Welcome to the CoinDesk Weekly Review 28th February 2014 – a regular look at the hottest, most thought-provoking and most controversial events in the world of digital currency through the eyes of scepticism and wonder.

Your host … John Law.

As it was written, so it came to pass – Mt. Gox has finally imploded and the hunt is on for Mark Karpeles. What finance system can cope with the collapse of one of its major historical drivers and the loss of a substantial percentage of its worth?

Meanwhile, US Senator Joe Manchin has demanded that bitcoin be banned, because of terrorists and drug lords and most probably satanists drinking the blood of boll-weevils.

It’s worth wondering what would actually destroy bitcoin, and what a ban would actually look like. It turns out that both are remarkably hard.

A major flaw in the cryptographic structure of the Bitcoin protocol would do it, destroying the integrity of the block chain or creating billions of fake coins indistinguishable from those legitimately mined.

That’s roughly the same order of likelihood as the basic security crypto of the Internet being hosed – so worry about that instead of bitcoin, if you’re so minded.

Other than that – well, even if consumer confidence is utterly destroyed in bitcoin as an investment vehicle and the price collapses to five dollars or five cents, John Law will be first in the queue to buy a whole bunch.

Bitcoin is useful, and whether it costs a thousandth of a bitcoin or ten thousand to buy wine online cheaper than with a credit card, who cares? That intrinsic utility cannot be destroyed.

So what if it’s made illegal? Bitcoin is crypto, and crypto is maths, and maths is notoriously hard to ban.

In the 1990s, cryptographer Phil Zimmerman invented PGP, a crypto system so powerful the US government classified it as a munition and banned its unlicensed export – with maximum sanctions of a million dollars and ten years in jail for those who failed to comply.

Zimmerman had made it public and it took no time to make its way outside the US. For his pains, he was investigated for three years – but the absurdity of trying to control something that was simple enough to be printed on a T-shirt eventually got through, even to the government. PGP ideas are in bitcoin, by the way: it’s good to share.

The most a state can do is make it illegal to deal in bitcoin – but then you have to define ‘bitcoin’ in a way that doesn’t outlaw all encrypted token transfer systems, but does catch all cryptocurrencies. Good luck with that. (Of course, if you’re not too bothered with legal niceties such as defining what you’re banning, you can do what you like. But let’s pretend you’re in favour of the rule of law.)

John Law can’t help but imagine legislators arguing late into the night about how big the red flag should be that has to be walked in front of those new-fangled motor cars, while a thousand inventors are firing up the welding torches with evil grins on their faces.

And as for Mt. Gox – if the mainstream financial systems coped as well with massive fraud and illicit trading as bitcoin has with Karpeles’ billion-dollar misdemeanours, then a lot more people would still have jobs.

You can’t un-invent an idea, and that’s what it would take.

Unwinding the mess left at the end of the Cold War is taking some time, and it’s not always pretty.

Far from being ‘the end of history’, as Francis Fukuyama unwisely suggested, it’s generating plenty of its own. This year’s flashpoint is the Ukraine, which is combining economic collapse with a spot of East v West shenanigans.

As usual, this is making life difficult for people who don’t have an enormous military to deploy but would nevertheless quite like to sort things out. Money is short and that makes everything hard – hey, bitcoin! As a result, some clever thinking has seen protesters holding up signs with QR-codes on for bitcoin wallets, soliciting international donations via social networks.

This is a neat idea; one kid with a smartphone can reach more people in an hour than Bono could in a month and at no cost – and the message contains the method of payment. It’s not as if it’s easy to do much with bitcoin out there, but there are options.

But be careful because it’s so easy to generate and propagate such pictures, it’s also easy to tamper with them. You don’t even need Photoshop – MS Paint is powerful enough for a miscreant to take one such picture and paste in their own QR-code.

Push that out through a fake Twitter account, and you have a clever but abhorrent equivalent of the fake Oxfam collectors that were going door-to-door “for the Somerset floods”, only far harder to catch.

There’s no evidence of this happening, but it will – it’s too easy and safe for the perpetrators. To guard against it, John Law suggests, spend some time tracking down the original of any picture soliciting donations you’re tempted to support.

Bonus points for pictures of known provenance – a newspaper or mainstream media website where the photo is credited to one of their own photographers, or one from a known agency. Extra bonus points if there’s video footage, or different shots from different sources.

Despite the potential for hijacks John Law would like to see more QR-codes on banners during protests. They don’t have to be for donations, they can go to web pages or videos or, well, anything digital.

Perhaps pictures of kittens. Because if it’s kittens versus balaclava’d thugs with machine guns, global support can go only one way.

John Law knows he bashes on about it, but we haven’t started to see what bitcoin technology can do over and above online shopping or haircuts for hipsters.

Take the sad story of Rhythm & Hues – a top-notch computer graphics company in California. It’s been around for twenty five years, and recently saw its work win an Oscar for Life of Pi.

Yet the Oscar came eleven days after the company had gone bankrupt. Life of Pi, which is around 70% computer generated, has made something like half a billion dollars.

Rhythm and Hues went down because just about all VFX (video effects, in industry parlance) companies go bankrupt. A combination of international tax subsidies, Hollywood accounting and fixed-price contracts with open-ended work requirements makes it almost inevitable, destroying lives in the process.

If you want to know the details and have half an hour to spare – and especially if you love film – then this sad but compelling documentary will repay your attention.

At heart, though, the problem is a massive imbalance of power between the money men and the creative workers, creating exploitation of the sort that unions evolved to remedy. But it’s next to impossible to unionise creative types, who love their work too much, and especially when the work can go elsewhere in a microsecond.

If Hollywood had to pay animators per hour, as almost everyone else gets paid in films, you can be sure the demands for extra work would end. VFX companies would prosper. Hollywood doesn’t want this – which, for an industry based on stories of redemption and the little guy winning against the odds, is ironic enough for any screenwriter.

So how can bitcoin help? Well, there’s one aspect of VFX that is constant across the industry and over which Hollywood has no control – the software tools that are used to make the images. Complex, expensive and pretty standard, you have to use them to be competitive. This software, like most software, isn’t sold – it’s licensed to companies, who have to obey the licensing conditions.

So what if one of those conditions was that its users had to belong to a workers’ collective and abide by its rules? In exchange, each user would get anonymous, non-transferable voting rights for that collective, so would get to set and agree those self-same rules.

All users could – in fact, would have to – use that power to agree what they want. It might look like the worst sort of coercion, a guild system with forced membership, but it also looks awfully like real democracy.

Bitcoin – or rather, the bitcoin technology for distributing and accounting for anonymous but unfakeable tokens – would create that voting system.

With the proof-of-work side of things too, it would automatically audit the amount of work done on projects: a very hard to corrupt system that would put a ton of power back in the hands of the workers. They wouldn’t have to down tools – the tools would go down in sympathy, by themselves.

There are plenty of problems with this. John Law can’t see the software makers being very comfortable with it – although a well-run industry with an equitable work-reward structure would be in their interests as much as it is everyone else’s.

But it is worth thinking such ideas. A very great deal of the advantages of technology are automatically co-opted by big business, to the detriment of individual workers. Be nice to redress the balance: digital Marxism without the dictators is quite the utopian fantasy.

They could even make a film about it.

John Law is an 18th Century Scottish entrepreneur, financial engineer and gambler. Having reformed the French economy, invented paper currency, state banks, the Mississippi Bubble and other ideas essential to modern economics, he took 300 years off in a small cottage outside Bude. He has returned to write for CoinDesk on the foibles of digital currency.