Over the last couple of years there has been a lot of criticism over the crypto-currency Bitcoin—some of which I’ve made myself (I think it is doomed as a currency but would be a great “alternative to Western Union”). But Neil Stevens at RedState recently made one of the most intriguing criticism’s I’ve heard so far: Bitcoin, if adopted widely, would be a grave threat to property rights.
There may be another cryptocurrency that isn’t hostile to our liberties, but Bitcoin is incompatible with freedom under the rule of law.
If our nation’s founders are to be believed, our government exists to protect life, liberty, and property. The reason it exists, and the way it has legitimacy, is that it serves the people to protect our fundamental rights. That’s how the rule of law is better than anarchy, because we can have laws against murder, slavery, and theft.
Recently in Virginia, a man was caught after stealing $2 million worth of gold. One of the jobs of police in this matter is to recover the stolen property, including through a pawn shop where the thief ran $340,000 worth of the precious metals.
If the man had stolen Bitcoin instead of gold, that would be out of the question. Money in the form of cash or a bank account, or tangible goods like gold or silver, can always have unlawful transactions reversed. Money can be sent back to the person it was stolen from. Property can be taken and returned to its rightful owner. But Bitcoin? Bitcoin advocates brag about how Bitcoin payments are irreversible. Anything the thief spent is gone forever, and anything the thief didn’t yet spend is meant to be gone forever.
Perhaps I’m missing something but I think there is a key flaw in Stevens’ argument: being foolish with one’s property is not a violation of property rights.
Let’s imagine I put $10,000 worth of Euros in a glass box and sit it on the curb (inside my property line) in front of my house. I go out for some frozen yogurt and when I return I find—quelle horreur!—that while the glass box is still there, someone has snatched all my cash.
Now the thief certainly violated my property rights by illegally entering my property without permission (trespassing) and taking my property without my consent (theft). But having a glass box full of Euros on my law does not mean Euros are a threat to private property or to property rights.
To make my example more like Bitcoin, let’s also imagine that the thief has a magic money laundering box. As he takes the Euros out of my glass box, he dumps the cash into his magic box and makes them immediately untraceable. Even if someone were to see him taking the cash, they’d have no way of proving he actually took them or that they were in his possession.
This is essentially how Bitcoin theft becomes untraceable. A thief takes the currency from your glass box (what Bitcoin users call a “wallet”) and dumps it into their magic money laundering box (a Bitcoin tumbler). It has been estimated that there have been 818,485.77 stolen Bitcoins, presently worth some $502,081,166.11. That means one out of every 16-17 Bitcoins belongs to someone who stole it. Yet I can’t find evidence that anyone has ever been prosecuted for stealing Bitcoins. This makes Bitcoin theft an ideal crime.
The only real way to truly protect Bitcoin is to store the currency offline, in a physical Bitcoin wallet not connected to the Internet. That process is essentially like taking cash and putting it into a safe deposit box. But because Bitcoin is a highly volatile, speculative currency, the money in the “safe deposit box” could increase or decrease minute by minute.
Personally, I can’t imagine why anyone in their right mind would hold significant amounts of their money in Bitcoin (for me, that’d be a couple of hundred dollars). Holding Bitcoin is less safe than holding cash and has many more drawbacks. It’s essentially an onerous, unstable, easily stolen type of currency for people who seem to care more about philosophical concerns (i.e., theories about non-state currencies) rather than financial ones.
But that doesn’t mean Bitcoin is a grave threat to property rights. It just means Bitcoin holders are likely being foolish with their property.
