According to documents published by The Intercept, The Pentagon has created a war game titled "Zbellion" to prepare for a possible future scenario where members of younger generations use cryptocurrency to support social change and attack current institutions. Make no mistake, while the blockchain industry has been working away at innovating and building the next generation of systems and money, the old systems have been looking at it as a military-grade threat.
Cryptocurrency has clearly been labeled as so revolutionary that it's perceived as dangerous by the powers that be. Let's look at why, as well as whether or not this perceived threat rings true today.
Crypto's True Value
Without a doubt, the greatest advantage of cryptocurrency is that it's censorship resistant. If done right, it's very difficult to stop due to the lack of a central party that can be coerced into stopping transactions for occurring. This stuff is crypto 101, but I feel the need to point out that it's the single most important, as well as both revolutionary and dangerous, aspect of the technology. Without it, let's be honest, no ones cares, certainly not the Pentagon.
The whole original point of Bitcoin was to create a new kind of money that couldn't be manipulated or controlled (see above). In doing so, it created a new asset class and monetary standard which, while fledgling, nonetheless provides an alternative to current systems. This means that expensive wars can't be financed by arbitrarily inflating the supply. A tamper-resistant sound money is "cryptonite" (I had to) to the global warfare state.
As included in the very title of the Bitcoin whitepaper, an electronic cash system is what we're aiming for. There's two things that cryptocurrency does really well, both of which are scary to the entrenched powers: it allows practical value transfers to and from anyone anywhere in the world, and provides a permanent and transparent record of such. If anyone can finance anything, no one group can hold the upper hand by shutting down the payment networks of the opposition while maintaining theirs intact. And, if everything is transparent, theft, fraud, and embezzlement become more difficult, and most importantly, glaringly obvious. Even though many cryptocurrencies offer advanced privacy features, these are either optional or the entire point of the coin, meaning that a public entity seeking to avoid accountability will be found out very quickly, even if what they did with the money isn't knowable.
Often downplayed now, cryptocurrency at its core provides unforeseen levels of financial privacy. This comes from its pseudonymous and identity-less nature, but over the past half-decade or more various projects have implemented innovations to improve privacy. Knowledge is power, information is a currency, and the more of your personal financial dealings are known, the more power others have over you. A great way to thwart a cause or insurrection is to find all its financial backers and shut them down by force. Privacy preserves the right to dissent.
Does Crypto Today Live Up To This "Threat"?
Censorship resistance remains in theory, tough in practice
The top cryptocurrency projects today still maintain a good level of censorship-resistance, and some have taken further measures to strengthen their ability to resist attacks: Dash's ChainLocks, DigiByte's MultiAlgo, Horizen's enhanced consensus algorithm, etc. In practice, things could probably be a little better, though. The vast majority of users still acquire cryptocurrency through a few centralized exchanges, many of which are used to actually store their funds. Few options exist to extract value out of funds by spending them, leading to the same old centralized gateways for liquidating. It's definitely a good start to being truly censorship-resistance, but ecosystem adoption has lagged a bit.
Privacy keeps evolving, but needs merchant acceptance to count
Privacy is a constant arms race between those developing increasingly solid tech for obfuscating transaction activity, and those seeking to break said tech. While this will be a constant problem that developers and privacy advocates will have to face, at least it's being aggressively handled by a variety of top projects and top talent. The challenge comes from limited adoption, compounded by regulatory hurdles. If there are only a few places to acquire or offload private funds, that inherently harms their usefulness as money, particularly in a lack of "legitimate" or mainstream uses. The only way to properly blend in is to be able to buy your coffee and pay your mundane bills with untraceable funds.
Focus is away from payments, even if some projects are still trying
As you can see from both points above, a common theme is that cryptocurrencies would become much more robust if only they were used more. This department has definitely been lagging due to a shift away from using the technology primarily to facilitate payments. Plenty of projects, like Dash and Bitcoin Cash, still care to bring digital cash mainstream, but they're few and far between, and since Bitcoin, which formerly represented nearly all of this use case, abandoned the mission, the entire industry's direction took a hit.
The Pentagon correctly identified why cryptocurrencies could one day pose a threat to the establishment. The question is, when will the technology live up to its revolutionary promise?
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