Wow, what a massive slippery slope to go down, and one I think the Bitcoin community should avoid at all costs. How or why is the community as a whole responsible for deciding who is and isn't allowed to own Bitcoin? You actually used Gadaffi as an example, which proves my point perfectly, because there's 10s or even 100s of millions of people out there who would happily argue against you on that. It's pretty tough to make the argument that Libya is better off now versus under Gadaffi, when everyone had free education, electricity, house upon marriage, etc.
Who decides what addresses should be blacklisted?
Who's in charge of the processes and regulations required to blacklist an address?
Is there an appeals process of any kind?
How can we be sure the ownership of said address hasn't changed hands during investigation process?
What happens when the Russian mafia gets $80mm worth of Bitcoin frozen, and proceeds to send some people over to the mining farm(s) to handle the blacklisting issue? Or even worse, a militant group like ISIS?
Will owners of DNMs have their coins frozen? If so, why? I don't personally do drugs, but don't have a problem with someone purchasing a little cocaine off the internet.
How about the FBI? Do we get to freeze the coins they confiscated, as it could easily be argued the FBI stole them from their rightful owners.
How about the US Department of Defence? After all, they're the largest arms dealer on the planet, and indirectly kill more humans than any other organization in existence, so are they allowed to own Bitcoin?
Who gets control over the frozen Bitcoins? Where do they go, and who decides that? Just permanently lock them, give them to the Red Cross, or?
Pretty much all of your concerns go out the window if you just let Big Brother worry about it. It's his job, and those of us who count live under a Democracy so obviously nothing bad will happen, or at least not for very long, right?
This OP screed about tainting by controlling miners was written some time ago. With time for analysis it seems (to me) to be pretty obsolete. Let the 'invisible hand' do the grunt work. Here's how:
+ Popularize Bitcoin for the masses so that a as many people as possible use it for buying the morning coffee and what-not.
+ The govt, in a valiant and self-sacrificing effort to protect us all from ISIS and such charters outfits like
CoinValidation to work their technical magic and declares that they love Bitcoin but they just want it to be 'safe and effective' for everyone so such a service needs to be utilized by all transaction providers (Coinbase, TigerDirect, etc.) All it would take is a quick API call to check spends (and de-value accordingly.)
+ Fairly easy to list unregistered UTXO's (Bitcoins) categorically differently from registered ones. If one has tainted coins, they can solve the problem by registering and accounting for their holdings.
+ Nobody no matter what their disposition is going to welcome tainted coins which cannot be used as broadly at retailers. Blustering claims to the contrary will be 99% bullshit when the rubber meets the road (and the other 1% will be creamed.) Fungibiity attack. I can almost promise that if the ecosystem is sufficiently heavy with Joe Coffeedrinker class users the attack will be successful. Note that it requires no code changes, no leaning on devs, no trying to track down nodes and miners all over the world, no consolidating of mining or other infrastructure required.
The prerequisite for setting up this attack is to get Bitcoin broadly used among the masses and accepted by retailers and the like. Unfortunately Bitcoin actually sucks for this (as evidenced by half a decade of experience now with favorable media and favorable regulations here in the U.S. even!) It is a batch system. Back in the day it was considered dumb to assume transactions solid without confirmations. History is being re-written by those who need Bitcoin to be a real-time system for the reasons I mentioned (much like the global warming hoaxers have tried to memory-hole the medieval warming period which is an embarrassment and detracts from their goals.)
Well thought out and developed off-chain solutions are one solution which offers the benefits of Bitcoin for the masses while not making it brittle and as prone to the above mentioned fungibility attack. One level of abstraction making Bitcoin used primarily as a settlement layer and backing store would throw a giant stick into the works. Anyone could start a sidechain with mainly open-source technology...the only real criteria for success would be attracting enough of the Bitcoin circulation to peg. Sidechains can adapt to attack by adapting to draconian requirements or simply closing up shop (whereupon users get their money back.) The hope would be that those primarily active at the settlement layer would be generally more able and willing to ignore the pain-points where tainting could be applied (e.g., Coinbase which they have little use for.)
