Bitcoin Runs on Paranoia. That’s the Beauty of It.
Wealth was always protected by the threat of violence, until the public blockchain came along.
Viking raid? No sweat. Bitcoin security is decentralized.
Photographer: Andy Buchanan/AFP/Getty Images
Traditionally, the only sort of financial system that works at scale is one decided by courts and enforced by threat of violence. Even back in the days of primitive firepower, deposit and lending activities took place in temples consecrated to the ancient gods, to underscore the idea that dishonesty would be punished.
Widespread belief in the threat reduces the need for active enforcement. The IRS relies on a system of voluntary compliance, meaning that individuals are responsible for reporting and calculating their own tax obligations. The IRS doesn’t have time to check everyone’s work, and less than 1 percent of tax returns are audited. Given the odds, one might expect rampant tax fraud. But we don’t see that. Our tax system functions reasonably well — because Americans fear their government.