Bitcoin’s Formidable Attack Vectors

Who stands to lose the most from the emergence of math-based currencies like Bitcoin?

Of course, the answer is the centralized power structures and they will not give up that power willingly.

Here are some of the tools at their disposal:

1. Disinformation & Destabilization
2. The outlawing of math-based currency exchange businesses
3. 
The outlawing of math-based currency acceptance

If they are unsuccessful at using the tools of Disinformation and Destabilization they will move on to the next two. These are what I will address in this short post.

In regards to numbers 2 & 3 above, the current trend appears to be towards the regulation of exchange businesses vs. their outright banning. This is not to say that governments would not change their tune in a heartbeat once these currencies became a more serious threat to their power. But for now they have not chosen that path. This gives these currencies more time to establish a foothold in the marketplace.

Making exchange businesses illegal would be a difficult task because it would require all the superpowers to act in concert to shut them down globally. This is no small endeavor since some nations may want to compete for the capital that free-market currencies would attract. Of course these nations might soon find themselves at the receiving end of economic sanctions and/or outright invasion.

The only nation that can truly defend itself is the “darknet”. This is the nation of cyberspace – hidden behind anonymous websites and encrypted communications. It is the “ultimate offshore” haven.

Math-based currencies do not need legalized exchange businesses to survive. Yes, attacks against the exchanges can hurt the current demand (depressing the current price) but they would still exist in the underground economy.

The demand for a more efficient anonymous currency would remain.

What underground marketeer would want to carry around bags of national currencies when he can have a hidden phone app or brainwallet with access to enormous wealth which is instantly transferable to almost any spot on the planet?

Like any banned commodity, individual exchanges would still communicate the exchange rates of these math-based currencies. There are no “legal” exchange businesses that publish prices for “illegal” items yet “illegal” buyers and sellers openly publish their prices on “darknet” marketplaces like Silk Road.

There are already “sellers” of national currencies, “sellers” of bitcoins and “sellers” of illegal drugs on Silk Road and similar websites. Each of these commodities can be delivered with little chance of the sender being discovered when proper measures are taken.

Seller reputations in these “darknet” communities would become even more valuable. Buyers would still have to worry about “sting” operations.

There will always be a demand for these math-based currencies that can instantly transfer value across distance without third-party interference.

Since the world now operates on “internet time” we can only hope that the spread of math-based currencies, and their recognized benefits to humanity, continue faster than the enemies of human life can react – essentially becoming ubiquitous and “too big to stop”. Otherwise, they will be relegated to the underground economy and exist at an albeit smaller scale – which is only a 10 trillion dollar economy.

The Myth of “Intrinsic Value”

Many folks make the argument that Bitcoin has no “intrinsic value”. What they fail to realize is that no thing has “intrinsic value” – not even gold. No thing has value in and of itself. Value is a verb. In order for something to have value it must be “valued” by someone.

Value is subjective.

Bitcoin is not “backed” by anything and neither is gold. Neither has to be backed by anything. Some people value gold for what it is and what it allows you to do with it. Some people value bitcoin for what it is and what it allows you to do with it.

Bitcoin is a new commodity created to serve the market demand for a better medium of exchange.

Bitcoin and Why Mises’ Regression Theorem is Wrong

For a little background please read Bitcoin: A New Commodity Created To Serve Market Demand. In this post I take it a little further.

In short, Mises’ Regression Theorem is wrong – I know this is heresy to the Austrian Religionists but think through this a little:

Bitcoin was primarily created to be used (100% DIRECT USE) as money (a store of value, medium of exchange, unit of account) not to mention its many other potential uses such as smart property and smart contracts. There was never the intent for it to have a prior use.

It was created to serve the market demand for a better medium of exchange specifically in the hampered market. I believe Mises’ Regression Theorem assumed an unhampered market. [updated for emphasis & clarification]

Another way to look at the bitcoin protocol is that it is a publicly auditable accounting mechanism which works extremely well for hawala-type transactions.

Two trading partners can voluntarily agree on an exchange rate (price discovery) and then trade using the trusted bitcoin accounting mechanism as a medium of exchange.

In another sense, you can look at bitcoin as an “opt-in” community currency (much like Ithaca Hours or any other community currency) where trading partners can opt-in or out at any time. People are “opting in” because it is trusted, decentralized, and better than gold in many respects (you can smuggle bitcoin across borders much easier than you can gold).

How to set up your own bitcoin trading network, protect your privacy and save exchange fees

Problem: The large, centralized bitcoin exchange services are not private (most are now requesting detailed personal information to satisfy Anti-Money Laundering regulations). It also can take time to open and fund an account and the transaction fees can add up. Not to mention, these centralized exchanges are vulnerable to targeted attack by cyber-criminals and governments.

Solution: Set up your own bitcoin trading network

Here’s how you do it:

Essentially you want to cultivate your own personal network of trusted trading partners. Make a market in bitcoin among your social network. Put the word out that you are the “go to guy” to buy or sell bitcoin. Build your “little black book” of trading partners that you can contact whenever you need to increase or decrease your bitcoin holdings. Join or organize local Bitcoin Meetup groups to expand your network.

Build your reputation as a trusted trader (Bisq.network). Ask every trading partner to think of you first when they need to buy or sell. Point out the privacy and money-saving advantages of staying “off exchange”.

The goals are to:

1. Help others in your personal community easily move in and out of bitcoin

2. Ensure yourself a reliable source of buyers and sellers

3. Facilitate the easy exchange between currencies which helps remove friction in the bitcoin economy

4. Reduce exchange fees

5. Preserve privacy

6. Reduce risk of attack from predators

Ideally we may someday arrive at the point where everyone is an exchanger and the process of exchanging bitcoin will be as easy as asking someone to “break a twenty”.

Bitcoin is an “opt in” community currency, here’s how you can get it at a discount

Bitcoin is a currency used by a community of individuals and businesses. It is used to facilitate the trade of goods and services. It is private, irreversible and transfers are virtually instantaneous – whether they are across the room or across the globe.

Bitcoin has all of the characteristics of a quality medium of exchange. It is accepted on a voluntary basis and there are over 45 million dollars worth already in circulation.

Bitcoin is basically an “opt in” currency. You have to “opt in” if you wish to accept it. How do you opt in? Simply let it be known that you will accept it as payment.

When you offer your goods and services in exchange for bitcoin you are essentially acquiring bitcoin at your “cost of goods”. For example: if the cost of your goods or services is half of your retail price, then you are essentially acquiring bitcoin at a 50% discount.

Are you interested in more business? If you decide to accept bitcoin as another payment option for your products and services you will open up your business to a whole new market of potential customers. By listing your products and services in the bitcoin wiki you will get free advertising that is yours for the taking.

To summarize, if you would like more business why not “opt in” and join us in the bitcoin community?

BITCOIN – What It Is and Why It Matters

I’ve published into a small booklet a compilation of my bitcoin posts from this site. It makes a great primer for someone who is new to bitcoin.

Click here to buy with bitcoin

Click here to buy on Amazon.com

Bitcoin Is Backed By Me

by Bitcoin Merchant

A lot of people fret over the idea that bitcoin is “not backed by anything”. Well, I’m here to tell you that it is. It is backed by my products and services. And it is also backed by the products and services of a bunch of other people. Together we form a market.

Currently, we look to the major exchanges to help determine our exchange price but what if the exchanges are shut down or regulated out of business?

Not to worry. There are those of us who value bitcoin as a commodity. We like it for what it is and for what it allows us to do. If the prominent exchanges are taken away from us, we – the users in this small but growing community – will arrive at an exchange value on our own. Come join us, it’s not so bad.

Author’s Note: Please repost this to your website if you accept bitcoin.

The Sunset of the State

Bitcoin: The Ultimate Offshore Bank Account?

By Anthony Freeman

In my previous posts (here, here, here, here and here) I’ve highlighted the many benefits of bitcoin and I recommend you review them for further understanding. In this post I will focus on what I believe gives bitcoin the potential to become The Ultimate Offshore Bank Account.

First, we have to ask – why do people go offshore in the first place? Here are what I believe to be the top reasons people choose to move their money offshore:

• Financial Privacy
• Protection from Theft
• Protection from Litigation
• Currency Diversification
• Jurisdictional Diversification
• Global Access to Funds

Here is how bitcoin satisfies each of these goals:

Financial Privacy

Out of the box bitcoin is pseudonymous and very private. Bitcoin is essentially digital cash. When you download the application you can physically store* the funds on your computer, a flash drive, or even upload them to the cloud. Current projects under development hold the promise of making bitcoin totally anonymous (see Open Transactions: link 1, link 2) .

Protection from Theft

Bitcoin is protected by the peer-to-peer network with no central authority. Combining this network with high-grade encryption makes it virtually impossible for any person, or group of persons, to take your money without your permission.

Protection from Litigation

This falls under the rule of “what they can’t find they can’t get”. By moving your money into bitcoin and obfuscating its whereabouts you become virtually “judgement proof”.

Currency Diversification

Every national currency is manipulated by central banks and governments. Bitcoin is limited in supply and cannot be inflated like national currencies can. This gives it potential to be an excellent store of value.

Jurisdictional Diversification

Bitcoin can be hidden behind encryption and stored in cyberspace – making it everywhere and nowhere at the same time. What existing power structures cannot find they cannot steal.

Global Access to Funds

Bitcoin can be accessed anywhere in the world. Not even an internet connection is necessary.

Additional Benefits:

No Counterparty Risk

When you store assets in any bank or gold-storage facility, those funds are an asset on your financial statement but they are also a liability on the financial statement of the other party. This exposes you to the risk of default, bankruptcy or fraud by the other party. When you retain physical possession of your assets through bitcoin – you eliminate this counterparty risk. Like physical possession of gold and silver, bitcoin is an asset with no corresponding liability.

Ease of Use

While there is a slight learning curve required to use bitcoin, you don’t have to fly to another country to open an account – nor do you have to provide any type of identification or tax number to own bitcoin. You do not need anyone’s permission to use bitcoin. It is truly “the people’s money”.

Mobility

You can cross borders with no physical currency on your person yet you can literally have access to a fortune via a flash drive or a simple internet connection.

The Network Effect

If more people across the globe discover the value and usefulness of bitcoin it will rise in value and usefulness to you.

Conclusion

Cyberspace is the ultimate offshore and bitcoin has the potential to become the ultimate offshore bank account.

*Technically, you do not store funds on your computer or other device. What you actually store are your “private keys” which give you title and control over the accounting units referred to as “bitcoin” which are tracked on the peer-to-peer network.

Financing the Revolution

http://vimeo.com/27653912