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Michael Goldstein: Bitcoin Can Make the State Obsolete

By: José Niño - @JoseAlNino - Jul 25, 2014, 6:00 am

EspañolI had the pleasure of working with Michael Goldstein during my time as a student at the University of Texas at Austin, where he helped set up groups such as the UT Mises Circle and the Cryptoanarchy Club at UT. Goldstein is a staunch crypto-anarchist and an early bitcoin adopter. He is the president of the Satoshi Nakamoto Institute, whose mission is to spread the most effective ideas in the realm of cryptography, distributed networks, and economic freedom.

Michael Goldstein, president of the Satoshi Nakamoto Institute
Michael Goldstein. (SNI)

A programmer by training, Goldstein sees great potential in bitcoin as a means to phase out the state and provide market alternatives to traditionally state-dominated monetary services. Recently, I spoke with the young cryptocurrency advocate about bitcoin’s promise and how cryptography can secure economic and personal freedom in the digital age.

What was the principal motive behind forming this organization?

When most people think about the beginnings of bitcoin, they think back to October 31, 2008, when the mysterious Satoshi Nakamoto posted his paper “Bitcoin: A Peer-to-Peer Cash System,” or January 3, 2009, when he mined the “genesis block” of the bitcoin block chain.

However, while this was the beginning of bitcoin itself, the problems that bitcoin aims to solve have been pondered by cryptographers for decades, notably by the Cypherpunks, a mailing list from the 1990s dedicated to using technology to thwart, subvert, and circumvent state power.

In fact, bitcoin is a direct descendant of the Cypherpunks. By reading the Cypherpunks, a full history of anonymous digital cash emerges, from David Chaum’s early works in the 1980s to protocols like b-money by Wei Dai and bit gold by Nick Szabo.

Furthermore, the Cypherpunks dare to not just talk about the cryptography but elaborate and embrace its implications, imagining what Tim May called “crypto-anarchy,” a world where information is secured by strong cryptography, state violence is impotent, and reputation systems reign supreme.

The Satoshi Nakamoto Institute is continually curating the best writings from this movement. So, by forming the institute, we are trying to capture this entire story of bitcoin: its history, its technology, its implications, and its future.

Why bitcoin?

As any reader of the great Austrian economists, such as Ludwig von Mises, Murray Rothbard, and Friedrich Hayek, knows, money plays a crucial role in an economy, allowing complex social cooperation to exist at all. Sound money, however, has been corrupted by governments and banks for centuries and destroyed by them in the past 100 years.

Bitcoin challenges this through technology in a truly stunning way. Not only is bitcoin sound money, it is incredibly useful, convenient, and built for the modern digital age. It allows instant and secure global trade. Its censorship-resistance keeps malicious actors from being able to intervene with the peaceful trade of others. Bitcoin is a global force for peace.

What are the biggest challenges that you think bitcoin will face along its path to wide-scale adoption?

Bitcoin is challenging the entire global financial and monetary system, so, of course, it can expect some enemies. Many jurisdictions are trying to determine how to regulate businesses operating with bitcoin, most notably with the recent announcement of the “BitLicenses” by the New York Department of Financial Services.

Of course, bitcoin is global, and it is decentralized. Legislation alone cannot stop bitcoin, and it should not be immediately feared. Bitcoin is “antifragile,” and grows stronger when met with and through overcoming challenges. As Nassim Taleb said, “For bitcoin to make it, it needs to be banned by a few governments and critiqued by policy makers. Otherwise, it will fade.” So we’ll see if Ben Lawsky actually gets what he thinks he is setting himself up for.

Ultimately, though, bitcoin is software, and users need good software. This is the main challenge. So far, major bitcoin services have used trusted third party models, which is antithetical to bitcoin’s value proposition of a decentralized protocol. In order to see wide-scale adoption, bitcoin developers need to continue making easier to use and more secure wallet software. Software libraries, such as Open Transactions, will give servers the ability to more safely store bitcoins.

The infamous Silk Road did not go down because of a flaw in bitcoin, but because it was a single server susceptible to attack. Wallet software, such as Dark Wallet, will also make it easier to attain financial privacy.

As bitcoin becomes more valuable, we can expect more white hat and black hat hackers trying to break the protocol and different software tools. Since bitcoin is antifragile, uncovering flaws in software allows us to make the software even stronger. I have extremely high hopes for the future of bitcoin.

What type of impact do you think bitcoin will have on Latin America?

Latin America is no stranger to currency crises. For instance, Argentina’s central bank continues to completely devalue the peso, and their government is crippling the economy with capital controls.

However, Latin America is also a very industrious continent, and the technological infrastructure and the skills of its people are developing at a quick pace. The next big crisis will happen at some point, and this time, they will not have to choose another government currency and restart the cycle.

Instead, Latin Americans can invest in bitcoin and put an end to the currency devaluation and capital controls altogether. We already see a very large, enthusiastic, and innovative bitcoin community emerging in Latin America. They could be the real pioneers.

Outside of bitcoin, what other topics does your organization focus on?

For the Cypherpunks, digital cash was just one component of a larger technological revolution to use strong cryptography to secure freedom. Bitcoin is a crucial component, but it wasn’t the beginning and it most certainly is not the end of this development.

The Cypherpunks brought us PGP, anonymous remailers, BitTorrent, WikiLeaks, and many other important technologies (Cypherpunks were involved in the open-sourced development of Tor, for example). The Satoshi Nakamoto Institute has an interest in all of these technologies and any further developments that can continue the path to securing freedom.

We will also be involved in the software development, too. As the Cypherpunk maxim went, “Cypherpunks write code.”

What is the best way for people to learn more about bitcoin and incorporate it in their daily lives?

The best way for people to learn about bitcoin is to read Satoshi’s original paper, which we have available in multiple formats on our website. It remains the clearest and most concise explanation of the protocol, and it is quite accessible.

The second most important thing when learning bitcoin is to actually use it. Invest in a small amount to play with, and learn how wallets work and how to keep them secure. The more you know about how bitcoin works, the better you can make a judgment as to how you can and should personally take advantage of it. And you might find that this small amount you were playing with is one day worth a lot more.

José Niño José Niño

José Niño is based in Dallas, Texas. A citizen of the world, he has lived in Venezuela, Chile, and the United States and is a former member of Students For Liberty’s Executive Board. Follow @JoseAlNino.