Bitcoin exists to make it possible for people to make their own bad decisions

1 March 2014 by Steve Blum
, , , ,

Where’s the fashion police when you need them?

Knee jerk calls to regulate virtual currencies, in order to protect us from a repeat of the total collapse of the Mt. Gox Bitcoin exchange this week, prove two things: 1. there are people in Washington (and, I wager, Sacramento) who must do nothing all day except see what’s trending on Twitter and paste top tweets into boilerplate bills, and 2. there’s a dangerous misconception that personal online behavior can be regulated. Intercepted, investigated, penalised, monitored, blocked, taxed and subsidised, yes. Run according to wise rules cleverly designed to lead us all to one vision or another of the Common Good, no.

Bitcoin’s purpose is to meet the needs of people who, for whatever reason, want to engage in unregulated transactions. There’s no shortage of talent aching to fill that need, whether for personal gain or in a quest for fame and status amongst fellow hackers, in the true and noble sense of the word. Regulate one solution and another will pop up.

In any event, Bitcoin’s fate will be decided by the market. If, as Marc Andreessen believes, the Mt. Gox eruption is just another step toward maturity, Bitcoin’s value and transaction volume will continue to climb. On the other hand, if there’s indeed a fatal flaw in the algorithm, then it’ll fade away. People will have lost wealth – more likely the product of Bitcoin’s rapid appreciation and the transactions it particularly enables than, say, heretofore prudent management of a pension portfolio – but it’ll be because they either accepted or ignored (if there’s a difference) or, perhaps, enjoyed the risks involved.

Better to guarantee regulatory success by sticking to predictably beneficent crusades. You know, like network neutrality.