“It is difficult to make predictions, especially about the future,” says a proverb often attributed to Yogi Berra. Imagine the world of freedom, or lack of it. Who could foresee the technologies that make our lives so rewarding and convenient? The same technologies have us all under the government’s giant microscope. Thankfully, the brave have turned the microscope around.
In the months since Edward Snowden revealed the nature and extent of the spying that the National Security Agency (NSA) has been perpetrating upon Americans and foreigners, some of the NSA's most troublesome behavior has not been a part of the public debate.
The problem for NSA apologist is that when guys like Snowden disclose that the government conducts comprehensive surveillance in ways that would have made 1984’s O’Brien drool, it puts the entire progressive agenda in jeopardy.
The east coast and parts of the southern U.S. were to varying degrees paralyzed by blizzards a few weeks ago. The snow as expected rendered the roads treacherous, and in anticipation of slick streets, shoppers flocked to the grocery stores in advance.The rush into grocery stores, and its aftermath, offers worthwhile lessons in economics.First up, […]
The financial world is plodding along like a drunken sailor avoiding debt collectors by keeping no cash in his wallet. It’s not the kind of calm that’s going to last or end well. But the storm will have to wait until after the Olympics.What a game! We’ve never watched ice hockey closely before. But watching […]
In times of war and national emergency, it’s sometimes necessary to sacrifice civil liberties to secure vital gains in public safety. In those cases, we may have to accept a loss of privacy or freedom rather than invite mass slaughter of Americans.The National Security Agency’s domestic phone records collection is not one of those.Never have […]
Last year was quite the year for Bitcoin. We’ve seen exponential growth in Bitcoin’s exchange rate and extensive coverage in the media. Another phenomenon we have witnessed is the proliferation of alternative cryptocurrencies, five of which we’ve provided below.What all of these cryptocurrencies have in common is that they rely on a decentralized network to […]
Image: ShutterstockBitInstant CEO Charlie Shrem, along with alleged co-conspirator Robert Faiella, was arrested by federal authorities last week for allegedly laundering more than $1 million worth of Bitcoins. This is a tiny amount compared to the largest drug-and-terrorism money laundering case ever. Yet when British bank HSBC was found guilty in 2012 of laundering billions, […]
The exercise had an awesome name, inspired by the movies: “Quantum Dawn 2.”On July 18, scads of U.S. banks, stock exchanges and government agencies took part in a digital fire drill — a practice run in the event all of Wall Street came under massive cyberattack.This isn’t the first time banks have come under an […]
The faces of the Detroit bankruptcy are the thousands of pensioners whose promised benefits are suddenly part of the restructure negotiation. When Motown filed for Chapter 9 last July, the city had $11.5 billion in unsecured liabilities. The vast majority of this was pension and health care benefits owed to retired city employees.The images of […]
The New York Times published an interminable article on health care recently. Plenty of facts — how scrupulous are these journalists! — but the article displayed absolutely no comprehension of the basics of cause and effect. I was left wondering about the whole point.The article details how the health care system rewards specialists to an […]
We’ve pointed out in the past that President Obama’s views on the surveillance state shifted completely from when he was Senator to when he was President. As Senator, he supported a bunch of reforms that are very much like the ones his panel have suggested — and which he’s about to ignore. The NY Times […]
Bitcoins are largely considered digital currency (or “crypto currency”) so you’d expect it to be treated like currency on a retail web site. But the Internal Revenue Service might not think so.
The great inventors/businessmen of the First Industrial Revolution, such as James Watt and Matthew Boulton of steam-engine fame, were not just smart but privileged. Most were either born into the ruling class or lucky enough to be apprenticed to one of the elite. For most of history since then, entrepreneurship has meant either setting up […]
Both research and production look poised for a revolution as 3-D printing applies its high-tech charms to the business of creating chemical compounds and turns the production of medicine into a DIY project.
“Tea. Earl Grey. Hot.”When Capt. Jean-Luc Picard wants a steaming beverage in his ready room aboard the starship Enterprise, he just utters those words. The ship’s “replicator” then assembles the necessary atoms — including those for the cup — and produces it, ready for the drinking. Picard thinks nothing of it — it’s hardly more […]
The market has selected different things as money throughout history. Some of these items have served as money in isolated places for specific periods of time — for instance, cigarettes in prisoner-of-war camps. Cigarettes continue to be a currency in prisons if allowed, but if not, according to Wikipedia, “postage stamps have become a more […]
[Ed. Note: This article originally published on Jan. 24, 2013]Stocks up. Gold down. Bitcoin… waaay up.The S&P 500 busted through the 1,500 mark this morning. Stocks haven’t been this expensive since 2007… right before they got a whole lot cheaper… for a whole lot longer. Gold, meanwhile, dipped a tad. This, despite central bankers of […]
Before the housing market collapsed and the government pumped billions into the economy to save it, there was a programmer named Satoshi Nakamoto. And without much fanfare, he created an idea that’s in the process of changing the world. His idea was Bitcoin.Some background information is in order before I go any further.Think back to […]
Americans are still trying to get a handle on the full extent of the government’s domestic spying activities, including the recent revelation that the National Security Agency (NSA) has been collecting and storing the email address books of ordinary Americans using online messaging services. Many users of such services are looking to tech executives for […]
The online Internet exchanges created by the Affordable Care Act are up and running.OK, they’re up. Uhh, OK, some of them are sort of up.It has been almost a week since last Tuesday’s initial launch, and there have been more than a few problems.Website crashes, excessive response times and other problems have plagued the exchanges. […]
A growing consensus of IT experts, outside and inside the government, have figured out a principal reason why the website for Obamacare’s federally sponsored insurance exchange is crashing. Healthcare.gov forces you to create an account and enter detailed personal information before you can start shopping.This, in turn, creates a massive traffic bottleneck, as the government […]
As much as I love technology, part of me hates being so dependent on a live wall plug wherever I go. You find yourself trapped in some setting without accessible wall plugs and your phone is dying. You charge from you laptop, but that is dying too. You take recourse to your tablet, but that […]
U.S. and British intelligence agencies have successfully cracked much of the online encryption relied upon by hundreds of millions of people to protect the privacy of their personal data, online transactions and emails, according to top-secret documents revealed by former contractor Edward Snowden.The files show that the National Security Agency and its UK counterpart GCHQ […]
Today, like most days, I fired up my computer.I read freely available information on the latest developments in technology that would, in the not too distant past, have required a drive to a library to flip through journals too numerous for me to afford. I read the latest national and global news without having to […]
On a Sunday afternoon swim, a 6-year-old boy was bugging me in a sweet sort of way. He rode up and down the handrail on the stairs in the shallow end of the pool where I was trying to sit in peace. He was laughing and talking, but I couldn’t understand a word through the […]
I’ve just completed a heavy schedule of talks at the Agora Financial Investment Symposium in Vancouver. All my talks centered on information economics, Web startups, and the productivity of the Internet and its meaning. As usual, I learned as much from the attendees as (I hope) they learned from my talks. The research I did […]
The opening talk at the Bitcoin 2013 conference in San Jose was given by the Wilklevoss twins, purported owners of 1% of the world’s existing Bitcoins. They addressed the burning question of whether and how much Bitcoin ought to be regulated by government.
Their primary message: “I don’t think anyone wants a fight — I think everyone here wants to build Bitcoin, to work with regulators… Cooperation is really the way forward.”
That was the opening salvo.The Bitcoin Foundation’s executive director also weighed in. “It’s time to engage with regulators and have a good, productive conversation,” Peter Vessenes told Cnet. This comment, and the Foundation’s intention to hire a lobbyist, prompted widespread calls from the rank and file for the Foundation to be dissolved.
And yet, apparently many people in the financial world agree with this nascent Bitcoin establishment. From their perspective, every regulation confers a welcome legitimacy on the currency/payment system, and grants it greater chance for market success. Already, people at the event this past weekend’s conference were discussing whether the Commodity Futures Trading Commission or the Securities and Exchange Commission would be the best overseer.
In private discussions with people who are pushing for this approach, the pro-regulation people view intervention as inevitable, and so therefore it is better to get out in front and push for rules that are not harmful but beneficial.
The presumption is that there are only two options here: government prohibition or government management. The third option — our forgotten and disrespected friend called laissez faire — is not even considered a realistic option.
Some people just think that being controlled by the heavy hand of the state is part of the maturation process. Despite the evidence of all of human history, the pro-regulation side here just assumes that public policy will be benign and even helpful, and, in the end, actually help support more development.
And yet, it has the framework of laissez faire that led to Bitcoin’s creation and adoption in the first place. The creator going by the name Satoshi Nakamoto didn’t propose his invention and submit it to the patent office or seek out some government R&D funds. The early adopters weren’t alerted to the opportunity by any government jobs program. The new businesses that have sprung up around Bitcoin didn’t go crawling to the Small Business Administration.
Essential to the magic and wonder of Bitcoin — and you can actually say this about most technologies in human history — is that it came about spontaneously within market process that encourages and rewards creativity, risk taking, trial and error. There have been no barriers to entry, and anyone can get into the market. This feature has been crucial to its success.
That was also true with planes, trains, and automobiles — all of which fell to the heavy hand — but there is something special about Bitcoin that makes it inherently resistant to government control. It is built on code. It lives in the cloud. It is globalized and detached from the nation state, has no own institutional owner, operates peer to peer, and its transactions are inherently pseudonymous. It cannot be regulated in the same way as the stock market, government currency markets, insurance, or other financial sectors.
Government has lots of practice at controlling the physical world, and not so much at doing the same in the digital world.
In that end, that might be Bitcoin’s most redeeming feature (among many). It’s as if its creator anticipated this moment, that coming together of the old-line money business, the revenue-seeking government, and a would-be new establishment that wants to maintain industry dominance. The protocol itself resists regulation in the old-fashioned sense. That is built into its very structure.
On the other hand, even the attempts at government regulation can do damage. Earlier this year, the Financial Crimes Enforcement Network of the U.S. Treasury Department weighed in to make clear that every Bitcoin exchange must registered as a money service under the Bank Secrecy Act. Already, some exchanges had made themselves compliant. But within days, three exchanges shut down.
How many new exchanges might have been deterred from starting up, we can’t know. And already Canada is working to court refugees from this law.
This intervention was just the beginning. The first round of regulation will continue to target the exchanges, and focus on reporting requirements and consumer protection. But it won’t stop there. Users will be next, with a focus on moving money from here to there. There will be dollar-based triggers on how much in Bitcoin funds can be moved without self reporting. Then of course the tax authorities will be involved to get a cut of every transaction.
Just think through how many different sectors are covered under Bitcoin’s reach. After all, we are talking about an innovation that defies every previous categorization. It is a payment system and a means of payment itself. It is an emerging money. It is a financial instrument and a proto-commodity. It will be subject to capital-markets speculation. In the future, It could take on take on new functions in insurance, loan markets, labor contracts, and international trade.
In other words, there is probably no bureaucracy in Washington that won’t be able to dream up some rationale for sinking its teeth into Bitcoin in some way. Strangling innovations and adding more costs on institutions doesn’t seem like a good path forward. In fact, one of the great reasons we need Bitcoin right now is precisely because government’s control over the dollar has created such wreckage all around. Why would anyone think it would turn out differently under Bitcoin?
The real danger of all these attempts to regulate digital currency is that they will encourage the emergence of parallel sectors in the Bitcoin world, one fully compliant and one thriving in the gray and black markets. After all, the feds have not even been able to stamp out unregulated behavior with old-fashioned dollars. They face an impossibly more difficult task with digital currency.
These approaches could end up sending the emerging Bitcoin commercial world abroad, and causing the industry to self regulate in a way that excludes American consumers. Already, the major Bitcoin gaming site Satoshi Dice has announced that it will no longer permit access from U.S.-based IP addresses.
Even now, the use of Bitcoin abroad is arguably more developed abroad. It’s big news in the U.S. when a house for sale is priced in Bitcoin. But in a country like Argentina, it’s common for rental and buying contracts to be priced in the digital currency. At this rate, the U.S. could find itself falling far behind the rest of the world in continued digital currency development.
We live in a global economic environment, and every Internet user has the tools to get around even the most egregious regulations. For my part, over the long run, I’m not worried that Bitcoin can be killed or even slowed by all this of these misguided attempts. But they will create opportunities for arbitrary enforcement and unnecessary invasions.
Remember that every act of government ultimately reduces to an act of violence against person and property. When you see the word regulation, think of cops with clubs and tasers. Think of fines, courtrooms, jails. These are the essentials means by which government operates to control society.
It might be a pointless plea, and feel free to tell me to get my head out of the sand, but I’ll just ask the question anyway: why not give freedom a chance? We have a wonderful opportunity here. Let’s not screw it up, again.