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This is unrelated to the article, but I'm interested to hear thoughts on this: As bitcoin becomes more valuable and ransomware / money laundering becomes more

This is unrelated to the article, but I'm interested to hear thoughts on this: As bitcoin becomes more valuable and ransomware / money laundering becomes more prevalent, why not blacklist coins that have been through a mixer? If you can't mix the coins, you can't launder them. It won't be possible to use Bitcoin for these activities anymore. Here's what I mean by "blacklist": If an exchange detects that your account has received more than N bitcoins that have been through a mixer, your account is closed and your coins are refunded. It's easy to check whether a coin has been through e.g. bitcoinfog, for example, so this is easy to implement. I think a lot of the resistance to this idea comes from people who use Silk Road clones, most of which force you to use a mixer. And while there's a strong ethical argument to be made that Silk Road ought to exist and that it's made the world safer, there are other types of activities that have been growing with concerning frequency in the Bitcoin world. The sole reason that Bitcoin is untraceable is because of mixers. Is it time to eliminate them? What are some consequences of pursuing this strategy? There's nothing stopping it from happening. As soon as a few exchanges become so large that they're the "gatekeepers" for BTC -> USD conversion, it will be difficult to get dollars out. And if other countries follow suit for euros and yen, then mixed Bitcoins won't be worth much. As far as I can tell, this is a very real possibility for the future, so if it has consequences then we should discuss them now. The era of "pay for everything in bitcoin" is sufficiently far away that we should probably talk about the implications of banning mixed coins. EDIT: Ok, I've exhausted my self-control for complaining about downvotes. This is a genuine, good-faith question that I spent time crafting. If you don't come to HN to have your preconceptions challenged, then what are we doing here? And no, people can't troll others by sending them mixed coins. It's no different than the fraud detection that exists today. You'd need tens of thousands of USD to even put a dent in a business account, for example, and exchanges will just forgive it. I think people don't like the future I've painted, and hence the downvotes. It doesn't bother me much, but it's an interesting phenomenon to see unfold.

MichaelGG 9y ago
Buy Monero or zCash, etc. with BTC? What defines a mixer? Etc. etc. Also, then you no longer have a nice transaction system and have to add middleware on every tx to make sure you're not getting "bad" coins. It's a mess, plus it hurts liberty and basically destroys the entire point of BTC.
- sillysaurus3 9y ago
  Those are fine arguments, but unfortunately the reality is that there's not much standing in the way of this idea. A mixer is whatever exchanges define to be a mixer. And a mixer is only useful if it has a large number of coins tumbling through it, so they're pretty easy to classify. If you ban mixers, it might turn bitcoin into the perfect Orwellian currency. Sufficiently far in the future, it might not be possible to hide any of your activities from the government. That may destroy the original point of BTC, but we don't know the original intent -- the point of BTC is that it exists and people use it, nothing more. Bitcoin is still by far the most popular cryptocurrency, so Zerocoin and other derivatives don't yet matter much in comparison. And if you ban mixed coins, it's easy to imagine nobody will want to trade you Monero for mixed coins. It's also easy for point of sale systems to check whether any given coin has been through a mixer in real time, so even if we do enter the era of "pay for everything in bitcoin," this still seems like a possibility. The consequences are pretty steep.
  - stale2002 9y ago
    There is quite a lot in the way of doing this. In order to blacklist coins, you do not need to get a couple exchanges on board. You need to get EVERY exchange on board. Because if a single exchange exists that accepts my blacklisted coins, in any country in the entire world, then that means that I can turn my blacklisted coins into real money, and then I can convert that money easily afterwords. And if such an exchange existed, then everybody would just use THAT exchange. Nobody would use an inferior exchange that has a history of taking away your bitcoin or blacklisting your coins. In order to censor transactions, you have to take control of EVERY important player, not just most of them. And even if you DO succeed in that monumentally difficult task of taking over every important bitcoin player in the entire world, well now you need to keep that up. Now you need to stop NEW players from forming that don't follow your inferior blacklisting rules. And you have to stop them in both bitcoin, and every single other altcoin/cryptcurrency . Because even if you succeed in killing bitcoin, anybody can just create a new altcoin.
    - sillysaurus3 9y ago
carbocation 9y ago
For some reason, your comment reminds me of "What color are your bits?" http://ansuz.sooke.bc.ca/entry/23 http://ansuz.sooke.bc.ca/entry/23
mimble 9y ago
This is where you run into issues regarding fungibility. I would suggest you give this video a watch for a better explanation on the topic (https://www.youtube.com/watch?v=VuI-8EwqIS8 https://www.youtube.com/watch?v=VuI-8EwqIS8). Also, if we were to apply this same logic to physical currency we would have to revoke something near 90% or more of the physical currency supply. (http://news.nationalgeographic.com/news/2009/08/090816-cocaine-money.html http://news.nationalgeographic.com/news/2009/08/090816-cocai...)
deweller 9y ago
Fungibility of the coins is a differentiating competitive advantage of bitcoin over, say, PayPal. Blacklisting coins leads to regulation, which leads to government control, etc. Soon I can't send money to someone in China because the Chinese government blocks coins that were used for something that they don't like. The system quickly falls apart and becomes much less useful.
- kanzure 9y ago
  Here are some bitcoiners and bitcoin developers talking about why privacy and fungibility is important. This might help to explain why so many of the bitcoin developers have been interested in coinjoin and confidential transactions: http://diyhpl.us/wiki/transcripts/gmaxwell-confidential-transactions/ http://diyhpl.us/wiki/transcripts/gmaxwell-confidential-tran... http://diyhpl.us/wiki/transcripts/bitcoin-adam3us-fungibility-privacy/ http://diyhpl.us/wiki/transcripts/bitcoin-adam3us-fungibilit... http://diyhpl.us/wiki/transcripts/sf-bitcoin-meetup/2016-11-21-mimblewimble/ http://diyhpl.us/wiki/transcripts/sf-bitcoin-meetup/2016-11-... http://diyhpl.us/wiki/transcripts/scalingbitcoin/milan/fungibility-overview/ http://diyhpl.us/wiki/transcripts/scalingbitcoin/milan/fungi... http://diyhpl.us/wiki/transcripts/scalingbitcoin/privacy-and-fungibility/ http://diyhpl.us/wiki/transcripts/scalingbitcoin/privacy-and... Long-term, I expect mixers, coinjoin, confidential transactions or other technology to get implemented into the bitcoin protocol. Short-term I think that they are most likely to show up in sidechains or we'll just stick with the services already deployed (joinmarket, maybe tumblebit, etc.). And ultimately the whole blockchain data stuff could poof out of existence thanks to the near magic of recursive SNARKs.... which isn't going to get deployed any time soon; uh, maybe on a sidechain. That said, I recognize we're in a thread about some sort of SEC enforcement action. Stay legal, folks. Fungibility is a property of money, and if fungibility is deemed illegal then that's certainly interesting and something to consider. As a faithful internet comment author, I have not read the article at all, so I am absolutely certain that the accusation is not merely "omg fungible money" it's probably an accusation regarding a crime/scam or whatever. (Oh I guess I get a free pass-- Silly3rd's post says the mixer comment is unrelated to the article.)
- peoplewindow 9y ago
  Regulation and government control is what sillysaurus3 is after: he specifically mentioned ransomware and money laundering as the goal. If Bitcoin's advantage over PayPal is ransomware, that isn't an advantage governments will tolerate for very long, and why should they? Bans would be popular with the voters.
stale2002 9y ago
"What are some consequences of pursuing this strategy?" This is a very good question, because it gets to the heart of the matter of what bitcoin is. Bitcoin was not created to be a paypal clone. Bitcoin was created as a way to do non-reversible, censorship-resistant electronic transactions. Blacklisting coins, or in other words, censoring certain financial transactions, defeats the entire point of bitcoin. If you want to engage in financial transactions that are censor-able or reverse-able, you have multiple options already. Use one of those instead. The other options are probably better, actually, because bitcoin makes a lot of tradeoffs in order to get the desirable property of censorship resistance.
e79 9y ago
I suspect that in reality, this would be far more complicated than your comment gives credit for. How do you determine what coins have been through a mixer? By looking at tx inputs and going back all the way to when those coins were mined into existence? What if an innocent wallet happens to receive "dirty" coins even when the wallet holder themselves has done nothing wrong? Who would be in the charge of enforcing this? The network? The exchanges? If this is done at the exchange-level, what's stopping someone from simply cashing out via Amazon gift cards or the like through a non-traditional exchange service? The list goes on. This is not a simple problem. I personally don't believe private or public regulation is the answer.
- sillysaurus3 9y ago
  Every one of your questions has straightforward answers: > How do you determine what coins have been through a mixer? By looking at tx inputs and going back all the way to when those coins were mined into existence? Graph the blockchain. This isn't a new idea. There are several visualizations that have already popped up showing who is sending coins to who. Mixers show up as a giant tumbleweed shape in these. > What if an innocent wallet happens to receive "dirty" coins even when the wallet holder themselves has done nothing wrong? For one, you'd need to send them a massive amount of money to taint their stash. For two, simply send back the coins to clear your name. The point is that it's relatively easy to detect when an account is receiving coins primarily from a mixer. > Who would be in the charge of enforcing this? The network? The exchanges? The exchanges. > If this is done at the exchange-level, what's stopping someone from simply cashing out via Amazon gift cards or the like through a non-traditional exchange service? The price of mixed coins will plummet if exchanges refuse to deal with them. Remember "GoxCoins"? Same thing. Non-traditional avenues aren't an escape from these forces when everyone agrees they're relatively worthless. All in all, the above proposal is no more difficult than implementing the fraud detection prevalent in most financial companies. I'm pretty sure people are being evasive solely because they don't like the idea, not because it's difficult. It seems like a bad idea to refuse to take it seriously.
  - unclebucknasty 9y ago
    >simply send back the coins to clear your name Earnest question: if someone sent you coins, wasn't it presumably in exchange for something? If so, doesn't that complicate the idea of simply sending them back (without incurring a loss)?
MichaelBurge 9y ago
Trolls could send you mixed Bitcoins to taint your entire stash. I suppose there could be a protocol for refunding the trolls to clear your name, so it's probably not a big deal. If you operate an MMO or other game where people can buy virtual currency, then the game acts as a "bank" that does periodic settlement transactions with the outside world. Lots of people are thinking about off-chain transactions in this manner, and it seems like you'd be hurting its utility if you couldn't. Then again, games usually don't let you take money out because then they could be used for money laundering. Exchanges have significant Bitcoin reserves and their employees are highly invested in Bitcoin. If they collectively blacklist other people's coins, they stand to benefit. So there's a conflict of interest. If Exchanges put a system in place to blacklist certain undesirables, what stops the feds from whispering into their ear, "You should add these porn and gun sites to your list. They're not illegal, but it'd be a shame if we found something else to investigate you for." https://en.wikipedia.org/wiki/Operation_Choke_Point https://en.wikipedia.org/wiki/Operation_Choke_Point The policy would increase the value of newly mined Bitcoins, which would further centralize mining in Iceland and China, which have cheap(or subsidized) electricity. Miners would have to reject these transactions, because otherwise it would end up in the transaction fee and in their account. Miners deal with a larger tree than just the main path, and it might be computationally expensive to calculate it for each transaction. If you exempt transaction fees, then pools stand to make a huge profit by cleaning mixed coins and would probably find a way to do it. If the miners, exchanges, users don't use exactly the same algorithm and blacklist at all times, then there's a possibility to profit by e.g. scamming a Bitcoin gambling site using newly-tainted coins. I feel like there's already enough ways to lose your hat from one subtle mistake with cryptocurrency, and we don't need any more.
Jabanga 9y ago
>why not blacklist coins that have been through a mixer? If you can't mix the coins, you can't launder them. It won't be possible to use Bitcoin for these activities anymore. This would totally eliminate privacy. It would be no different than making HTTPS illegal. It's not just criminals that use privacy technology. Eliminating privacy in money for the sake of eliminating some crime at the margins is giving up the farm to gain a horse. It's making a situation where everyone is subjected to mass-surveillance, and power concentrates to a small politically connected elite that can monitor all private interactions, exponentially more likely to be realized. It's very dangerous to society. https://aeon.co/essays/if-plastic-replaces-cash-much-that-is-good-will-be-lost https://aeon.co/essays/if-plastic-replaces-cash-much-that-is... >There's huge interest in cryptocurrencies and what perhaps they can create in the market place. Now we at MasterCard are not completely comfortable with the idea of cryptocurrencies largely because they go against the whole principle that we've established our business on which is really moving to a world beyond cash and ensuring greater transparency.. If you think about it, cash is a problem for a number of countries. Cash really facilitates anonymity, it facilitates illegal activity, it facilitates tax avoidance and a range of other things that aren't going to drive efficiency in an economy -https://youtu.be/bO4jHXjCXw8?t=2m57s https://youtu.be/bO4jHXjCXw8?t=2m57s >If it's an anonymous transaction, that sounds like a suspicious transaction. Why does somebody need to be anonymous? -http://youtu.be/bO4jHXjCXw8#t=4m12s http://youtu.be/bO4jHXjCXw8#t=4m12s MasterCard SE Asia President on cryptocurrencies and cash
desdiv 9y ago
1. Go on Microsoft Store 2. Select Bitcoin as payment method 3. Pay with legitimate Bitcoins 4. Later on, send a tainted post-mixer Satoshi to wherever address your legitimate Bitcoins ended up at 5. You just made a portion of Microsoft Corporation's Bitcoin holdings worthless Actually, come to think of it, big companies don't actually handle the Bitcoins directly. They have a payment processor that handles the dirty work for them and just receive fiat on their end. So that means this trivially executable attack not only fucks up some of Microsoft's accounts, it also fucks over everyone who uses the same payment processor as well as the payment processor itself.
- sillysaurus3 9y ago
  That would be an extremely expensive attack. You'd need tens of thousands to make a dent in a business account, and a business account would simply call up the exchange and tell them what happened.
  - desdiv 9y ago
    >You'd need tens of thousands to make a dent in a business account I already made clear that the cost per attack per address is 1 Satoshi + transaction fees, which is around $1.5USD in today's network conditions. You only need to pull off one successful attack to taint an entire business account. >a business account would simply call up the exchange and tell them what happened And a drug dealer on a Silk Road clone can just call up the exchange and tell them that some strange bitcoins landed in their account and that they have no idea how it got there, but they sincerely hope that it won't affect the withdrawal of their other completely legitimate bitcoins.
    - sillysaurus3 9y ago
      I thought it was pretty clear, but the proposal is to close accounts that receive a significant number of mixed coins. That "significant" part is important -- it varies per account. Obviously it needs to be high enough to fend off trolling, but low enough to fend off laundering. That's not a difficult proposition; it's equivalent to fraud detection that credit card companies employ.
jacquesm 9y ago
So, that's a nice way to get someone: take one of their public addresses, send them some coin through a remixer boom address invalidated. Also, bitcoin doesn't use accounts. I'm all for criticizing bitcoin and some of the more obvious problems with it (the size of the blockchain makes it less and less practical for normal use to run your own bitcoind) but you have to at least make a minimal effort to understand how the whole thing works and what the abuse potential is for your suggestions. Also, you're off-topic so no point complaining about the downvotes, and didn't you make it so that you no longer saw whether or not you were downvoted?
- sillysaurus3 9y ago
  I did! May as well plug it: https://news.ycombinator.com/item?id=14456203 https://news.ycombinator.com/item?id=14456203 To say I'm off-topic on a thread about bitcoin is a bit of a stretch. Not all of us have a blog and an HN army to upvote our weekly motivational posts to funnel views to our consulting business. You want me to wait until a blog post about exactly this topic comes up? I addressed your abuse argument directly in my edit, which you saw, so this comment was probably the definition of bad faith writing. More amusing than annoying, actually. (Also, the accounts are at the exchanges, which can be closed. Of course, you know this, so I wonder why you're writing this way.) But yeah, this is exactly why it's verboten to even mention downvotes on HN. I was trying to call attention to a more serious problem, which is that when the voting system loses value, what's the point in contributing? I don't mind this particular instance of it, but it's getting harder to ignore the trend. Nonetheless, with low-value comment chains like this one popping up every time someone even mentions it, it's best not to talk about it.
  - jacquesm 9y ago
    > I addressed your abuse argument directly in my edit, which you saw, so this comment was probably the definition of bad faith writing. How I read HN is none of your business but just FYI I opened the tab when your comment was in its original un-edited state and when I hit reply your edit wasn't there yet. Talk about bad faith.
gist 9y ago
> And no, people can't troll others by sending them mixed coins. I've often wondered if anyone has set someone up by depositing cash into their bank account (account number easy enough to find) and then created or leaked a back story to get them into some kind of trouble.
- hulahoof 9y ago
  IIRC in this talk by Chris Rock at DC24 he mentions this tactic as part of creating the environment for a coup: Edit - direct link https://m.youtube.com/watch?v=m1lhGqNCZlAusg=AFQjCNHkUHeVThwfRJkBLDp1A9PfAZauvA https://m.youtube.com/watch?v=m1lhGqNCZlAusg=AFQjCNHkUHeVThw...
boznz 9y ago
I wish more people would think about possible solutions like this. Unfortunately from their (fine) ideals bitcoin and the other crypto-currencies are just becoming another tool for criminals and speculators and someone needs to find a solution if its going to become a help rather than a hindrance. And don't worry about the down-votes, I'll take some off you by saying those are mostly from speculators who don't want to see their tower of card collapse.
cantrevealname 9y ago
If transactions have perfect record keeping and are always traceable, then why stop with just blacklisting. You could go much further and correct all sorts of frauds and injustices going back through layers of transactions. But we don't always do that in the non-cyberspace world even when it is technically feasible. If a car is stolen and it changes hands ten times, then yes, it'll get returned to the original owner. But not for fungible transactions like in securities. I'll give you a concrete example of where it doesn't happen: Canadians experienced a multi-billion dollar stock fraud due a company called Bre-X[1] that found an enormous gold deposit that turned out to be a massive lie. After the fraud was exposed and the stock had collapsed, the brokerages, exchanges, and the Ontario Securities Commission could have reversed all the transactions one by one until everyone who was unjustly enriched had their profit taken away and everyone who lost money was made whole. All the data to do this was available to the brokers. There is no such thing as anonymous holders and anonymous exchange of shares. If Mr. Wilson was left holding 1000 worthless shares when trading was halted, you could look at the records and see that he bought it from Mr. Coolidge for $85,000. You'd seize $85,000 from Coolidge giving it back to Wilson, and return the 1000 shares to Coolidge. Then you'd look at Coolidge's transactions. You'd unwind all the transactions to the beginning of the fraud. But the brokerages and exchanges did not do this! You're asking for stricter controls on cryptocurrencies than exist for fungible meat-space transactions. [1] https://en.wikipedia.org/wiki/Bre-X https://en.wikipedia.org/wiki/Bre-X
- paulsutter 9y ago
  Countries already consider use of a mixer as a possible indication of money laundering, they don't need to strictly outlaw it. When someone tries to cash out coins that came predominantly through mixers, the authorities could hold it up and ask the individual to explain. And if they don't have an explanation, the authorities can keep the money. Sure, this sort of enforcement isn't happening yet but it can and it's simple and practical. And I'd be more surprised if it doesn't happen. Last year I closed a bank account with $11,000 in it, and just for fun I asked for the money as cash. That took a long time, the bank manager got involved and I had to sign a document stating the source of the money. Which is funny because they sure didn't ask when I deposited it. That's the world we live in, and that's where bitcoin is going.
kakarot 9y ago
> The sole reason that Bitcoin is untraceable is because of mixers. Is it time to eliminate them? Uh, the whole point of bitcoin is returning socioeconomic control to the people. Part of the socioeconomic control government exerts over its citizens is tracing financial transactions to punish those who make transactions the State has deemed "bad". Getting rid of mixers just hands that control back to the State. Woudln't seem like much of a problem, if these policies weren't set by lobbyists and politicians with sick agendas. Who knows what could be a "bad" transaction tomorrow. Drones? CPUs without a TPM? All forms of pornography? Anti-government propoganda? We are talking about a massive slippery slope here. Besides, moves like that just result in new tech further obfuscating things from the State, like always. Attempt to read everyone's messages, everyone will move to encrypted communication platforms. Attempt to ban mixed coins, people will adopt a cryptocurrency with an encrypted ledger or obfuscated transactional history.
trophycase 9y ago
People will just use Monero then.
- patrickg_zill 9y ago
  Exactly why I am slowly building a position in Monero...
olegkikin 9y ago
It actually does happen, in a social way, not at the protocol/client level. During 2013 some investment companies were buying "clean" coins only, the ones that came straight from the miners. Indeed, nothing stops from that being implemented at the node level, or by the miners. But then you need to deal with people tainting other people's accounts.
nikcub 9y ago
Coinbase is well known to randomly lock people out of accounts - they're the Paypal of Bitcoin wallets. They are likely associating accounts with 'bad' addresses and doing what you describe. The downside here is that a lot of people don't use Coinbase, i'm not sure what their upside is. They aren't exactly earning a reputation as a safe Bitcoin space.
seesomesense 9y ago
"If you don't come to HN to have your preconceptions challenged, then what are we doing here?" Like other forums, HN is largely an echochamber for those who think alike. Break any of the largely unspoken conventions here, and see what happens to you....
cptn_brittish 9y ago
There is only a limited amount of bitcoins which can be mined so you can assume at some point all coins will be mixed at that stage what do you propose happens? Woth the type of people who invest in bitcoins I can see them simply making sure all bitcoins are tainted in this way for purely idealogical reasons not even to ensure that illigal activity can occur.
tuxxy 9y ago
You're implying that mixers and tumblers are ONLY dedicated malicious services. What you're forgetting is that hot wallets used on popular bitcoin services also serve as tumblers. The distinction between a "malicious tumbler" and a service's hot wallet is just the dedicated use. For example, if a bitcoin shopping site had a wallet you deposited coins into, you'll be recording that you have <number> of coins and they will show that. Your coins will be mixed with their hot wallet and who knows how long they keep them in there. If you wait a few days and withdraw, chances are that most (if any) are NOT your original coins. Not to mention, if you blacklisted these coins, then users who receive these coins wouldn't be able to legitimately use them. TL;DR: Tumbling services are just dedicated to tumbling bitcoins. Most semi-large bitcoin services with hot wallets inadvertently tumble their user's bitcoins.

MichaelGG 9y ago

Buy Monero or zCash, etc. with BTC? What defines a mixer? Etc. etc. Also, then you no longer have a nice transaction system and have to add middleware on every tx to make sure you're not getting "bad" coins. It's a mess, plus it hurts liberty and basically destroys the entire point of BTC.

sillysaurus3 9y ago
Those are fine arguments, but unfortunately the reality is that there's not much standing in the way of this idea. A mixer is whatever exchanges define to be a mixer. And a mixer is only useful if it has a large number of coins tumbling through it, so they're pretty easy to classify. If you ban mixers, it might turn bitcoin into the perfect Orwellian currency. Sufficiently far in the future, it might not be possible to hide any of your activities from the government. That may destroy the original point of BTC, but we don't know the original intent -- the point of BTC is that it exists and people use it, nothing more. Bitcoin is still by far the most popular cryptocurrency, so Zerocoin and other derivatives don't yet matter much in comparison. And if you ban mixed coins, it's easy to imagine nobody will want to trade you Monero for mixed coins. It's also easy for point of sale systems to check whether any given coin has been through a mixer in real time, so even if we do enter the era of "pay for everything in bitcoin," this still seems like a possibility. The consequences are pretty steep.
- stale2002 9y ago
  There is quite a lot in the way of doing this. In order to blacklist coins, you do not need to get a couple exchanges on board. You need to get EVERY exchange on board. Because if a single exchange exists that accepts my blacklisted coins, in any country in the entire world, then that means that I can turn my blacklisted coins into real money, and then I can convert that money easily afterwords. And if such an exchange existed, then everybody would just use THAT exchange. Nobody would use an inferior exchange that has a history of taking away your bitcoin or blacklisting your coins. In order to censor transactions, you have to take control of EVERY important player, not just most of them. And even if you DO succeed in that monumentally difficult task of taking over every important bitcoin player in the entire world, well now you need to keep that up. Now you need to stop NEW players from forming that don't follow your inferior blacklisting rules. And you have to stop them in both bitcoin, and every single other altcoin/cryptcurrency . Because even if you succeed in killing bitcoin, anybody can just create a new altcoin.
  - sillysaurus3 9y ago

carbocation 9y ago

For some reason, your comment reminds me of "What color are your bits?" http://ansuz.sooke.bc.ca/entry/23 http://ansuz.sooke.bc.ca/entry/23

mimble 9y ago

This is where you run into issues regarding fungibility. I would suggest you give this video a watch for a better explanation on the topic (https://www.youtube.com/watch?v=VuI-8EwqIS8 https://www.youtube.com/watch?v=VuI-8EwqIS8). Also, if we were to apply this same logic to physical currency we would have to revoke something near 90% or more of the physical currency supply. (http://news.nationalgeographic.com/news/2009/08/090816-cocaine-money.html http://news.nationalgeographic.com/news/2009/08/090816-cocai...)

deweller 9y ago

Fungibility of the coins is a differentiating competitive advantage of bitcoin over, say, PayPal. Blacklisting coins leads to regulation, which leads to government control, etc. Soon I can't send money to someone in China because the Chinese government blocks coins that were used for something that they don't like. The system quickly falls apart and becomes much less useful.

kanzure 9y ago
Here are some bitcoiners and bitcoin developers talking about why privacy and fungibility is important. This might help to explain why so many of the bitcoin developers have been interested in coinjoin and confidential transactions: http://diyhpl.us/wiki/transcripts/gmaxwell-confidential-transactions/ http://diyhpl.us/wiki/transcripts/gmaxwell-confidential-tran... http://diyhpl.us/wiki/transcripts/bitcoin-adam3us-fungibility-privacy/ http://diyhpl.us/wiki/transcripts/bitcoin-adam3us-fungibilit... http://diyhpl.us/wiki/transcripts/sf-bitcoin-meetup/2016-11-21-mimblewimble/ http://diyhpl.us/wiki/transcripts/sf-bitcoin-meetup/2016-11-... http://diyhpl.us/wiki/transcripts/scalingbitcoin/milan/fungibility-overview/ http://diyhpl.us/wiki/transcripts/scalingbitcoin/milan/fungi... http://diyhpl.us/wiki/transcripts/scalingbitcoin/privacy-and-fungibility/ http://diyhpl.us/wiki/transcripts/scalingbitcoin/privacy-and... Long-term, I expect mixers, coinjoin, confidential transactions or other technology to get implemented into the bitcoin protocol. Short-term I think that they are most likely to show up in sidechains or we'll just stick with the services already deployed (joinmarket, maybe tumblebit, etc.). And ultimately the whole blockchain data stuff could poof out of existence thanks to the near magic of recursive SNARKs.... which isn't going to get deployed any time soon; uh, maybe on a sidechain. That said, I recognize we're in a thread about some sort of SEC enforcement action. Stay legal, folks. Fungibility is a property of money, and if fungibility is deemed illegal then that's certainly interesting and something to consider. As a faithful internet comment author, I have not read the article at all, so I am absolutely certain that the accusation is not merely "omg fungible money" it's probably an accusation regarding a crime/scam or whatever. (Oh I guess I get a free pass-- Silly3rd's post says the mixer comment is unrelated to the article.)
peoplewindow 9y ago
Regulation and government control is what sillysaurus3 is after: he specifically mentioned ransomware and money laundering as the goal. If Bitcoin's advantage over PayPal is ransomware, that isn't an advantage governments will tolerate for very long, and why should they? Bans would be popular with the voters.

stale2002 9y ago

"What are some consequences of pursuing this strategy?" This is a very good question, because it gets to the heart of the matter of what bitcoin is. Bitcoin was not created to be a paypal clone. Bitcoin was created as a way to do non-reversible, censorship-resistant electronic transactions. Blacklisting coins, or in other words, censoring certain financial transactions, defeats the entire point of bitcoin. If you want to engage in financial transactions that are censor-able or reverse-able, you have multiple options already. Use one of those instead. The other options are probably better, actually, because bitcoin makes a lot of tradeoffs in order to get the desirable property of censorship resistance.

e79 9y ago

I suspect that in reality, this would be far more complicated than your comment gives credit for. How do you determine what coins have been through a mixer? By looking at tx inputs and going back all the way to when those coins were mined into existence? What if an innocent wallet happens to receive "dirty" coins even when the wallet holder themselves has done nothing wrong? Who would be in the charge of enforcing this? The network? The exchanges? If this is done at the exchange-level, what's stopping someone from simply cashing out via Amazon gift cards or the like through a non-traditional exchange service? The list goes on. This is not a simple problem. I personally don't believe private or public regulation is the answer.

sillysaurus3 9y ago
Every one of your questions has straightforward answers: > How do you determine what coins have been through a mixer? By looking at tx inputs and going back all the way to when those coins were mined into existence? Graph the blockchain. This isn't a new idea. There are several visualizations that have already popped up showing who is sending coins to who. Mixers show up as a giant tumbleweed shape in these. > What if an innocent wallet happens to receive "dirty" coins even when the wallet holder themselves has done nothing wrong? For one, you'd need to send them a massive amount of money to taint their stash. For two, simply send back the coins to clear your name. The point is that it's relatively easy to detect when an account is receiving coins primarily from a mixer. > Who would be in the charge of enforcing this? The network? The exchanges? The exchanges. > If this is done at the exchange-level, what's stopping someone from simply cashing out via Amazon gift cards or the like through a non-traditional exchange service? The price of mixed coins will plummet if exchanges refuse to deal with them. Remember "GoxCoins"? Same thing. Non-traditional avenues aren't an escape from these forces when everyone agrees they're relatively worthless. All in all, the above proposal is no more difficult than implementing the fraud detection prevalent in most financial companies. I'm pretty sure people are being evasive solely because they don't like the idea, not because it's difficult. It seems like a bad idea to refuse to take it seriously.
- unclebucknasty 9y ago
  >simply send back the coins to clear your name Earnest question: if someone sent you coins, wasn't it presumably in exchange for something? If so, doesn't that complicate the idea of simply sending them back (without incurring a loss)?

MichaelBurge 9y ago

Trolls could send you mixed Bitcoins to taint your entire stash. I suppose there could be a protocol for refunding the trolls to clear your name, so it's probably not a big deal. If you operate an MMO or other game where people can buy virtual currency, then the game acts as a "bank" that does periodic settlement transactions with the outside world. Lots of people are thinking about off-chain transactions in this manner, and it seems like you'd be hurting its utility if you couldn't. Then again, games usually don't let you take money out because then they could be used for money laundering. Exchanges have significant Bitcoin reserves and their employees are highly invested in Bitcoin. If they collectively blacklist other people's coins, they stand to benefit. So there's a conflict of interest. If Exchanges put a system in place to blacklist certain undesirables, what stops the feds from whispering into their ear, "You should add these porn and gun sites to your list. They're not illegal, but it'd be a shame if we found something else to investigate you for." https://en.wikipedia.org/wiki/Operation_Choke_Point https://en.wikipedia.org/wiki/Operation_Choke_Point The policy would increase the value of newly mined Bitcoins, which would further centralize mining in Iceland and China, which have cheap(or subsidized) electricity. Miners would have to reject these transactions, because otherwise it would end up in the transaction fee and in their account. Miners deal with a larger tree than just the main path, and it might be computationally expensive to calculate it for each transaction. If you exempt transaction fees, then pools stand to make a huge profit by cleaning mixed coins and would probably find a way to do it. If the miners, exchanges, users don't use exactly the same algorithm and blacklist at all times, then there's a possibility to profit by e.g. scamming a Bitcoin gambling site using newly-tainted coins. I feel like there's already enough ways to lose your hat from one subtle mistake with cryptocurrency, and we don't need any more.

Jabanga 9y ago

>why not blacklist coins that have been through a mixer? If you can't mix the coins, you can't launder them. It won't be possible to use Bitcoin for these activities anymore. This would totally eliminate privacy. It would be no different than making HTTPS illegal. It's not just criminals that use privacy technology. Eliminating privacy in money for the sake of eliminating some crime at the margins is giving up the farm to gain a horse. It's making a situation where everyone is subjected to mass-surveillance, and power concentrates to a small politically connected elite that can monitor all private interactions, exponentially more likely to be realized. It's very dangerous to society. https://aeon.co/essays/if-plastic-replaces-cash-much-that-is-good-will-be-lost https://aeon.co/essays/if-plastic-replaces-cash-much-that-is... >There's huge interest in cryptocurrencies and what perhaps they can create in the market place. Now we at MasterCard are not completely comfortable with the idea of cryptocurrencies largely because they go against the whole principle that we've established our business on which is really moving to a world beyond cash and ensuring greater transparency.. If you think about it, cash is a problem for a number of countries. Cash really facilitates anonymity, it facilitates illegal activity, it facilitates tax avoidance and a range of other things that aren't going to drive efficiency in an economy -https://youtu.be/bO4jHXjCXw8?t=2m57s https://youtu.be/bO4jHXjCXw8?t=2m57s >If it's an anonymous transaction, that sounds like a suspicious transaction. Why does somebody need to be anonymous? -http://youtu.be/bO4jHXjCXw8#t=4m12s http://youtu.be/bO4jHXjCXw8#t=4m12s MasterCard SE Asia President on cryptocurrencies and cash

desdiv 9y ago

1. Go on Microsoft Store 2. Select Bitcoin as payment method 3. Pay with legitimate Bitcoins 4. Later on, send a tainted post-mixer Satoshi to wherever address your legitimate Bitcoins ended up at 5. You just made a portion of Microsoft Corporation's Bitcoin holdings worthless Actually, come to think of it, big companies don't actually handle the Bitcoins directly. They have a payment processor that handles the dirty work for them and just receive fiat on their end. So that means this trivially executable attack not only fucks up some of Microsoft's accounts, it also fucks over everyone who uses the same payment processor as well as the payment processor itself.

sillysaurus3 9y ago
That would be an extremely expensive attack. You'd need tens of thousands to make a dent in a business account, and a business account would simply call up the exchange and tell them what happened.
- desdiv 9y ago
  >You'd need tens of thousands to make a dent in a business account I already made clear that the cost per attack per address is 1 Satoshi + transaction fees, which is around $1.5USD in today's network conditions. You only need to pull off one successful attack to taint an entire business account. >a business account would simply call up the exchange and tell them what happened And a drug dealer on a Silk Road clone can just call up the exchange and tell them that some strange bitcoins landed in their account and that they have no idea how it got there, but they sincerely hope that it won't affect the withdrawal of their other completely legitimate bitcoins.
  - sillysaurus3 9y ago
    I thought it was pretty clear, but the proposal is to close accounts that receive a significant number of mixed coins. That "significant" part is important -- it varies per account. Obviously it needs to be high enough to fend off trolling, but low enough to fend off laundering. That's not a difficult proposition; it's equivalent to fraud detection that credit card companies employ.

jacquesm 9y ago

So, that's a nice way to get someone: take one of their public addresses, send them some coin through a remixer boom address invalidated. Also, bitcoin doesn't use accounts. I'm all for criticizing bitcoin and some of the more obvious problems with it (the size of the blockchain makes it less and less practical for normal use to run your own bitcoind) but you have to at least make a minimal effort to understand how the whole thing works and what the abuse potential is for your suggestions. Also, you're off-topic so no point complaining about the downvotes, and didn't you make it so that you no longer saw whether or not you were downvoted?

sillysaurus3 9y ago
I did! May as well plug it: https://news.ycombinator.com/item?id=14456203 https://news.ycombinator.com/item?id=14456203 To say I'm off-topic on a thread about bitcoin is a bit of a stretch. Not all of us have a blog and an HN army to upvote our weekly motivational posts to funnel views to our consulting business. You want me to wait until a blog post about exactly this topic comes up? I addressed your abuse argument directly in my edit, which you saw, so this comment was probably the definition of bad faith writing. More amusing than annoying, actually. (Also, the accounts are at the exchanges, which can be closed. Of course, you know this, so I wonder why you're writing this way.) But yeah, this is exactly why it's verboten to even mention downvotes on HN. I was trying to call attention to a more serious problem, which is that when the voting system loses value, what's the point in contributing? I don't mind this particular instance of it, but it's getting harder to ignore the trend. Nonetheless, with low-value comment chains like this one popping up every time someone even mentions it, it's best not to talk about it.
- jacquesm 9y ago
  > I addressed your abuse argument directly in my edit, which you saw, so this comment was probably the definition of bad faith writing. How I read HN is none of your business but just FYI I opened the tab when your comment was in its original un-edited state and when I hit reply your edit wasn't there yet. Talk about bad faith.

gist 9y ago

> And no, people can't troll others by sending them mixed coins. I've often wondered if anyone has set someone up by depositing cash into their bank account (account number easy enough to find) and then created or leaked a back story to get them into some kind of trouble.

hulahoof 9y ago
IIRC in this talk by Chris Rock at DC24 he mentions this tactic as part of creating the environment for a coup: Edit - direct link https://m.youtube.com/watch?v=m1lhGqNCZlAusg=AFQjCNHkUHeVThwfRJkBLDp1A9PfAZauvA https://m.youtube.com/watch?v=m1lhGqNCZlAusg=AFQjCNHkUHeVThw...

boznz 9y ago

I wish more people would think about possible solutions like this. Unfortunately from their (fine) ideals bitcoin and the other crypto-currencies are just becoming another tool for criminals and speculators and someone needs to find a solution if its going to become a help rather than a hindrance. And don't worry about the down-votes, I'll take some off you by saying those are mostly from speculators who don't want to see their tower of card collapse.

cantrevealname 9y ago

If transactions have perfect record keeping and are always traceable, then why stop with just blacklisting. You could go much further and correct all sorts of frauds and injustices going back through layers of transactions. But we don't always do that in the non-cyberspace world even when it is technically feasible. If a car is stolen and it changes hands ten times, then yes, it'll get returned to the original owner. But not for fungible transactions like in securities. I'll give you a concrete example of where it doesn't happen: Canadians experienced a multi-billion dollar stock fraud due a company called Bre-X[1] that found an enormous gold deposit that turned out to be a massive lie. After the fraud was exposed and the stock had collapsed, the brokerages, exchanges, and the Ontario Securities Commission could have reversed all the transactions one by one until everyone who was unjustly enriched had their profit taken away and everyone who lost money was made whole. All the data to do this was available to the brokers. There is no such thing as anonymous holders and anonymous exchange of shares. If Mr. Wilson was left holding 1000 worthless shares when trading was halted, you could look at the records and see that he bought it from Mr. Coolidge for $85,000. You'd seize $85,000 from Coolidge giving it back to Wilson, and return the 1000 shares to Coolidge. Then you'd look at Coolidge's transactions. You'd unwind all the transactions to the beginning of the fraud. But the brokerages and exchanges did not do this! You're asking for stricter controls on cryptocurrencies than exist for fungible meat-space transactions. [1] https://en.wikipedia.org/wiki/Bre-X https://en.wikipedia.org/wiki/Bre-X

paulsutter 9y ago
Countries already consider use of a mixer as a possible indication of money laundering, they don't need to strictly outlaw it. When someone tries to cash out coins that came predominantly through mixers, the authorities could hold it up and ask the individual to explain. And if they don't have an explanation, the authorities can keep the money. Sure, this sort of enforcement isn't happening yet but it can and it's simple and practical. And I'd be more surprised if it doesn't happen. Last year I closed a bank account with $11,000 in it, and just for fun I asked for the money as cash. That took a long time, the bank manager got involved and I had to sign a document stating the source of the money. Which is funny because they sure didn't ask when I deposited it. That's the world we live in, and that's where bitcoin is going.

kakarot 9y ago

> The sole reason that Bitcoin is untraceable is because of mixers. Is it time to eliminate them? Uh, the whole point of bitcoin is returning socioeconomic control to the people. Part of the socioeconomic control government exerts over its citizens is tracing financial transactions to punish those who make transactions the State has deemed "bad". Getting rid of mixers just hands that control back to the State. Woudln't seem like much of a problem, if these policies weren't set by lobbyists and politicians with sick agendas. Who knows what could be a "bad" transaction tomorrow. Drones? CPUs without a TPM? All forms of pornography? Anti-government propoganda? We are talking about a massive slippery slope here. Besides, moves like that just result in new tech further obfuscating things from the State, like always. Attempt to read everyone's messages, everyone will move to encrypted communication platforms. Attempt to ban mixed coins, people will adopt a cryptocurrency with an encrypted ledger or obfuscated transactional history.

trophycase 9y ago

People will just use Monero then.

patrickg_zill 9y ago
Exactly why I am slowly building a position in Monero...

olegkikin 9y ago

It actually does happen, in a social way, not at the protocol/client level. During 2013 some investment companies were buying "clean" coins only, the ones that came straight from the miners. Indeed, nothing stops from that being implemented at the node level, or by the miners. But then you need to deal with people tainting other people's accounts.

nikcub 9y ago

Coinbase is well known to randomly lock people out of accounts - they're the Paypal of Bitcoin wallets. They are likely associating accounts with 'bad' addresses and doing what you describe. The downside here is that a lot of people don't use Coinbase, i'm not sure what their upside is. They aren't exactly earning a reputation as a safe Bitcoin space.

seesomesense 9y ago

"If you don't come to HN to have your preconceptions challenged, then what are we doing here?" Like other forums, HN is largely an echochamber for those who think alike. Break any of the largely unspoken conventions here, and see what happens to you....

cptn_brittish 9y ago

There is only a limited amount of bitcoins which can be mined so you can assume at some point all coins will be mixed at that stage what do you propose happens? Woth the type of people who invest in bitcoins I can see them simply making sure all bitcoins are tainted in this way for purely idealogical reasons not even to ensure that illigal activity can occur.

tuxxy 9y ago

You're implying that mixers and tumblers are ONLY dedicated malicious services. What you're forgetting is that hot wallets used on popular bitcoin services also serve as tumblers. The distinction between a "malicious tumbler" and a service's hot wallet is just the dedicated use. For example, if a bitcoin shopping site had a wallet you deposited coins into, you'll be recording that you have <number> of coins and they will show that. Your coins will be mixed with their hot wallet and who knows how long they keep them in there. If you wait a few days and withdraw, chances are that most (if any) are NOT your original coins. Not to mention, if you blacklisted these coins, then users who receive these coins wouldn't be able to legitimately use them. TL;DR: Tumbling services are just dedicated to tumbling bitcoins. Most semi-large bitcoin services with hot wallets inadvertently tumble their user's bitcoins.