# Why Do Decent People Accept Bitcoins? "You can't ban bitcoin, you'd have to make mathematics illegal!" is the all-too-frequent reply to those of us who [want the cryptocurrency to die](http://www.antipope.org/charlie/blog-static/2013/12/why-i-want-bitcoin-to-die-in-a.html). And it's true, more-or-less; while we can prosecute people who are living above their declared-for-taxation means, there's little we can do to stop two or more people who keep their balance of payments neutral from sending numbers back and forth. What I don't get, though, is why any upstanding citizen would want to help them out. Like any currency, a bitcoin behaves like an uncopyable token; the usual economic cycle is that a user buys bitcoins with money (from someone with a large supply - more on that later), and uses them to buy goods or services from a seller - who then sells the bitcoins on to the next user in exchange for cold hard cash. (Bitcoin's advocates speak hopefully of a bitcoin-native economy where the seller would keep their wealth in bitcoins and use them to pay for regular purchases like food and clothing, but that's purely aspirational at this stage) The one unique twist is that, being purely mathematical, it's possible to send these tokens over the internet as easily as sending an email - not an instruction for your bank to move money from your account into theirs, but the actual, nonphysical bitcoins. In many ways it behaves like cash - cash you can hand over in cyberspace. Which is all well and good, but it comes at a time when actual cash has been sinking into obsolesence. I don't think I paid for anything in cash last week - why would I, when a credit card is both more convenient and safer (not to mention the rewards)?\[2\] Companies hate doing business in cash, [using it only when forced to](http://www.bbc.co.uk/news/business-26248396). Partly this is because it's bulky and cumbersome to audit, issues that won't necessarily affect bitcoin - though people are already concerned about the computing power needed to participate in the bitcoin network, and MtGox's spectacular collapse shows some of the difficulties with accounting for large numbers of bitcoins. But the main reason respectable companies don't do business in cash is security. If someone steals your cash, it's very difficult to get the transfer reversed, or even discover who they were, because it's an anonymous\[1\] bearer instrument - the very properties that bitcoin, by design, emulates. The one remaining business where cash makes sense is crime - to the extent that [most $100 bills contain detectable traces of cocaine](http://www.cnn.com/2009/HEALTH/08/14/cocaine.traces.money/). Bitcoin is, as Stross describes, a currency designed to facilitate illegal transactions. For in-person transactions, it's slower than cash[3]; for legitimate internet transactions, it's less convenient and less safe for the consumer than credit cards[5]. The one legitimate purpose Bitcoin advocates make a case for is moving money abroad - buying bitcoins in local currency, transferring them over the internet to one's cousin in e.g. Morrocco, who then sells them for her own local currency, can be cheaper than an international bank transfer. Bitcoin is acting sort of like Transferwise here: rather than moving money from A in the US to B in Morrocco, find C in Morrocco who wants to send money to D in the US, and transfer money from C to B and A to D. But just as Transferwise matches you up automatically behind the scenes, if Bitcoin is functioning as a currency, there's no need to find an exact partner - you just buy or sell the bitcoins and let the free market sort out the rest of the round trip But as soon as we think about it in those terms the advantage disappears: why not just use Transferwise (or one of several competing services; I have no affiliation with Transferwise except as a happy customer)? True, they change a fee of their own - but so will any service for buying and selling bitcoins, and you'll have to pay two sets of fees doing the transfer the bitcoin way. (You might be able to avoid this by buying and selling bitcoins for cash, but the time and expense of meeting someone to do this will outweigh the Transferwise fees for small amounts - and for larger amounts, meeting a stranger carrying that much cash is rather perilous). There's one - or two - more legitimate case for bitcoin I can see - and strangely enough I *don't* see bitcoin advocates arguing for them: buying embarrassing things online, or donating anonymously to causes you might not want to admit your support for in public. But my experience is the former case is handled easily enough with PayPal, the fees being a small price to pay for the buyer security. You will see many horror stories on the internet from *sellers* whose accounts were frozen, which is a product of Paypal's enormous tilt in favour of buyers. But that's the right way around for internet commerce; with a bitcoin-like relationship, there's nothing to stop the seller from taking the money and running. The latter case, meanwhile, is less helpful than it might seem. True, a bitcoin donation can disguise which precise cause you're donating to - or the fact that you're donating at all, rather than buying drugs or the like. But all this accomplishes is to entangle your cause with a web of similarly dubious causes and criminal activity. If an advocacy organization is to move from fringe to mainstream, that surely has to include mainstream methods of payment. The causes where bitcoin makes sense are the ones that have no interest in "going legit". And while I hate to bring up the bogeyman that's been used to push so many bad laws, bitcoin is very well suited to funding terrorism. Everything I've written above is true even in an imaginary future in which Bitcoin is an established, stable currency. In fact, right now it's enormously volatile, meaning anyone who chooses to conduct business in bitcoin carries what's efectively a massive foreign exchange risk, something that can only be justified if the benefit is correspondingly large. That rules out people who are gaining a few marginal percentage points by avoiding credit card fees or traditional foreign exchange. No, right now there's only one reason to run your business in bitcoin: if you're a criminal (and even then, only for cases where cash would be incovenient). Probably the perfect use case for bitcoin is selling illegal purely-digital goods, which is to say child porn. I am genuinely quite surprised, impressed even, that we haven't seen reports of a bitcoin marketplace for such material. The same can't be said for mail-order drugs - the famous Silk Road was, and its imitators remain, bitcoin's biggest business. Silk Road's founder also [tried to hire an assassin through the site](http://www.techdirt.com/articles/20131122/11282025337/apparently-hiring-actual-hitman-online-is-more-difficult-than-dread-pirate-roberts-imagined.shtml). These are the kind of uses the currency is good for; if you meet someone with a lot of bitcoins, odds are they're a drug baron. Either that, or one of the early-adopter "miners": the original "investors" in a currency that by design concentrates wealth into their hands like a pyramid scheme. The more people use bitcoin, the more the price rises - but for every dollar the bitcoin "market cap" increases by, 25 cents or more of that value goes to its original inventor ("Satoshi"), and the distribution of the other 75 cents is just as inequitable. I suggested to a friend who makes money bitcoin "mining" that he was getting an unearned windfall; he replied that no, he was earning his mining fees by providing a service to other people by validating their transactions[6]. Fine, but who is this service valuable to? Once again, it comes down to criminals - no different from being a bookkeeper for the mob. When a guy walks into a fancy hotel with a duffel bag full of cash, the probabilities are enough to arouse suspicion - sure, he might've come buy it honestly, but what's the most likely possibility? It might not be grounds to refuse service, but we'd treat it as grounds to be wary. When a landlord asks to be paid in cash, even the most naive and trusting tenant would assume it's for the sake of tax evasion or worse, and refuse (or else ask for their cut). And yet we celebrate when a website starts accepting bitcoin, a currency held almost exclusively by criminals and those who abet them. We create companies whose mission is helping them trade this dirty money for clean. We ask reputable sites to legitimize it by treating it as just one more money transfer service, like accepting a new credit card type.[7] It's time for those of us who believe in the rule of law to put a stop to this. I don't suggest making bitcoin illegal - enforcing such a ban would require truly scary violations of liberty. But what we can do is establish a social norm of treating bitcoins like the criminal tokens they are. Don't accept them in payment, and look twice at a seller who accepts them - if you can find a similar business that doesn't take bitcoins, buy from them instead. It won't stop bitcoin completely - an unforgeable register of who owes how much to whom is valuable enough to the criminal underworld that the gangs will keep the network running, even if noone else is participating. But if decent people don't accept bitcoin, it means these drug dealers and worse will have to spend more effort to cash out their takings, cutting in to their profit margin. And that, by the simple rules of supply and demand that bitcoin's defenders love, will mean fewer people choose to become criminals. <br /> <br /> [1] More or less - cash has serial numbers. Bitcoin goes one better - you can see the whole transaction history of any given "coin". But the "addresses" used in any given transaction are just random strings of numbers - it's not easy to connect them to a legal identity you can file a lawsuit against - and the "community" that sells products for bitcoins seems to have no qualms about accepting stolen bitcoins in payment. [2] Yes, sellers pay fees to accept credit card payments. But they usually build them into their prices - and as happened in Australia, when those fees go down, they don't pass the savings on to customers. So as a customer one may as well use the credit card that gives the best rewards, except for the rare sellers that charge a fee for using a credit card. [3] Some advocates say that using a smartphone with bitcoin eliminates the inconvenience of having to withdraw cash. This is true, but only if your phone has access to your entire bitcoin wallet - practically equivalent to carrying around your life's savings in cash[4]. Otherwise, you still have the hassle of remembering to load up your phone wallet with enough bitcoin before you go shopping. [4] Admittedly it's less physically cumbersome than that much cash - but no less dangerous. [5] The seller is in some respects safer - so safe, they can take the money and run without delivering a product, as one Silk Road seller did. [6] This is how bitcoin works - to simplify, "mining" involves hashing blocks of transactions, forming a "blockchain" that records every coin's history and, therefore, its current owner. "Miners" are incentivized to work on the longest chain, because those who complete a block are rewarded with bitcoins - but only if that block forms part of the "network consensus" - usually the longest chain in existence. Transactions that are part of this consensus are considered to have happened, which means it takes some time until you can be confident you've actually received bitcoins - if your transaction is present in what you think is the newest block, but somewhere else on the network there are two new blocks that don't contain your transaction, your transaction probably won't form part of the eventual consensus - and if you've already given whoever sent you the bitcoins their cash or drugs or the like, too bad. [7] Such efforts can eventually become their own justification - if it becomes possible to use bitcoin to buy "normal" things, and the value of bitcoin stabilizes to the extent that "normal people" start using it, then it really will be just another currency, and it'll be impossible to justify treating its users as criminals. Which means criminals earning bitcoins will be able to spend them as easily as ordinary money. [Home](/) <div id="disqus_thread"></div> comments powered by Disqus