"How to Kill Bitcoin: A Guide for Governments"
Here is the first draft of a blog post I wrote back in 2013. The final article was lost during a data lossage event. Rather than try to update this draft, I am pasting it here, as-is. Remember, this was written in 2013. Enjoy!
|How to Kill Bitcoin|
What is Bitcoin?
Bitcoin is an Internet-based currency that people can buy with your local currency right now. Once a person has acquired Bitcoins, that money can be sent virtually anywhere on the Internet, within 10 minutes, with no transaction fees, and no names.
What threats does Bitcoin pose to governments?
- Tax Evasion
- Money Laundering
- Currency Destabilization
- State Destabilization
How can Bitcoin be killed?
The short answer is that Bitcoin cannot be killed with 100% effectiveness. However, we can force Bitcoin underground, out of the reach of the masses, and slow down Bitcoin adoption considerably. We must move quickly and contain Bitcoin while it is still small, or we may lose control of the government altogether.
Unity: The more governments can agree on this agenda, the more effectively we can counter Bitcoin. Arrange a global coalition.
Surveillance: It is crucial that the coalition mine PRISM data effectively to reduce alt-coin pseudonymity. Cross-reference currency transaction data, and IP addresses, with blockchain data to connect individuals to their Bitcoin holdings.
Propaganda: Spread FUD ( Fear, Uncertainty, Doubt ) about Bitcoin. Our main messages should be:
- Bitcoin is too volatile to be real money.
- Bitcoin supports terrorists and drug dealers.
- Bitcoin is anti-patriotic.
- Bitcoin wastes energy and harms the environment.
- Sensible people don't use shady junk like Bitcoin.
Law: Laws work synergistically with propaganda.
1. Ban buying, selling, accepting or mining Bitcoin in your country.
2. Impose severe criminal punishments on those found in possession of Bitcoin hardware ( mining rigs, wallets, etc ).
3. Ban your nationals from funding Bitcoin-related ventures.
Manipulate Bitcoin prices and keep them volatile. Bitcoin is still a relatively small market. The cost/benefit ratio of inducing volatility on alt-coin exchanges is worthwhile. Some money and a bot could start spiking BTC today.
Bitcoin is in the trusting old days of the Internet. Eager to encourage Bitcoin adoption, many Bitcoin vendors give away products and services without waiting the 10 minutes it takes to verify a Bitcoin transaction. There are ways to destroy this trust. e.g., synchronized double-spending attacks.
Bots trading low Satoshi amounts at high frequencies could be used to overwhelm the Bitcoin network. At least one alt-coin has already succumbed to this attack.
Choose a poor country that is not part of our coalition as a sacrificial beast. A country with good Internet penetration, and an unstable local currency would be a very good candidate. Indirectly encourage them to adopt Bitcoin as their national currency. When they do, make an example out of them by dumping Bitcoin and buying their resources.
A system is only as secure as its weakest link. While the Trezor device may hold Bitcoins securely, it is protected only by a holographic sticker as it travels through a postal system we control. Use this weakness to damage Trezor's credibility.
Using Trezor's open standards, we can clone it. Then, we can play man-in-the-middle for targets selected by PRISM and send them compromised wallets that look and work just like the real Trezor.
Whether an alt-coin uses SHA256, scrypt, or some other algorithm, its main weakness is not cryptographic -- it is economic. Keep a meta-plan for a 51% attack handy. If enough governments pool resources, the blockchain is ours.
Co-opt virtual currencies by creating a similar currency designed to be easy to regulate.