Doesn't this instead just show the Realpolitik nature of currency, that it doesn't matter the technical implementation when a government can still just step in and seize the asset using traditional force?

Yes but the key difference is with cryptocurrency the person that owns the wallet still has to sign the transaction, there is no other way. It's a push model instead of pull. Compare this to traditional banking where a 3rd party (the bank) can aquiesce to a government request without your knowledge or approval.

They could prevent you from spending the coins, though, by threatening anyone who accepts a transfer of the 'seized' coins.

Enforcing illegal torrents failed. I think a cryptocurrency ban would be similar. Also, the US made it illegal to hold gold between 1933 and 1974 but almost nobody turned in gold to the feds. https://en.m.wikipedia.org/wiki/Executive_Order_6102

They enforce it when you buy something real with the coins. A torrent is the thing you want, it isn't a currency to buy the thing you want.

Both are essentially electronic systems of information on a computing system, a format and a protocol of communication through the internet. In terms of technical difficulty to enforce them it would be very similar.

Does the crypto community actually stop people from spending stolen coins? No, they send off alerts but the coins still get used.

I'm pretty sure that "They" was meant to refer to the Government. The Government could most certainly pass laws (or enforce existing laws) that put people in jail for accepting stolen or "dirty" coins. (Just like the Government could pass a law or re-interpret existing laws to make making owning bitcoins illegal.)

That doesn't stop them from shutting things down. The result is the same: You no longer have it. An offline wallet would help, if you can avoid jail.

So you're basically saying that it works with an offline wallet? Wasn't that the original point?

Offline wallets have limited utility. Once you want to do anything at all with the money it becomes vulnerable.

I feel confident that any major state actor could completely disrupt the bitcoin market. In traditional banking the government wants to maintain the value of its fiat currency. But the government doesn't care one iota about the value of Bitcoin except potentially for its own nefarious purposes.

This is assuming that Bitcoin wasn't invented by a government in the first place. Cryptos have a strong benefit to central authority in that they are simple to track flows of money, it's impossible to play a shell game if you can check the block chain. It becomes very easy to check the full transaction history of someone if you find out their addresses. Here is an NSA paper on cryptocurrency that came out in 1996 https://groups.csail.mit.edu/mac/classes/6.805/articles/mone...

It cannot if you own your own keys. "Not your keys - not your crypto". Of course if you let some other entity to hold your keys, you're basically just using a bank, which has its own benefits, but I was talking about the unique ability to handle your keys, which crypto provides, as opposed to any other electronic money system to date.

Ok, but what if the government says "anyone who accepts a payment from this wallet will have their assets seized"

At some point, someone will want to do something in the real world with this money, and the government can step in there.

Doesn't this just show that Bitcoin is worthless in comparison to a state-backed fiat currency? It doesn't matter if you have all the bitcoin in the world, the US government has more violence at its disposal than you could ever buy, and ultimately violence is the only thing that ensures the ownership of anything. If a government wanted something from you they could just take it, that's the real reason that the money they print has value.

Fortunately those of us who live in the United States also have the protection of the U.S. Constitution, which provides a glimmer of hope that we can seek restitution when the government deploys its violence illegally. Who knows how much longer that will hold up though...

The Constitution is a piece of paper, it does nothing and protects no one. The real thing that is protecting you is the same thing that always has: the good will of your common man. The real power has always lied in the beliefs of the people and always will, and if you can’t have faith in that you can't have faith in anything. We all live at each other’s mercy. Any system that doesn’t have trust in each other as its fundamental basis simply can’t last.

So that the DOJ can steal it?