"Risk comes from not knowing what you're doing."
"Risk comes from not knowing what you're doing."
Of course they can. Some have. Others will. Will large governments like the United States do it? Maybe. But you have to understand the decentralized nature of Bitcoin to understand how effective the government making Bitcoin illegal would be.
Bitcoin is a threat to the finance industry. Bitcoin is a threat to the government monopoly on money through the Federal Reserve and other central banks. There have been many threats throughout history that have presented problems to organizations of control.
The printing press was a threat to religion. Once people could read the Bible themselves they no longer had to go through priests and other middle men to get their information about religion. The Internet was/is a threat to the news industry. As more and more people switch over to independent news sources the former gatekeeper system of newspapers and TV reporters is being deflated.
The world becomes more flat through technology. Technology empowers the individual and removes the need for organizations built on middle men. We've seen this throughout history.
Bitcoin is simply another technology that removes the need for finance middle men.
So can the government stop Bitcoin? In the short term there are things they can do, but the cat is out of the bag now. The technology is here. We can't go backwards. People know how to use crypto and how to re-create it. We can't uninvent the printing press. We can't uninvent the Internet. And we can't uninvent cryptographic trust.
Remember about 20 years back when Napster came along? Remember when broadband Internet was just becoming big and Napster came along and allowed people to easily share MP3s with anyone throughout the world for free? This simple little technology coupled with broadband Internet completely took a chunk out of the music industry and became huge virtually overnight. Everyone told their friends about it and everyone started using it.
Now there's a lot to unpack here.
We need to first look at this from a big picture perspective. Like I mentioned earlier, technology flattens the world and removes middle men and large systems of control. Before the Internet if musicians wanted to get their music out there they would need to go through a middle man, AKA a label. This label would provide the marketing, recording equipment, etc. to help get the musician out there. This label was basically the technology of that time. We used people to do the tech.
Once personal computers and the Internet came along it transformed the music industry into no longer needing labels. The musician now had the ability to cheaply and fairly easily do their own recording and their own marketing. This new technology removed the middle man and empowered the musician. This new technology allowed the producer, the musician, to go direct to the consumer.
So to a new and passionate musician who had no following something like Napster and file sharing was great, they were able to easily get their music and name out there. To an established musician or music group file sharing was seen as a bad thing because the old business model of making money off of music sales was starting to become obsolete.
Music had previously been consolidated into a business where album sales was a main part of the revenue. But the new technology of the Internet made the business of album sales less and less necessary. There was a better way to do it. New and upcoming artists were willing to not make money from album sales in order to get their name out for free. People undercutting their competition in a free market environment -- crazy I tell you! Larger established artists were not willing to do this, at least not initially.
This is how it is with any new technology. The same thing is happening with Uber. Established taxis hate it because it is undercutting them and removing all the licensing overhead that they currently have. But soon it will replace the current taxi industry in one way or another. You can't stop a better technology.
New technology forces us to change our views on existing industries.
Industries evolve. Some come and go. The horse and buggy was replaced by the automobile. The newspaper was replaced by the Internet. This same thing happened with the music industry.
This is more or less an economic discussion, but that is one of the most important parts of Bitcoin. The more you understand economics the more you understand how Bitcoin fits in and what will happen with it.
We have to look at it from the perspective of the consumer, you and me. The consumer in the music industry wants to listen to good music. Well now instead of having thousands of options of musicians to listen to before the Internet, we now have millions of options to choose from when it comes to music. There are many, many more musicians than before the Internet. Now the barrier to entry in music is super low. Music is one of the most competitive and heavily produced industries in the world. Anybody with a passion for music can fire up their computer, record a song and post it on the Internet for it to be immediately heard. And because of this the end user, the consumer, is able to have all the music they could ever desire for free. They don't have to pay for music anymore. Musicians are willing to go to great lengths just to be heard.
To many musicians it is more about the recognition than the money. And once musicians gain recognition the money follows in ways that may not be immediately obvious.
This is how economic advancement works. Things become cheaper and cheaper until they are free. Music is now free. And the people that used to produce music for money can no longer rely on album sales. Now they have to make their money through other forms like live shows. People are willing to work for less now. If Metallica wants to charge $10 for their album another similar group will undercut them and do it for free. This is competition. This is capitalism. This is how markets work. From the perspective of the consumer they have more, better options for less money. From the musician's perspective they have more competition and need to find ways to improve themselves or go out of business. They need to change their business model. This is how advancement in society works. If we always kept the same old business model we would never move forward.
This is really important to understand from a ethics standpoint as well. Many people see free file sharing as a bad thing. And while I understand that argument, the market and technology is showing us that it should be free and the old paradigm of charging for something people are willing to produce for free is going away. It's not bad to share music for free. But isn't this theft? Aren't these musicians having what they created stolen from them? Yes, many of them are. But many of the up and coming artists want people to listen to their music for free. And they're going to be the winners here and the people who copyright their music are going to have to adapt.
The market is showing us that forcing people to pay for something that can be distributed for free no longer works.
Sure, put your name on it and let people know you created it. But charging for it may not be the right model anymore. People are going to find it and listen to it for free, so you had better learn to adapt to the constraints of the new technology. The greater point now is that you can't stop it, so you better adapt.
Napster eventually got shut down. Napster was a centralized business and the government was able to easily go to them and shut them down. So that was the end of people illegally sharing music right? Of course not! A bunch of other similar Napsters popped up. So now the government had an even bigger problem. How do you stop all of these? Well you start shutting them down too, but you can't stop them all can you? When people know about a new way of doing things it becomes really hard to stop, especially when it is useful to them.
And then of course the final nail in the coffin came along in the form of Bittorrents. Previous file sharing applications were centralized. Bittorrents were decentralized. Bittorrents can't be shut down. Bittorrent isn't a company and it isn't owned by anyone. Millions of computers all throughout the world share little bits and pieces of information with everyone else that fit together to form the final file like pieces of a puzzle. This is decentralized. And as long as you have the Internet you can't stop Bittorrents. It's not a company. It's not centralized. It's decentralized.
Bitcoin is to trust as Bittorrents are to data.
And now this brings us to Bitcoin. Bitcoin is not a company. Bitcoin is not centralized. Bitcoin is decentralized. We are seeing the exact same thing happen with Bitcoin that we saw happen in the music industry. Replace music industry with finance industry and replace Bittorrent with Bitcoin. That's where we're at. Bitcoin is showing us a flattened model of the finance industry that requires not middle men and all the overhead. From the perspective of the consumer it is great. We can have banking for free without a middle man. Just as a musician doesn't need a label a Bitcoin user doesn't need a bank. Technology has removed that layer.
And the same way established labels and musicians did not want to go down without a fight the finance industry most certainly won't go down without a fight. But judging from the perspective of history they can't win. They failed with the printing press. They failed with the Internet. They failed with the music industry and they will fail with the finance industry. You can't stop a good idea whose time has come. And if there is one industry that needs a technological flattening it is most certainly the financial industry.
So can the government stop Bitcoin? How? They tried to stop file sharing. They made file sharing illegal. That didn't stop anyone. People still do file sharing because file sharing is a new business model. File sharing allows content producers to get their content distributed throughout the world for free. Now what we call the file sharing of music is done in the form of Youtube and other social apps.
We moved around the old paradigm in a decentralized way and then created new businesses to adopt the new paradigm.
Music producers and content producers post all their content for free on Youtube and everybody wins. People are even okay with some ads because it was never about not making the artists money, it was always about better distribution and making use of the new technology. It was always about giving more to the artist without the need for a middle man. You can't stop advancement like this.
Bittorrent is decentralized and the government can't stop a decentralized program. There is no one person or entity to go after. You'd have to go after millions of people who use the technology. And even if you stop them, a million more will pop up.
Bitcoin is in this exact same position, except the ramifications are much more immense. Reshaping the music industry is one thing. Reshaping the finance industry will send shock waves throughout the entire world. The music industry was a small part of the economy. The finance industry, tied to the government, is essentially the economy. This is going to be huge.
A few takeaways:
And then of course not all governments see eye to eye. Just as we have different businesses that compete with each other and try to gain market share and new consumers, so too do governments compete with each other and try to gain new citizens. If a big country like the US makes cryptocurrency illegal then it will be a great opportunity for another country to fully legalize and promote cryptocurrency.
But if you have learned anything from this article about cryptocurrency, it would be that the government is essentially irrelevant in regards to crypto the same way they are irrelevant to file sharing. People aren't going to stop using it. The technology isn't going away. If it's made illegal people will still use it. Making file sharing illegal didn't stop anyone. It's not about breaking the law, it's about embracing a better way of doing things. And sometimes the law lags behind.
When something that makes your life better is made illegal you really have to stop and ask yourself if the government has your best interest at heart.
Filed under: Internet / Tech, Bitcoin, Cryptocurrency
"It is dangerous to be right when the government is wrong."