Bitcoin

Bitcoin  (technology,  cryptocurrency,  p2p)
Start	2009-01-03
Abbreviation	BTC
Interest of	• Tyler Lindholm • Mircea Popescu • Kenneth Rogoff
A cryptocurrency

Bitcoin is a cryptocurrency, created by the pseudonymous Satoshi Nakamoto. Its symbol is BTC.

Design

Bitcoin is designed as a decentralized and uncensorable distributed system, i.e. it stores it's blockchain redundant on every computer running the Bitcoin p2p client. The consensus algorithm in use is proof-of-work. Bitcoin has been criticized for using up too much electricity to power its proof-of-work mining network. Bitcoin and other crypto currencies are being platformed.

Does it scale?

Full article: Lightening network

Bitcoin grew slower with raising numbers of users. A p2p payment took several days to complete in 2020 (when no transaction fees are selected), the initial download of the whole blockchain required ~1500 GB of free disk space in 2022 and the time to integrate well into the network was definitely end-user unfriendly. To increase usability the Lightening network was introduced 2014 for instant (micro) payments. Exchanges (super nodes not run by users) took the place of central banks to increase usability, make a profit and enable speculation with Bitcoins.

Pseudonymity

Due to its fully transparent ledger, transactions can be linked to IP addresses. The Bitcoin address (wallet) is therefore pseudonymous - if no additional encryption is used such as Tor and the same wallet is used for more than one transaction.

Use

In cooperation with Visa or Mastercard Bitcoin smartcards (Creditcards) are in use which can be used to pay at hotels and gas stations, for example, in Italy and Austria. However, not Bitcoins are transferred. Traditional banks operating as super nodes convert BTC to EUR or USD and then this monopolized fiat currency is used for the actual payment.

Legal position

NSA

The Intercept reports that already by 2013, the NSA had named Bitcoin as "#1 priority" and was interested in "tracking down" its users.

Legal tender?

Bitcoin is illegal in some countries. WP reports on changing legal status.

In December 2017, Australian banks froze the accounts of bitcoin users. Computers (with wallets) have been seized by US law enforcement. It is rumored that wealthy Chinese buyers used Bitcoin to circumvent capital restrictions by the Chinese government to buy i.e. real estate in the US.

The following countries have (partially or inconsistently) outlawed the use of Bitcoin:

• Nepal
• China
• Vietnam
• Columbia
• Russia
• Equador
• Bolivia
• Algeria
• Egypt
• Indonesia

Bitcoin is legal tender in El Salvador from September 2021.

Tax

In 2018, Israel announced an intention to tax Bitcoin. Capital gains from cryptocurrency speculation are taxable in the EU (and probably elsewhere).

Speculation and Deep state reactions

Full article: Pump and dump

BTC is traded at FOREX and can be hedged in futures contracts. The commercially-controlled media encouraged the general public to invest in BTC ETFs and ETCs before the second BTC bubble burst in January 2022. As BTC is convertable to fiat currency, unsurprisingly the distribution of wealth resembles that of fiat currency, i.e. less than 1% of the population holds or controls 99% of the units.

Peter A. Thiel (Paypal, intelligence contractor Palantir) accused cryptocurrencies to be a Chinese "weapon of mass destruction" (sic?) (although China banned Bitcoin) aimed at destabilizing the US in 2021. After the collapse (see speculation above) Bitcoin rose 15% when Russian Billionaires tried to evade US lead sanctions in the 2022 Russian invasion of Ukraine.

Billionaire Stanley Druckenmiller said, Bitcoin may challenge the US-Dollar.

The "climate change" argument

In a push-pull motion, Elon Musk first announced Tesla would accept Bitcoin as payment, then three month later turned around for the (obvious) reason of energy consumption.

Along these lines an European ban of Bitcoin was discussed in the EU parliament, but delayed several times.

The energy consumption (aka. climate change) argument continues to be used against all Proof-of-Work consensus algorithms. However, expensive crypto mining is finite and 99% of Bitcoins have already been mined. "Miners" now consume energy for keeping the network alive, i.e. confirming transactions. The energy consumption of the fiat money system with its banking houses is probably higher than that of all crypto currencies combined making the argument a hypocricy.

Code development

The code to Bitcoin core is subject to change. Over a dozen different companies and industry groups fund the development of Bitcoin.

Outlook

Increasingly, those who wish to keep their transactions private are turning to privacy coins such as Monero. A market has emerged where companies advertise their law enforcement capabilities. Proof-of-work consensus is getting replaced by proof-of-stake algorithms (for other cryptocurrencies). Work on the central part of consensus algorithms is in progress.

 

Related Quotation

Page	Quote	Author	Date
Whitney Webb	“Bitcoiners should pay close attention to these developments as the DOJ in particular has attempted to paint bitcoin as the payment of choice for well-known terror groups like ISIS and al-Qaida, signaling that the working group proposed by this bill will likely seek to specifically target bitcoin. Adding to this concern is the fact that a slew of recent mainstream media reports — which cite Treasury and FinCEN officials, DOJ officials and CIA analysts — have claimed specifically that “terrorists are turning to bitcoin, and they’re learning fast”, that bitcoin is the “new frontier in terror financing”, and that “bitcoin is helping terrorists secretly fund their deadly attacks”. Even the prominent military think tank RAND Corporation has argued that “bitcoin and the dark web” are the newest terrorist threat.”	Whitney Webb	September 2023

 

Related Documents

Title	Type	Publication date	Author(s)	Description
Declaration of Currency Independence	declaration	May 2021	John McAfee	The main author, John McAfee, died mysteriously in jail the next month.
Declaration of Monetary Independence	declaration	2021	Mark Maraia Mike Hobart
File:Bitcoin-FBI.pdf	report	24 April 2012	FBI/Directorate of Intelligence

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