Topic: Governments/regulators may eventually actually *like* Bitcoin. - coin blacklists - page 2. (Read 4390 times)

Whitelisting solves all the problems of anonymity while securing privacy. This is how its done:

I hate when people respond with the anti-intellectual TL;DR, but in this case.... it was a bit on the side of long. But my skim caught:

"kidnaps a cute kid and ask for the ransom to be paid in Bitcoins? ... cryptocurrencies and rightfully blame... anonymous ransomes... boycotted... make it illegal to trade with Bitcoins."

This would certainly put bitcoin in the lime light. I suspect malice of this type would be more common after greater bitcoin acceptance. A kidnapper hopes that the case does not go public, that the desperate parents will just pay and shut up. That's more likely only after the parents can be expected to have at least heard of bitcoin. I think extorting a company is more likely... someone breaks into a Coca-cola, and starts releasing one line from its secret recipe each day until funds are transfer... or the like.

Scary, I had the exact same thinking and idea...

I was going to post this on my new blog.

But have not had the time to finish it.

The biggest obstacle with Bitcoins for mass adoptation is the anonymity.

Yes cash is also anonymous, but unlike cash, Bitcoins can be transfered
from an anonymous source to another anonymous source.

With physical cash you have to transfer it in the real world.
An analogy to this would be that its almost the same as if you could teleport real cash to anywhere in the world.

But only the person recieving the cash knows where.



This means that bitcoins are perfect for certain types of crime.
Especially kidnapping comes to my mind, since it solves an old problem with kidnapping.

How will you get the ransom without anyone following you.

With physical cash a kidnapper needs to pick them up at a physical location
which makes it almost impossible for the kidnapper to know that its safe to pickup
the ransom.

Because a bank transfer would be traceable.

So for the first time in history a kidnapper can now kidnapp someone and get the ransome
and get away with it.

Unless you are really naive, its obvious that its going to start a new crime trends such as kidnapping and extortion as we are getting more and more poor and desperate people.




But.


What will happen the day that someone kidnaps a cute kid and ask for the ransom to be paid in Bitcoins?

This becomes something HUGE in the NEWS. The Bitcoin kidnapper, and its going to be reported all over the world.

There will be heated debates and a majority of the opinion will turn against Bitcoins and similar anonymous cryptocurrencies and rightfully blame them for making it possible to ask for anonymous ransomes.

The day this happens, Bitcoins will be abandoned and boycotted by many normal investors, business and normal persons.
No "serious" business will want to be associated with this currency.

If/when it happens its also likely that soon after, just like US blocks pokersites, they will block bitcoin sites and make it illegal to trade with Bitcoins.

European and Asian countries will follow

This would have a huge impact on the price of Bitcoins and nearly destroy them as people panic sell as the value drops, only very few wanting to buy.

I can even see how the people working on Bitcoin will be grilled and held responsible in TV shows.
Recieve hatemails from angry mothers and have to go out and say they were naive and Bitcoin was not meant for these things to happen and that they have stopped working on it or are working on a solution.

Unless there allready is a hidden solution. If there is and the kidnapper is caught, than Bitcoin will be the hero.

Otherwise there will be made a new non anonymous cryptocurrency, if possible will step up and take Bitcoins place to become the world online currency or Bitcoins will be illegal or regulated in most countries in the world.

Bitcoins will still have a place in black markets etc but it will never get legal in US and EU unless there is a way to blacklist adresses.

Even if its possible to trace Bitcoins its enough that a single crazy person think its impossible to trace them and kidnap a kid and ask for Ransome to get the public opinion to hate the coins.


Maybe there acctually needs to be some way in the client or in a cryptocurrency to mark the money legit or illegal.

All there needs to be is a way for clients to check if an adress that money comes from has a message
on a site. Saying that the adress is a illegal adress.

The question than would be by who? Governments/police or exchange services or all of them?

The public and the forum people cannot do this and especially not the software coders.
Since this could open up to blackmailing, mob behaviour etc, unless you pay us, we will taint your adress etc.

And how will this work in a world?

I think that governments will simply cooperate.
The US will have one list, russia another but most exchanges will have to demand that all lists are clean.
There might be exchanges that dont demand clean lists, but you will probably get less money for your coins at those.

Whitelisted coins will allways be in a higher demand since you will be able to spend them anywhere in the world.

I would imagine it working like this.

The person will see the warning message associated with the adress.
The message could even be of different kinds depending on in which countries they are blacklisted.
If they are proved to be illegal or suspected to be illegal and what type of crime.

"Warning the coins in that adress are from a serious crime. Accepting them is a crime in US, EU etc list of countries."
Please send those coins back and report to us.

Or in another case.

"Warning the coins in that adress might be stolen, accepting them could be a crime in your country"


It will smear onto your adress unless you send them back.
This smearing would make it impossible to make a new adress that cleans the coins.


Would it even be possible? It probably would.

Most people dont know it, but there is something similar in the poker world.
Accounts and even persons do get fraud scores and these are traded among all the bigger poker sites since they collaborate by sharing info on this with services such as this.

http://www.volusion.com/merchant-account/credit-card-fraud-protection/

But the question remains.

Will the government bother with such trouble?

I dont think they will unless bitcoins are really big.
It will probably just be easier for them to outlaw Bitcoins.

They could "force" well somewhat force, by making it illegal to not do a check against their database to se if a bitcoin adress has some message or not.

Sites that does take money from blacklisted adresses will be taken down or shut out.

This will force people to use a client that can see those messages unless they dont care but that would mean that
they will not be able to use their coins on other than black markets.

If it would be possible, it could make stealing Bitcoins by hacking less interesting and especially kidnapping and asking for ransom.

What if the stolen Allinvains coins adress was marked as illegal?

It would have meant that when they tried to cash them out a MTGox they would not had been able to do so. MtGox would probably not have accepted those coins.

Saving Bitcoin from atleast one crash.

Their only option would have been to cash them out in the black market.
But at that market they would be worth much less.

I think that even most black markets would check the list.
They would be to curious to see why the coins are blacklisted, some would not accept certain types of coins.

This would also make it less attractive to acctually try and steal Bitcoins since their value would increase.

In the longterm it would probably also mean that you will have to whitelist you adress if you want to use the coins at any bigger company.

Question is if there will be greyzones.

Coins that are not whitelisted or blacklisted.

Thinking of it, it will probably end up with the governments blacklisting all the coins and adresses that are not whitelisted?
Go to the IRS and whitelist them.

I can only see that or all Bitcoins getting illegal in the longterm, but I´m taking longterm 10-20 years.


But the question is why should a government bother with having Bitcoins legal unless there are advantages.

I can only see this happen if the people demand Bitcoins, because they dont trust the government printing the money
and because it means banks cannot charge whatever fee they want.

If Bitcoins grow bigger the governments will deal with Bitcoins one way or the other.

The first thing they will do is ofcourse try to regulate the exchanges.
And after that there will more steps that follow.

What would Bitcoins getting legal mean?

Bitcoins getting legal will also mean that their value will increase, since
it would mean that they are here to stay and can be adapted by everyone.

It might still be possible to have anonymous adresses in some countries as long as they pay taxes
and there will probably be higher taxes on them.

I really like the concept of Bitcoin, with less power to the banks, and no government printing etc.

But the anonymity is going to be a huge obstacle for it no matter if we like it or not.

Agreed. We use serial numbers to track money and anti-counterfeiting to ensure it is genuine. These are to help law enforcement, not to stop its use.

Every individual who supports blacklisting of any money totally misses the point of money i think.
I for one would stop using it and switch to an alternative currency.

The nice thing about Bitcoin is that it doesn't need a whole lot of infrastructure to stay dormant for a few months and weather out the storm.

No kill switch is 100% effective. Even in the most repressive regimes, people somehow manage to connect to each other.  Even in countries where encryption is banned, people manage to use it.

Also, it is almost impossible to hermetically seal a local internet from the outside.  For bitcoin to continue working locally, all it needs is a few leaks to the main chain in free countries, perhaps via shortwave radio. 

A kill switch could seriously slow down the bitcoin economy and hurt the price of bitcoin, but there will always be a core of diehard supporters who will keep the block chain alive, and enable access to those who  think it's worth taking the risk.

In that way, bitcoin is similar to gold, only better. There were times in history when government banned the private possession of gold, which made it almost impossible to spend and practically worthless short-term, but people held on to it anyhow because they knew that normal economic activity would resume sooner or later.

The only way to completely destroy a cryptocurrency is to ban computers outright, North Korea style.

If I remember it well I wrote that post while thinking about the coins extracted from the MtGox hack.  SilkRoad seemed as the most vivid example of what government would like to do so I used it instead, unfortunately  that failed example because of my confusion of some technicalities of running a site like SilkRoad - this dampened the discussion.

I'm not sure everybody understands the nature of money-laundering or other shady businesses. It's not the same as blood-money because it's mixed (sometimes heavily) with "clean" money. You can't penalize someone that does legitimate business with someone that also secretly does illegal business. That's the job of law enforcement to determine.

A sends dirty coin to B. Upon noticing it is dirty, B returns dirty coin to A (different address).

=

A sends dirty coin to B. Upon noticing it is dirty, B sends dirty coin to B (different address)

---

There may become two markets. One legitimizing the other. If at any point all coins are dirty, then they are all clean, and we'll better understand the true nature of money.

Governments are more concerned about collecting taxes than fighting crime. I think Bitcoin itself will reduce most common crimes. Whitelisting is preferable to blacklisting when it comes to tracking transactions for taxation purposes. By only allowing merchants to accept whitelisted addresses, then law enforcement will have a better trail to detect wrongful transactions. Eventually, everyone will only accept whitelisted (or original block) addresses. It won't reduce your privacy, except to law enforcement.

Thanks for the pointer - I hadn't seen that one.
I don't think that thread explored the ramifications or the possibilities though.

Sure - they couldn't just use this blacklist to stop silk road in it's tracks, because they don't know their addresses,
but they could make it risky to do deals with various 'shady' outfits - because your coins could be tainted and thus taxed.

Stolen coins would be the obvious addresses to add to the list.

Also, a seized wallet from one criminal could provide a bunch of other addresses they could apply taint to.
Honeypot systems could also taint your change.

If this were to happen, I hope that once started up, all coins as of now being considered clean. The only exception I could think of would be unspent stolen coins, where there is documentation of the stolen/illegally acquired coins going to an address and being held as of the time the blacklist goes up.

Of course what is considered tainted would be decided by the person making the list. It could be focused on laundered coins, drug related coins, terror related coins, etc. Sadly, the most accepted lists would be ones that comply with the government (the ones meatspace merchants would be required to use).

It only hurts if lots of people join and there aren't that many tainted coins. If all coins are tainted it's just another way of gov saying don't use bitcoin.

Plus all of this first requires gov to explicitly endorse and approve the non-tainted coins.

The original discussion thread about this problem in this forum: https://bitcointalksearch.org/topic/what-if-bitcoins-that-can-be-tracked-back-to-silk-road-are-declared-illegal-20979 

I made reference to it as a 'different' form of blacklisting early in this thread.  Different than blocking certain transactions or addresses.

I have mentioned the idea of having 'block level blacklisting' ready to go in the client once or twice on other threads.

I'm actually mostly interested in 'alternate currencies' which derive their value from being backed by 'real' Bitcoin.  This would reduce the strain and need for complexity in the 'real' Bitcoin and let it scale without the load of supporting the entire 'vertical' from central bank type operations down to 1,000,000,000 people buying skittles.  One of the main reasons this is of significant interest to me is that I fear a future where bitcoind needs to run on specialized hardware or networks.

As importantly, this could provide a variety of sub-currencies which are 'tuned' to different kinds of use-cases and could provide a better end-user experience for them.  One thing (of thousands) which could be designed in would be a value-level black/white listing.  If it gave people something they wanted, it would prosper.  If not, it would die.

I think one of the places I mentioned 'block level' blacklisting (meaning ignoring a block or set of blocks which would otherwise be considered valid) was on a thread where I rambled on about 'BTC backed alternate currencies.'

I think that's also an interesting hypothetical to evaluate - but I'm not sure it relates to the tainted-coin blacklists I'm talking about here. (perhaps I'm not understanding you either!)
Maybe another thread for this 'block level blacklist' idea?

I an not fully understanding what you are saying I think.  Here's the situation which concerns me:

Say that at a certain point in time, some threat requiring activation of an 'internet kill switch' pops up.  Suddenly, for all intents and purposes, all networks are off-line.  Fairly soon critical infrastructure would be wired back in, but that would be large corporations, and there would be significant packet level filtering.  Consumer grade connectivity may be out for a long time.  Months.  And as it came back on-line it would also probably be carefully analyzed and regulated.  I could even imagine a situation where encryption was only allowed between authorized endpoints (like people and their banks.)

Obviously such a scenario would spur interest in mesh networks and the like, but the technologies are extremely immature and untested, and anyone deploying them would likely be labeled a 'terrorist' which would complicate development.

Bitcoin seems to be developed under the assumption that peer-to-peer communications are available in a wide-spread and relatively reliable manner.  I fear that Bitcoin could fail if that happens to not be the case, particularly if it were actively exploited by competent attackers during such a time of limited connectivity.

So, I would envision the 'block level blacklist' capability of Bitcoin being useful for a situation where there was a very obvious and very clear need to simply black out the entire economy for as long as needed in order to save it.  Actually, in such dire (and probably far-fetched) circumstances, it might be fairly tenable and make the most sense to simple upgrade the client software in order to get going again.

I didn't think of them trying to stop mere relaying of tainted-coin transactions..  I don't really see how they'd know if your node just relayed.

They could however penalize the miners for including tainted transactions in a block by tainting the reward - so yes, you'd probably end up with miners specializing in those transactions and willing to accept their block reward as tainted because they charge higher fees for tx inclusion. That would make black market transactions much slower though - as you'd have to wait for a black market miner to hit a block. 

Besides, there are too many jurisdictions to let you implement this globally. I'd just send them to my colleague in Nigeria and he'd send me clean ones. I guess if they take it seriously and push it long enough (decades even), this could put some pressure on owners of tainted coins. In ideal conditions, these coins would only be used in the black market. They would exchange for less than clean coins, but would still be exchanged. Bob would buy some to sell later to Alice who's looking to make an illegal purchase. They could try to destroy this market totally by making it illegal to relay black coin transactions, but I'm guessing a parallel network would be created to verify those transactions anyway.

mm.. yes.
Bitcoin seems like it may be far from the anonymous libertarian dream many saw it as - but I still think it levels the playing field somewhat.