Once upon a time in the late nineties, the internet was a crypto-anarchist’s dream. It was a new trans-national cyberspace, mostly free of the meddling of any kind of government, where information could be exchanged with freedom, anonymity, and (with a bit of work) security. For a certain strain of crypto-anarchist, Temporary Autonomous Zone was a guiding document, advocating small anarchist societies in the blank spaces of existing society temporarily beyond the reach of government surveillance or regulation. This was a great idea with some obvious drawbacks: On the one hand, TAZ served as a direct inspiration for Burning Man. On the other hand, it eventually came out that Peter Lamborn Wilson (who authored TAZ under the pseudonym Hakim Bey) was an advocate of pedophilia, which had clear implications as to why he wanted freedom from regulation. It’s a document whose history highlights the simultaneous boundless possibilities and severe drawbacks of anarchism.
Against this background, Lawrence Lessig’s Code made the case that the internet TAZ was in fact temporary. Lessig argued that the internet’s behaviour is determined by a combination of computer code and legal code, and that while the legal code hadn’t been written yet, it would be soon. His prediction (which has largely been realized) was that the internet would lose its anarchic character through government regulation mixed with a need for security and convenience in commercial transactions. (In addition to these forces, social media also came along, in which people largely sacrificed their anonymity willingly for the convenience of being able to easily communicate with their meatspace social networks.)
In thinking about Bitcoin, it’s useful to see how the regulation came to change the internet. The prediction (again pretty much correct) was that regulations would target large companies instead of individual users. Companies are compelled to follow the law under the ultimate threat of not being allowed to operate at all. Because of the tendency for people to glom onto just a few instances of working solutions, it becomes easy to target a few large entities to enact regulation on a broad base of users.