Bitcoin may be let loose now Silk Road has been shut down

Now that Silk Road has closed without any discernible damage to Bitcoin's value, maybe we can accept it's here to stay.

You can't kill Bitcoin. It will not die. The Silk Road shutdown is the second event to challenge its stability and it’s come through with barely a scratch. And, despite the libertarian beliefs of many of its advocates, in part that’s due to Bitcoin going legit in the eyes of the law.

To recap, Silk Road was an online marketplace where users could buy and sell (almost) anything. Mostly that meant drugs, and in the criminal complaint filed by the FBI against its alleged owner/operator Ross Ulbricht it lists 1,229,465 transactions between 6 February and 23 July 2013 - or 7,362 transactions a day - all of which were conducted using Bitcoin.

Indeed, up until this year the story of Bitcoin and the story of Silk Road were essentially the same. The unstable bubble that grew over the first three months of 2013 to burst in April was driven at least partly by media commentary about Bitcoin being a bubble, and it had to be a bubble because there's no reason to use Bitcoin for anything other than gambling or drugs.

Except, Bitcoin recovered relatively quickly - and its price has remained stable right up until the FBI arrested Ulbricht in San Francisco. People no longer bother keeping lists of businesses that accept Bitcoin up to date because there are just too many, and it began to gain something quite crucial to its long-term survival - legitimacy.

Here's a graph that shows what I mean:

That's the trading chart for the past month on Mt Gox, the world’s largest Bitcoin trading exchange. That big spike is the market reacting to the news of Ulbricht’s arrest, and while the price drops for maybe a day, it’s soon back to the level it was before the FBI’s announcement. That’s not panic selling by Bitcoin users, worried that their assets will soon be worthless.

Now look at this:

Perhaps this is more tenuous as evidence, but that’s the Google Trends data for mentions of Bitcoin versus mentions of Silk Road. They both jump as the arrest is reported around the world, but Bitcoin by not as much. It's as if Bitcoin isn't as central to the story of Silk Road as it once was. The irony here, for a currency that sidesteps government authority, is that governments may have helped in this.

The stereotype of the Bitcoin advocate is someone who’s a libertarian, an Ayn Rand fan, a minarchist who feels that a return to the gold standard would solve most of the world’s economic problems. Bitcoin - the ever-deflating, decentralised, uncontrollable currency - is meant to be the 21st century gold standard. However, despite Bitcoin’s clear ability to be used to circumvent the law, many of its functions can be easily absorbed by the rest of the legitimate economy.

Bitcoin’s central blockchain records every transaction, and if a user is public about owning a wallet there’s no way they can send or receive funds without a note being generated. That’s great for tax agencies. “Tumblers” - which split up transactions into tiny amounts and mix them with other payments to make them so hard to trace even the NSA can’t manage it - can be used for laundering cash, but they’re not built into the infrastructure.

Several governments have given their blessings for Bitcoin. There's been a meeting at Number 10 about drawing up a regulatory framework, and the German government has recognised it as "private money". The US government has subpoenaed large exchanges to get an idea of what kind of tax evasion might be happening, and those exchanges haven't really resisted. Some of them have actually started doing what most other industries do, and started sending lobbyists to Washington DC.

Brian Patrick Eha at the New Yorker asked the question "Could the Silk Road closure be good for Bitcoin?" two days after the arrest of Ulbricht, before it became clear that Bitcoin's price had, at least, been unaffected. He quotes Adam Levine, the editor-in-chief of the Let's Talk Bitcoin! podcast:

It seems inevitable that regulation will be a part of mainstream legitimacy for Bitcoin," Levine said. "The thought is, even if it changes it for the worse a little bit, it will gain much more in legitimacy.

That’s going to worry a lot of the people who built Bitcoin up to where it is now, but could be the price it pays for actually fulfilling some of its hyped potential.

A Bitcoin keychain. Photo: BTC Keychain/Flickr

Ian Steadman is a staff science and technology writer at the New Statesman. He is on Twitter as @iansteadman.

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The Home Office made Theresa May. But it could still destroy her

Even politicians who leave the Home Office a success may find themselves dogged by it. 

Good morning. When Theresa May left the Home Office for the last time, she told civil servants that there would always be a little bit of the Home Office inside her.

She meant in terms of its enduring effect on her, but today is a reminder of its enduring ability to do damage on her reputation in the present day.

The case of Jamal al-Harith, released from Guantanamo Bay under David Blunkett but handed a £1m compensation payout under Theresa May, who last week died in a suicide bomb attack on Iraqi forces in Mosul, where he was fighting on behalf of Isis. 

For all Blunkett left in the wake of a scandal, his handling of the department was seen to be effective and his reputation was enhanced, rather than diminished, by his tenure. May's reputation as a "safe pair of hands" in the country, as "one of us" on immigration as far as the Conservative right is concerned and her credibility as not just another headbanger on stop and search all come from her long tenure at the Home Office. 

The event was the cue for the Mail to engage in its preferred sport of Blair-bashing. It’s all his fault for the payout – which in addition to buying al-Harith a house may also have fattened the pockets of IS – and the release. Not so fast, replied Blair in a punchy statement: didn’t you campaign for him to be released, and wasn’t the payout approved by your old pal Theresa May? (I paraphrase slightly.)

That resulted in a difficult Q&A for Downing Street’s spokesman yesterday, which HuffPo’s Paul Waugh has posted in full here. As it was May’s old department which has the job of keeping tabs on domestic terror threats the row rebounds onto her. 

Blair is right to say that every government has to “balance proper concern for civil liberties with desire to protect our security”. And it would be an act of spectacular revisionism to declare that Blair’s government was overly concerned with civil liberty rather than internal security.

Whether al-Harith should never have been freed or, as his family believe, was picked up by mistake before being radicalised in prison is an open question. Certainly the journey from wrongly-incarcerated fellow traveller to hardened terrorist is one that we’ve seen before in Northern Ireland and may have occurred here.

Regardless, the presumption of innocence is an important one but it means that occasionally, that means that someone goes on to commit crimes again. (The case of Ian Stewart, convicted of murdering the author Helen Bailey yesterday, and who may have murdered his first wife Diane Stewart as well, is another example of this.)

Nonetheless, May won’t have got that right every time. Her tenure at the Home Office, so crucial to her reputation as a “safe pair of hands”, may yet be weaponised by a clever rival, whether from inside or outside the Conservative Party. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.