People forget that, for that money to have any value, you eventually have to interact with the rest of human society. As another commenter said, we've been dealing with this for centuries--black markets, cartels, smugglers, etc. Everything old is new again.
That could work, but cryptocurrencies are more convenient. You could transfer your coins anywhere in the world much easier. For example, you could donate your coins Wikileaks undetected, but it's much harder to do that with cash buried in the desert. It's also possible that the government may declare some bills invalid (what happened in India with larger bills). Also, government could inflate away your wealth by printing more currency.
It's also possible that the government may declare some bills invalid (what happened in India with larger bills). Also, government could inflate away your wealth by printing more currency.
At end of the day governments control both the network via (ISPs & Networking equipment) and processors (Try producing an 8080 in your backyard.).
You make mistake of assuming that countries won't put up a global firewall that makes bitcoin/ether network impossible to operate. If China can filter traffic at internet scale, crippling Bitcoin network even if say EU/US/China are on board is trivial.
Currencies are backed by the only thing that matters, its will/trust of the people. And no amount of crypto changes that. Unless of course you have some magical way of baking silicon on your own into processors and other chips used in computers and networking equipment in your backyard.
Governments are not a conscious entity that is separate from society. They are institutions run by a collection parties with numerous competing and aligning interests, and with extensive stakes in society at large. They're not going to do something as massively destructive to society at large as ban encryption and prohibit all microprocessors lacking a back door.
HN/BitcoinTalk/etc, suffer from extreme (pro-crypto) filter bubble. The average man/woman on the street ("society") could care less about Bitcoin/Ether. Just look at the whole Net Neutrality debate.
Bitcoin/Ether barely register in terms of the total economic activity (75 Billion $). With significant fraction unusable. They will either be tamed or destroyed.
In fact another way of looking at cryptocurrencies is as a revolt against the Visa/MasterCard duo-poly & regulations that has made digital transactions too difficult. The moment digital transactions become cheaper/more-efficient, the allure of crypto-currencies will disappear.
It's not Bitcoin/Ether that the average person on the street cares about. It's the collateral damage that will be done if broad categories of technology are banned or have their security completely compromised. That's the only way to stop a purely informational technology.
As for the allure of cryptocurrency, only time will tell. I predict they will continue to grow in prominence.
> The moment digital transactions become cheaper/more-efficient, the allure of crypto-currencies will disappear.
Except for drugs, contraband, money laundering, and evading capital controls. Which, from day one, has been the entire actual value of these things and remains so.
That's a reasonably big business to be sure, but it will always remain a niche element and always be under fire, for obvious reasons.
While cryptocurrencies have been great (so far) for speculation, give how quickly their worth changes they make a pretty poor store of wealth. I'd prefer my cash to be worth in 1 year roughly the same as it's worth today.
And if all you ever do is hold on to them your high score looks great, the problem is that if rent comes due in USD in the middle of a down swing. What was 1M usd is now 100K usd and rent is now 1-2% of your bitcoin instead of .1-2%, if you get unlucky a few times that can start eating your holdings real quick. Medium to long term growth only matters in assets you won't need to spend in the short term.
You can trade for goods or services with your coins. You cannot trade for anything with cash dug in the desert. Cash is confiscated daily by authorities.
If I buy a house or a car with cryptocurrency that can be confiscated. If I live a lavish lifestyle while under a judgement I'm not paying, then the court can imprison me indefinitely under contempt of court.
Courts have centuries of case law for how to deal with people that hide assets from judgements. They're not going to care whether your assets are in a shell company or a cryptocurrency.
You are correct, when it comes to protecting your assets from (minimally competent) authorities, cryptocurrencies aren't much better than a hole in the ground full of cash.
Where they are much better than a hole in the ground is when it comes to moving your assets to a different jurisdiction. As long as you can physically get yourself from Somecountry to Othercountry, all your e-cash will be accessible in Othercountry regardless of what Somecountry may have to say about it. And even if Somecountry imprisons you, you can still hand over your e-cash to someone else with a single message.
I can't think of any asset that offers that particular advantage.
Sure, but extradition treaties make the list of viable country hops limited.
You also can only pull this trick once: after you are a known flight risk the next country to come after you will be careful to make sure your detainment comes as a surprise.
Finally, as much fun as it can be to game out, for how many people in the world is this use case actually applicable?
You're thinking of a known criminal holding ill-gotten funds, whom his new country would like to prosecute as much as the old one.
Think instead of an ordinary person fleeing a disintegrating economy and/or an oppressive regime, who had stashed away some e-cash for such an eventuality.
The offshore banking industry has been helping people hide, launder and transfer funds for centuries. It's not infallible, but neither is the process of converting your cryto assets into something readily accepted in Othercountry.
The hard part has always been getting it out and not getting caught.
Nothing is truly yours.