I'm not sure this is true. Censorship resistance is a pretty basic part of Bitcoin, yet gov'ts are busy coming up with ways to circumvent this.

If we all upgrade Bitcoin to some incredibly fungible, ecash-level privacy, that is essentially the same as physical cash, what stops the gov't from requiring all the same things it requires of physical cash? "If you want to send your 100% fungible, private coin to our exchange, you have to prove where you got the money (proof that you earned them, a letter from the source, etc...)."

The issue here, it seems to me, is not the technical abilities of Bitcoin, but rather the fact that the gov't controls most of the points you need to touch in order to do very much with Bitcoin in the physical world.

Privacy improvements to Bitcoin help Bitcoin be better, but they don't fix this problem.

The only way I see out of it is a direct collision with the big brother. All of the revolutions in the past have become successful by facing the oppressor directly not by hiding.

The Way of Bitcoin Banking is to bypass the government compliance concerns by using their own weapons against them. Those who write the rules value their own financial privacy more than anyone and will fight tooth and nail to protect their own wealth. By using private contract business and asset protection Trusts, along with Private Membership Associations, even the 5% of world population that are subject to US jurisdiction can capture and retain financial privacy for themselves.

Structuring our Private Bitcoin Membership Associations as NodeRunners, LSPs, Relay Operators, AND eCash Mints will bypass these regulatory attacks being made by the Naked Emperors. By never touching their corrupted monetary systems, those who've left the plantation need not worry about the rules the Slave Owners force upon their chattel. The rule is "He who creates it, controls it." Using government IOUs at all gives them subject matter jurisdiction, so we simply apply Bucky Fuller's wisdom and build a better system entirely outside of the existing monetary system, and let the outdated systems atrophy and die on their own.

Governments cannot stop people from growing and using cannabis, or even prevent us from 3d printing our own firearms, they will be no more effective at controlling NodeRunners. The more they try, the stronger our defenses will become and the more energy they waste in an ineffective game of Whack-a-mole.

Great article. Depressing as hell, but great.

What authority will FinCEN have over a Lightning node hosted on VPS in Salvador, or Russia, or some other independent country? Or even at home in a compliant territory, with a good VPN. If the operator is careful to stay anonymous, I don't see how they can get him. Not sure how big that "if" is, must be a function of the node size...

His example on LN is about sending sats to an exchange. It doesn't affect the broader LN network if you are using sats to receive and send. This scenario might even spur more plebs to run a LN node using all unannounced channels.

It should say FIN-2019, right?

The governments and regulators only have power over their own created fictional legal entities, called companies. But, they have no control or say over the bitcoin network.

I suspect this is an old figure, or was an uncompetitive quote from a lawyer, but there are orgs that provide this as a service now (one from former USDC folks) and do it for ~$1m (excluding ongoing costs and other expenses like bonds deposited with each state). When I was asking lawyers out of curiosity, I was quoted $2m. So I suspect this figure is off by an order of magnitude.

Hi @_arshbot, I share your thoughts. I also wrote about this in my blog www.kokkomaki.com . I worked at a crypto custody company, read lots of regulation and upcoming changes (TRP, MiCA, and all FATF suggestions), and came to the same conclusion: Bitcoin is neutered effectively. It is a dystopia compared to the original dream. Only outlaws will have privacy.

However, I do not think it is an attack per se. Or yes, regulators know what they are doing and to whom. Yet I believe it is more akin to path-dependence and adapting crypto to the existing system of regulations and financial institutions. Thus, it is more neutral act than as if there was a targeted and coordinated attack.

Bitcoin is certainly becoming a walled garden in the US, EU and China. But it need not be elsewhere.

Super interesting article. I know I am reading this through a filter but doesn't this seem like a great reason to NOT do any type of covenants? All these machinations seem like they could use covenants as a perfect weapon to make the big brother dream a reality.

"Our largest allies at the legal, institutional, and zeitgeist level are Coinbase, David Sacks, Marc Andreessen, and countless others.

In contrast, there are no champions at the Bitcoin protocol level. There are some proposals with some cool privacy improvements whose work I follow closely (Payjoin and Silent payments come to mind). But none of them are as drastic as we need, largely because the tools in Bitcoin are currently lacking for any significant, decentralized privacy upgrades.'

good summary of problems in legal world.

not much in the way of solutions.

it's fiery stuff but kind of hand wavy about tooling or protocol changes he'd like to see in Bitcoin.

anybody care to bite?

I'm guessing he'd like something like monero. But then you have the stealth inflation problem.

Am I missing anything?

I agree the situation is bad but I think those who want everything privacy just have to resist with coinjoins and lightning and malicious compliance and lobby for better laws.

until there are more consequences for petty violations (rare to never seen iiuc) there's not really any motivation for the masses of users to resist. there's your dilemma.

maybe things have to get worse to get better.

but we should certainly work on and get good at using privacy tooling now. even if we don't need it or use it other than playing around on testnet