# Last edited on 2014-06-06 14:48:13 by stolfilocal

Dear @aminorex, thanks for the reply.

You ask what are the old bitcoin dogmas and dreams that I think were
broken in 2013. Among them:

  * "[b]The network effect and first-player advantage will prevent the
  appearance of other cryptocoins.[/b]"

  The rise and persistence of the altcoins has shown that those
  advantages of bicoin were not strong enough to cancel the motivaton
  for the creation of other coins. Which is, "why should I use bitcoin,
  and let Satoshi and friends become filthy rich at my expense, when I
  can create my own coin, and become filthy rich at other people's
  expense?"

  [i]Perhaps[/i] the altcoins will eventually die and only bitcoin will
  survive; but now that is a matter of faith, not logic. 
  
  If the cryptocurrency "market" is going to be a free market, rather
  than a monopoly, the limited supply of bitcoin should not result in
  ever-increasing astronomical prices, but in a shrinking market share.

  * "[b]Bitcoin can incorporate any technical improvement that altcoins
  could have[/b]"

  This no more feasible for bitcoin than for any other sofware system,
  such as a programming language or operating system. Some features of
  competitors can be incorporated, but others would require susbtantial
  redesign and would require substantial adaptation effort from users.
  (It would be pointless to try to make emacs into a WYSYWIG editor, or
  to add elisp programming to MSWord.)
  
  Moreover, it usually takes years for a new feature to be recognized as
  a real improvement worth copying; and by that time the competitor may
  be well established.

  * "[b]Bitcoin will let us make payments that are not allowed by
  governments and banks.[/b]"
  
  The SilkRoad bust showed that this dream has serious limitations, to
  say the least. Governments have various tools and tricks for detecting
  illegal payments and identifying the parties involved (including
  posing for illegal merchants or coercing them to cooperate). 
  
  In particular, the bitcoin economy must eventually connect to the main
  economy, either through national currencies or purchasing goods; and
  the identities of accounts can be traced from there.
  
  I should not need to tell you that bitcoin transactions are not truly
  anonymous but only "pseudonymous"; and it does not seem possible to
  retrofit true anonymity into the bitcoin protocol.
  
  * "[b]Governments cannot stop bitcoin.[/b]"
  
  China has shown that bitcoin can be effectively stopped by rendering
  it useless for general commerce (internet or otherwise), and
  restricting the use of banks and other payment methods for bitcoin
  exchange. 
  
  I read that Russia and India, among others, have also banned
  bitcoin in some sense.  Many other governments (including the US and
  allies) have tolerated bitcoin only because it is too small for them
  to bother. That will surely change if bitcoin transactions grow,
  and/or it gets used for things that are illegal or against the
  government's interest.
  
  While the less developed countries may not be able to stop bitcoin
  transactions between their citizens, I have no doubt that the US and
  other nations can interfere with the Bitcoin Network in a way that
  will make it inaccessible to most of their citizens. Even if that were
  technically difficult, just making bitcoin illegal would have a
  similar effect: if accepting payment in bitcoin could result in a hefty
  fine, your newsstand will not accept bitcoin for chewing gum any more.
  
  * "[b]Bitcoins are fungible.[/b]"
  
  This is not quite true already, and can only become less true with time.  
  Already people have been posting addresses that supposedly contain
  stolen bitcoins.  If bitcoin were to become widely adopted, almost 
  certainly the FBI or the Interpol would create a database of  
  addresses (and therefore bitcoins) belonging to thieves, scammers, 
  drug traffickers, terrorists, Iranian and North Korean officials, etc.
  
  Presumably they already have a database of serial numbers of banknotes
  involved in bank heists, ransoms, etc.. However, they cannot force
  everyone who receives a cash payment to access that database and check
  every banknote they receive against it. Thus people cannot be punished
  for accepting reasonable amounts of stolen cash, and that database can
  only provide hints, not proofs.
  
  With bitcoin, however, updating and checking the "bad coins" database
  can be automated; so laws could be passed requiring merchants to do
  that check on every bitcoin payment, and promptly transfer any "dirty"
  bitcoins that they receive to the government; with failure to do so
  being considered receipt of stolen goods, money laundering, etc..
  
  Moreover, since the blockchain is public, anyone can mark bitcoins as
  being undesirable for their own reasons, and track them -- e.g.
  Islamic states could criminalize the receipt of "Israeli bitcoins" by
  their citizens, and vice-versa.
  
  * "[b]Bitcoin will be forever "owned" by us Western Libertarian
  computer nerds.[/b]"
  
  Admittedly, I do not recall seeing this belief explicitly stated, but
  it seems to be an implicit assumption of the most enthusiastic
  bitcoiners.  It seems to be a prerequisite for bitcoin becoming
  the key to the Libertarian economic utopia.
  
  However, in 2013 China entered the bitcoin scene, and since then the
  open Bitcoin market has been dominated by a small army of Chinese
  speculators. It is those Chinese speculators (in spite of all
  constraints by their government) who set the BTC price, even today.
  
  Unless the Chinese stop trading bitcoin, or some market much bigger
  than China opens up, the bitcoin price will remain unpredictable and
  extremely volatile. The volatility is an obstacle for its adoption as
  currency of trade and as a store of value, and even to the
  profitability of bitcoin mining. (I do not need to tell you that, I
  suppose.) 
  
  Of course, the fact that China -- almost the perfect opposite of 
  the Libertarian dream -- rules the open bitcoin market 
  is extremely unpleasant to Western bitcoiners, and many of them
  are still refusing to acknowledge that fact.  
  
  The Chinese also seem to have a large presence in the mining
  market, both as providers of ASICs and as large-scale mining
  operations.  (You know about this better than me of course.)
  
  Worse, after the Chinese speculators lifted the price 10x (or 50x, if
  the early 2013 rally is their doing too), an army of crooks and
  opportunists took over the political and financial parts of the
  "bitcoin economy". Even when they are not professional scammers like
  Danny Brewster, those entrepreneurs have little interest in the
  longterm future of bitcoin and ideals, Libertarian or otherwise: they
  are only interested in short-term profits, or worse. Thus we have
  ventures like the SMBIT and PBP, which do not really help bitcoin achieve
  its goals, but will only skim a few million dollars from investors who
  are lured to it.
  
  I must say that, in these five months that I have been looking at
  bitcoin, I have still to find ONE "bitcoin personality" whose opinion
  I could trust -- someone who has been honest in the past and who has a
  valuable reputation that he may be reluctant to lose. On the contrary, the
  bitcoin scene is dominated by people like Mark Karpelès, Charlie
  Shrem, Amir Taaki, Roger Ver -- who do not inspire any trust at all,
  to put it very mildly. The "election" of Brock Pierce the board of the
  Bitcoin Foundation -- and the way he was "elected", and the
  indifference of the "bitcoin community" to that event -- should be
  enough to keep any decent human being away from bitcoin. (Are you aware of
  his VERY close connections to Autumn Radtke?)  
  
  Were the "Zero-Niners" expecting this sort of thing, before 2013?
  
You also dispute my alleged claims that 
[quote] it was not possible to use
ordinary legal recourse simply because a transaction was mediated by or
denominated in BTC. This is demonstrably untrue, from the body of court
precedent in the U.S., for example. [/quote]

I don't recall what I wrote exactly. If it came out as saying that "the
law does not recognize bitcoin payments", sorry, that is not what I
meant. I am aware that the law recognizes intangible property. (IIRC,
there have been lawsuits about stolen or undelivered computer game
weapons etc.. And the Cypriot police issued an arrest warrant for Danny
Brewster for him having failed to deliver bitcoins to people who paid
euros for them.).

What I meant is that bitcoin's "features" may make it impossible to
[i]prove[/i] that a crime has been committed. Say that you buy a laptop
via internet, paying in bitcoins (directly, not through BitPay); but the
merchant does not send you the laptop, and denies having received your
coins. You can point to the blockchain and transaction records as proof
that some bitcoins were transferred from address X to address Y. But how
do you prove that address Y belongs to the merchant's? With luck, you
may have saved a screenshot of the relevant webpages -- but screenshots
and other digital records that YOU created could have been easily
doctored by you.

Even if you prove that address Y belongs to the merchant, if he says
that he received those coins from a guy called "Ramluda Antonictvius"
who picked up the laptop at his store -- how do you prove that address X
was yours at that time, and YOU did the transfer? (Showing that you NOW
have the key to X is no proof: if X was emptied by or after that
transaction, you could have obtained the now worthless key from someone
else, for the purpose of making a false claim. And screenshots or other
digital records that YOU made would not prove anything, either.)

Ditto if a hacker breaks into your computer (e.g. through a malicious
wallet software), gets the private keys to your accounts, and sends off
transactions that move your savings to other accounts. You can prove
that the transactions happened, but how do you prove that the source
addresses were yours, that the destination addresses are NOT yours, and
that the transactions were not issued by yourself? (A police
investigation of the MtGOX "hack" may well run into this wall.)

Finally, about the letter to the "Dear US Government": you don't have 
to actually rewrite it, only think whether you [i]could[/i] do that.

The point is that bitcoin's stated goal -- not in Satoshi's paper
perhaps, but definitely in the Zero-Niners' credo -- is to bypass all
the government controls and barriers that governments have been building
over the years, such as KYC and AML, to block and seize money of
terrorists, drug traffickers, enemy countries, etc..

So, why should the US Government help bitcoiners achieve that goal -- in
particular, by authorizing the ETFs that are supposed to boost adoption
in the US? (They may even do this, it will not be their stupidest
decision by far; but, if bitcoin really catches on, they will soon
realize that they are shooting their foot, and ban or neuter it.)

These are some (not all) of the reasons why I am skeptical about
bicoin's success in the long term -- that is, it being onde day widely
used for legal internet payments for its advantages to common users, not
just by owners of old bitcoins or to "help the cause". 

You may not agree with my probabilities, but I hope you agree at least
that they are legitimate reasons for skepticism if one has somewhat
more pessimistic probabilities.

All the best,

--jorge