There is much talk about the arbitrary imposition of a nonsensical “Bitlicense” on businesses based in New York that use Bitcoin to make a profit.

Apart from the nauseating and unimaginative use of the prefix “Bit” in yet another context, this idea is of course, completely absurd and unethical. It’s also guaranteed that this bad idea will face a robust and successful legal challenge that will remove the possibility of any sort of “Bitlicense” from being required anywhere in the United States, potentially causing that country to become the center of all Bitcoin business for the entire world.

Let me explain why.

Some say that Bitcoin is money. Others say that it is not money. It doesn’t matter. What does matter are two things; that the Bitcoin network does what it is meant to do completely reliably, and what the true nature of the Bitcoin network and the messages in it are.

Bitcoin is a distributed ledger system, maintained by a network of peers that monitors and regulates which entries are allocated to what Bitcoin addresses. This is done entirely by transmitting messages that are text, between the nodes in the network, where cryptographic procedures are executed on these messages in text to verify their authenticity and the identity of the sender and recipient of the message and their position in the public ledger. The messages sent between nodes in the Bitcoin network are human readable, and printable. There is no point in any Bitcoin transaction that Bitcoin ceases to be text. It is all text, all the time.

Bitcoin can be printed out onto sheets of paper. This output can take different forms, like machine readable QR Codes, or it can be printed out in the letters A to Z, a to z and 0 to 9. This means they can be read by a human being, just like “Huckleberry Finn”.

At the time of the creation of the United States of America, the Founding Fathers of that new country in their deep wisdom and distaste for tyranny, haunted by the memory of the absence of a free press in the countries from which they escaped, wrote into the basic law of that then young federation of free states, an explicit and unambiguous freedom, the “Freedom of the Press”. This amendment was first because of its central importance to a free society. The First Amendment guarantees that all Americans have the power to exercise their right to publish and distribute anything they like, without restriction or prior restraint.

Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.

This single line, forever precludes any law that restricts Bitcoin in any way. I will show you why.

In 1995, the US Government had on the statute books, laws that restrict the export of encryption products from America without a license. These goods are classified as “munitions”. The first versions of the breakthrough Public Key Encryption software “Pretty Good Privacy” or “PGP”, written by Philip Zimmerman had already escaped the USA via BBS systems from the moment it was first distributed, but all copies of PGP outside of the United States were “illegal”. In order to fix the problem of all copies of PGP outside of America being encumbered by this perception, an ingenious plan was put into motion, using the first Amendment as the means of making it happen legally.

The source code for PGP was printed out.

Its as simple as that. Once the source code for PGP was printed in book form, it instantly and more importantly, unambiguously, fell under the protection of the First Amendment. As a binary, the US government ridiculously tries to assert that immaterial software is a device, and not text. Clearly this is patently absurd, but rather than waste money arguing this point in court, printing out PGP removed all doubt that a First Amendment act was taking place.

The printed source code was shipped to another country, and then transfered to a machine by OCR, resulting in a PGP executable that was legally exported from the United States.

The direct analogy to Bitcoin should be clear to you now. PGP and Bitcoin are both:

1. Pieces of software that can be rendered as text
2. Software that generates unique blocks of human readable text
3. Designed to generate text that is covered by the First Amendment

The purpose of PGP is to absolutely verify the identity of the sender of a message and ensure that the message was not read or changed in transit. The purpose of Bitcoin is to absolutely verify the ownership of a pice of text that is a ledger entry in the global Bitcoin network. Both of these pieces of software are messaging systems and services that absolutely fall under the First Amendment in every aspect, from the source code used to generate the clients to the text the compiled clients generate, send, receive and process.

Bitcoin is text. Bitcoin is speech. It cannot be regulated in a free country like the USA with guaranteed inalienable rights.

Bitcoin and PGP generate messages that are initiated by their users. Each of the messages that are generated by these two pieces of software are unique. The only bodies of law that could possibly be invoked regarding their output and source code are Copyright and Patent law respectively. The Bitcoin source is not copyrighted and the core idea of it is not Patented, and in any case, none of this has anything to do with the nature of Bitcoin messages.

Copyright gives the generator of these texts privileges under the law imposing fines on someone copying your message without your permission, but that law has nothing to do with exporting or imposing a tax on the messages themselves, and of course, forbidding the copying of your Bitcoin payment message rather negates the purpose of using Bitcoin.

Taking all of this into account, if any legislator, regulator, three or six letter US agency or other bored bureaucrat busybody dares to try and regulate Bitcoin, they will be on a hiding to nothing. A legal challenge will be mounted, and will have to be mounted, because if the State can legislate against a single piece of software that generates messages, a legal precedent will be created allowing the US government to regulate all software no matter what it does.

Bitcoin’s operation is fundamentally no different to what all email, text messaging and internet connected software does; relay messages. The only difference is in the software that tracks how the messages of the sender and recipient relate to each other. Email is no different to Bitcoin, save for the fact that a record of the sender and recipient and content of your email is not stored in a public ledger one against the other. We know its stored in a private database, but that’s another story. Wink wink.

Allowing legislation to touch Bitcoin means that any software of any kind will suddenly be liable to arbitrary and unethical restriction. It will set a precedent that will be highly damaging to all software development in the USA.

Twitter for example, could find itself being regulated; it transmits messages that are no different in nature to the messages that Bitcoin transmits; the only difference being the publicly maintained ledger and application of the messages. In fact, twitter could turn itself into a Bitcoin company quite easily by adding a few fields to its message JSON schema to include a bitcoin address for each of its users, adding a page to its client and running its own Bitcoin server pool. Would that extra text suddenly transform Twitter into a different company? Would that suddenly change the nature of each Tweet that is sent on their network? How is having a Bitcoin address integrated into your Twitter account different to making a promise by hand on Twitter to your followers or in a direct message?

Essentially, Bitcoin allows you to make contracts with people without knowing them or signing paper; the network and software takes care of identifying and fulfilling the promise, all with cryptographically signed pieces of text. What the people calling for “Bitlicenses” are asserting is that because Bitcoin right now has a particular use, it should be exempted from the basic law of the United States of America. That is completely insane, and will have unintended consequences that would be absolutely disastrous for the American economy since almost everything today is mediated by or touches software.

On the other hand, if Bitcoin is left to flourish and the market allowed to define the services and means of setting the value and resolving disputes, Bitcoin as an ecosystem will be extremely robust and widespread, just like the internet is today, after having grown for twenty years without any regulation or oversight from the State.

Furthermore, as I have said previously, the country that does not enact Bitcoin legislation will become the starting and endpoints of all Bitcoin transactions globally by first mover advantage. All other jurisdictions will see Bitcoin passing through them untaxed, and there will be nothing they can do about it, as Bitcoin is an unassailable peer to peer network.

We have seen a similar phenomenon with the legal position of encryption in France. SSL was regulated in France until Dominique Strauss-Khan removed the restrictions. They knew that “French e-commerce” would take place inside “le pays Roosbeff” if it were not possible to secure French websites with SSL on demand without friction. American Bitcoin businesses since the endpoints will be in their jurisdiction, will be taxed on their profits, and this will be a percentage of the trillions of global transactions made on the network for every conceivable and inconceivable purpose.

The same is true for any other country. The United States looks set to cripple itself by enacting “Bitlicenses” and declaring by fiat that Bitcoin is a currency, or a commodity or legal tender. As I describe above, Bitcoin is none of those things by nature, and the myriad number of applications it can be put to is only just being discovered. Our project Azteco is but one of them, with the potential to reach the 2.2 billion unbanked people in the world, and provide them with an easy way to access internet e-commerce, world-wide, with a system that makes payment fraud impossible. The potential benefit to the unbanked and the websites that sell goods online is without precedent. Only a fool would do something that could harm the advent of this transformation.

No legislature will be able to keep up with the advances in software that are taking place; there are too many developers and efficient tools in the wild all over the world, all with equal access to the market. The best the State can possibly hope for is to tax new businesses that use the new tools as they emerge, and encourage entrepreneurs to incorporate in their jurisdictions. If America wants to drive away Bitcoin developers, exchanges and new businesses fine; there are plenty of other places in the world where fast internet pipes have been laid and where the government is not so backward. Skype was founded in Estonia, not Silicon Valley, and this is for a reason. All the big Bitcoin exchanges are outside of the USA. There is a reason for that. No one wanting to start a Bitcoin business is planning to move to New York from anywhere, because they know that their business models will immediately come under attack.

For those of you who are frightened of a free market in Bitcoin, rest assured, all the laws that currently exist to do with fraud, theft, misrepresentation and everything else, continue apply to all people and corporations who use Bitcoin. Bitcoin does not make laws or your personal or corporate obligations moot. When you deal with a company, you retain access to the law and recourse to it. When someone makes a promise to sell you goods with Bitcoin, that promise is not nullified because you are paying with Bitcoin. Good Bitcoin businesses will build dispute resolution systems the way that eBay and Amazon have, so that you never have to go to court to obtain justice if there is a problem. Online, reputation is everything, and bad reputations can destroy your credibility and customer bas over night. This is a far more powerful incentive to do right, which most people do by default in any case, than some arbitrary “Bitlicense”.

All the “Bitlicenses” in the world could not stop MTGOX from having a software problem, and no law can bring back the money lost either directly or through the disruption the event caused by the software error. Once again, entrepreneurs powered by the internet make life easier and better, not laws and regulations. Regulation does not make software correct; developers do.

I have one recommendation for anyone advocating that there should be a “Bitlicense”. Don’t waste everyone’s time and money and resources knocking down this stupid idea. The EFF has better things to do with their time than teach the PGP “Munitions Case” lesson all over again. If it goes to court, your side will lose, and as a consequence, America will lose its head start as all Bitcoin entrepreneurs flee the USA for environments that will allow them to innovate, grow and prosper.

And what can the people who want a “Bitlicense” forced on the public say? That they don’t trust themselves? That’s patently absurd. That they do not trust their competitors? If its the case that their competitors are not good actors, then the good actors have a market advantage, and remember; a license cannot protect the public from fraud or provide any guarantee of any kind, it can only distort the market.

What these “Bitlicense” advocates actually want is a guaranteed market advantage. They want to prevent the “Golden BB” entrepreneur that might destroy their business, they want to slow down and stifle innovation, so that they can become the entrenched and unassailable gatekeepers. They want to bar new entrants to the market. It simply will not work. And its un-American.

Let the American dream flourish and extend its power to Bitcoin.

Or else.

The Financial Times has published an astonishingly blinkered and short-sighted article, where Bitcoin is mischaracterised as a threat, instead of the greatest business opportunity of the century.

The fact of the matter is, and I have said this before, the country that puts a 150 year moratorium on all Bitcoin regulation and ‘supervision’ will reap all the Bitcoin entrepreneurs in the world, who will run to incorporate in that territory. This event will spark a Hong Kong style boom without precedent in size, and of course, all the businesses located in that territory, should it be the UK, will be paying corporation tax on the profits gleaned by providing services to Bitcoin users world-wide.

It seems however, that the socialists and Keynesians at the FT are squarely ant-British, anti entrepreneur, anti progress and computer illiterate to boot.

Lets take this article to pieces, starting with the sensationalist and irrational title:

Taxmen, police and spies look at bitcoin threat
By Jane Wild

This is an entirely misleading title. Unless you believe that profit and human progress are threats. The advantages Bitcoin will bring to commerce world-wide are easy for even a child to see.

Mobile phones are everywhere. MPESA is absolutely huge in Kenya. It doesn’t take much to understand that Bitcoin is MPESA for the entire world, only orders of magnitude bigger and better because it can never be gamed or corrupted.

The country that ends up being the “Home of Bitcoin” will have trillions of dollars worth of transactions flowing through it, and will skim taxes off of the top of the activity. Anything that hinders this is going to cause the entrepreneurs building these fledgling systems to go to other jurisdictions. The UK must shun the voices that call for regulation and exchanges as the legalized model, because exchanges are not the only possible business model and regulation will drive entrepreneurs away.

Bitcoin has come onto the radar of the UK government, with officials gathering in London on Monday to discuss the security threats and tax concerns posed by the digital currency.

This is a very bad sign. It is a bad sign because no one really knows what Bitcoin is or what its potential is. No one knows the perfect Bitcoin business model; this is still being actively discovered. No one can even define Bitcoin; people are still arguing over its true nature. It is therefore highly unlikely that anyone is able to predict the future of what Bitcoin bushinesses will look like. Its too early to legislate, if legislation is needed at all, and of course, we hold that it is not.

About 50 civil servants from HM Revenue and Customs, the Serious Organised Crime Agency, Home Office and GCHQ – the intelligence listening service – held a one-day conference which examined how bitcoin works and how criminals might seek to exploit the electronic cash system, which is currently unregulated by any financial authority.

Its interesting that the only thing that is being considered is how to disrupt entrepreneurs; that is of course, the implication of these sorts of people gathering to discuss Bitcoin. They were not there to discuss what they are not going to do, after all.

Imagine such a meeting taking place in 1995, before the internet and the web exploded and increased the flow of goods and knowledge beyond anyone’s imagination. Imagine that these same people met and decided that an unregulated internet was “not acceptable” and that legislation needed to be tabled to regulate who could publish on the internet, who could be an email provider, etc etc. It would have killed the internet in the UK, causing an unimaginable amount of permanent damage. This is what will happen to the emerging Bitcoin economy if anything resembling regulation touches Bitcoin. The businesses trying to start here, that can incorporate and operate anywhere in the world, will simply do so in a place other than Britain. The Bitcoin will flow around this damage, and the UK will not profit, as the money and talent flees to a free jurisdiction. This is undesirable.

The meeting, entitled The Future of Money, focused on the implications that widespread adoption of the currency might have. As bitcoin users are anonymous, authorities worry that it could be used for purposes such as money laundering, and that transactions between individuals fall outside boundaries of tax collection.

Rather than focus on the majority use case that is inevitable with Bitcoin, these ill informed and well meaning people are being entirely mislead.

Once Bitcoin is flowing between devices, it will be impossible to track, and moving very quickly. Bitcoin will suck up fiat currency world-wide. The jurisdiction that allows exit and entry points to operate in it will make massive amounts of revenue, and the Bitcoin will simply flow through the countries where it is either impossible or unfavourable to operate.

It is important to understand what Bitcoin is, not in the monetary sense, but in the data sense. Bitcoin is data. It can flow wherever it is pushed and pulled. It cannot be stopped, any more than Bittorrent can be stopped. Its users will be everywhere, all at once, all the time, always on. Will it be used for unethical purposes? Yes of course; but these will be very rare edge cases, as all crime is an edge case. The difference here is that we are talking about pure information, that is very fluid; as fluid as liquid helium near absolute zero. It flows without friction, up the sides of the container it sits in against gravity. It cannot be stopped; but it can be tapped for revenue. Understanding data and how the world has changed will prevent forward thinking countries from being totally sidelined.

No amount of building projects (“Silicon Roundabout”) or talk will convince entrepreneurs to build their companies in the UK. Anyone thinking about incorporating in the UK to start a Bitcoin service now has cold feet.

If the government decides to act with its Luddite hat on, there will be little point in starting anything here, and those that have, will simply run a shell script to move their businesses to servers in free countries. It will take less than an hour to move operations to any jurisdiction anywhere in the world, and we need only look to The Pirate Bay to see how quickly a high traffic website can move from one place to another. The Pirate bay is an operation under extraordinarily heavy attack; its operators are scattered, its servers constantly being shut down. They do not make a profit and pay no corporation tax; a website that is not doing any infringing or harm, and that is making a profit and paying corporation tax in large amounts, like MTGOX, will be very welcome in many jurisdictions, who will make special rules to accommodate them. Britain must not go down the road of the Luddite and the anti-technology fanatic. There is nothing to gain from doing it. The business will go elsewhere and the British will still be using Bitcoin by the millions.

The Revenue said that its attendance at the conference had been to further its understanding of “current tax-related issues” and that it was monitoring the development of the bitcoin market. “The tax system already deals with transactions in currencies other than sterling,” the department said. “Any such transaction will be potentially taxable.”

Any company incorporated in the UK is subject to tax on its profits. A Bitcoin company operating in the UK will be making a profit and submitting returns every year. This is not an issue different to the operation of any business that currently operates in the UK, and Bitcoin should not be the focus of any kind, since it is just another kind of business, like selling soft ice cream.

Also under consideration was the idea of creating a regulated exchange, which would be the world’s first. Such an entity would go some way to addressing concerns about criminality by requiring users to provide proof of identity. An unregulated exchange was set up in London in 2011 but closed a year later after its bank account was shut down.

This just demonstrates the near horizon thinking of the people who attended this conference. Bitcoin exchanges are not the only business model that can be built on this new technology.

For example, there is a new business, Bitspend (not operating from the UK) that allows you to buy anything in the world with Bitcoin. You select what goods you want, inform the website of your choice, pay them Bitcoin to the amount of the purchase, plus their fee, and they purchase the goods for you and have them dispatched to you directly from the seller. They don’t even have to handle the goods, all they are doing is making purchases on other people’s behalf.

This business has nothing to do with Bitcoin Exchanges. It is a pure service that uses Bitcoin as a money transport. A business like Bitspend could operate in any jurisdiction,  since it is buying goods over the internet. They are based in the USA, and as they grow, their software will become more robust and reliable, and their customer base will grow. New business ideas and opportunities will come to them first.  People in the UK can use this service transparently; it is a perfect example of Bitcoin flowing through the UK without ever touching a UK incorporated entity. The question then is obvious; why should this business leave the USA and incorporate in the UK? What advantage is there for them to do so? What inducements can be put on the table to cause Bitspend to move to the UK so that its profits are taxable in the UK?

These are the correct questions that should be asked; Bitcoin should not be mischaracterised as a threat, but as an unprecedented opportunity, and something that should be used to attract entrepreneurs and visionaries to London.

Many more Bitcoin companies are being planned and developed right now in a myriad number of different models and forms. Conferences are being held in Romania and California. Britain is going to be left out of this important revolution if the wrong noises are made and disseminated.

The web was born in the UK, and the centre of the web’s entrepreneurial activity is all in California.

Why?

Why is it that the British invent all the great things and other people in other countries capitalize on them? Why is Facebook everywhere in the world, and Bebo, early star in social networking, filing for bankruptcy protection?

Britain has the brains, it has the talent. Its young people have the entrepreneurial spark. Bitcoin is going to be the biggest thing since the internet itself. If Britain drives entrepreneurs in this sector away, it will not get a second chance.

The Future of Money conference, which included presentations on how the cryptocurrency works, was organised by the government’s Foresight Horizon Scanning Centre, an arm of the Department for Business, Innovation and Skills which develops innovative, long-term policy. Although unofficial meetings have been held previously, this was the first official meeting of civil servants held to discuss bitcoin. No government ministers were present.

Bitcoin and its growing ecosystem was created by developers. It did not need the State to help it, design it or get it going. Like the internet, it will grow at its own amazing pace if left to do so. Anything that touches it will distort its natural geometric growth.

What must be understood here is that the threats presented by Bitcoin are absolutely minuscule, molecular even, when compared to the planetary scale big picture; it is exactly the same as the internet itself. The vast majority of internet usage is absolutely harmless, ethical, beneficial and normal, and the same will be true of Bitcoin.

Policy, if any is to be made at all, and it should not, must be driven only by the facts and economics. If not, Bitcoin will see it as damage and will route around it. The Bitcoin will flow through and out of the UK, rather than coming in and terminating here; and that is what, surely, the government must want – for Bitcoin to begin and end in the UK, so that the businesses that provide the services can aid the economic recovery.

And what an aid that will be. Trillions of dollars and Pounds in Bitcoin on a weekly basis, flowing through UK based nodes that are all as trusted as eBay and built to the highest standards, just like Facebook, but without any regulation, just like Facebook.

This is the ideal situation; The Facebook of Bitcoin incorporated in Britain showing the world that London is the centre of the emergent Bitcoin economy. “If you want to be where the Bitcoin action is, London is your Go To destination”. This is what we want to read!

Michael Parsons, a banking management consultant and chartered accountant who presented at the event, said: “There were a lot of questions. Everyone was very receptive and keen to learn more.”

!

GCHQ confirmed that it had sent staff to the conference in the interests of its role in helping to deliver cyber security.

Bitcoin is not a “cyber security issue.”

Its very important to characterise these technologies correctly. At the beginning of the Internet, I am sure that there are people alive now, who would characterise ISPs as “cyber security threats”. Of course, acting on any such mischaracterization would have fatally crippled the nascent ISP and web industry, and caused Britain to be an also ran in the internet stakes. As it happened, despite the telephone monopoly of BT, the ISP business in the UK thrived and produced many wonderful spin-offs in terms of new businesses and skilled developers, many being of world importance. This should be the aim with Bitcoin also. Britain should seek to nurture, by keeping an arms length from it, all Bitcoin related entrepreneurial activity.

As we have seen with Hong Kong, once all the work is done, there will be a glistening jewel of activity to collect at the end of the exercise. Only a hands off policy can create such jewels, and in the case of software businesses, the jewel is quicksilver, that can flow very rapidly to the place where regulation is lowest. Business is mercury that always seeks its most efficient level.

And let us remember; Bitcoin is hardly being used for anything at all at the moment. What everybody thinks it is and what it could be used for is pure speculation. A cautious, future centric position is the best one to be taken, because either way, the Bitcoin is going to flow, and that flow cannot be stopped without stopping entire internet.

Some people might say that websites can be blocked, which will stop people in the UK from getting Bitcoin from other jurisdictions  They will cite the blocks on The Pirate Bay and Kickass Torrents as successful examples. This view is entirely incorrect.

A small browser extension called Stealthy makes all ISP blocks moot. It is currently installed by 277,794 users, and it is sure to grow in its user base. This is but one very easy ways to completely circumvent ISP blocks on websites, and of course, once you get your Bitcoin on your mobile phone or laptop, it is a pure peer-to-peer system, that cannot be blocked at the ISP level.

With the Stealthy plugin, all ISP blocks are completely defeated. That means it will be impossible to block any website in any jurisdiction selling Bitcoin.

The normal reaction process of problem, reaction solution will not work in the twenty-first century. A new model must be designed and implemented that utilizes these new tools so that everyone benefits.

Bitcoin and the internet itself are entirely beneficial and should not be regulated, but should instead, be harnessed and their utility leveraged.

Rather than having a meeting to discuss fallacious ideas and imaginary threats, meetings should be held to see how Bitcoin can reduce the cost of government.

Imagine the following applications for Bitcoin.

• Paying parking fees and fines.
• Collecting taxes. In micro amounts.
• Paying usage fees for all government services. In micro amounts.
• Reducing all money related fees on flows into and out of government, saving billions.
• Disbursing benefits at a fraction of the current cost.

These are just some the sorts of things that should be discussed at the government level, not how this baby should be killed before it is born.

This is an opportunity for increased efficiency, transparency, speed and effectiveness in the way government collects and disburses money. This is the sort of thinking that should be on the table, not Luddite dreams of wrecking the internet.

Civil servants will now prepare two reports for ministers on their conclusions: one public and one private.

FT

These reports, both the public and the private, cannot possibly present a complete picture. The Bitcoin business models are still being developed and iterated through. No one knows what the final, profitable and viral shape of Bitcoin businesses will be; the only thing that can be predicted is that there will be a final shape, and that the company that hits on it will be incorporated in some jurisdiction, and that it is in that jurisdiction that the money will flow.

The question here is whether or not that country will be Britain. Articles like this, and any move by Her Majesty’s Government to control Bitcoin will cause Bitcoin to bloom elsewhere.

No amount of Silicon Roundabout development, ribbon cutting and pleas to come to Britain will make the UK attractive. Only a guaranteed, decades long moratorium on any interference in Bitcoin activity will attract entrepreneurs and investment in this once in a lifetime event.

The FSA letter on Bitcoin sent to Intersango was an encouraging sign that Bitcoin was to be left to flourish. I will leave it to you to imagine the next MTGOX starting in the UK (or for that matter, the next MEGA that has grown to dominate New Zealand  internet traffic and will be an economic powerhouse there with its soon to be announced new services); there is simply no reason why such a company should not start in the UK and grow to a size greater than MTGOX, as second and third generation successful Bitcoin business models begin to emerge.

The question is will the correct business conditions exist to facilitate this emergence, or not?

It seems that FinCEN has finally decided to opine on Bitcoin, without naming it specifically. This US pronouncement spells death to all “compliant” US Bitcoin companies that choose to remain based in the USA.

There is one thing you absolutely must bear in mind; nothing that FinCEN unilaterally declares has any force outside of the USA. If you do not base your business there, their bespoke rulings, “guidance”, that is not even law in the US, has no effect on you or your business. This is a problem for Americans only, and no one else.

Here is the relevant passage:

De-Centralized Virtual Currencies
A final type of convertible virtual currency activity involves a de-centralized convertible virtual currency (1) that has no central repository and no single administrator, and (2) that persons may obtain by their own computing or manufacturing effort.

A person that creates units of this convertible virtual currency and uses it to purchase real or virtual goods and services is a user of the convertible virtual currency and not subject to regulation as a money transmitter. By contrast, a person that creates units of convertible virtual currency and sells those units to another person for real currency or its equivalent is engaged in transmission to another location and is a money transmitter. In addition, a person is an exchanger and a money transmitter if the person accepts such de-centralized convertible virtual currency from one person and transmits it to another person as part of the acceptance and transfer of currency, funds, or other value that substitutes for currency.

The first thing you will notice about this is that if you are a Bitcoin miner, FinCEN says that what you are doing does not fall under their jurisdiction. This means you can be a Bitcoin miner, with the biggest mining rig in the world, and then take your mined BTC and buy whatever you want without the threat of any interference from them. Even though you must transmit your mined Bitcoin to make a purchase, you are not a “money transmitter”. Its crazy talk.

If however you pay someone to mine for you, and then receive the Bitcoin, all of a sudden, the situation is somehow different, and you are committing an act that they are claiming they have jurisdiction over. Its utter nonsense of course; Bitcoin is no different to Monopoly Money, which presumably FinCEN does not think is worthy of their attention. And if not, why not? How is Milton Bradley’s Monoply Money different from Bitcoin, and why is it not regulated? These are questions that no one asks, like, “why is the Emperor naked?”  If the purpose of FinCEN is to stop people “misusing money” whatever that means, surely if the Bitcoin is mined or paid for is completely irrelevant. The thinking behind this is pure illogic on stilts.

You will note also that FinCEN does not name Bitcoin specifically, but instead generates an arbitrary ruling on an entire class of software technology. This means that you will not, if you are an American, be able to claim that Litecoin is different to Bitcoin, “because FinCEN doesn’t mention Litecoin”.

This unconstitutional and arbitrary guidance has grave implications not only for American Bitcoin companies and users, but for the First Amendment of the Constitution of the United States.

Bitcoin, if it is read out or printed onto paper, is protected speech under the Constitution. Americans had this debate many years ago, where people tattooed RSA code on their bodies and read it out in public in exercise of their first amendment rights. PGP was exported out of America, legally, when its source was printed on paper (First Amendment protected act) and then read back in by OCR in the free world.

All of this precedent applies to Bitcoin, but now, instead of a single book of source code, you will have millions of people printing out Bitcoin and transferring it everywhere, storing it, exporting it, and there is nothing that anyone can do about this.

As more and more money disappears into Bitcoin  we are going to see an escalation in the reach, scope, fines and penalties meted out to Bitcoin users and businesses who in the future will no longer be distinguished from each other, once (for example) services like Local Bitcoins comes into the radar of FinCEN.

Bitcoin is going to be the new Internet Poker, which funnily enough, has started to accept Bitcoin as an alternative to money because Bitcoin is not money.

Clearly, a Supreme Court challenge is in the future over this, and I suspect a coalition of Poker companies, real Americans and sensible people are going to join forces to stop the insanity.

What we can also expect is an attack from the Crony Capitalists who want Bitcoin regulation arbitrary licenses and fees levied by the state and policed by FinCEN to stifle competition and keep out agile upstarts. It will not work.

Like Suprnova, MiniNova, the Pirate Bay, Kickass Torrents and finally MEGA, it will be impossible for America based, FinCEN crippled Crony Capitalists to stop a huge, popular  easy to use Bitcoin business from sucking up all the US Bitcoin business and eventually bankrupting them.

This is what these Crony Capitalists have asked for; a noose around their necks to end their own lives. If you want to see what this looks like in real life, as it has actually happened, you need look no further than the case of Think Computer Corporation and the arbitrary crony capitalist written California Money Transmission Act that caused that company to shut down. Every Bitcoin startup basing itself in California will be subject to this; and most extraordinarily, the license fee applied to corporations operating there is not set. The amount payable for a license is arbitrary, and calculated and levied on a case by case basis. I suggest you research this case. It is astonishing. How a Bitcoin company can know this and decide to move to California is frankly, baffling.

Finally it must be repeated; this document is guidance only. It is not new law, and as a matter of fact, you are free to ignore their guidance and do what ever you want, if you are an American of that vanishing breed. Guidance is not Law, it is guidance; a suggestion of practices, and nothing more.

We are still a long way from a true legal attack on Bitcoin, but you can be sure that it is coming, and you can be just as sure that its effect will be precisely ZERO, just as it has been with Bittorrent recently and Warez for decades. The best they can do is make an example of the high visibility, high earning Bitcoin businesses, but for the billions and billions of transactions taking place daily between iPhones, iPads, Droids and desktops FinCEN will be absolutely powerless and impotent.

Warehouse banking, Hawala, and all the other private, person to person money transacting services are going to become more powerful and efficient by many orders of magnitude, thanks to Bitcoin and its frictionless, massless ability to move money anywhere in the world in the blink of an eye.

Finally, this is a great opportunity for a country to cause Bitcoin startups to congregate in their territory. A 150 year moratorium on any law that touches anything to do with Bitcoin / Blockchain technology would create a new Hong Kong island of super prosperity, as it becomes the world’s hub for all Bitcoin business, and the trillions of dollars in Bitcoin flowing through it, leaving the pitiful democracies in the dust.

We just received notification that The Conet Project: TCP / 1111, the five disc edition, has successfully reached its funding goal, over by one percent.

Thank you to everyone who blogged, tweeted, emailed, encouraged, and put their money where their mouths are.

The further in to the twenty first century we go, the better it gets. Crowdfunding. Bitcoin. The Free State Project.

Exiting times ahead, for certain.

Happy New Year to all BLOGDIAL readers!

The Digital Marketing people at IGGY put together the trailer above. Its a very beautiful piece. I wonder how many people out there recognise the sound of a 1990’s modem negotiating over a phone line?

Those were the days!

We just mailed out this reminder to all TCP Mailing List members:

_______________

Here is an update on our crowd-funding campaign. Thank you to all those who have contributed so far.

Irdial-Discs just received the following message:

“Can I humbly suggest another email to the TCP subscriber list to see if it gets this pledge over the line? People have been waiting for a reprint for years and I’m sure they wouldn’t see a second email more than a month later as too spammy! I’m sure there are a few dozen absentminded people like me who’d put a pledge in if given a second prod!”

That was left on our Pledge Music message board, from maximum £50 contributor Timothy Lenders.

We have reached 71% of the target amount. There are 76 donation slots left to fill, and twenty days to run in our crowd-funding campaign to re-press to TCP / 1111, the five disc edition of The Conet Project.

Only a few more pledges will push us over our target. We need you to pledge right now on our Pledgemusic page:

http://www.pledgemusic.com/projects/tcp1111

to make the magic happen. If you forward this message to anyone who you think will be of use to the push, this will help us reach the goal more quickly. Birds of a feather flock together. Your personal email is far more powerful than any press release or news item. Your recommendation can double the effect of this email instantly.

The 5th disc of The Conet Project is full of deep weirdness, unique beauty, perplexing textures, odd rhythms, and savage mimicking communiqués. For the people who respond to the pure sound aspect and musical context of The Conet Project, the 5th disc is pure, mind shattering, jaw dropping gold.

Head over to Pledgemusic, be immortalised as a contributor by donating £50 to the re-press of TCP / 1111, and then share this message with a friend.

The long wait is almost over; all it needs now is for you to…

http://movieclips.com/dWJQx-juggernaut-movie-cut-the-blue-wire/

cut the red wire.

_______________

We now stand at 235 pledges, 83% complete, with 50 slots left and 18 days to go.

If you have not secured your place, do it now, for great justice!

For years, Slashdot has used its moderation system to filter out the trolls. The “mods” are given “mod points” intermittently in a feedback mediated system that keeps the site clean. This does not stop people from making troll posts, it keeps them out of sight to an extent that you can choose, using a threshold selector. If you have set your threshold low, you will see all the noise and trolls like, “first post”, and “Free BSD is dying” and other staples of Slashdot. If you set your threshold high, you will only see posts that have scored highly.

But there is another, better way to moderate posts, and Reddit has almost done it first:

By using Bitcoin as mod points, troll posts will not only be better controlled, they will diminish in number. It will literally be worth your while not to troll or waste peoples time, and if you are insightful, you could actually make some Bitcoin that you can use to buy real things in the real world. Slashdot has its own internal currency called “Karma”. You cannot take it away with you, you cannot spend it, even on Slashdot, and it is entirely meaningless to everyone in the world except the users of Slashdot who are paying attention or who even care.

Bitcoin is a different matter however. You can spend it in places other than Slashdot; it has a life outside of the site. The reward for posting thoughtfully in such a system is therefore, many times greater than collecting Karma.

As I have said before, Bitcoin does not have to take over the entire world for it to be a successful project. If it is used in only a small fraction of all transactions world-wide, it will change everything. Its not hard to imagine a world where the thumbs up and group moderation systems that are found in tools like Discus no longer exist, replaced entirely with Bitcoin. Given the number of blogs and newspapers that use these systems, and the number of comments that are made every day on them, it is not hard to imagine just how huge a market and Bitcoin driver this could become.

Bitcoin is going to monetize areas of life online and off that are not immediately obvious, and each one has the potential to make adoption of Bitcoin wallets go viral. Furthermore, the effect of Bitcoin adoption is beneficial wherever it touches; it is an instant international money transfer medium, a potential spam moderation facilitator, and many more things that are hard to imagine.

Read this post in Spanish

This video is a visual representation of the difference between the Austrian School Bitcoin detractors and the people who understand what Bitcoin is, what it can do, and how it is the biggest thing since email.

On the right, you have James Turk the head of GoldMoney, who is old, and on the left you have Felix Moreno de la Cova, who is young. The old man doesn’t understand computers, cryptography or the internet. The young man does. They have a very illuminating and friendly conversation about Bitcoin and money, without confrontation, rancour or irrational nonsense like, “I just don’t like the product”.

This is how discussions should take place, and I have alot more sympathy for Mr. Turk now, because he is genuinely reaching out to understand something that is clearly incomprehensible to him, and he is not intimidated or defensive, is eager to learn and is patient and thoughtful.

We need people like James Turk, because he has a vast amount of experience to offer, and once he understands Bitcoin, I would say that his presence on a board of directors would be invaluable.

Compare and contrast this gentlemanly interview with the appalling article that just appeared at The Daily Bell (which I will not link to; one click from me is quite enough) where every sort of fallacy and nonsense is trotted out in what is a blatant attack piece trolling for clicks.

As I have said before at length, GoldMoney is a fundamentally flawed idea:

http://irdial.com/blogdial/?p=3103

and it is now suffering from its exposure to the State, and is becoming harder and harder to use thanks to suffocating regulations. The exact opposite is true of Bitcoin, which is becoming easier and easier to use, with better software and more outlets accepting it every day, and a response from the State which amounts to a shrug of the shoulders.

When the economic collapse starts to bite, I am betting that GoldMoney will be forced to shut down entirely, because it serves its customers against the interests of the State. The gold confiscation of 1933 is a precedent that can happen again in a heartbeat; this is not beyond the realms of possibility. People who hold real money with third parties are going to face the institutionalized theft of their savings. Bitcoin on the other hand, will never be shut down by the State, it cannot be confiscated en masse or stopped, just as Bittorrent will never be shut down.

Whatever your opinion on what Bitcoin is or is not, it is here to stay, and it is going to change everything. Wether or not you take advantage of it is up to you, but the future is not going to wait for you to wake up and catch up.

As the barriers to competition evaporate, the world is becoming Bitcoin’s oyster.

Guess who it is you’re fighting now? Everybody.

In his old book, The Road Ahead, Bill Gates wrote of “friction-free capitalism,” a type of marketplace that he argued will be ushered in by the spread of a technology like Bitcoin. This is like heralding the Net as a harbinger of instantaneous transaction while dispensing with hard cash and the credit card. Forget the Banks — we already inhabit what has become a remarkably low-friction internet economy. That’s why today’s marketplace feels so competitive. And it’s why some businesses are prospering beyond all expectation while others are wondering who changed the rules of the game.

Economic friction is everything that keeps markets from working according to the textbook model of perfect competition: Distance. Cost. Restrictive regulations. Imperfect information. In high-friction markets, customers don’t have many suppliers to choose among, or are restricted to suppliers hampered by regulation. Owning a factory — or a store with a good location — counts for a lot. It’s hard for new competitors to get into the game. The marketplace moves slowly and predictably. Low-friction markets, as are found on the internet, are just the reverse. New competitors crop up all over, and customers are quick to respond. The marketplace is anything but predictable. Bitcoin exacerbates these effects exponentially, because it removes barriers to securely collecting money from customers.

The single most significant change in the economy over the past 36 years has been a wholesale reduction in friction, affecting nearly every industry. Some of the factors are obvious: increased air travel, overnight delivery, credit cards, cellphones, the internet. They put faraway companies on a competitive par with local ones; they enable Lands’ End, Amazon and a hundred other mail-order houses, for example, to match the convenience and price of a neighbourhood store. Other factors are less visible but no less important: Deregulation opened up many industries; local truckers, for instance, may face competitors from half a world away. The growth of high-risk, high-return capital markets has transformed other fields. Today a local Bitcoin entrepreneur must worry about the entrepreneur in Kiev showing up two clicks away in her browser.

Sure, the Internet will grease the market’s machinery still further. But friction is declining every day anyway. Banks face new competition not just from the occasional startup fiat money site (like Linden Dollars) but from distant competitors using Bitcoin technology. Entrepreneurs in Kansas or New York, according to the Wall Street Journal, must now compete with entrepreneurs from Bangalore and China, whose Bitcoin services are only a click away.

There’s little need to elaborate on the threat posed by a low-friction economy; it means more competition, often from unexpected parts. The opportunity is pretty plain as well. In principle, at least, the world is any small company’s oyster. Bitcoin services selling in Dallas can be offered in Dakar or Bangladesh with zero extra time and expense. The thing is, the rules of a low-friction marketplace are different. And if you’re not playing by the right rules, you’re out of the game before it starts.

Rule Number One is merely a caution: Don’t expand blindly. The fact that you can open up a plethora of locations or launch a public relations operation or even integrate into the mainstream banking system doesn’t mean that you should. After all, everybody else can do the same, or something new and disruptive that will outmanoeuvre you. You may be able to peddle your products or services in Minneapolis or Brooklyn, but nobody has to buy them. Having 100,000 outlets is meaningless when it comes to being outflanked by a more nimble competitor.

Rule Number Two: Offer a distinctive something to your customer. This seemingly trite piece of advice is more revolutionary than it sounds. Your job is to take care of the customer — to deliver good value. All the business gurus harp on that one theme, albeit in many variations: Quality. Service. A fair price. In a low-friction marketplace, however — particularly if you’re expanding — the old nostrums are nowhere near sufficient. You have to have something that sets you apart from all the other suppliers offering quality, simplicity, service and a fair price. What should the something be? In the internet age, the company that provides the best privacy and usability wins, especially with Bitcoin.

There’s a hidden secret of the low-friction marketplace, which I’ll call Rule Number Three: What you sell doesn’t need to be a unique product or service. It can simply be the ability to do something better than anybody else. If that puzzles you, think of Google. None of Google’s strategies — search, webmail, storage — is exactly a secret. Indeed, most of the big search engines have at one point or another tried to be Google, only to discover they can’t. They just don’t know how to do what Google does and still make money at it.

You can be a lot smaller than Google and still do things that leave most competitors baffled. New, agile Bitcoin Businesses, will learn how to guarantee, for example, the delivery of Bitcoin in 30 minutes, without fuss or privacy issues. You think people wouldn’t welcome that capability? There will be many market players entering the Bitcoin space who will offer friction free services that will be a no brainer when you compare them to the stifling complexity and Orwellian surveillance state features of other services.

We get dazzled these days by glossy visions of information superhighways and electronic bazaars fuelled by Bitcoin. No doubt we’ll all have to deal with the commerce of Bitcoin sooner or later. Meanwhile, the friction-free economy is already here. The entrepreneurs who recognise what it means are the entrepreneurs who are going to prosper.

http://www.inc.com/magazine/19960601/1690.html

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 +

It seems that another crack in the dam has appeared:

http://blogs.telegraph.co.uk/finance/thoore-scandalous-than-libor/

How long can it be before it cracks all the way and the whole creaking edifice bursts and the pressure is relieved?

Bad stuff is what happens when the state is involved in the production of money and the regulation of banking. Banking is no different to flipping and selling hamburgers; money is a commodity just like any other. The state should regulate neither banking nor burgers. If McDonalds was in the business of manufacturing money, there would be standardized, reliable, consistent money, redeemable everywhere on every high street, at a stable price.

As revolting an idea as this sounds at first, being people who know a little about good food:

it makes perfect sense. The McDonalds consistency ethic superimposed on the manufacture of money, free of regulation, would solve all the problems of unsound money.

Selgin outlines the foundation of this:

http://www.amazon.com/Good-Money-Birmingham-Beginnings-1775-1821/dp/0472116312

if you superimpose the Birmingham button maker money from the 1700s with McDonalds and modern computers, how this would work becomes instantly clear.

The Financial Services Club Blog has an interesting piece on Barclays Pingit:

http://thefinanser.co.uk/fsclub/2012/05/case-study-barclays-pingit-for-consumers-and-corporates.html

Pingit is the new service from Barclays that runs on iPhones and Android. In order to use it, you need to be a Barclays customer.

Barclays Pingit is growing fast. They have over seven hundred thousand users. They are using the PayPal “recipient becomes a user” as a way to spread the service. This is a fascinating trend, and they probably have so many initial users because they were able to target existing account holders directly in the branch or through the post or other points of contact to offer them their new free app.

Pingit is very interesting for anyone interested in Bitcoin, banking and liberty, for several reasons, and it is a bad product for anyone interested in the future of money transfers over devices that is beneficial to the users. Look at the onerous and invasive sign up procedure you have to go through to use Pingit, and you get a taste of what that service is all about; arbitrary controls and restriction:

As a non-Barclays customer you have to go through a very complex account verification process that involves not only a PayPal like penny drop into your current account with a reference number that you need to enter; but this is followed by a letter to your house via snail mail with another verification number.

More on this in detail below. None of this ‘account verification’ has anything to do with the utility of the product, how it works, its security or anything else. If Barclays did not have to do this, Pingit would be on the phones of seventy million people, not seven hundred thousand. And this is a very good thing, because once a service becomes entrenched it will be hard to displace it.

Or maybe not.

Everything has changed in the internet mediated world. Pingint might have seven hundred thousand users today, but there is nothing to stop another app developer creating a product that sits four millimetres adjacent to it on your iPhone’s home screen that does a better job without any nasty restrictions or requirements.

Pingit users could then move their money into that app and then never open Pingit again. Think of it as similar to MySpace users migrating to Facebook, and of course, all the people who are un-banked and who do not live in the UK are also on the same internet with the same mobile phones that Pingit users are on. The market for these users is bigger than the population of the entire UK. On this basis alone it is clear that Pingit will eventually reach an upper limit that is a subset of the UK population. The field is wide open to disrupt and capture the money on mobiles market, and the winner will not be Barclays Bank.

Imagine the following scenarios. Barclays doesn’t like what you are doing on your mobile phone. They can unilaterally or by order of the State, freeze your account and disable your Pingit access. They have total surveillance of every transaction you make, on both ends, to whom, when and from whom. Their 4,123 word long terms and conditions include the following arbitrary restrictions:

• You need to be 16 or older to use Pingit.
• You can send £1 or more but not less than £1.
• You must have a UK current account.
• You must give them your UK mobile number.
• Pingit can reverse payments at any time.
• There is a maximum daily limit of £300 for payments.
• The payment can be made only once the Payee has registered for the service.
• There is a maximum daily limit of £5,000 for all payments received through Pingit. Barclays will refuse to process a payment if it exceeds the arbitrary limit.
• Barclays places arbitrary restrictions and limits on how you use your Pingit account.
• Users may not be able to install or use the app on a jail-broken or rooted device.
• You may not attempt to derive income from the use or provision of the service, whether for direct commercial or monetary gain or otherwise.
• Pingit can refuse to process a payment if they believe that you have not met any of the conditions.
• You must authorise Pingit to display the full name of the account and your mobile number to the payer when they input your mobile number into the app.
• Depending on the information you provide when registering, Barclays may require you to complete registration at a Barclays branch or to provide us with further information before you can use Pingit.

Arbitrary, absurd, completely ridiculous and even astonishing.

These terms and conditions, and this is only a cherry picked selection of them, are unacceptable to all decent people with an intact moral centre, and none of them are needed for Pingit to work if it had been designed properly; they are made to surveil the user and to be compliant. People in other countries or of no country at all will not be bound by these arbitrary, anti human, anti market restrictions, and when an entrepreneur launches a rival e-money app, they will eviscerate Pingit and all other competitors that are spawned by banks.

This might be the reason why Blockchain.info’s Bitcoin app was removed from the iTunes store after having been approved. It is exactly the sort of app that is an existential threat to Pingit and products like it. Both Pingit and Blockchain.info’s apps are free, so there is no friction there. One surveils you and you cannot use it ‘out of the box’ upon download. The other works as soon as you run it and does not surveil you. Bitcoin allows you to send and receive very small fractions of Bitcoin. The arbitrary one pound limit, apart from being denominated in fiat Sterling, means that the world of micro-payments is forever shut off from Pingit. It is a major flaw. Blockchain.info’s app wins over Pingit.

Blockchain.info’s app and service has no KYC restrictions, no fees and no ability to arbitrarily shutdown your account. It is a friction free service. It has no default surveillance, and you do not need to identify yourself in order to use it. There are no limits to the amount of money you store on it. It is international, ‘instant on’ and interoperable with a plethora of different services. By any measure Bitcoin running in Blockchain.info’s app is infinitely superior to Pingit.

On top of all this, Pingit only allows you to send Sterling back and forth. This means that the money you use in Pingit is deflating, losing purchasing power on a monthly basis, by design. Quite apart from the fact that you cannot use this ‘money’ anywhere else but in the UK, the inflation tax is another reason why people will opt for Bitcoin rather than Pingit when the two apps are installed side by side on their phones.

This has implications for Apple also. If they continue to refuse to allow Blockchain.info’s app to be given away for free on iTunes, people will turn to Android phones where they will be able to run the apps that they need without any fear of arbitrary shut down. Imagine that you have 50BTC on your iPhone and you run iTunes to update your apps. Apple, because they have disallowed Blockchain.info’s app, prevents you from getting updated versions, and if you need to download it again, you cant. This is an unacceptable risk, quite apart from being insulting and anti consumer. Its clear that Android phones are the future when it comes to e-money provided by third parties, because Apple cannot be trusted to allow you to use your device for what you need it for. Add to the mix the rumours that Apple is working on iWallet, and you get a sense of what Apple’s motivations might be in removing Blockchain.info’s app. They don’t want any competition… CAPISH?

Barclay’s Pingit service is interesting because it means that money on mobiles is going to happen in a big way. Now it is a matter of who has the best product that will fit into the space, avoiding the bear traps like iTunes, the attacks from the banks (shutting down the accounts of Bitcoin businesses), the technical difficulties and the State.

On top of this, and perhaps the biggest barrier of all for Bitcoin, is the PR problem; getting the public to understand what Bitcoin is, how it works and why it is superior to services like Pingit. In order to make this happen, the merchants are the first line of attack. Bitcoin, if it is accepted in many places will trigger installation of the clients on phones, and a spread of the ecosystem. Blockchain.info’s app is potentially, a key piece of this puzzle.

It should now be clear to anyone with an interest in this that regulation and registration of Bitcoin services will not help adoption. If this is a race between services, clearly Bitcoin has the advantage and the better potential to go viral far more than Pingit or MintChip or any of these broken by design bank offerings.

In order for the chain reaction to happen, nothing must stop the flow of money in the system. Registration and regulation are carbon rods in the pile. What is needed is a runaway chain reaction so that the Bitcoin is spread everywhere, into every device in every pocket. Tying down Bitcoin into jurisdictional boxes, hampering it with onerous regulations, KYC and other arbitrary nonsense will allow Pingit and other services to mature, spread and solidify. Once again, this does not mean that their dominance will be permanent, it will simply mean that for a time, the market is broken and people are hurt. It would be far better for humanity if Bitcoin wins without going through a stage of broken e-money, and there is no reason why this should not happen.

Pingit cannot win. By popularising e-money on mobile phones, they are educating the users about money on mobiles. Once this information is spread everywhere, a new challenger can arrive and wipe them out in a matter of months, and there will be nothing they can do to stop it.

Should people who want to see the widespread and rapid adoption of Bitcoin seek tight regulation and integration with the State, or should they rely only on their skills as developers, marketers and entrepreneurs to create the rock solid, reliable and trustworthy products that people will use in their millions, like the other well known internet companies that have changed the way we do things?

*****

A Bitcoin innovator has just applied for and received a registry entry from the US Federal Government’s Financial Crimes Enforcement Network:

http://www.fincen.gov/financial_institutions/msb/msbstateselector.html

on that linked page you can read the following statement clarifying FinCEN’s position on each entry they list:

“The inclusion of a business on the MSB Registration Web site is not a recommendation, certification of legitimacy, or endorsement of the business by any government agency.”

This disclaimer appears on the certificate as the first paragraph, in large letters. The certificate also says that, “FinCEN does not verify information submitted by the MSB. Information provided on this site reflects only what was provided directly to FinCEN”. Read the rest of this entry »

TransferWise may or not be the next big thing, but as far as I can see their appeal is limited both in terms of who needs it, can use it, and the time it will take for them to be completely outflanked by superior services.

The VentureBeat press release:

http://venturebeat.com/2012/04/18/transferwise-undercuts-the-banks-with-crowdsourced-currency-exchange/

says “Banking is broken”; this is true, but what is needed to replace it is not ‘the AOL of banking transfers’; what is required is the open Internet of banking transfers, and that means Bitcoin.

Back before the internet permeated every home, AOL was the main way millions got online and used email. It was the consumer method of getting online. Anyone who knew anything about how the net really worked understood that AOL was garbage, and not the true internet. Similarly, anyone who had a friend that needed to get their contacts list out of AOL Messenger knew what a jail and walled garden it was. TransferWise is the AOL of money transfers. and I predict that it will end up just like AOL, even if it becomes massively popular for a short time.

TransferWise suffers from several problems. First, it is under complete control of the State. Look at its boast of full integration with the UK regulatory bodies. This means that all transactions are subject to complete surveillance and control.  Read the rest of this entry »

The idea of socialism is diametrically opposed to the core philosophy of a voluntary peer to peer system like Bitcoin. Peer to peer systems dis-intermediate the transfer of information and eliminate the need for an arbitrary governing authority or service provider. Bitcoin, like maths, has no philosophy and is neutral.

*****

Socialism’s basic premiss is that ‘property is theft’, and that all property, goods and services should be collectively owned for the benefit of all people in a coercive State with no opt out. Under a socialist system of forced organization, individuals do not have free use of their inherent rights, which are violently suppressed.

This is an inherently immoral proposition, where one group of people inevitably coalesce into an illegitimate ruling class to control and administer other people ‘for their own good’; the good of the collective. Even if this aggregation of power were not the case, no man or group of men has the right to force another man to relinquish his property.

Libertarians understand that there is no such thing as ‘the rights of the collective’ and that only a living individual human has rights. Chief amongst these rights, the ‘root right’, is the right of property. Read the rest of this entry »

There is a great deal of deeply seated confusion about corporations, their origins and true purpose. People who are intelligent and well read in the field of the philosophy of liberty sometimes fall short when it comes to understanding what a corporation is, why people use them and what the true nature of them are. On the one hand, they are for voluntary association, and yet on the other, they rail against corporations. This is illogical.

As it is with anything complex, clear thinking is needed when you try to think about corporations. Lets begin by taking apart the myth that they exist as creatures of the State.

There is no reason that in a free society without a State that a group of people cannot band together to work on a project under rules that they select for themselves. They pool their risk, and (for example) decide that they do not want to put all their capital on the line should something go wrong and face a court, however founded, deciding that they are liable. Read the rest of this entry »

The popular media are full of ‘news’ about Greek finances and their impact on the political landscape of Europe and beyond;

World Bank chief Robert Zoellick: Greece’s €130bn bailout merely buys it time

Robert Zoellick, the outgoing President of the World Bank, has warned that Greece’s latest €130bn (£108bn) bailout would merely buy it time, adding that a European recession would hamper crucial reforms needed to lift the area out of the crisis.

The desperate acts of vainglorious politicians (not to mention the blinkered journalists who insist political /economic restructuring is the big story here) are of interest for one reason only: to remind us of that feature noted by Thomas Carlyle in his opus of 1837.

Hunger and nakedness and righteous oppression lying heavy on 25 million hearts: this, not the wounded vanities or contradicted philosophies of philosophical advocates, rich shopkeepers, rural noblesse, was the prime mover in the French revolution; as the like will be in all such revolutions, in all countries.

I am indebted to Edward Hallett Carr and his magnificent lectures collected in ‘What Is History?’ for selecting this quote in his discussion that history is ‘a matter of numbers’.

Athens mayhem raises fears of Greek social explosion

(Reuters) – Greek political leaders say the nation must accept yet more punishing austerity or face a social explosion, but after a night of violence and destruction in Athens, some people fear this explosion may already be about to begin.

‘Punishing austerity’ lies heavy on more hearts every day. The number grows. History awaits.

John Matonis has a new and excellent post on his ‘Monetary Future’ blog.

In it, he logically goes through some of the issues surrounding Bitcoin. It is well worth reading.

One section however, spurred this BLOGDIAL post. It’s the part about Vili Lehdonvirta’s ideas on ‘virtual goods’…

[…]

I am worried that Bitcoin is a step too far as it leaves no possibility for even democratic governments to enforce their laws. This is a topic I would love to debate with the community and hear opposing views. I think the end result could be a better understanding for me, but also a better understanding for the Bitcoin community on how to live in harmony with democratic authority.

Absolutely astonishing. A ‘step too far’? Towards or away from what exactly? We do not want to live in harmony with democratic authority. Democratic authority, to us, is inherently illegitimate, evil, immoral and completely unjustifiable. There are people who are attracted to Bitcoin precisely because it is beyond the control of ‘democratic authority’. As for it being a step too far, we must bear in mind that no one is forcing anyone to use Bitcoin. You decide on your own to use it, and if it succeeds or fails, you take the benefit or profit or losses respectively. Violent Statists are of course, vehemently opposed to free trade, voluntary exchange and liberty. Bitcoin is to the Statist as sunrise is to Dracula.

Matonis chimes in with…

For the most part, I respect Vili Lehdonvirta’s academic work on virtual goods ownership, but he harbors confused thoughts on the broader acceptance of bitcoin through dilution of its most beneficial properties, because he mistakenly extends the notion of virtual goods legal recognition to virtual currency legal recognition.

Fascinating. The Statists from the legal profession class are described by Murray Rothbard in ‘For a New Liberty’ as follows:

We see clearly why the State needs the intellectuals; but why do the intellectuals need the State? Put simply, the intellectual’s livelihood in the free market is generally none too secure; for the intellectual, like everyone else on the market, must depend on the values and choices of the masses of his fellow men, and it is characteristic of these masses that they are generally uninterested in intellectual concerns. The State, on the other hand, is willing to offer the intellectuals a warm, secure, and permanent berth in its apparatus, a secure income, and the panoply of prestige.

[…] since the early origins of the State, its rulers have always turned, as a necessary bolster to their rule, to an alliance with society’s class of intellectuals. The masses do not create their own abstract ideas, or indeed think through these ideas independently; they follow passively the ideas adopted and promulgated by the body of intellectuals, who become the effective “opinion moulders” in society. And since it is precisely a moulding of opinion on behalf of the rulers that the State almost desperately needs, this forms a firm basis for the age-old alliance of the intellectuals and the ruling classes of the State. The alliance is based on a quid pro quo: on the one hand, the intellectuals spread among the masses the idea that the State and its rulers are wise, good, sometimes divine, and at the very least inevitable and better than any conceivable alternatives. In return for this panoply of ideology, the State incorporates the intellectuals as part of the ruling elite, granting them power, status, prestige, and material security. Furthermore, intellectuals are needed to staff the bureaucracy and to “plan” the economy and society.

[…]

In all societies, public opinion is determined by the intellectual classes, the opinion moulders of society. For most people neither originate nor disseminate ideas and concepts; on the contrary, they tend to adopt those ideas promulgated by the professional intellectual classes, the professional dealers in ideas. Now, throughout history, as we shall see further below, despots and ruling elites of States have had far more need of the services of intellectuals than have peaceful citizens in a free society.

[…]

For States have always needed opinion-moulding intellectuals to con the public into believing that its rule is wise, good, and inevitable; into believing that the “emperor has clothes.” Until the modern world, such intellectuals were inevitably churchmen (or witch doctors), the guardians of religion. It was a cozy alliance, this age-old partnership between Church and State; the Church informed its deluded charges that the king ruled by divine command and therefore must be obeyed; in return, the king funneled numerous tax revenues into the coffers of the Church. Hence, the great importance for the libertarian classical liberals of their success at separating Church and State.

For a New Liberty

The whole idea of ‘Digital Goods’ is a fallacy, created by Statist professionals in order to gain a foothold in the emerging digital economy that threatens to disrupt their authority and completely replace the old world economy in many areas, specifically the delivery of films, books and music, and now through Bitcoin, the process of moving money around the globe.

The fallacious notion of ‘Digital Goods’ is pyramided on the idea that copyright (an artificial concept of the State) is legitimate and logical. As is the case with copyright, the idea of Digital Goods conflates the correct idea of property rights in real-world physical goods with a false right in intangible pure information, which can be infinitely copied, transmitted and transformed without loss.

An idea can have a human originator, but once that idea is conveyed to another man, it resides in the mind of that man. The only way that you can prevent that second man, the receiver, from using this idea is to initiate force against him. On this basis alone copyright as a legitimate idea falls, since it violates the non aggression axiom. I will leave it to you to explore the rest of this idea at your leisure. I also strongly recommend that you read ‘Against Intellectual Monopoly‘.

Bitcoin is an extraordinary and important innovation. It is the first system where a ‘Digital Good’ cannot be double spent. That means Bitcoins can be duplicated perfectly an infinite number of times, but they cannot be spent more than one transaction at a time between two people.

Bitcoins retain all the qualities of information (near zero cost transmission, infinite transformability, infinite lossless replicability), but the Bitcoin ecosystem changes them into something that has some of the qualities of physical property, whilst retaining all of the advantages of pure information. You can actually own a Bitcoin secure in the knowledge that even though everyone can read your Bitcoin, make copies of it, and see it in the Block Chain, they cannot steal it from you and spend it. You can copy Bitcoins ad infinitum, but inside the system is the only place where they have value or more accurately, utility. Bitcoin is the first instance of a digital representation that has some of the scarcity properties of a physical good.

Interestingly, this idea if transposed onto a music file, picture or film, could not work to prevent people using (double spending) those things, because there is no inherent value in owning a digital copy of a music file, film or book.

Imagine that instead of digital signatures, the Bitcoin block chain was used to control signed MP3 files. You could then have an ecosystem where unique copies of tracks (unique in that they were digitally signed, could not be forged and ownership was verifiable) could circulate for payment. The problem with this is that in this scenario music has two uses, one when it is stored in a file, and another when it is played in a music player, as well as being a string of numbers stored somewhere. There is also the ‘problem’ of the intent of music creators being that the same music is available to many people all at once.

Bitcoins do not have any use other than to confirm that they are owned by someone. This is why they can be used to transmit money over the internet. A digression, but interesting nonetheless, because this is the sort of thinking the large media companies should be doing or paying to have done for them, if they want to survive in any form over the next decade.

Apart from the revolutionary and singular case of Bitcoin in the Bitcoin ecosystem, all digital representations of ideas have zero intrinsic value, because they can be copied at a cost that approaches zero. In fact, the more copies there are, the lower the cost of obtaining a copy becomes because there are more storage locations to get them from and the cost of your time to search for them decreases. On some level, the law industry understands this, as they put pressure on Google to remove search results that point to files they claim contain ‘intellectual property’ belonging to their clients.

Digital technology has changed the way the world handles information forever. Trying to superimpose the outmoded, ridiculous and erroneous 19th century ways of thinking about property and business on people living today is a fruitless and anti-human endeavour. What’s more, it does not make everyone more honest and make business more efficient. Look at the dispute resolution mechanisms in eBay and Amazon, and you get a glimpse of how the free market works to protect everyone and benefit everyone. The State does not poke its snotty nose into the dispute resolution systems of these online services and the vast majority of transactions happen without any problems, and where there are problems, they are resolved within the mechanisms of the services to everyone’s satisfaction.

Just as the buggy whip makers, the lake ice industry and all superseded industries were eliminated by progress, the notion that music, books and any work that can be digitised should remain scarce, by force, is an astonishingly evil idea. The difference in people today as compared to those living in the age of the horse and cart it seems, is that this generation of men is not sufficiently agile, and a subset of them is unwilling to pivot and change business models to deal with the new reality. This is probably due to the very rapid pace of change, and the fact that there appears to be no future whatsoever for the people in the business of hoarding and supplying scarce information distributed in physical containers. They are squeezing this model for every drop of blood they can get before it becomes untenable to ask for money in exchange for physical discs or files.

Ill informed and self interested cronies and Statists are trying to keep man in horses and carts when the internal combustion engine car is in the garage of every home. It simply doesn’t make any sense on any level, is immoral, and the only reason why they can get away with it is they have an agent with the monopoly of violence to back them up: the State. In absentia of this force, no one would listen to the Statists, the MPAA/RIAA, the luddites, the lawyers, the buggy whip manufacturers and the Statists. Since they offer nothing of value, they would simply be ignored.

I predict that there will come a time when none of these people are taken seriously, and they are ignored and sidelined. The world simply will not be held down to the level of Stone Age Man to suit the needs of a vanishingly small number of venal, violent and ignorant men and their blinkered apologists. The dispute resolution systems that are an emergent property of sites like Amazon and eBay will spread out into the real world, making the State and its proponents redundant. It would be a fascinating project to try and separate these arbitration services and generalise them so that the public could use them instead of the courts of the State.

The fact of the matter is that lawyers have no right to tell anyone how to voluntarily exchange goods and under what terms those goods are to be exchanged. Their role is to arbitrate in disputes where both parties agree to be subject to the rules of the arbitrator, and nothing more. Because the vast majority of humans can exchange without disputes, they must create conflict in this area to maintain their social status and incomes, with the help of the State. This is why lawyers support the fallacious idea of copyright, and why they want to extend this sickness to Bitcoin, and all areas online.

The Statists refuse to accept reality, or cannot understand it, or understand it and actively fight to control it with violence. Lawyers especially have the most to gain from keeping the immoral, illogical and absurd copyright laws in force.

Or do they?

The fact of the matter is that once copyright laws are removed from all statute books, the amount of work for lawyers will not decrease, but will in fact increase, as creative people adapt to the new business models.

For example, no one has the right to steal a physical disk from anyone. If a musical work is created and stored in a fixed medium, and the right to be the first to sell it is sold to someone, a person who steals that disc and releases what is stored on it could be held liable for the damage caused to both contracting parties.

A disc of an unreleased highly anticipated pre-sold masterpiece would have an agreed value that is set out in a contract, and a value in pre-sales. Once it is leaked by theft and no one will pay for it, losses have been imposed upon the creative party, since exclusivity has been broken by the thief. In this scenario, damages are not calculated by how many copies are in the wild but by the fact that a physical disc has been stolen, its contents leaked and sales potential has been destroyed through cancellations. This is of course, completely separate from a work that is released on a disc, sold to a person, and that person making a copy for whatever reason. This is entirely legitimate, for reasons laid out clearly in Against Intellectual Monopoly.

This scenario is the same as someone breaking into a jewellery store and stealing a diamond necklace. Once that necklace has been stolen, it cannot be sold to someone else. The scenario of a pre-release disc being stolen and released is even worse, because the irreplaceable, unique first use opportunity has been destroyed forever. This is the true nature of the damage and theft done to both parties by this sort of act; the value of such a theft can be estimated and a valid moral claim made against a thief. Once again, this has nothing to do with the subsequent copies made by people who got a hold of the data by whatever means.

I use the example of the theft of a necklace deliberately, because it is used by the copyright monopoly to justify everyone being forbidden from making copies of what they own. Note how I am separating the act of copying what you have legitimately purchased from the destruction of potential by an unauthorised pre-release of a stolen disc.

There are many other circumstances where fault can be placed in this scenario. For example, if one party fails to maintain security and this is the cause of the leak, someone is at fault and has to pay. This can be laid out explicitly in a contract. These byzantine details are the job of lawyers to sort out, set terms for and organise. It is for lawyers to define these agreements, fix the agreed penalties, pursue the wrong doers in case of a breach of information. This would be a huge amount of complex work, worth an enormous amount of money. Lawyers are major beneficiaries of a world without copyright.

Of course, once a suite of music or book or other information is released, it can be copied ad infinitum, but then the next thrill is the thing that is valuable, and the public has an insatiable appetite for the new; this is just one possible model for the creative to explore, and of course, since they are the creative, its up to them to think of new ways of approaching the market in a reality where every idea can be copied and can spread world-wide in a matter of hours, if you hit exactly the right note.

The ignorant, imagination-less Statists want to prevent this astonishing world of the super abundance business model from fully emerging. They are doing everything they can to wreck the exponential growth of tools, contracts and technology that will unarguably benefit the entire planet, for the sake of a handful of ignorant, comfortable, computer illiterates.

Unfortunately for them, the harder they push against the internet, the stronger it becomes. Every service they have tried to cripple has either resulted in that service strengthening or spawning new services. Bulletin Board Systems, IRC DCC channels, Napster, Gnutella, Bittorrent are all examples in chronological order of how software outpaces the luddites, and of course, that list excludes the peripheral discoveries like MP3 that fuel the creation of new services.

This is a battle that they cannot win and which they should not win, because they have no case or moral foundation whatsoever.

Read this article in Hungarian.