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Could We See The Berlin Wall Of Bitcoin?


One of the numerous motivations for creating the original Bitcoin was that it would give the world a currency that was independent of any big state control. For people like ShapeShift founder, Erik Voorhees, who spoke eloquently recently at the global blockchain investor community’s annual conference, CFC St Moritz. For Voorhees, this was more than just a detail in the small print. It was a fundamental philosophical basis, the raison d’etre of the establishment of Bitcoin currency in the first place.

Yes, there are all sorts of rational arguments for Bitcoin – after all, it is so much better suited to computers and the internet than fiat currency ever was. But scratch below all of those rational reasons, the real excitement for a whole trench of Bitcoin and crypto purists, was the fact that for them it is out of reach of the ugly big state meddling.

According to Voorhees, markets are an expression of freedom, money is an expression of the human psyche, and the state running our fiat currency is an expression of unacceptable interference in our private lives. Voorhees points out that half of almost every transaction involves fiat money that is ultimately controlled by the state, and this means that the state is involved in half of all our activities, which, he says, can never be a good thing.

Of course the state isn’t very good at managing things. It’s why Soviet Russia gave you the option of three types of shoes and the Western equivalents were orders of magnitude more.

For those on the Big State side of the argument who observed this Bitcoin Purism, but weren’t persuaded by it, they see Voorhees as a kind of paranoid with a borderline conspiracy neurosis. After all, we sometimes need the state and the state sometimes needs us. Especially when there’s a real threat to its existence. Pearl Harbour, or a Viking invasion, for example.

The King has always taxed the people to fund the army to protect the people from marauding invaders. That was the deal, since the first millennia. Our safety comes from trust in authority, and that is the deal we all make as citizens.

But our acquiescence to the big state authority depends on an unspoken licence, which in turn depends on the state acting in good faith and a certain amount of transparency.

And it seems, the last few years will have deeply challenged the nature of that licence.

The Bitcoin purists point to any number of examples, but COVID-19 is as good as any. They see it as an exaggerated kind of fear.

Not the real fear of Viking invasion which warrants taxes for protection. But an overstated fear, stoked by corrupting scientific methods, minds and modelling, to make their populations compliant.

They point to the COVID-19 variants like Omega, predicted to cost millions of lives, but which left the people of Africa and everywhere else largely untouched. And these were predictions that could not be replicated by financial modellers outside the government community of scientists running similar software.

The Bitcoin purists see democratic nations frightening their populations to create the largest limitation on human freedoms ever imposed in peacetime. Freedoms, like whom you can take to bed for the evening, who you have a drink with in your own home, not to mention when and for how long you can leave your home and what you can do in that hour of daily relative freedom.

There were the ethical issues of denying young kids education because their contraction of COVID-19, which formed no threat to their own health but could imperil their elders health; this passed without so much as a raised eyebrow in almost all democratic countries.

And, say the Bitcoin purists, at the end of this unparalleled experiment with authoritarianism, we have no clear data that it was worth the sacrifice. Sweden versus China? Did the authoritarian approach save any lives? Or did it actually cost an awful lot more in excess deaths, as many now believe?

Not to mention COVID-19 monetary policy, they say, for the money that was printed to deal with the lockdowns, which in turn stoked inflation and devalued everyone’s savings. Voorhees says “you could consider that if you have an 8% inflation rate, your money is being cancelled at a rate of 8% per year”.

And with greater distance on the COVID-19 years comes greater clarity and understanding.

Formerly trusted scientific institutions lost their sheen of authority and with it their licence to operate on our behalf. Take the World Health Organisation, whom many mothers still look to for guidance on how to sterilise their baby’s milk bottle: The lengths to which its scientists had become politicised shocked those in the scientific community and beyond. An organisation that claims to promote health, keep the world safe and serve the vulnerable, seemed to be doing the opposite, making a wrong call at every turn.

But you don’t just have to look at NGOs to see wrong calls and cover ups.

The prevailing feeling until just a few months ago, was that anyone who spoke of a COVID-19 lab leak was a conspiracy theorist, and if they persisted they should be shut down with a cancellation of their career, livelihood and status.

Such views were deemed to be racist in origin and no right thinking person should be allowed any platform beyond the lunatic asylum.

This anti ‘lab leak’ position was endorsed by the second highest office in the USA. In April, 2020, Dr Anthony Fauci, the US health chief, addressed reporters at a White House press conference, pointing to the paper as justification for his belief that the lab-leak theory was a far-fetched conspiracy. Fauci did not acknowledge his own role in commissioning the paper and feigned ignorance as to the identities of its authors.

Now the science appears ‘settled’, or at least clear, that the lab leak is the most probable origin of the virus and all talk of a racist conspiracy theory is swept under the carpet.

In all these twists and turns, the fallout is a loss of licence for our leaders to make decisions on our behalf about how we conduct our lives.

We’re seeing that in France there are riots when that licence goes; in Holland and Israel too, where social unrest is also challenging strongarm tactics, and in many other places. The licence to do Big State coercion is on notice.

The big state goes crypto

And so we come to crypto and CBDCs, or, central bank digital currencies.

In CBDCs, say the purists, we have something that looks and smells like a crypto but actually is an organ of the big state.

It must be particularly galling to Voorhees and the Bitcoin purists to see so many of the elements of Bitcoin being appropriated by exactly the forces that bitcoin was designed to tackle.

All the more so since the Purists say that all the crashes of crypto haven’t come from pure crypto plays, but rather from crypto as an intermediary for centralised excesses.

The purists are also quick to point out the new dangers present in CBDCs.

Never before has it been so easy for a state to disable your money. In fact they could switch it off a coin just like a car immobiliser or a smartphone can be turned off. Or, as Voorhees points out, it could force you to spend it before a certain date, or when it can or can’t be spent. All via smart contract control of your wallet. And this raises all sorts of questions.

In China, if you support the wrong party or say the wrong thing, they can fine you with even more ease than paper money. This is already happening.

Will that happen in the West?

Ah, say the Bitcoin purists, given the history of following Chinese leads, on the tackling and epidemiology of COVID-19, and the penetration of Chinese soft power into the Western systems, one thing is inevitable.

The West will follow the Chinese lead.

They feel, if we start issuing CBDCs, it’s only a matter of if and not when our democratic western states start penalising us for a list of violations. If saying that a virus started in a lab in China is a race hate crime then the scope for control is unlimited.

But, say the Bitcoin purists, there’s one even more terrifying manifestation of Big State and it’s already here and doing its damage.

Closing down a business you don’t like.

Around 2014, US banks started to judge their customers not from a financial point of view, but from a reputational or even aesthetic one. This was an Obama-led piece of legislation that got dubbed “Operation Choke Point”. Essentially, regulators threatened to cover a bank in red tape and investigations if they didn’t cut off banking services to certain types of clients. Usually, ones that had a profile the Administration thought didn’t espouse the correct liberal values.

So for over two years, the nation’s gun dealers, pawn shops, tobacco stores, and payday lenders got closed down due to pressure from the regulators. Of course the original intention was somewhat different; to get rid of fraud, which was seen as emanating or being enabled by all the types of stores listed above. But like many high minded projects pursued with too much zeal, the real victims were very different from the intended targets. What closed down were the Mom and Dad stores, small time legitimate businesses not the syndicated fraudsters Choke Point was set up to cull.

Under Trump, there came a repeal of these laws, but then with Biden they came back into frame again. Choke Point 1.0 has been updated to Choke Point 2.0.

The new targets weren’t the bricks and mortar businesses of 2014, but the crypto businesses of 2023.

Some in the crypto community see the fall of the Silicon Valley Bank as triggered by the Choke Point 2.0

Certainly, the European crypto community is making the most of having a more crypto friendly outlook. The chart below shows Europe gaining on the US in this domain.

But if banks start freezing out crypto and crypto starts funding its own kinds of projects we might foresee a kind of cold war between big state and blockchain purists.

Just as the cold war saw Warsaw Pact countries separating from NATO countries as two separate communities, and doing very little business across the divide, could we see a dual community business world emerging?

Just how that works out and who wins and who loses is anyone’s guess. Either way crypto in its big state or purist form will have a significant role to play.

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