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The U.S. Government Can Nationalize the Bitcoin Network at Any Time

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Re: The U.S. Government Can Nationalize the Bitcoin Network at Any Time

#11

Post by michaniskin »

LinuxBender wrote: post #7
alwillis wrote: post #6

Absolutely not. How can the US nationalize a global, decentralized network?

I am not an expert in this area and have never used virtual currency. That said, I vaguely recall governments already making it hard for some currencies to be converted to regular fiat currency. I don't know the implementation details, but I assume that if you can block conversion or transfer, then the money can only be used within the virtual currencies own network. If enough governments or central banks from enough…

The point TFA is making is that the US government can force holders of bitcoin to sell their bitcoins to the government. And, importantly, they can do it via the Fed (which is nominally a private institution), thereby avoiding any politically messy legislation.

The Fed can do this by launching their own bitcoin exchange and then dominating the mining of blocks on the blockchain (AKA a 51% attack). They can then prevent any other miners from being able to mine blocks, and they can configure their own miners to only accept transactions which are depositing bitcoin into the own exchange's wallet.

At this point nobody can sell bitcoin to anyone other than the Fed's exchange, at any price, because the transaction will not be recorded in the blockchain. The Fed can now set the exchange rate to whatever they want, and they can pay for the bitcoin they exchange with whatever instrument they want. They can run the money printer to buy your bitcoin with USD, they can make you accept US treasuries at a certain price, whatever makes the most sense for their balance sheet. Your alternative is to HODL and never be able to sell your coins.

Re: The U.S. Government Can Nationalize the Bitcoin Network at Any Time

#12

Post by mikeblackson »

theamk wrote: post #3

This seems highly inefficient - why give money to random people (many of them non-US citizens) when you don’t have to? Here is a much cheaper plan which grants US a lot of control over bitcoins: - Some US government agency publishes “bad bitcoin address” list - this is initially a list of addresses of clearly evil people, like ransomware attackers. - The new law is passed, requiring all US-based bitcoin firms to refu…

This will just fuel the rise of background mixing and decentralized exchanges. Many Bitcoin holders and devs will consider it an honor to make as much of the Bitcoin supply as "dirty" as possible and the community will mostly support it. Layer 2 also further hinders easy tracking of "dirty" addresses/transactions.

The FBI wants to interact with and attack the 200M+ people that will eventually hold "dirty bitcoin"? Much of whom are non-KYC holders? Good luck accomplishing that with a limited budget and man power.

Re: The U.S. Government Can Nationalize the Bitcoin Network at Any Time

#13

Post by michaniskin »

mikeblackson wrote: post #12
theamk wrote: post #3

This seems highly inefficient - why give money to random people (many of them non-US citizens) when you don’t have to? Here is a much cheaper plan which grants US a lot of control over bitcoins: - Some US government agency publishes “bad bitcoin address” list - this is initially a list of addresses of clearly evil people, like ransomware attackers. - The new law is passed, requiring all US-based bitcoin firms to refu…

This will just fuel the rise of background mixing and decentralized exchanges. Many Bitcoin holders and devs will consider it an honor to make as much of the Bitcoin supply as "dirty" as possible and the community will mostly support it. Layer 2 also further hinders easy tracking of "dirty" addresses/transactions. The FBI wants to interact with and attack the 200M+ people that will eventually hold "dirty bitcoin"? Mu…

Exactly. Also the carrot is far more effective and palatable to citizens than the stick. The US government could deploy the attack described in the article under the guise of a stimulus program, with their hands completely clean. No legislation required, the Fed would just need to print a little fiat from the money printer and everyone is happy.

The government is happy because their fiat monetary system is secure from any threat crypto poses, bitcoiners are happy because the Fed buys their bitcoin for fiat at a good rate, the miners are happy because they got to sell their assets to the Fed for a sweet pile of fiat.

The only people crying is the middle class who bears the burden of all this currency debasement. I think we have more empirical data than we'd ever need to predict that nobody who matters politically cares about the tears of the middle class.

Re: The U.S. Government Can Nationalize the Bitcoin Network at Any Time

#14

Post by mikeblackson »

michaniskin wrote: post #13
mikeblackson wrote: post #12

Earlier quoted context omitted.

This will just fuel the rise of background mixing and decentralized exchanges. Many Bitcoin holders and devs will consider it an honor to make as much of the Bitcoin supply as "dirty" as possible and the community will mostly support it. Layer 2 also further hinders easy tracking of "dirty" addresses/transactions. The FBI wants to interact with and attack the 200M+ people that will eventually hold "dirty bitcoin"? Mu…

Exactly. Also the carrot is far more effective and palatable to citizens than the stick. The US government could deploy the attack described in the article under the guise of a stimulus program, with their hands completely clean. No legislation required, the Fed would just need to print a little fiat from the money printer and everyone is happy. The government is happy because their fiat monetary system is secure fro…

One more thing that's overlooked, the nodes control the Bitcoin network, not miners. In the face of a 51% attack, consensus would be reached that banning malicious miners is in the interest of the majority of node owners.

They would fork Bitcoin and the Fed would burn a ton of money with very little to show for it. The miners they bribed would pile into the non-Fed controlled fork using the Fed funds they received. The network may actually grow after this kind of attack is successfully sidestepped purely from the Streisand Effect and the corrective action proving what people theorized about the difficulty of censoring the bitcoin network.

Re: The U.S. Government Can Nationalize the Bitcoin Network at Any Time

#15

Post by michaniskin »

mikeblackson wrote: post #14
michaniskin wrote: post #13

Earlier quoted context omitted.

Exactly. Also the carrot is far more effective and palatable to citizens than the stick. The US government could deploy the attack described in the article under the guise of a stimulus program, with their hands completely clean. No legislation required, the Fed would just need to print a little fiat from the money printer and everyone is happy. The government is happy because their fiat monetary system is secure fro…

One more thing that's overlooked, the nodes control the Bitcoin network, not miners. In the face of a 51% attack, consensus would be reached that banning malicious miners is in the interest of the majority of node owners. They would fork Bitcoin and the Fed would burn a ton of money with very little to show for it. The miners they bribed would pile into the non-Fed controlled fork using the Fed funds they received. T…

But that's just turtles all the way down. The Fed can mine that forked chain even more easily than the original one.

When one actor has a money printer they can use the permissionless, decentralized nature of the bitcoin network as a weapon. It's a vulnerability they can exploit.

Re: The U.S. Government Can Nationalize the Bitcoin Network at Any Time

#16

Post by michaniskin »

mikeblackson wrote: post #14
michaniskin wrote: post #13

Earlier quoted context omitted.

Exactly. Also the carrot is far more effective and palatable to citizens than the stick. The US government could deploy the attack described in the article under the guise of a stimulus program, with their hands completely clean. No legislation required, the Fed would just need to print a little fiat from the money printer and everyone is happy. The government is happy because their fiat monetary system is secure fro…

One more thing that's overlooked, the nodes control the Bitcoin network, not miners. In the face of a 51% attack, consensus would be reached that banning malicious miners is in the interest of the majority of node owners. They would fork Bitcoin and the Fed would burn a ton of money with very little to show for it. The miners they bribed would pile into the non-Fed controlled fork using the Fed funds they received. T…

What prevents the Fed from operating as many nodes as they need to overrule the "honest" node operators?

Re: The U.S. Government Can Nationalize the Bitcoin Network at Any Time

#17

Post by mikeblackson »

michaniskin wrote: post #16
mikeblackson wrote: post #14

Earlier quoted context omitted.

One more thing that's overlooked, the nodes control the Bitcoin network, not miners. In the face of a 51% attack, consensus would be reached that banning malicious miners is in the interest of the majority of node owners. They would fork Bitcoin and the Fed would burn a ton of money with very little to show for it. The miners they bribed would pile into the non-Fed controlled fork using the Fed funds they received. T…

What prevents the Fed from operating as many nodes as they need to overrule the "honest" node operators?

If fed nodes run a different version of bitcoin that permits censorship, they will not be in control of the forked chain.

Re: The U.S. Government Can Nationalize the Bitcoin Network at Any Time

#18

Post by mikeblackson »

michaniskin wrote: post #15
mikeblackson wrote: post #14

Earlier quoted context omitted.

One more thing that's overlooked, the nodes control the Bitcoin network, not miners. In the face of a 51% attack, consensus would be reached that banning malicious miners is in the interest of the majority of node owners. They would fork Bitcoin and the Fed would burn a ton of money with very little to show for it. The miners they bribed would pile into the non-Fed controlled fork using the Fed funds they received. T…

But that's just turtles all the way down. The Fed can mine that forked chain even more easily than the original one. When one actor has a money printer they can use the permissionless, decentralized nature of the bitcoin network as a weapon. It's a vulnerability they can exploit.

Regardless of how much money can be printed, no government has enough resources to attack a perpetually moving and atomizing target.

As long as governments debase the currency to carry out this attack, they are also continuously creating more reasons for variations of Bitcoin to exist.

Re: The U.S. Government Can Nationalize the Bitcoin Network at Any Time

#19

Post by mikeblackson »

michaniskin wrote: post #11
LinuxBender wrote: post #7

Earlier quoted context omitted.

I am not an expert in this area and have never used virtual currency. That said, I vaguely recall governments already making it hard for some currencies to be converted to regular fiat currency. I don't know the implementation details, but I assume that if you can block conversion or transfer, then the money can only be used within the virtual currencies own network. If enough governments or central banks from enough…

The point TFA is making is that the US government can force holders of bitcoin to sell their bitcoins to the government. And, importantly, they can do it via the Fed (which is nominally a private institution), thereby avoiding any politically messy legislation. The Fed can do this by launching their own bitcoin exchange and then dominating the mining of blocks on the blockchain (AKA a 51% attack). They can then preve…

The network would be forked long before all of that could be setup. Millions of developers around the world working towards a goal generally move faster than governments.

Re: The U.S. Government Can Nationalize the Bitcoin Network at Any Time

#20

Post by michaniskin »

mikeblackson wrote: post #17
michaniskin wrote: post #16

Earlier quoted context omitted.

What prevents the Fed from operating as many nodes as they need to overrule the "honest" node operators?

If fed nodes run a different version of bitcoin that permits censorship, they will not be in control of the forked chain.

OK, now you're talking about inventing a new altcoin that introduces censorship, governance, and control. This has already been done a number of times, and they all failed.

Bitcoin is the ultimate fiat in that it's not backed by anything tangible. The bitcoiners will say that the intrinsic value of bitcoin lies in the value the network provides, eg. facilitating uncensorable, permissionless transfers across borders. It is definitely not a given that a new coin without this utility will be a success. I'd bet against it given the history of altcoins that have attempted to do it.

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