How Cryptocurrency Can Abolish the Fed (Part 2: Disruption through Bitcoin)

Knowledge of the Federal Reserve and its effects on the economy embolden people to abolish it. The vampiric embrace central banking has maintained on society has endured for too long. Technology now exists to push humanity into the next epoch, and move away from the current state of monetary cannibalism. The tools to propel this economic reformation have arisen from underground capitalism, from online shadow markets, and from the individual desire to be socially and financially independent.

This tech is referred to as cryptocurrency. It was established without the guiding hand of authority overseeing its manufacture. It was created by cypherpunks for the purpose of escaping clumsy and heavy-handed bureaucracy. It was built to be decentralized and to evade institutional control. It was meant to be the people’s money, to liberate the populace from the oppression and corruption of State banking. It was forged to shatter financial totalitarianism, and level the playing field. It is the ultimate form of technocratic nonviolent disruption and disobedience.

The White Paper

Many different cryptocurrencies exist. The most popular is Bitcoin. It first emerged in 2008 when an enigmatic figure named Satoshi Nakomoto submitted a paper to the cypherpunk mailing list referred to as the Bitcoin white paper. In the abstract of the paper Nakomoto elaborated on his intention.

He said, “A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution.”

A year later, this culminated in the creation of the Bitcoin software and the Blockchain that it is founded on. The Blockchain is a public ledger that documents every transaction ever made through the protocol, and publishes it transparently. The blockchain is essentially the vertebrae of Bitcoin. It gives it all its fundamental characteristics.

However, it is not readily apparent how Bitcoin is going to revolutionize finance, much less bring down the banking conglomerate and Federal Reserve system. There are several major characteristics as to why Bitcoin and its protocol have the capacity to disempower and disrupt those who wield too much control over the economic infrastructure.

The Disruptive Power of Bitcoin

The underlying disruptive power of Bitcoin is simple yet elegant. Decentralization represents the mainstay of this tech. It does not rely on central planners. It is automated. It is programmed to spit out a limited number of Bitcoins over the course of years. The implications of this are huge. There will never be a crypto-authority, or a few guys sitting in a room deciding what is best for people, economy, or country. This is why the technology puts a check on human corruptibility, and invalidates the Federal Reserve.

Bitcoin is peer-to-peer. Transactions only occur between the people directly involved or chosen. There is no middleman. No institutional stranglehold. People no longer have to rely on a third party. They can send their money to each other without going through an organization. People can essentially debank, or become unbanked. Or looked at another way, they become their own bank. They are the masters of their own money. They do not have to worry about having their accounts frozen either. No one besides users have access to their funds. This removes the possibility of institutions stopping transfers or confiscating money.

Bitcoin represents the height of computer functionality insofar that it is also tamper resistant. If a group of tyrants or banksters wanted to access the money supply and control it for themselves, they could not accomplish this easily. The Bitcoin protocol is distributed over a large network and operates with many computers. This increases the strength and flexibility of the network, which deters hackers and tyrants. In its current State, it is almost impossible to acquire the computational power to successfully hack the protocol. Several security experts and professionals have already tried. They openly admitted failure.

As an aside, it is true that Bitcoin exchanges such as Mt. Gox have been hacked, but it was not the Bitcoin protocol itself that failed--only Mt. Gox's servers. The protocol is currently resistant to outside threats because of its size. Bitcoin's distributed nature is what makes it astoundingly resistant.

Targeting the CEO

The aforesaid reasons are why the Fed cannot deal with cryptocurrency on a practical level. Usually, when someone tries to compete with the Federal Reserve and government, they simply get arrested for counterfeiting or another bogus charge. Bernard Von Nothaus was a monetary architect who created the Liberty Dollar. His money was backed by gold, and it looked "authentic." This caused it to gain popularity. Shortly after, the Feds caught on. They arrested Nothaus for alleged domestic terrorism and then confiscated his money. He ended up getting a light sentence and not going to prison, but he lost all his revenue.

This can never happen to Bitcoin. Since the system is decentralized and no one person controls it, the State cannot just issue a warrant and arrest a CEO for "domestic terrorism" or counterfeiting. There is no central commander. The Feds would have to run around and round up all the miners and programmers involved in the network. In other words, it is impossible for them to act against Bitcoin in an efficacious manner. The system does not care about authority and bureaucracy. It will function anyway, regardless. Even if they did arrest everyone, new miners would crop up and create new nodes on the network, like new dealers crop up to sell more pills in the drug market. There is a potential threat to Bitcoin neutrality, but realistic threats to the protocol will be examined in the next part of this series.

The Age of Economic Freedom

The most important reason why the Fed will die an agonizing death is because of Bitcoin's utility. It is safe, secure, and efficient. It works and works well. There is incentive to use it. Anyone can send Bitcoin anywhere around the world for negligible fees. The fear of being defrauded is reduced because users don’t have to share private data. They can also keep multiple wallets with Bitcoin and spend their money from anywhere so long as they have an internet connection, which is becoming easier to access, even in third world countries.

Bitcoin will not dismantle the governmental banking empire by assaulting it with guerrilla warfare; it will abolish the system with guerrilla economics. The central bankers have to compete with it. Since they can’t arrest anyone, they will be forced to outpace it. Their attempts will fail, though. Decentralized currencies are the next step in innovation, not improvements of existing money and payment technologies. This implies the Fed has been subjected to a Zugzwang: all their potential moves worsen their situation. All cryptocurrencies have to do is continue growing. This is not a problem. Bitcoin has become of a phenom. It is not a matter of whether it goes mainstream, only when. The age of economic freedom has arrived, and the Fed is sounding its death knell.

Nonetheless, there will be battles over Bitcoin neutrality that have to be fought and won. The Fed and bankers will not go down without a fight. There are limitations and weaknesses in the protocol and network that the community must overcome in order to succeed...

(To Be Continued)

Do you agree that cryptocurrencies will usher in a new age of economic freedom? 

Image Sources:
jeff-gomez.com
scannellkurz.com
usnewsghost.wordpress.com

Resources:

http://dankaminsky.com/category/security/
https://bitcoin.org/bitcoin.pdf
https://www.cryptocoinsnews.com/digital-currencies-like-bitcoin-will-disrupt-global-finance/

How Cryptocurrency Can Abolish the Fed (Part 1: What is the Federal Reserve System?)

Central Banking Murders People

The Federal Reserve Bank commands immense power over people’s lives. The extent to which it exercises this control is incalculable, and if people understood how it worked and the consequences of its activities, they would strive to abolish it immediately. However, this is not the first time someone has articulated the dangers of centralized control over money. Economists, philosophers, anarchists and others have already exposed the nature of America’s cartelized bank system, and they have warned every one of its perils.

So what exactly does the Fed do that makes it so bad?

The central bank mints fiat currency, controls interest rates, and decides economic policies for a whole geographic region. The Fed does more than this, but these are its fundamental obligations. Anarcho-capitalist Chase Rachels expressed the underlying intentions of these powers in his book A Spontaneous Order: the Capitalist Case for a Stateless Society:

“The central bank’s true purposes are to finance government operations, cartelize the banking system, and win over support from the financial elite by allowing them access to newly created money before the rest of society, thus concentrating ever more wealth into the hands of a select privileged few at the artificial expense of the many.”

Since the high priests of The Federal Reserve possess these powers, they have the ability to destroy economies and populations through mass starvation and death. They can do this because they can arbitrarily inflate the currency supply and alter interest rates. This devalues the money while simultaneously inflating prices, which obliterates market signals and confuses investors. The end result is an endless cycle of bubbles that eventually burst and lead to worthless money and a broken economy, such as what happened in 2007. Imagine what happens if this currency manipulation gets worse? Thus, there is an urgent need to abolish the system.

Nature of the Beast

There is a significant hurdle people need to overcome before addressing this issue, though. Few agree on how to abolish it, because they do not understand its nature. They do not know whether it is public or private, whether it is controlled by government bureaucrats or capitalists. They continuously wrestle with the idea of what it is and where it comes from, and most conclude that it is a private entity ran by greedy capitalists, which is inaccurate. So they erroneously advocate "abolishing" free markets instead.

Here is some background. 

The Fed was first conceived on a small Island called Jekyll, and both banksters and politicians were instrumental in birthing it. It was an early incarnation of typical incestuous relationships established between politicians and banksters. It is thus an iteration of corporatism—which is an effect of government.

Author of The Creature from Jekyll Island, G. Edward Griffin, in a talk about government and banksters, nearly grasps it. He said,

“We come to the conclusion when we analyze the nature of the Federal Reserve System how it operates, read the Federal Reserve Act, place it against the context of the historical background and we come smack to the realization that the Federal Reserve System although it parades around looking as though it's a government operation of some kind, is merely a cartel of banks right under our noses and it is protected by law.”

Do not make the mistake of wholeheartedly agreeing with Mr. Griffin. He was part correct. Yes, the collaboration between bankers and government cartelized the banks, but this occurred because of government and law. Without authority to establish the legal precedent for The Fed’s existence, there would be no central bank. And as this system has matured, bankers and politicians have become one and the same. Politicians are now bankers. Furthermore, their control hinges on the ability to manipulate the Fed to benefit the State. This is why its chairman and leaders are selected by Congress, and any oversight is conducted by government.

The Federal Reserve’s official page offers further insight into its ownership:

“The Federal Reserve System fulfills its public mission as an independent entity within government. It is not "owned" by anyone and is not a private, profit-making institution.”

There are a couple key components that demonstrate that the Fed is government-centric. The quote states that it is an “independent entity within government.” And most importantly, it is not for profit, which means it is not a capitalistically based company. 

An Alliance Based on Truth and Technology

This is important information because it contributes to how people will choose to fight it. With the knowledge that capitalism and privatization are not the problems, people can gather the appropriate intellectual and technological resources to act appropriately.

Before this knowledge, most people elected to campaign against the "rich" by attempting to incite Marxist style revolutions and overthrow the wealthy and business owners. As history has shown, all forms of socialism have failed. If Marxists can stop thinking in terms of revolution and coup de tats, they can wield a technological development to destroy the system without lifting a firearm. This solution eliminates the problem at its foundation. It puts money back into the hands of the individual, and away from the elite. This weapon is called cryptocurrency...but socialists have to understand it's not privatization or capitalism that have caused malevolent entities like the Fed to crop up. It is government. And government alone. 

(To be Continued)

Image Sources:

themoneymasters.com

dont.tread.on.me

richardcassaro.com

References: 

A Spontaneous Order: The Capitalist Case for a Stateless Society by Chase Rachels

The Creature from Jekyll Island by G. Edward Griffin

End the Fed by Ron Paul 

http://www.federalreserve.gov/faqs/about_12594.htm

https://www.kansascityfed.org/aboutus/federalreservesystem

Blockchain Tech and the Wizardry of Sharing Economies

This is not Communism 

There is much untapped potential for digital cryptocurrencies and blockchain technologies. Both have not scratched the surface of the "sharing economy. The sharing economy is a form of economic interaction that relies on collective resources, modern communication outlets, and a distributed network of information. It is the apotheosis of shared resources and commodity allocation in a more efficient form than economists have ever envisioned.

Many people see a disturbing similarity between "communism" and "sharing economy,” though. This is only superficially true. Property ownership is voluntarily pooled to raise value of consumer goods, and modern sharing economies only come into existence as a result of wealth creation through capitalistic endeavors and the production of excess goods and services. Another difference is that no one is forced to adopt sharing economy business models. Property ownership is also not seen as evil as in ideological communism. Sharing economies are benevolent and noble since they rely on sharing rather than coercion. If communists come to see this, they will understand how capitalism can justify their views in a consensual manner.

These sharing economies also have a defining characteristic: they are decentralized. Today, they have been implemented via app-based functionality on smart phones and other hardware. They involve the random participation of disparate people offering a service versus those needing a service, without the shackles of a centralized institutions and regulations, from either the business itself or regulatory bureaucracies.

Uber and the Future of Share-Sourcing

Uber ridesharing service is a great example.

It is true that Uber has a central headquarters, but their services are decentralized to the extent that their businesses manages to evade many government regulations that traditional taxicabs have to suffer. This has caused massive backlash toward Uber by government, leftist thinkers, and those with vested interests in saving the old cab services. However, this backlash is unnecessary and destructive. What Uber has done is innovate. It has propelled the economy forward. Uber has given people the ability to quickly and efficiently link up with a driver and find a ride without going through a headquarters or facing strenuous wait times. Disruptive businesses models like Uber, as well as Air BnB are just the tip of the iceberg. These decentralized undertakings are in their infancy.

What will be really exiting is when sharing economy technologies link up with decentralized protocols via the blockchain. This would not only streamline the decentralized nature of these companies, it will add an element of anonymity and ease of purchasing power. There is also the possibility of micro-payment solutions with Bitcoin that will initiate a movement towards "share-sourcing," where people can collectively micro-pay these decentralized companies, thus continually pooling resources and funding them while keeping quality and efficiency high. All of the potential ways these businesses and technology will interact is manifold. This is a sprawling new field of discovery that is being torn open.

The Marriage of Sharing Economies and Smart Contracts

Another interesting way the sharing economy combines with blockchain technology is through the upcoming invention of smart contracts. If companies like Uber and Air BnB adopt smart contracts with customers who decide to continually use their services, or with customers who have problems with the company, then the notion of “trust” in third parties is abolished, and people can rely on absolute decentralization. However, this does not mean that dispute resolution organizations or other arbiters may not be needed in some scenarios. This is just speculation about where this technology can drive humanity. The possibilities of the sharing economy translate as pure wizardry not only for technology, but for social culture as we know it.

Everyone will have to wait and see what will happen when smart contracts get released, cryptocurrencies grow up, and more businesses test decentralized application processes. The frontier that lies ahead is filled with wondrous innovations for completely freeing humanity from the clutches of power and central mechanisms of control. The time is upon us. The sharing economy is breaking the horizon, and the world is changing, yet again.

Can you imagine other ways the marriage of blockchain tech and sharing economies will help free humanity? 

Image sources:
Diginomica.com
Montrealgazette.com
nytimes.com

The Block Size Debate and 'Sock Puppet' Accusations

A recent post on reddit titled “5+5 BTC Bounty for proof of block size debate manipulation” shows some interesting parts to the highly debated block size discussion. The post is a research PDF written by Andre Haynes on July 10, stating that many of the people commenting on this topic were “sock puppets” Most of these multiple account were found debating high profile core developers, most notably Peter Todd.

A “Sock Puppet” is an anonymous account created by a user typically used to “troll” or rustle a debate or conversation. Sock accounts can be found all over the internet on literally every social media application. This is why platforms such as Facebook have recently been requiring identity confirmation. Sock puppets are seen quite a lot in debate on r/bitcoin, u/bitcoin, and u/petertodd which were recorded by Haynes.

In his introduction Haynes writes:

“The current block size debate is critical to reach consensus on issues that affect the scalability and overall future of the Bitcoin network. The process for consensus is one that typically involves Bitcoin core developers, miners, merchants and other experts and stakeholders, but there has been difficulty reaching a viable agreement on the block size.”

The difficulty being multiple accounts manipulating the discussion. The paper is in response to two people offering a bounty of 5 Bitcoins each for proof of debate manipulation. Haynes tries to attack the problem in an unbiased way and uses machine learning throughout the research process. Haynes writes: “this report seeks to identify cases of multiple account use on the Bitcoin subreddits.”




The data collected used the reddit API to gain access to all threads related to the block debate. All users comments stored into the database were compiled into two groups, “Seen Data” and “Unseen Data”. Both groups commentary were analysed and broken down to 10 or more comment collections. From here the commentary was pre-processed to remove common words in the activity.

“Other users who responded to the bounty did not dig deep enough into the data and were not able to find evidence of socks. An analysis of this scale takes a lot of time and computational resources.”

The project found similar styles in each author's commentary throughout the debates. Finding that commentary on these threads were indeed coming from multiple accounts. Although Haynes says on reddit: “The title is click bait and I should have been more careful in my choice of words in this post. To be clear, I am not accusing anyone of being a sock puppet. I am simply stating that given the assumptions of the models, the listed users were suggested as probable cases of sock puppets by the model.” Rankings and possible sock puppet pairs can be found here.

Haynes is a data scientist by trade and says that his analysis methods may help people find out about the true identity of Satoshi. Or whether Satoshi was a sock puppet, which seems to be the case. Haynes insists his studies are not perfect saying: “ There is a high False positive rate, but this was done as a tradeoff to recover as many relevant cases as possible. These could have been removed by hand but that would have introduced the same subjective biases that this analysis was trying to avoid. The above lists represent a starting point to look for sock puppets and nothing more.”


Do you think this research has found Sock Puppets manipulating consensus? Let us know in the comments below.

Images Courtesy of GitHub and Crypto-Graphics.com

Ben Lawsky's Revolving Door

BitLicense is extremely controversial in the Bitcoin community. Not only is it the first comprehensive body of Bitcoin regulation in the United States, but it is also the most restrictive. BitLicense was created by the New York Department of Financial Services (NYDFS), with Benjamin Lawsky -- the Department’s superintendent -- leading the charge.

Also read: FBI Director Calls for Decryption Tools to Combat "Going Dark," Bitcoin Users Affected

The Bitcoin community has vilified Lawsky because of his leadership role in BitLicense. Since the beginning, Lawsky and his associates at the NYDFS have touted their ability to engage with the community and produce safe legislation that preserves innovation in New York’s digital currency space. However, the community sees the Department’s actions in a different light. Bitcoiners admonish Lawsky for being stubborn and inflexible, failing to seriously take their opinions into consideration. These sentiments are not without reason, either; although BitLicense has been revised twice, most of the major stipulations that irk the community are still firmly in place in the final draft.

What’s more is that Lawsky has recently announced his plans to leave the NYDFS and start a private consulting firm in the near future. What will he be consulting on? Naturally, Lawsky’s firm will focus on helping digital currency companies navigate New York’s virtual currency regulatory environment -- the one Lawsky created.

This move has made Lawsky out to be even more of a Bitcoin villain. Not only did he oversee what many people consider to be the death of Bitcoin in New York, but now he is trying to profit from it in the private sector. Given that a large bulk of the digital currency community come from libertarian backgrounds, there is a lot of outrage surrounding the construction of Lawsky’s revolving door.

BitLicense alone is bad enough. It’s requirements are so restrictive and its reach is so extensive that it could affect the entire US Bitcoin economy -- and possibly digital currency businesses across the world. The bloated regulation has already claimed its first victims; ShapeShift and Eobot have cut off their services to New York, and BTCGuild is shutting down completely -- citing BitLicense as a partial reason.

These initial service suspensions and closures is grim foreshadowing of what faces the New York digital currency economy. BitLicense is so restrictive that only the biggest, wealthiest, and most well-connected Bitcoin companies will be able to operate in New York -- whose large, finance-driven economy otherwise offers a promising Bitcoin market. Even if smaller companies do manage to meet BitLicense’s requirements, the cost of doing so will put them at a marked disadvantage against larger competitors with more resources and influence.

Now, Lawsky is adding insult to injury by injecting a layer of cronyism into an already depressing regulatory landscape in New York. Of course, the idea of giving compliance guidance to budding businesses is not bad; if there must be regulation, people might as well help each other navigate it. However, Lawsky is offering advice on how to deal with the burden that he created.

The moral implications of such an action are undoubtedly questionable. As mentioned above, it is one thing to help fellow entrepreneurs navigate an unfortunately brutal regulatory environment. But to profit from the very burden that you orchestrated is under-handed, greedy, and morally and politically corrupt. Intentionally or not, Lawsky is making Bitcoin businesses worse off for his own personal gain. If Lawsky truly wanted to help firms in New York, he would have fought for their freedom to innovate instead of profiting from their struggle and misery.

With this new consulting firm, the possibility of a cronyist and elitist Bitcoin economy in New York is much more likely to come to fruition. Essentially, Lawsky is providing the top firms with a direct link to the NYDFS. With his political connections and intimate knowledge of BitLicense, Lawsky is equipped to open the floodgates for companies that wish to use the law against competitors. In public choice theory, this phenomenon is known as regulatory capture, where private firms use their resources to influence the government in their favor.

Unfortunately, Lawsky’s questionable transition from the public to private sector is nothing new, It happens all the time in the mainstream economy. Regulators spend several years crafting new legislation or beefing up existing laws only to take jobs helping companies get around those same rules. Then, after a few more years, they reenter the bureaucracy and get to work making the web of regulation even more ensnaring. Banking, health care, agriculture, energy, or anywhere else, the revolving door exists wherever there are rules telling firms what they can and cannot do.

Of course, there must be some balance between ensuring that customers know what they’re buying and avoiding suffocating companies with rules. However, attempting to strike that balance means that there will always be predators around to derive personal benefits from the laws. It is discouraging that politicians and bureaucrats seem to desire that personal gain more often than wanting to preserve that balance between anarchy and intervention.

How can we achieve the right mix of regulation and laissez-faire without creating the revolving door? Public choice economists have tried to find an answer to that question for decades, and so far it seems like they have been unsuccessful. Maybe it’s impossible to get the perfect mix, perhaps we just have to accept the fact that there will be corruption and cronyism as long as the government tries to tell people what to do.

But maybe it’s possible that laissez-faire is better than a system of corrupted consumer protection. Although it isn’t politically feasible, experimenting with a hands-off approach might reveal that the spontaneous order produces market-based consumer protection. If such experiments confirm that hypothesis, then the antics of Lawsky and countless other bureaucrats will be rendered unnecessary. Whether or not we will ever get to conduct free market experiments, though, remains to be seen.  

What do you think about Lawsky's plans to create a private BitLicense consulting firm? Let us know in the comments below!

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Disclaimer: The views are of the author and not necessarily those of Bitcoin.com
Images: Pixabay, Wikimedia Commons