Today my bitcoin google alert lead me to one of the most poorly-researched anti-bitcoin articles I have ever seen. I quickly tweeted at Karl that he has misspelled his title, “BitCon: Don't” and he quickly blocked me, like any good politician would when the opposition has something important to say directly refuting your point:
I was about to pick apart his use of “BitCon” with the capital “C” in the title vs. his use of the word in his first sentence, this time with a lower-case “C” spelling it “bitcon.” The next 140 characters was going to discuss the fact that he can't decide himself on his own spelling, and after that I was going to pick apart his weak ass arguments, although it looks like Jon Matonis is already crushing him. Max Kaiser can't be far behind, but sometimes these asshole stereotypical rich politicians earn enough money and power that they create their own reality & always think they are right and just. Well Karl, here is your ill-conceived piece destroyed by an Indiana University dropout:
First off, even though I have little classical writing training, my contemporaries inform me that the use of bold throughout an article is a very amateur writing convention. The use of bold should only be used sparingly, like when you want to make your one-sentence ultimate point, in this article it would be that Karl Denniger doesn't understand bitcoin.
Enough about poking fun at Karl Denniger's grammar, while an easy game it's the substance of his article that is most valuable in refuting:
I want to first demolish the argument for using it that is going around in various circles and media these days — the idea that it is stateless (that is, without a State Sponsor) and this is somehow good, in that it allows the user to evade the tentacles of the State.
This is utterly false and, if you're foolish enough to believe it and are big enough to be worth making an example of you will eventually wind up in prison — with certainty.
This man is clearly against a stateless currency, which is a position I can understand. Saying that bitcoin is not stateless is just plain wrong by every measure. No government creates, destroys, or exerts any control over the bitcoin system. Certainly any one of many government may lock up one of it's citizens for something akin to “racketeering” or “operating a criminal enterprise” but punishing humans for using bitcoin would in no way make bitcoin a state-controlled entity. Bitcoin is the honey-badger of currencies, it really doesn't give a fuck what Karl Denniger or your government thinks about it. Also his words “in prison – with certainty” is delusion – he thinks he controls the justice system? What about the Silk Road users? How many of them are in prison now? The future legality of bitcoin and it's uses and users is certainly going to be an exciting legislative debate across many countries. As a proponent of bitcoin and a rational thinker, I will not make any blanket statement regarding bitcoin legality or possible prison terms for possible future violations. With no laws about bitcoin on the books, Karl's source here is himself.
Bitcoin and other digital currencies are different — they're just a string of bits. To validate a coin, therefore, I must know that the one you are presenting to me is unique, that it wasn't just made up by you at random but in fact is a valid coin (you were either transferred it and the chain is intact or you personally “mined” it, a computationally-expensive thing to do), and has not been spent by you somewhere else first.
done instantly and automatically by the bitcoin system
In order to do this the system that implements the currency must maintain and expose a full and complete record of each and every transfer from the origin of that particular coin forward!
This may sound hard, but it's done instantly and automatically by the bitcoin system
This is the only way I can know that nobody else was presented the same token before I was, and that the last transfer made of that token was to you. I must know with certainty that both of these conditions are true, and then to be able to spend that coin I must make the fact that I hold it and you transferred it to me known to everyone as well.
done instantly and automatically by the bitcoin system
Now consider the typical clandestine transaction — Joe wishes to buy a bag of pot, which happens to be illegal to transact. He has Bitcoins to buy the pot with. He finds a dealer willing to sell the pot despite it being illegal to do so, and transfers the coins to the dealer.
This same transaction is done with Karl's precious USD over 9000x as frequently as it's done with bitcoin each day
The dealer must verify the block chain of the coins to insure that he is not being given coins that were already spent on gasoline or that Joe didn't counterfeit them, and then he transfers the pot to Joe.
And remember kids! this verification is done, as you would expect, instantly and automatically by the bitcoin system.
There is now an indelible and permanent record of the transfer of funds and that record will never go away.
Ok Karl, you got me here. This is a link to ~$900 worth of pot someone just bought. Hit up the DEA, see what they can come up with.
This creates several problems for both Joe and the dealer. The dealer can (and might) take steps such as using “throw-away” wallets to try to unlink the transfer from his person, but that's dangerous. In all jurisdictions “structuring” transactions to evade money laundering or reporting constraints is a separate and unique crime and usually is a felony. Therefore, the very act of trying to split up transactions or use of “throw-away” wallets in and of itself is likely to be ruled a crime, leaving any party doing that exposed to separate and distinct criminal charges (along with whatever else they can bust you for.)
Karl Denninger apparently says it's illegal to use a throw-away bitcoin wallet. I'm done here, as I cannot reasonably devote any more time to such a sensationalist article written by an uninformed author that is now dabbling upon the extremities of the absurd.