BitCoin: Technology & Morality

CS 463 Lecture, Dr. Lawlor

Technology of BitCoin

It's actually pretty simple:
The surprising things about it are:

Morality of BitCoin

One problem with BitCoin is nobody knows what the value should be--is a pizza 10,000 BTC or 0.0001 BTC?  Value stability can be a problem with any currency, where there are two macroeconomic error conditions:
The other huge problem with alternative payment services is they tend to get used for thing you can't do on legitimate services--for example, illegal transactions like money laundering or drug transactions.  This means what looks like a technical issue, preserving anonymity in transactions, turns into a very controversial social and very thorny moral issue.

For example, the $1m/month online illegal drug marketplace  Silk Road uses BitCoin as its payment service, despite denominating prices in US dollars.  Dealers and buyers still get busted, but it's during delivery, or because they didn't hide their IP address sufficiently, not via the payment service.

Morality of Drug Laws

In 2010 a doctor of neuropsychopharmacology in the UK led a workshop of experts to quantify the harms from a set of drugs, resulting in this surprising chart:
Nutt et al study of drug harms, chart by type of harm

The first author of the study, David Nutt, was fired from his position on a UK government research council due to disagreements about this approach.

I personally am not sure what the lack of correlation between harm and legality implies--should we ban the manufacture, possession, and distribution of alcohol too?  Legalize everything to the right of some trade-off point? Reboot our approach to drug addiction entirely?  How? Unfortunately, there are no easy answers, only complex and historically dependent trade-offs.

One lesson here is you can't ignore the second-order and third-order effects of your choices.  The designer of BitCoin chose to make transactions anonymous, which has fairly straightforward implications for a very touchy subject that could result in BitCoin being demonized and banned.