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“The reason that we are focused on financial institutions and payment processors is because they are the so-called bottlenecks, or choke-points, in the fraud committed by so many merchants that victimize consumers and launder their illegal proceeds,” Bresnickat explained to the club. “We hope to close the access to the banking system that mass marketing fraudsters enjoy — effectively putting a choke hold on it…”

This concerted effort, later labeled “Operation Choke Point”, targeted a wide range of business categories, including ammunition sales, drug paraphernalia, payday loans, dating services, pornography, telemarketing, tobacco sales, and government grants. This broad application of financial exclusion ultimately prompted multiple lawsuits and federal investigations into the conduct of both the DOJ and the Federal Deposit Insurance Corporation (FDIC), as well as harsh criticism from all corners.

“The clandestine Operation Choke Point had more in common with a purge of ideological foes than a regulatory enforcement action”, wrote Frank Keating, a former governor of Oklahoma who served in the DOJ during the Reagan administration, in a 2018 editorial for The Hill. “It targeted wide swaths of businesses with little regard for whether legal businesses were swept up and harmed. In fact, that seemed to be the goal.”

In 2017, the Trump administration’s DOJ wrote a letter to Congress indicating that Operation Choke Point was officially over. In 2018, the FDIC promised to limit its personnel’s ability to “terminate account relationships” and to put “additional training” into place for its examiners.

But in the years since the federal government so blatantly demonstrated its interest in dictating access to banking services and its power to do so deliberately with little or no consequences, many feel that little has changed.

Bank Runs, With Bias

On March 8, 2023, it was announced that the cryptocurrency-focused institution Silvergate Bank would be voluntarily liquidated by its holding company. The bank had been focused on serving cryptocurrency clients since 2013 when its CEO Alan Lane first invested in bitcoin. In 2022, it had acquired the technology behind Meta’s failed stablecoin project, Diem, with hopes of launching its own dollar-backed token. As the cryptocurrency market declined in late 2022, marked by the collapse of one of its biggest clients in cryptocurrency exchange FTX, the bank’s stock price plummeted. It likely did not help that at the same time, U.S. Senators Elizabeth Warren, Roger Marshall, and John Kennedy asked Silvergate to disclose details of its financial relationship with collapsed cryptocurrency exchange FTX.

Soon after, on March 10, 2023, almost ten years to the day from Bresnickat’s public detailing of Operation Choke Point, Silicon Valley Bank (SVB) was seized by the California Department of Financial Protection and Innovation and placed under FDIC receivership, marking what was then the second-largest bank failure in U.S. history.

Since 2021, the bank had been increasing its long-term securities holdings but, as the market value of these assets deteriorated amid U.S. dollar inflation and Federal Reserve interest rate hikes, it was left with unrealized losses. Simultaneously, its customers, many of whom were prominent businesses within the cryptocurrency industry and were similarly strained by economic conditions, were withdrawing their money. On March 8, 2023, SVB announced that it had sold more than $21 billion worth of securities, borrowed another $15 billion, and was planning an emergency sale to raise yet another $2.25 billion. Perhaps unsurprisingly, this sparked a run on its remaining funds, totaling some $42 billion in withdrawals by March 9, 2023. On Sunday, March 12, state and federal authorities stepped in; customers of Signature Bank had withdrawn more than $10 billion.

Since 2018, Signature Bank had maintained a focus on cryptocurrency businesses, with some 30% of its deposits coming from the sector by early 2023. Signature Bank had also accrued a large proportion of uninsured deposits, worth some $79.5 billion and constituting almost 90% of its total deposits. It was holding relatively little cash on hand — only about 5% of its total assets (compared to an industry average of 13%) — so it was poorly prepared for a run on crypto-friendly banks spurred by SVB’s issues. On March 12, 2023, the New York State Department of Financial Services closed Signature Bank and placed it under FDIC receivership as it faced a mountain of withdrawal requests. At the time, this represented the third-largest bank failure in U.S. history.

Following their seizures of SVB and Signature Bank, the U.S. Department of the Treasury, Federal Reserve, and FDIC described the takeovers as “decisive actions to protect the U.S. economy by strengthening public confidence in our banking system”. But others suggested the actions, particularly against Signature Bank, signified a blatant reemergence of the prejudice displayed during Operation Choke Point and connected to a larger effort to stymie cryptocurrency businesses.

“I think part of what happened was that regulators wanted to send a very strong anti-crypto message”, Barney Frank, a Signature Bank Board member and former congressman who helped draft the seminal “Dodd-Frank Act” to overhaul financial regulation following the Great Recession, told CNBC in March 2023. “We became the poster boy because there was no insolvency based on the fundamentals.”

Following an FDIC announcement that Flagstar Bank would assume all of Signature Bank’s cash deposits except for those “related to the digital-asset banking businesses”, the editorial board of The Wall Street Journal announced that Frank was right to call out this bias.

“This confirms Mr. Frank’s suspicions — and ours — that Signature’s seizure was motivated by regulators’ hostility toward crypto”, the board wrote. “That means crypto companies will have to find another bank to safeguard their deposits. Many say that government warnings to banks about doing business with crypto customers is making that hard.”

Targeting A New Choke Point

Public officials, financial professionals, and Bitcoin advocates had been pointing out an apparent bias against cryptocurrency businesses from the Biden administration well before the March 2023 bank runs. There were numerous policy events in the early part of 2023 to back up those sentiments.

A January 3, 2023, “Joint Statement on Crypto-Asset Risks to Banking Organizations” from the Federal Reserve, FDIC, and Office of the Comptroller of the Currency (OCC) noted that, “The events of the past year have been marked by significant volatility and the exposure of vulnerabilities in the crypto-asset sector. These events highlight a number of key risks associated with crypto-assets and crypto-asset sector participants that banking organizations should be aware of…”, effectively serving to dissuade financial institutions from taking on those risks.

A White House “Roadmap to Mitigate Cryptocurrencies’ Risks” released on January 27, 2023, indicated that the Biden administration sees the proliferation of cryptocurrencies as a threat to the country’s financial system and warned against the prospect of granting cryptocurrencies more access to mainstream financial products.

“As an administration, our focus is on continuing to ensure that cryptocurrencies cannot undermine financial stability, to protect investors, and to hold bad actors accountable”, per the roadmap. “Legislation should not greenlight mainstream institutions, like pension funds, to dive headlong into cryptocurrency markets… It would be a grave mistake to enact legislation that reverses course and deepens the ties between cryptocurrencies and the broader financial system.”

On February 7, 2023, the Federal Reserve pushed a rule to the Federal Register clarifying that the institution would “presumptively prohibit” state member banks from holding crypto assets as principal in any amount and that “issuing tokens on open, public, and/or decentralized networks, or similar systems is highly likely to be inconsistent with safe and sound banking practices”.

And on May 2, 2023, the Biden administration proposed a Digital Asset Mining Energy (DAME) excise tax, suggested as a way to force cryptocurrency mining operations to financially compensate the government for the “economic and environmental costs” of their practices with a 30% tax on the electricity they use.

For Brian Morgenstern, the head of public policy at Riot Platforms, one of the largest, publicly traded bitcoin miners based in the U.S., these policy suggestions, updates, and rule changes clearly indicate a larger attempt to hinder Bitcoin advancement by targeting financial choke points.

“The White House has proposed an excise tax on electricity use by Bitcoin mining businesses specifically — an admitted attempt to control legal activity they do not like, in the name of environmental protection”, Morgenstern explained in an interview with Bitcoin Magazine. “The only explanation for such inexplicable behavior is deep-rooted bias in favor of the status quo and against decentralization.”

Collectively, this behavior could influence the conduct of regulated banks, just as the pressure applied by the DOJ in the 2010s unduly limited the businesses in its crosshairs back then. For many, it’s clear that Operation Choke Point has been reinstated.

“‘Operation Choke Point 2.0’ refers to the coordinated effort by the Biden administration’s financial regulators to suffocate our domestic crypto economy by de-banking the industry and severing entrepreneurs from the capital necessary to invest here in America”, U.S. Senator Bill Hagerty, a member of the committees on banking and appropriations, told Bitcoin Magazine. “It appears that financial regulators have bought into the false narrative that cryptocurrency-focused businesses solely exist to facilitate or conduct illicit activities, and they seem blind to the opportunities for the potential innovations and new businesses that can be built.”

Pressure Where It Hurts

It may be fairly obvious how such a pressure campaign by federal regulators would hurt cryptocurrency-focused projects that depend on access to banks. But the larger ramifications of such financial prohibitions for retail customers and the advancement of Bitcoin in particular may not be.

Why should proponents of Bitcoin, a decentralized financial rail designed to function outside of the legacy system, care about a choke point in regulated financial institutions?

Caitlin Long, the founder of Custodia Bank, which is focused on bridging the gap between digital assets and legacy financial services, recognizes that for users in the U.S. to legitimately participate in Bitcoin, the regulatory landscape must be accommodating.

“I’ve been working for years to help enable laws to be enacted, in multiple U.S. states and federally, precisely because in the absence of legal clarity about Bitcoin, legal systems can become attack vectors on Bitcoiners”, she said in an interview with Bitcoin Magazine. “All of us live under legal regimes of some sort, and we should be aware of legal attack vectors and work toward resolving them in an enabling way.”

Long’s advocacy may best represent the potential that favorable or even just equitable financial access could mean for Bitcoin adoption and the advancement of its technology for everyone. Through her work, Custodia (then under the name Avanti) obtained a 2020 bank charter in its home state of Wyoming that made it a special-purpose depository institution capable of custodying bitcoin and other cryptocurrencies on behalf of clients. But, following a prolonged delay in approval of Custodia’s application for a master account with the Federal Reserve that would allow it to leverage the FedWire network and facilitate large transactions for clients without enrolling intermediaries, Custodia filed a lawsuit against the Fed last year.

“Operation Choke Point 2.0 is real — Custodia learned about its existence in late January when press leaks hit and reporters started calling Custodia to say they learned that all bank charter applicants at the Fed and OCC with digital assets in their business models, including Custodia, were recently asked to withdraw their pending applications”, Long said. “Reporters told us that the Fed’s vote on Custodia’s application would be a foregone conclusion before the Fed governors actually voted.”

But, more than just stifling innovators who seek to build bridges between Bitcoin and legacy financial services, targeting the choke points of Bitcoin platforms will only push these platforms outside of the scope of regulators, giving those with malicious intent an advantage over those who are attempting to play by the rules.

“Internet-native money exists. It won’t be uninvented”, Long added. “If federal bank regulators have a prayer of controlling its impact on the traditional U.S. dollar banking system, they will wake up and realize it’s in their interest to enable regulatory-compliant bridges. Otherwise, just as with other industries that the internet has disrupted — corporate media, for example — the internet will just go around them and they will face even bigger problems down the road.”

As was laid bare by the collapse of cryptocurrency exchange FTX, Bitcoin is still very much tied to the world of cryptocurrency at large in the portfolios of investors and the eyes of most people around the world. Indeed, the revelations around FTX’s criminal operations have been a case in point for regulators who seek the financial prohibition of cryptocurrency businesses. But this very prohibition may have enabled FTX’s operators to fleece billions in customer funds: Based on a Caribbean island, the vast majority of FTX’s business was outside of the jurisdiction of U.S. regulators. As U.S. regulators limit the growth of domestic businesses, offshore alternatives like FTX benefit.

And while many Bitcoiners may think that policymakers are powerless to determine the success of this permissionless technology, adverse or absent regulations can limit Bitcoin-specific businesses just as harshly as they do broader, cryptocurrency-related ones. In fact, it may be Bitcoin’s unique properties that make the current regulatory landscape such a daunting one for growth.

“Bitcoiners should care about Operation Choke Point 2.0 because certain policymakers are trying to take away our ability to participate in the Bitcoin network”, Morgenstern argued. “Moreover, Bitcoin is different. It is not only the oldest and most tested asset in this space, it is perhaps the only one that everyone agrees is a digital commodity. That means the on-ramp for inclusion into any policy frameworks will have less friction inherently, and Bitcoiners need to understand this.”

Relieving The Choke Points

Reviewing the recent, hostile policy updates from federal regulators, it seems clear that Bitcoin is firmly entrenched along with “crypto” in their minds. And, Bitcoin proponents in particular will agree, many businesses focused on other cryptocurrencies are apt to hurt investors. But some in the Bitcoin sector think that more education could help underscore the distinctions between Bitcoin and altcoins, and better protect Bitcoin from more justified regulatory limits on manipulated tokens and vaporware.

“Engage with your elected officials”, Morgenstern encouraged. “Help them understand that Bitcoin’s decentralized ledger technology is democratizing finance, creating faster and cheaper transactions and providing much-needed optionality for consumers at a time when the centralized finance system is experiencing distress. This will take time, effort and a lot of communication, but we must work together to help our leaders appreciate how many votes and how much prosperity is at stake.”

Indeed, for those elected officials who do recognize this bias as unduly harmful to innovation, continued advocacy from Bitcoin’s supporters is the best way out of the choke hold.

“This isn’t an issue where people can afford to be on the sidelines anymore”, Hagerty concluded. “I encourage those who want to see digital assets flourish in the United States to make your voice heard, whether that is at the ballot box or by contacting your lawmakers and urging them to support constructive policy proposals.”

This article is featured in Bitcoin Magazine’s “The Withdrawal Issue”. Click here to subscribe now.

A PDF pamphlet of this article is available for download.

This post Operation Choke Point 2.0: How U.S. Regulators Fight Bitcoin With Financial Censorship first appeared on Bitcoin Magazine and is written by Peter Chawaga.

For nearly 25 years, virtually as long as online payments have been possible, David Marcus has been trying to figure out how to perfect them.

In the mid-’90s he founded a telecom company that offered internet access along with telephone service. In 2000, he launched Echovox, which he spun out into Zong in 2008 — a mobile platform that let users pay for things online directly through their mobile phone bills. When this venture was acquired by PayPal in 2011, Marcus joined the digital payments giant, becoming its president the next year.

He’d read the Bitcoin white paper shortly after it was published, but “didn’t fall into the rabbit hole” at first, he recalled in an interview with Bitcoin Magazine. Then, in 2012, Argentina ordered PayPal to stop all transactions that would send money out of the country as it grappled with currency inflation and a fiscal austerity effort, and the real value of this peer-to-peer electronic cash system started to resonate with him.

“We had to (comply), we were a regulated entity,” Marcus explained. “The day that happened, bitcoin prices went up significantly and I was like, ‘Whoa.’ Like, this is something where consumers in a place like Argentina are actually rushing into bitcoin as a way to move money that they’ve earned — it’s their money — in a way that they saw fit. So, I felt that was a very eye-opening moment for me in terms of Bitcoin being an escape valve to certain behaviors that weren’t aligned with my views of self sovereignty, of money … so that was kind of a turning point for me in 2013, where it really solidified my conviction.”

Shortly afterward, in May 2013, he attended the Bitcoin 2013 conference in San Jose and, despite its relatively small community, he was intrigued by the breakthrough Bitcoin had made in how digital payments could be facilitated.

“It was really a handful, like two handfuls of people basically, it was so incredibly early,” he said. “I was fascinated by this general idea that you move value in a completely self-sovereign way without any intermediaries whatsoever. And during that same time period, I remember sending and receiving bitcoins, and I was setting up wallets for friends to show them what was possible: ‘Look, this is me sending you money and there’s no one in between, right?’ And I was really fascinated by it.”

To The Best Of Our Abilities

But Marcus was not yet ready to give up on the possibility of institutionalized yet open payments for the internet. In June 2014, he joined Meta (then Facebook) as its vice president of messaging products, developing the Facebook Messenger mobile app. Marcus released Messenger P2P Payments in 2015, which allowed users to send each other money from their synced checking accounts via the app.

By mid-2019, Marcus had begun leading Facebook’s cryptocurrency project, Libra, which was later renamed Diem before being abandoned altogether. Libra was almost instantly dismissed by Bitcoiners as offering nothing particularly valuable compared to other centralized digital currency projects. And Marcus found himself defending the project before the House Financial Services Committee as well as the U.S. Senate’s banking committee, forced to answer questions that were often more broadly focused on Meta’s history of invading user privacy.

But before Libra settled on the permissioned, oligarchical node model outlined in its white paper, Marcus had actually considered leveraging the Lightning Network for his project.

“I remember meeting with Elizabeth Stark (CEO of Lightning Network development firm Lightning Labs) in early 2018 and trying to figure out whether Lightning was actually the way to go, because if there was a way to actually use Bitcoin, I really wanted to do that,” Marcus said. “At the time, we thought, OK, maybe we can use Lightning and then build a world-class wallet that we can embed across all of the Meta products, WhatsApp and Messenger and others, and then enable people to move value around.”

Ultimately, he decided the protocol wasn’t robust enough to fulfill Meta’s vision due to some of the insufficiencies that it has yet to overcome, including limited nodes and liquidity.

“Even today, it would be challenging, and it will be challenging, to actually get to billions of consumers on the Lightning Network,” Marcus pointed out. “Even Layer 1 won’t have enough HTLCs (hash time locked contracts) to actually do that. So, we’ll have to find solutions as we get there. But our view was that it won’t scale… And as such, we came to the conclusion that we need to go build this proprietary technology that we will then do whatever we can to decentralize to the best of our abilities.”

In the end, Marcus’ ability to decentralize a payments project under Meta proved insufficient and he has since come to the realization that attempting to do so on any other network aside from Bitcoin is an exercise in futility.

“We’ve built the unshakeable conviction at this point that the only blockchain and the only underlying assets that can support a truly open protocol for payments on the internet is Bitcoin and nothing else,” he said.

In 2021, Marcus left Meta and the next year he launched Lightspark to pursue that conviction.

The Reason Bitcoin And Lightning Are Better

Lightspark builds software and development tools meant to make accessing the Lightning Network easier, such as its software development kit to help businesses offer Lightning wallets to their customers and Lightspark Predict, which identifies the best-performing Lightning nodes and can route transactions to them.

Rather than building a centralized platform to enable digital payments, Lightspark is focused on building tools to help customers access this existing, decentralized one. And while Lightning Network adoption is still far from rivaling the user base of something like PayPal, Marcus is optimistic about its potential to scale if companies like his are successful.

“Lightning still has issues, but I feel very confident that we’re in a position to address these issues,” he said. “You’ll see that for companies to integrate on Lightning using Lightspark services, you don’t even need to worry about channels. You don’t need to worry about liquidity. You don’t need to worry about channel rebalancing and distributing liquidity. You don’t need to worry about what routes you’re going to use and which minimum fee or maximum fee you’re going to set. All of that complexity is being completely taken away from the equation of a company deciding whether they’re going to implement Lightning for their consumers or not.”

When asked if abstracting users so far away from managing their own liquidity, channel balances and routing could in a sense recreate the issues with centralized, trusted financial middlemen, Marcus responded with an analogy.

“In the early days of the web, if you wanted a website and you wanted to be on the internet, you had to go build your own server, find a rack, put it in a rack, buy a router, configure your router, get an E1 or a T1 line, plug that router into your E1 or T1 line and then maintain that whole thing all the time, and it was like, OK, no one does that,” he explained. “But the reason Lightning and Bitcoin are better is because there are companies like Lightspark that will make things easier for mass market adoption, but if you are in a random country anywhere, and you just have internet connectivity, you can run a node on your phone yourself and be a participant in this network. And I think that’s what makes it amazing.”

And he went further to underscore that his intention now is to enable a certain kind of Lightning adoption, rather than roll out a solution that minimizes the need for independent participants.

“We don’t expect everyone to use our software,” he continued. “That would actually be a bad thing, right? We think that everyone should run their own thing and we’re going to cater to a certain segment of the market that is going to tend to be larger, enterprise-types of customers.”

Of all the executives actively working on Bitcoin projects, Marcus probably has the most legacy experience to inform him on what Bitcoin needs to succeed as well as what it must avoid in order not to fail. And, declaring that building on Lightning is the culmination of his life’s work, he’s determined to succeed.

This post ‘Bitcoin And Nothing Else’: Why Former PayPal, Meta Executive David Marcus Is Building On The Lightning Network first appeared on Bitcoin Magazine and is written by Peter Chawaga.

Zoltan Pozsar, who until recently worked as the managing director of investment bank Credit Suisse, offered his insight into financial markets and the issues that are weakening the dollar’s dominance around the world.

In his role at Credit Suisse, Pozsar’s insight into the ins and outs of the legacy financial system and market dynamics was highly sought after. His recent departure from the bank came shortly after it was purchased by UBS in March as an attempt to keep it from collapsing amid existential turmoil for banks around the world. On stage at Bitcoin 2023, Pozsar addressed how U.S. banks have been impacted.

“This is basically an episode where the large banks are largely insulated from the problems,” Pozsar said. “It’s basically lessons in not being able to run interest rate risk, not knowing how to make a loan that will be weathering a rising interest rate storm.”

He described the Federal Reserve’s responses to these banking failures as only addressing “half the problem.”

“I think it’s more like foaming the runway for any of the large banks that might be having problems down the road,” he added.

Pozsar was interviewed on stage by BitMEX co-founder Arthur Hayes, who pressed him on whether he owns any bitcoin.

“I don’t own any,” Pozsar responded. “I’m observing it. I don’t like to dabble in things that I don’t understand well.”

Pozsar outlined his pessimism that bitcoin could ever really serve as money, as his historical research has shown him that money has to have a direct link to a government to endure. As a fundamentally decentralized, peer-to-peer network, Bitcoin could not support money that fits his definition.

“The one thing I will say about bitcoin is that money, if you will, is something that is purely public or a public-private partnership,” Pozsar explained. “When I look at Bitcoin, it’s a purely-private initiative. It’s clearly lacking a state link. But then again, things are evolving, there are a number of countries that have adopted bitcoin as a legal tender, so things are definitely in flux there.”

In his writing, Pozsar has underscored the evolving role that Bitcoin is playing around the world as institution-backed money like the U.S. dollar becomes weaker. At Bitcoin 2023, he listed several global market trends, including the rising economic power of China, that are threatening its role as the global reserve currency.

“There’s a number of changes happening that I think we need to keep an eye on because it’s all going to be at the expense of the dollar’s share of commodity finance, trade finance, share of reserve assets and so on,” Pozsar said.

This post Zoltan Pozsar, Who Just Left Credit Suisse, Addresses Issues Facing The Federal Reserve And The Dollar At Bitcoin 2023 first appeared on Bitcoin Magazine and is written by Peter Chawaga.

Best-selling author and journalist Michael Lewis, known for writing “The Big Short,” “Moneyball” and “The Blind Side,” offered his perspective on the current financial landscape and the rapidly-changing world of cryptocurrency on stage today at Bitcoin 2023.

“When I first encountered the idea of being able to use the blockchain technology to disintermediate financial intermediaries, I thought, ‘thank God,’” Lewis said of his realizations when first researching Bitcoin. “There are lots of unnecessary hands touching money when financial transactions occur. They’ve just been kind of hard baked into the system.”

As the author of “The Big Short,” Lewis outlined the fundamental inequalities and short-sighted policies of the contemporary financial system that led to the economic crisis of 2007 and 2008. At Bitcoin 2023, he acknowledged how Bitcoin is designed as an escape from the problems that caused that crisis.

“If you go back to Satoshi’s original paper, you know, line one, paragraph two, you eliminate the need for a trusted financial intermediary,” Lewis said. “Clearly, the very beginning of the spirit of the enterprise is mistrust of existing financial institutions, well earned mistrust, on the backend of the financial crisis.”

Across his books and news reporting, Lewis has been praised for his ability to condense complicated financial concepts into digestible prose and demonstrate systemic issues through the experiences of the individuals within them. This skillset makes him uniquely qualified to digest and interpret the emerging cryptocurrency ecosystem, which experienced unprecedented turmoil last year with the implosion of numerous crypto projects, most notably FTX.

At Bitcoin 2023, he discussed his next book and movie project, which will focus on FTX, and described some of the insight he gained from spending time with former CEO Sam Bankman-Fried before and after its collapse.

“Not in a million years did I think I was going to write about Sam Bankman-Fried,” Lewis recalled, adding that he was first asked to meet with Bankman-Fried by a friend on Wall Street, and found himself intrigued by his unique personality. “There’s so obviously the potential for a great movie in it… so you want to let people know it’s out there.”

Lewis was joined on stage by Arthur Hayes, the co-founder of cryptocurrency exchange BitMEX. Hayes asked Lewis if he owned bitcoin, and Lewis quipped that it was “in the FTX bankruptcy.”

Hayes and Lewis also touched on the current banking crisis, with Lewis sharing the view that things have not really changed in the institutional system since 2008 — that, if anything, things are worse for retail investors.

“It seems inherently unstable right now,” he said. “You essentially created a handful of institutions that are too big to fail, and everyone knows their deposits are insured, so no other institution can actually compete in that environment… It’s not going to end until there’s some structural reform.”

This post ‘Big Short’ Author Michael Lewis On The Financial Crisis, FTX And Bitcoin’s Freedom From Intermediaries first appeared on Bitcoin Magazine and is written by Peter Chawaga.

Former congresswoman and presidential candidate Tulsi Gabbard addressed the audience at Bitcoin 2023 today, focusing on the institutional problems with U.S. politics and elected leaders who seek to consolidate power rather than serve constituents.

“I served in Congress for eight years and ran for president in 2020, and while we like to have this idea that we have great courageous leaders in Washington … unfortunately, that’s not the case,” Gabbard said. “Ultimately, they’re driven by a fear of losing power and losing control and, at the heart of it, they’re afraid of us. They’re afraid of a free society.”

In particular, she highlighted the Biden administration’s exploration of a central bank digital currency (CBDC), underscoring how such a project would be antithetical to the privacy- and freedom-preserving qualities of cash transactions. As outlined in its white paper by Satoshi Nakamoto, “Bitcoin: A Peer-To-Peer Electronic Cash System,” Bitcoin was designed to preserve these qualities in a digital way.

“The Biden administration’s move toward implementing a central bank digital currency is their latest effort towards exerting control and taking away our freedom,” Gabbard said. “No matter how many flowery words they use to deny that there is ill intent… no matter how many times they say, ‘Hey this is for your own good’… But ultimately, we know this is about their insatiable mission and desire for total control.”

She also suggested that those in power are combative toward or disinterested in Bitcoin because it cannot be manipulated by any third parties.

“You would think they would be interested in how Bitcoin is transforming the lives of people around the world, but they don’t actually care about people,” she said.

This post Speaking At Bitcoin 2023, Tulsi Gabbard Describes How A U.S. CBDC Threatens Freedom first appeared on Bitcoin Magazine and is written by Peter Chawaga.

Robert F. Kennedy Jr. made his first public appearance as a presidential candidate at the Bitcoin 2023 conference today, sharing his own experiences with Bitcoin, warning about how technology is enabling government totalitarianism around the world and describing how he would protect the rights of Bitcoiners if elected president.

“As president, I will make sure that your right to hold and use bitcoin is inviolable,” Kennedy said. “I am an ardent defender and lifelong defender of civil liberties and Bitcoin is both an exercise and a guarantee of those freedoms.”

Kennedy told the crowd that he was first inspired by Bitcoin as a critical freedom technology after learning about how it was used to circumvent financial restrictions during the Canadian trucker protest last year.

“None of these lawful and peaceful protestors had violated any law… But suddenly, they found that they could not access their money, their bank accounts to pay their mortgages or feed their families,” he recalled. “When I witnessed this … devastating use of government repression, I realized for the first time how free money is as important as free expression.”

Kennedy has publicly expressed his support for Bitcoin since May 2023, acknowledging its separation from other cryptocurrencies and indicating that legislators should support its development rather than hinder it, as with regulations like the Biden administration’s proposed tax on energy used by miners. On stage, he reinforced his distaste for such regulations and he outlined the steps his administration would take to drive Bitcoin innovation in the U.S.

“First, I will defend the right of self custody of bitcoin and other digital assets,” he said. “Second, I will uphold the right to run a node at home… Third, I will defend use-neutral, industry-neutral regulation of energy… Fourth, I will make sure that the United States remains the global hub of Bitcoin and other cryptocurrencies… I will reverse the government’s growing hostility toward this industry.”

Finally, he said that he would look closely at “whether individuals like Ross Ulbricht,” the founder of darknet, bitcoin-based marketplace Silk Road who received a double life sentence in 2013, were prosecuted “for actual crimes, or as a means to crackdown on crypto.”

“I will consider pardoning them and I will act very quickly to do so,” Kennedy added.

Kennedy launched his Democratic primary bid shortly before signaling support for the Bitcoin industry on Twitter and announcing his Bitcoin 2023 appearance. His public stances on issues like vaccine mandates and climate change have contradicted those of most mainstream Democrats and he has positioned himself as a party outsider. As of this writing, he sits in second place, though trailing by a significant margin, to Joe Biden in national polling average.

At Bitcoin 2023, Kennedy clarified that he is not personally invested in bitcoin and announced that his presidential campaign would be the first in history to accept donations via the Lightning Network.

“We are now living in this age of turnkey totalitarianism … and our job is to try and build and fortify democratic institutions at the same rate,” he concluded. “The biggest, most important one on the horizon is Bitcoin, because it can’t be manipulated.”

This post Robert Kennedy Jr. Makes Campaign Debut At Bitcoin 2023: ‘Free Money Is As Important As Free Expression’ first appeared on Bitcoin Magazine and is written by Peter Chawaga.

On stage at the Bitcoin 2023 conference, Brink announced a matching campaign for donations from Bitcoin mining firm Marathon Digital Holdings to support the work of Bitcoin Core developers. Marathon will match donations made to Brink on a two-for-one basis for the duration of the conference, which ends on May 20, and then match donations one for one through the end of the year, up to $1 million total.

“We’re going to match dollar for dollar $500,000-worth of donations that Brink receives for Core developers. More importantly, we will donate two-for-one if you donate money during this conference,” said Fred Thiel, Marathon’s CEO. “So, if you believe in the importance of supporting Core development efforts … then I strongly urge you (to) donate 50 cents, $1, whatever you can during the conference.”

By committing to match all third-party donations up to an aggregate of $500,000 until December 31, 2023, Marathon hopes to advance Brink’s support for the developers who maintain and upgrade Bitcoin’s code. Since 2020, Brink has supported numerous developers in their work to make Bitcon more accessible and advanced through grants, mentorship and education, including former lead maintainer Marco Falke, Lightning Network white paper author Tadge Dryja and Bitcoin Core PR Review Club’s Gloria Zhao.

“We have nine developers in five different countries that are all independent developers funded by Brink,” explained Mike Schmidt, the executive director of Brink. “I think we would all agree that we would want this Bitcoin software that’s powering all of this innovation on top to be better reviewed, better tested, better maintained, easier to run and more performant. So that’s why at Brink we fund grantees that are spending upwards of 50% of their time on testing and reviewing the Bitcoin Core code, proposing changes to the Core codebase and basically making that software more secure.”

Donations made to Brink through its website are now eligible for the match. Thiel framed the campaign as part of Marathon’s larger commitment to securing the Bitcoin network as a significant contributor of hash rate, the computing power that ensures Bitcoin’s immutability.

“We believe that it’s the most secure protocol out there and we think we and the rest of the industry should do everything they can to support the developers and really foment as much activity in the space as possible,” Thiel said. 

This post Brink Announces $1 Million Donation-Matching Campaign From Marathon Digital Holdings For Bitcoin Development first appeared on Bitcoin Magazine and is written by Peter Chawaga.

In a panel discussion at the Bitcoin 2023 conference moderated by CNBC technology reporter MacKenzie Sigalos, leaders from some of the biggest businesses building services based on the Lightning Network discussed the opportunities and challenges for Bitcoin’s payments-focused second layer protocol.

The discussion, titled “Building Lightning-Native Companies,” featured Elizabeth Stark, the CEO of software development firm Lightning Labs; David Marcus, the CEO of Lightspark, a firm focused on making Lightning adoption easier and more accessible; and Miles Suter, the Bitcoin product lead at Cash App, a mobile payment platform that introduced Lighting payments to its more than 40 million users in 2022.

“We’ve really reached the point right now where Lightning is maturing and we’re seeing more and more adoption,” Stark said, summarizing the momentum she has seen since she co-founded Lightning Labs in 2016. “People are adopting the network because it is solving real problems for them.”

By allowing peers to create closed payment channels between themselves, which are only settled on the underlying Bitcoin blockchain when closed, the Lightning Network enables bitcoin payments that can take place in seconds while still benefiting from the security of Bitcoin’s base ledger. But as this second layer is relatively young, adoption represents just a fraction of the larger digital payments volume across the world.

The panelists highlighted the importance of developing products and services that make Lightning easier to use and solve some of its outstanding issues, like the network’s relatively-low liquidity and limited number of nodes.

“A channel-based payment network is still very complicated,” Sigalos pointed out. “There’s not a ton of liquidity sitting on the nodes right now” for instance.

In response, Suter noted that many of the challenges in making Lightning more accessible derive from Bitcoin’s most important qualities.

“It’s hard to develop on Bitcoin,” he explained. “We see that everyday… but it’s an intentional decision because we believe that’s what allows it to maintain a very minimal attack surface.”

But the panelists all agreed that when there are significant problems for Lightning to solve, like in countries where it can help people access the dollar or enable more efficient cross-border transactions, adoption is evident. As more of those problems emerge and companies like these continue to build products and services on top of Lightning, they expect adoption to accelerate.

“Making it easy will drive more adoption,” Marcus said. “Between now and next year when we gather again, we’ll be in a much better place when it comes to Lightning adoption.”

This post Cash App, Lighting Labs, Lightspark Executives Discuss Bringing Bitcoin Payments To The World first appeared on Bitcoin Magazine and is written by Peter Chawaga.

“One of the many ways that Bitcoin is an experiment is in its decentralized development model,” explained Amiti Uttarwar. “Whether a non-profit or a private company, the vast majority of software projects have a centralized structure for directing funding, prioritizing projects and coordinating efforts. But the community consensus model of Bitcoin is essential for ongoing censorship resistance. While it’s not easy to get tens of thousands of individual computers to agree, getting thousands of humans to agree is arguably the greater challenge.”

As a Bitcoin Core developer, Uttarwar is understandably fascinated with Bitcoin’s unique consensus model. She opted to focus on this community-led, open-source project full time in 2019, taking a significant pay cut from an engineering role with Coinbase, and has since earned grants to continue her work from OKCoin, BitMEX operator HDR Global and Gemini.

Her past codebase contributions have changed the logic of Bitcoin’s address management, fundamentally shifted address communication and reduced privacy leaks caused by transaction broadcasting. Today, her development focus is on improving support for privacy-enhancing communication layers like Tor, I2P and CJDNS through a collaboration with Chaincode Labs’ Martin Zumsande.

“While Bitcoin users can run nodes on multiple networks right now, the benefits are limited and often require a deep level of understanding from the node operator,” Uttarwar said. “Our current project is to enable automatic connections to nodes on every network that a user has enabled. With our work, if a user has enabled clearnet (with interfaces IPv4 or IPv6) and Tor on their Bitcoin node, the node will strive to ensure at least one of their 10 outbound connections is to an onion peer on the Tor network.”

For Uttarwar, who has seen her work merged into a Bitcoin Core update and who depends upon the larger community of Bitcoin developers for feedback and critical review of her work, the decentralization that underpins this software project is more than just a development model, it is a responsibility.

“Honoring decentralization in the world of Bitcoin development requires participation from Bitcoin users at varying levels of expertise,” she said. “For example, a protocol upgrade can only happen if users all over the world decide to adopt the code and activate the new logic… The question of what makes Bitcoin better evokes strong opinions in the community, but whether advocating for ossification or soft-fork methodology, funding developers or selecting maintainers, the question that underpins all of these conversations is: How do we agree on what Bitcoin needs in a decentralized way?”

Exploring this existential question will be Uttarwar’s focus at the upcoming Bitcoin 2023 conference, where she is set to deliver a keynote titled “Decentralization In Action.” Rather than advocating for a particular Bitcoin project, use case or implication, Uttarwar will be using this spotlight to grapple with the very nature of organizational systems and the unique value of Bitcoin development in their context.

“My talk begins with an epistemological lens, identifying meaningful mental models by taking a look at the world around us,” she described. “By starting with these examples, I encourage the audience to broaden their understanding of how decentralization works in practice. The rest of the talk relates these questions back to daily challenges in the ecosystem of Bitcoin builders. Bitcoin relies on nodes running code around the world to ensure censorship resistance on the network. Upholding this goal also requires a decentralized model of development — the community needs to ensure that making changes to the code is not vulnerable to a single point of failure.”

She will also participate in a panel discussion alongside Bitcoin Magazine’s Aaron van Wirdum, Judica Founder Jeremy Rubin and Lightning Network Developer Tadge Dryja called “Evolving Bitcoin’s Code” to further explore when and how changes can be successfully made to Bitcoin’s underlying software.

Uttarwar sees Bitcoin 2023 as a chance to advocate for the work that she and the rest of the Bitcoin development community are doing every day, reinforcing what decentralization really means for all of us who enjoy the tools built on top of this technology.

“At Bitcoin 2023, I aim to encourage people to develop a richer understanding of the complexity of what it means to build a truly decentralized technology, and how the success of Bitcoin relies on the individuals within the community contributing their unique attention,” she concluded. “I look forward to getting a pulse of the greater community, learning more about what excites people as well as current pain points. I’m also excited to connect with different people and discover corners of conversation that reinforce my excitement for this space.”

This post Core Developer Amiti Uttarwar Will Be Reinforcing Decentralization At Bitcoin 2023 first appeared on Bitcoin Magazine and is written by Peter Chawaga.

Tuur Demeester has a self-described “out of the box” approach to macroeconomic analysis, and it’s one that has made his insight into Bitcoin’s unprecedented potential sought after by institutions (in 2021, Demeester’s bitcoin alpha fund Adamant Capital was sold to Blockstream, where he is now an advisor) as well as individuals (Demeester’s is ranked as the third “best Bitcoin Twitter account to follow” by social media analyst Hive.One).

Combining deep research into historical patterns, an academically-rigorous approach and a willingness to embrace new innovation, Demeester’s outlook on how Bitcoin fits into our wider world has been remarkable for its consistency and prescience for more than a decade.

He first recommended BTC as an investment to readers of his newsletter in 2012, when it was priced at $5. In 2013 (with bitcoin priced around $100), he told Bitcoin Magazine:

“I think bitcoin and the cryptocurrencies are the greatest investment opportunity of our day and age. First of all because bitcoin has all the qualities to make for an ideal money, to a greater extent than any digital or tangible commodity on the planet. Second, in contrast with traditional fiat money, bitcoin is designed for the internet; it’s open source, it’s mobile, fast, and it allows for personal privacy. Third, because we are approaching a bankruptcy event in the developed economies, both in banks and governments, I think that bitcoin, as a discrete and nonconfiscatable currency, will benefit greatly from the capital flight that will ensue.”

As more people around the world have realized Demeester is right about this nascent digital currency, his own perspective has continued to grow. In the introductory note to Adamant’s landmark research paper from 2019, “The Bitcoin Reformation,” Demeester made the case that bitcoin was not merely a new kind of money, but represented a fundamental shift with few precedents in history.

“In the past I’ve drawn parallels between bitcoin and the early petroleum industry, the search engine wars, the domain name markets, the growth of P2P file sharing, and internet protocols,” he explained. “But I kept feeling that I was failing to fundamentally grasp the magnitude of the epoch in which bitcoin functions as a catalyst. It wasn’t until I studied the era around the Protestant Reformation that I felt I’d found a potential blueprint of sufficient scope.”

Demeester continues to develop one of the most sought-after perspectives in Bitcoin and now he’s preparing to share that perspective at the upcoming Bitcoin 2023 event in Miami.

“I have a new report, ‘How To Position For The Bitcoin Boom,’ which I’m happy to talk about in Miami,” he told Bitcoin Magazine in an interview about the event. “I can’t say much as to the content right now, but rest assured it will be bullish on bitcoin. In general, my aim is always to inspire people to think for themselves by providing good source information and perspectives that they hadn’t considered before.”

Of course, today’s global, macroeconomic climate is one that will produce a lot of compelling Bitcoin content at the largest annual event dedicated to showcasing it. And this year is one that is bringing some of Demeester’s earliest insights about Bitcoin to fruition.

“It’s hard to predict the very short term, but my view for 2023 is that quantitative easing will make a comeback, and hence that we’ll see a surge of new inflation, in particular in rising commodity prices,” he said. “That is enormously bullish for bitcoin, because it’s one of the few true inflation hedges out there.”

The event will also be a chance to reflect on the progress Bitcoin is making as a technology, independent of BTC’s value relative to fiat currency or the erosion of the legacy financial system. With an outlook that has experienced numerous bear and bull cycles, Demeester is optimistic about how the current environment will produce more advanced and resilient Bitcoin projects.

“In bear markets, developers, entrepreneurs, politicians and other Bitcoin actors tend to take their time working on projects because they know that announcements — no matter how impressive — will generally see very little interest,” Demeester said. “I expect a huge amount of exciting announcements to come out in 2023, even though I can’t yet predict where exactly they will come from. I’m expecting serious progress in nation-state adoption, in Lightning technology, in bitcoin mining and in the use of bitcoin as a financial performance benchmark, and in bitcoin-backed mortgages.”

Finally, Demeester — a veteran of Bitcoin events, big and small, in bear markets and bull markets — is looking forward to checking in with the Bitcoin 2023 attendees who he’s known throughout his long and expansive career in the space, as well as meeting the new ones who will help take that journey into the future.

“I look forward to catching up with friends, some of whom I haven’t met in a long time, and also of course to meet new people,” Demeester concluded. “Bitcoin conferences like Bitcoin 2023 are so fun because they gather Bitcoin people from all around the world together in one place.”

This post With Insight Honed Since $5 BTC, Tuur Demeester Is Ready For Bitcoin 2023 first appeared on Bitcoin Magazine and is written by Peter Chawaga.