Bitcoin and quantum uncertainty – a different view

Bitcoin’s legal status and quantum physics – how crazy is that

Bitcoin and cryptocurrencies fear quantum computers. Every crypto nerd knows that. And every Bitcoin hodler knows that if quantum computers evolve fast, the fate of crypto may become less certain. It’s all about breaking encryption after all. But today we will talk about another (un)certainty, not the (un)certainty you may be thinking of…

Does Bulgaria really own (hold) more than 200 000 BTC?

or the lawyers’ view on owning Bitcoin and what does it have to do with quantum uncertainty

What does it really mean to own something?

Without going too deep into the legalities (as we talk global here, not only about the laws of a certain jurisdiction), to own something means to have full control over it. In other words, the “item” you own must be in your possession. Generally, this is achievable in two ways:

1. If the “item” is in your physical possession, in case it doesn’t need to be registered in a central (usually governmental) register. Your personal things, money in cash, jewelry, household items, etc. are usually being owned that way. If one takes possession of these “items” (ie steals your cash or you hand it over to pay for something), the “item” ceases to be yours;
2. In the case that the “item” has to be registered centrally, then it is the registration that matters. A real estate for instance needs to be registered and you are the owner if the estate is on your name. You may let tenants in it and hand them over the key, but the property remains yours. The same is with your car, bank accounts, etc.

You never actually own a Patek Philippe. You merely look after it for the next generation.

The above is the Patek Philippe’s slogan, but how very true it is for Bitcoin…

Through an exchange

Owning Bitcoin is another story. You can basically own it the old fashioned way too – through an exchange. This is done by means of registering the BTC in the exchange in your own name. In this case, you are letting the exchange have (basically create them) your private keys in return for keeping a record in their own registers that you own certain amount of Bitcoins. It resembles to great extend a bank account, where the bank has your money and keeps a record that you own certain amount.

But this is not true ownership of Bitcoin. From professional point of view (that of a cryptocurrency expert), this is as ridiculous as it can be. Everyone in the crypto business will tell you that if you don’t own the private keys, you don’t technically own the bitcoins. And this is indeed, very true. Don’t believe us? Ask the ex-clients of Mt. Gox for references.

True ownership

Many novice crypto owners tend to believe that they store the Bitcoins in their BTC wallet on their laptop or other device. This can’t be further from the truth. The record of how many BTC are associated with each Bitcoin address is held publicly on the blockchain. The thing is that no names are linked to the BTC addresses, unlike with a bank account or holding BTC with an exchange. And this is what guarantees the anonymity of Bitcoin. To access the Bitcoins and to move them from one address to another (ie to pay), one must be in possession of the secret key linked to the address (the address being in fact the public key). This secret key is the thing that can be stored on a computer device or even on paper.

So in a nutshell, the “owner” of the Bitcoins doesn’t possess any actual Bitcoins (ie like money in cash). He does however have control of the secret keys that give him access to the Bitcoins, by manipulating the BTC address records through the private key. The “owner” in fact only has knowledge of something (the private keys) rather than possession of something physical. The fact that the secret keys may be optionally stored somewhere (on PC, paper, etc.) is only to ensure that the keys won’t be forgotten.

How can a government own or hold Bitcoin?

The short answer is IT IS NOT POSSIBLE, neither legally nor technically. Unless of course, there are special laws and regulations in place that REGULATE how Bitcoin is “stored”. Such laws do not exist in Bulgaria however.

In fact, owning Bitcoins is not about having possession of something physical, but a knowledge of something intangible (the private keys that correspond to a certain BTC address). But the knowledge of something intangible may be available to more than one person and the very knowledge of who has the knowledge is uncertain. Sounds complicated, but this is in fact the core principle in quantum mechanics and the uncertainty principle. The thing in quantum mechanic is that you can’t tell where the electron is and what its energy is… until you measure it. And the very same idea is with cryptocurrencies – you can’t tell who knows the keys, until they are used (the Bitcoins moved from the address).

The story in short

The story that Bulgaria has confiscated huge Bitcoin hoard is circulating since 2017. It is believed, by many, that the Bulgarian Government has seized more than 200 000 BTC during a criminal investigation.

According to some reports, Bulgaria ranks as the third largest state holder of Bitcoin. Mysteriously, these reports were removed from the internet, shortly after they were published.

To our knowledge, both the Bulgarian Finance Ministry and the Bulgarian Prosecutor’s office have been denying the existence of the Bitcoin hoard.

See also: does the crypto queen Ruja Ignatova have Bulgarian citizenship?