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Friday, March 15, 2013

How to protect bitcoin from politics

Update: I respond to the haters here.


If we were to invent money from scratch using all the knowledge available today, we could hardly do better than something like bitcoin. It's better than cash in several important ways: it's unforgeable, it's international, it's inflation-proof, and it has quick, cheap money transfer built-in without the need of intermediaries.

However, there are existing players in the market for money and they are as big as it gets. You have probably heard of the market leader - it's called the US government. This money provider also owns more guns than anyone else in the world. It has an unfortunate history of using those guns to threaten people who come up with new currencies.

Bitcoin is a child of the internet and its pedigree is reflected in its radical decentralization. Like other p2p protocols, such as bit torrent, there are serious doubts as to whether any one government or group of governments could shut it down. There's no one place to apply your guns to to cause failure.

However, the government could certainly screw with existing bitcoin owners by making it illegal for local businesses to accept them. That would drive the currency underground, kill its enormous potential, and substantially reduce its value.

Since the biggest threat to bitcoin is political in nature, bitcoin users should act preemptively to defend their economy from politics. The easiest way to do this is by seeking proactive political acceptance.

Whenever a new disruptive product enters a market it faces regulatory pressure driven by vested interests - those who benefit from the old way of doing things. The new products that succeed are those that run towards the regulators, not away from the regulators. They don't fear or hate the politicians, rather they offer a sweeter deal.

If a major politician accepts bitcoin on his campaign donation site through bitpay or a similar service, he will have a vested interest to fight its demonization. There is nothing a politician desires more than money, and nothing he fears more than political embarrassment. In today's hyper-partisan political environment once you support a thing you cannot unsupport it. So once a politician commits to bitcoin he will remain committed.

Since bitcoin is a digital native currency, it enables cool things like sending money with a tweet. This user sent Obama 20 bitcents on twitter. He has the right instinct.

The biggest win for bitcoin would be to get Barack Obama's Organizing For America campaign to accept bitcoin donations. This is the most significant point of leverage that I can think of, nothing else would do as much to reduce the threat to bitcoin from political actors. The threat of political embarrassment to Obama would protect bitcoin for the next four years - long enough for it to become established. Since many of Obama's staff are technophiles, this is quite possible. Obama himself has probably not heard of bitcoin and his personal support is not needed.

With OFA's support, the chance of a government assault on bitcoin falls to the low single-digit percents.

Barring that, the next biggest thing for bitcoin would be to get tech-friendly politicians to accept bitcoin donations during the 2014 campaign season. Off the top of my head, the following politicians have some history of reaching out to the tech community:
  • House of Representatives
  • Eric Cantor (R-VA)
  • Zoe Lofgren (D-CA)
  • Darrel Issa (R-CA)
  • Jared Polis (D-CA)
  • Justin Amash (R-MI)
  • Anna Eshoo (D-CA)
  • Carolyn Maloney (D-NY)
  • Bob Goodlatte (R-VA)
  • Paul Ryan (R-WI)
  • Kevin McCarthy (R-CA)
  • Senate 
  • Rand Paul (R-KY)
  • Jerry Moran (R-KS)
  • Ron Wyden (D-OR)
  • Richard Lugar (R-IN)
  • Mark Udall (D-CO)
  • Kirsten Gillibrand (D-NY)
  • Michael Bennet (D-CO)
  • Other
  • Gavin Newsom (D-San Francisco)
  • Campaign for Liberty (Ron Paul's org)

(side rant: California's senators are awful on tech policy. That bugs me.)

Less impactful, but still good, is convincing mainstream businesses to accept bitcoin until it is perceived as part of ordinary life. The lowest hanging fruit is convincing merchants of digital goods to accept it, such as the advertising platform of twitter, facebook, or google.  

Bitcoin has the potential to create a truly global, frictionless, free economy where sending money is as easy as sending an email. This is a place where commerce and creativity can thrive. We should play one move ahead of potential opponents to secure a bright future for bitcoin. 


3 comments:

  1. Excellent idea and insights for Bitcoin acceptance. 10th Amendment center or others could pick this up and offer it as a State-level solution for having a sound money especially if and when the dollar collapses via hyper inflation. A State could accept Bitcoin as an alternative and competitive money within their borders. This fits Dr. Edwin Vieira's model of the value of the Purse & the Sword for regaining State, community and individual sovereignty.
    Noel

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