Bitcoin is no stranger to controversy, from the genesis of the original cryptocurrency to the reaction of governments to it. The origins of bitcoin are shrouded in mystery, and due to its anonymity, it has been tied to illegal activities over the years. Governments and businesses that once saw Bitcoin as a fad have seen it evolve into an innovative feature that is here to stay. The narrative has shifted from it being a digital asset that should be ignored to one that should be built around and regulated.
Who is Satoshi Nakamoto?
The identity behind the creator of Bitcoin, Satoshi Nakamoto is shrouded in a cloud of mystery. Nobody knows for certain who the founder is or if they are a group of people.
On October 31st, 2008, Satoshi Nakamoto transferred a paper containing their thoughts on a then-strange means of payment called Bitcoin. Most people were uninterested in the contents of the paper at the time. After all, they felt it was impossible to create an electronic version of cash because many had tried and failed.
Nakamoto decided to launch the bitcoin network on January 9th, 2009. He corresponded with Mr. Hal Finney, a cryptographer about the development of the network, and both parties initiated the first transaction on the chain.
During the early stages of the network’s development, the creator actively discussed it on message boards and with developers. In the last month of 2010, Nakamoto seized every communication with the public concerning the network. In 2011, the creator had ended all communications with developers.
Some researchers and students ran a linguistic analysis on Satoshi and believe that Mr. Nicholas Szabos was most likely the hidden creator. He has since denied this claim.
Craig Wright, on the other hand, claimed to be Satoshi Nakamoto, but the bitcoin community dismissed his assertions after analyzing them. He tried to file a patent for the software surrounding bitcoin, not minding that it was released as an open-source.
Bitcoin Undermines the Cycle of Trust
Bitcoin ushered in decentralization, which was an almost non-existent feature in the traditional financial ecosystem. Central banks control the activities of a conventional financial clime, swaying the economy with different strategies based on the state of its health.
The decentralized system alters the status quo, removing the power from the central bank, and in extension the government. Traditionally, if people want to send money within the country or across the border, they use conventional financial institutions that have rules that must be adhered to by the user. Some red tapes have to be strictly followed, making it difficult, expensive, and slow to send money.
Cryptocurrencies made the concept of peer-to-peer mainstream, removing the need for an intermediary. Money is an important aspect of any country because those that control the legal tender determine what happens. Bitcoin is creating another stream of widely accepted payment structures.
Generally, the government through its agencies such as the Central Bank has the authority over the legal tender and economic decisions. Bitcoin is undermining the power that once rested solely in the courts of the government.
Governments Wariness of Bitcoin
Recently, some countries have started to publish their policies and regulations concerning the foremost crypto. These guidelines are designed to either elicit how bitcoin will be viewed and used in the country to the restrictions that surround it.
Governments are wary about the development and adoption of cryptocurrencies, especially BTC within their regions.
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Energy consumption rate
Bitcoin uses the Proof of Work consensus mechanism, meaning that transactions are verified by miners. These miners have to solve complex mathematical puzzles and to do this, they need massive computing power and energy.
Bitcoin miners tend to opt for regions with cheaper or free electricity to set up their farms. A regular Bitcoin farm drains enormous amounts of energy from the power grid. Some countries have started clamping down on miners. In some regions, people are banned from block mining of any kind. Georgia made its miners perform an oath ceremony promising that they would not engage in Bitcoin mining activities. Some countries impose taxes on miners.
Environmental Organizations have complained about the impacts of verifying bitcoin’s transactions on the environment. Elon Musk has voiced this in the past, claiming that it will continue to accept Bitcoin payment for Tesla if more environmentally friendly options were available to the network.
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Lack of control
Bitcoin and other cryptocurrencies offer a decentralized means of payment and exchanging money. It strips the central banks of the right to dictate what constitutes money and its flow within the region. Typically, central banks oversee a country’s economy, regulating the money supply and determining monetary policy. Apex banks control banks and the way they interact with the end-users. They can increase the interest rates and much more. These apex authorities determine how cross-border payments are made and the steps that people must follow to enjoy banking services.
The advent of bitcoin and other cryptocurrencies may signal an end to this custodial control, giving the power to the end-users. People can send money from one part of the world to another without jumping through hoops of red tapes. Individuals can store any amount of cryptocurrencies in a wallet without filling out any form, making things easier.
Governments fear that their control over money may become obsolete with the ease that cryptos offer their users. With tokens, millions of dollars could be seamlessly moved, as Bitcoin without undergoing any Anti-Money Laundering process.
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Fear of the unknown
With the mystery clouding the origin story of Bitcoin, some stakeholders feel that there may be more to it. For example, the CIA is currently analyzing the effects of Bitcoin on the country and its economy. According to Central Intelligence Agency Director William Burns, the CIA was keeping track of cryptocurrencies through multiple in-house projects. He stated that his predecessor “had set in motion a number of different projects focused on cryptocurrency and trying to look at second-and third-order consequences as well and helping with our colleagues in other parts of the U.S. government to provide solid intelligence on what we’re seeing.”
The fear of the unknown has made some governments wary about adopting Bitcoin or allowing its residents to use it freely. On the other hand, the likes of the El Salvador government have embraced Bitcoin, making it their legal currency.
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Criminal activities
Bitcoin has been linked to illegal activities in the past. With its anonymous features, the cryptocurrency may be used in money laundering, terrorism, thefts, and much more. To curb this, some countries have banned bitcoin outrightly, while others have created laws to regulate its usage. In the US, for example, the likes of Coinbase requests that their new users undergo stringent KYC processes before they are allowed to utilize the services. The IRS taxes some transactions linked to Bitcoin. The USA is one of the countries that has regulated the usage of Bitcoin by its residents.
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Bitcoin’s volatility
Bitcoin is relatively young compared to the traditional money system. A lot is yet to be understood about it, especially in the aspect of volatility. Its lack of stability has made governments put a target on its back.
Bitcoin Operates on an Opaque Ecosystem
Though blockchain technology may offer transparency, it is still anonymous. Bitcoin transactions are transparent to the extent that anyone can view the inward and outward transactions linked to a wallet address.
It is anonymous because it is difficult to tell the owner of an address, except in some cases. For example, if a firm publishes its wallet address, anyone can check the transactions linked to it.
If an individual signs up on a centralized exchange like Binance or Coinbase, they have to undergo stringent KYC processes. Once Bitcoin is sent to the individual’s address on this exchange, the authorities can find out the identity of the owner. Trading platforms like Binance and Coinbase are known to cooperate with different government agencies.
For example, Binance recently blacklisted some user accounts and froze the assets linked to them. According to the exchange, the accounts were frozen because of links to suspicious activities. Some were vetted and released to their owners, while those being investigated by different government authorities remained frozen. Binance can provide the identities of the owners to the authorities.
On the other hand, most decentralized exchanges do not request KYC from their users, making it difficult to track the identity of those using the features.
When an attack occurs on a crypto platform, history has shown that the hackers tend to move the cryptocurrencies to decentralized exchanges to convert them to other tokens or fiat currencies. This is because of the opaqueness of this type of exchange and cryptocurrencies, especially Bitcoin.
In Conclusion,
- The tale of Bitcoin’s history is inconclusive.
- Craig Wright claims to be Nakamoto, though the bitcoin community believes otherwise because he has shown no content proof. On the other hand, Mr. Nicholas Szabo has denied being Nakamoto.
- Governments are wary of Bitcoin because it primarily strips them of control.
- Bitcoin has been linked to illegal activities by users in the past because of its anonymous features.
- Some countries are warming up to Bitcoin, such as El Salvador made the coin its legal tender.
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