Digital Gold
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It is interesting that a meme of digital gold has popped up around BTC over the last few years. The complete lack of understanding of how Bitcoin works from the Bitcoin Core team has led to such a narrative. In particular, the promotion of Nick Szabo’s failed concept of bit gold has crept into Bitcoin Core. In his comment where he says that using a new key for every transaction is utterly stupid, Mr Szabo, unfortunately for him, has demonstrated just how little he seems to understand about Bitcoin. It is written in my white paper:
As an additional firewall, a new key pair should be used for each transaction to keep them from being linked to a common owner. Some linking is still unavoidable with multi-input transactions, which necessarily reveal that their inputs were owned by the same owner. The risk is that if the owner of a key is revealed, linking could reveal other transactions that belonged to the same owner.
The section is an important aspect to consider. It provides the key to making Bitcoin private. If you imagine every individual holds a single key, Bitcoin becomes very simple to trace without any need for search warrants or even a requirement for it to be private. When a single key is used, every transaction can be followed and linked by any person on the blockchain. Alternatively, if you split your coins into many parts in the manner that I’ve recommended many times, it becomes nearly infeasible for anyone viewing the public chain to comprehend what happened. If you imagine splitting a single coin into 100 pieces, and every time you transact and get a new coin, you split the coin and remix the pieces, and the person you’re sending coins to does the same, tracing becomes exponentially hard as the graph problem moves towards an NP-hard analysis.
Bitcoin’s privacy model was one of removing identities from the public view. When you start reusing “addresses” or coin templates or keys, you enable the owner of a key to be linked and thus the modelling and mapping of every single transaction that the individual is involved with. In other words, you would allow for not just the tracing in the manner law enforcement works, but public tracing. You would remove all the privacy features of Bitcoin.
Why Is the Meme of Digital Gold Quite Relevant?
With a single address, or even a limited number of addresses that hold large amounts of bitcoin, the process of finding and seizing assets becomes very simple.
The reason I say the meme of digital gold is very cogent for BTC is that gold has been seized throughout history. With only a few easily traced keys that are reused over and over, it becomes really easy for law enforcement to capture BTC. Luckily, the solution is not one that suits their mantra. In previous posts [1], I have detailed how the function of splitting and dividing coins increases privacy. It does create bigger transactions, though. Using the technique, the BTC blockchain would handle around 1/100th to 1/10th of a transaction per second or less. The fees would also exceed the cost of the transaction other than the largest of transactions. Consequently, it removes the ability to add privacy from Bitcoin Core.
Once you have a few large addresses that act as accounts, Bitcoin becomes easily seizable. As with gold [2], we can imagine criminals being stopped at airports and having addresses taken. Contrary to what many people think, it is possible to very quickly require miners to blacklist particular coins, preventing the targeted individuals from moving them, and to then seize the devices and require the coins to be handed over. And so it has happened multiple times already. More importantly, where the individual refuses to hand over the keys, the government would be able to force miners to change the output and to seize bitcoin in any event.
Bitcoin is not cryptographically secured; it is based on economics. Hash algorithms do not secure systems, and those who have been telling you so either do not understand what hashing is or seek to mislead you.
Interestingly, widespread seizures of gold have occurred throughout history. One notable example from the US follows executive order 6102. Signed in 1933, the presidential order was created to forbid the hoarding of gold coin, gold bullion, and gold certificates within the continental United States. It was only repealed by Gerald Ford in 1974. Anyone discovered with gold other than in jewellery or without a valid reason for the use in trade and commerce would be subject to the legal seizure and likely the melting of it. Executive orders 6260 and 6261 and the Gold Reserve Act of 1934 continued the trend.
The case of Frederick Campbell presented a notable prosecution. He had held 160 kg of gold with Chase Bank. When he attempted to remove his money from a safe deposit box, the gold was confiscated, and he was indicted.
Bitcoin: A Peer-to-Peer Electronic Cash System
Ironically, people have moved completely into the perpendicular, away from what Bitcoin was designed to be. The title of my white paper clearly defines the nature of Bitcoin. It’s a peer-to-peer electronic cash system, and unfortunately, Bitcoin Core is neither peer-to-peer nor cash. So it is not Bitcoin.
Cash forms a particular use case within the wider definition of money…
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