Topic: I don't like the idea of governments holding millions of Bitcoins. - page 6. (Read 1507 times)

If the change is a potential fork, then users have to follow or they will fork away to another chain, which will in this case be considered an "altcoin" by the governments, and all coins they own on this chain will be sold (they could even cite legal justifications, i.e. that by law they are only allowed to hold "FATF-compliant" coins).
I wrote already that my (layman) idea such a thing could be implemented is like checkpoints were handled. If a miner finds a block containing a transaction from or to a sanctioned address, it will then be simply invalid by the standard Core client protocol.

People can of course use the original protocol but then they will trigger the fork from this block on.

In my last post I wrote that such a change would be probably possible as a soft fork, because it's a "tightening of rules". I think however this doesn't change the logic behind this attack scenario.

It's still an unlikely scenario but not completely impossible. I think if countries implement BTC as reserve on a large scale then the probability could be as high as 5%.

If Bitcoin manages, even with state intervention, to hold up censorship resistance as a core value and most users/holders really are conscient about that, then your scenario is possible. This was also my argument in a similar thread about an "evil ETF fork".

The problem is that states holding millions could scare much more with such a threat than ETFs holding the same amount, because ETFs always have to take into account their customers, which could run to a competitor if they believe an ETF investment company behaves in a wrong way.

States instead could say: "ok, the FATF is forcing us to sell our Bitcoins on the non-compliant chain, because otherwise we will be added to the gray list", and dump everything very fast.

I said already that I don't believe that ("the real") Bitcoin would die in such an event, but it could lose a lot of trust and value, and in an extreme case this could be used e.g. for 51% attacks, amplifying volatility and pushing back Bitcoin potentially by decades.

@stompix: Ok, I was guiding myself by the population and not GDP (and with that in mind the current $5-6k holdings would correspond more to something like 300k BTC for the US). But of course GDP is also a valid indicator for such a calculation. And even by population we would come into regions like 6 million BTC if every state followed El Salvador's strategy. You then may be right, El Salvador's holdings are already quite large.

I see it completely opposite!

For all the reasons we as Bitcoiners are into Bitcoin doesnt it make sense for
any government to HODL Bitcoin? Primarily the scarcity of it alone would be the
driving factor.

Personally I would never consider abandoning Bitcoin for anything else and I'm sure
I speak for many.

I dont like the idea of governments such as US, China and India buying and HODL'ing
Bitcoin because I can see over time a small number of countries HODL'ing the majority
of coins which would push the price of Bitcoin further out of more peoples access.

While Bitcoin could still remain decentralised, centralised entities could choke the
availability of mined coins.

It's very stupid from any government except very small ones to hold millions of Bitcoins. First of all, the number of Bitcoins will only be up to 21 million coins, second of all, up to two million Bitcoins are lost. Kennedy announcing buying of millions of Bitcoins means that every Bitcoin owner will hold every satoshi and price will go to the moon because no one is stupid enough to sell Bitcoin at such a low price when the USA is going to buy 500 every day. This is very disadvantageous for the USA because people will sell it at a very high price and then people will easily move to other coins like Ethereum, Litecoin, Solana or something different and the government will be left with billions of dollars wasted into coin that lost value.

Not that am wishing but bitcoin could be headed in that direction if many individual bitcoiners don't cultivate the hodling culture even in bad times. If we check carefully we will discover that most of these bitcoin that are in government wallet were BTC that they have been holding for almost decade even though some were confiscated just like the German government. Some bitcoin hodler are in a hurry to sale at every circle that comes with the bullrun but does the government also sale in such a hurry? I am not sure. So maybe we should intensify emphasis on the HODLing campaign among we bitcoiners because that's the only way we don't let the government get hold of such amount of bitcoin that could make them gain that much power to interrupt the equilibrium.

When it comes to governments and bitcoin, there are probably a dozen nightmare/doomsday scenarios I could think of if given a few hours.  Bitcoin, banks, and government just don't make good bedfellows and since the creation of bitcoin they weren't ever meant to be.

OP, everything you laid out seems quite plausible and I don't care for the idea of the US or any government buying up substantial amounts of bitcoin.  As of this writing, BTC has a market cap of $1.42T, and the majority of it could be purchased by a consortium of countries if they wished to do it damage.  On the other hand, that would be a serious waste of their (taxpayers') money since it would drive down the value, and one would hope citizens would at least grumble loudly about it.

But even if a government targeted bitcoin through ownership, that would most likely just drive people to the next best altcoin--whatever that might be.  If they really wanted to throw a spanner in the works, all they'd have to do is pass legislation focused on mining, "tainted" coins, or whatever they can think of.  They make all the laws, right?  That way they wouldn't have to spend a single cent buying and owning bitcoin or any other cryptocurrency, which is a much riskier play as far as I can see.

That still wouldn't stop people from breaking laws, and governments know that.  Just like tobacco and alcohol, they're probably going to find a way to tax the shit out of bitcoin.

So glad bitcoin doesn't have a DAO.

Salvador is not the US, and actually pretty funny if we consider GDP numbers if Salvador has 5000 the US should have around 3.8 millions!  


They don't need protocol levels for that, some mistake the thing that if 49% would go out there would still be a balance but at some point, more and more coins will come on this side of the fence as business will not allow you to withdraw to addresses not labeled as clean, at one point you won't be able to interact with more any services nor will they want to have anything to do with you.

And it's not even a SF scenario:
https://www.coindesk.com/policy/2022/01/25/south-korean-crypto-exchange-bithumb-will-block-unregistered-wallets/



Yeah right, just how they ditched the USD for Bitcoin, oh wait, USDT...
People (as in the majority) will dump x over y on a single thing, which will bring them more $, guess what will happen when Coinbase and Binance delist BTC and keep govBTC.
I know it's nice to believe in something and to hope but usually, it only leads to reality hitting you harder.

I don't like the idea of the government being in possession of a huge amount of bitcoin either. Fiat is the major concern of the government, and I think they should be concerned with fiat alon. I feel that when the government is in possession of a huge amount of Bitcoin, they can manipulate the price of Bitcoin and also make Bitcoin more centralized, just like they are already doing through some centralized exchange. 

I made one emphasis in a comment before now that if the government, by chance, is in possession of about 70% of the total Bitcoin and they decide to create their own personal centralized system, just like they are in charge of banks, then if anyone must invest in or own a Bitcoin, the person's full identity will be revealed and the investment will be controlled by a third party. When I made such a statement, someone said that it could not happen, but the question has always been: what if it happens? That means the government has succeeded in making Bitcoin completely centralized, which was not what Satoshi wanted.

What the government needs to do is work on increasing the value of fiat (by managing money supply), reduce inflation, and still use their fiat for federal reserve.

Well, I can understand you, but most of the Bitcoin is still in the hands of the individual holders, and I hope it will stay that way. If we start becoming a minority - then there will be a reason to panic.

OFAC is Office of Foreign Assets Control, an agency of the U.S. Treasury Department. F2Pool is a Chinese mining pool in Beijing, China. The pools they enforce OFAC nonsense on are mainly the American miners and mining pools like the MARA pool which is probably what you had in mind.

Bitcoin Core is open-source software and as such it would be trivially easy to rip out any sort of blacklisting code that is implemented inside it.

People often forget that Bitcoin Core development is highly transparent, where *every single commit* is made via pull request, with detailed explanations and much debating, and most importantly, all of this is done in public so there can never be any surprises in the final binary.

I mean in the sense that if they were buying for investment reasons then I would say that would be a good thing, like how Trump talked about creating a bitcoin reserve, if it was that kind of thing then I would say that's not really that bad. However, if we are talking about something a bit more serious, like how they seized hundreds of thousands of bitcoins, then we are talking about them not having it just because they wanted to, they just ended up with it and that's the most important part.

If we can make that work somehow, then we are going to end up with some profit and that will be a good situation without a doubt. I think the greatest situation would be just focusing on how to get a better result, it's going to be very entertaining and we are going to see something better. I think the result will be quite good eventually, just assume what we can do and how we can move from there.

Note that users don't have to follow the latest version, because of that. And note that since Ordinals, it is possible to deploy new features, without asking developers. Currently, we don't even have a single mempool policy: there are nodes with full-RBF, and nodes without full-RBF; nodes censoring Ordinals, and nodes allowing them; mining pools accepting out-of-band transactions, and those who don't. Sure, developers can be forced to implement something, but would users agree to update? Many developers have much less power, than you can expect. They cannot even kill testnet3 that easily by "pulling off the plug", because the network is decentralized. All they can do, is to remove the code for testnet3 in the next version, but it won't kill the network: it will simply move it into the altcoin land (and because of long history, and being quite close to the mainnet, it may perform better than a lot of other altcoins).

If something needs a hard-fork, then it will be rejected, just because of that reason alone. It is more likely to see some evil soft-fork being accepted, than any hard-fork. Really, the nearest date for any hard-fork is 2038, because then some clients may terminate with "assertion failed" message, and people may be forced to upgrade (and only those, who will still use some version around 22.0, in 2038, and will be living under a rock for around 15 years). And if not that, then probably something like 2106. And guess what: it is even more likely to see the latest block, being constantly rewritten, than see some proper hard-fork, even in that case. Just because doing chain-reorg on the last N blocks, and pushing the chain forward in that way is easier, than writing a good code.

Then go on, just sell it. For a successful transaction, you need two sides: the seller, and the buyer. People will simply dump their govBTC for real BTC, just like they did in 2017, and during many other altcoin wars. Then, the history will just repeat, and you simply won't have 1:1 peg between govBTC and BTC. You will have more similar situation, as it was between BTC and BCH. And a lot of users will happily dump some worthless coins, to get some worthy ones, just like they dump some altcoins today, to get real BTCs.

I think you are worrying too much about it. People panicked in March 2020, and it was a great time for buying BTCs. If some government will sell, then any sane person will just buy the dip. It is a simple question: which coin is worth more? Gresham's law can be applied here: you sell bad coins, and keep good coins. And then, bad coins are in circulation, while good coins are used as a store of value. It was always the case, even in Middle Ages, and it is also true today.

Governments have no reason to be holding any number of bitcoins in the first place unless they actually believe in the tech like El Salvador.

Since what they are after is hard, liquid cash, they should just sell it on the open market immediately and get it over with.

All this hoarding of thousands of bitcoins and then selling them all at on hurts prices and it's something that governments could potentially use (and weaponize) to manipulate crypto markets.

Does this mean that you will soon be "waving" the flag of another country that causes terrible suffering to other people just because they suddenly became pro-Bitcoin?


I will not support anyone who says he is pro-Bitcoin, and at the same time has dangerous intentions, which concern not only the people in the country where he lives, but also the whole world. Bitcoin should be apolitical, not dependent on one man, no matter who he is.

They don't need to spend $128 billion to buy a large amount of bitcoin at once, they can use the same DCA strategy we are using. We should not underestimate the fact that they could buy the majority of bitcoin if they really wanted to do it and it wouldn't be too difficult for them. Governments may not be getting into the game anytime soon, but it is happening for major financial institutions. I believe that BlackRock owning millions of bitcoins is something that will happen sooner or later.
In just a few months since bitcoin ETFs were approved, they have bought and held over 300kBTC and it was only a matter of time before they had 1 million BTC.

Source: X.com

I must be honest, I don't like the idea of the government holding such amounts of Bitcoin, but for now, I'm not too bothered about the government having that amount of Bitcoin because I see all these talks as just campaign strategies. Politicians talk a lot before they're elected and when they get elected they find out that it's not as easy as they think it is, that's if they have any plans of implementing what they said.

Let's assume the government wants to buy 2 million BTC at the current price of $64,000, that's a total of about $128 billion. I do not think such an amount of money would be released for any president to buy Bitcoin. Except it's a dictatorship, he alone doesn't have that much power. But even if he does, like you said, the more they buy the more the price goes up. It may not go up as much as a million dollars, but it will go up a reasonable amount and it would become more difficult for them to buy up to 2 million btc.

Finally, someone raised this topic; it's something I had been thinking about as well, especially after Trump's statements regarding cryptocurrencies. The OP's concern is valid; the hypothetical scenario being discussed is a plausible one. Governments have the ability to acquire significant amounts of bitcoin, which raises valid concerns about the decentralization of cryptocurrencies. Bitcoin's nature is decentralized; that's true, but how decentralized can we claim it is after 20% to 30% of Bitcoin is under government ownership? What would happen in the scenario of blacklisted addresses?

Unfortunately, from how I see things, it's a plausible scenario that we might face in the upcoming future.

If such thing happens, the BTC price would crash down to 1K or even lower. A lot of Bitcoiners would lose a lot of money and the Bitcoiners, who sold BTC at the right time would simply never buy BTC again and move to Monero(or they might completely leave the crypto markets). The Bitcoin community will get severely reduced in size and the trust in Bitcoin would be almost completely destroyed. Your case scenario is possible, but I don't believe that it will happen in reality. All the Democrats and many Republicans won't allow such decision to be taken by the Congress and Senate. Countries like China and India would never buy BTC or altcoins. The whole process of attacking and conquering the Bitcoin blockchain become pointless, because no country would get any profit from it.

Of the countries that I know, only El Salvador invests in bitcoin, and its investments are relatively small, while other large bitcoin holders have mostly confiscated it and are ready to sell it at any time, as Germany did recently. The state's priority now remains increasing its gold and foreign exchange reserves, and bitcoin is still perceived as a high-risk and volatile asset for them. All the talk about bitcoin being used by states as a reserve along with gold is nothing more than someone's assumptions, which so far have nothing to do with reality.

I don't think it matters if you like it or not, Bitcoin is decentralized therefore accessible to anyone. If governments think it wise invest and hold Bitcoin, they can and I see them just like an individual holding Bitcoin. There is really no difference between government holding Bitcoin and big cooperations like MicroStrategy...

Your reference to what the authorities can do through regulations can still happen without them holding majority of Bitcoin. It is just a matter of time before countries start investing in Bitcoin, the signs are there already. As individuals, we should just prepare ourselves for that time and take advantage of the opportunities we have now.