My main takeaway from this is that the U.S. government has just put their citizens on notice. They do not believe you have a right to privacy. They want to treat privacy like it is something criminal and sinister. This is a direct attack on U.S. citizens, but it is unlikely this stance is limited to the U.S. It would seem highly probable that many other smaller “allies” will follow suit and get in line.
What does this mean for Bitcoin?
It once again shows the level the State will go to to keep you as a subordinate slave. If code is speech, then this shows a complete disregard for any freedom of it, and it is a glaring reminder of the need for true decentralization and the critical nature of self custody.
Decentralization provides us with the optionality to remove single points of failure, like exchanges. Exchanges are regulated entities and as we see in this instance, they will instantly bend the knee. They will do what they’re told.
If you opt to use bitcoin in such a way where you allocate trust to an exchange to take custody of your bitcoin, it is important you understand the risk you are taking. The reality is, that bitcoin is no longer yours. All you have is an IOU, and under extreme adversarial conditions, as with this current example, that IOU will not be redeemable for your bitcoin. What could have been fuck-you money, will become fuck-me money.
I can’t speak to the properties of shitcoin mixing services like the one in question, but bitcoin mixing can imply a custodial service. One where you relinquish custody of your bitcoin. If you use a mixing service, you are sending your bitcoin to a third party and hoping to receive someone else’s bitcoin back. CoinJoins on the other hand are collaborative transactions which leverage the core properties of the Bitcoin protocol — that being self-custody — to provide you with a powerful tool to improve your privacy while not compromising the trust model which Bitcoin affords.
Any entity that is centralized — be it a custodial mixing service or any other — is a single point of failure and should be avoided. Trust these at your peril.
The question remains: If open-source software can be sanctioned, can Bitcoin be sanctioned, given that it is simply free, open-source software, too?
As mentioned above, open-source software cannot really be sanctioned. Can people using certain software be targeted? While the notion of such a thing seems completely insane, the answer of course is yes, but it becomes more a question of how can that be enforced. If the U.S. Treasury said tomorrow Bitcoin is sanctioned, what they are really saying is you are sanctioned from using Bitcoin. They would be criminalizing the transmission of scarce information. Despite how absurd that sounds, it’s worth considering the possibility given this recent development.
In this instance, any bitcoin custodied by regulated third parties vanishes and would be under the control of the government. That is the most obvious point of capture. Any single points of failure become targets. Assume failure. Even with that, Bitcoin would remain. The network would continue to produce blocks and facilitate transactions, which highlights the critical nature of running a node. If there were only a few nodes, then the potential may exist to capture and shut down the network, but there are tens of thousands of nodes and this number is growing every day. In addition, the nodes are geographically distributed throughout every corner of the planet. The realistic probability of shutting down every one of those, while it is not zero, would likely be close to it.
The Bitcoin network would endure such attacks and, ultimately, it would become stronger. But how individuals use bitcoin would have significant ramifications on individual Bitcoiners. Which brings us back to the critical nature of privacy: If you have a high level of privacy, you cannot be targeted as easily. If the majority of users have a high level of privacy, such an action becomes almost unenforceable. A powerful asymmetry would exist and render any attempts to sanction or outlaw it as futile.
There are 437,000,000 new reasons to ensure you custody the keys to your bitcoin, and there are many future Bitcoiners learning this lesson the hard way right now.
Bitcoin was designed to operate under adversarial conditions. There is little the government can do to attack the Bitcoin protocol, which makes it unlikely they would try. They would simply attack the users: us. Acknowledge the game board and act accordingly. Privacy is not just a right, it is critical. Everything is downstream of privacy and it is a central piece of the fortune you pay for getting things for free.
Remember: Freedom is not given, it is taken. Bitcoin empowers you to take yours.
Fix the money, fix the world.
This is a guest post by Andrew Keir. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc. or Bitcoin Magazine.