Wendy McElroy: Other Than the Black Market, a Last Stand for Economic Freedom

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Other Than the Black Market, a Last Stand for Economic Freedom

The Satoshi Revolution: A Revolution of Rising Expectations
Section 4: State Versus Society
Chapter 9, Part 5
Crypto: Other Than The Black Market, A Last Stand For Economic Freedom?

Money…is the economic area most encrusted and entangled with centuries of government meddling. Many people, many economists, usually devoted to the free market stop short at money. Money, they insist, is different; it must be supplied by government and regulated by government. They never think of state control of money as interference in the free market; a free market in money is unthinkable to them. Historically, money was one of the first things controlled by government, and the free market “revolution” of the eighteenth and nineteenth centuries made very little dent in the monetary sphere. So it is high time that we turn fundamental attention to the life-blood of our economy—money.

-Murray Rothbard, “What Has Government Done to Our Money?

Envisioning free-market crypto should be easy because cryptocurrency was created on the free market, and it remains unregulated in many places. How difficult is it for a person to envision what is standing in front of his or her own eyes? Coins like Bitcoin or Bitcoin Cash are success stories for all to see.

Unfortunately, governments also see it. They recognize crypto as a fierce competitor to their own fiat monopolies, their tax systems, and a relatively untapped source of wealth. To control crypto, however, government cannot praise the phenomenon; government needs to demonize crypto by creating public hysteria over problems both real (fraud) and manufactured (links to terrorism). Rest assured, if crypto was an economic Satan rather than a business sensation, governments around the world would not be salivating and scheming about how to co-opt the industry. To do so, they paint crypto as a ‘good’ that is currently rife with abuses, which only governments can solve. The free market has failed, they claim.

Pressure from government is increasing. As cryptocurrency becomes more accepted as money, the cry for regulation grows. A recent report from the trading giant eToro and the Imperial College London claimed, “Cryptocurrencies like Bitcoin offer a viable evolutionary ‘next step’ for money and have the potential to become a mainstream form of payment within the next decade.” The report stated that regulation was a necessary prerequisite for such an evolution.

And most people will listen to the call for regulation because they believe a government monopoly makes money safer for them to use—at least, safer than free-market money, which they do not understand. Of course, the opposite is true. Government money gives those in power an iron control of the economy, and that arrangement never ends well for the average person. By contrast, the free market panders to customers who are the source of profit. How many government restaurants would allow people to send meals back to the kitchen for a replacement? How many have a “no questions asked” return policy on goods or services?

The free market also provides goods and services, including money, more efficiently than government. For one thing, competition forces companies to be efficient in order to achieve the low prices that attract customers. The free market also expresses far greater morality because it is based on voluntary exchanges, while the government consists of coercion.

Nevertheless, money is considered to be a “special” case that requires government intervention because money is essential to the functioning of a healthy society. But so is food. And, yet, the free market provides a cornucopia of groceries from around the world at affordable prices. Most people can walk to stores with a bounty for sale. It is difficult to imagine a government managing a similar food chain; indeed, the governments that have tried have produced rationing, famines, black markets, and soaring prices on the essentials of life.

Hysteria is a standard fall-back position for those who wish to obscure reality. And hysteria against crypto is underway because it is the best strategy to convince people that government is an instrument of crypto justice, not a crypto-criminal wannabe.


Respectability=the Need for an Injustice to Remedy=Regulation

Governments are playing a multi-leveled shell game with crypto, which is likely to play out as follows.

First and wherever necessary, crypto will be redefined as money rather than as an asset, because central banks, government agencies, and traditional financial institutions have no proper authority to regulate privately-held assets that are legally acquired and held. Governments can tax and confiscate, to be sure, but that level of control is modest compared with the monopoly power to issue and/or to define what is legal money.

Next, crypto will be conflated with crypto-asset markets, such as exchanges and businesses that issue ICOs (Initial Coin Offerings). Although the two are separate, most people make little to no distinction between them; the concepts become jumbled together. Those who want to regulate crypto itself find the jumble to be useful because it facilitates broad legislation that covers the entire sphere of crypto and its many manifestations.

The blueprint for crypto control is predictable; it is also global. Last week, for example, the Financial Stability Board delivered a report to a G20 meeting of Finance Ministers and Central Bank Governors, which discussed a framework for setting standards on crypto-asset markets.

A few months earlier, the International Monetary Fund’s (IMF) Managing Director Christine Lagarde indicated how global bodies would proceed. There were familiar references to crypto’s alleged role in terrorism and money laundering. But the emphasis differed. On the IMF blog, Lagarde called for crypto-asset markets to protect consumers in the same manner as traditional financial markets do. Know Your Customer policies and global coordination were stressed.

The call for consumer protection is echoing. At a June 25th conference, for example, the Federal Trade Commission’s Bureau of Consumer Protection Director Andrew Smith, explained, “With the rise of cryptocurrencies we’ve seen many signs, from public sources to law enforcement actions brought by us…that scammers are using the lure of cryptocurrencies to rip off consumers.”

“People need protection from the new money!” is ascending as the argument for regulating crypto. The argument not only appeals to an ingrained bias against free-market money, it also plays on people’s fear. Popular support makes it much easier for government agencies and central banks to succeed in their global grab at crypto. And, so, the word “fraud” is becoming more common whenever crypto is discussed, even though crypto-asset markets are usually the focus. (Note: the fact that fiat currencies are total frauds, along with many penny and over-the-counter stocks, does not arise.)


The Most Damnable Aspect of the Widespread Fraud Claim

There is real truth to the accusation of fraud. Crypto, like every other investment, is a “caveat emptor” situation due to the risk of fraud and other forms of theft. “Caveat emptor” is usually translated as “Buyer Beware,” and it means that a buyer or customer is responsible for checking goods and services before purchasing them. The principle is valid, but it is unsatisfying and an incomplete answer when confronted with fraud, which is a crime—the crime on which government pins its dreams of usurping crypto.

How massive is the problem of fraud? A recent study prepared by the Satis Group found that, as a percentage of the ICOs it examined, “approximately 78% of ICOs were Identified Scams, 4% Failed, 3% had Gone Dead, and 15% went on to trade on an exchange.”
It is not clear if the findings are valid, especially since expert reports have become a stock aspect of any push for legislation; many of them are sloppy and politically motivated. Frankly, the figures seem exaggerated. On the other hand, many ICOs have been revealed as corrupt, and the existence of fraud is undeniable, especially in crypto-asset markets.

Admitting a problem, however, does not validate a particular solution, such as government intervention. For one thing, government has proven itself to be unwilling to prevent fraud in the monetary system it already commands: central banking. Satoshi Nakamoto explained,

“The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust. Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve. We have to trust them with our privacy, trust them not to let identity thieves drain our accounts. Their massive overhead costs make micropayments impossible.”  

The debasement of currency is also known as inflation, which becomes inevitable because inflation is a prime source of revenue for the government and for the groups it favors. But the damage of government money extends beyond the degradation of value. Rothbard explained,

“It has fragmented the peaceful, productive world market and shattered it into a thousand pieces, with trade and investment hobbled and hampered by myriad restrictions, controls, artificial rates, currency breakdowns, etc. It has helped bring about wars by transforming a world of peaceful intercourse into a jungle of warring currency blocs. In short, we find that coercion, in money as in other matters, brings, not order, but conflict and chaos.”

And, yet, one of the main arguments against free-market money is that the marketplace is too chaotic and corrupt. Nonsense.

 There Oughta Be a Law

Fraud requires a legal response because a crime has occurred. But, again, admitting a need does not validate a particular solution. This is especially true of the legal solutions offered by government.

Generally speaking, there are four types of laws that function in society, and they sometimes overlap.

  • Ones that impose a specific vision of the world or of morality. These include laws against alleged vices, such as alcohol or drug use, as well as laws requiring alleged virtues, such as voting or paying taxes. The goal is to mandate a code of behavior, thus erasing the boundary between the legal and (someone’s vision of) the moral. Typically, the laws are enforced on everyone, except those with power seem to be exempt.
  • Ones that regulate a targeted segment of society. These include laws about who may conduct a specific business and how it must operate, as well as laws that discriminate between people based on factors such as race. The goal is economic and social control, with enforcement focusing on designated people.
  • Ones that protect against physical harm and property damage, including theft. These include laws against assault and vandalism. Rather than mandate a behavior, they prohibit one–namely, violence, which includes fraud. The goal is to provide the safety that allows a healthy society to thrive, with enforcement applying to everyone.
  • Ones that are created by contract. These include laws that allow creditors to seize assets in arrears, such as a repossessed car, and laws aimed at enforcing behavior, such as the performance of work for which payment has been rendered. A contract can always be breached, but there is a penalty for doing so: for example, a repossessed car, a refund of fees. The goal is to establish enforceable contracts, which are nothing more than enforceable consent between individuals. Again, it provides a safety that allows a healthy society to thrive and which discourages violence as the only way to resolve a dispute. The law applies only to those who contract.

On crypto, the government flexes only the first two forms of law: a specific vision imposed on the world; and, the regulation of a targeted sector. The laws do not protect people and property, as evidenced by the fact that recovered funds are not returned to those who have been defrauded. Fines, fees and recovered wealth go into the government’s coffers. In short, the laws serve government; they do not protect consumers.

The last two forms of law protect individuals, including consumers, and not government. They are laws that would exist in the free market because they fulfill human requirements. But what exactly would they look like? And how would they be enforced?

[To be continued next week.]

Reprints of this article should credit bitcoin.com and include a link back to the original links to all previous chapters


Wendy McElroy has agreed to ”live-publish” her new book The Satoshi Revolution exclusively with Bitcoin.com. Every Saturday you’ll find another installment in a series of posts planned to conclude after about 18 months. Altogether they’ll make up her new book ”The Satoshi Revolution”. Read it here first.

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Bitcoin Cash Developers Debate an Idea Called Pre-Consensus

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Bitcoin Cash Developers Debate an Idea Called Pre-Consensus

This past Thursday, the lead developer of Bitcoin ABC, Amaury Séchet, published a paper on the social media platform Yours.org about a protocol technique called ‘pre-consensus.’ According to Séchet, and other BCH developers like Bitcoin Unlimited’s Peter Rizun, pre-consensus could improve block propagation time, benefit zero-confirmation reliability and help delegate decisions tethered to consensus conditions.

Also Read: Vietnam’s Central Bank Thinks Cryptocurrency Miners Should Be Banned

Bitcoin ABC’s Amaury Séchet Publishes a Paper Called ‘On Markets and Pre-Consensus’

Bitcoin Cash Developers Debate an Idea Called Pre-Consensus
Amaury Séchet

This week, Amaury Séchet, the Bitcoin ABC client’s lead developer announced on Twitter that he had wrote a paper called, “On Markets and Pre-Consensus.” The article discusses the concept of pre-consensus which Séchet describes as a protocol that enables network participants to agree on what the next block size will look like. Various developers have discussed this idea before, including Bitcoin Unlimited’s chief scientist, Peter Rizun, who wrote about the subject for the Ledger academic publication, and Rizun also discussed pre-consensus during his talk at the Satoshi’s Vision Conference in Tokyo.      

“Even before Bitcoin Cash was a thing, I was promoting the idea of pre-consensus — This refers to a set of technologies allowing network participants to agree as much as possible on what the next block is going to look like,” explains Séchet’s paper. “If done well, this provides significantly stronger 0-conf guarantee that we currently have, while also allowing to reach greater scale by moving work out of the critical path (if a node know what the next block is going to look like, a lot of the validation work can be done ahead of time).”

As it turns out, pre-consensus has the added bonus effect that it allows to delegate the responsibility of picking various values which are currently centrally planned to the market. Actors who use different policies will be able to reconcile their differences in a time scale that is compatible with 0-conf.

Bitcoin Cash Developers Debate an Idea Called Pre-Consensus

Séchet Says Pre-Consensus ‘Too Important to Not be Tackled Now’

Séchet delves further and states that pre-consensus has been on the BCH roadmap since day one, and has made “zero progress” so far. He explains that the past year had been hectic and the latest “flavor of the day” is tokens.

“While all these projects have value, it is clear that I need to ruthlessly prioritize pre-consensus,” Séchet emphasizes.   

The actions I have to take along the way will surely irritate many, but this is too important to not be tackled now.

Nchain’s Craig Wright: ‘No Hash Goes to This Crap — They Want It, They Fork It’

Bitcoin Cash Developers Debate an Idea Called Pre-Consensus
Craig Wright.

After Séchet published his idea and fellow colleagues began to share the paper on Twitter, Nchain’s chief scientist Craig Wright spoke out against the pre-consensus idea. “No hash goes to this crap — They want it, they fork it, without us,” Wright states on Twitter. “Without the apps using our code, our IP etc. — Without the companies, we have invested in.” Of course, the outburst from Wright got the community stirring wildly into a heated discussion.

There’s also a Reddit conversation about pre-consensus and Wright’s comments on the subreddit r/BTC which has over 400 comments at the time of writing. The top comment belongs to Bitcoin Unlimited’s lead developer, Andrew Stone. “At Satoshi’s Vision Conference, Craig Wright said his miners were going to detect and somehow penalize double spends which is a form of pre-consensus,” Stone says. “We don’t even know concretely what Deadalnix (Amaury Séchet) is proposing so how can a person reject it and call it crap?”

An Avalanche of Pre-Consensus Emotions

Other developers such as the Yours.org founder, Ryan X Charles, seemed to be interested in the idea of pre-consensus when discussing the subject in one of his latest videos. Charles gives his viewers a glimpse of what he thinks about Séchet’s latest statements, and details there is also a paper called, Avalanche, which offers a unique approach to pre-consensus. The paper “Avalanche: A Novel Metastable Consensus Protocol Family for Cryptocurrencies,” was written by a group of developers who call themselves ‘Team Rocket’ after the mischievous Pokémon characters.

Other members of the community dislike the idea of pre-consensus and have shared their responses to Séchet’s recent article. One person’s post on Yours.org called “Pre-Consensus Implies Content Without Giving It,” is particularly interesting. In the writing, the author compares pre-consensus to the Segregated Witness protocol (Segwit) perverting the underlying foundations of Nakamoto Consensus.

“This will change if we make a fundamental protocol change like a pre-consensus,” explains the author @Logan.

We will be in the same position as Segwit, making the argument that Bitcoin needs to change and adapt over time. We will no longer be the protocol as described in the white paper.    

What do you think about Séchet’s pre-consensus statements? What do you think about Nchain’s Craig Wright disagreeing with the idea? Let us know what you think about this subject in the comment section below.


Images via Shutterstock,Twitter, Pixabay, and Wiki Commons. 


Verify and track bitcoin cash transactions on our BCH Block Explorer, the best of its kind anywhere in the world. Also, keep up with your holdings, BCH, and other coins, on our market charts at Satoshi Pulse, another original and free service from Bitcoin.com.

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