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 like mtgox.com are operating out 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 like mybitcoin.com 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 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 will likely be one of the most powerful and revolutionary tools to bring about more freedom and liberty to humankind.