BTC backers may come to rue the day they implemented their latest protocol change if certain governments conclude that a system that can be altered at will could also be altered by them.
Last month, BTC’s latest ‘upgrade’ Taproot was officially locked in, clearing the way for its implementation this November. Taproot, which was initially proposed by developer/sock puppet di tutti puppi Greg Maxwell and crafted by developer Pieter Wuille, offers modest improvements to BTC’s notoriously clogged transaction pipes and major benefits to criminals looking to obfuscate their transactions from financial authorities.
However, as with the controversial Segwit protocol revision of a few years back, the fact that BTC continues to distance itself from the original protocol described in Bitcoin’s 2008 white paper could leave it vulnerable to having even more radical changes imposed on it from outside the clubby confines of the BTC Core developers’ cabal.
In a recent thread on Dr. Craig Wright’s Slack channel, the author of Bitcoin’s white paper opined that BTC was “now beyond fragile” due to the changes forced upon it by the Core camp. Wright warned that this refusal to lock in the BTC protocol means that the protocol is “open to changes enforced in EVERY jurisdiction that the developers reside in.”
Craig explaining that modifying BTC to create an airdrop makes it no longer a fixed commodity but something that can be ordered to change, as it is no longer under the original issuing contract pic.twitter.com/txNyynK1gE
— BSV KING (@bitcoinkaiser) July 5, 2021
Wright explained that “if the system can vary, it can be changed under government order, court order etc at will.” Without a fixed system, “there is no defence from the unilateral contract” and developers “can be made to comply with an endless range of rules.”
A key plank supporting BTC proponents’ belief in their technology’s superiority to fiat currency is its fixed supply of 21 million coins. But as Wright observes, by allowing BTC to be compromised via protocol changes, you open the door for “external parties to take action for the use of the coin,” including “being forced to increase the supply over 21 million.”
Wright laid bare the nightmare scenario for the laser-eyed BTC maximalists, in which “the only thing stopping the adding of more BTC over the existing 21m is a court order saying that is to occur.”
This argument would have been moot had the Core developers ensured that the BTC protocol was “set in stone”—a path that Wright wisely ensured the Bitcoin (BSV) protocol followed—although that would have precluded efforts by the likes of Blockstream to hijack the technology and forcibly steer transactions off the main blockchain and onto their proprietary Layer 2 ‘solutions’ Lightning and Liquid.
Wright’s arguments regarding BTC’s newfound fragility build on his previous comments that Taproot represented (we’re paraphrasing here) a raised middle finger to financial regulators, who understandably frown upon efforts to disguise the alpha and omega of illicit transactions.
This is particularly unwise given the current regulatory climate, in which numerous countries have reached their tipping point with regards to crypto shenanigans. The Binance strategy of operating in jurisdictions without local approval—while telling customers that the filing of a never-to-be-completed application means they are regulated in that jurisdiction—was always a ticking time bomb, one that is now set to go ‘boom.’
The U.S. government’s patience is also wearing thin, as demonstrated by its taxman’s recent public annoyance at losing out on as much as $1 trillion worth of uncollected annual taxes on its citizens’ digital asset holdings. With U.S. national debt having soared due to pandemic relief programs, the government is actively seeking opportunities to chip away at that debt mountain, including seizing digital assets to resolve back-tax claims.
And as recently detailed on this site by Johnny Jaswal, there’s mounting speculation that major changes to a crypto protocol that make transactions on the original protocol incompatible with subsequent protocols—a scenario for which Taproot amply qualifies—effectively results in an airdrop, aka the creation of newly issued digital assets, with the developers of that new protocol liable for the tax payable on the receipt of these new assets.
The Core developers will publicly dismiss all these looming threats on the horizon as mere mirages. But the cypherpunks who believe in BTC’s invincibility in fending off fiscal or regulatory challenges may be in for a rude awakening. As English (non-cypher) punk Joe Strummer famously warned wannabe hoods all those decades ago, “it won’t get you anywhere fooling with the gun [because] the British Army is waiting out there and it weighs fifteen hundred tons.”
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