As Silk Road 2.0 Pops Up, The Government Needs To Avoid The Temptation Of Moral Panic

from the moral-panic-a-coming dept

Plenty of digital ink has been spilled about the supposed launch of Silk Road 2.0, a near copy of the original infamous Silk Road “dark web” shopping site for all sorts of illegal things. But, perhaps more interesting is how Congress suddenly feels the need to jump in and try to understand the dark web and things like Bitcoin:

The Senate Homeland Security Committee, officials tell TIME, plans on holding hearings on Bitcoin within the month. The committee sent letters to nine federal agencies in July asking for their thoughts on Bitcoins and other virtual currencies in the hopes of developing a holistic approach to the so-called cryptocurrency that neither stifles the currency’s potential nor enables criminals to abuse it.

This should be cause for concern. After all, it wasn’t that long ago, that Senator Chuck Schumer absolutely flipped his lid about Bitcoin, claiming that Bitcoin itself was “money laundering” after some of the first news stories about the original Silk Road came out. The fact that he so immediately conflated the dark web with Bitcoin should be problematic already — though, one hopes that he’s since learned some more about Bitcoin and has realized his original statements were exaggerated.

Of course, any time Congress gets involved, especially with the kind of story that can be portrayed the way Silk Road has been portrayed, you almost expect the moral panic and grandstanding to reach a fever pitch. The one (minor) good sign in all of this is that the Senator who is putting together that hearing on Bitcoin, Tom Carper, seems to be going out of his way to make it clear that he isn’t looking to have a kneejerk reaction to all of this — especially if it might stifle important innovations. After news broke of the new Silk Road, he was quick to put out the following statement:

“This new website – launched barely a month after Federal agents shut down the original Silk Road — underscores the inescapable reality that technology is dynamic and ever-evolving and that government policy needs to adapt accordingly. Rather than play ‘whack-a-mole’ with the latest website, currency, or other method criminals are using in an effort to evade the law, we need to develop thoughtful, nimble and sensible federal policies that protect the public without stifling innovation and economic growth. Our committee intends to have that conversation – among others – at our hearing this month on virtual currency.”

That’s a whole hell of a lot better than Schumer’s “it’s money laundering!” grandstanding from two years ago — but that doesn’t mean that others in Congress will be as willing as Carper to take a careful, measured and informed approach to all of this. While it sounds good to create policies that “protect the public without stifling innovation and economic growth,” in practice that’s often a lot more difficult than most people think — and Congress often has an uncanny ability to say one thing and put in place policies that do the exact opposite.

While some people like to mock concepts like the dark web and Bitcoin, there’s a tremendous amount of important innovation happening within and around each of them. While they may initially be used, in part, for illegal activity, that’s going to become less and less of the predominant use, and all sorts of powerful new tools and services are likely to develop — if allowed. Bitcoin, in particular, has many powerful uses beyond just being a currency (in fact, that may be one of its least interesting characteristics), but overly regulating it based on moral panics might kill that off. I already know a few entrepreneurs and investors who are unwilling to commit to some really interesting Bitcoin projects, just because they know the regulatory situation might destroy the space overnight. Hopefully, Congress will avoid that temptation to go on a full out moral panic — but their track record with these kinds of things isn’t that great.

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Comments on “As Silk Road 2.0 Pops Up, The Government Needs To Avoid The Temptation Of Moral Panic”

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Mike Masnick (profile) says:

Re: Re:

Can you explain?

If you explore the details of Bitcoin you can see a variety of examples. Here are just a few, about how it can be used to sign documents and to do authenticated time stamps, or even act as a distributed DNS system.

And, just as I was finishing this email, someone pointed me to a much more thorough look at Bitcoin as a platform beyond currency:

That explains a lot of what I meant…

out_of_the_blue says:

Wrong, MIke! Bitcoin is just another Ponzi scheme that'll be taken over.

“Bitcoin is broken. And not just superficially so, but fundamentally, at the core protocol level. We’re not talking about a simple buffer overflow here, or even a badly designed API that can be easily patched; instead, the problem is intrinsic to the entire way Bitcoin works. All other cryptocurrencies and schemes based on the same Bitcoin idea, including Litecoin, Namecoin, and any of the other few dozen Bitcoin-inspired currencies, are broken as well.”

out_of_the_blue says:

Re: Wrong, MIke! Bitcoin is just another Ponzi scheme that'll be taken over.

Forgot to mention that “virtual” swindles are basically the same old con games, and will rightly be shut down to protect the public. Bitcoin in particular relies on exchanges of “virtual” to “real” money and those can’t be hidden. Just because it’s not gone after now doesn’t mean will be able to operate once focused on.

Anonymous Coward says:

Re: Wrong, MIke! Bitcoin is just another Ponzi scheme that'll be taken over.

“Bitcoin is broken”

So is our currency. The government can create inflation (stealing the value of our earned dollars) at will.

and currency exchange rates do the same thing, they rely on exchanges of one currency to another while credit cards and debit cards and bank accounts allow for an exchange between ‘virtual’ and ‘real’ currency. Currency allows for an exchange between ‘virtual’ and ‘real’ value (that which you buy).

If the Bitcoin protcol has problems, if there is a problem that allows a small group of people to have way too much influence, if there is some other flaw in the system (a flaw that your simple mind is too unsophisticated to understand even if it exists), then we can argue that as a separate issue. and flaws very well may exist and be discovered in the future. But to say that Bitcoin is flawed simply because it allows for exchanges without any further explanation is not very convincing. You need to elaborate.

Mike Masnick (profile) says:

Re: Wrong, MIke! Bitcoin is just another Ponzi scheme that'll be taken over.

“Bitcoin is broken. And not just superficially so, but fundamentally, at the core protocol level. We’re not talking about a simple buffer overflow here, or even a badly designed API that can be easily patched; instead, the problem is intrinsic to the entire way Bitcoin works. All other cryptocurrencies and schemes based on the same Bitcoin idea, including Litecoin, Namecoin, and any of the other few dozen Bitcoin-inspired currencies, are broken as well.”

Good explanation for why that paper is not particularly accurate:

Spaceboy (profile) says:

Re: Wrong, MIke! Bitcoin is just another Ponzi scheme that'll be taken over.

That article has it wrong. It conveniently left out the fact that the majority of miners have to confirm any blocks found. So if a pool actually attempts this they run the risk of forming their own blockchain fork, which will become utterly useless if the majority finds a block at the same time the minority pool does. Also, with the hashrate and difficulty so high, this method is way too risky to even consider. Miners won’t knowingly join a pool if their shares are at risk from being lost or orphaned. The longer the pool ‘hides’ results, the more they stand to lose.

Anonymous Coward says:

This rebirth was inevitable. The demand for drugs atill exists. This channel works, therefore someone will reinstate it. This will continue to happen until the market dries up. What will do that? Legalization, and treatment of the addicts. If legalized, governments will have a tax revenue stream available for treatment and education. Now it’s just a burden on everyone, sorta like Prohibition.

Anonymous Coward says:

This is just the government regulating more stuff they should stay out of. Look at govt established broadcasting monopolies. The government now regulates those entirely in the interests of private businesses, against the public interest, but when these technologies were first made available the government started regulating them slowly under the same pretexts that they are now trying to use to regulate the Internet. They said that they will regulate them in the public interest and ensure a minimal amount of competition if we allow them to steal our right to freely use that spectra. The FCC will ensure the public interest is served. End result? The plutocracy that we have now where regulations are only intended to serve private interests with absolutely no regard for the public interest. Even those controlling the FCC represent industry interests.

Look at government established broadcasting, cableco, and taxi cab monopolies. Look at the mess the patent system has turned into. Look at the plutocratic mess copy’right’ has become, with infinite minus a day durations and retroactive extensions in exchange for campaign contributions and revolving door favors. Look at the revolving door problem in congress. The FDA is nothing but an industry sock puppet. Our existing laws clearly have absolutely no regard for the public interest and if anyone thinks for a minute that the government wants to introduce new laws with the intent of serving the public interest you are very naive. Congress needs to fix the existing laws to serve the public interest before they introduce new laws but I don’t see that happening because the the private interests that benefit from the existing laws have way too much influence.

NoteworthyFromTimeToTime says:

Would they care if there was no money in it?

I am saddened but not surprised.

Congress is soo simple at times. I can’t imagine that they are so much concerned about the ‘criminal activity’ that bitcoin may cause considering their own methods.

I can imagine how many dollar signs are appearing in their eyes and the notition that they don’t yet have their hooks in it yet.

beltorak (profile) says:

this goes directly to the heart of Doctorow’s “The Coming War on General Purpose Computation”.

It is impossible to create a tool that cannot be used against the dictates of any philosophy, good or evil.

Cash is good because it provides immediate liquidity for purchasing life’s necessities. Cash is evil because it can purchase children for sex slaves.

Drones are good because we can monitor wildfires as they progress without endangering human lives that would otherwise be needed to pilot the planes close to the blazing inferno. Drones are evil because some secret governmental organization can apply explosive force against anyone, anywhere, without exposing themselves to retaliation, self defense, or even public scrutiny.

This pen in my pocket is good because I can use it to express ideas that will live beyond my fragile body, inspiring countless generations to the noblest heights of humanity, progressing the freedom and egalitarianism of untold civilizations. Or I can stab someone in the neck with it.

Please, dear congress critters, please; stop blaming the tools.

Anonymous Coward says:

Silk road is OBVIOUSLY a honeypot. First, set up an exchange. Second, find users that use the exchange. Third, find a “terrorist” using the exchange to set up as a patsy. Does anyone else see they are literally taking the plot from a movie? They like to rub their “capture/kill” (read frame jobs and murder) in everyone’s face and the plot is literally out of a movie.

Anonymous Coward says:

Just legalize and tax everything! Do you think a junkie cares if they’re breaking the law when they’re doing/buying/selling drugs?

I can tell you from first hand experience the answer is hell no. I’m still a junkie today and I’ll be one for the rest of my life. Though today I’m doing it legally “methadone clinic” the fact remains I’m still hooked. If they shut down I’d be back on the needle in under three days.

To get from my house to the clinic is three hours one way and for a long time I had to do it like that 6 days a week. That meant I had to drive there get my shit dive to work then drive home go to sleep then back to the clinic or drive to the clinic from work and sleep in my car. Because of that I had to cut my working hours way back. :/

I’m not any better off on methadone than I was on bth… In fact I never messed with anyone while on either methadone or heroin and I held down my job with no problems for years now.. The only reason I’m on methadone was because I was arrested for heroin possession which cost me my job. Not that I needed it since I hit the win for life ages ago, but still I enjoyed keeping busy and they took that from me for a long time. It took a year to build up enough take home days to get a full time job again.

Luckily now I have a new job at the mines which is okay, but hey it beats sitting around all day.

That said silk road should not have to exist. If people want to do drugs let them. It’s not like society would break down.. If it did it would have from alcohol a very long time ago. People fuck up while drunk they’re arrested just like anyone else.

The only reason shit is illegal is because of alcohol companies lobbying for it. Drugs like heroin were very dangerous to their sales and they could not have that.
I have a 1920’s Sears catalog with heroin for sale in it. In fact Sears sold opium, heroin, and cocaine before they were illegal.

John85851 (profile) says:

Legalize and tax it

Here’s a radical idea: legalize it, but tax it to death.
How many people will shop at the Silk Road simply because it’s illegal and the government tells them not to?
How many people will shop at the Silk Road when they realize they have to pay a 60% sales tax? The vendors selling there can lower the prices all they want, but customers won’t want to pay the high sales tax… and look what happens: the government kills the business without making anything illegal.

It’s like the argument for legalizing marijuana: the government gets income from taxes, it doesn’t have to spend money on arresting people and moving them through the criminal justice system, and it can regulate quality.
This happened with Prohibition in the 1920’s, so why can’t the government learn from it?

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