BITCOIN - What It Is and Why It Matters - Keep Your Assets

wallbroadSecurity

Dec 3, 2013 (3 years and 6 months ago)

176 views

BITCOIN - What It Is and Why It Matters
1
BITCOIN
What It Is and Why It Matters
by
Anthony Freeman
BITCOIN - What It Is and Why It Matters
2
Table of Contents
Forward - 3
Introduction - 4
What is Money? - 5
A New Commodity Created To Serve Market Demand - 10
The Ultimate Offshore Bank Account? - 12
Bitcoin And The Virtue of Hoarding And Deflation - 15
Will Bitcoin Be Banned? - 17
The Coming Attack On Bitcoin And How To Survive It - 18
The Real Problem With Digital Currencies and Privacy - 20
Further Observations on Bitcoin, Digital Currencies,
Privacy and Liberty - 21
Appendix A - “Bitcoin Is Backed By Me” - 25
Appendix B - What is Economics? - 25
Appendix C - Bitcoin and the “non-economists” at The
Economist - 26
Appendix D - My Philosophy of Liberty - 27
Appendix E - A Way To Be Free - 30
BITCOIN - What It Is and Why It Matters
3
Forward
Money, as we know it, is changing. The liberating power of technology,
combined with the proliferation of the internet, have been a boon to individual
liberty and the betterment of humankind. This technology is now enabling
individuals the opportunity to wrestle control of their money away from the
centralized power structures that have robbed them of their production and
purchasing power for centuries. When you free the money you can free the
people.
This book is the result of a series of essays I have written about the exciting
new commodity money known as “bitcoin”. I address the ideas behind it and I
explore the potential that it offers to those who seek to advance their freedom
and liberty. The age of the individual is before you - but only if you are prepared
to seize it. It is my hope that this book will help arm you for the challenges that
lie ahead and that you will be a freer person because of it.
- Anthony Freeman
BITCOIN - What It Is and Why It Matters
4
Introduction
Bitcoin is an experimental new digital currency that enables instant payments to anyone,
anywhere in the world. Bitcoin is one of the first implementations of a concept called crypto-
currency, which was first described in 1998 by Wei Dai on the cypherpunks mailing list.
Building upon the notion that money is any object, or any sort of record, accepted as payment
for goods and services and repayment of debts in a given country or socio-economic context,
Bitcoin is designed around the idea of using cryptography to control the creation and transfer
of money, rather than relying on central authorities. Bitcoin is also the name of the open
source software which enables the use of this currency.
Here is a transcript of the introductory video put out by
http://www.weusecoins.com:

“What is Bitcoin? Bitcoin is the first decentralized digital currency. Bitcoins are digital coins
you can send through the internet. Compared to other alternatives, Bitcoins have a number of
advantages. Bitcoins are transferred directly from person to person via the net without going
through a bank or clearinghouse. This means that the fees are much lower, you can use them
in every country, your account cannot be frozen, and there are no prerequisites or arbitrary
limits.
“Bitcoins are generated all over the Internet by anybody running a free application call a
Bitcoin Miner. Mining requires a certain amount of work for each block of coins. This amount
is automatically adjusted by the network such that Bitcoins are always created at a predictable
and limited rate.
“Your Bitcoins are stored in your digital wallet which might look familiar if you use online
banking. When you transfer Bitcoins an electronic signature is added. After a few minute the
transaction is verified by a miner and permanently and anonymously stored in the network.
Anonymity requires additional tools.
“The Bitcoin software is completely open source and anybody can review the code.
“Bitcoin is changing finance the same way the web changed publishing. When everyone has
access to a global market, great ideas flourish. Let’s look at some examples of how Bitcoins are
already used today:
“You can purchase video games, gifts, books, servers, and alpaca socks.
“Several currency exchanges exist where you can trade your Bitcoins for dollars, euros, and
more. Bitcoins are a great way for small businesses and freelancers to get noticed. It doesn’t
cost anything to start accepting them, there are no chargebacks or fees and you’ll get
additional business from the Bitcoin economy. “
For technical information, and to download the software, you can visit the public website for
BITCOIN - What It Is and Why It Matters
5
Bitcoin located at
http://www.bitcoin.org
.

BITCOIN - What It Is and Why It Matters
6
What is Money?
Before we I get into discussing Bitcoin it is important to understand what money is and where
it comes from. Money is primarily a medium of exchange or
means
of exchange. It is a way for
a person to trade what he has for what he wants. Ideal money has three critical characteristics:
it acts as a medium of exchange; it is an economic good; and it is a means of economic
calculation.
Medium of Exchange
To properly understand money as a medium of exchange one must first go back to the first
methods of trade. Before money was invented one would have to engage in direct barter. A
farmer who produced grain – but wanted shoes for his family – would have to find someone
who, a) had shoes and, b) wanted grain. You can imagine the difficulty involved in finding
that perfect someone who had what the farmer wanted and wanted what the farmer had.
Out of necessity, this gave rise to indirect barter. Continuing with our example above, let’s
assume that the farmer found a shoemaker but discovered that the shoemaker did not want
grain – he wanted candlesticks. While having a drink at the local pub he overheard the
gentleman next to him lamenting that he needed grain in exchange for his candlesticks.
Naturally, the farmer traded his grain for the candlesticks and went back to the shoemaker
and traded the candlesticks for shoes. In this example, the farmer performed indirect barter
when he used the candlesticks as a medium of exchange.
Economic Good
Over time, different commodities served as medium of exchange but the problem of
marketability and durability came into play. A necessary and highly exchangeable commodity
was food. The problem is that it was perishable. One had to either use it or trade it before it
went bad. Over time, the most marketable and durable commodities came to be used as
medium of exchange – commodities such as gold and silver. Since gold and silver  did not rust
nor rot they were ideal economic goods. Over time they became the preferred medium of
exchange.
Economic Calculation
Money is an expression of exchange value (the exchange values placed on goods by traders in
the marketplace). In our examples above, it was extremely inefficient to express the exchange
value of goods in units of sacks of grain, shoes, or candlesticks. Out of necessity the market
gravitated toward the use of the exchange value of fixed weights of gold and silver. As an
example, the original U.S. Silver Dollar was modeled after the Spanish Dollar which had a
specific weight of silver (371 4/16th grains of pure silver or 416 grains of standard silver). A
simple method of economic calculation consisting of weights and measures greatly improves
trade and fosters economic growth.
What is the best form of money?
In actuality, the best approach is to let the people (the free market) decide what they want to
use as money. There is no need for a central bank, government control, or legal tender laws.
History has shown that, when left up to the people, silver and gold tend to gravitate to the role
BITCOIN - What It Is and Why It Matters
7
of money for the following reasons:
1. scarcity
– supply cannot be manipulated like fiat money which causes the boom and bust
cycles in the economy
2. durability
– gold and silver will not rot which makes them a great store of value
3. fungible and divisible
– they can be divided into small, interchangeable amounts which
make them ideal for trade.
4. portable
– Their high concentration of value allows you
to carry and store substantial value
5. proven
– gold and silver have been used as money for over 6000 years of recorded history.
6. use value
– both gold and silver have tremendous use value in industry. The highest use
value though is in their role as money
Due to third-party interference with voluntary exchange the market is constantly looking
for alternative currencies. Bitcoin is a new commodity that may be able to compliment or
replace traditional currencies.
Purchasing Power Can Rise Over Time with Honest Money
Honest Money  (defined as a medium of exchange consisting of real goods that are in limited
supply) can actually increase in value over time.  Let me explain.  When the production of
other economic goods grows at a faster rate than the supply of money (mined gold for
example)
the money can buy (be traded for) more of these other goods
(money supply divided by the
total number of goods).  This means that it could actually pay to save your money because it
can increase in exchange value over time.  This also means that nominal wages could decrease
over time while
real
wages increase (your paycheck “amount” drops but your purchasing
power increases).
Why and how did Government Money supplant Gold and Silver?
Laziness and deceit. The first bankers were the goldsmiths. Miners would bring the gold to
the goldsmiths for minting. The goldsmith would give the miner a receipt that he could
redeem when the minting was completed. The miner soon found that he could immediately
trade his receipt (his claim on the gold) for tools and supplies and return to the mines without
having to wait for his gold.
Over time, the goldsmith found that the receipts he issued stayed in circulation and were
being used as medium of exchange. Only a small percentage of the people ever came in to
redeem the receipts. To increase his purchasing power he simply began to issue his own
fraudulent receipts (that had no gold backing) and used them to acquire goods and services.
This increase in the number of outstanding receipts created inflation and lessened the value of
all of the other outstanding receipts.
In later days, central banks did the same thing. They issued more receipts (paper currency)
than they had the gold and silver to back it. The U.S. paper currency was originally a receipt
for gold or silver. Take a look at the five dollar silver certificate below. Notice the words
“This
certifies that there is on deposit in the treasury of the United States of America five dollars in silver payable
to the bearer on demand.”
BITCOIN - What It Is and Why It Matters
8
In March 1964, Secretary of the Treasury C. Douglas Dillon halted redemption of Silver
Certificates for Silver Dollars effectively breaking the contractual terms of the Silver
Certificates.
Here is an image of a Gold Certificate:
From
Wikipedia
:
The gold certificate was used from 1882 to 1933 in the United States as a form of paper
currency. Each certificate gave its holder title to its corresponding amount of gold coin.
Therefore, this type of paper currency was intended to represent actual gold coinage. In
1933 the practice of redeeming these notes for gold coins was ended by the U.S.
government and until 1964 it was actually illegal to possess these notes (in 1964 these
restrictions were lifted, primarily to allow collectors to own examples legally, however
the issue technically converted to standard ‘legal tender’ with no connection to gold).
When U.S. paper money was modernized (made smaller, with fewer variations or
BITCOIN - What It Is and Why It Matters
9
“types”, as with current paper money) in 1928, gold certificates ceased to be issued.
In essence, the goldsmiths (central bankers) reneged on their promise to honor their
warehouse receipts and effectively stole the gold and silver that was owed to the populace.
It
was laziness on the part of the populace to blindly trust the central bankers with their
money and deceit on the part of the central bankers when they reneged on their promises.

The central bankers were now able to expand and contract the supply of money
(nonredeemable certificates) to exert their power and influence over the populace.
Criticisms of Gold and Silver as Money
A common and misguided criticism of the use of gold and silver as money is that
“there isn’t
enough to go around”
.  Let’s answer that here:
Gold and Silver are easily divisible in their physical form and, when combined with
technology, infinitely divisible. Businesses are emerging that store the gold and issue digital
warehouse receipts. These receipts are a claim on the gold held in storage. These digital
receipts can be mathematically and infinitely subdivided and then traded. Like all services that
offer to store your gold you must do your due diligence as to the integrity of the service
provider and recognize that fraud can still occur. Spread your stored holdings among
competing service providers so that your risk is reduced and, by all means, keep a substantial
portion in physical form within your possession. Also, note that business offering digital
warehouse receipts are subject to attack due to their centralized nature.
Bitcoin is a new
commodity created in an attempt to address this problem. This will be discussed in more detail later in this
book.
Another common criticism is
“those with the gold will not want to part with it”
.  
Here is the answer:
You can’t eat gold. Those with the gold need other goods and services. In order to obtain these
other goods and services they have to trade their gold. That is the beauty of the free market.
People are free to trade what they have for what they want.
The market always decides what is the best form of money.
In fact, it is deciding right now
– despite government intervention. One need only look at the exchange value of gold and the
emergence of
free-market currencies
as evidence.
When people say “the price of gold is going up” they have it all wrong. It is the value of paper
money that is going down.
One only needs to judge a paper currency like they would a stock. When you look at a stock
you look to the balance sheet and the management of the company in order to decide what
value you would place on that stock.
The same goes for a national currency. Look at the balance sheet and the management of the
country and that will determine the value of the currency. The dollar is the common stock of
the United States. When they issue additional stock (print money via the Federal Reserve)
they dilute the value of all the other outstanding stock (inflation).
BITCOIN - What It Is and Why It Matters
10
A New Commodity Created To Serve
Market Demand
Proposition
: Bitcoin is a new commodity invented to address the market demand for a better
medium of exchange.
First some definitions for terms that I will be using in this post:
Commodity
: a) an article of commerce; b) something of use, advantage, or profit; c)
economics

– an exchangeable unit of economic wealth, esp a primary product or raw material
Medium of Exchange
: a) anything generally accepted as representing a standard of value and
exchangeable for goods or services; b) a tool or
means
of exchanging what you have for what
you want
Hampered Market
: a market where the voluntary exchanges between individuals is
prohibited or restricted
Government
: a gang of individuals who collectively act to force their opinions and objectives
upon everyone else
Background
The great Austrian Economist Ludwig von Mises theorized:
“Before an economic good begins to function as money it must already possess
exchange-value based on some other cause than its monetary function. But money that
already functions as such may remain valuable even when the original source of its
exchange-value has ceased to exist.”
I believe this theory holds true
but with the added observation
that the elevation of an
economic good to monetary status works best in an unhampered market. In this instance I
further define the “hampered market” as one that prevents individuals from using their
preferred medium of exchange. When individuals are hampered (restricted) from using their
preferred medium of exchange they begin to look for alternatives that allow them to operate
within
the hampered market. In a hampered market a new commodity can be created with its
sole purpose being to serve as a better medium of exchange.
Enter Bitcoin
Bitcoin is a new invention, or creation, designed to address this market demand for a better
medium of exchange. As a new creation, with its own use value, it becomes a new commodity.
Here is a list of several features and benefits that make bitcoin a highly desired medium of
exchange:
increased privacy
– allows people to trade more freely with less interference by third parties
lower transaction costs
– saves money
BITCOIN - What It Is and Why It Matters
11
person to person payment functionality
– bypasses traditional middlemen
limited supply
– may help preserve and even improve purchasing power over time
compact
– incredible wealth can be stored on a small area of disc space or flash drive
portable
– wealth can be transferred across the room or across the globe via an internet
connection
defensible
when using encryption and other forms of concealment
added protection against theft
(which includes taxation)
decentralized
– less vulnerable to attacks since there is no central depository. Any seizure of
bitcoin only serves to limit the supply further and increase the value of the remaining supply.
Conclusion
Bitcoin is a new invention created to serve the market demand for a better medium of
exchange. It derives a great portion of its value from governmental restrictions on voluntary
exchange. As long as governments interfere with individual voluntary exchange there will be
demand for inventions like bitcoin. In the event of the disappearance of governments, bitcoin
(or something similar) is likely to continue as a desired medium of exchange because it makes
it difficult, if not impossible, for new governments to gain control of the monetary system.
BITCOIN - What It Is and Why It Matters
12
The Ultimate Offshore Bank Account?
In this section I will focus on what I believe gives bitcoin the potential to become
The
Ultimate Offshore Bank Account
.
First, we have to ask - why do people go offshore in the first place? Here are what I believe to
be the top reasons people choose to move their money offshore:
• Financial Privacy
• Protection from Theft (taxation)
• Protection from Litigation
• Currency Diversification
• Jurisdictional Diversification
• Global Access to Funds
Here is how bitcoin satisfies each of these goals:
Financial Privacy
Out of the box bitcoin is pseudonymous and very private. Bitcoin is essentially digital cash.
When you download the application you can physically store* the funds on your computer, a
flash drive, or even upload them to the cloud. Current projects under development hold the
promise of making bitcoin
totally
anonymous
(see
Open Transactions
:
link 1
,
link 2
)
.
Protection from Theft (taxation)
Bitcoin is protected by the peer-to-peer network with no central authority. Combining this
network with high-grade encryption makes it virtually impossible for any person, or group of
persons, to take your money without your permission.
Protection from Litigation
This falls under the rule of “what they can't find they can't get”. By moving your money into
bitcoin and obfuscating its whereabouts you become virtually “judgement proof”.
Currency Diversification
Every national currency is manipulated by central banks and governments. Bitcoin is limited
in supply and cannot be inflated like national currencies can. This gives it potential to be an
excellent store of value.
Jurisdictional Diversification
Bitcoin can be hidden behind encryption and stored in cyberspace – making it everywhere
and nowhere at the same time. What existing power structures cannot find they cannot steal.
BITCOIN - What It Is and Why It Matters
13
Global Access to Funds
Bitcoin can be accessed anywhere in the world.
Not even an internet connection is necessary
.
Additional Benefits:
No Counterparty Risk
When you store assets in any bank or gold-storage facility, those funds are an asset on
your

financial statement but they are also a
liability
on the financial statement of the other party.
This exposes you to the risk of default, bankruptcy or fraud by the other party. When you
retain physical possession of your assets through bitcoin – you eliminate this counterparty
risk. Like physical possession of gold and silver, bitcoin is an asset with no corresponding
liability.
Ease of Use
While there is a slight learning curve required to use bitcoin, you don't have to fly to another
country to open an account – nor do you have to provide any type of identification or tax
number to own bitcoin. You do not need anyone's permission to use bitcoin. It is truly “the
people's money”.
Mobility
You can cross borders with no physical currency on your person yet you can literally have
access to a fortune via a flash drive or a simple internet connection.
The Network Effect
If more people across the globe discover the value and usefulness of bitcoin it will rise in value
and usefulness to you.
How You Can Help Make Bitcoin Ubiquitous:
Become an Exchanger
Not in the business sense but in the individual sense. Become an individual exchanger
amongst your social network. Centralized exchanges are vulnerable to attack by existing
power structures. Cultivate and utilize a personal network of exchange partners to help you
move in and out of your existing national currency. As more individuals become users/
exchangers liberty will flourish.
Conclusion
Cyberspace is the ultimate offshore and
bitcoin has the potential to become the ultimate
offshore bank account
.
*Technically, you do not store funds on your computer or other device. What you actually store are your
BITCOIN - What It Is and Why It Matters
14
“private keys” which give you title and control over the accounting units referred to as “bitcoin” which are
tracked on the peer-to-peer network.
BITCOIN - What It Is and Why It Matters
15
Bitcoin And The Virtue of Hoarding
and Deflation
Let us dispel some of the myths circulating that hoarding and deflation are a bad thing when it
comes to bitcoin:
What most people don’t understand is that “deflation” (defined in this instance as the lowering
of prices compared to bitcoin’s appreciation in exchange value) is a GOOD thing. It means
the purchasing power of your bitcoin money increases over time. You are rewarded for
saving.
A person who “hoards” is actually doing a favor to all the other holders of the currency. Since
he is withholding supply, the value of the remaining supply goes up (all things being equal).
By hoarding, he is delaying his gratification to the benefit of the other holders who now have
increased purchasing power. He has traded his goods and services without seeking immediate
repayment.
The myth of “spending creates wealth” is a Keynesian fallacy. What creates wealth is
production. Savings is a form of deferred consumption. Savings provides capital that can be
invested into long term production projects that can improve our quality of life and standard
of living by providing the goods and services we consume (think industrial and manufacturing
plants).
Money is a claim on goods and services. Money is a way to trade what you have for what you
want. We only produce in order to consume – either now or in the future. I trade you the
sandals I produce for the goods and services you have produced and we both use a “medium
of exchange” that we call “money”.
At this point of the exchange I can choose to save the money or spend it. The act of spending
is the exercising of my claim on the goods and services of others. If I choose to save the money
(or “hoard” it) I am simply choosing to defer my claim on the goods and services of others. In
other words I have supplied goods and services to the marketplace without demanding
immediate repayment. This is like a temporary “gift” or “loan” to the marketplace. This “loan”
is reflected in lower prices.
Generally speaking, prices are calculated by the following formula:
Prices = Total Money Supply divided by Total Available Goods and Services
In my example above I have temporarily reduced the Total Money Supply causing a reduction
in prices. The other holders of money are rewarded with greater purchasing power.
Everyone’s purchasing power increases.
Probably the best little book ever written that explains money is
99% of Everything You
Need to Know About Money and its Effect Upon the Economy
by Harry Browne
http://
BITCOIN - What It Is and Why It Matters
16
tinyurl.com/3phsofe
BITCOIN - What It Is and Why It Matters
17
Expect Bitcoin to be “banned” – expect the
ban to be ignored
Man, by nature, wants to be free. He wants to choose how he lives his life. He wants to
choose with whom he will associate. He wants to choose with whom he will trade. He wants
to choose how his money is spent. Bitcoin gives him a greater potential to do all of these.
In my previous sections I point out the endearing features of bitcoin and the direct threat of
bitcoin to governments and central banks. Because bitcoin has the potential to make these
institutions obsolete, expect them to attempt to ban or restrict bitcoin anyway they can.
The incentives to use bitcoin are too great. Yes, I expect bitcoin to be “banned” or restricted
by central planners in many ways. I also expect these bans and restrictions to be ignored and
circumvented. The incentives are too great. Man wants to be free.
BITCOIN - What It Is and Why It Matters
18
The Coming Attack On Bitcoin And How To
Survive It
With bitcoin gaining
mainstream attention
the coming attack on its users is inevitable. In this
short piece I will explain how it is likely to unfold and how you can survive it.
First, a little background:
In 1996
E-gold
was one of the early entrants to the market with a private, global e-currency.
They achieved stellar growth and widespread attention – much like bitcoin today. Accolades
came from freedom-lovers everywhere. They were the “Great Gold Hope” that would free the
people by freeing the money. Privacy-enthusiasts, libertarians, gold-bugs,
autarchists
,
anarchists,
voluntaryists
, drug-dealers, and even unsavory types flocked to it with praise and
adoration.
Of course, the monopolists of the monetary system didn’t take lightly to this threat to their
very existence. They came after the independent exchangers and e-gold with their full force
and fury – eventually succeeding in convicting the key players for “conspiracy to operate an
unlicensed money-transmitting business” and “conspiracy to engage in money laundering”. E-
gold was fairly easy to take down because their operations and data-center were centralized
and readily accessible.
Many folks who are now currently acting as currency exchangers for bitcoin will be the first
to come under attack. Many will get hurt and possibly even imprisoned but, because of its
decentralized nature, bitcoin will survive where e-gold did not.
If any of the large exchangers are operating inside of the US then it won’t be long before they
are raided and shut down. Individual exchangers will be targeted as well – just to make an
example and to scare others out of the community. This will create a giant “wet blanket” on
the current enthusiasm for bitcoin and I expect the currency to take a major drop in exchange
value when this happens. Not to fear though. Bitcoin will survive due to its decentralized
“peer to peer” nature and it will continue to operate as an “alter-cash” resuming its growth
albeit at a slower rate during the immediate aftermath.
To protect yourself I recommend the following:
You probably have a little more time before the attacks come (maybe a couple of months?) to
acquire bitcoin with cash – and there are profits in speculation to be made until then but,
when the raids come, expect a sharp correction before exchange values move on to new highs
over a longer period of time. What you do not want to do is be involved as an “exchange
service” conducting exchanges in and out of national currencies and you definitely
do not
want
to have your money sitting in the exchanger’s account when they are raided and shut down.
Remember, e-gold was shut down for “conspiracy to operate an unlicensed money
transmitting business”. Do not store any money in online accounts in case they get taken
down along with the exchangers. Keep all of your bitcoins on your computer with multiple,
encrypted back-ups both on the cloud and on an external thumb drive.
The safest way to acquire bitcoin is to let people know that you will accept it as payment for
your products and services. Do not ever exchange it for national currencies. The point that
BITCOIN - What It Is and Why It Matters
19
people miss here is that national currencies are the very problem that freedom-lovers are
trying to get away from. Instead, use bitcoin to trade with merchants and individuals who
accept it as payment. Offer it as payment to those who are unaware of it and explain the
benefits to them. This will help develop the market and create a solid economy outside of
national currencies. After the initial attack, bitcoin has the potential to be one of the most
powerful and revolutionary tools to bring about more
freedom and liberty
to humankind.
BITCOIN - What It Is and Why It Matters
20
The Real Problem With Digital Currencies
and Privacy
The readily observable problems with digital currencies is that they have two major weak
links. The first is the exchangers who convert cash to e-currency and e-currency back to cash
again. “Authorities” target these exchangers and the system fails (see the story of
e-gold.com
).
If the “authorities” do not shut them down they then regulate them and privacy is eliminated
(see
goldmoney.com
).
The second major weak link is that the e-currency must be defensible and the asset that backs
the e-currency must be verifiable. Systems like
Pecunix
are excellent but if they were to
achieve a meaningful size they (and the businesses that store their gold for them) would come
under attack by world powers. These power-hungry “rulers” would attack anyone who
threatens their control of the monetary system.
The real problem is the widespread lack of understanding of property rights and individual
liberty. It is the pagan faith and belief in “external authority” as described by Rose Wilder
Lane in her book
The Discovery of Freedom
. What is needed is a powerful network of
individuals who respect property rights and are willing to defend them. This “territory” is
where the asset that backs the e-currency would be stored and defended. The individuals of
this territory would reject and repel attempts to violate these property rights. The “territory”
need not be centralized if it can be defended. E-currencies like
Bitcoin
have attempted to
address these issues but they still face many challenges.
The ultimate territory is in the individual minds and actions of the masses who have learned,
understand, and appreciate what property rights and liberty are all about. An excellent source
for this knowledge is The Freedom School
(
http://www.freedomschool.org
)
. The ultimate state of
individual awareness is described as “autarchy” or “self-rule”
(see
http://centerforselfrule.org

specifically the essay
A Way To Be Free
)
.
One man alone cannot defend his property but when he and his neighbors have matured to
the point where they understand, respect and appreciate property rights; and when they can
outnumber the plunderers, they can then repel the attacks of the aggressors.
The answer is
Autarchy
.
BITCOIN - What It Is and Why It Matters
21
Further Observations on Bitcoin, Digital
Currencies, Privacy and Liberty
In my previous post
The Real Problem of Digital Currencies and Privacy
I proposed that
there were two, readily observable weak links and one primary problem outside of digital
currencies. Namely:
Weak Link #1
: The exchange services who convert common currencies into e-currency and
vice versa.
Weak Link #2
: The e-currency must be defensible and the asset which backs the e-currency
must be verifiable (technically this is two more weak links bringing the total to 3; in my haste,
I neglected to separate these so I make note of that here).
Primary Problem
: The lack of understanding of property rights and individual liberty in a
sufficient number of people to enable them to come to each other’s mutual defense.
In conducting further research on Bitcoin it is interesting and encouraging to see how it is
addressing these issues. While I am no expert on Bitcoin I will do my best to touch on how it
and its users are tackling the issues I describe above.
First let us discuss the qualities of an “ideal money”
(see
What is Money?
):
Scarcity
– limited supply helps maintain value
Durability
– the ability to resist wear and decay
Fungible & Divisible
– divisible into small, interchangeable amounts
Portable
– a sufficient concentration of value that allows efficient transportation
Proven
– a history of successful use
Use Value
– its usefulness
Defensibility
– the degree that it is capable of being defended
Let us now compare how Gold and Bitcoin stack up against each other in each of these
areas:
Scarcity
The supply of gold is regulated by nature. The supply of Bitcoin is limited by its configuration.
Durability
Gold does not decay or rot. With proper back-up and storage, neither can Bitcoin.
Fungible & Divisible
Both gold and Bitcoin can be divided into very small quantities of equal nature but Bitcoin is
the clear winner here because its cost of division is close to zero.
Portable
Due to their concentrated value both gold and Bitcoin are highly portable but Bitcoin is the
BITCOIN - What It Is and Why It Matters
22
clear winner since wealth can be transferred across the globe with the click of a mouse.
Proven
Gold has a 6,000 year history as a proven form of money but it has also proven its weakness
since it has been driven out of the monetary system through many periods of history including
the present time. Bitcoin has been in existence only a short time and has yet to prove itself
over long periods of time.
Use Value
Gold has many uses in industry – over and above its usefulness as money. Bitcoin’s primary
use value is as a medium of exchange. Time may prove that the degree of Bitcoin’s usefulness
as a medium of exchange outweighs it’s lack of usefulness in other areas.
Defensibility
Gold, due to its physical nature, is expensive and difficult to store and defend. Bitcoin is easy
and inexpensive to store. The degree to which Bitcoin can be defended will continually be
tested but the outlook is hopeful. There is no such thing as 100% protection for any asset but
one can take actions to minimize risks. The cost to benefit ratio must always be considered.
The assets created and known as Bitcoin have unique qualities in that:
1.They are created electronically and exist in a distributed and decentralized fashion
across multiple computers across the internet. With no central storage location they
become much less susceptible to confiscation by invading armies. A powerful feature
indeed.
2.They are created or “mined” by complex computational problems which regulates
the rate of their creation and limits the ultimate supply giving them an anti-inflationary
nature which is one of the main characteristics of a desirable money.
Conclusion
Overcoming Weak Link #1
: If there is a ready market of willing trading partners, there really
is no need for Bitcoin to be exchanged for fiat currencies. Since fiat currencies primarily act as
a medium of exchange (a means to trade what you have for what you want), Bitcoin can
simply be traded directly for the goods and services of willing trading partners bypassing the
need for currency conversion. A growing market of willing trading partners strengthens the
value of Bitcoin and reduces the dependency on fiat currencies.
Overcoming Weak Links #2 and #3
: There is no asset backing Bitcoin. Bitcoin is itself the
asset. Its greatest value is as a medium of exchange. The fact that it is decentralized makes it
extremely difficult to confiscate. Hence, it is highly defensible.
Bitcoin is a promising tool in the struggle for individual liberty. In order for life-protecting
tools like Bitcoin to have continued success there must be a sufficient number of people who
have a clear philosophy of what Liberty is and what it means (see
My Philosophy of Liberty
)
and they must act consistently within this philosophy (see
A Way To Be Free
). They must
respect the property rights of others. This is called
Autarchy
.
To continue following the news and discussion about bitcoin please visit my website at
http://
www.EconomicsandLiberty.com

BITCOIN - What It Is and Why It Matters
23
BITCOIN - What It Is and Why It Matters
24
Appendix A
“Bitcoin Is Backed By Me”
Posted on
January 16, 2012
at
http://www.economicsandliberty.com

by
Bitcoin Merchant
A lot of people fret over the idea that
bitcoin
is “not backed by anything”. Well, I’m here to tell
you that it is. It is backed by my products and services. And it is also backed by the products
and services of a
bunch of other people
. Together we form a market.
Currently, we look to the
major exchanges
to help determine our exchange price but what if
the exchanges are
shut down
or regulated out of business?
Not to worry. There are those of us who value
bitcoin as a commodity
. We like it for
what it is

and for what it
allows us to do
. If the prominent exchanges are taken away from us, we – the
users in this small but growing community – will arrive at an exchange value on our own.
Come join us, it’s not so bad.
BITCOIN - What It Is and Why It Matters
25
Appendix B
What is Economics?
Economics: A Science of Means

Economics is sometimes thought of as a very dry and dismal subject dealing with dusty tomes of statistics
about material goods and services.  Economics is not a dry subject.  It is not a dismal subject.  It is not
about statistics.  It is about the human life.  It is about the ideas that motivate human beings.  It is about
how men act from birth until death.  It is about the most important and interesting drama of all – human
action.

The main objective of economics is to substitute consistently correct ideas and actions for the contradictory
ideas and actions inherent in popular fallacies…

We all want things that are not necessarily essential, but we always choose those actions which we think
will best improve the situation from our viewpoint.  This means that the ideas that men hold determine their
choice of actions.  This means that the most important thing in the world is ideas.”
-
Percy L. Greaves, Jr.,
Understanding the Dollar Crisis

The Art of Economics

The art of economics consists in looking not merely at the immediate but at the longer effects of any act or
policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.”
- Henry Hazlitt,
Economics in One Lesson
Economics and Liberty:  Two Sides  of the Same Coin
Economic freedom (property rights) and political freedom (human rights) are indivisible. 
They are merely two sides of the same coin – for you cannot have one without the other.
BITCOIN - What It Is and Why It Matters
26
Appendix C
Bitcoin and the “non-economists” at The
Economist
Here are some quick comments on a
recent article
from The Economist:
In the article the unnamed author makes the following statement:
“Attracting enough users to smooth such volatility seems unlikely in the foreseeable
future. Established fiat currencies―ones where bills and coins, or their digital versions,
get their value by dint of regulation or law―are underwritten by the state which is, in
principle at least, answerable to its citizens.
Bitcoin
, by contrast, is a community
currency that requires self-policing on the part of its users. Most people would rather
devolve this sort of responsibility to the authorities.”
Yes, many people prefer to shirk responsibility and succumb to what
Rose Wilder Lane

described as “the pagan faith in external authority”. We’ve seen the results of abdicating
personal responsibility. You cannot have liberty without personal responsibility.
The article also goes on to state:
Moreover, Bitcoin may be useful for trading goods and services but it does not yet allow
borrowing or lending. In the physical world this happens through financial
intermediaries: you put money in a bank, and someone else borrows it. A virtual Bitcoin
bank might spring up but that would create problems of its own. How would a saver be
assured that he would get his money back when he wants? If a bank got into trouble,
who would be the lender of last resort? The usual answer is a central bank: exactly what
Bitcoin is trying to avoid. Bitcoin is technically sophisticated. As a monetary system, it
looks primitive.
The Economist fails to acknowledge the “moral hazard” built into the current banking system.
This moral hazard is the primary cause of the recent banking crises and the many crises that
preceded it. This is the same system where depositors fail to do their “due diligence” on the
banks that they entrust their money to because they are lulled into the false sense of security
of FDIC insurance. In turn, the banks fail to be wise stewards of that money because they
know they are backed up by the central bank and that losses will be socialized. This is the
system which The Economist is advocating for bitcoin.
What The Economist faults as a weakness of bitcoin is actually what gives bitcoin one of its
greatest strengths. If a depositor knew that his deposits were not guaranteed he would be a
little more careful in choosing who he entrusts them to. If the banks were not backed up by
the central bank (and the duped taxpayer) they would be much more prudent with their
lending policies. There are no risk-free investments. Economist, you can do better than this.
BITCOIN - What It Is and Why It Matters
27
Appendix D
My Philosophy of Liberty
By Anthony Freeman
The following is a loose overview of my personal “Philosophy of Liberty” which I have
developed up to the present time. It warrants further refinement and I’m sure I will continue
to modify it as I continue my studies of economics and liberty. Those champions of individual
liberty that have contributed to my personal philosophy are too numerous to list here but I
have provided links below to sources where you will find many of their works. I hope that my
philosophical observations may be of benefit to you and give you some ideas in the
development of your own “Philosophy of Liberty”.
Simplified Definitions
Life:
our biological existence in space and time.
Liberty:
the ability to live one’s life as one wishes while respecting the lives of others.
Property:
the goods that man produces or acquires through voluntary exchange and/or gift.
Claims of land ownership are included here as well.
Murder:
the taking of man’s life without his voluntary consent. This deprives him of his
future

(and future productivity).  Excluded from this definition is the taking of another person’s life
in the act of self-defense against an aggressor (when one believes one’s life is threatened) or in
the defense of others when the lives of these others are threatened.
Slavery:
the taking of man’s liberty without his voluntary consent. This deprives him of his
present
.
Theft:
the taking of man’s property without his voluntary consent. This deprives him of his
past
(the time energy and talent that he used to produce this property).
Plunder:
The ill-gotten gains from theft.
On The Nature of Human Life
• Man seeks happiness (and seeks to remove uneasiness or discomfort).
• Man seeks life for if there is no life there is no man.
• In order to live man must consume those things that sustain his life (food, shelter, etc.).
• In order for the necessities of life to be consumed they must first be produced.
• An infant cannot produce for himself so he must rely on the production of others
through charity.
• As a child matures he must continue to rely on the charitable production of others until
BITCOIN - What It Is and Why It Matters
28
he learns to produce for himself.
• In the process of producing for oneself man usually develops a specialization resulting
in a surplus that can be traded for the products of the specialized skills of others.
• This process of production results in what is often referred to as “the fruits of his
labor”.
• These products are an extension of man because they are the direct result of his
invested time and life energy.
First Conclusion
Based upon the propositions set forth, anyone who seeks to take another man’s life, liberty or
property against that man’s voluntary consent is an enemy to human life. With this
understanding I propose to label my philosophy of liberty as “pro-life” as I am vehemently
opposed to murder, slavery, and theft. This is not to be confused with the label of “pro-life” as
it relates to abortion although abortion is certainly an issue to be considered within this
broader philosophy
(the issues regarding abortion will not be addressed in this missive)
.
Further Observations
There are some men who seek to take away the property and liberty of others in order to use
this production for personal profit. These men choose this path as they find it preferable to
producing for themselves.
This short-term benefit is not only dangerous to the thief but it is detrimental to his long-term
well-being as well. This is because his victims must divert a portion of their resources toward
protection services instead of to production. This loss of production reduces the overall
societal standard of living as there are less products and services available for trade.
Despite this, the thief is not concerned with the detrimental, long-term effects of plunder as he
only cares about the immediate benefit. Therefore, the rest of society must take protective
measures if they wish to safeguard their life, liberty and property. It follows then that the
degree of man’s freedom is proportionate to the level of protection he has secured.
The Ignorant Plunderers
These are the individuals that unintentionally participate in plunder as they have not thought
through the consequences of their actions. Those in this category are the majority of all
plunderers and, unfortunately, a large percentage of society.
The Purposeful Plunderers
These are the individuals who know that their actions are contrary to human well-being and
they continue in their plunder anyway. They can be thought of as “anti-life”. Those in this
category are in the minority of all plunderers.
On Advancing Liberty
It appears then that there are three worthy endeavors that must be undertaken if one wants to
BITCOIN - What It Is and Why It Matters
29
enhance life (freedom):
First:
One must work to master himself.  Self-mastery.  Self-control.  He must work to adjust
his actions so that he is no longer a participator in plunder.  Robert LeFevre referred to this as
Autarchy
or “self-rule”.  Freedom is self-control, not license to impose on others.
Second:
One must work to educate those individuals that are Ignorant Plunderers so that
they can recognize the negative consequences of their actions and then hopefully change those
actions.
Third:
One must invest a portion of his resources toward the protection of his life, liberty and
property from both types of Plunderers. Harry Browne recognized this when he said that
“freedom is self-defense” in his fantastic
Rule Your World
seminar.
On Self-Defense
There many strategies for defending one’s life, liberty and property which will not be
addressed in detail here. Instead I direct you to resources such as those found at
www.KeepYourAssets.net
.
One strategy for dealing with the Purposeful Plunderers that I will call your attention to is the
one put forth by Marc Stevens in his book
Adventures in Legal Land
. His key observation is that
the Purposeful Plunderers must maintain a veneer of legitimacy or moral authority in order to
continue their plunder. Marc’s techniques for destroying that veneer are powerful and they
warrant further study, analysis and practice.
On Education
Thankfully for the internet there are now numerous resources where people can learn the
ideas of liberty. My favorite is
The Freedom School
.
On Self-Rule
On this wise I will refer you to two, short discourses that explain this principle better than I
ever could.  The first is Robert LeFevre’s
Autarchy
.  The second is
A Way To Be Free –
Epilogue
which I feel are some of the finest words ever written concerning the cause of
liberty.
Conclusion
With my personal philosophy I can easily be referred to by any of the popular labels:
Libertarian, Liberal, Classical Liberal, Voluntaryist, Autarchist, Capitalist, Free-Market
Capitalist, Anarcho-Capitalist, Anarchist, Agorist, Counter-Economist, Idealist, Realist,
Objectivist and so on but when you really get to the heart of the matter I am ultimately “Pro-
Life”.
BITCOIN - What It Is and Why It Matters
30
Appendix E
A Way To Be Free
By Robert LeFevre
The following is an excerpt from the Epilogue of
Robert LeFevre
‘s autobiography
A Way To Be Free
which
was written towards the end of his life.  It is his personal reflections on the cause of liberty after a lifetime in
pursuit.  In my opinion, there are few words that have ever been written that are as great as these. ~
Anthony Freeman
What have I learned as a result of my experiences?
I have learned that man-made government is man’s great enemy.  Further, my own
experiences with the
Freedom School
, and then with Rampart College demonstrates that a
man-made government is not necessary.  There, in those beautiful foothills of the Rampart
Range in Colorado, we lived without government “protection” and “services” to the degree
possible at this time.  “Degree possible” denotes my own limited ability to create conditions
outside and separated from government at any and all levels.  Doubtless, others will come
along having more ability who will be able to move further in this direction than I can.
The new frontier, waiting to be conquered by man isn’t a continent, or even the vast reaches of
space.  Were a new location to be found – were it possible to achieve colonization of some
planet other than Earth – a flight to take up residence would be an escape, a way of
temporizing with the real frontier.
Today’s frontier challenge comes from the mind.
It is absurd to suppose that all will see this, or prepare to cope with it.  Nor is it necessary.  No
frontier has ever demanded that everyone cross the barriers.  Nor has there ever been a
guarantee that those who do cross it will find paradise.  Indeed, there is no guarantee
whatever.  Doubtless many wrong avenues will be followed.  Predictably, some persons will
fail and even die in making the attempt.
But the future of our species beckons in that direction.  Human beings are going to have to
learn to live in a society that is not ruled by man-made government.  This was not always true,
but it is true now.  Relocating with the same philosophic baggage in tow will produce the same
errors we are struggling with now.
At this juncture, the argument of the unthinking invariably surfaces.  “Every human being is
capable of performing evil deeds,” it will be said. And this is true.
“We cannot afford the evil that human beings are capable of inflicting on their fellows.” This is
also true.
“It follows, therefore,” say my opponents, “That we must have a government capable of
restraining those who would perform these evil deeds.”
Then in a burst of generous condescension, my adversaries exclaim:  “You would probably be
correct, LeFevre, if men would somehow behave themselves properly.  But they don’t. 
BITCOIN - What It Is and Why It Matters
31
Clearly, if men were good, government could be abandoned.  But human nature won’t
change.  And, therefore, we must have a government to impose by force upon all, so that those
evil doers are captured and punished, either on a local scale or world-wide.”
I believe I have stated the position of my adversaries fairly.  There is invariably the same
oversight.  If we have a government, it will be human beings who will be hired to restrain the
evil in others.  Who are these persons who will be hired, either by popularity contests or by
direct application?  They will be just as human and as much disposed toward evil as those to
be restrained.
If people are capable of committing evil deeds, then the people occupying the offices of
government will be cut from the same cloth.  They are evildoers, too.  There is not a single
shred of evidence that they will be otherwise.
If men are capable of committing evil actions, granting them power over others makes evil
actions certain.  But there is a difference.  When men in government commit an evil act, they
are legally shielded from the consequence of the act.  If ordinary people, endowed with
neither rights nor powers over our fellows, began to behave on a daily basis the way the
people in government behave, then the world would be in flames.  We would have a reign of
terror in which ordinary people went from house to house, took what they wanted, and
proclaimed that their “need” justified their performance.
As a matter of fact, that is what we are beginning to experience, and we call it “terrorism.” 
But all that is happening is that small groups of persons – noting what governments have done
since they were devised – have set themselves up to emulate their political masters.
The frontier of the mind is a frontier that decries terrorism from all persons, not merely from
those without legal protection for the violence they inflict.
If a band of armed men with the latest devices for mass murder raid an opposing country, we
wait to learn who sent them.  If they are the minions of some state, we applaud their bravery. 
If they are acting independently of government, we call them terrorists.
But if we care to be honest, it is the nature of an act that makes it one of terror, not the name
of the sponsor.
There was a time in man’s history when such actions may have been necessary and even
fruitful.  When man lived in a state of barbarism, governments were the barbaric answer to
every problem.  Kill or be killed, was the rule.
This was at a time when the best techniques for murder centered on the athlete.  They
benefited the man strong enough to wield a sword and skillful enough to shoot an arrow, or
even a bullet.  The people who risked life and limb in these contests was limited by the size of
the armies of the respective combatants.
That age has passed.  Our technologies have marched in the direction of peace, while our
politicians continue to gird for war.  Now we have the equivalent of death rays (the laser) and
an explosive potential so vast that we talk calmly of wiping out a hundred or more cities at a
time.
Our athletes today train for football, basketball, and other spectator sports.  And mean little
men cower in bunkers far underground, pushing buttons.  The same motivation grips them
BITCOIN - What It Is and Why It Matters
32
that mastered Genghis Khan or Torquemada.
“We are the ‘good guys’!” they proclaim.  “Those other guys are ‘bad’.  For the triumph of
‘good’ we must kill them or they will surely kill us!”
Or, they say:  “We must teach them our catechism so they see the world and Creation as we
do.  Since our way is good and all others evil, we are doing ‘good’ if we inflict our wills upon
them before they inflict their wills upon us.”
Then a further and presumably conclusive argument is offered.  “We know that those other
guys are bad because of what they have done.  We are merely evening the score!”
Will the government that has never cast a stone please stand up to be identified?
I have spent my life as a crusader.
I love my country, which love begot my efforts when I
saw what I took to be an alien philosophy encroaching on the concepts set forth in the
Declaration of Independence.  I am still enlisted in that crusade.
But as I labored to restore the dream of freedom and independence of our ancestors, I realized
that the American government
in its actions
, was much an enemy of freedom and independence
as any other government on earth.
In the name of freedom, it enslaved us and made us dependent upon it.  In the name of
protection, it committed such actions of intervention and violence throughout the world that
other people see it as a danger of vast proportions, thus increasing the risk we all face.  To
cloak its behavior in benign garb, it performed various acts of alleged generosity; it used the
money it had wrested from the toiling, perspiring workers by force.  It punished success and
rewarded failure.
There is something else I learned as well.
Freedom cannot be imposed; it must be earned.  It
will not arrive with the blare of trumpets and the sound of marching boots.  I cannot make
you free, much as we both might approve.
Real freedom will come quietly when the idea of liberty so dominates the informed mind that
the individual blessed with those thoughts begins to act in accordance with the principles of
“live and let live.”
The merit of human existence is found in human variation, not in cloning.  The thrill of
achievement comes because an individual learns to excel, not because he blanks out his
individuality and makes himself part and party of the group.
This means that, in a total sense, we will
never
have a free society.  We will, instead, have free
individuals who strive within a culture where non-freedom continues to lurk. 
It is our own
nature, as human beings, which we must conquer, not the nature of others.
The job must
be performed one by one.
Why do I see a free society
in a total sense
as an impossibility?  Because we were not all born at
the same moment and will not all live in the same way with the same values.  Some of us are
younger and some older than others.  Some of us have had more experience.  We are not all
endowed with equal potential for wisdom or restraint.
Freedom is not a goal that can be achieved; it is the necessary means to all other goals.
In the final analysis, all governments consist of human beings.  We have nothing but people
BITCOIN - What It Is and Why It Matters
33
with which to work.  To imagine the human beings calling themselves “government” are
endowed with the ability to achieve goals which persons outside of government could not
achieve, is to ascribe mystical or divine powers to government.
Where is the evidence to sustain such a conclusion?
I am told that government is necessary for us to have highways and roads.
Governments do not build roads using equipment, natural resources, and manufactured
products.  Government does not provide any of these things.
I am told that government provides the money with which to pay for the people and the
equipment and the products used.
But the government has no money of its own.  All that it has it wrests from those who earn
money by productive effort.  If this were not true, government would immediately halt all
taxation.  If government halted all taxation, then it would cease to exist.
In short, people provide roads.  In the interest of justice and fair play, those who use the roads
should pay for them and those who do not use the roads should not be required to pay for
them.
I am told that we must have government in order to adjudicate disputes.
Government does not adjudicate anything.  People do all the adjudicating that is done.
There are only four possible outcomes of every dispute.  You win; you lose; you compromise;
or, you keep disputing.  There are no other possibilities.  It does not require a black robe or a
high bench to discern the reality of disputes or their settlement.
Disputes will have to be adjudicated.  Government is not needed – people are.  A judgment is
as good as the wisdom within it.  The black robe cloaks the lack of wisdom.
I am told we must have government in order to protect society.  I marvel at the “protection”
government provides.  There is hardly a spot on earth that hasn’t been torn up and damaged
by war – a government exclusive – or by roving bands of terrorists who make their own
private wars as they emulate governments, or seek to set up one of their own.
I do not see government protection.  Each government treats certain other governments with
favoritism, thereby awakening the cupidity of some and the envy of others.  Government
converts the world into an armed camp, in which human beings stand guard so that other
human beings won’t attack.  But the only reason for wanting to attack is the existence of the
other government in the first place.
When war comes, people are drafted and shot at in order to protect the government that
created the tensions that led to the war.
Government cannot even protect its own politicians.
Two recent Presidents escaped assassination attempts, not because they were well protected,
but because their assailants were inept.
The last time a President was assassinated, it occurred in broad daylight on a busy street in
front of crowds of people.  The government investigation created a continuing dispute as to
how many people tried to kill President Kennedy, which one did kill him, and why.
BITCOIN - What It Is and Why It Matters
34
Meanwhile, a man was arrested and accused of the crime.  While the alleged villain was in a
police building, surrounded by government protection, he was gunned down in front of a
national television audience.  We call this protection?
A policeman is only an armed guard.  An armed guard is as effective as his skills make
possible; whether he was hired by the government or not has little to do with those skills.
In short, whatever protection is possible can be and has been provided by people. 
Government has merely provided a mystique.  It suggests that by granting a group of persons
a license to steal, beat up, and murder others, society will be protected.
The final argument is that if the laws are stern enough – if the police are granted total power,
are armed, and stationed at frequent intervals on the street – then crime will cease. 
Particularly if the courts back up the police in their accusations.
Were such a procedure to be followed, freedom would cease and every urban center would be
no more than a prison.  But even this would not stop crime.  In support of that last conclusion,
might I suggest that an examination of the incidence of crime occurring inside prisons be
undertaken.  There, in a confined area, with armed guards in sight of everyone, we have one
of the largest and most persistent recurrences of every crime known to man.
I could go on with one illustration after another; but cataloging governmental failures is not
necessary.  The reality we confront as a result of human nature stands starkly before us all.
There are three points that must be looked at now.  Each stands in the way of our
maximizing human well being.  They may even stand in the way of human survival.
One is human gullibility
.  What we want is a world in which crime never appears.  That is
impossible to achieve as a totally free society.  It will never occur.  A few moments’ serious
reflection should show that there would always be someone who is angry, maladjusted,
emotionally upset, or sadistic.  Some of those persons will, at the same time, be cunning and
clever.  Crimes will occur.
But we are gullible.  When a politician announces that he will achieve what we want if we
grant him more power, we grant him that power.  He will not achieve it, because such an
achievement is contrary to the reality with which we must deal.
But our gullibility, our belief in centralized power, now administers the
coup de gras
to our
reason.  If we shift the problem to the shoulders of government, then we can shift
responsibility.  And that is what we want.  We can put the problem out of our minds.  When a
crime occurs, it is now the other fellows’ fault.  So we authorize the government to commit
crimes which, were we to do them, we would be criminals ourselves.  So we change the
meaning of words.  A crime committed against a criminal is no longer a crime.
The second point
we must consider has an equally fallacious base.  It is the assumption that,
to improve human well being, we must all act together.  Nothing could be further from the
truth.
First of all, we will never all act together.  That is contrary to human nature.  If human history
tells us anything, it tells us that human beings do not agree.  There are a half dozen major
religions in the world and at least half a hundred interpretations of those religions.
BITCOIN - What It Is and Why It Matters
35
There are scores of philosophies and thousands of explanations of practically everything.
Human beings do not yet universally agree that there is a right or a wrong, that two and two
add up to four, that the world is round, or that human beings cannot fly.
I have met thousands of human beings.  I have never yet met a man totally capable of
handling his own affairs.  We all make mistakes.  Our species falls far short of the perfection
of which we like to dream.
But I have reached one conclusion that has to stand.  While no human being can manage his
own affairs perfectly, he will handle the affairs of others with less effectiveness than he
handles his own.  Most believe the contrary, demonstrating that we believe according to our
fantasies, not according to reality.
And now a third point.
Like children, we want to “even the score.”  We want vengeance and retaliation.  We want
restitution from, and punishment inflicted upon the wrong doer.
That is the glowing ember of hate that keeps governments alive.
To achieve vengeance, retaliation, to command restitution, and to punish others demands the
ability to injure human beings.
My opponents at this point can be heard on every hand.  “Why don’t you think he deserves to
be injured?  Look at what he did?”
I carry no brief in favor of the criminal.  That is why I carry no brief in defense of those in
government.  Setting a thief to catch a thief doubles the amount of loot stolen.
“But look at all the evil deeds that have been committed!” I am urged; “Do you want those
villains to ‘get away with it?’”
My answer is:  “They already got away with it or they would not be criminals.”
Nor am I comforted by those who say to me:  “you’re right, LeFevre.  And government is
wrong.  So we will set up private agencies of retaliation and restitution (which will be called
‘protection companies’.)  Then, when we go after the criminals and force them to repay or we
will imprison or kill them, we will be doing ‘good’ since people will voluntarily pay for our
services.  Taxation can be dispensed with.”
Any agency that carries out the public will to commit violent acts upon other human beings –
whether authorized by legal
federal
or by sponsors putting up the funds – is, by its actions, a
form of government.
Government is nothing more than a group of people who sell vengeance and retribution to the
inhabitants of a limited geographic area at prices made  possible by force (either monopolistic
or competitive) and charge by those who carry the guns.
So the cry continues:  “Let us even the score.  Then, we can have peace.”
Let us see about, “evening the score.”
The United States was, to a large degree, wrested from the prior inhabitants by force,
trickery, or both.  To “even the score,” this land must be returned to its former owners.
BITCOIN - What It Is and Why It Matters
36
I do not condone what happened and I cannot deny it.  But the fact is that those persons
performing the trickery and imposing the force are all dead.  The wrongs perpetrated
cannot

be made right.  Many of us who live here now are the descendants of some of those persons. 
Many others are not.  But long before the first European settlement appeared on these shores,
those holding the terrain stole the same resources from each other.
If we are to be fair and honest, the effort to “even the score” must go beyond returning the
land.  Those of us here have produced nearly everything we have from this same land.  Since
the land must be restored, if follows that all that has been gained through it must also be
returned to the original owners.
That would mean that every non-Indian in America must be pauperized.  Sure, you would not
want to see the thief gain at the expense of those he has wronged?
Such a procedure is clearly absurd.  We don’t know precisely who was wronged, or how
much and how many have gained thereby.  What is done is done, however wrongly.
Consider some of our more current exploits.  Consider the bombs we have dropped in
Europe, Japan, Korea, and Vietnam.  That has to be made right, too.  Whatever was taken
must be restored.
It is impossible.
How about the state of Israel?  It was wrested from the Palestinians with the concurrence of
certain modern governments including our own.  Why?  The claim was that it had originally
been the land of the Israeli.  True enough.  After they had wrested it from the Canaanites. 
And before that?  The Canaanites were taking it from each other.
The human race, through its various governments, is facing its past and endeavoring to make
the past less bloody than it has been.  To do so, we must shed more blood.  Our present is
filled with gore and our future has become aproblematical.
The amount of human life and treasure expended on taking care of the past is destroying the
present and putting the human future into eclipse.  All in the name of “getting even.”
Goethe was never more wise than when he said:  “Let the dead past bury its dead.”
When I recite these facts to those who listen, many respond:  “You may be right, LeFevre. 
Peace is better than war.  As soon as I got my vengeance, my restitution, whatever is coming
to me or mine, we can stop.”
On that basis, governments will never stop.  Their furnaces are fired by human hatred and the
lust from vengeance – the desire to “get even.”  This is the human malady.  It is the father of
terrorism and the mother of the modern state.
War is the luxury of barbarism, a luxury that civilized life cannot afford.  It comes down to
you and me in a very personal way.  Have you ever been wronged?  I have.  Indeed, if you
have managed to absorb much of the foregoing, you have the story of some of the times I have
experienced injury at the hands of others.
I am told constantly that the desire for vengeance is an unavoidable characteristic of our
kind.  It has become a characteristic, but it is not inevitable.  Infants are not born with a thirst
for vengeance.  They learn it.  Let them be taught something else.
BITCOIN - What It Is and Why It Matters
37
The truth – and I have tried to tell it – is that I, too, have wronged others.  I haven’t intended
to.  Nonetheless, it has happened.
If we care to be honest, few of us can claim no wrongdoing.  Presuming, of course, that we
have matured enough to attend school.
I find that I am ignorant in many ways.  But I do have some competence.  I have the ability to
develop skills and to earn a living.  I am capable of earning enough so that my family and I
can eat with some regularity.
I have not done this perfectly, as a reading of my story demonstrates.  But I have been skillful
enough to feed myself and my loved ones fairly well.
There is no way that I have the ability or skills to feed society.  I’m not that effective. 
Neither are you.
Further, I have been able to earn enough to clothe myself and my loved ones (not always as
we might have wished), but I’ve done a fair job, despite my mistakes.
But, I’ll tell you what I can’t do.  I haven’t the skills or abilities to clothe society.  Neither do
you.  You may be able to do a better job than I’ve done.  It may be that some of you have
fallen short, in which case my compassion goes to you.
But you can’t clothe society, either.
And the same can be said of housing.  Like me, you can do a fair job.  Sometimes you may
find shelter in a hovel, a cave, or under a bench.  And possibly you’ve done well enough to live
in a mansion with every comfort and convenience.  But there is no way that anyone can house
society to its satisfaction.
The same is true of protection.  Efforts to food, clothe, house, and protect society are exercises
in futility.  And when government is called upon to do those things, government can’t do it
either.  What it does is wage financial war upon the productive and pass inadequate funds
over to those less productive (for whatever reason), while keeping the lion’s share to
“administer” the “program.”
The net result is injury to the poor by helping to create gullibility, dependency, and injury to
those less poor by making them more poor.
Is the human situation hopeless?  Yes, it is, if we continue to depend on government.  But that
is something we don’t have to do.
For example, there is one crime I can absolutely prevent from occurring.  My own.
I cannot prevent you from committing a crime, if you make up your mind to do it.  The
government cannot prevent it, either.  But I can see to it that I don’t commit a wrongful act.
I might add that this is not an easy task.  I am as prone to anger as any.  I cry out against
inflicted pain and injustice.  I know and understand the emotion that can engulf anyone and
make him yearn to inflict an injury on another person.
Also, if I have injured another inadvertently, I can come forward and try to make things right. 
It isn’t easy.  But it can be done.
Sooner or later, we must reach the conclusion that government is obsolescent, if not already
BITCOIN - What It Is and Why It Matters
38
obsolete.  Will everyone agree?  Of course not.  You cannot control what others may think,
and neither can I.
But you can make a beginning.  You can decide to support yourself and to provide your own
food, clothing, and shelter.  Yes, even to provide your own protection, as a result of your own
efforts.  You cannot do it perfectly because you and I are not perfect.  But you can be effective
to a large degree.
Some will do a better job than anything I could possibly achieve.  Some may not do as well. 
But you’ll do a better job of it when you believe in yourself than when you become dependent
on politicians and expect them to do it for you.
How can one individual assist in maximizing human well being by advancing the cause of
liberty?  His first task is to learn his true nature.
1. Each of us has the ability to think and act as he pleases.
2. Each of us controls his own energy.  We do it wisely or foolishly, but we do it individually. 
We may act on the advice or the command of others.  Or we may decide not to.  Our own
energies remain under our individual command and control.
3. It follows that I cannot make you free; I can earn my own freedom by controlling myself
instead of trying to control others.
4. What steps do I take when I wish to be free?
5. I free myself from dependency on others when that dependency is created or maintained by
force.  Since there is no way that I can survive without the help of others, I will always be
dependent to some degree.  But I can depend upon the voluntary support others provided
when they willingly buy my goods or services.  If I have to compel them to buy my goods or
services – either directly at the point of a gun, or indirectly through governmental avenues –
then I am acting in a way that is counter-productive and anti-freedom.
6. Having recognized this point, I break off all relations with government.
I will make no contribution to any political campaign or political party.
I will endorse no issue and no candidate.
I will not vote.
I will de-register and refuse to participate in government-sponsored proceedings of
any sort.
I will not run for office, nor hold a political job even if asked.
I will patronize those persons and firms that have the least to do with government.
If a firm or individual is heavily subsidized by the government, I will have nothing
to do with it; it is an arm of the State.
I will not ask for government help, guidance, advice, money, or emolument of any
kind.
I will accept no government check for Social Security, welfare, injury, pension, or
for any difficulty I may be in.  I will solve my own problems.
BITCOIN - What It Is and Why It Matters
39
I will set  my own standards in such a way that I impose on no one.
I will injure no one for any reason.
I will be as generous and helpful to others as my ability makes possible.
I will live up to every contractual agreement I voluntarily enter into.
I will, therefore, take great care to only enter into those agreements that are
worthy of fulfillment.
I will be true to the highest and best within me, committing no act of theft,
dishonesty, or violence against any other human whatsoever.
The foregoing are the rules.  How many will follow them?  Predictably, very few.  That is why
human society is in such upheaval.  What I have set forth isn’t popular.
But it is factual and in harmony with the reality that is man.
The fact that I do not participate in government at any level and in any way does not cause
the government to cease to exist.  Should you reason your way through the human morass and
decide to emulate the non-participation procedure, government will surely continue.
That, in itself, should cause rejoicing.  The recommendations I have set forth provide a
method that will be as gradual as the dawn of intellectual integrity.  That is as it should be. 
Any other procedure will contain a reaction, a backlash that can destroy any temporary gains.
By employing the method of logic and learning, no one is coerced into accepting an
unwelcome or a misunderstood objective.  He advances toward freedom and a free society
exactly at the speed and to the degree that he is prepared for it.  That is the only way it can be
done.  It will not be popular because we have been nurtured on the hopes of panaceas and
quick political solutions.  But it is the only way that will never have to be repeated.
Today the world is sick with the greatest social disease of all.  It isn’t herpes or syphilis.  It is,
in fact, a pagan faith in the State.  Around the world, terrorists are operating under the noses
of various governments, often aided and abetted by those same governments.
We will move
toward
a free society, one by one.  We will never achieve a free society in the
sense that we can finalize the process.  The price of freedom is eternal effort aimed at
achieving self-control and self-mastery.  We do not achieve this by controlling others.  We
move toward achievement when we learn to control and govern ourselves. 
Freedom is self-
control, not license to impose on others.
It has taken a lifetime to learn this.  I am grateful that I have lived.  I am even grateful that I
have made mistakes, yet continued to live so that I could learn more.  Man learns by trial and
error.  Few of us learn much of anything by success.
I am also grateful that some across this great country of America agree with at least some of
my conclusions.  They are out there now, quietly minding their own business, improving their
own performance, raising their own standards, and willfully imposing on none.
At the moment, man knows too much and understands too little of what he knows.  But the
answer you seek for is in your self.  There is no logical “other place” for it to be.