Sit down and shut up!  

August 13th, 2012 by Irdial 1DnwFLXczVZV8kLJbMYoheUrpqHesjxrSi

Jon Matonis has another great article up at Forbes which replies to Fred Wilson the venture capitalist and principal of Union Square Ventures question about Bitcoin.

Below is the text of our comment on this post, spurred on by a man asking people to essentially “sit down and shut up with the Anarchism jive”.

Before I copypasta, something interesting related to this has just happened. Australian-based trading firm @SpendBitcoins has decided to pull out of the U.S. market, citing “regulatory obstacles”:

https://spendbitcoins.zendesk.com/entries/21806042-spend-bitcoins-out-of-the-us-market

Just what those obstacles are are not specified; in fact, there are no regulations or laws covering Bitcoin buying selling or transferring anywhere in the world. Bitcoin is unregulated, free of legal constraints and its up to the people who use it to do what they want with it on whatever terms they see fit.

That being said, if there were regulations controlling Bitcoin, we can see by this abandonment of the US market exactly what the effect of regulation would be.

Entrepreneurs would not be able to enter the market and compete, thanks to artificial barriers to entry. This is great for early entrants, who also happen to be the advocates for regulation. This is called ‘Crony Capitalism‘; where businessmen use the violence of the State to keep competition out and entrench their positions so that they are unassailable.

Bitcoin is going to be a different case when it comes to the Crony Capitalists and their plans to dominate the market by the force of the State. Because it lives on the internet, and is essentially a new hybrid between pure information, money and a certificate of ownership, the dynamics of the internet and telecoms, specifically Warez (MP3s Torrents), Instant Messaging, SMS and email are going to come into play.

When we look at all of these unregulated services, it is clear that Bitcoin will be absolutely unstoppable, and the Crony Capitalists will not be able to dominate because each computer and mobile phone on Earth will act as an input and output point, circumnavigating them. They will be as Apple’s iTunes DRM files are to the pirate music scene; large in number and market penetration, but dwarfed by the total amount of transacting going on world-wide. For certain, this State sanctioned walled garden Bitcoin world is a goal of such massive proportions that any business man would kill to be the owner of it. What I am saying is that it is not ethical to use the State to get to that position of domination.

Bitcoin will see regulation as damage and it will route around it.

In the end, only the inured 5% will move their Bitcoin in systems that are expensive and regulated, whilst the rest of the world will live and profit in a Bitcoin ecosystem that is pro-human, unregulated, open and free.

That is the scenario where the pro-regulation camp ‘wins’.

And now, on to the reply:

*******

First of all, Bitcoin is not money. If you receive it in exchange for goods and services, it is more like an intangible barter instrument rather than money. Since it is intangible, you can argue successfully that you have received nothing in exchange for your work. It is therefore not possible to be taxed on income when you have taken Bitcoin (nothing) in exchange for your work, any more than you can be taxed for receiving the telling of a story or a concert of music, or a soft whisper in your ear in exchange for your labor.

This is obviously different to receiving physical precious metals issued by the State in exchange for your work, and yet, we can look to a recent case that went to court on this very act for insights in to how Bitcoin might be treated if people were to be paid in it.

In the Kahre tax case, a company paid its workers in US Government issued gold and silver coins. Since the face value of these coins is one thousand times less than the Federal Reserve Note value (in the case of gold), all the wages of the workers at that company fell beneath the reporting and taxation thresholds. They were taken to court by the State on multiple counts of tax evasion and other ‘financial crimes’, and won:

http://portland.indymedia.org/en/2007/10/366287.shtml

In the light of this, it would be hard to argue that wages paid in Bitcoin were more taxable than silver and gold dollars issued by the United States Mint, when the State does not even recognise Bitcoin as money in the first place.

While we are at it, it might be possible to bring a case for tax evasion on gold and silver coins paid as wages by valuing them at the spot price on the day the wages were paid, but this is not how Federal money works; the face value of the money paid in wages is the value for reporting. That is why they won.

Do you see what they did there?

Then there is the matter of who owns Bitcoin as a system and the perception of it. The developers of services that run on Bitcoin do not own the Bitcoin system and are not responsible for what other people say about it or do with it. There is no pecking order that puts developers and their opinions above the opinions of the users of Bitcoin.

Some people believe in tight integration with the state, through licensing, registration, ‘compliance’ and other forms of disgusting, degrading destructive, irrational and anti-human regulation. Others believe that Bitcoin users and service owners would be better served by the ecosystem growing as the internet did; organically and exponentially, without regulation or interference from the computer illiterate luddites of the State poking their noses into other people’s private business.

To say that linking Bitcoin with tax evasion is, “not helpful”, implies that there is a central aim to Bitcoin that everyone must be on board with. Helpful to whom exactly? If someone’s aim in developing Bitcoin and promoting it is to defund the State, then promoting Bitcoin as a way to prevent having your money stolen by the State is an extremely helpful thing. Everyone should promote Bitcoin to their constituencies and not concern themselves with what other people are thinking or are doing. Of course, the flaw in this logic is abundantly clear when you consider that the State will not let people who do not conform to its ideas live in peace. But that is another story.

Jon’s pieces in Forbes, are the best pieces of writing on Bitcoin to date. They are compact, crystal clear, factual and informative, without being bombastic or overtly skewed to a political philosophy. Reading between the lines, I sense a pure Rothbardian hatred of the State, but that is probably just me projecting my own philosophy on his words.

Bitcoin changes everything. All of your assumptions about money, how it is moved, what it is and is not are blown to pieces by it. Rather than trying to squeeze Bitcoin into a Procrustean Bed, it is better to embrace it on its own terms and build services that work on those terms, and not on the assumptions and qualities of physical money or the demands of the State. Its analogous to designing a surf board to surf waves, or an aircraft to fly. What you would prefer these things to look like is of secondary importance to aero and hydrodynamics. The aim of a surfboard is to allow you to shoot the tube at Teahupoo and live. The aim of Concorde is to get you to London from New York in three hours instead of six. Bitcoin is designed to destroy the State. It is designed to destroy Western Union. It is designed to wipe out the banks. This mission is implicit in its architecture and design.

Accepting Bitcoin for what it is, on its terms, will enable you to build better, revolutionary and disruptive services that better serve people. You wil be able to identify these services by how close they bring you to the core of the service. The most innovative services will balance and blur the distance to the ‘raw network’ and the user experience. This is the sort of Bitcoin entrepreneurialism that we are going to eventually see, and it will not come from people who are trying to build a new kind of Bank.

[…]

In reply on Google +

Share/Save

One Response to “Sit down and shut up!”

  1. Virtual cash exchange becomes bank | Delaware Reason Says:

    […] financial institutions in the societal wealth transfer to cryptocurrency will come from embracing bitcoin on its terms. If banks want to participate in a meaningful way, they will have to adapt to Tor exit nodes, coin […]

Leave a Reply

You must be logged in to post a comment.