And while Canadian authorities moved against this funding source with the same alacrity and hammer-like intensity they displayed with the dollar-denominated fundraising sites, St. Louis was far more successful in distributing the money he raised to its intended recipients. According to the Rouleau Report, he managed to distribute 14.6 Bitcoin, or approximately $800,000, to the truckers. The remaining 6.7 Bitcoin, or less than $300,000, was eventually seized by police. (Note how the bulk of the left-hand orange line flows into the blue “Available to protestors” line on the chart’s right side.)
As a recent documentary by the Reason Foundation explains, “Financial censorship, or cutting off access to the global banking system, is one of the most powerful tools that governments have for punishing people.” The actions of Prime Minister Justin Trudeau government’s during the convoy certainly meet the definition of financial censorship. Virtually anyone who tried to make a donation in Canadian legal tender via electronic means found their efforts ultimately stymied. At the same time, St. Louis’ experience with Bitcoin suggests that cryptocurrencies may offer far greater personal privacy and, accordingly, stronger resistance to interference by third parties – including governments intent on exercising politically motivated financial censorship.
Here is what you need to know about how it happened. And why Ottawa wants to make sure it never happens again.
Bitcoin for Beginners
The world’s first cryptocurrency was created by an unknown person or group under the pseudonym Satoshi Nakamoto in 2009. “What is needed is an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party,” Satoshi wrote in the seminal document Bitcoin: A Peer-to-Peer Electronic Cash System.
Bitcoin and newer cryptocurrencies such as Ethereum, Litecoin or Dogecoin rely on a foundational technology called blockchain. This is effectively a digital ledger, similar to the records of a banking statement, that allows a digital currency to fulfill the role of traditional money by acting as a unit of exchange. The necessary security is provided through advanced encryption – conversion of all data from a readable into an encoded form – hence the “crypto” in cryptocurrencies.
Blockchain has two key features. First, unlike traditional centralized databases, it exists on many computers, or nodes, around the globe. In this way it cannot be shut down; no single entity has control over it. Second, it is immutable. Every time a transaction occurs, it is recorded in an ever-lengthening chain of information blocks that cannot be tampered with. This chaining is done through a “consensus mechanism,” which verifies the validity and security of any transaction. Unlike traditional currencies issued by governments, the consensus mechanism operates without the need for a trusted intermediary, such as a bank, to oversee the process.
Since Bitcoins are electronic, they can reside in a trading platform similar to how stocks and bonds are bought and sold. They can also be held in a crypto “wallet.” A crypto wallet is simply a place that holds the private digital key (similar to a login ID and password) necessary to access and manage a user’s cryptocurrency. While this wallet can be digital, it can also be as rudimentary as a piece of paper printed with the key, or a “seed phrase” – 25 random words that can be used to recover the key. A wallet can also be a special physical device with sophisticated tamper-proof security features, or a digital application (either online or locally installed) that holds the key and is used to interact with the cryptocurrency.
Another important aspect of cryptocurrencies is how they are created. Bitcoins are “mined” rather than minted or printed. Bitcoin miners compete with each other to solve the complex cryptography problems required to maintain the consensus mechanism, and are rewarded for their effort with new Bitcoin. Anyone can become a miner, as long as he or she has the necessary computer hardware and a data centre with a sufficiently robust air conditioning system to deal with the heat generated by all that computing effort. Financial success in mining thus becomes a race between the Bitcoin the miner earns and their electricity bill.
How to Seize Crypto – Simple and Advanced Techniques
If you hold your Bitcoin in a trading platform or online application wallet, your wallet is technically controlled by the third party that manages that platform or app. This unfortunately means a government can issue an order that the funds be blocked or transferred to another, government-controlled wallet address. In this sense, Bitcoin is no different from funds held in ordinary bank accounts or on the crowdfunding platforms Ottawa froze during last year’s imposition of the Emergencies Act.