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With BTC you can have multi input multi output transactions: in the same tx you can spend 2 legit BTCs and 2 stolen BTCs and send those to 8 addresses, each get

With BTC you can have multi input multi output transactions: in the same tx you can spend 2 legit BTCs and 2 stolen BTCs and send those to 8 addresses, each getting 0.5 BTCs. Which of those resulting addresses contain tainted BTCs and which contain the clean ones? A transaction such as the above would make it clear that the thief has control over the whole stolen wallet, but that's it. It doesn't mean that the recipient's addresses are thief's addresses, even though they could be. And we can't consider all of the end addresses as tainted, because what happens when the thief sends some of these to the address holding the silk road BTCs confiscated by the feds? Will they arrest themselves?

gojomo 9y ago
There’s still a ‘native ordering’ of the inputs and outputs, so this FIFO process will still be able to ‘taint’ a specific deterministic set of the value-units, across one or more of the outputs. Whether that’s a fair allocation of the taint is a separate issue. They have a case, in some jurisdictions based on that precedent, that the law would support their allocation, and further that this treatment has other efficiencies. It’s sometimes the case that laws are construed to be predictable, and easy-to-apply, rather than maximally ‘fair’ according to deeper subjective case-by-case analysis.
- tudorconstantin 9y ago
  Indeed, there is an ordering, but that's decided exclusively by the creator of the transaction, so he could easily manipulate the future tainted addresses. The FIFO (or LIFO for that matter) rule seems like an arbitrary chosen one which could easily be overcome: the thief can put the stolen funds in an address and only use those when the atomic swap protocol between chains is created, for example. Or exchange those funds on decentralized exchanges, or sell on localbitcoins. This is an example of a transaction with multiple inputs, multiple outputs: https://blockchain.info/tx/1952ae67f75707e8a357cb40cc4e2123c7e4d1310ce805c62469a778d2dc595d https://blockchain.info/tx/1952ae67f75707e8a357cb40cc4e2123c... The creator of such transactions can manipulate the order in both inputs and outputs.
  - gojomo 9y ago
    Yes, the possessor can control where the ‘taint’ goes by their spending choices, just like someone with stolen property can choose who to give/sell it to. The point of this FIFO method isn’t exclusively — or even primarily — to outwit thieves. Rather, it’s just to have a tractable (and legally-based) rule for deciding which balances, arbitrarily later, can be deemed ‘the stolen amount’.

gojomo 9y ago

There’s still a ‘native ordering’ of the inputs and outputs, so this FIFO process will still be able to ‘taint’ a specific deterministic set of the value-units, across one or more of the outputs. Whether that’s a fair allocation of the taint is a separate issue. They have a case, in some jurisdictions based on that precedent, that the law would support their allocation, and further that this treatment has other efficiencies. It’s sometimes the case that laws are construed to be predictable, and easy-to-apply, rather than maximally ‘fair’ according to deeper subjective case-by-case analysis.

tudorconstantin 9y ago
Indeed, there is an ordering, but that's decided exclusively by the creator of the transaction, so he could easily manipulate the future tainted addresses. The FIFO (or LIFO for that matter) rule seems like an arbitrary chosen one which could easily be overcome: the thief can put the stolen funds in an address and only use those when the atomic swap protocol between chains is created, for example. Or exchange those funds on decentralized exchanges, or sell on localbitcoins. This is an example of a transaction with multiple inputs, multiple outputs: https://blockchain.info/tx/1952ae67f75707e8a357cb40cc4e2123c7e4d1310ce805c62469a778d2dc595d https://blockchain.info/tx/1952ae67f75707e8a357cb40cc4e2123c... The creator of such transactions can manipulate the order in both inputs and outputs.
- gojomo 9y ago
  Yes, the possessor can control where the ‘taint’ goes by their spending choices, just like someone with stolen property can choose who to give/sell it to. The point of this FIFO method isn’t exclusively — or even primarily — to outwit thieves. Rather, it’s just to have a tractable (and legally-based) rule for deciding which balances, arbitrarily later, can be deemed ‘the stolen amount’.