Logo for the e-gold website.e-gold is a private digital currency founded in 1996 by Dr. Douglas Jackson and Barry K. Downey that facilitated the transfer of gold between members of their website instantly using modern technology.e-gold is unique from historic alternatives to federal currency in that it is purely digital in nature and that the transactions were completely irreversible.Although the website was likely started with benevolent intentions, it quickly became a haven for criminals.The irreversibility of the gold transfers made e-gold an indispensable tool for money launderers, identity thieves, fraudulent “financial” investors, and purchasers of child pornography.Furthermore, the irreversibility of e-gold transactions left one without remedy when one’s account was compromised by hackers or phishers leaving a victim.By 2006, e-gold’s corporate governance realized that the website was being used for non-trivial illegal activities and began blocking accounts.CEO Douglas Jackson released the following statement, “e-gold operates legally and does not condone persons attempting to use e-gold for criminal activity.

e-gold has a long history of cooperation with law enforcement agencies in the US and worldwide, providing data and investigative assistance in response to lawful requests.” Soon after in 2007, the U.S.government mandated e-gold to block several e-gold accounts running services similar to e-gold before indicting e-gold of several criminal activities.The crux of the argument against e-gold was that e-gold did not do enough to prevent illegal activity, by not having a mechanism in place that stopped fraudulent users from just creating new accounts and transferring their e-gold to these new accounts.bitcoin fbi saleThere was also the issue of e-gold being an unlicensed money transmitting business even though it was not transferring money, per se.bitcoin entrepreneur crosswordMoney transmitting businesses are required under U.S.bitcoin faz

law to receive a license to do so which comes with keeping certain legal information on the users that create accounts.e-gold met neither requirement.Unfortunately for e-gold, the court found in UNITED STATES OF AMERICA v. E-GOLD that “a business can clearly engage in money transmitting without limiting its transactions to cash or currency and would commit a crime if it did so without being licensed” and thus ruled against e-gold.In addition the creators of e-gold were found guilty on similar charges including conspiracy.However, the legal consequences to the company and the corporate governance were relatively light and e-gold was able to work out a negotiation with the federal government that allowed legitimate users to retrieve their funds form their accounts, similar to online poker.e-gold still technically remains in business today, but is no longer accepting new accounts or transfers of e-gold from user to user.Proponents of Bitcoin as ‘digital cash’ place more emphasis on the accessibility aspect, arguing that its transaction fees should be low, whereas proponents of Bitcoin as ‘digital gold’ are more focused on its security, arguing that this should not be compromised by efforts to lower costs.In my opinion Bitcoin is and will be both: digital gold and digital cash.The vision behind Bitcoin emerged from the cypherpunk movement, which over the course of two decades pursued the development of ‘digital cash’, also named ‘digital gold’.

These two words are more alike than it may seem on the surface.The definition of cash is “money in coins or notes” and “money in any form, especially that which is immediately available”.The etymological origin of the word cash is thus:In order for cash money and its value to remain ‘immediately available’, it must have the possibility to be stored privately and securely.This is why, historically, most lasting forms of cash have gravitated towards forms that are durable, so they cannot be destroyed by time, and compact — so they can be easily stored in a secure environment like a vault.As a consequence, anyone who pursues the notion of a durable standard of ‘digital cash’, must also put a significant value on security.Cash that cannot be stored securely is useless, and forms of cash that have better security characteristics will, ceteris paribus, win out over cash with inferior security.India is a good example, where private gold holdings are valued at $770 billion, versus at the most $210 billion for rupee notes.Satoshi Nakamoto called Bitcoin ‘electronic cash’ in his white paper, and later referred to it as “an implementation of Wei Dai’s B-Money proposal [an ‘anonymous, distributed electronic cash system’] and Nick Szabo’s BitGold proposal”.

In his emails and forum posts, he explained Bitcoin using the analogy of gold and gold mining on six different occasions (1,2,3,4,5,6).The most clear way in which Satoshi explained Bitcoin as digital gold was in a 2010 forum post:Satoshi was right in my opinion: Bitcoin can be both a secure store of value, as well as a liquid medium of exchange used for small size payments.The solution is to accept and embrace an ecosystem with division of labor, where each sector prioritizes a different part of the solution.In the case of Bitcoin, you can let one part of the ecosystem prioritize security, while the other focuses on convenience and speed.I’ll let Hal Finney, the first ever person to receive a Bitcoin transaction, explain:Finney wrote this in 2010.In my discussions with developers in 2012–’13, this was the prevailing idea of long term scaling: specialized custodians would store bitcoins and issue easily tradable deposit tokens, just like what happened throughout history with gold banks issuing gold backed paper money—only this time the users of the bills would much more easily be able to audit the reserves backing them.*And that has become our reality today.

Western Bitcoin exchanges process over $80 million in Bitcoin off-chain transactions per day; Bitcoin bank Xapo processes 500,000 off-chain Bitcoin transactions daily; Bitcoin gambling site PrimeDice processes 13 million off-chain Bitcoin bets per day.Cheap, high volume Bitcoin transactions are here already — though they require trust in a third party.Little did we know a few years ago that Bitcoin core developers would produce something even better than an enterprise network on top of the blockchain; technology that truly eliminates the need for trusted parties to serve as middle men.I’m talking about second layer solutions such as the Lightning Network, Sidechains, and MimbleWimble.Scaling software solutions in a modular way is considered good digital hygiene.Here’s how Unix guru Eric Steven Raymond explains the principle:Developer John Ratcliff puts it a bit more bluntly when arguing for the Bitcoin Core strategy to scaling:To further illustrate the importance of how modularity produces functionality that stands the test of time, consider its applications in product design, construction, biology and even evolutionary psychology.The question whether Bitcoin ought to be digital cash or digital gold represents a false dichotomy: it can be both a secure and accessible form of money.

By embracing modularity, the main Bitcoin blockchain can act as a maximally secure settlement layer, while second layer payment channels serve as pipelines for fast, high liquidity transactions.Hal Finney’s view on Bitcoin scaling may have been informed by Nick Szabo’s concept of bitgold.Szabo comments in a recent article ‘Money, blockchains, and social scalability’: “When I designed bit gold I already knew consensus did not scale to large transaction throughputs securely, so I designed it with a two-tier architecture: (1) bit gold itself, the settlement layer, and (2) Chaumian digital cash, a peripheral payment network which would provide retail payments with high transactions-per-second performance and privacy (through Chaumian blinding), but would like Visa be a trusted third party and thus require a “human blockchain” of accountants, etc. to operate with integrity.The peripheral payment network can involve only small value transactions, thereby requiring much less of a human army to avoid the fate of Mt.