My previous article What Gives Cryptocurrency Value touched on the usefulness and utility of Bitcoin in the marketplace. To recap, Bitcoin allows the user to send censorship resistant, permission-less value transfer. In other words, Bitcoin can be used to send “digital cash” across borders via the internet. This means that anyone can send money to anywhere in the world without the need for a bank or traditional money transmitter. With that, what are some of the Bitcoin use cases for sending a censorship resistant transaction?
Buying banned products
The obvious answer is to circumvent money transmission laws. You may not live in a tyrannical country, but it has to be appreciated that there are tyrannical regimes throughout the world, and the use of Bitcoin liberates individuals who are oppressed under these governments. Bitcoin does this by enabling the user to purchase goods and services which are deemed to be illicit by a particular government. Yes, Bitcoin can certainly be used to purchase illegal drugs, but it can also be used to purchase banned products such as foreign baby formula, video games, medicinal cannabis and religious text.
Bitcoin can also be used to circumvent political blockades. A classic example is Wikileaks, an international non-profit news organisation that publishes secret information, news leaks and classified media provided by anonymous sources. Their publishing of secret government documents led to the US government ordering the financial blockade of donations to Wikileaks. A number of US banks, Visa, Mastercard and PayPal all participated in this financial censorship in an attempt to choke Wikileaks’ source of funding. However, they were able to continue to operate due to the donations provided to them in Bitcoin.
Regardless of what you may think about Wikileaks, this prompts the critical question “Should governments be allowed to censor payments to political parties and news organisations?”
Furthermore, should governments block the movement of funds in and out of a country at all? It’s well documented that, for example, the Chinese government heavily restricts capital flows out of their country. Bitcoin serves a key role of facilitating the transfer of value across borders, particularly in countries like China. In some instances, moving one’s wealth across borders during a time of war is a life or death issue. During World War 2, gold coins were used to transfer wealth across borders. In this digital age, Bitcoin serves as a far superior option for transferring wealth across state lines.
Censorship resistant international transfers
Bitcoin can also be used for international remittances. If you live in a developed country such as the US or Australia, transferring funds internationally through the legacy banking system is a simple process. However some banks and even entire countries have been blocked from participating in foreign trade. Countries such as Iran, Cuba and Yemen, just to name a few, have been completely excluded from the international banking system. Because of this, Bitcoin can be used to transfer value to and from these countries in a permission-less, censorship resistant way.
Perhaps the most important use case Bitcoin will have in the future is to bank the unbanked. It’s hard to believe in this day and age there are still over two billion people with no access to basic banking services. Sending and accepting Bitcoin payments is a very simple process. It doesn’t require the user to give their name, ID, address or tax file number. By simply downloading a Bitcoin wallet app on a smart phone, a new Bitcoin user can essentially be ‘banked’ and able to participate in the global economy.
Push not pull
Taking this a step further, Bitcoin can also be used in place of credit cards to purchase goods online. Some countries, such as Nigeria, are so associated with fraud that online retailers simply won’t accept credit card transactions from these counties. In fact, almost one third of all credit card transactions from Africa are fraudulent. Unlike credit cards which are a pull system, meaning that funds are pulled from an account, Bitcoin is a push system, meaning that the user pushes funds to a retailer when making a payment. This eliminates payment fraud altogether, meaning that online merchants can offer their products to countries who are traditionally associated with credit card fraud.
Recently though, Bitcoin has acted more as a store of value than a currency. Bitcoin is often compared to gold due to its scarcity and difficulty to mine. But unlike gold, because Bitcoin is a digital asset that doesn’t exist in the physical world, it may be the only asset in the world which cannot be confiscated. Bank deposits, property, shares, and even gold can be confiscated. Bitcoin acts as an unconfiscatable Swiss bank account for users who wish to store their wealth outside the legacy financial system.
Freedom and liberty
In conclusion, there are a variety of Bitcoin use cases. It promotes free speech by allowing users to donate to cutting edge political news organisations. It respects personal freedom by allowing holders to spend their money however they wish without censorship from banks and money transmitters. And it upholds property rights because of its unconfiscatable nature. For these reasons, Bitcoin’s biggest use case is the promotion of individual freedom and liberty.