L$: The (Possibly) Scary Future

If Linden Dollars are a private currencydepending on our implementation – this could fuel the anarchic fantasies of the tinfoil hat crowd to dangerous heights. (Love this WoW hat: -10 Intellect, +10 Spirit)

OK, lemme back down from the funny-scary attempt and restate: The concept of private currency is dearly held by a certain libertarian viewpoint. This viewpoint sometimes overlaps with and is often confused with a type of anarchist view, as both have a deep distrust for the government as a central tenet. I suppose in my mind the difference between a libertarian and an anarchist is that both have guns, but only the anarchist really wants to use them to further his political philiosophy. Anyway, the distrust of government is easily caricatured as a prediliction for conspiracy theory, and that’s why I made the tinfoil hat reference. All the libertarians and anarchists out there: sorry, I don’t mean to insult, and hey, I’m just fooling around, it’s a free country isn’t it? Uh, don’t answer.

I’m obviously feeling a little loopy after reading too much about private currency. A lot of this stuff sounds somewhat, shall we say, Ayn Randian. (Ayn Rand always makes me feel a little loopy, even when I agree with her.) The basic argument is that there’s no reason for us to accept that government-issued currency is the only usable medium of exchange, and in fact governments are less reliable actors compared to private companies when it comes to taking actions that will hurt the economy and the economic positions of individuals. Governments play all sorts of games with money that have everything to do with keeping governments in power and little to do with maintaining a stable economy. Private companies issuing private currency are highly incented to keep those currencies reliable, as the free market will weed out those private currencies that are managed imprudently.

There are several private currency efforts out there, such as the Millenium Dollar, PCX, the Liberty Dollar, and eGold. At least two of those efforts are being prosecuted (persecuted?) by the U.S. federal government.

The eGold case is particularly instructive. The government came after eGold for enabling illicit activities, including child pornography, conspiracy, and money laundering. If you believe the blog chatter and eGold’s claims, the eGold guys had a long history of trying to cooperate with the government, as well as perhaps a little too much ego and belief in their manifest destiny. The history and the ego were no help in Congressional testimony, which eventually was followed by the prosecution.

So who’s scared? Well, it looks like the government is afraid of private currency. And why not – nobody likes to lose a monopoly. But let’s not make the tinfoil hat mistake in this direction either. It’s entirely possible, and in fact probable, that the government has legitimate concerns around illicit activity, and the private currency services did not do enough to assuage those concerns.

There are plenty of sober people who think that private currencies have a real future. But maybe it’s one of those futures that’s always in the future, which you might think from seeing so many failed attempts.

When it comes to thinking of Linden Dollars as private currency, there is one other complicated field to look into: electronic money and digital cash. Now, this starts to get a bit complicated, but the idea of private digital cash is a crypto-anarchist‘s dream. According to the National Security Agency, properly implemented digital cash would be untraceable and anonymous. Combine those two characteristics with the fact that the issuer is a private company, and just how long do you think the government would allow this to exist in an unregulated state? Only until they figure out what is going on, and as slow as they can sometimes move, they’ve been thinking about this stuff for longer than I have. (Dammit, where did I leave my tinfoil hat?)

So, if Linden Dollars are a private currency, we’d have an interesting and scary question as to how much untraceability and anonymity we could implement without getting shut down by the people we scare.

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