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Goodbye War On Drugs, Hello Libertarian Utopia. Dominic Frisby’s Bitcoin: The Future of Money?

Now that bitcoin has subsided from speculative bubble to functioning currency (see the price chart below), it’s safe for non-speculators to explore the whole “cryptocurrency” thing. So…is bitcoin or one of its growing list of competitors a useful addition to the average person’s array of bank accounts and credit cards — or is it a replacement for most of those things? And how does one make this transition?

With his usual excellent timing, London-based financial writer/actor/stand-up comic Dominic Frisby has just released Bitcoin: The Future of Money? in which he explains all this in terms most readers will have no trouble following. As you’d expect from someone who uses words to amuse as well as educate, Frisby’s prose is informal and fluid and occasionally very funny, with lots of first-person anecdotes.

The message, however, is fairly serious: Bitcon is, just maybe, a new and better form of money, an emerging homo sapiens to the dollar’s Neanderthal. As such it’s potentially transformational.

So let’s start with a little background: Bitcoins are created (or mined) when computers solve certain kinds of mathematical puzzles. The number of bitcoins outstanding is designed to grow at a predetermined rate for a predetermined period, making its supply both limited and predictable (in contrast to fiat currencies that multiply at the whim of central bankers and politicians). And the currency can be transferred online quickly and cheaply, bypassing the traditional banking/credit card nexus.

Bitcoin book
Frisby spends the first half of his book telling the story of how bitcoin came to be, featuring the author’s attempts to track down the currency’s enigmatic creator, Satoshi Nakamoto (generally believed to be either an individual super-genius polymath or some sort of libertarian programmer collective). Frisby concludes that it’s the former and claims to have found him. You’ll have to read the book for that revelation.

He also profiles some of the early players in the bitcoin ecosystem. Silk Road, for instance, was briefly the Amazon.com of online drug sales until it was shut down by the authorities — and then subsequently reemerged in various forms around the world. Meanwhile, a lot of early adopters made and lost some serious money during bitcoin’s initial price spike:

One student from Norway bought $27 worth in 2010 while studying for his degree. He forgot about them, and then remembered them three years later. That $27 had turned into $670,000. He sold half through MtGox and half through Bitcoin-24. He managed to get the money out of MtGox and bought a flat in Oslo. But the German authorities seized Bitcoin-24. With it went half of his fortune. ‘I’m not so worried about that,’ he says. Another coder from Wales mined 7,500 bitcoins and then threw away his laptop. He spent many hours trawling the local rubbish dump trying to recover his fortune – without success. Martti Malmi bought a beer from his friend for 10,000 Bitcoin. His mate would later use those coins to buy a prime residence in central Helsinki. Lily Allen was offered 100,000 bitcoins to perform on 3D chat website Second Life. She turned it down. That became, at one stage, a 100 million dollar fortune on which she missed out. Olivier Janssens now flies from London to his new home in Monaco by private jet – paid for in bitcoins.

Here’s the promised chart of bitcoin’s explosive rise and subsequent decline to what looks like a stable valuation:

Bitcoin price 2014

The second half of the book covers the impact of cryptocurrencies on the old, corrupt financial order. Frisby concludes, rightly, that today’s fiat currencies are pale, dysfunctional shadows of yesterday’s sound money and that this corruption is the main cause of our descent into debt-driven chaos. Cryptocurrencies, meanwhile, have the potential to usher in an age of high-tech sound money that puts future governments and mega-banks in their (much more humble) place.

From the chapter titled “Why Bitcoin is a libertarian Utopia”:

The ability for a government to fund itself through the manipulation of money disappears. You can’t obfuscate bitcoin supply. You can’t ‘quantitatively ease’ bitcoins. Governments – without a very aggressive and potentially impractical bitcoin confiscation scheme – will struggle to use your bitcoins to bail themselves out. Defcit spending becomes impossible – you can’t spend bitcoins you don’t have. Central and private banks can’t create bitcoins when it suits them, and governments can’t print bitcoins (they’d have to compete to mine coins along with everyone else).

From Why “Bitcoin will end the war on drugs”:

People are always going to want to buy drugs. Bitcoin is enabling them. Unless the authorities launch a War on Bitcoin – which due to its decentralized nature will be a very hard war to win – it seems they will lose the War on Drugs once and for all. Bitcoin may be what ends it.

These are of course controversial predictions and before they come true lots of questions will have to be answered. For instance:

When the empire inevitably strikes back, what will the world’s central banks and intelligence services do to squash and/or co-opt cryptocurrencies, and how will these actions affect the functioning and value of bitcoin and its peers?

Which cryptocurrency will win out? Besides bitcoin there are hundreds in existence already and several, including Litecoin and Dogecoin, are gaining traction. What would the emergence of one or two winners do to the utility and monetary value of the others?

By decade’s end we’ll know the answers. In the meantime this is a great place to start.

33 thoughts on "Goodbye War On Drugs, Hello Libertarian Utopia. Dominic Frisby’s Bitcoin: The Future of Money?"

  1. Pingback: The Küle Library
  2. “When the empire inevitably strikes back, what will the world’s central banks and intelligence services do”

    As Governor of the Bank Of England*, I will forthwith be issuing the new gold backed MINTcoins (the new national UK cryptocurrency). They are redeemable at the mint at any time. There will only be 12,000 x 2014 MINTcoins. No more, no less. They are all pre-mined by the Royal Mint and are only available to buy** (commission free) online at the official MINTcoin monthly auction shop.

    *I’m not really
    **The buying and selling of MINTcoins does not attract any VAT.

  3. It might not be a libertarian paradise but at least the banks would no launder cartel drug money. Fat chance that’ll happen anytime soon.

  4. “People are always going to want to buy drugs. Bitcoin is enabling them. ”

    That only works if you believe that Bitcoin transactions are anonymous. They aren’t.

    If you want to end the war on drugs, you need to repeal the relevant laws. Lacking that, have the common sense to not use a designed-for-tracking cryptocurrrency for drug related transactions.


    “All entities that have pledged to the principles have vowed to support measures that will empower companies and consumers with the ability to better guard their financial information, while respecting the law enforcement need for anti-money laundering (AML) and know-your-customer (KYC) protections.”

    Pay attention to the *law enforcement” needs that the Bitcoin whores are yielding to. The academics, even at MIT, are corrupt beyond imagination. They don’t care about your privacy.

    As EPJ points out,

    “Who is behind this ultimate tracking machine? All the big players:

    including market leaders like BitPay, Bitstamp, Coinsetter and Ripple Labs.”

  5. I think the last thing the world needs now is an even more abstract and complex system as “Bitcoin” or any other cryptocurrency.

    It seems to me that in our increasingly bifurcated global economy that some (many?) people have an awful lot of time on their hands and things like crytocurrencies are what were called “solutions in search of a problem” (when I was in university and then in the corporate world). It all could just be a “see what sticks” phenomena.

    I think the so-called advantages of cryptocurrencies are pretty marginal for most people, and there are many – and potentially unknown – disadvantages too. Since most people don’t even understand the current monetary system in use today they aren’t going to appreciate the technical “advantages” of cryptocurrencies except to be reminded that complexity and esoteric knowledge generally tends to benefit the few.

    That said, it’s possible that the younger generations believe that “technical” geeky, nurdy and entrepreneurial people are more honest and idealistic (than bankers and government people and corporations) and so they may go for cryptocurrencies if they believe they’ve been developed “outside” the official “system

    1. With modern debit card (not credit card) technology, there is no need for any currency besides gold, except a dual gold-silver bimetal system. You take a gold coin to the bank to open an account, and they give you a debit card. You buy something with your debit card, and you have that much less gold in your account.
      If you want to make a small ‘cash’ purchase, you give the vendor a silver coin.

      If you want to earn a return on some of your gold, you put it into a savings account. The bank then lends out your gold, with the loan having the same maturity as your savings instrument.

      1. You are describing a gold-backed non-fractional reserve monetary/banking system. Good for you. But you must be kidding about that being the “modern debit card technology”. Cryptocurrencies are not fundamentally different than what exists now. They are simply more abstract and more traceable. The same problems that exist with the central banking/fractional reserve/fiat monetary system we have today still exist except they are even more “hidden” and less accountable. There really is no long term upside to cryptocurrencies for ordinary users, only questionable convenience in exchange for a loss of privacy and control of one’s own wealth.

        1. Modern debit card technology allows for the payment (in gold bullion) from customer to merchant, without gold actually changing hands at the point of sale.

          The problem with cryptocurrencies is they are like internet stocks in 1999, there is no limit on the number of them that can be floated and offered to the public. Think about it. Just a handful of fellows put together Bitcoin. And other groups are doing the same with similar cryptocurrencies.

          Contrast this with gold. Its supply is regulated by the scarcity of the metal in the Earth’s crust and the difficulty in digging it out of the ground.

          1. What is the price of gold based upon at the point of sale with “modern debit technology”? What fees are involved?

          2. Banks will compete, and the efficient ones will route your gold based debit card purchases for a tiny fee. Certainly less than the big banks charge now.

  6. When too big to fails and goes down the tubes and a restructuring of the banks comes down the pike, bit coin will end up in the rubbish because the governments will have control of the banking system, as they reorganize them, and the history of capitalism repeats itself. When it’s to hard for the pubic to figure out how a currency works then it’s to hard to buy into. Banks are backed up by the good faith and credit of our government, bit coin isn’t. Bit coin operates like too big to fail. When they fail they disappears with your money.

    1. The dollar is backed up by what exactly? You obviously haven’t been paying attention. I suggest you keep an open mind. Crypto currency isn’t going away. It offers too much. When you flee Amerika, you can take all your money with you in Bitcoin. You can’t do that with dollars.

  7. 1) Do you trust the mining algorithm that much that no one can hack it? I’d rather have a central gov manipulate currencies to the net benefit of the country, then some greedy hacker just trying to get rick 2) There are sooo many crypto-currencies. 3) How does it control population growth 4) Is inflation gone with bit coins?

    1. bitcoin not “bit coins”, all your questions have been answered already, not trying to be insulting but your inability to spell bitcoin correctly tells me you haven’t looked into it

  8. With the advent of super computers and the internet why does the world even need a reserve currency? Any currency can be turned into any other currency (including Bitcoin) in an instant. Trade in anything you want.

    1. That’s called the Ripple protocol. The banks are looking into it now. I’d say its a great investment. The Ripple platform permits trading of any stock, currency, asset in seconds regardless of what or where you are trading from. Buy it.

      1. So essentially Ripple (and no doubt other platforms) makes it easy to trade anything in an instant. I think the idea of a reserve currency is a 20th Century relic. Technology will soon make it unnecessary.

  9. I would think intelligence agencies would covertly support alternatives to Bitcoin because as each new coin system becomes popular, it decreases the value of the previous crypto-currencies. So there can indeed be inflation in the realm of such currencies, if not within a single currency. This instability in value would of course make them less attractive. This seems much easier than attempting to suppress them, which is akin to playing whack-a-mole.

    Ultimately if you have a bunch of competing alternative currencies I think gold and silver win out because of tangibility, wider acceptance, and historical role.

    1. 1. There is only one Youtube, Facebook, Google, Twitter etc. etc. Each one has competitors most of which you’ve never heard of, none of which are listed on the NYSE. Apply this to crytocurrencies.
      2. Bitcoin has over 99% of the cryptocurrency market.
      3. Very few vendors accept anything but bitcoin.
      4. 1000s of programmers enhance only bitcoin related services vs. a single programmers creating and supporting the remaining cryptos.
      5. Bitcoin code can be modified if necessary, any needed functionality can be implemented.
      That’s just off the top of my head as to why bitcoin will win. I won’t go into the details as to why silver and gold aren’t practical in our modern world of finance. They worked great in the 1800s but the world has changed. Metal coins can’t work now even during a financial crisis. The World Bank and IMF have now realized the potential of Bitcoin. They are now talking about banking billions of currently unbanked people.

      1. “Metal coins can’t work now even during a financial crisis.”

        Actually, metal coins could work fine during a financial crisis, it’s just that not much else would.

        We may all get to witness “my” prediction first hand someday. Barter will probably be the most common form of trade because most people won’t have PMs, but I am quite confident that just about everyone will recognize “intuitively” the value of PMs, just as they have for thousands of years, and they will readily accept them. In fact, cash will still be king, just in it’s rightful form.

        1. How will you get change for your gold or silver coin? Will you shave fragments off for smaller purchases? How many people own silver? Less than 0.005% of people maybe? How will barter work for silver when nobody owns any? We live in a digital world. Besides bartering for a pizza from your local pizza shop how will you buy things online or pay a bill? To top it off, silver is no longer recognized as a monetary metal. That’s why the gold to silver ratio is now 70:1. IF we go back to the Stone Age due to a worldwide financial crisis nobody will care about bitcoin or silver coins, they will only want items that help them survive. That doesn’t include shiny pieces of metal. Remember when the first white people landed in north America? They convinced the natives that shiny mirrors, cutlery and beads were “very valuable”. In a survival situation you can lump silver coins into the same category as beads and cutlery. I own silver but I fully understand its value will be zero if food, water, ammo and medical supplies are in frantic demand. Bitcoin won’t need a financial collapse to gain significant value. I’d suggest you look into what IBM, the World Bank, IMF, Overstock and others have planned to build on the block chain. Not trying to sound condescending but I often wonder where silver supporters draw their logic from.

          1. I’m assuming you have an open mind in asking that last question ?
            I’m wondering how I’ll run my bitcoin computer when we’re back in the stone age ?
            There are lots of scenarios between here and the stone age and silver and gold suit many of them. The main advantage of PMs is that there is no counterparty risk in a time of crisis. Paper assets always contain counterparty risk , no matter who the counterparty is,
            Also PM holders dont hold them as a medium of exchange in a time of crisis, rather they are held as a store of wealth to maintain existing wealth. I don’t think Pm holders ever suggest that the only thing they will own of value will be PMs. In crisis there will definitely be a place for holding tradeable necessities and other tangible property.
            My final point about Bitcoin is why would it be trusted in a time where there is a crisis of trust ? TSHTF and people go to bitcoin ? Not even in a currency crisis will that occur, Trust will be a huge issue when TSHTF

          2. You will be using block chain technology in the near future even if you don’t understand what it is. You have a chance to buy the equivalent of Google stock for pennies but would rather go all in on silver. Baffling to me… ok dudes. I did my homework on Bitcoin when it was sub $100. Good luck.

          3. Hi Jonny,

            You seem like a genuine guy with a clear perspective. I’d like to ask a respectful question about what you have written.

            Apart from Bitcoin how do you people buy into the block chain opportunity you’ve outlined ? This is a genuine question, not point scoring or looking to be argumentative. Just trying to broaden my understanding. Cheers.

          4. To reiterate what Tony said, there are many different scenarios that can play out and a “stone age” situation is probably not the most likely. That said, every one’s experience and situations will be different. Of course I’m not advocating that all one have are PMs. You should always have some cash in your local currency, along with other tangible assets. In fact, I would try to NOT spend my PMs in a crisis mainly because I would want them to preserve my wealth until the crisis ends. PMs would likely be a basis for the re-establishment of wealth after the crisis passes. Furthermore, some people would be able (and wise enough) to collect PMs as payment for things and be able to save them. PMs would most likely go “underground” or into hiding during a crisis. My point was that if one HAD to spend them then they would be highly valued, at least to the wise and circumspect.

          5. Support for silver is very logical. People all over the world understand silver and gold. People with no electricity or internet understand silver and gold. Right now, I can go anywhere and place a few pure silver coins in someone’s hand and they will trade me something for them. Most people have no idea what Bitcoin is. I know exactly what Bitcoin is, and I don’t want it. We’ll see how things go. You’ll have your Bitcoin and I’ll have my silver, and we’ll see which of us is more able to exchange. Here is a perfect example: if you knock on my door and ask for some food in exchange for Bitcoin, I would probably refuse you. If I knock on your door and ask for some food in exchange for some silver, would you refuse me? If you and I go to the neighbor’s house, which of us do you think the neighbor is more likely to exchange with?

            And one more thing: a bag of silver buried in the woods can’t be hacked.

          6. “That doesn’t include shiny pieces of metal” I refer you to my comment above as my bullets are VERY shiny 🙂

            But I agree totally with your comment. Bitcoins are a bet on a successful digital future, they are not made for riding out the apocalypse.

        2. IMO .22 bullets would work better than PMs’ in a [crisis] barter situation….. but as bullets are metal and are also precious, I guess they qualify as PM’s too 😉

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