Why Bitcoin CANNOT be Controlled by Government:Submitted by JixMainstream on Fri, 03/22/2013 - 11:50
Here on the Daily Paul, I've read a lot of comments from Bitcoin skeptics who are (rightfully) curious how we Bitcoiners know government will not "step in and take control of Bitcoin." Stated very simply, they can't.
This statement, too, is met with skepticism since common knowledge tells us that EVERY technology can be hacked and commandeered. The nuance with Bitcoin is that it is both a currency technology AND a protocol.
A protocol in the technology world is like a language. It has a dictionary, grammar, and rules. If someone were to "take over" the English language and change a bunch of the words and rules, it ceases to be English. The same is true of Bitcoin.
Suppose someone didn't like one of Bitcoins rules, for example, the hard limit of 21M BTC. He could set out to re-write the Bitcoin protocol and begin generating coins. However, the coins created by this new protocol could not be spent on the Bitcoin network. To return to the language analogy, it would be like speaking Klingon to someone who's never even heard of Star Trek. They are simply incompatible.
So that's how Bitcoin as a Protocol protects it from being changed. But even if one agrees to all the rules, can it still be affected, seized, and controlled by government or a nefarious entity?
It's a bold claim to state that a technology is un-hackable, but by any reasonable measure, Bitcoin is exactly that. To understand how this is possible, you must also have an understanding of cryptography and mathematics.
When a user sends bitcoins to another user, he broadcasts it to every single user on the network. It's almost like a Tweet in that respect. (Don't worry, the users on each end of the transaction are only identified by their Bitcoin address - so long as the users haven't publicly disclosed their Bitcoin address, they may remain unidentifiable.)
With all the transactions going on, the Bitcoin network is very noisy. But there are users who are gathering all the transactions that are floating around into blocks. In order to validate that block of transactions, one has to audit that the users sending the Bitcoins actually have the coins to spend. This is where the Cryptography comes in.
The transactions are locked with a key that can ONLY be unlocked using guess-and-check. They CANNOT be revese engineered. (To understand how this is possible, see this video for a quick Cryptography 101: https://www.youtube.com/watch?v=3QnD2c4Xovk). So while the government may be "snooping" on your transactions, so is everybody else... and this is encouraged! (Remember, you are anonymous until you publicly disclose your Bitcoin address!)
The users who are working to create these blocks are ACTIVELY trying to guess-and-check these transaction blocks to ensure that they are valid transactions. In fact, they are in a race to do so! The user that is the quickest to find the solution to these blocks of transactions and publishes the result to the "Block Chain" receives a reward.
Now because the users are in a competition to audit the Block Chain, it becomes extraordinarily difficult to "control" Bitcoin transactions in any way. One must possess over half the power of the entire Bitcoin network! At present, this network already has over 10 times the hashing (decrypting) power of the world's most powerful super-computer, and it's increasing by the day. Building a government hack machine is already cost-prohibitive by any reasonable standards.
That doesn't mean that such a move isn't a concern to Bitcoin users. (It is.) The implications of such an attack have been calculated, and though an attacker couldn't replace any preceding transactions (steal your Bitcoins) one *could* falsify future transactions. Such an attack, however, would be very difficult and very costly to maintain. (As soon as the attack ended, the Bitcoin network would revert to its previous state. The attack would literally need to be carried out until the end of time.)
Most likely, users would see the attack coming and even those who are not active miners (like myself) would add their hashing power to the network to protect Bitcoin, or as a worst-cast scenario, switch to an alternate cyrptocurrency like Litecoin, which has many of the same properties as Bitcoin, but uses a different cryptographic algorithm (thus, requiring a new Hack Machine).
It is generally believed that these disaster scenarios have an *incredibly* small likelihood of occurring, much less being successful.
It is important that people new to Bitcoin know the risks before adopting, which why I included information about the ("51% attack"). I know full well that some of the skeptics will jump on and blindly state, "See? Bitcoin is hackable. DOA." I ask that these people pause before posting and consider their words with care. Bitcoin as it stands today is more secure than any bank, and it cannot be seized or intercepted by government. It is true ownership of one's purchasing power, and a viable alternative to FRNs.
PMs are still an important hedge, but unlike PMs, Bitcoin is being used and accepted as payment today! More and more websites and physical establishments are accepting Bitcoin every day. They are people who are sick of being told what they can and cannot buy/sell. They are people who are sick of having their money confiscated annually to fund other people's wars. They are people who want to OWN their purchasing power, and have taken that desire into their own hands.
Bitcoin is an extremely powerful technology. It circumvents the banks & government authority... and unlike PMs, it can be perfectly hidden, and is resistant to force.
I firmly believe that Bitcoin is how we can peacefully End the Fed.