In The previous chapter, we were able to study the origin of this received idea that bitcoin is a criminal currency. We also saw why censorship resistance is an indispensable characteristic for Bitcoin and how its use in illicit activities is actually a viability test for Bitcoin.
Since this observation of criminal use goes hand in hand with a suggestion to ban Bitcoin, in this second chapter, we will study the application and consequences of such a measure.
Is the Bitcoin ban enforceable?
The statement “Bitcoin is a criminal tool” is not a constructive reflection in itself. Once we say that, and even if it turns out to be true, what action should we take? What can we do about it?
Some react to this thought by asking for a simple action: the ban on Bitcoin. In this part, we want to know if the ban, under the justification of use by criminals, is actually enforceable.
The Bitcoin ban can only be effective on a legal level. As this system is distributed, in practice, it is impossible to stop it or prevent its use by individuals. Anyone with a node will always be able to broadcast their transactions. The use of the Nakamoto consensus principle established on proof of work allows resistance to censorship in terms of transaction confirmation.
Concretely, just because Bitcoin is forbidden does not mean that individuals will no longer be able to use it. It would even be quite easy to get around the law without being detected. Indeed, the majority of Bitcoin nodes communicate with their peers under Tor, and are therefore difficult to detect.
Tor (The Onion Router) is a decentralized computer network that allows connections to be anonymized by masking users' IP addresses and encrypting their communications.
In addition, criminals would continue to use Bitcoin since they are already illegal even before choosing a payment method. As a result, a Bitcoin ban would certainly penalize legal citizens and businesses in the sector, but certainly not criminals.
What would be the consequences of a Bitcoin ban?
Bitcoin is just code. It's a computer system, it's a tool. Like any other tool, it can be used constructively and destructively. For example, the hammer can certainly be used to hit another individual, but it is especially widely used to build beautiful buildings.
A civilization that prohibits tools under the justification of their most marginal uses is a step towards authoritarianism and naturally tends towards widespread poverty. If the hammer is banned, what will be the consequences? All the constructive entities that specially used this tool, in a lawful manner, will be the most impacted. They will be able to drive nails with the handles of screwdrivers, but it will be much less effective. On the other hand, people who used it illegally will not be so affected by this ban. Indeed, an unbalanced person who wants to hit his neighbor, if he no longer has access to the hammer, will take a knife, a rolling pin, or even a glass bottle. The operation will not be made less effective.
It should therefore be understood that the prohibition of tools, under the pretext of their marginal uses, levels our society downwards while not preventing criminals from operating.
Moreover, when bitcoin is used by criminals, it is only a small parameter in their operations. Take the example of ransomware, viruses that encrypt a computer and demand the payment of a ransom, sometimes in bitcoin. To succeed in this operation, the hacker uses a computer connected to the Internet. It probably also has a chair and a desk. In the morning, he may be eating a banana to have sufficient sugar intake during the programming of this virus. Since this operation is criminal, is the use of the Internet also criminal? Are tables, chairs, and bananas criminal tools? I don't think so. However, if these parameters were forbidden, do you think that would have prevented the computer attack? No, the hacker can replace the chair with a stool, he can replace the banana with an apple, and above all, he can replace the bitcoin payment by a settlement on another transaction system.
This argument is not new. It had already been exposed by the famous Bitcoin developer Gregory Maxwell, during A message introducing the idea of CoinJoin on the Bitcoin Talk forum in 2013. Maxwell's idea about CoinJoin can obviously be extended to Bitcoin more generally:
In reality, real criminals don't need CoinJoin, [...] they can afford to buy privacy in a way that regular users can't, it's just an added cost to their business (often very lucrative).
Conclusion
This cliché of the use of Bitcoin by criminals is in fact a way to ask for its ban. However, as you may have discovered in this second chapter, a Bitcoin ban would be technically unenforceable.
Moreover, this possible ban would be absolutely not effective in the fight against criminals. On the contrary, it would affect the legitimate actors in this ecosystem in the first place, which would contribute to levelling our society down.
In the next chapter, we'll look at Bitcoin's privacy model. We will learn that it is not necessarily an optimal tool for criminals.
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