• Sun. Aug 14th, 2022

Why it’s almost impossible to close cryptocurrencies

Since Bitcoin‘s (CRYPTO: BTC) Since its inception, regulators around the world have dabbled in shutting down the world’s first peer-to-peer (P2P) electronic payment network. Fear, uncertainty and doubt surrounding regulatory crackdowns are ingrained in investor psychology despite mixed results. In early September, the market capitalization of cryptocurrencies fell more than 20% to a low when China introduced a new set of legal restrictions on digital currency.

But it’s important to note that not all of these crackdowns have dealt crypto the final blow. In fact, Bitcoin has grown over 35,000% since its inception and now has a market capitalization of over $ 900 billion. So why is it so hard to put an end to cryptocurrencies?

Image source: Getty Images.

The resilience of cryptography

Cryptography is an area that strongly favors the defender over the attacker. For example, a computer or phone wallet takes less than a millisecond to generate a new wallet address (public key) and a unique phrase (private key) to unlock its entry. However, it would take millions of years for machines to guess the right key combination, not to mention the enormous resources it would consume.

Legal limits

There is no other plausible way to ban cryptocurrencies than to completely rewrite human rights laws. It doesn’t take too long for users to upload wallets to an app store or open an account and trade cryptos. But this is not the case for regulators as they would have to get a court order to seize the wallets / accounts. Even then, the seized assets would be useless if they failed to obtain the private keys of the users.

Heck, even dictatorships can’t outright ban crypto. Take China; the country has banned mining, declared all crypto transactions illegal, banned financial institutions from doing business with crypto investors, etc. After all, users can create thousands of wallets and accounts in the time it takes law enforcement agencies to shut down one.

A not-so-inspiring track record

Anyone who has read Sun Tzu’s military classic The art of War will understand the importance of never underestimating your enemy. However, it is equally important not to overestimate them. Investors in the throes of FUD regulation can find the reassurance they need by simply checking the background of governments regarding the shutdown of P2P networks.

In 2001, the launch of P2P file sharing software BitTorrent immediately caught the attention of copyright advocates and law enforcement. Ten years later, there are reportedly over 200,000 lawsuits against BitTorrent and its users in the United States alone, citing intellectual property infringements. But as with crypto, there is no central headquarters that stores BitTorrent servers that regulators can attack. In addition, its users are spread all over the world, which makes the application practically impossible due to the limits of sovereignty.

Either way, the end result of an ongoing two-decade offensive against BitTorrent is that the software has grown to be adopted by over 2 billion users. If that wasn’t humiliating enough, BitTorrent recently launched its own cryptocurrency, also known as BitTorrent (CRYPTO: BTT). The tokens have reached a market cap of $ 2.3 billion and have returned 2,812.24% since their inception in 2019.

A company beyond difficulty

Keep in mind that the field of cryptocurrency is also constantly changing. By the time the stop tactics materialize, the crypto moat will have been stepped up to the next level. For example, doomsayers claim that once quantum computers come to fruition in a few decades, they will give regulators the ability to crack the keys to the wallet. However, all it takes is an upgrade of the blockchain to a more secure type of crypto to reduce the difficulty of decryption at the post-quantum level. In short, regulatory risks cause nothing more than market corrections that occur from time to time. Investors should be much more concerned about the hypercorrelation of cryptocurrencies with overall stock market sales and internal signs of fraud within the peer-to-peer blockchain financial community.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Questioning an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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