Friday, May 02, 2014

Much more than a Bitcoin forecast

The internet began as a child's toy, more like a pen than a sword.  Internet freedom, while controversial, was little more than a question of free speech.  Companies were free to advertise online, everyone freely sent emails, and you could put up your family photos on your personal web server without any government-issued license, who cared?
The appearance of bitcoin was much more than the start of a new form of currency; it was the end of internet freedom as we knew it.  For the first time, covert groups conducted large-scale economic activity outside the umbrella of government regulation and taxation.  It started with billions of dollars of illicit drug deals over encrypted web forums, but spread within a few years to include
  • tax-evading transfers of wealth from aging parents to children
  • a new "dark" that delivered all manner of products (not only drugs) from the tax-evading parallel bitcoin economy; the products at first were shipped over standard mail with no return address
  • illicit online gambling (just a few ...)
  • bribes to win political favors or outright mercenary warfare.
In the first few years, this trend towards tax evasion earned little notice from the government, for two reasons.  First, the bitcoin economy was too small to matter much (only a few billion dollars by the end of 2013).  Second, it was widely believed that the public bitcoin blockchain (a kind of ledger) would make it easy to pursue tax evaders.
By the year 2016, when the price of a single bitcoin rose above $10,000 for the first time, it was becoming clear that the problem would only get worse.  Dark Wallet in 2014 was only the first of a long series of increasingly sophisticated software packages that would provide impenetrable secrecy for those who wanted to use bitcoin untraceably.
The regulatory backlash began with a hodgepodge of rules to increase penalties on those who used bitcoin illegally.  A new federal commission was founded, the Department of Cryptocurrency, to fight the war on crypto-crime, and everyone using bitcoin was required to register their bitcoin activities with the DOC on quarterly basis.  
These rules had little effect.  Advisers to the president soon realized that the only way to really monitor bitcoin (or ban it altogether) was to take over the infrastructure of the internet.  The internet consists of computers and the cables and wi-fi/satellite signal-generators that connect computers to each other.  Taking control was expense, but necessary.  Without tax revenue, the government would have to trim spending; the lower classes threatened a revolt at the prospect of harsh welfare reforms.
So, little by little, internet freedom disappeared.  In 2020, the DOC began requiring individuals to register every internet-connected computer annually, mirroring the much-older vehicle registration system.  The DOC nationalized Verizon and Comcast and declared it a criminal activity for a non-licensed civilian to run wires connecting computers across property boundaries.  Web servers faced exceptionally strict monitoring, and web administrators were required to grant root privileges for random examinations by government inspectors.
By 2025, bitcoin had fallen close to $0 in the US economy.  For the next 20 years it would continue to oscillate between $100 and $40,000 in the third world ... but how about I don't get too far ahead of myself.


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