While Bitcoin has not become the super-currency that its fans had hoped, it has hit a point of critical volume that previous non-government currency had never reached. Unlike other Libertarian-based ideas such as the Liberty Dollar, Bitcoin has avoided the legal problems often found in alternative currencies by not presenting itself as a replacement to government issued currency, but only as a medium of exchange for use in place of the more traditional currencies. This has gained the attention of Wall Street, who now are seeking to tap into, and milk, the low-information, easily deceived people who seek out the cryptocurrency.
For those unfamiliar, Bitcoin is the world’s most popular cryptocurrency. Cryptocurrencies are a medium of exchange relying upon high-end computer cryptography to confirm the exchange and creation of units. It works by people using computers to process the transactions of the currency in a peer to peer manner, and in exchange for doing so, they earn units of the currency. Its decentralized design makes it difficult, but not impossible, to be controlled or monitored by a central agency. This gives it an appeal for various groups, but also makes it very difficult to track down perpetrators who seek to exploit them.
Despite the severe blow by the Mt. Gox disaster, the adherents of Bitcoin are proud to claim that it has finally stabilized and spawned a new sense of legitimacy, with the prestigious New York Stock Exchange now introducing a Bitcoin pricing index. This index would work in much the same way as the LIBOR index, and would in effect serve as a measuring stick to determine global value. A golden day for the cryptocurrency, if you listened to the fans of Bitcoin.
This does not mean that Bitcoin will be used by the NYSE for trades, or that you can trade Bitcoin on the exchange, but that now there is a semi-official standard for other markets to be based off of. This comes on the heels of popular Bitcoin market Poloniexadding Margin Trading for the first time. Bitcoin has grown up, is the belief. But the reality is much, much darker for the Libertarians who love Bitcoin.
What this also means is that now Wall Street will be firmly in control of the exchange rates, and as history showed us with theLIBOR scandal, if the opportunity for exploitation exists, Wall Street will do it. Unlike LIBOR, where there are bank records and financial filings to verify against, Bitcoin’s own decentralized nature works against it. Unlike LIBOR, the manipulation of Bitcoin cannot be easily verified, and even if demonstrated, no penalties extracted. Also unlike LIBOR, which can only be indexed a few times per day due to the nature of the banks involved, Bitcoin manipulations can happen in milliseconds, controlled by complex trading programs without human interference. One moment is all it takes for someone to lose everything they have, and more, on the Bitcoin exchange.
It is a wild west show, no rules or regulations, exactly what the Libertarians wanted. Unfortunately, there are no ruled or regulations to stop abuse, manipulation or outright fraud. Libertarians often claim that they could go to court to defend themselves, but the courts require such rules and regulations in place, else there is no state for which the victims of even overt manipulation can stake a claim and be granted any compensation for their losses. No rules or regulations, nothing for them to sue over. In short, Wall Street can rob the users of Bitcoin blind, and the victims cannot do anything to stop it.
Caveat Emptor indeed.
There is an irony in a currency which was closely associated with Occupy Wall Street now being embraced by the very institutions it stood against. That the cryptocurrency markets did not respond with alarm is even more telling. The users of Bitcoin are about to be taken for a ride, and they are in effect handing over the car keys to do so.
So, it should be said that Bitcoin is indeed an ideal example of Libertarian ideas at work, because this is what happens every time. Pity they won’t wake up and realize that the very core of their ideas will never work, because once they prove it works, the very nature of Libertarianism enables a minority to take over of the idea, and monopolize it, denying it to others. Then that monopoly will exploit and abuse those who use it.
Someday they may wake up and realize that they are only selling to others the chains with which they would be enslaved.