Great question, and it's a conversation I'm not sure we're ready to have.
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The “illegal activity” is where they lose me.
I can get behind NOT having a standardized way to store data in the block. I can get behind having more room in a finite block space for transactional data, not arbitrary data. I can even get being not relaying that to my peers.
But “illegal activity” is an always moving goalpost and therefor is an incoherent incomplete argument.
Simple. Ossify.
I proposed a more likely scenario awhile back:
The US Gov’t adopts a Bitcoin Strategic Reserve.
Then later, declares Bitcoin an asset of National Security.
Therefore no Developers will be allowed to work on it who aren’t “Certified” by the US Gov’t.
The US will then lobby and incentivize other major nations to sign-on to a multi-national “Bitcoin Developer Protocol” - protecting/preventing Bitcoin from any other nation-state soft-fork.
Use of non-Certified node software will be slowly clamped-down on.