Bitcoin: Revolutionary Game-Changer Or Trojan Horse?

Bitcoin Is Going Mainstream

Reddit, Virgin Galactic, and now accept Bitcoin.

So do dating site OKCupid and travel site Game giant Zynga is now in the testing phase.

Two big Las Vegas hotels accept Bitcoin.

Congressman Steve Stockman (R-Texas) accepts Bitcoin for 2014 campaign contributions. As does a law firm in Australia.

Reuters notes:

Already, 21,000 merchants are using Coinbase to accept Bitcoin from customers.

Indeed, there are websites listing scores of businesses which now accept bitcoin.

(And you can use Bitcoin at Amazon, Barnes and Noble, Crate & Barrel, Target, Sears, CVS, Hyatt Hotels, Kohl’s, Burger King, Applebees, Victoria’s Secret, Land’s End, Facebook, Groupon, Banana Republic, the Gap, AMC and Fandango movie theaters, Whole Foods,, Wine Enthusiast, Papa John’s, Nike, Adidas, Sephora, Sports Authority, Staples, Zales jewelry, Game Stop, FTD flowers, Zappos and hundreds of other stores if you use Bitcoin to buy gift cards at Gyft.)

But is Bitcoin going mainstream a good thing or a bad thing?

People Power … Challenging the Status Quo?

Andy Haldane – Executive Director for Financial Stability at the Bank of England – believes that peer-to-peer internet technology will lead to the break up of the big banks.

Bank of America said “We believe Bitcoin could become a major means of payment for e-commerce and may emerge as a serious competitor to traditional money-transfer providers”

Visa has attacked Bitcoin as being less trustworthy than its well-established payment system.

So it sounds like Bitcoin is shaking up the status quo …

Backed by … the Big Banks?

On the other hand, a lot of major mainstream players are backing Bitcoin and other digital payment systems.

Wells Fargo wants to get into Bitcoin in a big way.

JP Morgan Chase has filed a patent for a Bitcoin-like payment system. And Russia’s largest bank is working on a Bitcoin alternative as well.

Ben Bernanke and the Department of Justice have both cautiously blessed Bitcoin.

François R. Velde, senior economist at the Federal Reserve in Bank of Chicago, labeled it as “an elegant solution to the problem of creating a digital currency.” John Browne theorizes:

While crypto-currencies remain insulated from central bank manipulation, governments have thus far been tolerant, perhaps because their capability to track transactions is more advanced than Bitcoin believers admit.

Indeed, Bitcoin is not really that anonymous, as the NSA can track Bitcoin trades.

The NSA can apparently also hack Bitcoin. And see this. Given that the NSA may be changing the amount in people’s accounts, it would be child’s play for them to change the amount in your Bitcoin wallet.

And Yves Smith argues that Bitcoin actually plays into the hands of the central bankers:

Many [Bitcoin enthusiasts] clearly relish the idea of launching a currency outside the control of central banks (plus this beats Cryptonomicon in geekery).

If you believe the hype, you’ve been had. As Izabella Kaminska of the Financial Times tells us, you all are really just doing free/underpaid R&D for central banks, since you are debugging and building legitimacy for one of their fond projects, making currencies digital and getting rid of cash altogether.

I had wondered about the complacency of Fed and SEC officials in Senate Banking Committee hearings on Bitcoin last year.


As Kaminska explains (boldface mine):

Central bankers, after all, have had an explicit interest in introducing e-money from the moment the global financial crisis began…

Bitcoin has helped to de-stigmatise the concept of a cashless society by generating the perception that digital cash can be as private and anonymous as good old fashioned banknotes. It’s also provided a useful test-run of a digital system that can now be adopted universally by almost any pre-existing value system.

This is important because, in the current economic climate, the introduction of a cashless society empowers central banks greatly. A cashless society, after all, not only makes things like negative interest rates possible [background here, here, here and here], it transfers absolute control of the money supply to the central bank, mostly by turning it into a universal banker that competes directly with private banks for public deposits. All digital deposits become base money.

Consequently, anyone who believes Bitcoin is a threat to fiat currency misunderstands the economic context. Above all, they fail to understand that had central banks had the means to deploy e-money earlier on, the crisis could have been much more successfully dealt with.

Among the key factors that prevented them from doing so were very probable public hostility to any attempt to ban outright cash, the difficulty of implementing and explaining such a transition to the public, the inability to test-run the system before it was deployed.

Last and not least, they would have been concerned about displacing conventional banks from their traditional deposit-taking role, and in so doing inadvertently worsening the liquidity crisis and financial panic before improving it…

Almost of all of these prohibitive factors have, however, by now been overcome:

1) Digital currency now follows in the footsteps of a “disruptive” anti-establishment digital movement perceived to be highly accommodating to the black market and all those who would ordinarily have feared an outright cash ban. This makes it exponentially easier to roll out. Bitcoin has done the bulk of the educating.

2) What was once viewed as a potentially oppressive government conspiracy to rid the public of its privacy can be communicated as being progressive and innovative as a result.

3) Banks have been given more than five years to prove their economic worth and have failed to do so. If they haven’t done so by now, they probably never will, meaning there’s unlikely to be a huge economic penalty associated with undermining them on the deposit front or in transforming them slowly into fully-funded fund managers.

4) The open-ledger system which solves the digital double-spending problem has been robustly tested. Flaws, weaknesses and bugs have been understood, accounted for, and resolved.

The balance of the article describes how the central bank digital currency would be launched, and Kazmina finds a plan developed by Miles Kimball of the University of Michigan to be thorough and viable.

Oh, and why would Bitcoin, um, central bank digital currency make it viable to implement negative interest rates? Kaminska tells us:

…the greater the negative interest rate, the greater the incentive to hold alternative coins. The greater the incentive to hold alternative coins ,the greater the incentive to produce them. The greater the incentive to produce them, the greater the chances of oversupply and collapse. The more sizeable the collapse, the more desirable the managed official e-money system ultimately becomes in comparison.

Either way, the key point with official e-money is that the hoarding incentives which would be generated by a negative interest rate policy can in this way be directed to private asset markets (which are not state guaranteed, and thus not safe for investors) rather than to state-guaranteed banknotes, which are guaranteed and preferable to anything negative yielding or risky (in a way that undermines the stimulative effects of negative interest rate policy).

So all these tales … of how liberating and democratic Bitcoin will be are almost certain to prove to be precisely the reverse. Hang onto your real world wallet.

The head of Signature Bank – Scott Shay – raised these same issues last month on CNBC:

Bottom Line: Too Early To Tell

It’s not yet clear whether Bitcoin will be a force for good or a backdoor way for big banks – and central banks – to get people to accept a cashless society.

Note: Yes … We accept Bitcoin.

This entry was posted in Business / Economics, Politics / World News. Bookmark the permalink.
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  • Tonto

    It’s really laughable that the anyone can be so naive as to believe that the Invisible Man who built BitCoin didn’t leave a back door.

    Come on, people. Check your pulse up around your neck. You may be brain dead.

    If you do not study human nature, what good is anything you teach yourself?

    • Flippy Jigger

      Someone doesn’t know what open source means.

      • Tonto

        Someone does not know that chess is open source too.

        The analytical human mind is only so capable of comprehending any wildly complex system. And this is a wildly complex system that defies even moderately exhaustive comprehension by any single analyst -short of those anonymous liars who wrote the code. And even those rapacious creeps who wrote the code have no ability to exhaust all the possibilities of what can be done with this easily worm infected bit of software handicraft.

        BitCoin’s growth is due to it being a populist phenomenon, not because it is a secure technological wonder. LoL Some Jackass, named Flippy Jigger comes here, makes an asinine post, and the BitCoin groupies pile on. Did either Flippy Jigger or his admirers ever comprehend the “open source” computer code?

        Nope. But they each keep spreading the foolish myth of BitCoin to the brain dead here on Washington’s Blog. Go ahead, put you money in -BitCon-! I’m sure you’ll live to see it become a great investment, for someone… SUCKER! LoL

        • Winston_from_the_Ministry

          But you don’t have to put your money in it to benefit from it. So everyone wins. Apart from you, you’re still grumpy I guess.

          • Tonto

            Everyone wins when monetary (credit) events are being initiated by unknown persons or persons whose intent is completely unspoken and entirely unofficial?

            I bet you think everyone wins when someone is raped too.

            Where the fuck do these assholes come from? Is someone paying these pieces of shit to stalk the Internet and spread these fucking lies?

            Let me answer my own question. Duh?

          • Winston_from_the_Ministry

            Personal abuse aside, is their something about “official” intent that makes you feel particularly safe?

          • Tonto

            No. It’s just that I don’t, and never will bank with some anonymous group of assholes standing in the shadows.

            But you go ahead. Your Nintendo skills will fare you well in the world of finance.

            I don’t buy gold either unless I can buy it at half what it is trading for on the market. Why? Because there’s no real market for gold. It’s all hype. Gold is a commodity that has to be stored, shipped and transacted before it has any real value. Some jewelers will buy gold scrap from an individual, though only after checking it very carefully. And a jeweler wants to discount what they pay too. So, the cost of turning gold back into cash, is going to put a lid on what I would pay for it. The market for gold is mighty shaky right now. It’s always been populated by a particularly venomous den of viperous salesmen.

            I read Tyler Durden over at ZeroHedge, though I don’t post there. I cannot understand why he is long on gold, while forever predicting a worldwide market collapse. He seems to be talking out his sleeve there. He’s also a fan of BitCoin. But then, the man has to make his money some way. So I take what he writes with a grain of salt. He’s clearly very clever.

            And while I am digressing, Michael Rivero at What Really Happened must be deathly ill. His wife, Claire, has been doing the posting for the last two weeks.

            There’s a medical con going around. It’s called diverticulitis. And these greedy doctors get you in their grips with severe signs of constipation caused by the shortening substitute used in a lot of commercial bakeries (read- Walmart, etc.). And then the fucking doctors explain how you’re gonna die if they don’t cut you open to see what’s going on.

            When you wake up, if you wake up, you’ve got a colostomy bag, and your asshole no longer has any real function, not farts, nothing. They tell you that in a month or two, they’re re-attach your plumbing, if all goes well!

            They are billing low six-figures for their fraudulent handiwork in the guts of suckers. The patient is just the intermediary by which the medical crooks reach into the deep pockets of the insurance industry, or the welfare department.

            So, stay out of hospitals. And watch what you eat. Go long on the dollar, because Durden is part right. The worldwide collapse is coming. But what he hasn’t recognized is, the worldwide collapse is wholly contrived, and intended to fleece everyone, especially China. Wall Street’s greed has never been surpassed. The wire pullers are stocking up on piano wire for the grand finale.

          • Winston_from_the_Ministry

            Well I’m certainly not going to replace my regular banking anytime soon, but to me they’re just as anonymous and just as much of a bunch of arseholes. But it’s a promising pillar to add to my strategy, and one with plenty of other potential benefits that in my opinion make it worthy of a bit of risk.

            While I appreciate you taking the time to find an apt form of condescension, Nintendo is for fun, Forex is where I am serious and Nintendo certainly hasn’t harmed me in that area, lol.

          • Tonto

            Nintendo is fun? No, Nintendo is time-consuming. And when you finally grow up, you’ll realize the time you spent playing Nintendo, and the time you spent thinking and talking about Nintendo, was a great waste of a very precious gift that fast slips away. Nintendo, like the Transformer toys you had when you were young, were meant as passing entertainment for youth. Both became an obsessive compulsive thing for some.

            Try reading a book instead. There you will find more than enough real world experience and insight to enhance your own existence in this infinitely complex reality that beckons lively participation.


          • Winston_from_the_Ministry

            Thanks for the sagely advice, but I read quite enough as well. Nintendo lets me switch off a bit, relax and bond with my daughter. Book looks nice, description reminds me of one of my favourites; Far From The Madding Crowd. There’s an excellent passage early on describing a shepherd observing the passage of the stars on a hill.

            Are you done trying to make yourself sound more grown up than me now?

        • Daily Lomas

          You’ve managed to elicit the standard response from a bitcoin shill “oh but it’s open source” as by saying the words “open source” can somehow transmigrate anything into a realm of untouchable grace and innocence. As you pointed out, Bitcoin was created by a stranger and to 99% of the public, is as incomprehensible in its inner workings as say, a transistor or particle collider. This, by definition, means that power is potentially going to be transferred from an oligarchy to a technocracy. Apparently it’s one nil to the geeks, who are all feeling rather smug and full of themselves because of the recent “victory” of bitcoin. What they aren’t seeing is that they’ve been got “on side” by the clever marketing of bitcoin as an “open source project”. Most open source projects I know actually involve more than one person at the outset and the person is freely identifiable. So, far from being the financial panacea that the “open source” bitcoin, fully paid up NSA shills like to claim it as, bitcoin is most likely, as the article says, going to represent the final nail in the coffin of the freedom and untraceable nature of cash and open up the very real spectre of an all pervading, totally trackable digital nightmare.

          • IT Shiess

            Whilst the packetised nature of blocks of data are more difficult to track and trace than say a circuit-switched connection, still packetised data flows such as those of Bitcoin still have to pass through gateways, which is like smuggling narcotics or contraband through border checkpoints, rather than slipping them across a pourous border at night.

            I’m already quite tired of this cyber-utopian nonsense about how Bitcoin challenges the establishment’s financial system.

            Such people are hippies who are still trying to realise their failed Utopian dreams since the 1960s.

            Open source software is another of those “alternative” solutions proprietary software and whilst excellent in of itself, the fact that estimated over 3,000 Linux distributions together have 1.6% market share of desktop computers versus over 90% for Windows, according to, goes to show how such “successful” such anarcho-libertarian inspired alternatives are.

            Windows’ dominance is not due to government regulation but to Microsoft’s marketing power and the free play of “stupid” market forces which accept it, and I am saying that as a long time desktop Linux user.

            The software is great but the techno-Utopian idiocy surrounding it is tiringat best.

            Open source software, such as that used in Google’s Android operating system on smartphones and tablets took off only when large corporations such as Google, IBM, Oracle, Red Hat, etc. embrace them.

            It will be the same with Bitcoin.

      • abinico

        If you think open source can’t have a backdoor, you’re a fool. Open source is very complex and a huge amount of code – there are ways to plant a backdoor by doing something innocuous – I will not elaborate.

    • Me Ted

      Keep your wallet offline then. Done. Unless you physically break into my home and find the USB it happens to reside on (1 of many), decrypt both the encrypted USB key and subsequent wallet, you’re a shitload safer than the guy using his debit card at a shifty gas station. lol

    • Me Ted

      Keep your wallet offline then. Done. Unless you physically break into my home and find the USB it happens to reside on (1 of many), decrypt both the encrypted USB key and subsequent wallet, you’re a shitload safer than the guy using his debit card at a shifty gas station. lol

  • elizabethhanson
    • Flippy Jigger

      Your partner is a goober.

    • jo6pac

      Thank You, I’ll have to come back and finish reading this later but sounds about right.

      • elizabethhanson

        I’ll be interested to see what you think… He did a lot of research… Math equations that were over my head. My thought is if we go to a digital currency maybe this will be it.

    • morpheus1994

      Looks like it makes perfect sense. I’m going to go through the reference materials. Bitcoin was a good idea, but it looks like the NSA or some other institution with those types of resources are the only ones who had the resources to pull it off. Thanks for sharing this with us. This needs to be read by everybody. if Bitcoin was really as secure, revolutionary and off-grid as claimed, the authorities would be absolutely sick about it! But they’re not. Hmmmmmmm…..

      • elizabethhanson

        Thank you Morpheus for your feedback and for looking into this further. Because he knows about math and about the NSA he came to this conclusion. I appreciate other people feeling this same suspicion too. 🙂 Elizabeth

  • NoToTyranny

    Paypal takes a large bite in my own business, as I need to increase the fee to receive the full payment. Peer-to peer will solve this problem. It seems like the Bitcoin is ideal for these types of transactions.

    • Name

      My understanding is that although no fee is required for BC-to-BC transactions, it is implied that paying a fee will make the transaction clear faster and more securely, whatever that means. Also, don’t the exchanges charge a fee for converting BC to cash? I’m not really sure what the buy-in is, except maybe for the novelty value.

  • Guy Incog

    FYI, Zappos does not accept Bitcoin. You may want to double check that list of companies again

  • Name

    My impression is that there is definitely a nerve center behind BitCoin, although the network is distributed and anyone can participate. The professionally designed website with its cutesy but, again, professional videos is a bit out of kilter even for open source projects that have corporate funding and a strong developer base.

    It seems in order to open a wallet, you have to transfer some money to an account, but I might be wrong about that. Or, apparently, you can host a “full node” and contribute disk space, processing power, bandwith, and electricity and in return you get, well, a sense of accomplishment, I guess.

    You can earn BitCoins by BitCoin mining, in which you again contribute processing power to help solve cryptographic problems. However (again I might be wrong) this isn’t a purely cooperative process like Seti@Home, but rather a competitive one: whoever solves the problem first gets the coin, so you have to join a pool (which usually skims your earnings) in order to have a chance at success. You can’t use your old PC and expect to actually earn something, you have to buy specialized hardware or lease time in the “cloud”; you’ll be lucky to break even and if the price of BitCoin drops low enough your power bill will cost more than your earnings. You can be out some serious RealCoin and be stuck with hardware you can’t use for much else. I think you needed to have been in on the ground floor with mining.

    As far as Yves’ fears go, it seems to me that the central bank has a monopoly on money and doesn’t need to create a new digital currency in order to screw us over; they’re doing a fine job without it.

    So if someone wants to give me BitCoin, that’s fine, as long as it’s not in lieu of cash. It seems too risky as a store of wealth, but if you can afford to gamble it might not be any worse than many other investments. Except that there is an odor of deception around the supposed nobody-owns-it claim and there is a cottage industry behind BitCoin mining, so I think I’d personally find something else to risk my money on.

    Just my two cents.

  • Justinwalker

    Bitcoin is a cleverly placed scam – go back to 1914 for the real solution to deal with the private banksters.. This year sees the Centenary of the debt-free and interest-free Bradbury Pound which was issued by the Treasury and not the Bank of England at the outbreak of the First World War. Check it out – feed Bankers, Bradburys and the Carnage on the Western Front and read what really happened in WW1. And see how we can reintroduce the Bradbury in Britain and how every country in the world can do the same. Wake up people – it’s bloody simple and bloody effective!

  • Bitcoin = CIA = More Control of Humanity

    • Me Ted

      So did the CIA anticipate the creation of over a hundred (and still counting) crypto-currencies as well? Was that part of their “masterplan”?

      • abinico

        Had a friend of mine who worked with the CIA tell me that the CIA will lie even when they don’t have to, but do so for the practice. So in that sense, bitcoin could be the CIA having some fun.

  • Dimitri Ledkovsky

    Everybody so hot to convert this Bitcoin to a gambling, i.e. stealing or something for nothing, proposition.

  • IT Shiess

    I am rather sceptical of all these “alternative” solutions to “establishment” problems.

    Back the the late 1960s and early 1970s, the counterparts of today’s Utopians believed that smoking pot would lead to world peace, the end of racism and a world brotherhood of mankind.

    Well, look around today at all the wars, violence, racial and religious hatreds despite more people having smoked pot or still smoking pot.

    In the early days of the mass availability of the Internet – i.e. the early 1990s, cyber-utopians believed in the liberating nature of the Internet, which would break down all racial, national and religious boundaries and barriers in a “borderless” world beyond the reach of the laws of national jurisdictions but look now at the concern NSA and GCHQ surveillance of online activity to see that it’s the exact opposite of what the cyber-utopians claimed.

    Likewise, Bitcoin is touted as being like the Internet was claimed to be back then, but whilst it may solve the immediate financial problems of some, I don’t see it solving the financial woes on a broad societal level.

    Sure, Bitcoin is the latest hip thing to be into but like all other “alternatives” of the past, it wil end up being co-opted by the “establishment” system.

    The only real solution is to smash the system – i.e. the capitalist financial system and bring it under people’s control.

    • Rollo10

      1971 was the start of this ‘upheaval’, when tricky Dicky un-pegged from ‘gold’ backed currency. This is when the attack on workers rights and wars really began.

      ‘Cashless’ will lead to us being completely controlled by the bankers. They can no longer raise interest rates, as to do so will burst all their ‘bubbles’ they have spent so much pumping up, they now need to charge us for ‘banking’ our money. This will lead to people taking their money out, so they need to make ‘cash’ illegal. [Already is in Louisiana for purchasing used goods] with cashless they will dictate when you spend, by taxing if you have to much, stop you spending, if you talk out of turn?

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  • Dave Smith

    Bitcoin (and/or a similar currency) is the future. It is only a matter of time.

    • abinico

      You are delusional. Control of money is control of the people – the government will squash bitcoin in a second if it poses a threat to the bankster profits.

  • abinico

    Said it from the beginning – bitcoin is a fake, a fraud, and a scam. Bitcoin’s wild gyrations in value are indicative of its speculative and fake nature. Want to gamble – do bitcoin; want real coins, buy Maple Leafs, US Eagles, old silver coinage, etc.

  • Mike

    Let me just put this out for discussion and then I’ll go away.

    All currencies will fail. That’s part of the plan. It’s a given.

    Vein scanners for hands are about to be introduced. (Forehead scanners next? Some people don’t have hands. Everybody has a head.)

    All of that computational NSA horsepower out in Utah could hold and figure a whole lot of block chains so they don’t have to be downloaded to your ‘puter. A scanner, or your phone, can hold and match your personal vein pattern, or mark, to your personal NSA block chain.

    The word man, under current law, actually means monster.

    Monster, beast, vein pattern, mark, one world currency, accept it or starve?



  • sara

    WAKE UP PEOPLE!!!! Bitcoin . Cashless society ..Add RDIF chip and that`s it . THAT`S THE END .Death will be a welcoming relief from total slavery called “life”.How can you not see it ???

  • icekold

    hahaha! the nsa can see bitcoin transactions and steal them. I used to enjoy this blog but this is a load of bull

  • waddle duck

    Do you have an opinion on They are launching soon and I would like to give them a try as a platform to use.