It’s clear that governments can use financial censorship to squeeze worthy and unworthy targets alike for the time being, but it’s less clear if governments can maintain this power for much longer. The moment raises a pressing question for cryptocurrency enthusiasts: Does bitcoin solve this?
Does a global, decentralized monetary system that nobody can manipulate or control take away the power of the state to use financial censorship as a weapon, for good or for ill?
A surprisingly successful bitcoin-based crowdfunding campaign called “Honk Honk HODL,” which raised more than $1 million worth of bitcoin for the Canadian truckers, shed some additional light on that question. And the answer appears to be, “eventually, maybe, but there’s more work to be done.”
This is from Zach Weissmueller, “The Canadian Government Couldn’t Stop Bitcoin,” Reason, March 11, 2022.
Having never bought or sold Bitcoin or any other cryptocurrency, I don’t claim to understand all the ins and outs that Weissmueller discusses, but I kind of get them.
The bottom line is that there is some reason for hoping that Bitcoin and other cryptocurrencies will protect us from some of governments’ worst assaults on our financial liberty.
The whole thing is worth reading.
READER COMMENTS
Alan Goldhammer
Mar 12 2022 at 9:37am
The value of cryptocurrencies is overrated. There is a public ledger of transactions and at some point under the current monetary set up, crypto has be be converted to cold hard cash in order to conduct routine business transactions. The wild swings in crypto value makes it unappealing as a transactional medium for such transactions. Say you are a shopkeeper and you want to accept Bitcoin but the interday swings unnerve you, how do you price goods or services?
It is difficult for me to figure out how this can be achieved. In the absence of regulation of crypto (and I am a firm believer that it should NOT be regulated; can you envision the clamor for deposit insurance on crypto holdings if they are linked to the banking system?). What is the role of multiple cryptocurrencies in this scenario? At least holdings in dollars, are reasonably stable and easily used in commerce.
A thorough reading of the linked article points to the key pitfalls of relying on Bitcoin in this use scenario. As is noted, anyone thinking that these exchanges of Bitcoin remain out of the eyes of governmental authorities is mistaken.
Jon Murphy
Mar 12 2022 at 12:47pm
I’m not sure these are as big of problems as you think. Given the sheer number of firms, from small companies to major sports franchises, who transact in Bitcoin I think it’s probable that a number of solutions exist for the problems you list. I do not know what they are as I am not a Bitcoin scholar, but the evidence is there that problems have been solved (or, at least, mitigated) to an extent to make Bitcoin viable.
Alan Goldhammer
Mar 12 2022 at 5:29pm
The problem of Bitcoin volatility absolutely has not been solved. Furthermore, nobody really knows how many Bitcoins are actually in circulation given the number of lost passwords that resulted in people losing their Bitcoins. In those cases, they are out of luck and the Bitcoins cannot be recovered. I’ve read estimates that as much as 10% are out of circulation as a result. Most of those were from early miners who were doing this on a lark not thinking that the coins would be valuable.
Sports teams are a niche business in the overall economy. the reference you posted was a single incidence of from one franchise in the NBA.
Jon Murphy
Mar 12 2022 at 6:46pm
“Solved” insofar as “people have figured out ways to handle the volatility.” That’s what I meant. All currencies are volatile (look at the dollar right now). People come up with all sorts of solutions to those problems: long term contracts, currency hedges, etc.
My point is that the problems you cite are not preventing take-up of Bitcoin, and many organizations of all sizes are operating with the currency. What the methods they’ve adopted to cope with Bitcoin’s issues are, I do not know. But clearly they exist.
Brian
Mar 13 2022 at 1:09am
When you buy a Mavericks hat there is a USD price and it is converted to the displayed Bitcoin price at the spot value of Bitcoin. The Bitcoin price is valid only for a few minutes to allow the purchase to be made. When the vendor receives the Bitcoin they have the option to convert it to USD immediately if they are not interested in speculating on the value of Bitcoin. This way the vendor’s USD profit margin is at risk for only a few minutes if they want to run a conventional goods and services business. Whether Bitcoin is 1 USD OR 40,000 USD doesn’t affect the volatility in the USD profit margin as long as the percentage volatility of Bitcoin is the same at all values of Bitcoin.
Brian
Mar 13 2022 at 1:19am
In effect, the Mavericks hat vendor doesn’t have to “operate” in Bitcoin because they have a USD price they are willing to sell at and they are almost certain to receive some amount similar to that if they are operating a normal merchandising business and they will earn a USD profit margin that will average to their expectation.
Matthias
Mar 13 2022 at 5:15am
You are right that all transactions in bitcoin are published in a pseudonymous ledger.
However there are alternative cryptocurrencies that are working on that problem.
So called stable coins are on attempt to deal with volatility.
Warren Coats
Mar 12 2022 at 8:50pm
The optimal system (solution) is a hard anchor (government fix price for something such as gold but preferably a small basket of commodities) to money issued according to strict currency board rules by banks or licensed money service providers. Then the supply will be purely market determined with the market value of the anchor. https://works.bepress.com/warren_coats/25/
Billy Kaubashine
Mar 13 2022 at 9:45am
There are already several crypto-currencies. Why would there be any limit to the number?
What happens to the nominal and relative value of existing crypto-currencies as more and more are introduced?
Tim Townsend
Mar 13 2022 at 12:16pm
Cryptography has advanced light years in the 21st century and its use by financial institutions is impressive as well as the creation of the Block Chain and the solving of double spending in cryptocurrency. However; codes, even though those that change instantaneously, can be broken and thus the basis of cryptocurrency is always at risk.
David Dzidzikashvili
Mar 27 2022 at 2:23pm
Blockchain tech & crypto projects are not just the game changers, but definite part of our future. Crypto & Blockchain tech + Metaverse + Web3 = Future digital economy!
The web3.0 and the future digital economy is based on this innovative tech, its development and progress.
In general, there are wide variety of projects in this space. However, some of these projects provide superfast (Solana for example = up to 100K transactions per second vs. 4k/5k TPS for Visa and MC) and secure transactions at the fraction of the cost that can rival established banks and financial institutions.
Why pay Visa/MC high fees when Solana, PolkaDot or Eth 2.0 could provide much faster and much cheaper processing power?
Comments are closed.