It all happens. After falling to $ 3,800 in March 2020, Bitcoin is now around $ 35,000. It seems like more senior institutions or major investors are announcing their entry into the space every day. Thousands of coins move from the exchanges. Governments around the world continue to print money, and the “deficits don’t matter” message is floating next to the newly printed cash.
The bull run is in progress. More and more people are starting to question the assumptions they have made about the world, viewing Bitcoin as a valuable asset. The narrative changes. As Bitcoin continues to attract attention, more and more people are exposed to its gravity. Inevitably, a percentage of these people will be sucked down the rabbit hole. The “Number go up” (NGU) technology works as intended. The feedback loop continues.
Hyperbitcoinization is inevitable. The growing user base continues to provide additional liquidity. The protocol and surrounding infrastructure continue to improve, making Bitcoin easier to use. Altcoins keep dying as Bitcoin’s monetary and network effects continue to grow. A broad user base and increasing corporate interest make it impossible for governments to ban Bitcoin. The citadels are close.
Before we get too carried away, let’s throw an ice cold bucket of reality on our heads. Instead of getting caught up in the hype that bull markets create, we should take a step back and acknowledge the reality. Bitcoin will, and more importantly, not become what we envision with the help of the state.
As Bitcoin grows in popularity, the question of whether or not governments can ban Bitcoin has become more and more debated. Many of the answers to this question end up in one of two camps. The first camp concluded that governments can and will ban Bitcoin and there is nothing we can do about it. The second camp considers a state ban on Bitcoin to be impossible. Constitutional rights, Supreme Court proceedings, popularity, competition, and even corporate involvement have been cited as reasons why governments cannot or will not take action. Most of those who fall into the first camp are nocoiner, while the second camp consists mostly of HODLers.
To add some nuance to this topic, I’ll join the first camp. Yes, governments will eventually ban Bitcoin. It can’t be tomorrow. It can’t be that fast. To be honest, it may never be banned, but the opposite should be our basic premise. In order for Bitcoin to be censorship-resistant, there must be a censor.
To date, Bitcoin’s success, as well as the proliferation of altcoins, is largely due to what Eric Voskuil calls the honeymoon phase. Bitcoin is currently so harmless that governments are making no serious attempt to destroy it or change its use. However, if that space continues to grow and governments’ ability to finance themselves is compromised, the honeymoon will come to an end. Should the state ever have to choose between protecting its own sovereignty or protecting individual property rights, it will choose the former.
The word decentralization has been falsified in a world full of altcoins. It’s easy to claim and difficult to prove. Many industry participants use the term loosely, but what do we really mean when we claim decentralization? Why is decentralization important? The main goal of a decentralized currency network is to be censorship resistant. Everything else is just noise.
In the long term, Bitcoin resistance to censorship is achieved by:
1. Users are willing to trade bitcoin illegally and pay a premium for it.
2. Miners are ready to illegally mine Bitcoin and can do so for a profit.
When one of these necessities collapses, so does Bitcoin. Yes, you read that right. Bitcoin’s long-term survival depends on people willing to break the law.
My intent in pointing out Bitcoin’s security assumptions is not to make us die-hard criminals, but rather to remind HODLers of what they actually own. There have been a number of narratives working against Bitcoin in recent months, and Bitcoiners have been desperately trying to counter these narratives through the use of social media. If we were just being honest about what Bitcoin is, rather than trying to give in to regulators and institutions, we could be more effective in our rebuttals or make them completely unnecessary.
The latest noise about Bitcoin’s energy usage need not be defended. Each joule consumed by the Bitcoin network is a function of the free market. Positioning Bitcoin as a “green technology” to alleviate the worries of those responsible is simply a waste of energy. Another waste of energy is arguing with altcoin promoters about how superior Bitcoin is. It has become pretty clear that the market doesn’t care about “network fundamentals”. The truth is that what sets Bitcoin apart from all other coins is that it actually has a chance of surviving as black market money when this honeymoon period comes to an end.
If Bitcoin were banned worldwide, then all Bitcoin transactions would be considered a black market. The more interesting scenario is what happens to Bitcoin when it becomes a forked market. Approved bitcoin activity would take place within the walled gardens of the regulators, and any peer-to-peer transaction would be illegal. If miners and users choose to play by the rules, the properties of the network are lost. In the long term, changes will be made to meet the goals of regulators. However, if we choose to disagree, we have a chance to protect the properties that make Bitcoin so valuable. We would pay a premium for this too, as black market goods tend to fetch a premium.
If you are feeling pessimistic reading this post, it is time to re-examine your assumptions. Bitcoin will succeed or fail based on its own merit and the economics behind the security model. I am confident that Bitcoin will survive. There is nothing to be gained from friendly regulation. Bitcoin skeptics like to repeat that “Bitcoin is not covered by anything”. Nonsense. Bitcoin is supported by us and we need to be prepared to defend it. Shouting on Twitter about how 76% renewable energy is used in Bitcoin mining doesn’t help.
Ignore the prospect of mass adoption and the charm of “numbers increasing”. Instead, ask yourself the following difficult questions:
What will you do when bitcoin is banned? Will you still hold it Deal with it? Mine it?
What will you do when regulators try to control Bitcoin?
I am ready to take a stand. Are you?
References: Many of the ideas written here were influenced by the works of Eric Voskuil. I know he would find flaws in my distillation of his concepts, so please have a look at his original work on libbitcoin or buy his book here.
Disclaimer: Bitcoin Magazine does not condone or promote illegal activity.
This is a guest post by Justin Siegal. The opinions expressed are solely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.