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By Beautyon via Decentralize Today
Posted July 27, 2020
In The United States District Court for the District of Columbia, “UNITED STATES OF AMERICA v. LARRY DEAN HARMON”, Chief Judge Beryl A. Howell (a Barack Hussein Obama appointee) made a problematic ruling on the nature of Bitcoin, relying only on hearsay and third party sources, which misguided her to a totally wrong conclusion. Here we dissect the part of the judgement that mischaracterises Bitcoin. It is full of errors, and should not have been used to make the judgement.
Bitcoin is not “a decentralized form of electronic or digital currency that exists only on the internet”. Bitcoin is a database, copies of which are held by people who download a piece of software to run it. Bitcoin is also not “an alternative currency” and simply asserting that it is does not make it so. Bitcoin is never transferred anywhere. Entries are made in the publicly visible database. No one “owns” Bitcoin. The fact that Bitcoin has units does not confer the property of money to it. For example, memory storage devices and rulers have units but are not considered money.
Any proof that Bitcoin has a characteristic cannot come from case law or a layman. An accurate description that is not description by analogy is possible in this matter, and in every instance this is the only description that should be submitted to any court in any proceeding. Relying on second hand descriptions of what Bitcoin is is not necessary, and it is not correct to describe discreet technical operations and devices by analogy only.
Bitcoin is not “an alternative currency”. It is a database. Bitcoin transactions are entries in a database, which is identical in nature to all other databases where information is stored. The numbers in the Bitcoin database can represent literally anything, because it is data. The idea that Bitcoin is money rests solely in the minds of the people who choose to treat Bitcoin as money. It is not actual money itself. Bitcoin is never transferred anywhere. Bitcoin users sign messages and write them to the global database. Nothing is transferred from one person to another in Bitcoin, and ownership is never transferred in Bitcoin; all data in the Bitcoin network is a property of the Bitcoin database, and not of any particular user.
The capitalisation conventions in Bitcoin have no bearing on the nature of Bitcoin, and have been adopted by people desperate to try and contextualise Bitcoin. Anyone can make a copy of the Bitcoin network’s database and call it something else, with its own naming conventions. That would not make any aspect of the copy money. It is not true that “tokens” are transferred in Bitcoin. The use of the word “token” emerged from users of Social Media attempting to contextualise Bitcoin through analogy. At no point is Bitcoin ever a “token”, like a subway token or ticket.
Units of Bitcoin are not stored by reference to an address. Bitcoin addresses are keys used to sign messages that are sent to the network for storage. The authors making this false claims cited in the memorandum admit themselves that they are analogising the address to a user name and that addresses are similar to a bank account number, both of which are absolutely false.
Bitcoin is never transferred from one address to another. Bitcoin is always sent to the network and stored. The controller of a Bitcoin address never receives anything, because nothing is transferred. Bitcoin users scan the database to see if a message signed to their key has been written to the database. This is not “reception” in any sense, because the location of the “recipient” is immaterial. People on the ground seeing skywriting are not, “recipients of messages”, they are viewers only. This is how Bitcoin works. The nodes that store copies of the Bitcoin database are not linked together; they are all separate and totally independent of each other.
The “sending” and “receiving” terms in Bitcoin are analogies adopted by the computer illiterate public to help them contextualise Bitcoin’s internal processes. Bitcoin confirmations are records on the database, and nothing more. Bitcoin is no different in function to forum software that makes note of what author wrote what text. The only difference being that people have unilaterally chosen to accept messages in lieu of money. This is a choice the public has made that has nothing to do with Bitcoin’s nature, and there have been several other attempts to do what Bitcoin does that the public refused to accept. All of these systems relied on databases, and the only difference between them all is the public’s acceptance.
Bitcoin addresses are not owned by anyone. They are pieces of text that have a context in the Bitcoin database. Users of Bitcoin have the power to sign messages with keys they keep secret, but they are not owners of those strings and neither are they owners of the copies of the database they use to verify messages. The only way a claim that users “own” keys is to suffix with “in the ordinary sense of the word”, which is not sufficient for a court proceeding where only material facts are to be taken into consideration.
Bitcoin keys can be stored in many media like any other text, or no media at all, in the form of memorised words. To make the claim that a set of memorised words is money stretches the credulity of even the most stupid person. Bitcoin is not money, has never been money, and is text only. It is always text, all the time, and you cannot assert that it is money because a computer illiterate author asserts that it is because he wants to sell a book.
Similarly, no amount of case law can turn Bitcoin into money. The genetically modified seed that grew the tree of “Bitcoin is money” found its genesis with computer illiterates and ambulance chasers desperate to sell books and run crony capitalist front foundations to control this new phenomenon. They don’t have the language or understanding to classify Bitcoin, and those that have the intelligence to do so, quickly realise that they can’t possibly tell the truth, or their new careers as Bitcoin gatekeepers and “Thought Leaders” will be over. They know that Bitcoin is just a database that people accept for accounting. It is as dull and pedestrian as that, and you can’t run a “Legal Centre” or be a “Thought Leader” in something boring and mundane as an Excel spreadsheet.
The various guides written for “Legal Professionals” will all need to be deprecated and replaced with works that accurately describe how Bitoin works without analogies, comparing its operation to other databases that are in common use. This is the only way the “Legal Professional” and the courts will ever be able to rule on Bitcoin correctly. If they do not, then all databases on earth will be subject to the same rulings that have been made against users of Bitcoin.
It will mean that all online video game companies could be sued for being “Money Transmitters” because users can trade in game goods between each other. None of the judgements against Bitcoin users make a distinction that separates game monies with Bitcoin, and the mere difference in operation does not count as a difference in nature. Both Bitcoin and MySQL (a database) are databases working with the same thing; data, or plain text.
In order to say that Bitcoin is different to MySQL in law, a distinction would need to be made so that math operations required for Bitcoin are legally distinct, separate and controlled. This would be a direct violation of the Constitution, and impossible in the USA.
Operating a Bitcoin full node or sending messages to the network is not “Money Transmission”, even if the service is paid for. If you accept money to transmit a message to the Bitcoin network you are no different to a telegraph operator. You can charge by whatever means you see fit to perform this service, per word or per character, and this is the same in Bitcoin, because the database entries are scarce. You therefore, in order to run a business, need to charge sufficient money to make a profit and replace your Bitcoin so you can continue to send messages on the network. This is not “Money Transmission” and Bitcoin has no official price either. If the price of Bitcoin by agreement of the two parties using the network is agreed to be 0, does this mean that the act is still money transmission, or not? These are the difficult questions that people who assert that Bitcoin is money cannot and will not answer, because they’re either ignorant or they know the truth and want to obscure it for their own personal gain.
In no way is writing messages on a database “engaging in the business of receiving money for transmission or transmitting money within the United States, or to locations abroad, by any and all means, including but not limited to payment instrument, wire, facsimile, or electronic transfer.” If this were not the case, every text message that had a number in it could be construed as “Money Transmission” if the two parties agreed to a fee to send or receive text. When your accounts are prepared by H&R Block, and they send you the forms to sign, you have paid them for this service. Their records are kept on a database, and you sign and return the forms for a fee. This is no different to Bitcoin.
- A text is prepared
- You sign the text with your unique signature
- You return the text for storage in a database
- You are charged for the service by a service provider
The database used is irrelevant, and so is the means of identifying you and the method used to identify you by a signature. By this, you can see that H&R Block is, “running a Blockchain”, and their name should be changed to “H&R Blockchain”.
Bitcoins are not funds, any more than your accounts or text messages are “funds”. Calling Bitcoin funds is an analogy used to put Bitcoin in a context. Similarly, in the definition of Money Transfer, “electronic transfer” applies only to dollars sent through the traditional banking network. It does not apply to any other context, and cannot, because if it did, it would capture all electronic transfers of any kind that contained an explicit representation of money, reference to money or number.
Bitcoin Tumblers are not “MTAs”. If any court asserts that they are, they will be capturing all dice on earth. A Bitcoin tumbler is nothing more than a computer programme that randomises numbers in a database. It does not accept money as inputs and does not output money either. It takes numbers as inputs, performs calculations on them and then outputs different numbers. This operation has nothing to do with money, and in fact could be done manually with a pencil and paper.
Bitcoin is not a medium of exchange, method of payment, or store of value. For certain, only a fool would assert that Bitcoin is a store of value, since it has historically been very bad at doing that in fiat terms. Bitcoin is not a method of payment either; people have chosen to use it to pay for goods and services, but that doesn’t make Bitcoin a method of payment. People can use bananas to pay for goods and services, that doesn’t make them a method of payment. Bitcoin is not a medium of exchange either; it is a database of numbers. Numbers can be used to represent anything, and so can Bitcoin. People agree that it is a medium of exchange today. They may not in the future. That has nothing to do with the nature of Bitcoin. Common parlance does not change the nature of things, and defendants claiming that Bitcoin is money does not make Bitcoin money. Slave owners could testify in court that people he owns are “his property” and only a terribly immoral person would assert that because a defendant said this that people are transformed into property. The same is true of Bitcoin.
Courts do not have the power to claim that human beings are property for the purposes of a judgement, and they do not have the power to create a form of money out of thin air. Only the Congress and Senate have the power to say what money is in the United States. The ordinary meaning of money is also not applicable, as is the Appeal to the People fallacy. The court cannot prove what it is asserting about Bitcoin, and it refers to fallacious arguments to do so without making any direct reference to what Bitcoin is. This should tell you that the court doesn’t know what Bitcoin is and it simply wanted to punish a man who very foolishly sold drugs online.
Relying on other courts is also faulty. Those courts are similarly ignorant of what Bitcoin is, and are all referring to the same fundamentally flawed material to make their wrong judgements. “The federal district courts have unanimously and unequivocally concluded that Bitcoin constitutes money.” This unanimity is the Faulty Appeal to Authority Fallacy. The court is not showing us what Bitcoin is, it is merely telling us what other people have said it is and it is relying on its “overwhelming authority” to badger, bully and railroad.
All of this is enough for a higher, neutral court to reject this flawed ruling and dismiss it. Further to this, this ruling has no effect outside of the District of Columbia and cannot not affect any business in another jurisdiction, like BitMEX in Hong Kong or the thousands of companies that will inevitably be formed to work on the new global database.
This judgement is vindictive and designed to punish someone who made a very bad mistake and accepted Bitcoin in return for services that are illegal in the USA. By making this entirely erroneous judgement, the court is damaging the reputation of the District of Columbia as a place to do global business with the Bitcoin database. Fortunately, billions are already being made outside of the District world-wide, and this judgement is moot everywhere on earth but there.