My Journey Down The Bitcoin Rabbit Hole (part 2 of 3)
How Bitcoin resists censorship, protects freedom of speech, and can help restore the American Experiment and Dream
Bitcoin as Censorship Resisting
A couple of weeks ago, in my journey down the rabbit hole, I came across journalist Alex Gladstein, who writes for Bitcoinmagazine.com. According to Gladstein's account of Bitcoin's history, the creator's original motivation to invent a new digital currency was not a better store of value or a new monetary system of sound money (which they have also done), but rather to create a currency that could resist financial censorship. Big Brother was their target, not getting rich.
"Bitcoin's decentralized digital cash…was the holy grail of the cypherpunks, a group of civil liberties advocates concerned about how personal freedoms could survive the great electronic transformation of society. Their goals were to separate money from governments and corporations, check the growth of the global surveillance state, and preserve human rights in an increasingly digital age. Satoshi Nakamoto's (the name for the anonymous person or group that created Bitcoin) greatest trick was to animate these aspirations into something that looks like and functions as digital gold."
Over the years, as Bitcoin has increased in value, the stress has been on its benefits as a store of value, a hedge against inflation, and a fantastic growth investment, far superior to fiat currencies like the American dollar. If you want to dig deeper into why Bitcoin is superior to money, I would suggest you read the short book, The Bullish Case for Bitcoin by Vijay Boyapati. And those who believed Bitcoin was the superior money (were the first to be “oranged pilled.”) and invested early, they have become wealthy.
Yet, as much as this new currency has created scores of Bitcoin millionaires, Gladstein wants to make his point clear: creating a great investment tool was not the top priority; instead, it was to resist Big Brother.
"So, while, yes, Bitcoin gives anyone — regardless of their nationality, status, wealth, gender, race, or beliefs — access to the best savings technology on the planet, it also gives them unstoppable, programmable money that cannot be debased or censored and that fights surveillance and confiscation. Dissidents, democracy protestors, opposition leaders, and independent journalists worldwide are beginning to realize this, from Minsk to Lagos to Los Angeles to Buenos Aires."
It is why Cubans, Nigerians, Black Americans, and Ukrainians are turning to Bitcoin in record numbers. They understand its political significance. They know it is their only protection against Big Brother, the ruling global elites.
How Bitcoin Checks the Ruling Elites
But along with a tremendous censorship-resisting tool (exactly how it does this we will look at below), Bitcoin also has the potential to check the ruling elites and their never-ending quest for political, economic, and cultural power. Again, Gladstein's insights are profound.
"In a world of increasingly centralized control and social engineering, Bitcoin provides a check by empowering the individual at the expense of the authority. Yes, billionaires and dictators can buy a lot of bitcoin, but they cannot control the system as they can with fiat money. Unlike the dollar, euro or yuan model, they cannot tweak issuance, censor transactions, make special rules or bailouts for the aristocracy, or perform mass remote confiscation or debasement."
In other words, because it is rules-based, and all social classes have to follow these rules, and because it prohibits elites from increasing its supply, it necessarily restrains their use of unsound money to grow the state, pursue wars forever, and redistribute it to their political and economic and cultural allies in the ruling elite. Bitcoin may be the best anti-ruling elite tool available today. And that is why they want to shut it down. They fear what it could do to their grip on power.
The Great Canadian Wake-Up Call
Around the time I was learning about the censorship resisting potential of Bitcoin, still somewhat theoretical in my mind, the trucker convoy in Canada took the discussion out of the academic realm and drove it home practically with a loud bang. A few weeks into the protest, right when the Canadian trucker "Freedom Convoy" had P.M Justin Trudeau on his back heels, he struck back. In a desperate attempt to shut down the convoy, Trudeau used Canadian law enforcement (who collaborated with the crowdsourcing platform GoFundMe) to block $10 million in donations raised for the convoy. This was pure financial censorship at its best, and it showed the lengths of illegality a government would go to shut down free speech. But this didn't stop supporters of the convoy. In fact, within days, BTC Sessions, a Canadian crypto YouTuber organized another fundraiser for the truckers, this time using cryptocurrency. But Justin Trudeau again responded, "freezing" dozens of crypto accounts. The crypto world responded in outrage.
Kraken CEO Jesse Powell, responding on Twitter, condemned Canadian authorities:
Due process is for plebs. Might makes right in Canada. If someone dissents, you just confiscate their wealth, revoke their licenses, exclude them from the financial system and kill their pets. No need to debate the law, policy or even rights when you have a monopoly on violence.
Powell also expressed concerns over crypto holders, admitting that it could be possible that Kraken [a crypto exchange where one can buy and sell crypto] could potentially be forced to freeze assets by police without judicial consent.
100% yes it has/will happen and 100% yes, we will be forced to comply. If you're worried about it, don't keep your funds with any centralized/regulated custodian. We cannot protect you. Get your coins/cash out and only trade p2p.
Powell is correct. The Canadian government was guilty of financial censorship and political tyranny. And he was also right that his currency exchange couldn't protect his clients against the tyranny of the state because Kraken couldn't stop the state from getting access to the cryptocurrencies people have stored in his "bank." That is why he says holders of crypto need to move their funds into self-custody and only trade person to person.
But here is where it got interesting, showing that not all currency exchanges are the same. Some don't custody the money for clients but only facilitate the exchange of currencies. But once Bitcoin, or whatever cryptocurrency, is purchased on the exchange, it goes right into the private wallet of the owner, giving them total control and self-custody. And once this happens, no one, not even the all-powerful state, can steal it. So when The Ontario Superior Court of Justice sent Nunchuk "a self-custodial collaborative multi-sig Bitcoin wallet," Nunchuk's response was correct to the point and a little snarky.
We do not collect any user identification information beyond email addresses. We also do not hold any keys. Therefore, we cannot 'freeze' our users' assets. We cannot 'prevent' them from being moved. We do not know 'the existence, nature, value, and location' of our users' assets. This is by design.
And here is where the letter got snarky.
Please look up how self custody and private keys work. When the Canadian dollar becomes worthless, we will be here to serve you, too.
Of course, he is right. If the bitcoin is in self custody (protected offline in what is called a cold storage wallet device) where only the owner has the access keys, then no one can get to it, not even under threat of court order. But there is a problem.
Almost 65% of all bitcoin owners have their Bitcoin stored with a currency exchange (a type of crypto bank) where the business holds the keys and gives the Bitcoin owner an IOU, promising they can access their Bitcoin whenever they want. Unless the government gets to it first, the exchange is hacked and the Bitcoin stolen. If your money is held in one of these exchanges, it is one signature away from being frozen or stolen, and you have no recourse to get it back. The Bitcoin community likes to say, "Not your keys, Not your coins." If you don't control the keys, you don't' control your bitcoin money.
Considering that so many bitcoin owners are died-in-the-wool radical libertarians, who hate all government (see my book Cold Civil War for a more detailed analysis of radical libertarians), it is incredible how lazy they have been about custody issues. Most won't' make this mistake again, and my guess is we will see a massive movement of Bitcoin off these exchanges. I am sure millions of Bitcoin investors who have had their money stored online in one of these exchanges are frantically researching cold storage self custody wallets right about now. At least they should be. Because if they are not, and they keep their Bitcoin on a custodial exchange, they risk losing them and their freedom of speech. And having been warned, they would only have themselves to blame.
In Part 3 I will talk about how Bitcoin has the potential to recharge the American Experiment (what I call the New Vital Center in my book Cold Civil War, which is now available). If you missed Part 1, you can read it here.
Disclaimer
The views expressed in this article are for information purposes only. I am not giving investment advice.