Bitcoin’s Four Drivers: Part One – Unlawful Trade

[Eugen Leitl]

http://falkvinge.net/2011/06/16/bitcoins-four-drivers-part-one-unlawful-trade/

Bitcoinbs Four Drivers: Part One b Unlawful Trade

Bitcoin stands to streamline the worldbs unlawful trade. This is one of its
four key drivers, providing an almost-perfect anonymity, untraceability and
laundrability b at least, it is leaps and bounds above anything else
available today.

It is certainly not hard to have opinions on a technology that stands to
streamline gambling, drug trade, and arms trade. But the facts stand b when
people want to hide an activity from government, and are given a technology
that enables them to do so, then it is very likely that those people will use
the technology to hide that activity.

BITCOINbS FOUR DRIVERS

This is an article in a series on what Falkvinge identifies as Bitcoinbs four
drivers (plus a surprise opportunity). This is the first article, on unlawful
trade. The others are international trade (coming June 18), merchant trade
(coming June 20), investment (coming June 22), and a low friction economy
(coming June 24).

So isnbt this unlawful tradeb& wellb& bad?

The ramifications for society are huge, and not necessarily entirely
negative. Like I wrote before, who are congresspeople, senators, and members
of parliaments to determine what other people may trade with each other? They
took that right to themselves, inheriting it to themselves from the previous
monarchies b they were never given it by anyone. When the masses have a means
to circumvent these enforced opinions, I would not be surprised if people
started to ignore these self-granted legislatorbs edicts en masse to make
them effectively unenforceable.

I think Bitcoin and cryptocurrency stands to challenge and has the potential
to topple the very notion of unlawful trade, just like the printing press
challenged and toppled the notion of unlawful speech.

Think about that for a moment. We stand at a point in time where the law can
be reigned in substantially by the development of technology.

And letbs not forget to compare regulated and free speech in retrospect:
although free speech means we have to put up with a whole lot of nonsense,
lies, and American Idol in this age, I think few would argue that it wasnbt
worth it. At the time when regulated speech was challenged, people were not
so sure; radical ideas were chopped off quickly. So were heads.

In any case, arguing whether technical developments are good or bad is a
quite pointless endeavor. One might as well discuss whether itbs good or bad
that blueberries grow in the forest. At the end of the day, they wonbt care
but keep on growing anyway.  Growth potential

Letbs push moral issues aside a bit and look a things from a purely economic
perspective instead. It is undisputably a driver for Bitcoin, after all, so
letbs not get ourselves occupied whether we like its color or not. I outlined
a bit of Bitcoinbs growth potential in this field in my post where I
described why I invested in Bitcoin.

Between 5% and 30% of the worldbs money supply of about 75 terabucks are in
circulation to support unlawful trade. The guesstimates vary due to the
nature of the subject. Letbs assume 5%, and then letbs move on to guesstimate
that 10% of those 5% is in high-tech trade that would be early adopters of
Bitcoin (the kind of merchants capable of building intercontinental
undetectable submarines).

Letbs assume that these merchants move about one-sixth of their trade to
Bitcoin over the coming years to explore it and use it for long-distance
transactions. That would mean 15% of 10% of 5% of 75 terabucks enter the
Bitcoin ecosystem, which comes down to about 60 gigabucks. The current value
of Bitcoin in circulation is roughly 6.5 megacoins times 20 bucks, coming to
about 120 megabucks.

Thus, the value used to trade in the Bitcoin ecosystem stands to multiply by
about 500x in the next few couple of years b counting this uptake driver
alone. Now, this doesnbt automatically mean that the value of one bitcoin
will rise by 500x as the market is more complex than that, but itbs a good
estimate of where webre heading.

Next: international trade and merchant trade. Those uptake drivers are much,
much larger (not to mention currently legal).