Why Bitcoin is Not Cash

Why Bitcoin is Not Cash

The difference between Bitcoin and cash, is that cash is fungible. At least if it’s a coin – if it’s a gold coin. It’s really no different from any other gold coin and so one is as good as another. That’s not quite as true with notes because notes have serial numbers but let’s ignore that for the time being. Now, there’s other things that’re fungible. like ears of corn, or in the old days, sheep. In Roman times, if twenty sheep wandered from Marcus’s farm into Crasus’s farm, then the corp could just simply tell Crasus to give Marcus twenty sheep back. And any twenty sheep, it didn’t matter. But nowadays, of course sheep have got electronic passports clipped into their ears. So if that were to happen between two Italian farmers nowadays, then Marcus could go and get exactly the right twenty sheep back from Crasus.

So here’s an example of how technology has made sheep from a fungible asset into a tractable asset. Now Bitcoin’s the same, because every Bitcoin carries with it pointers to its entire history. So you can see everybody’s who’s owned that Bitcoin or parts of it ever since these parts were originally mined. And so you can see where the parts of Bitcoin were stolen at one time or another or probably went through money laundering schemes or probably were used in the drugs trade or various other objectionable qualities that might cause the authorities to want to call them in and have a close look at them. What about the money laundering thing, then? How does that work? At present, in England, you can’t get a good title to stolen goods um But until 1995, you could because there was a law called “The Law of Market Overt.” So if I stole your horse, and I went and sold it in Cambridge Market between dawn and dusk then somebody who bought it from me in good faith would end up owning the horse and all you could then do was to sue me or get me hanged or sent to Virginia.

Now this was abolished in 1995 because it was being abused but the rule survives in the law of money and banking. Now, if you go to a Barclays Banking ATM, for example, and you get out a twenty pound note, then even if that twenty pound note was stolen last year in a bank robbery, that’s not your problem. That’s Barclays Bank’s problem. because you got it from a regulated financial institution. And so your title to it is certain Similarly, if you go to John Lewis’s, and you buy a toaster for 30 quid, and you pay with a 50 and you get a 20 pound note in your change Then you own that 20 pound note because it’s another rule that says that if you get something, for value, in good faith, right? Then, so long as that something is money you get good title to it So the Bitcoin people have been lobbying for at least five years to have Bitcoin to be declared money. Because if Bitcoin becomes money then they think that many of the problems around stolen Bitcoins and Bitcoins that were used in the drugs trade and so on would go away.

So we’ve been looking into this and it turns out that it isn’t quite true. Now no government has yet admitted that Bitcoin is money But even if a court were to find that Bitcoin is money, as courts, for example, found that carbon credits could be treated as money for some purposes; then it doesn’t get the Bitcoin criminals off the hook. And the reason for this is that to get good titles for something that was once stolen you have to do it in good faith.

Now, what’s the meaning of “in good faith?” Somebody might argue that you can’t a Bitcoin in good faith because everybody knows that so much bad stuff goes on in Bitcoin. But even if you don’t buy that argument there’s another problem which is that many people in the Bitcoin world have set up what they call “Bitcoin Mixers” or even “Bitcoin Laundries,” where the idea is you take along your stolen Bitcoin or the Bitcoin you got from selling hashish on the sheep market, or whatever, you put this black Bitcoin into a pot and nine other people come along and put in their white Bitcoins into the pot and you shake the pot very, very hard and you kind of hope that you get ten white Bitcoins out.

Now the law is quite clear on this, that if there’s money laundering then you can’t have good faith. And so if you put one black Bitcoin and nine white Bitcoins into a pot and you shake it then if Bitcoins are held to be money what you get out is ten black Bitcoins. Sorry, guys. Asking for Bitcoin to be money was the wrong thing to ask for. Because if Bitcoin had simply remained a commodity, you know, like pig iron bars, or whatever, then this magic wouldn’t happen. The stolen pig iron bar would still be a stolen pig iron bar. You would put the one black Bitcoin and the nine white Bitcoins into a pot and then you’d shake them and some unlucky sod would get the black one out. In that case, of course, economics kicks in because then nobody’s got an incentive to take part in a money laundering scheme. Now, the interesting thing about this is that if Bitcoin becomes money or is treated as money for some purposes then this is a really mortal threat, to those cryptocurrencies which provide built-in laundries, such as Monero and Zcash, Now in Zcash, for example, most of the time it works just like Bitcoin and there’s a fully traceable blockchain of who passed on a coin to whom.

But you can, if you want, take your Zerocoin and you can put it back in the mine and have it remined and get one out that’s nice and shiny and new, in the sense that it’s indistiguishable from all the other coins mined in that round. Just the same as if you’d been re-casting a gold bar. You’re taking a gold bar to a crooked foundry or a bent goldsmith and got it turned into something that was untraceable. But the affect of this according to the law of money and banking, is actually to poison every single coin that comes out of that mine. And this would lead regulators to ask themselves whether or not they should simply instruct regulated Bitcoin exchanges not under any circumstance to change cash or other cryptocurrencies into currencies such as Zcash or Monero on the grounds that these were designed for the purpose of money laundering. and therefore there was an issue of obstruction of justice..

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