Why The Fall of Silk Road and Bitcoin Is Inevitable

As the saga of Silk Road plays out, a lot of attention has been focused on the mistakes that Dread Pirate Roberts made that helped the Feds catch up with him.  The Verge has a good longform piece on this topic:

It appears that the current Dread Pirate Roberts (for we all know that the original Dread Pirate Roberts is retired and living like a king in Patagonia) made a number of fatal mistakes, including posting a question about Tor on StackOverflow under his own name (!).

Yet to focus on either hacker mistakes or lawman cunning misses the point.  The fall of Silk Road (and by extension Bitcoin) was truly inevitable.

There are three monopolies that sovereign nations reserve to themselves:
1) The power to mint currency
2) The power to tax
3) The use of violence

These are the fundamental powers of government, and no government can afford to tolerate rebellion in any of those areas.  Printing money, running protection rackets, and fielding private armies are a very good way to get the Treasury, FBI, and ATF on your tail, if not the military itself.

Bitcoin can’t become a viable global currency because the nations of the world won’t let it.  If the US, EU, and China think Bitcoin is a threat to their currencies, they’ll simply outlaw it (using their monopoly on violence to enforce their monopoly on currency).  The possible outcomes are either failure or criminalization–there is no success case.

Silk Road was even worse, because it leveraged Bitcoin’s rebellion in the area of currency to rebel in both tax (Dread Pirate Roberts made his money by taxing Silk Road transactions) and violence (by selling arms and flouting drug laws).

I freely admit that it’s scary to let governments control currency, taxation, and violence.  But the alternative is worse. 

The IRS may be a protection racket, but at least it’s a
protection racket that’s partially answerable to us citizens as voters,
and it jealously guards its monopoly, preventing random people (Donald
Trump perhaps?) from levying random taxes on us.

A world of unstable and fragmented currencies, split into feudal fiefdoms, with disputes settled by armed bands, is a terrible place to live.  Just ask the residents of Europe, prior to the advent of the nation-state.

4 thoughts on “Why The Fall of Silk Road and Bitcoin Is Inevitable

  1. No offense the logic is there but the message is destroyed by silkroad yes you're absolutely right, whereas i think you are mistaken on bitcoin. Things like nafta and sepa and vat show that countries aren't really jealous of currency. Do you think that is USA seized bit coin it wwould simply leave them on The wallet or would destroy them? They would cash them back out for us dollars. If you did this to get rage views, good job you got me!

  2. Anonymous

    Come on dude, after 4 years of Bitcoin its all You came up with?

    Its been answered numerous times.
    1st of all, none of those powers are threatened by bitcoin. Just like none of those countries is not threatened when new country with its currency pops out this or the other day, and there are already 200+ of them. Or even if they do, they cant do much about it.

    So whats the diff with one new currency in imaginable country called Internet first of all?

    And there are many things laws of countries forbid yet people use as if its legal 😉

    Think about it.

  3. Anonymous

    I don't agree with the article. Read the IMF paper on bitcoin, and you'll understand they're not looking for a ban. IMF mainly wants to prevent bitcoin to be used in a speculative attack against another currency (a very distant possibility for that currently, but the potential is there).

    The U.S. may want to ban bitcoin, just as they want to ban so many other things that are tolerated elsewhere (online gambling, for example). I don't think the prospects for a ban are nearly as good in Europe. There the bitcoin is gradually moving towards wider acceptance. For example, bitcoin exchanges freely cooperate with banks.

    Cryptocurrencies have some very positive things going for them. Over time, all this Silk Road/money laundering fear monging wanes, and the benefits will be recognized. Perhaps even in the U.S., but at least in Europe.

  4. My broader point is that we're not in a post-nation-state era; for all the techno-utopianism of the Internet, life is still lived in geographic legal jurisdictions.

    I'm not pro- or anti-Bitcoin; I'm simply pointing out that governments will not allow it to succeed at any real scale. Mafia bosses don't like other gangs to impinge on their turf.

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