Iron-clad cooperation across these five groups is the only thing that could be successful in banning cryptocurrencies

Advertisement
Iron-clad cooperation across these five groups is the only thing that could be successful in banning cryptocurrencies
  • The increasing popularity of Bitcoin is raising new questions for financial regulators.
  • Banks and governments are more familiar with the financial system that existed before cryptocurrencies.
  • Banning Bitcoin in its current form is technically possible — but at tremendous cost.
Returning to a financial world where cryptocurrencies did not exist, looks less likely each day. That goal may be desirable for the central banks of some countries, but the chance of putting the genie back in the bottle seems minimal.

However, it is not impossible. What is needed is massive cooperative effort among five major groups.

Here’s a quick dive into a ‘what-if’ scenario of what the world would look like if a Bitcoin ban was enforced in an alternative universe — how might that have been achieved, what actions would be required from whom, and could the world ever be the same again?

Global governments - An explicit ban on Bitcoin

Global governments - An explicit ban on Bitcoin
Youtube

The first and foremost step would be to ban Bitcoin, the original cryptocurrency. All governments across the world would have to enforce the steps mentioned below for a ban to be effective. If even one or a few countries stay indifferent, those countries will become crypto havens — akin to the current tax havens — and the ban won’t work.

This will discourage all formal financial support, such as banks, exchanges, companies, institutional investors and large buyers. As a result, Bitcoin’s value will get pushed into a downward spiral, making it hard to recover. <I’m not able to think of any example of a banned financial asset that never recovered>

The structuring of policies may drop Bitcoin mining power by 55% as it did in China, or even lead to steamrolling over cryptocurrency generating machines, like Malaysia did in July 2021.

Advertisement

Internet Service Providers - Prevent Bitcoin node communication

Internet Service Providers - Prevent Bitcoin node communication
Academic study on Bitcoin’s public topology

Bitcoin is an online currency after all. If Bitcoin nodes (miners, exchanges, users) cannot ‘see’ each other online, they cannot transfer coins between one another. Preventing Bitcoin nodes from communicating with each other would essentially render all stakeholders blind.

Such a Bitcoin blockade would have to be as rigorous as the ‘Great Firewall of China’ which has been censoring their internet traffic since decades.

Advertisement

Software companies - Updates to hinder remaining nodes

Software companies - Updates to hinder remaining nodes
DigiCert

Dominant operating systems — this means Microsoft’s Windows, Apple’s Mac, and Linux — would have to push out updates that prevent Bitcoin related calculations and applications from working correctly.

Similar to secured banking websites in a browser, it is possible to allow only applications ‘signed’ by specified certificate providers to run SHA-256 algorithms, which is needed to verify Bitcoin.

Advertisement
Advertisement

Manufacturers - New hardware hinders Bitcoin mining

Manufacturers - New hardware hinders Bitcoin mining
Pixabay

Both PC vendors and specialised (ASIC) hardware makers would have to co-operate to alter market supply. Since all electrical items fail eventually, mining would hold no monetary rewards if replacement computers are too slow for this purpose. For example, nVidia makes so-called ‘LHR’ graphics cards that work well for gaming but are unhelpful to miners.

The process of ‘mining’ which records transactions in a blockchain ledger is essential for Bitcoin to operate. If stopped, no new purchase or transfers of Bitcoin could occur. The aim would be to slow down mining, making it less profitable and leading to a departure of miners, also hurting Bitcoin speed and price in the process.

Advertisement

Law enforcement - Corrupting Bitcoin calculations

Law enforcement - Corrupting Bitcoin calculations
Information Matters

Researchers have already uncovered indications that investigative agencies like the US’ Federal Bureau of Investigation (FBI) run ‘fake nodes’ on the Bitcoin network, using them as a listening post. They could go one step further, by inserting wilfully wrong calculations or transactions that serve to ‘poison’ the blockchain.

They could also make far too many transactions and offer very low fees, to slow down and overwhelm Bitcoin’s normal operation.

This would serve to frustrate the few users who may still transact in a globally banned cryptocurrency.

Advertisement

The cost of banning Bitcoin

The cost of banning Bitcoin
Pixabay

As illustrated above, the scale of the undertaking would be enormous, with lasting effects on the tech industry and individual freedoms. Ironically, these measures may make pre-blockade BItcoin equipment more valuable in the short term.

Fortunately for crypto enthusiasts in our own universe, these measures wouldn’t hurt Bitcoin in the long run. The Bitcoin protocol/network is not set in stone and has changed many times since 2009. So it may take a few weeks or months for all Bitcoin participants to update themselves, but it would simply evolve to go around the new restrictions.

Advertisement