Government Intervention on Freedom Convoy: Is Bitcoin The Answer?

Recent protests in Ottawa and blockades around the Canada-U.S. border have caused much tension in a three week long tug of war between people and state. Truckers came out in opposition to mask mandates and mandatory vaccinations, drawing a large crowd of supporters in-person and online. Fiat and even crypto donations were flowing into crowdfunding campaigns and wallet addresses. Shortly after, the Canadian government instructed banks to freeze 206 accounts affiliated with the protest. In an unprecedented move, Trudeau signed the Emergencies Act, and seized 253 crypto addresses tied to a specific wallet address responsible for accepting donations that involved truckers, their family members and donors. In a tweet by Ottawa police, they threatened financial sanctions as repercussions and viewed any support as a criminal charge. This sparked outrage. Many believe the government overstepped their boundaries in civilians’ freedom and right to protest. In recent days, the Emergencies Act has finally been revoked, though bank accounts and wallet addresses continue to be frozen. Court orders and bureaucratic policies will take time for money to be slowly given back to their rightful owners. The conversation hasn’t died and many are still arguing. Are financial systems underpinning our constitutional rights? Substacker Zvi Moshkovitz shares a grim yet poignant message: “Government weaponizing financial systems to resolve domestic dissent or even criminal justice issues is a terrible precedent to set”. Indeed it is. And what if this happens again?

           In this story, Bitcoin served as a near-hero and gave a strong reason for people to believe in the new necessity of decentralized currencies. But in the Freedom Convoy case, the Canadian government was so fast and deft to track all 253 wallet addresses, due to the easily traceable nature of Bitcoin: “The past and present ownership of every Bitcoin—in fact every 10-millionth of a Bitcoin—is dutifully recorded in the blockchain, an ever-growing public ledger shared across the Internet” (Bohannon). This is why criminals can’t hide behind Bitcoin, or even Ethereum for that matter on centralized exchanges because of the identity authentication process (Know Your Customer). If another crypto fundraiser were to take place a second time, Bitcoin may not be the answer — its addresses are too transparent on the blockchain, its transaction fees are too high, and its inability to scale means it can only handle at most 7 transactions per second (about 600K transactions per day). This is nowhere near enough when in the real world, people are swiping 1B credit card transactions in one day alone.

           The only way to avoid central authority’s overstep without recourse is to successfully move away from wallets on centralized exchanges. In response to the Emergencies Act, Kraken CEO Jesse Powell advised worried users: “Don't keep your funds with any centralized/regulated custodian. We cannot protect you. Get your coins/cash out and only trade p2p,” he tweeted. That sure sounds like an easy pivot, yet understanding how decentralized work requires a bit more knowledge and patience. This is something that not a lot of crypto beginners want to take the time to do, given the convenience of trading on centralized exchanges (CEXs) with a custodial wallet attached to the platform that is easily linked to a bank account or debit card. Essentially, decentralized exchanges (DEXs) are a peer to peer marketplace. Trades happen between users without an intermediary, and wallets are non-custodial, allowing a person to have sole ownership of his/her money. The best thing is, DEXs do not hold customer records. The downside of using it is the extra hurdle to link funds with a non-custodial wallet and finding a DEX that supports the coin of choice for trades. Each currency has their own wallets and process for getting into blockchain apps. DEXs do not trade fiat at all. On top of that, high transaction fees, security risks, and scalability issues do not go away when using Bitcoin on decentralized exchanges. At the same time, a small token swap on Uniswap may cost hundreds of dollars in gas fees on Ethereum which is again impractical for small traders. If the freedom convoy was to use such crypto proceeds for water, food, or materials to rally continued support—they’d just need a customer and vendor to open their wallets and swap with each other. Inevitably, they’ll still have to deal with the high fees and slow transaction speeds to make a successful trade.     

           A coin that has solved the scalability, privacy and high transaction fee problem is altcoin eCash. A previous fork from Bitcoin & Bitcoin Cash, eCash implements larger blocks to virtually eliminate throughput scarcity. Privacy is available through the opt-in CashFusion protocol, which preserves supply auditability. eCash also has the same supply cap and low inflation characteristics as its predecessor, Bitcoin. There are many other altcoins like Monero that claim to be “private cryptocurrencies” which can shield wallet addresses—yet higher inflation, poor auditability and ties to the darknet cast wariness for adoption and support.

           The trucker’s freedom convoy in Canada paved the way for an ambitious near-perfect case study for Bitcoin. But the government’s successful interference of freezing wallet addresses exposed its flaws and the problems other altcoins still face. There is a long way to go for cryptocurrencies to become the next switchover from fiat. At this time, most adopters are merely storing value and trading coins on exchanges, and not using it as a daily payment system. More tech development and integration is needed within communities, while promising that crypto’s characteristics are really better than cash and money stored in vaults. Two years into the pandemic, and with fear of the government's looming power over its people, many are wondering how to protect their money and have it be accessible in an emergency. Bitcoin and Ethereum failed to overcome state opposition to their use in a crowdfunding campaign. Next time, we’ll learn which cryptocurrencies can succeed.