Bitcoin stands to streamline the world’s unlawful trade. This is one of its four key drivers, providing an almost-perfect anonymity, untraceability and laundrability — at least, it is leaps and bounds above anything else available today.
It is certainly not hard to have opinions on a technology that stands to streamline gambling, drug trade, and arms trade. But the facts stand — when people want to hide an activity from government, and are given a technology that enables them to do so, then it is very likely that those people will use the technology to hide that activity.
This is an article in a series on what Falkvinge identifies as Bitcoin’s four drivers. This is the first article, on unlawful trade. The others are international trade, merchant trade, and investment (coming July 5).
So isn’t this unlawful trade… well… bad?
The ramifications for society are huge, and not necessarily entirely negative. Like I wrote before, who are congresspeople, senators, and members of parliaments to determine what other people may trade with each other? They took that right to themselves, inheriting it to themselves from the previous monarchies — they were never given it by anyone. When the masses have a means to circumvent these enforced opinions, I would not be surprised if people started to ignore these self-granted legislator’s edicts en masse to make them effectively unenforceable.
I think Bitcoin and cryptocurrency stands to challenge and has the potential to topple the very notion of unlawful trade, just like the printing press challenged and toppled the notion of unlawful speech.
Think about that for a moment. We stand at a point in time where the law can be reigned in substantially by the development of technology.
And let’s not forget to compare regulated and free speech in retrospect: although free speech means we have to put up with a whole lot of nonsense, lies, and American Idol in this age, I think few would argue that it wasn’t worth it. At the time when regulated speech was challenged, people were not so sure; radical ideas were chopped off quickly. So were heads.
In any case, arguing whether technical developments are good or bad is a quite pointless endeavor. One might as well discuss whether it’s good or bad that blueberries grow in the forest. At the end of the day, they won’t care but keep on growing anyway.
Let’s push moral issues aside a bit and look a things from a purely economic perspective instead. It is undisputably a driver for Bitcoin, after all, so let’s not get ourselves occupied whether we like its color or not. I outlined a bit of Bitcoin’s growth potential in this field in my post where I described why I invested in Bitcoin.
Between 5% and 30% of the world’s money supply of about 75 terabucks are in circulation to support unlawful trade. The guesstimates vary due to the nature of the subject. Let’s assume 5%, and then let’s move on to guesstimate that 10% of those 5% is in high-tech trade that would be early adopters of Bitcoin (the kind of merchants capable of building intercontinental undetectable submarines).
Let’s assume that these merchants move about one-sixth of their trade to Bitcoin over the coming years to explore it and use it for long-distance transactions. That would mean 15% of 10% of 5% of 75 terabucks enter the Bitcoin ecosystem, which comes down to about 60 gigabucks. The current value of Bitcoin in circulation is roughly 6.5 megacoins times 20 bucks, coming to about 120 megabucks.
Thus, the value used to trade in the Bitcoin ecosystem stands to multiply by about 500x in the next few couple of years — counting this uptake driver alone. Now, this doesn’t automatically mean that the value of one bitcoin will rise by 500x as the market is more complex than that, but it’s a good estimate of where we’re heading.
Next: international trade and merchant trade. Those uptake drivers are much, much larger (not to mention currently legal).