I'm not sure this is true. Censorship resistance is a pretty basic part of Bitcoin, yet gov'ts are busy coming up with ways to circumvent this.

If we all upgrade Bitcoin to some incredibly fungible, ecash-level privacy, that is essentially the same as physical cash, what stops the gov't from requiring all the same things it requires of physical cash? "If you want to send your 100% fungible, private coin to our exchange, you have to prove where you got the money (proof that you earned them, a letter from the source, etc...)."

The issue here, it seems to me, is not the technical abilities of Bitcoin, but rather the fact that the gov't controls most of the points you need to touch in order to do very much with Bitcoin in the physical world.

Privacy improvements to Bitcoin help Bitcoin be better, but they don't fix this problem.

The only way I see out of it is a direct collision with the big brother. All of the revolutions in the past have become successful by facing the oppressor directly not by hiding.

Great article. Depressing as hell, but great.

What authority will FinCEN have over a Lightning node hosted on VPS in Salvador, or Russia, or some other independent country? Or even at home in a compliant territory, with a good VPN. If the operator is careful to stay anonymous, I don't see how they can get him. Not sure how big that "if" is, must be a function of the node size...

His example on LN is about sending sats to an exchange. It doesn't affect the broader LN network if you are using sats to receive and send. This scenario might even spur more plebs to run a LN node using all unannounced channels.

It should say FIN-2019, right?

Hi @_arshbot, I share your thoughts. I also wrote about this in my blog www.kokkomaki.com . I worked at a crypto custody company, read lots of regulation and upcoming changes (TRP, MiCA, and all FATF suggestions), and came to the same conclusion: Bitcoin is neutered effectively. It is a dystopia compared to the original dream. Only outlaws will have privacy.

However, I do not think it is an attack per se. Or yes, regulators know what they are doing and to whom. Yet I believe it is more akin to path-dependence and adapting crypto to the existing system of regulations and financial institutions. Thus, it is more neutral act than as if there was a targeted and coordinated attack.

Bitcoin is certainly becoming a walled garden in the US, EU and China. But it need not be elsewhere.

Super interesting article. I know I am reading this through a filter but doesn't this seem like a great reason to NOT do any type of covenants? All these machinations seem like they could use covenants as a perfect weapon to make the big brother dream a reality.

"Our largest allies at the legal, institutional, and zeitgeist level are Coinbase, David Sacks, Marc Andreessen, and countless others.

In contrast, there are no champions at the Bitcoin protocol level. There are some proposals with some cool privacy improvements whose work I follow closely (Payjoin and Silent payments come to mind). But none of them are as drastic as we need, largely because the tools in Bitcoin are currently lacking for any significant, decentralized privacy upgrades.'

good summary of problems in legal world.

not much in the way of solutions.

it's fiery stuff but kind of hand wavy about tooling or protocol changes he'd like to see in Bitcoin.

anybody care to bite?

I'm guessing he'd like something like monero. But then you have the stealth inflation problem.

Am I missing anything?

I agree the situation is bad but I think those who want everything privacy just have to resist with coinjoins and lightning and malicious compliance and lobby for better laws.

until there are more consequences for petty violations (rare to never seen iiuc) there's not really any motivation for the masses of users to resist. there's your dilemma.

maybe things have to get worse to get better.

but we should certainly work on and get good at using privacy tooling now. even if we don't need it or use it other than playing around on testnet