out for digital currencies. But Jackson believes there is a place for a product like e-gold that offers a usable escape from government monetary policy without striving to evade financial information regulations.

'It's Up to the Market To Tell Us How Useful It Is for People'

Law enforcement may have pushed E-gold out of the e-currency market, but is it still a usable business model? Crypto has since proliferated into near-infinite varieties and soared to unprecedented market valuations. Internet-enabled monetary competition between various government fiat currencies the past two decades, some economists theorize, may have helped keep price inflation low. Gold—even gold split up into bits and bytes with ownership shifted around the world cheaply and nearly instantaneously—is perhaps just a barbarous relic, destined to be outcompeted in day-to-day transactions by both government money and blockchain coins.

But Lawrence H. White, a monetary economist at George Mason University specializing in free banking and currency competition, points out that the market had decided as of the mid-2000s that e-gold met consumer demand just fine. "You can say it's not for me, it doesn't serve any need I have," White says. "But it's up to the market to tell us how useful it is for people. From a standard economic perspective, we don't second-guess people's preferences for what choices help them achieve their purposes and realize more gains from trade."

Jackson sees the rise of crypto as a direct consequence of what the government did to him. The bitcoin bubble "never would have happened in the first place if we had not had to exit the business," he contends. "Our exit afforded the foundational myth bitcoin started with, that 'look what happened to e-gold!'" If the feds could take down a single alt-currency company, better to build instead an entire decentralized system.

That's not the lesson one should take from his experience, Jackson insists. He pushes back against the widespread belief that E-gold was "shut down by the government, and the reason was some government antipathy to competition with the almighty buck. That wasn't the case, neither aspect. We weren't shut down, though we did eventually have to close down. And protecting the dollar from competition had nothing to do with it."

He points out that in the sentencing, Collyer was explicit that E-gold should continue to exist after adopting proper anti–money laundering standards and getting the appropriate money transmitting licenses. Yet his guilty plea made that impossible.

With his vision for how to run an e-currency sidelined, Jackson complains that there has been "no progress toward what I was trying to accomplish." Gold, historically and to this day, has been a great hedge against sovereigns destroying the value of their currency and therefore a great basis for new competition. Those clients of the original e-gold who eventually got their money back out of the system received anywhere from 200 percent to 500 percent more dollar value than they put in, thanks to gold's price appreciation, he says.

Bitcoin, he argues, is too slow and too expensive; it's essentially unbacked; and it consumes too many resources. And all the other cryptocurrencies that followed in its wake have never mounted a serious attempt to solve day-to-day payment or monetary problems for the masses. Instead, he thinks, they've just offered promoters a chance to cash in on speculative mania.

"Suppose that someone has 1 Bitcoin in their wallet, which they regard as having the equivalent value of $500 or $900 or, give it another day or two, $20,000," Jackson told the Financial Times in 2013. "And then suppose that some circumstance emerged that effectively prevented it from ever circulating again….Who, after six years of non-circulation, would pay that $500 or $20,000 or even so much as a nickel?"

Many in the e-currency space, even those who respect Jackson's innovative strides pre-bitcoin, consider his arguments and techniques archaic now that the blockchain has taken the field. Jon Matonis, who has followed Jackson's efforts for decades and had even been offered a job at E-gold when it was operating, is now chief economist with Cypherpunk Holdings. He is sure the blockchain has rendered Jackson's style of e-currency obsolete.

"The single biggest reason for why a decentralized cryptocurrency is a superior choice for electronic money than Jackson's e-gold model is resiliency from state actors," Matonis insists. "When challenging governments and central banks in the monetary realm, the greatest forces in the world will quickly align to work against the leading opponent, as history has demonstrated." This means any strong competitor to government money "must be the leading permissionless, censorship-resistant, decentralized cryptocurrency with the majority of the world's computational power reinforcing its distributed network every single day. This is Bitcoin."

While Jackson doesn't believe the government was deliberately trying to put him out of business, Matonis insists that "the State will simply not allow a monetary challenger to thrive." That, he writes, "is why survivability is the single most important attribute. When there is a centralized entity organizing the issuance of a monetary unit, this will present a single point of failure. When there is physical commodity backing that requires assaying and auditing, this will present an opportunity for confiscation."

From the pro-bitcoin perspective, the very fact that no one has succeeded in an e-gold-like project since Jackson was pushed out might suggest that the market has spoken and that Jackson is overly arrogant to think he and his ideas are spec-ifically indispensable in e-currency.

Still, he's trying to fight his way back in by clearing his record of what he now considers to be an illicitly obtained guilty plea. To fulfill his decadeslong mission, Jackson and partner Roger Bass, a former Intuit exec, are developing an e-gold 2.0 company called Global Standard that, like its predecessor, will offer a digital currency backed by physical gold. "As matters stand, an e-gold successor with me as a control party is effectively precluded from offering our services in the U.S. market," Jackson says. "But the conviction also negatively impacts our ability to engage around the world with not only regulators and policy officials but also with potential investors and bank partners." It's "the first thing a potential investor sees in the due diligence process."

Banks are especially skittish about his past, which is bad because "banks play a crucial role" in the Global Standard system, he writes. "They should serve as the primary vector for distributing e-gold into global circulation where it can be used not only for P2P payments but as an alternative reserve asset and medium of settlement for bank-intermediated payments."

Bass, for one, still believes in the original mission. Central bank balance sheets, he says, "are way out of whack with any historical normality," with "no gentle glide path back….Really bad things happen when money gets messed up, and right now money is just about as messed up as it's ever been."

One needn't share Jackson's triumphalist sense of his own unique mission to see that the trap the government placed him in with his conviction has stymied something many users around the globe found valuable, even if it won't drive bitcoin off the field. As Bass says, "a rural villager in India can often understand exactly how and why something like e-gold is important and how it works better than an international banker whose day-to-day life is beyond such needs and who is more than comfortable with existing monetary systems."

The government's heavy-handed leaning on Jackson was not about its concern for sensible monetary policy or our liberty—or about an Indian villager having a currency that meets his needs. It was about the government's inability to tolerate anything that makes it harder to know what it wants to know in order to enforce tax and drug laws. George Mason's White says cost-benefit analyses of "know your customer" laws show they hobble lots of beneficial economic activity for a very tiny return in crimes discovered.

But Jackson himself thinks that a good e-currency going forward need not offer a lot of privacy to users. It merely needs to be cheap, efficient, universal, and free of the mistakes caused by government monetary policy.

Jackson is sure his ability to set e-currency back on what he insists is the right track will be increased if he can get his conviction off the books. But "the past, some sort of vindication or credit, doesn't matter so much," he says. "What matters is that we return and finish the task that, incredibly, is more needed than ever after this lost/wasted decade of unprecedented malinvestment and massive criminality that resulted from the blockchain bubble."

NEXT: The U.S. Is Hoarding Vaccines It Won't Let Americans Take

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  1. In the wake of the original prosecution, many states have clarified that businesses such as E-gold, even if not actually shifting national currencies from one person to another, do fall under the regulatory aegis of money transmitting laws.

    And there’s the explicit FYTW. We’re going to make a law, and if you find some way to get around the law, we’re going to say the law applies to you anyway. You may think that a law that applies to shoe sellers doesn’t apply to you because you’re selling hats, but we can just declare that hats are shoes and you’re fucked.

    1. Worse yet, they can redefine hats as having always been shoes and hit you for what would in any sane world be ex post facto violations of the shoe selling laws.

  2. And I think it’s somewhat interesting that you have an illustration of William Jennings Bryan as your frontispiece, because as far as I know, his arguments for the free coinage of silver were arguments for currency manipulation on a grand scale – he wanted to have the government set the price of silver at an artificially high price. Which is kind of the exact opposite of the argument that a government-free currency would be free from government manipulation of the money supply.

    1. he wanted to have the government set the price of silver at an artificially high price.

      No. I suppose you could say he wanted to set that price at an artificially OLD price but using the word ‘high price’ is a deliberate misunderstanding by gold standard advocates who have always feared SILVER. Silver is the metal that can become EITHER a bank-intermediary or a physical coin stand. But the competition means there are no big advocate/whales who profit. Gold coins don’t work as circulating currency so a gold standard always becomes an intermediary representative-money standard. It is those intermediaries who are protected by the govt chosen standard and who thus advocate it.

      The price of silver advocated by Bryan (a price relative to GOLD – 16:1) was the original definition of “US dollar” in 1792. Gold was defined as “US eagle” then. And the 16:1 ratio, roughly, has been the relative ratio of those two in all bimetal money systems since, roughly, forever – since those are, roughly, the intrinsic geologic/economic costs of extracting those into coin form.

      It was silver that was demonetized – legal tender acceptance in any amount greater than $5 – in 1873. The effect of that demonetization is that the price of silver dropped, the price of gold rose, and the ratio between the two rose to 31:1 by 1896.

      Bryan had no problem restoring the 1873 price because he deliberately wanted to restore the balance between those two metals – away from those who had benefited from demonetization (banks, creditors, ‘the 1%’) and towards those who had been harmed (farmers, workers, debtors). That was the basic politics of money as an issue for Populists.

      If you’re saying that that old price was ‘too high’ then you are simply making a value judgement that the 1896 status quo was the acceptable status quo. If you’re implying that the 1896 status quo was ‘natural’ and Bryans preference was thus political/gummintal; then you’re just lying to yourself. All money standards are political/gummintal

      1. Is the argument that gold coinage doesn’t work because gold values are effectively too high for everyday usage in coin sizes that make any sense at all? (I can see it, you’d need 1/100th ounce coins to equal a modern $20 bill. And a coin that small is *absurdly* small.) But that’s where e-gold really shines, since you don’t truly need to handle the physical gold.

        Of course, the flip side of that is the saying that gold you don’t posess is gold you don’t really own.

        1. Yes that’s the reason. Gold is geologically rare enough so that humans can’t easily distinguish a coin of daily usage from pocket lint. Easily stolen, easily lost, easily clipped. So the coins get deposited in depositories (banks) and what becomes currency (circulating money) is actually the bank note. Or e-gold – the digital note. And the money is then subject to problems of ‘do we trust the intermediary or should I just pull my gold out first before the bank calls its loans and I end up without a chair when the music stops.’

          Coins contain their value. So an exchange does not create a debt or transfer a debt. It is a closed debt-free transaction. Very different monetary effect.

  3. The problem with gold is that it is often used by niggers for their teeth. This leads to gangbanging, gangbangs, and pants at their knees. There must be a way to keep niggers from getting gold.

    1. And the rent is too damned high.

    2. Is that why they hate the gold hoarding jews so much?

    3. 1/100 this attempt at parody sucks.

      1. The original OBL account is a parody account. Creating a parody of the parody is … just stupid.

        And as you say, this one sucks.

        1. Agreed. Dumb and stupid

  4. What astounds me is that, even after what he went through, he still doesn’t see the problem with being “part of the system”.

    Satoshi essentially created a new type of “gold’ (value store). It may not be shiny and pretty like gold, but its finite supply, and the ease at which it is stored and moved, make it far superior to gold. Or any other value store, for that matter, aside from land which has alternative uses, obviously.

    The notion that Bitcoin is not practical as a currency is not entirely true, but more importantly, not the point. While Jackson’s e-gold might serve better as a currency than Bitcoin, alt-coins such as Algorand and others solve this problem and more.

    I’m thoroughly impressed by Jackson and what he was able to achieve, but ultimately, his willingness to be a “team player” is, and will continue to be, his problem. He doesn’t have enough “punk” in him to meet the demands of a market that is looking more and more for punk solutions.

    1. Satoshi essentially created a new type of “gold’ (value store). It may not be shiny and pretty like gold, but its finite supply, and the ease at which it is stored and moved, make it far superior to gold. Or any other value store, for that matter, aside from land which has alternative uses, obviously.

      Satoshi did not create a new type of gold. He created an alternate currency that was supposedly anonymous (it’s not- but that’s another discussion).

      To bitcoin enthusiasts, the goal posts have shifted so much it might be more efficient to put wheels on them.

      In no particular order, Bitcoin is not “limited in supply”. There is an infinite potential supply of competing blockchain currencies. When this is pointed out, bitcoin enthusiasts immediately say “yeah, but Bitcoin is the ORIGINAL” as if that gives it some kind if immutable value that can’t be supplanted by a better, more efficient (and more anonymous) competing currency. Ultimately, there is a real possibility that bitcoin holders could find the value of their holdings plummeting if a better alternative pops up on the horizon.

      “It’s not shiny and pretty” is probably a more important aspect than your or I can quantify. That ‘shiny and pretty’ aspect… for whatever reason, has held an almost universal appeal to humans for most of history. While it’s an impossible task to quantify that in terms of monetary value, there is *some* kind of intrinsic value there.

      In addition, the physical nature of gold gives it industrial uses that are entirely unique. While I can’t name them all here, and of course industries change and where gold was useful or necessary at one time, it too may become supplanted by other materials– but either way, built into the price of gold is that industrial value.

      Another reason Bitcoin’s value is questionable is that it requires technology to transact. While this is really a more theoretical discussion, Gold or even dollars for that matter, require no technology to transact. While I don’t have any illusions about getting my pants pressed with an ounce of gold, it’s possible to do.

      All of this is why Bitcoin quickly went from an “alternative, game changing currency” to “it’s a store of value!” within the bitcoin community in just a couple of short years, once the obvious technical limitations of its transactability became clear.

      1. “In no particular order, Bitcoin is not “limited in supply”. There is an infinite potential supply of competing blockchain currencies. When this is pointed out, bitcoin enthusiasts immediately say…”

        Yes, “enthusiast”, (or possibly more apt, “fan boys”, as some are indeed fanatical) do say such silly things, but their fanaticism has merely caused them to make the wrong rebuttal. There IS a finite amount of BTC and is the ONLY reason it’s price is as high as it is. The presence of competing blockchains (all of which do not even compete in the same space), does not negate this fact. This first to market position is even more emboldened when (despite its failings as an everyday currency), it’s role as a value store is inherent and need not be improved upon anymore than gold does.

        On the other hand, you have accurately pointed out that there’s a competition and so there will be losers and winners, no doubt. While BTC could wind up being one of the losers, as the existence of those fanatics suggest, being first to market is a strong advantage/strategy for the emergence of any new category. It’s why Coke and cola were at one point synonymous (and still are to a much lesser extent).

        This argument is not all that different than comparing gold to other precious metals, or other multi-purpose commodities, like Diamonds. They each have their place as a value store, as well as serving various real world functions. They each have their independent value as such, just as the various blockchains have theirs.

        “All of this is why Bitcoin quickly went from an “alternative, game changing currency” to “it’s a store of value!” within the bitcoin community in just a couple of short years, once the obvious technical limitations of its transactability became clear.”

        Aye, early adopters were probably wrong on this. They could also be right for the same reason electric cars had obvious limitations at first. They still do, obviously, but they continue to become more and more practical as advancement overcomes those limitations. More to the point, though, is that even if something does not become what it intended, does not mean that what it became is worthless. Besides, in the crypto market, many of those vested parties I mentioned in my reply to your other comment are infrastructure plays. In this regard, BTC (or other crypto currencies) could be like the train that only needs a better track to make it optimal.

        “Another reason Bitcoin’s value is questionable is that it requires technology to transact.”

        No doubt! It’s a glaring weakness and even frightening prospect to consider if one was substantially vested in crypto in the event of a technological catastrophe of some kind. If this is what you meant, I think if our current society ever experienced such an event, neither cash, nor gold, would matter. We would be more like Venezuela where eggs, TP, etc would become the medium of exchange. Barter Town, anyone? If you’re referring to needing terminals like what is needed to process a credit cards, I actually don’t see your point.

        As far as anonymity, I’m not a criminal or tax cheat, so this was never really an appeal to me, but just as the Swiss used to provide privacy to its account holders, truly anonymous exchanges do exist. If they were ever compelled to comply/give up their data, as were the Swiss, okay. But unlike a country, there is much less to leverage a virtual exchange with.

      2. the physical nature of gold gives it industrial uses that are entirely unique. While I can’t name them all here,

        It is the exact opposite. It is the LACK of any serious industrial uses that means gold supply is extremely stable relative to itself over time. Money that itself fluctuates in price is an utterly crappy thing. Gold has intrinsic qualities that make it a commodity that is useful for extremely long debt terms and extremely large debt repayments. IOW – it is the preferred form of money by government creditors. And a backing for currency that is going to be based on debt.

    2. You may be right about it being better if he is not a “part of the system”, but if he is not a part of the system how should he deal with, say, child porn payments made via e-gold?

      1. It seems you’ve given me a false choice. If he’s independent of the system, he is not precluded from turning over the same information he had in the past. He just also needs to be out of the reach of the systems, so to speak, should they decide to foolishly bite the hand that was feeding them – again.

        1. That could work. Outside the system but not out of communication.

  5. “he was off and running toward his dream of a universally usable, cheap, and easy way to exchange value across the globe that didn’t depend on governments making wise monetary policy choices.”

    You don’t want to depend on government?
    You challenge the wisdom of government?
    (And you think you can take over some role of government?)

    Treason!

  6. The problem with e-gold is that they had a way to shut it down.

    Bitcoin not so much.

    We touched $60k today.

    1. Since it’s based on technology and access to information channels that the feds most certainly can control and monitor, I would not bet that they couldn’t shut it down if they chose. Bitcoin and the internet only seem open but it’s an illusion.

      1. They can certainly attack the off-ramps, at least in the US.

        Good thing btc is permissionless!

    2. E-gold was backed by something besides the hope of finding a greater fool.

      1. Yup.

        1. Luckily we don’t need to find a greater fool.

  7. “Bitcoin, he argues, is too slow and too expensive; it’s essentially unbacked; and it consumes too many resources. And all the other cryptocurrencies that followed in its wake have never mounted a serious attempt to solve day-to-day payment or monetary problems for the masses. Instead, he thinks, they’ve just offered promoters a chance to cash in on speculative mania. ”

    I completely agree with him.

    1. Agreed.

    2. As I believe I’ve stated before, I respect your takes a lot, and so I hope I either learn something here, or dissuade you of this current one of yours.

      “…is too slow and too expensive; it’s essentially unbacked; and it consumes too many resources”

      – As an everyday currency, it may be slow, but as a value store, it’s relatively lightning fast.
      – Perhaps here is where I might learn something should you proffer a reply, but I submit it needs no more “backing” than gold, itself, does. It is meant to achieve an inherent consensus value on which other things are backed by. Not the other way around.
      – the resources it consumes are substantial only during the mining, which is expected to be completed in 2027, if I remember correctly.

      “And all the other cryptocurrencies that followed in its wake have never mounted a serious attempt to solve day-to-day payment or monetary problems for the masses.”

      – This may come down to definitions and/or context, but it’s hard to imagine this is your unbiased belief. The suspected bias coming from the understandable concern that “they’ve just offered promoters a chance to cash in on speculative mania.” I think the obviously growing demand in crypto assures us that more than a few actors exist and are very vested in being a legitimate winner (solving the problems) in the various block chain spaces. The fact that there are a lot of bad actors in the market (as there are in any market), should not be an indictment of the entire market, or belie the demand that drives it.

      Wrapping my head around the supposed intrinsic value in lines of code was difficult when I first learned about it. In doing so, however, I gained a better (truer) understanding of what “value” really is. Subjective, yet definable. Abstract, yet concrete.

      If nothing else, crypto has the potential to expose and open younger eyes to the reality of monetary policy and the free market, itself. Perhaps I’m being too reductive and projecting my own experience here, but just as with me, the rise of crypto could really help better conceptualize what’s happening with our currency and the policies that are creating those effects.

    3. The “other” cryptos don’t have to solve the problem because BTC already did it.

      And the major problem we face is: What do we do when the government zaps up trillions of dollars out of thin air, every year?

      1. Bitcoin literally does the same thing, only it uses more and more electricity to do so.

      2. What do you do with bitcoin when a few dozen new cryptocurrencies can be launched every month, and one of them will eventually replace it?

        1. “What do you do with bitcoin when a few dozen new cryptocurrencies can be launched every month, and one of them will eventually replace it?”

          We have to separate what I assume are two separate “problems”(?).

          First, as Paul illustrated earlier, one must decide for themselves whether bitcoin is a potential “general use” currency, or better as a store of value. I believe that because it is of finite supply and as its current astronomical price suggests, it is generally regarded by the market as a store of value (and have invested accordingly). If that is the case, then it being “replaced” should not really be a concern. No more than it was for any pre-existing value store – I don’t believe the price of Gold, land, diamonds, etc. have taken a hit in market price since the surge in BTC price. Incidentally, Gold has had a market cap of around 9T, and BTC is currently around 1.1T.

          If you believe that it serves as a currency, then you’re right, it will almost definitely be replaced at some point by something that is not so slow to verify, among other issues.

          Like any other market, the competition always changes and is up to the investor to keep abreast of such changes and make adjustments to their holdings as they see fit. UNlike other markets, you’re right that barriers to entry are relatively small, and as a result, a proliferation of coins are the norm right now. Thankfully, it’s not really a problem in need of a solution. There are numerous coins that have potential to be that currency alternative, but it’s not something that gets resolved over night and unexpectedly.

          For what it’s worth, if you’re speculating on a new currency coming out of this, you invest in the sector, rather than any individual asset. Or for a more targeted approach to maximize gains, you separate the wheat from the chaff by dividing your nut amongst the top ten coins by market cap, and adjust as changes occur and are needed.

      3. And the major problem we face is: What do we do when the government zaps up trillions of dollars out of thin air, every year?

        Those trillions of dollars require repayment or rollover. That repayment/rollover creates deflation – not inflation.

        The reality is most of the inflation that was created by govt stimulus this year was already manifested in – house prices and stock prices. IOW – govt debt simply created a base for private debt. Homeowners are the beneficiary of that inflation. The direct zero-sum beneficiary if they use those increased prices to refinance.

        The deflation will occur if the cost of money ever becomes a free market again. Interest rates will rise – mortgage costs will either rise or housing will stop being sold – the monthly mortgage ‘nut’ will rise high enough to choke off all economic growth and transfer all economic growth to the FIRE sector.

  8. I lost any sympathy I had for him when I read he helped the police catch criminals.

    1. I agree Jeremy. Bit not because I give a crap for scammers and crooks, rather, because in order to accomplish this voluntarily self-pointed role as grand snitch, Jackson and his gang of snoopers had to violate the privacy of all their product users. Everyone! The extent of his dragnet method was astonishing in how it violated the financial privacy of millions of users — and for that alone he should have been sent up.

      1. Unlike some of the cyber-anarchists who later promoted bitcoin or other cryptocurrencies, Jackson had no ideological or practical interest in helping people commit crimes or evade law enforcement. He even elided his own company’s user agreement in cooperating with cops.

        “While inaccurately depicted in the media as a system affording anonymity and hospitable to criminal activity,” Jackson wrote in a 2020 memo about his ongoing legal conflict, “bad actors who believed this and elected to use e-gold as a platform for illicit activities commonly discovered that decision to be their career-ending, game-over mistake.”

    2. Wait. Such an attitude is often used against libertarian ideology. Libertarians are so often defined as anarchists for this very reason.

      Even libertarians believe in the rule of law. Less “laws” certainly. But those that exist must be accepted and adhered to. That requires enforcement in some cases.

      Don’t throw the haters another bone with witch to disparage libertarian concepts.

      1. So on the libertarian planet you’re from, fraud and braking contractual agreements regarding privacy is OK?

  9. Better Money: The Inside Story of e-gold Paperback – August 15, 2020, by P. Carl Mullan
    https://www.amazon.com/exec/obidos/ASIN/1735356913/reasonmagazinea-20/
    My book details the entire history of e-gold from day one through today. Dr. Jackson opened his files up for the 2 1/2 years I was writing the material. We covered the prosecution and the new FOIA/Florida evidence that shows the prosecutors and the USSS covered up their malicious case. Dr. Jackson should be vindicated.

  10. Stories like this make me wonder about the availability of sanctions against prosecutors who deliberately mislead the court in a case by making false statements and concealing exculpatory evidence or against attorneys or police officers who make false statements in the application for a search warrant. There was one recent high profile case involving the FISA court, but that’s the only one I remember seeing.

    I would have thought that such a person could be prosecuted for perjury if the statute of limitation had not run (as it obviously would have in this case) and, if a lawyer, disbarred. Am I correct legally? In practice, does it happen?

    1. From my area: 30 years ago Boston police lied to get a warrant. One officer was shot and killed during the raid. Due to the extra attention the truth came out. Judge was pissed, careers were ended, an officer was criminally charged, and a suspect who got a beatdown for being a cop-killer won a settlement.

      But it’s not common, hence the 30 year old story as an example. Usually the court says if you strike the lies from the affidavit a magistrate could have found suspicion in the rest (without considering that the magistrate might not have). And the potential perjury prosecutor is the one who relied on or defended the perjury in the first place.

      1. “magistrate could have found suspicion”

        Could have, should have, would have. A slippery slope indeed.

        This is most frequently seen in sports fans. It has no place in our judicial system.

  11. And please don’t also forget the sad story of Bernard von NotHaus’ Liberty Dollar:

    http://bernardvonnothaus.org/history-liberty-dollar/

    Another case of what happens to anyone who touches one of the main sources of government power, its money. If anything should prove that government is a power-focused political animal, it is the stories of these two alternative money systems.

    1. Guns and butter.

      Some of us have lived through such malinvestment.

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