"One thing you quickly become aware of at this conference is the number of virtual currency competitors Bitcoin has. There are many, though Bitcoin has most of the focus. I asked the doc and the engineer which virtual currencies they were most impressed with beyond Bitcoin, The names they threw out included DevCoin, NameCoin and BitcoinX, though they emphasized that Bitcoin has about 99.9% of the virtual currency market."
That's pretty cool. However his biggest takeaway is this:
"The sense I am getting is that the Bitcoin world is going to end up very heavily regulated. Many of those involved with Bitcoin here at the conference are talking compliance with the government. Even the Winklevoss twins brought this up as something that will be necessary. The libertarian dream of anonymity seems like a distant memory to this crowd. It will be name and social security number in the not too distant future for anyone trying to open a Bitcoin account to buy or sell bitcoins through an exchange. Thus, Bitcoin, if it is not completely closed by government, will be no more than a faster PayPal type system, with a fluctuating value."
So here's my question: What's the point? What's the point of using Bitcoins, or opening a Bitcoin exchange, if you're going to give up on the goal of anonymity? The whole point of Bitcoin is to subvert state control of the money supply and of money.
When the state controls the money supply, it is able to debase the money supply to its own advantage (this is nothing new - see the photo of clipped coins at the top of this post) - and to the detriment of the rest of society. You know, those who actually produced the wealth that the state now bleeds away through inflation and outright destroys through the cyclical booms and busts its manipulations create. On top of this fundamentally parasitic behavior, the state is also able to take even more wealth through taxation of everything it can get its hands on: Income, purchases, death...
So the holy grail of those who seek an end to government control of the money supply (and of money) is twofold: 1) The establishment of a currency that is independent of the governement's fiat currency (and no, "local currencies" don't accomplish this, as they are generally denominated in dollars.); and 2) Anonymity, so that the state cannot simply confiscate money either at the point of a transaction or from an account, regardless of the form that that money takes.
The first part of this already exists, in the form of precious metals. The problem is that the government makes it difficult for people to conduct transactions in precious metals - both by outright harrassment and prohibition (witness the experiences of e-gold and the Liberty Dollar) as well as by legal tender laws which tend to drive good money out of circulation as people prefer to hang on to it and to spend the "bad" money.
So it is not really a new form of currency that was needed, but a new form of making transactions and of keeping that money such that the state could not get access to it - or even know who had it or who had made the transactions. This is where Bitcoin comes in. What is potentially revolutionary about Bitcoin is not that it is a new currency independent of government manipulation - that already exists, and in forms that have withstood the test of time. What is revolutionary about Bitcoin is its potential for being a truly anonymous way of making transactions and of storing wealth. Had e-Gold been peer-to-peer, it might still be in existence and Bitcoin might never have arisen. I know, Bitcoin isn't able to offer genuine anonymity yet - particularly at the point of transfering BC into other currency. Maybe it never will be. But it is more than likely that some digital currency will.
Getting back to my question: What, then, is the point of getting into the Bitcoin business if you're immediately going to cave on the issue of anonymity? What is the value of the service you would be providing (as an exchange service, for example)? Why would anyone want to use a Bitcoin exchange that kept records of account holders and their transactions? There might be some slight currency advantage vs. using US dollar accounts, and as the US dollar gets deeper into trouble that advantage will grow. But why not just have gold exchanges then? Why take the additional risk of dealing with an untested digital "currency" when you could do the same thing with gold or silver?
I personally think that untested digital currency can work. But there is nothing about it that makes it any better than gold or silver or platinum (or e-gold, e-silver, e-platinum, etc.) What is special about Bitcoin - so special that it could change the world - is its potential for providing anonymous transactions. If you're going to throw that away, why even bother?