Are Cryptocurrencies Real? Is it True? I Can’t Believe it…

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I don’t just hate the Australian Labor party. I don’t just hate the Australian Liberal party. I don’t just hate the Greens, just that One Nation mob, or just all those kooky independents.

I don’t discriminate. I hate them all.

Okay perhaps hate is a strong word. Maybe extreme disdain is more appropriate.

Either way, I simply think that all politicians are rubbish. I’m yet to find one that isn’t in someway compromised. And none of them that ever make it into power do so without owing favours to those who really pull the strings.

You could ramble off a big old list of things the government has stuffed up:

  • Same-sex marriage
  • Energy
  • The NBN
  • Multiple citizenship of Federal MPs
  • Double taxation on bitcoin and cryptocurrency

That’s just a taster.

These by the way are just things that the government has stuffed up in the last year and a bit. You could go further back and add hundreds more examples to that list.

Quite simply I’m at a loss to think of much they’ve done right in the last…umm…well my lifetime I guess.

While most of the time they’re as useless as an ashtray on a motorbike, occasionally…very occasionally they do something not half bad. In fact, they might have just done something incredibly progressive…

The Cypherpunks

When you think of progressive you can’t look past the current crypto boom. It is technological progress on a level the world wasn’t prepared for.

But this didn’t spring up overnight. Nothing truly revolutionary just appears out of nowhere.

And with crypto it’s actually been decades in the making. It’s just that most people didn’t know it was happening.

The world of cryptocurrencies, digital currency, digital tokens, or whatever you want to call them, isn’t a new idea.

While bitcoin is the first to gather any serious momentum, it’s not really the first. In fact you can trace digital currency back into the 90s.

In 2012, IEEE Spectrum published a piece titled, ‘Bitcoin: The Cryptoanarchists’ Answer to Cash’

It’s an excellent description of how bitcoin came to exist and the foundations and legacy of those attempts before it.

It explains,

The pursuit of an independent digital currency really got started in 1992, when Timothy May, a retired Intel physicist, invited a group of friends over to his house outside Santa Cruz, Calif., to discuss privacy and the nascent Internet.’

It continues,

By the end of the meeting, the group had given themselves a name — “cypherpunks” — and the superhero-like task of defending privacy across the digital world.’

The cypherpunk community were like financial anarchists. But even then the term anarchist isn’t really fair. They were simply trying to prevent centralised authority from pressing undue influence over people.

And these cypherpunks started using their skills to try and create ways for people to operate outside of the traditional system. For example in 1998 Wei Dai published information around a digital currency he called ‘b-money’.  The intention was, ‘…to enable online economies that are purely voluntary,’ and create these economies so they, ‘…couldn’t be taxed or regulated through the threat of force.’ 

Around this time Nick Szabo came up with the idea of ‘bit gold’. As he explained in a blog post from 2008,

Thus, it would be very nice if there were a protocol whereby unforgeably costly bits could be created online with minimal dependence on trusted third parties, and then securely stored, transferred, and assayed with similar minimal trust. Bit gold.

My proposal for bit gold is based on computing a string of bits from a string of challenge bits, using functions called variously “client puzzle function,” “proof of work function,” or “secure benchmark function.” The resulting string of bits is the proof of work. Where a one-way function is prohibitively difficult to compute backwards, a secure benchmark function ideally comes with a specific cost, measured in compute cycles, to compute backwards.’

You will note a lot of terminology these is similar to the functions of what we know as bitcoin today.

Now that’s not to say Nick Szabo is bitcoin’s mysterious creator Satoshi Nakamoto. But it’s almost certain some of bitcoin’s inspiration came from the likes of Szabo, Dai and other cypherpunks from the 90s.

These are the origins of cryptocurrency as we know it today. Now, we don’t expect the government to have been all over this as far back as the 90’s. But they’ve had a fair bit of time to get their head around it all.

Progressive? Really?

Remember bitcoin started its genesis block on January 3, 2009. It’s now been around for eight years, almost nine. Again, government wouldn’t have been that familiar with it in 2009, not that many people were.

But by the time 2013 rolled around bitcoin was taking off. It pushed past US$1,000 in price that year. And it was on the front page of mainstream news like Forbes.

That was now four years ago. But were the government taking it seriously then either? No they weren’t. It was until 2014 the government started thinking about it. Then they decided to try and apply law to it. And they made a huge error.

They decided crypto was akin to a barter arrangement. As such Australian businesses must pay goods-and-services tax (GST) if they sell digital currencies, and can be liable for the tax should they receive them as payment.

This double tax was a deathblow to the burgeoning crypto industry in Australia. And it forced a lot of bitcoin and crypto-related businesses offshore to more friendly regions…like Singapore.

For the last three years there has been no change. Until now. The government finally realises this may be an opportunity for the country. Just this year they’ve lifted the double taxation issue. And they’ve provided reasonable tax guidance on the use of cryptocurrencies.

But most importantly they’ve decided to amend legislation. These new changes make Australia a test bed for fintech businesses. This includes crypto projects.

The changes provide up to a two-year exemption from licensing requirements. That means small, start-up companies can test their tech without having to deal with costly regulation and licencing.

This could open up Australia to be the world’s hub for fintech companies. We could see a flood of new fintech and crypto businesses landing on Aussie shores.

It’s an incredibly progressive approach to new tech. And even more mind blowing is that it seems Australia is genuinely becoming highly receptive to the potential of crypto.

We think Australia could become a mecca for crypto in the near future. And if that’s how it plays out there could be huge opportunity to profit. Aussie-based cryptocurrency projects could be the next huge wave of crypto opportunity.

And it might just be thanks to a more relaxed approach from the government…


Sam Volkering,
Editor, Secret Crypto Network

About Sam Volkering

Sam Volkering is an Editor for Money Morning and is small-cap, cryptocurrency and technology expert.

He’s not interested in boring blue chip stocks. He’s after explosive investments; companies whose shares trade for cents on the dollar, cryptocurrencies that can deliver life-changing returns. He looks for the ‘edge of the bell curve’…

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