I wrote an earlier post going over bitcoin. In it, I made a prediction that it would be more successful than most suspect, and I stand by that...but upon reflection, not for the reasons cited there. I was always suspicious about one or two technical parts of bitcoin, and the interview with one of the big bitcoin movers & shakers on the Peter Schiff show, along with Gavin Andressen's visit to the CIA have not helped such. Considering the history of cryptocurrencies, I could not believe that anyone would want to get the government involved in any way. Cypherpunks hate the government's control, and would not even try to sidle up to the powers that be...so I am forced to conclude that this has nothing to do with the cypherpunk movement, and their primary child, the cryptocurrency. The fact that you see almost no mention whatsoever of J. Orlin Grabbe's DMT, TruLedger or even lucre/opentransactions on the Bitcoin Forum, or practically any bitcoin information source gives me great pause. This, along with a few other things have led me to the conclusion that bitcoin is not a cryptocurrency, but a hologram[1] of a cryptocurrency.
To summarize my previous article, Bitcoin is basically the same as dollars from a technical standpoint but with the added advantages of being scarce, and not being controlled by the FED banking cartel. I think I left out the most important reason things will succeed, which I thought at the time was a fairly trivial conclusion to make based on the lack of FED control. That advantage would be that anybody can get in on the seigniorage train; bitcoin is literally a gold rush. Add these tough economic times to all the unemployed hipsters with computers and that's about all you need to conclude bitcoin isn't going anywhere anytime soon.
It is worth noting what I am not saying here though; gold is scarce and not controlled by a banking cartel...plus it can't be physically destroyed like bitcoin wallets can be done with a keystroke. So why would anyone use BtC over gold? Well, it would have to be a cryptocurrency to have an edge; and I did not define explicitly what that was. The primary selling point of cryptocurrency is that it cannot be tracked, not that it is possible not to be tracked. Bitcoins all contain a transaction history, ergo they are all unique, ergo they are imminently traceable...unless you launder them. Which is the real problem. If one has to go out of your way to launder things, the government can criminalize such an act, and the ability to evade taxes and exchange controls (the reason to have cryptocurrency in the first place) as a matter of form is basically gone.
There are other systems that did (and do!) have real untraceability, yet can be used in transactions credibly (as the tokens are basically reciepts, as laid out here). I even linked to them in the introduction...so why no mention? Why the trying to be friends with the government? And why did this currency initially billed as a proof of concept take off? All the arguments I used to justify bitcoin in my previous analysis apply, yet are even stronger in the cases of bitcoin's competitors. It's sudden success is because it was the first decentralized one; the DMT, E-Gold and others being shut down cannot happen to bitcoin, despite it not being a cryptocurrency in the most important way.
However, the ability to modify bitcoin to not have transaction registers beyond the last one, and to make everyone's wallets a part of the network (and thus not destroyable) could be easily added. And such will be done; this will result in a pretty much perfect cryptocurrency, supposing it uses the strongest crypto it can. However, I doubt it will take over and kill bitcoin despite it being better for the intended purpose. This is because there will be a huge number of folks with a large vested interest (indeed there are several large interests already) in keeping bitcoin going, and the government, when confronted with a perfect cryptocurrency, will opt to stick with the devil it knows. That the bitcoin majors seem to be trying to cozy up to governments makes me think that they perhaps anticipate this; and to their credit, they see what little improvement this represents over the dollar as worth it.
It is a pity that in this regard, "worse is better". However, this does not change the fact that people will use the better form whether bitcoiners or the government wants them to; and this gives me hope due to the extreme police-stating that will be required to stop it. Anything that can kill a perfect cryptocurrency from being used will kill the imperfect one too; so maybe Gavin and Don Norman aren't so out there sidling up to the powers that be. Perhaps they think bitcoin could go from being a mere hologram, a false promise, into a Trojan horse. If it catches on enough to become widely legitimate, there will be no stopping real cryptocurrency from coming along and dealing the killing blow to asset taxation.
I think that may be a bridge too far, however. Governments will NOT like having their seigniorage gravy train taken away; this is a serious barrier to becoming legitimate. Furthermore, if things are forced by a dollar collapse, it is more likely that gold rises back to the top than bitcoin. So, I think we have to go back to the strategy of the cypherpunks: Use barter dead dropping (like with TruLedger) and real cryptocurrency to take yourself out of the system. Run, silent, run deep. Withdrawal of consent from the current system is what is required for real change.
