[lsc]

yeah; this is what scares me more about bitcoin than e-gold.

With E-gold, the government went after the owners, and they were able to shut the whole operation down; I lost maybe two hundred bucks worth of gold.

Now, when the government decides to shut down bitcoin, what happens? there is no central 'off switch' - just like drugs, they will have to go after the users, or like illegal information, they will have to go after the viewers.

I mean, I think I'm being a little bit paranoid here, but I just don't see the government leaving a system that works so well for money laundering in place, and all the things I can think of the government doing to dismantle bitcoin seem like they would be quite unpleasant for the users, over and above just losing the money invested.

[JulianMorrison]

Interesting argument.

Trying to go against users is hard, the government is not as dumb as the music industry, to play whack-a-mole versus grandmothers and kids. My guess is they would attack exchanges trading BTC <-> USD. There are fewer, and separating the BTC economy from the USD one would make the currency significantly less attractive. Even the threat to do so would crash its USD price.

[lsc]

I hope you are right.

>the government is not as dumb as the music industry, to play whack-a-mole versus grandmothers and kids.

I think the war on drugs would be a counterexample to this statement. Especially considering that legitimate bitcoin use is largely confined to nerds, I don't think the government would have a hard time painting bitcoin users as people who ought to be punished.

[jerf]

When the government wages its war on drugs, it cuts supply of drugs, which raises the price, which raises the incentives to smuggle drugs. Meanwhile, there is a certain contingent of people who will basically do anything for drugs. If the government could push the price of drugs for them above "all economic value a person can possible generate in any manner including through illegal means", they would win, but they just can't do that effectively.

When the government goes after a BitCoin exchange, they make BitCoins less valuable by raising the transaction costs associated with them, and severing the BitCoin economy from the general global economy. This will cause BitCoins to reduce in value against the currencies traded in the general global economy. This will cause people to be less inclined to use them because they will be less valuable. In this case, where the economic characteristics of drug trade fights against the government's goals, the economic characteristics of alternate currencies give the government a multiplicative advantage in its efforts to shut it down.

It is not a defense of BitCoin that the government can't shut down drug trade. It's a different problem. Indeed, the question BitCoin faces is even if the government never takes exception to it, will the multiplicative advantage that any attempt to shut down or game BitCoins will obtain be insufficient to kill it or gravely wound it? I don't think the government will have a need to demonize BitCoin users, they will be perfectly capable of shutting it down without that effort.

[narrator]

One thing about bitcoin... since there's no central server, the bitcoin economy can live all over the world and there's no single door for the feds to bust down. A war against it would look like the music companies trying to shutdown pirates in developing countries. A decade long crusade of state department aggressive diplomacy to get a global 3 strikes copyright policy enforced.

[lsc]

that's a pretty convincing argument.

[waterlesscloud]

The whole online poker kerfuffle is not an unrelated idea here.

The idea is that online poker chips were being used for money laundering, and the first point of control attempted was the exchange of chips for USD via banks.