Topic: [LEAKED] Private Bitcoin Foundation Discussions On Blacklisting, more (ZIP dump) - page 18. (Read 61193 times)

In my head, I picture people sticking their fingers in their ears and going "LALALALALAL DON'T TALK ABOUT COINTAINT LALALALAL"

Or maybe somebody in a funny hat pointing their finger at Mike and shouting "BLASPHEMY!"

It is fine if y'all want to pretend that coin-tracking won't happen if the Foundation ignores it, and maybe it is such a hot-button issue that the Foundation should ignore it right now.

But it will happen anyway, because the technology to make it happen is pretty straightforward, and any victim of CryptoLocker will be VERY sympathetic to law enforcement tracking "dirty" coins. More than sympathetic, I think we should expect a lot of pressure on law enforcement to DO SOMETHING.

Despite the lies tossed around elsewhere, the foundation membership is almost entirely composed of people with very strong opinions in favor of decentralization, opposed to regulation, opposed to taint enforcement, in favor of freedom, etc.  The foundation is not a secret cabal hell bent on handing control of bitcoin over to some government.  Also, neither the foundation itself, nor any member or group of members, has any magical power to coerce people into accepting changes to the client or protocol.

Also -- it's very poor form to publicly post discussions from here to elsewhere. Whoever did that should read our meta section and think about why that wasn't helpful.

We've had the theoretical discussion before, multiple times. The technology involved isn't very interesting from a legal perspective and doesn't deserve more discussion. There's near consensus in the community that it's a very bad idea, for multiple reasons, regardless of your thoughts about privacy and anonymity.

If you want to discuss it further, knock yourself out. But there is every reason for community members to be worried when someone in a position of power - Mike Hearn is chair of the Foundation Legal and Policy committee - starts promoting a discredited and dangerous idea yet again. It's like finding out in 1940 that the chair of your local electricity board thinks the town needs a direct current feed and that Tesla guy got it all wrong. Sure, his arguments for DC may sound convincing to some people who are unfamiliar with the technology, but the discussion's long been settled in favor of AC by those who are.

Maybe you don't understand how censorship works. If you threaten to fire somebody for discussing a topic, that's censorship.

Look, if Mike Hearn had taken an action that you disagreed with, then go ahead and recall him. But in this case, all he's done is raise a topic for discussion!

Let me put it a different way—you don't want a Law & Policy Chair who talks about the benefits of Coin Tainting. Do you agree? You want to recall any chair who talks about that?

That's censorship.

Grow some balls and prove him wrong if you disagree. Use your intelligence to engage in debate. Don't pretend to recall him for raising the issue.

Wow, such dangerous radical thoughts! This man is trying to destroy Bitcoin! Hide your children!

Seriously? We'll talk about rebuking Mike Hearn when he actually agitates in favor of the approach. Until then this is a witch hunt.

"I don't have any particular opinion on what we should talk about. I'm aware of the arguments for and against such a scheme. I'm interested in new insights or thoughts" - Mike Hearn

Yes, this is about counterproductive censorship. Mike is giving you the space to discuss the idea, alternative ideas, new thoughts, concerning a real controversial problem nobody really dare speaking about exactly because of what you're doing. It's easy to vote against something exactly because nobody wants the risks and the efforts of thinking about solutions and be criticized in return.

I personally am wary of this system and remain unconvinced, but I appreciate that Mike is bringing the subject on the table, even if it doesn't produce any new solution in the end, it just needs to be discussed.

We have discussed coin taint ad nauseam in the past, on the bitcoin forums.  I sometimes have the feeling this board is like 'the elite' and doesn't even read what's going on somewhere else.  Either way, you don't have to take my word for it, I'm just voicing other people's opinions.  If they want his head for even considering coin taint at this point, that's them.  He could have stayed up to date.  And if he wouldn't be in the power position he is in right now, it would probably be a very different story.  But from past discussions people are very worried that he's the type of guy thats ready to comply with whatever government demands.. and they want someone who's willing to fight for what 90% of the community stands for: 21 million, complete privacy, and decentralisation.  If you touch on the holy trinity it's going to backfire big time.

He's presenting blacklists as an idea that should be taken seriously. As I say, the discussion has happened, and we have near consensus that they are a bad idea; he's in a very small minority. What the Foundation's policy should be when it comes to blacklists is something that the community has a pretty good rough consensus on - we'll still have healthy debate about the details, but the basic idea has been rejected as a bad idea by almost everyone.

It is perfectly reasonable to continue researching the topic - people didn't stop researching DC after AC was accepted as the way to go. Sure enough, some really remarkable advancements in technology have made DC the right choice again in certain specific circumstances. (e.g. long distance undersea power transmission) But when it comes to coin taint, those kinds of potential advances in the underlying understanding are very far removed from anything the Foundation would want to put down in writing as a policy now, just the same way that the chair of an electricity board in the 40's would be at best deceptive to be telling the general public that DC was a viable option that merits serious consideration in the here and now.

Except that very little of the discussion (there or here) is actually about what he wrote.  Mostly it is the usual cast of instigators whipping up an angry mob, and the mob then being angry about something that they don't understand.

Mike wrote about "A", and now you are here bitching about "B" because a group of people knew that a fraction of the bitcointalk mob can be counted upon to fly off the handle without bothering to think and understand the topic.  Congratulations, you are today's winner sucker.  Feel good about being used?

P.S.  If even 10% of the crap about this that I've read on the bitcointalk forums today were true, I'd be pissed off too.

P.P.S.  Context is important.  The location of the topic in question has meaning.  Why do you suppose it is in Law and Policy?  Do you understand the bigger picture in and around that forum?

Me, and many others in the bitcoin community are deeply concerned about Mike Hearn pushing for coin taint.  We feel that if the Bitcoin Foundation is even going to consider mentioning this in the upcoming government meeting, that we can no longer stand behind them.  This is serious.  Coin taint is even worse than increasing the 21 million limit.  Since the chairman of Law and Policy is involved here, I would like to call for a vote against this, and a clear stance from the Bitcoin Foundation.  I know many of the board members are supporters of mixing coins even more, so something like this can never happen again.  It would be a good message to the bitcoin community to confirm that the foundation supports keeping coins anonymous, instead of going in the opposite direction.

This disturbs me. Nobody is implementing anything. This is just a theoretical discussion.

You really want to censor a discussion on technical possibilities?
Since when is the bitcoin community into censorship?

Mike Hearn is one of our best assets. He works fucking hard! Who is going to step up for this job if you all threaten to recall people who hold conversations on tough topics?

Adam Back, as usual, has an excellent response:


An electronic cash system, must have irrevocability, which as we discussed here is how bitcoin can achieve low cost and efficiency relative to credit cards & paypal.   Coin anonymity is necessary for fungibility, but that is strictly about fungibility, identity level privacy is separate.
-https://bitcointalk.org/index.php?topic=333882.msg3585877#msg3585877

Irreversibility of transactions is a key attribute of Bitcoin, and a key reason why Bitcoins have value. The reality is any type of blacklist, redlist, whatever you want to call it, marks coins as "different" Even worse, this can and will happen after the fact. Adam's point about costs is also apt:


-https://bitcointalk.org/index.php?topic=333882.msg3582302#msg3582302

While people see Bitcoin as representing a variety of things, one of the most common beliefs in the community is that Bitcoin should be a low-cost and irrevocable method of payment. I think what's interesting about this recent flare up, is from the sounds of it perhaps what Coin Validator is planning to do is simply a technically misguided way for businesses to verify the identities of those they transact with. Sure the technical details are all wrong - from what they've said it's based on trusted addresses, a major privacy concern - but the basic concept of making it easier to determine the legal identities of who you choose to transact with is reasonable in some circumstances.

On the other hand what Mike Hearn is bringing up, yet again after a thorough discussion and heavy criticism the last time, is about the coins themselves. Now ask yourself: Do we want a world where it was common for normal, average, businesses to find out that the cash money they received in good faith is suddenly suspect because apparently someone multiple steps back did something illegal in some jurisdiction to get it? No sane business would choose to accept such cash if they had an alternative, and when considering whether or not to accept Bitcoin, businesses do have alternatives already like PayPal and credit cards.

The fact that Bitcoin transactions can be traced using publicly available data, broadcast to the whole world, is a flaw, end of story. It's a flaw bad enough that regulators are beginning to take notice, warning about the privacy dangers of Bitcoin! The flaw is a consequence of the underlying technology, but we can and should fix it to the best of our abilities. Embedding this flaw even deeper into the way we use Bitcoin would be a serious mistake and the Foundation should make it absolutely clear to the community that they will not make that mistake.

Just a suggestion, wouldn't the famous "90% of dollar bills carry traces of cocaine" quote be an interesting example somewhere of what is fungibility and why it is essential? Along with the neutrality of technology arguments ( emails don't prevent you from sending Cryptolocker, computers are not defect because they let you open cryptolocker.exe ).

All in all, regarding the initial example of this thread, I think Cryptolocker indeed is a problem that cannot be ignored. As opposed to other usual forms of crime, there is no "physical hook" that can be used to investigate and restrict these harmful activities. Should they grow without restrictions, it is possible that Bitcoin will lose a lot of its users and be marginalized, further more as governements will adopt an increasingly severe stance and as merchants will want not to be associated with Bitcoin anymore.

Take the US War on Drugs for example - the expense of a $Trillion in labourer's (tax) capital to no measurable effect on use or adoption rate over decades, coupled with an incarceration rate (and subsequent lives disrupted/destroyed) an order of magnitude beyond anything else in the developed world is a case in point. The recent findings that private sector prison management companies (these should have been anticipated) lobbied for and were awarded state/county guarantees for minimum incarceration rates to minimize future corporate risk profiles is a truly icky case in point wrt unintended consequences. But it's just one among a constellation of examples I condense and subsequently draw cause/effect conclusions from.

Interestingly, you strike me as someone more than able of coming to the same conclusions, and for the same reasons - a wish to let people lives their own lives as they see fit, and to reduce harm from others. Which begs the question.... what are you trying to accomplish by airing this subject again? As a Bitcoin coder, you're already acutely aware that CoinValidation is a pointless hiccup - a nascent waste of time/effort capital - because the first effective layered/integrated bitcoin mixer instantly makes it irrelevant, and there is obvious enormous, distributed vested interest in the value of a bitcoin to make that happen. Are you trying to stir the pot and get peeps  to make it happen sooner?

XXXXX: I hear you loud and clear, but honestly I wouldn't worry about this issue. My own personal take on the matter is that as long as Gavin is lead programmer and Jon is Executive Director, we and Bitcoin are in good hands, and if that changes I'm cashed out until Bitcoin 2.0. Just my personal gut feeling of course, but if I can give a possibly apt example: in the private sector, many high tech startups, small and weak and undercapitalized, typically take an approach called "operating in stealth mode". In other words, they say one thing publicly but their real capabilities and internal plans are held very close to the chest. Otherwise, the large corps could do an end run around them and eat their lunch, and then eat them. Do these large corps know this goes on? Well yes, of course they do. Wheels within wheels.

This idea is outright crazy. You are digging the grave for the bitcoin. Developers and users in Europe will not tolerate this and create a fork. Only thing you can achieve is the creation of an American Bitcoin whose value will rapidly collapse. Whoever supports any efforts of coloring coins AND is holding bitcoin at the same time is irrational. He is destroying the biggest benefit of the bitcoin and devaluating his own stake.

Even thinking about coin coloring by members of the foundation is a scandal. It is like a politician proposing to abandon the right to vote. I am deeply concerned and outraged about this discussion.

If you need to see that you are acting against the majority of the members of this foundation, have a vote!

This is a bad idea (in my opinion), but it requires no changes to the core consensus of bitcoin. There would be no fork. In fact this system could be implemented as a patch on top of any wallet without the help of any core devs.
If regulators decide they want to do this, they can do it over our objections and with very little effort.

Given this is the "Law and Policy" committee, there has been scant discussion given to the real world legal impacts such a coin-tainting scheme would have.

You do realize that this would be a massive legal liability thrust upon most merchants? Oh, so you sold them the hamburger even though your BTC client said there was a 84% degree of coin-taint? What...you mean you by company policy don't even check that because you think its a "voluntary" part of the client? So accepting stolen goods is a "company policy"?

The simple fact is, given the litigious  nature of the modern world, the inclusion of such a "feature" would have debilitating effects.

I think everyone appreciates Mike's bringing this topic up, and his desire to eradicate CryptoLocker, but Bitcoin is *absolutely* the wrong square peg to try and nail into that round hole.

From a strategic perspective, trying to make envision ways Bitcoin can be more like Paypal plays to their strength.

At its core we must think of Bitcoin as a protocol. As long as a transaction is valid, it should be propagated through the network, and written in the blockchain. No questions asked. We understand that some might abuse the system, but that is the cost of doing business. Imagine if we proposed a redlist for TCP/IP instead. "This user visited 20% gambling sites, 10% adult sites, etc." No one would be comfortable with that proposition.

As John Stahl stated, while terrible this is not Bitcoin's problem. We are not the global money police. Furthermore, I think the userbase understands the worst case scenario in terms of fungibility. Any coin client that implemented coin tracking would simply be abandoned, so I highly doubt that anyone will write code for this.

The anti-redlisters here (myself included) seem to have been putting up solid arguments describing why its a bad Idea from "it feels against the spirit of bitcoin" to solid concerns about the unanticipated (and anticipated ones) emergent results of such a change. What I haven't seen to much is why would this really be a good thing? How would it really protect us? Or stop Cryptolocker? From what I can gather you would have a bunch of red flags floating around that either effectively do nothing (except be a huge annoyance having to clear the red flags which I know I'm not going to do.) or everyone goes crazy about them and we make bitcoins practically unusable.

I just don't see how this actually solves the problem. At least I see no way it adds anything we don't already have with the public ledger. In essence you could already report a cryptolocker incidence to some sort of investigator. and they can follow the money until it goes into a mixer. But if you have the redlisting. Won't you just taint the mixer anyways? And you have gained nothing.

In some senses Bitcoin already has way more tracking then cash does. But its not going to solve the problem. the problem is bad people doing bad things. And you can't sacrifice everything in order to try and stop a couple bad people. they will simply find another way. Not that we shouldn't fight them. But fight them in other ways. Not by disassembling Bitcoin.

Law enforcement is the job of Law enforcement not cash. So if you want to really stop this fund an internet police force. I'm on board with that. make it decentralized also to avoid corruption with mutual checks and balances and punishments.

tainting, redlisting, blacklisting, whitelisting, None of these should be part of bitcoin or any widely accepted protocol overlaying bitcoin.

"Oh hello there owner of the redlist. Here is a gag order for you to keep this conversation secret. You see, there is this organization that is leaking government information in an act of treason. Here is a warrant for you to redlist those addresses. If you don't comply, we will be forced to assume you are aiding the terrorists in getting their money and take you to court and put you away for treason as well." RememberLavabit?

As it goes, if the redlist is supposed to be successful, people will need to make it global. Global usually means "run in the US", which means "controlled by the US". If you have multiple redlists, they are worthless - people could just trade coins redlisted under list A for those redlisted under list B as long as A is green under B and vice versa.

I figured I'd throw in some comments about the worst case scenario as well:
Assume that this redlist idea is implemented, taken to the extreme ('marked' by default) and legally required on the entire planet. What's the net effect?

It splits coins into two categories: white market and grey market. White market coins are tied to identities very strongly, and are the only way you can buy from law-abiding merchants. Grey market coins are no longer in the possession of any known actors, but they still are usable (barring core protocol changes). It's pretty easy to move funds from white market to the grey market (coinjoin, reminting through transaction fees, zerocoin). But moving money in the other direction exposes you to scrutiny. Where does that leave us?

Well that's the situation with regular money today! I can take cash out in large quantities, and go buy grey market goods trivially, but the guy I buy from won't be able to use it to pay his mortgage without jumping through hoops. Of course bitcoin makes this divide even more stark (since it tracks funds perfectly), but it's the same fundamental stituation. And unlike the regular financial system, grey market bitcoins would preserve almost all of their attractive properties (instant transfer, divisibility, security). They'd just trade at a discount relative to the clean coins (based on how hard it is to launder them).

TLDR: While not desirable, the worst-case outcome of this doesn't kill bitcoin, not even close.

I came here this evening because I knew there would be a thread on tainted coins in light of the launch of CoinValidation. I wanted to make it know that I am strongly opposed to any action that threatens the fungibility (real or perceived) of Bitcoin.

I wish that all of the Law and Policy Committee threads got this much attention. There are quite a few topics that I see as more important to developing into comprehensive positions(see links below for some samples) but unfortunately they don't draw the same level of attention as this topic. Someone says "coin tracking" and Bitcoin Foundation" in the same sentence and things get weird fast.

As far as the Mike's original discussion prompt, I have (of course) a short response and a long response

Short:
If the Bitcoin Foundation is to arrive at a coherent policy on the subject of coin tracking/tainting, it should follow along the same lines as what Jeff Garzik previously outlined, "On stolen coins and transaction blacklists." To oversimplify and pick one quote out of the article, "Stolen coins are fundamentally a legal, not technical concept." (There's so much more, I hope everyone reads his full post but this is the "short" response.) All in favor say aye? "Aye."

Let's not make the mistake of reinforcing any perception that bitcoin is intertwined with crime and nefarious activity. Our response to the use of bitcoin by people engaged in "anti-social" behavior should be "bitcoin is a protocol/network/whatnot that is agnostic to who uses it so long as that use is compatible with its basic operation, now go be better at law enforcement and catch the bad guys. We'll be over here coding and feeding homeless people with this awesome new technology."

Long:
CryptoLocker and its ilk are not "bitcoin problems." Transaction fees, block size, double-spends, these are bitcoin problems.  It's not even a "second degree" bitcoin problem like Money Transmission and KYC laws, or banking embargoes. It's as much a bitcoin problem as it is an email problem.  I despise people who victimize others. CryptoLocker is horrible, and I want to eradicate it. The good news is that there are technological and social means to defeat CryptoLocker and other harmful tools. The bad news is that this is a human/social problem, not a technological one. A percentage of the global population has and will continue to consistently victimize people using the means at their disposal. More good news: the same platforms that allow CryptoLocker to harm people also enables tools that neutralize it. (See Brian Krebs' writeup)

Coin tracking is not a Bitcoin Foundation issue. As a thought leader, our organization may have a position on the subject(see  first bullet point of my "Short" response for what I think that position should be), and we can be in favor/against/neutral, but our position will remain just that, a position, its power enforced by peer pressure. Coin tracking, and the problems it is intended to solve are, I believe, outside of our purview. There are people and organizations dedicated to solving those problems. I'm pretty sure they're WAY ahead of us in building those solutions.

We're a non-profit organization encouraging the development and use of an open source software project. Let's focus on ensuring that bitcoin remains solid at the core level, work to reduce the barriers to use by providing comprehensive educational material and showing that bitcoin provides a wide range of benefits for consumers, and everyone else(see proposed position papers below, and add to them!)

"We are determined to keep Bitcoin rooted in its core principles: non-political economy, openness and independence." From our "About" page.

Read Jeff Garzik's article, I'm tired.

Mike, I'm sorry your thought prompt got turned into "BURN THE WITCH!" I think there may be a confusion between a free exchange of ideas on a relevant topic and a decree. I appreciate that there has been some productive conversation on the subject, and I think it exposes what seems to be a raw nerve.

In summary, and staying on topic, I think that if we decide that we need a formal position on coin tracking it should be that we recognize that it will happen, it's not in our realm of responsibility.

PSA, there's a lot of topics that I think are more time-sensitive that need to be developed and built into coherent positions that we can present to the public. Links below. (FFS: Removed)

System security and user education won't solve this problem, just because of the law of large numbers.

Let's say conservatively, there are about a billion people using the internet (the true number is higher these days I think, 1B is the number I used to see some years ago). And let's say about 90% of them use Windows. so that's 900 million.

Let's also say that thanks to brilliant virus scanners, spam filters and super education, 99% of users who are sent CryptoLocker DON'T get infected. But unless Windows goes full iPhone and totally bans unapproved software, no defence system will be perfect: let's say 1% of people get whacked.

So that's 0.01*900,000,000 = 9,000,000    (we can assume that after a few years everyone got mailed at least one scam mail with CL attached just because it's free to send)

How many Bitcoin users do you think there are in total, today? 1 million? With a generous definition of "user", perhaps a bit more.

No matter which way I slice these numbers, it seems left unchecked CL could grow at least as fast or faster than Bitcoin itself, to the point that there are more victims than genuine users. And let's face it, 99% of people are not protected.

You say, "real world criminal prosecution" but to prosecute you must find, and I don't see a good way to track these people down. That's kind of the point of exploring this topic.


What makes you think cash is held to a different standard? You realise that cash is not 100% fungible, right? If you're found to have forged money, you lose it, even if it's not your fault. And that really sucks because counterfeit currency is not really a rare problem. In the Economist today there is a story saying 1 in 4000 British bank notes are fake!

What's more, if you turn up at a bank with a giant pile of cash, or indeed at a real estate agent, they are expected to treat that carefully and possibly file reports if it seems suspicious.

So cash is not fungible, it's actually very much non-fungible, as anyone who tries to spend large amounts of it at once will discover.

However, I don't think we need to hurt Bitcoin's fungibility to find bad guys and make them prosecutable. See my reply to Piotr for why I think that.

Only have limited time now, I'll re-join the discussion tomorrow. Just two brief remarks:

re: CryptoLocker. The problem with those extrapolations is that they sound about right, maybe they will turn out to be right, but they are very much 'back of the napkin' calculations. I would rather not risk core functionality of Bitcoin to combat a problem that is real, but far from certain to be catastrophic. How exactly is CryptoLocker different from any of the other malware that has been plagueing average users for more than the past decade, causing significant damage, but ultimately not being any threat to the system itself (be it Internet usage in general, online banking, etc.).

re: fungibility. The counterfeit argument is a strawman. Counterfeit money is by definition not real money, so it is not a limitation of fungibility of the actual currency. Also, you will note that I didn't simply say blacklisting coins will limit fungibility, I argued that, because of the ease with which the property of being marked as "used in criminal activity" can spread, it is an actual risk that diminish fungibility enough to make Bitcoin unusable.

There's actually two issues at stake here:
The first is the question of having a way for someone who has paid bitcoins under duress, or had them stolen, to tell others about it, so that those of us who sympathize and want to help (or are required by law to help) can help provide information about the inputs they received, to help track down the original criminal.
In a perfectly voluntary world, I can see such a system being a great idea in theory: The more horrible the crime, the more likely everyone in the chain is willing to cooperate with tracking down the originator. There's still the issue of how such lists are constructed, and how the credibility of the victims is established, but multiple competing lists could keep the process honest (the way spam filter lists work). In the absence of a legal obligation to cooperate, this system works pretty nicely.

The second issue is that we do not live in anything close to a voluntary world, or even one in which governments limit the scope of their authority.
A government would almost immediately spawn their own redlist, and make it a requirement for all businesses to use it.
As you mention, they wouldn't be able to mark "Wikileaks's addresses" directly. What they can do however is mark all addresses as tainted. Every single one. Then the moment I spend any money, the merchant has to report information on my person to the redlist operator (my government). This very quickly removes privacy from the system. Essentially, a redlist system can be expanded by legal authorities to be mostly indistinguishable from CoinValidation's own proposal (by making 'marked' the default state of any funds). The cooperation we've seen between intelligence agencies tells me that we can reasonably assume the results of such a fishing expedition would be shared between most countries.

Nothing we do affects the feasability of this approach from the government. They could mandate it right now, and we can't stop it from coming into existence.
But I would be wary of building the tools you proposed, precisely because that would be making their task easier. Maybe we can actually build it once the threat has subsided due to (insert libertarian utopia of your choice here).

Now I disagree with those who are calling for your head, it seems they're getting a little spooked at how easily such a scheme could come into existence. Let's not shoot the messenger, especially when he's limited himself to a theoretical discussion. There's plenty of people who actually deserve our ire (the CoinValidation thing is positively vile, and they're openly trying to get legislators on their side).

We must keep this discussion going! If we can't find a good technical solution, somebody else will make one. And we might not like it.

I'm confident we can creatively code our way through this issue. For instance, what if we created a decentralized, fuzzy redlist, without a central authority deciding which transactions were bad or good? Is there an economic solution to this problem?

If we decide that no decent system is possible, we still need to scope out the possibilities. We need to be one step ahead.

I am honestly surprised, bordering on appalled, by the largely positive reaction to this proposal.

Then again, I'm completely new here, so I probably shouldn't.

Any such attempt, to create a database of tainted coins to remove them from circulation, is a direct attack on Bitcoin's fungibility. And because of the relative ease with which the property of being tainted can spread (any shared address will do the trick, presumably) or could even be entirely faked ("Bill stole my coins. Mark them as stolen, please." Who will do the detective work on this claim, Bitcoin Police?), Bitcoin's fungibility is not just threatened, but at the real risk of being completely destroyed over time.

There are ways to cooperate with (law enforcement) authorities and try to limit the usefulness of Bitcoin as a tool for criminal activities, but blacklisting coins is not one of them. It is a surefire way to destroy this fantastic little (5B USD) experiment we have going here.

please do elaborate on those other ways you mention. For instance, how do you think CryptoLocker should be tackled.

The way any worm/malware should be fought? System security, user education, if possible, real world criminal prosecution? But maybe I'm missing the weight of your question.

Here's one question I have yet to see an answer for: Why should Bitcoin, which in many ways resembles, or perhaps can be seen as the next evolutionary step following cash, be held to an entirely different (moral, and legal) standard than cash?

The problems Bitcoin should tackle are ease of transaction, persistency of store of wealth, [more grandiose goals go here], but "making financially motivated crimes near-impossible, at the cost of crippling the core functionality of the currency" is not among them, in my opinion.

I am also concerned that this system can be abused, could not be efficient and can represent concrete risks for Bitcoin that shouldn't be ignored. That is why I think these discussions are very important and shouldn't be taboo.

On fungibility, one difference with Bitcoin is that you can't see the money until you irreversibly received it, so you can't refuse it in a traditional sense and the same is true for the people who will receive this money from you. You can't be persecuted for accepting redlisted money. Where I see a real risk for fungibility, however, is that you can be persecuted for spending this money without reporting if you're denounced by the people who will receive money from you.

Another unsolved problem is that I hardly see independent organizations maintaining redlists; third parties generally can't witness crimes or have financial incentives to maintain their list. I am therefore concerned that:

1. Lists would be mainly government maintained.
2. Persecuting users for not reporting will be tempting (complicity).
3. Abusing the system for political reasons will be tempting (and opaque to the public).
Edit: 4. Persecuting miners for processing redlisted coins transactions will be tempting (fully anonymous miners might become more rare as the network scales).

I think we shouldn't automatically reject any idea that could (efficiently) improve this system. Obviously, there is a big difference between discussing and adopting these ideas.

In my view, this "redlist" process has already gained enough steam that it will be implemented in one form or another.

If Satoshi were still in this 3d reality I'm sure he would be opposed to this ridiculous perverting of his ideal and supportive of altcoins that are true to the principles of freedom and independence.

Bitcoin is now the bloated IBM of the 1970's and destined to become a secondary player to these emerging altcoins stars.

Moreover, I think the "redlisting" of coins is a slippery slope. Here is how things could progress:

You start with informing people of coins that were used for crime

People start discriminating against tainted coins

Someone from the US government would have the bright idea of redlisting coins that passed through wallets of "terrorist organizations", so say Wikileaks gets redlisted

People that don't know better can't tell a difference between coins redlisted for crimes and ones redlisted by politicians for "war on terror", so they discriminate against them both.

Term "terrorist" or whatever is the flavour of the month gets extended to more and more organizations that are inconvenient for the US - Anonymous, some foreign journalists that report on war crimes, government of a country that is "at war" with US or "harbouring terrorists", etc.

Soon the redlist becomes a political tool - we start discriminating against the grey area. Say some place does research on human embryos or human cloning in a country where that is legal, but since some western country thinks that their law trumps over regional law, they start redlisting their addresses.

Transactions and addresses are started to be added to it indiscriminately because some government agency says they are tied to this or that crime. Whoever is keeping the redlist can't say no since they have some order from the agency, and they can't tell anyone why they are adding those since they have a gag order.

Soon you start having a currency controlled by the political powers of one country that houses whoever is making the redlist since they can muscle their way into controlling it.

CoinJoin needs to be nicely implemented in Bitcoin-Qt before any of these ridiculous blacklist proposals take off. So for the next 30 days, I will match donations to the CoinJoin bounty fund (3M8XGFBKwkf7miBzpkU3x2DoWwAVrD1mhk), up to a maximum of 5 BTC. Just donate to that address, and in 30 days I'll donate the difference between the current received amount (16.21420773) and the received amount at that time (max 5 BTC).

This is why we need alternative blockchains. Bitcoin is going mainstream.

So far what I'm reading is a very adult conversation about serious issues Bitcoin faces as it grows up. I'm not seeing the sort of thread that would happen here or Reddit.

It's not decisions being forced by the Foundation and I'm tired of seeing it put across like that. It's a discussion and it's a really important one. Here is why:

Imagine Bin Laden is still around.

We find out his Bitcoin address. It contains 10,000 Bitcoins and we can see transactions entering it.

We then see outgoings, some of which are traced to weapons used to kill 1000s of Americans, think a major bomb or subway incident.

What do you think is going to happen? Media outrage and congressional outrage. "We must ban this worldwide!". It's exactly what will happen. Bitcoin being so public is a double-edged sword.

I don't want anything that's been proposed but I can see the need for a good digital identity system. There are good reasons to keep it off the blockchain - it could even be a bitcoin derivative run by miners. It could be required for high value transactions or purchasing of certain items, e.g. alcohol. There are many ramifications and many issues it will raise. Issues of data protection, even more and much easier identity theft, the US knowing far too much about everyone, issues getting verified, centralised entities in control, etc etc etc.

I also think that something in this area is inevitable, it's about finding the least damaging way to do it. I would not want it coming from the likes of Yifu et al but that doesn't take away from the importance of discussing it with an open mind rather than immediately jumping into personal attacks and invalid conclusions.

For reference: I am not a foundation member and I do not want to see any of this. However, I recognise that there is a problem and that lawmakers worldwide are going to mandate some form of identity regulation on all cryptocurrencies for taxation and criminal purposes. Whether it remains just with exchanges or more expansive I don't know, but at the very least I'd expect all commercial purchases > $10,000 (e.g. houses, cars) to have some form of reporting requirement, just as banks have to report similar things.

The status quo isn't going to work. Saying that Bitcoin will just get on with things anyway isn't true. Bitcoin would become a black market device while another crypto - perhaps more centralised and horrible, would become mainstream. Most people out there don't care about all this, they just want to have/spend money, that's what people here don't realise.

Similarly, enacting any of these solutions will push criminals into black market currencies, extensive identity theft, and new technologies. It will, however, improve the situation for law enforcement and the taxation authorities (yes you have to pay tax; no it's not up for discussion here). It will also prevent the Bin Laden situation I describe, for which you could also write cryptolocker etc.

Please don't shoot me, just have the discussion about the problem and suggest solutions.

So far what I'm reading is a very adult conversation about serious issues Bitcoin faces as it grows up. I'm not seeing the sort of thread that would happen here or Reddit.

It's not decisions being forced by the Foundation and I'm tired of seeing it put across like that. It's a discussion and it's a really important one.