At some point on everybody’s Bitcoin journey, they begin to realize that Bitcoin may actually be a better form of money. They realize that it has a number of traits (supply capped, digital, censorship-resistant etc…) that make it better than their government’s currency. However, the government benefits from printing its own currency. So people fear their government will try to shut down Bitcoin.
Fortunately, Bitcoin was purposefully designed to be resistant to the government’s attacks. Bitcoin’s founder, Satoshi Nakamoto, studied the past failures of non-governmental currencies before he designed Bitcoin. He realized that many past non-government currencies (like E‑gold or Liberty Dollar) failed because there was a centralized point that governments could attack. So when the currency got too big, the government would take the CEO to court, raid an office building, or disable the small network of computers that ran the currency.
Bitcoin was designed to be resistant to these types of attacks. There is no Bitcoin CEO. There is no single physical location of Bitcoin. There is no one-building that Bitcoin is stored in. Instead, it is stored and run by thousands of computers (aka nodes) all over the world.
Even if the US government tried to track down all of the computers running Bitcoin in the US (which would be impossible given that many are run in rural, totally secret locations) they still wouldn’t be able to kill the network. Any American with internet access (or even radio access!) could still communicate to the Bitcoin computers running the software in Ethiopia or Indonesia. So Americans would still be able to access and send their Bitcoin. So long as one person anywhere in the world is running the Bitcoin software, Bitcoin works.
If governments cannot easily kill the network because there is no single weak point to attack, people then fear that they will try to ban Bitcoin. This is a slightly more credible threat. Governments could pass laws making it illegal to own, buy or sell Bitcoin. After all, governments have tried to ban other things (like Brie cheese, saggy pants, kissing on Sundays, marijuana, and alcohol during the prohibition). But Bitcoin has some advanced privacy features that make enforcement of a ban very difficult. It’s very easy to hide your Bitcoin and very difficult to prove that you own it. And, if people find Bitcoin useful, they will probably keep using it regardless of the ban!
That said, we don’t expect the US government to ban Bitcoin. After all, it seems like they are being increasingly supportive of Bitcoin. However, if the winds shifted and they did begin to try to attack Bitcoin, they would not succeed. Bitcoin’s decentralized computer network assures that a government cannot kill Bitcoin.
This blog offers thoughts and opinions on Bitcoin from the Swan Bitcoin team and friends. Swan Bitcoin is the easiest way to buy Bitcoin using your bank account automatically every week or month, starting with as little as $10. Sign up or learn more here.