Topic: Conceptually, what could the government do to defeat bitcoin? (Read 3603 times)

it's ridiculous for people to think bitcoins pose a threat to government. some idiot kid at bloomberg took this seriously recently, but it's nonsense.

first, there's not even a real threat. people do illegal things all the time now, with cash. some get caught. bitcoin doesn't change that. enforcement resources track enforcement priorities. the most likely scenario even if bitcoin gains massive adoption is that major governments either don't care or that they try to promote it. they'll focus on the crime and win about as often as they do now.

second, criminal sanctions deter most people and can destroy the economic value of a trade, at least temporarily. if the government makes it illegal to use bitcoins, many people would stop, or at least it would sharply restrict trade. an illegal cryptocurrency would never gain mainstream adoption in the united states. file-sharing is widespread but doesn't require the same coordination and trust that a currency does. the right analogy to have in mind is child pornography, not bittorrenting a television show. most people are law-abiding in general, and unless bitcoin solves major, pressing problems for them (hint: it doesn't, at least not yet), they won't even be tempted to use it if it were illegal.

third, people here have been incredibly narrow-minded about potential government responses if the government actually cared. yes, obviously they could shut down currency exchanges, but they could also force the protocol into tor or even, if it were ever important enough, try to inderdict bitcoin by requiring hardware manufacturers to cooperate (as the 'content' industry tried with DRM. it failed there, but not because it's conceptually impossible).

in any case, i very much doubt it will ever be illegal to trade bitcoins or that it will have any meaningful impact on government power. people who want to illegally evade taxes can already do so. many get caught, many don't.

If you would like to know what the USA (or any) government will do if they decide to "kill" BTC simply look at the UIGEA (it basically killed online poker/gambling in the USA)... 

They don't have to attack the network, they don't have to "manipulate" the market all they simply have to do is make it illegal for American banks to process any transaction to or from a BTC exchange or business.  Until people need to stop changing BTC for fiat IMO that will be the weak link, currently at some point people want/need to convert their BTC to fiat and usually at some step of the process a bank will be involved. 

While this may not kill BTC completely it will certainly keep the "average joe" out of the game and would likely relish BTC back to the seedy underworld for all intents and purposes.  All the gov't has to do is play the money laundering and terrorism card and a law could get passed and I can see the current monetary regime with their lobby groups helping this along...  I actually think that for this reason a lot of big money is going to sit on the side lines and watch the next few years and it is honestly the biggest concern I have for the long term success of BTC.

At what stage do you believe, the neutral governments start to endorse Bitcoin and welcome bitcoin-millionaires?

After all, not all the government workers in the world are directly controlled by the banking cabal (actually some of my friends work for gov, and are quite nice guys...) It does not take much from the government of Iceland, for example, to declare a Bitcoin-millionaire exile with a fixed poll tax of $5,000, and 100-year moratorium on any tax, duty, regulation or reporting requirement concerning anything Bitcoin.

Iceland is one of the world's premier places for mining, since energy there is free. They produce more out of nature than can be consumed.

Gentlemen, is the day of our release near? 

That method is completely anonymous, but requires the presence of a Tor exit node in a free country. Running Bitcoin as a Tor hidden service does not involve exit nodes, and therefore works even if every ISP in the world is blocking Bitcoin traffic, though it's more complicated to set up.

Does one have to run it as a hidden service?  Or are you just saying that you need to run vidalia and select the socks 5 proxy option and point the client proxy address to 127.0.0.1:9150?   Is there some more anonymous way to run this, or do i misread that?

Thank you! 

Wiki is out of date. Everybody running their node as a tor hidden service would work just fine as of a couple of releases ago.

And, this comes from the Bitcoin Wiki page: "The IP addresses of most users are totally public. You can use Tor to hide this, but the network won't work if everyone does this. BitCoin requires that some country is still free."

There are other ways to do trading than using a website, besides, it's not difficult to catch governments red-handed if they do commit suck attacks, which will trun out to be a PR disaster for them, see, e.g., the Chinese hacking incident.

Government would attempt to buy out the next batch of ASICs. They can afford it. Under different names of course.

Hahahahahaha in Bold Red, too!!

A few dozen countries also call their currency ''dollar'', a few use the dollar sign and yet we do not see US invading them for doing so

You can try to kill a specific technology, but you can't kill evolution as a process. Killing Bitcoin would be a huge mistake, because the community would learn from its mistakes, and what would come next would be even more robust, stealthy and ... unstoppable. At the moment, personal profit, curiosity and progress are the prime motivators in the community. Kill the coin, and you'll just add to the list the most powerful of motivators: vengeance.

The only thing a government can do to tame bottom-up evolution of peer-to-peer technology is to make it irrelevant by addressing all the issues that fuel it: tax abuse, inflation, market manipulation, confiscation of wealth, discretionnary monetary policy, lobbying, neo-feudalism, privacy abuse, control of information, censorship...

Either way we win.
Checkmate.

They could balance their budgets, allow the banksters to be prosecuted for fraud and racketeering, stop the emission of unbacked credit, repeal the AML/KYC laws which prevent banks from offering the services their customers actually want, and basically reduce the appeal of bitcoins by making national currencies not suck.

In other words, nothing they are actually willing to do.

The question itself contains the answer. They will outlaw Bitcoins by saying "Bitcoins are bad, mkay, you should not use Bitcoins..." It is like outlawing filesharing, porn or political dissent, few users will get caught and made example of, all other will take technical measures to hide.Barely working Celerons with Intel GMA will make crappy botnet. Even if all government owned computers of lets say Italy would be in botnet, it will be only medium sized one. And botnets are crappy at mining. Not nearly enough to pull 51% attack.

This means that answer to question is probably nothing.

I have a question to those residing in the US.

Could American users of Bitcoin be classified and sentenced as domestic terrorists?

From what I have read Liberty Dollars were regarded as a form of 'domestic terrorism'

http://en.wikipedia.org/wiki/Liberty_dollar#Conviction

That would more likely affect the exchange's popularity than Bitcoin itself.

Probably, but that makes a lot of unlikely conditions.

Removing all the liquidity on both side is even better. It means executing everybody at the price they asked, and you aren't even impacting the money supply because you sell on one side what you bought on the other. Pure profit for everyone. You may even increase liquidity as people will rush to place more orders. It's like shouting loud "Hey guys, today the spread is on us!".

I somehow missed this. It sheds a new light on how western governments may perceive the value of financial liberty. Perhaps the arranged marriage to the central banks is not so important to defending freedom in the intelligence community.

This would immediately earn all of us a lifetime worth of income, so we would have all the time, focus and resources we need to create an even more pervasive and unstoppable Bitcoin 2.0.

Yeah. Even if the government's secret agenda was to "be the enemy of all its citizens, all good, all progress and all fun" (which I don't even literally believe), it is certainly not good tactics to do what you described.

Declare war on Bitcoin and drone anyone who ever heard read or said or wrote word Bitcoin. Send the drones to take out every computer that ever was spotted on Bitcoin network. Damn.... I am missing out on a brilliant career in government.

Very good points. To add:

- "The government" presumably means the U.S. government, and its allies. They do not 100% own the world yet, so an outright attempt to discredit/destroy bitcoin may end up just harming their own citizens, while enriching others. Not that they cared..
- The idea of a cruptocurrency cannot be destroyed by rooting up its offspring, the cryptocurrencies. If they want the world to be content without cryptocurrencies, they need to disprove their validity and usefulness. That cannot be done by force. By just wrecking Spinning Jennys, the idea is not destroyed, but rather gains more traction. A 51% attack against a certain crypto would do more harm to the gov than good.
- I am sure the NSA has gathered a formidable database of compromised private keys. This may amount to 25%-75% of all bitcoins existing. We don't even know all the methods they have for snooping us. Even if they wrecked with these all at once, I don't believe it would do more than to infuriate all the honest users against their own gov. Governments typically want to avoid provoking extremism.

* Smear campaign informing people its used for kiddie porn, drugs and terror.

* Telling people its actually devaluing their own currency! Those without BTC would instantly hate it.

* A ban on exchanges

* A ban on merchants accepting Bitcoin as payment.

I think these are much easier and cheaper than any form of network attack.
Its not out of the question... the US can do pretty much what they want when playing the 'terror' card.
I read that China already have legislation for virtual currencies?

I'm hoping this explodes Globally before any of this happens.

Think about it, how would you stop bitcoin?

Firstly, you would highlight all the bad reasons people use bitcoin (Silk Road etc) then you would highlight how the political beliefs of the biggest users were all anti government types.

The next step is to create a mistrust of how it would work in conjunction with the current system. Would people suddenly lose all the benefits they already have? Would society actually be damaged if bitcoin was to be popular?  Would people stop paying taxes, and would the government quickly go bust?  Would this lead to the country being at the mercy of its enemies?

A few articles in the national papers asking this questions would certainly create enough distrust of bitcoin to stop anyone thinking its was a good honest idea for a good honest working person to get involved with.

Finally, the government would require all bitcoin exchanges to be qualified members of the financial industry and be fully compliant with every rules required by international banks.

This would not make bitcoin illegal, but it would stop it growing.

Governments prefer to control people than to ban them.  They learnt that didn't work with the drug industry.  They won't make that mistake twice!

Well Government could create like 8 new pools. Each of them offering 120%? (idk whats the highest rate yet) payout.
Nobody knows that all of thoose 8 pools are owned by the same person/government. After   all 8 pools  own together like 80% of the hashing power, they just start to kill coins.

I said that's the worst possible interpretation.

Seeing as how the courts almost always rubber stamp tyranny and favor the government above its victims despite crystal-clear, Constitutionally-enumerated rights with shit-tons of original intent to bury tyrants with, I would not be surprised to be correct.

They would not even need that, a botnet would do just fine. offering 150% would not get anyone to join it. Those intelligent enough to join a pool are intelligent enough to read %'s and know that making $15 a day, instead of $10 a day, isn't smart to do when tomorrow you're making $0 a day.



Especially since bitcointalk would have a big red banner flashing saying DO NOT JOIN THIS GOVERNMENT POOL ERROR ERROR ERROR WOOT WOOT DONT DO IT!!1.1.1.1!!!1.14$@$$%%!! :p

That's not how I interpreted the guidance...

Under the worst possible interpretation of FinCEN's "guidance"*, and the best, pro-liberty, intentions of bitcoin, it's already defeated in the U.S. Tyranny does not go quietly into the night.

*If you accept a single penny from someone in exchange for your BTC without first going bankrupt to be compliant with the MSB/MT regulations, you are a criminal.

Government could start a bitcoin mining pool. Offering 150% payout!
Lots of people would join to get 50% extra profit. Government would reach 80% and kill bitcoin instant

Use all government computers as a botnet to mine, bringing the difficulty up so high aisics cant mine, then dump coins.

Let's assume the US government, or any government for that matter, decided to outlaw bitcoin. What could they reasonably do?

Make the use of bitcoin as a method of payment illegal? How would it be enforced? Well, clearly people could not advertise to either be paid or to pay with bitcoin. Or the authorities could mount sting operations offering to pay in bitcoin and entrap anyone attempting to use it. That would pretty much close the door, right?