Fedcoin Objectives

As implied by Value Proposition there are two aspects of Bitcoin that make it a target of state controls, both threats to tax revenue.

In combating Bitcoin the state may attempt to introduce a cosmetically similar money, which can be referred to as Fedcoin. This could be introduced as a split or alternative coin. The objective would be to preserve the superficial aspects of Bitcoin while eliminating its value proposition. This would protect tax revenues while propagandizing Fedcoin as a “safer” alternative to Bitcoin. Fedcoin is not itself relevant to Bitcoin except to the extent that the act of compelling its use requires resistance.

The essential Fedcoin distinctions from Bitcoin allow the state to arbitrarily create new units (seigniorage) and deny transfer (censorship). The seigniorage objective can be achieved by a hard fork that introduces one new consensus rule. This rule allows the introduction of new units in the case where the state has signed an inflationary transaction. The censorship objective can be achieved by a soft fork that precludes confirmation of transactions that lack state signature.

Preventing the state from compelling the use of these forks is the central purpose of Bitcoin system security. The economy guards against the hard fork and miners guard against the soft fork. The risks taken by these people preserve the value of the money relative to state-controlled alternatives.