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You The BankMost people who had any interaction with the Internet are somewhat aware of the many cryptocurrencies now available for use, starting with the original one: Bitcoin. Most people are also clueless as to what these currencies are, how they work and what can they do with them. However, this awareness is growing and this is a good thing. The most powerful element of cryptocurrencies is that they are beyond the control and regulation of Central Banks and this is very troubling indeed… for politicians.

WATCHING WATCHERS

Print, print, print and then print some more. This is the mantra of all politicians, Central Banks and the power elite. To a large degree they rule by controlling the supply of money and when they run out of it, creating more out of thin air. Cryptocurrencies on the other hand, are not controlled by humans; they are controlled by algorithms (computer programs). As such, they cannot be reasoned with, blackmailed, pressured, bought or otherwise manipulated. Algorithms create a certain amount of currency here and then but every time it is less and less. Eventually, they will stop producing it. Inflation will come to an end. Game over for politicians and Central Banks. If you want to see a list of available cryptocurrencies, go to Wikipedia and search for "cryptocurrency".

CHEATING

Cryptocurrency algorithms are neutral and the clever bit is just how this neutrality has been achieved. It has been achieved following the Libertarian principle that demolishes the democratic principle. In a democracy we have the watchers (i.e. politicians) who represent us and govern in our name (at least theoretically). But they are not perfect and as such they need watchers themselves to ensure they do not deviate from their task. But this second layer of watchers also need to be watched by… you guessed it, more watchers. As such the key question becomes: who watches the watchers? And the democratic answer is: nobody. This is one of the primary reasons why democracies are a failed method of government. There is no way to ensure the honesty of politicians. However, the Libertarian principle is different; it states that everybody watches everybody else as long as it is in their interest to do so. Cryptocurrencies work in the same fashion.

It so happens that there is a record of all transactions that took place since the implementation of every cryptocurrency. That record is called the "block chain". This chain is watched by many independent people because there is a reward in so doing. Since now everybody is watching everybody else, it is statistically extremely hard to cheat (most people would say impossible). This is the first step towards the liberation of currencies from Central Banks. A distributed network of watchers. A de-centralized record keeping system. Everybody has access to the record of every transaction ever produced. There is no secrecy or the means to cheat. Politicians and Central Banks cannot create fiat cryptocurrency on demand. Game over.

NO ANONYMITY

Cryptocurrencies seem anonymous but they are not. Let's say this again. They are most definitively not anonymous. This is not to say that researchers are not working towards achieving this goal, but as of right now, they are not… well sort of. The transaction record (the block chain) contain several bits of information, but critically:

  • The day/time the transaction took place
  • How many Bitcoins were transacted
  • The serial number of those Bitcoins
  • The serial number of the virtual wallets of the people involved in the transaction
  • The Internet addresses of the people involved in the transaction

With this information (which is public because the block chain is public) people (the government) can work backwards and figure out who got what to whom and when. At least in terms of Internet addresses. Once armed with this information and adding Bitcoin exchange and credit card info, it is possible to identify exactly which person exchange Bitcoins with which other person.

Yes. Governments can to this today. We would be extremely surprised if professional snoopers and code breakers such as the GCHQ or NSA are not doing this today. With the computing power they have at their disposal and virtually unlimited access to financial databases, it is a no-brainer.

YES ANONYMITY

Yet, there is always a way to beat the system… at least partially. Let's take for example this process:

  1. Use the Tails Operating System or create an encrypted virtual drive in your PC using a tool such as DiskCryptor.
  2. Install the Tor Browser (from the Tor Project ) and use it for every single transaction dealing with Bitcoins
  3. Set-up and install a virtual wallet in your PC.
  4. Go to a physical exchange and change cash for Bitcoins. Do NOT use ANY online transaction for this. Watch for cameras; use a disguise or at least a cap and dark glasses.
  5. Now surf the net using Tor and purchase whatever you may want using your Bitcoins. However, we are not done yet.
  6. If you purchase physical goods, ship them to a pickup location that cannot be traced back to you. Select a third party provider of POBoxes or VirtualOffices that do not require ID. Pay in cash. Watch out for cameras and be camera-shy same as before.

If you follow this process to the letter chances are excellent you won't be tracked. Yet, this process is clumsy, complicated and requires plenty of time and effort. Not to worry. There are people working on a better solution right now (for example the app called Dark Wallet). Eventually, all cybercurrency transactions will be anonymous. The only way to beat the "surveillance society" is not to leave information to survey. Anything else is just self-delusion.

YOU THE BANK

Nowadays "monitoring" and "surveilling" people is easy since most of the information that the "Intelligence Community" requires is "out there". It is just a matter of getting it and connecting the dots. For example, the all-important bank anonymity has been non-existent for many decades, albeit only accessible to the highest levels of government snoops. For smaller issues, we have the upcoming OECD barrage (see This Is The End ). The "community" is OK with this arrangement because they can always get to a bank and demand the information. However, with the advent of untraceable cryptocurrency transaction processes, the situation changes dramatically because there is no bank. You are the bank. If any "community" wants to find out what you spent your money on, they will have to ask you directly, which defeats the purpose of so doing. You are the bank and this is good indeed!

TAXES AND OTHER INTRUSIONS

For now and as most people are still thoroughly brainwashed, governments will continue with their tactics. The two next obvious steps for governments to take are some sort of formal recognition of cryptocurrencies leanding to the inevitable taxation. USA has already done it. Others will follow. That much is expected. Yet, the good news is that governments are always a few steps behind in this sort of arms race. Practical, anonymous cybercurrencies are coming; they are already possible for the tech-savvy. Soon there will be payment anonymity for the masses. This will happen as more and more people become disillusioned with governments. Why pay taxes when one can pay without them with the swipe of a finger?

THIS IS ONLY THE BEGINNING

Beyond this point, the sky is the limit. One small (but crucial) detail that most people do not know is that most cryptocurrencies are programmable. What this means is that any type of information can be added to the block chain. This means that all kinds of documents that today require the validation of governments to be "official" will simply be submitted to a block chain for all to see and validate. No more central authority. No more fiat laws. No more governments required. Of all possible documents that come to mind, two are critical: property deeds and contracts. Think about this. Here we have a process that can be used by any person anywhere in the world to certify an agreement between two parties or to certify property ownership. No more registries or government databases. No more arbitrary fees and process. No more ridiculous rules and regulations. No more government sticking their noses in our business. But this gets better. This process does not depend of humans, it is not possible to cheat, modify or alter as the current is. It is written in stone. It is the great equalizer. We are all following the same rule and the rule is watched by all of us. What could be better?

Eventually, people will realize that governments are useless, superfluous and horribly expensive in this aspect too. Why go through government bureaucracies if the same can be achieved far more efficiently and inexpensively through the swipe of a finger?

CONCLUSION

The next evolution of cryptocurrency is coming and it will be good for you; not so good for governments. Actually, quite horrible and this is good for you. Anything and everything that removes power from governments is a good thing. We will take the good news in any shape or form they may come to us. We need all of them than we can get… at least that's our opinion. Then again, if you believe that those government bureaucrats you are forced to obey are here to help… well… good luck with that. You are most definitively going to need it.

Note: please see the Glossary if you are unfamiliar with certain words.

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