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I know soooo very little about crypto currency, but his idea here makes sense, at least to me, but what do I know. Is it possible to create a registry like this

I know soooo very little about crypto currency, but his idea here makes sense, at least to me, but what do I know. Is it possible to create a registry like this, or is this never going to work? "Given bitcoin traceability and the ease of getting an injunction, one can imagine that it might make sense for insurers, bitcoin exchanges, and over-the-counter traders to build some sort of private "ransom registry". The moment that an insurer pays a ransom to a hacker, that insurer simultaneously announces the offending address to the registry. A verified OTC trading desk can now protect itself from potential bankruptcy by always checking the registry to make sure that any bitcoins offered to it are "good" bitcoins. Exchanges too would likewise cross-check incoming bitcoin deposits against the registry."

ses1984 7y ago
What if someone gave you change in cash, then you went to deposit it at a bank, and they refused to take it because those bills were in a registry? You could check the registry yourself before accepting change, but what if those bills weren't in the registry when you checked? Such a system could be implemented for bitcoin but there are crypto currencies with stronger privacy guarantees for which this would be practically impossible (those guarantees could maybe be cracked in the future, people are working hard on both sides).
spuz 7y ago
Such services exist and are in use by many bitcoin organisations: https://www.elliptic.co/ https://www.elliptic.co/
spzb 7y ago
Not a cryptocurrency expert either but I suspect there will always be someone willing to launder the cryptocoins for a large enough commission.
- mbreese 7y ago
  How can you launder something with a traceable serial/transaction number? I don’t think it’s possible. The best you can do is mix it with enough other transactions that it becomes murky as to the final destinations. Ex: If half of the bitcoins used to buy a car were fraudulent, would you need to return half the car?
  - GuthL 7y ago
    So, it is slightly more complicated than a serial number. In some sense, everytime you make a transaction, you burn all the input coins and creates new coins for the same value, each assign to the respective recepient. Tracking them is not straight forward. Most OTC are not very tech savvy and I can imagine one either being criminal but stupid for bringing it to Bitfinex or simply non criminal but did not do their due diligence and KYC the seller (which is very surprising knowing the space)
  - shkkmo 7y ago
    If bitcoin is not treated as legal currency, then the person you bought the car from would be required to return half the coins you have them to the original owner as they would qualify as stolen property. This risk would have to be managed by contracts, insurance, and/or quick exchange for safer assets.
  - lawn 7y ago
    The point isn't to make the coins themselves clean, it's to exchange them for something clean. So a laundering service could specialize in buying tainted coins and to sell them off to other unsuspecting people, pocketing the difference. In return they could provide clean coins for their customers.
    - lawlessone 7y ago
      you can pay bitcoin to mine bitcoin or other cryptos. Thus getting "clean coin"
aphextim 7y ago
The thing is that 96 bitcoin could be thrown through a mixer of sorts. Take the 96 bitcoin, split it into 96 different addresses with 1 bitcoin, then mix those 96 individual addresses to multiple new addresses and then reassemble them elsewhere. This is a horrible explanation, but explains the general idea. You could also mix from Bitcoin to Monero or another currency and back again through various pairs. There are lots of things out there to attempt to trace the bitcoins back to the source since every transaction is always logged, however if people keep rearranging coins on various addresses it does make it harder. Having a blacklist registry of all bad/stolen coins would be great if implemented, however I don't know how feasible it would be.
- JumpCrisscross 7y ago
  > 96 bitcoin could be thrown through a mixer One, mixer output could be, by default, added to the registry as laundering proceeds. Or two, the subunits could be traced through the mixer, thus retaining their black marks.
  - rini17 7y ago
    This may result in tainting large part of bitcoin in circulation. If someone buys a coffee with tainted coins, is the cafeteria now responsible for querying the registry to reject the transaction? Or it risks to have whole daily turnover, if spent together, end up tainted?
    - PeterisP 7y ago
      I'not saying that it's going to happen, but it certainly seems plausible to have laws that merchants who violate some blacklist forfeit their daily turnover, there are existing laws with much, much harsher consequences.
  - derefr 7y ago
    Many upstanding people—and even large companies like payment processors!—process their received funds through a mixer “just to be safe”, i.e. to escape any coincidental untoward paper-trail that attaches to their funds two or three steps back. You know how they say that every US dollar bill has a little cocaine on it? Using your suggestion, every dollar bill would be marked tainted as drug proceeds.
martindevans 7y ago
What stops fraudulent reports? e.g. 1. I pay you 1 BTC 2. Wait until I receive whatever I paid for 2. Now I tell you to send me 0.5BTC or else I'll report the entire 1BTC as ransom payment. The blacklist is just a new and very powerful tool for additional fraud!
- nkrisc 7y ago
  Presumably the registry could also have some mechanism of identifying those making the reports (maybe limited to insurance companies), and not just accept random reports of ransom payments. That makes it less ideal, sure, but it could help prevent the scenario you posed.
gwbas1c 7y ago
The problem with all schemes like this are political: Who defines what is "good" versus "bad?" What happens when the hackers use social engineering to muck with the people running the registry?
thekevan 7y ago
The hackers don't even need to add a whole sentence to get around that. "When we receive our 96 BTC, we'll release your data." Becomes: "When we receive our 96 BTC without it being reported to the fraud registry, we'll release your data."

ses1984 7y ago

What if someone gave you change in cash, then you went to deposit it at a bank, and they refused to take it because those bills were in a registry? You could check the registry yourself before accepting change, but what if those bills weren't in the registry when you checked? Such a system could be implemented for bitcoin but there are crypto currencies with stronger privacy guarantees for which this would be practically impossible (those guarantees could maybe be cracked in the future, people are working hard on both sides).

spuz 7y ago

Such services exist and are in use by many bitcoin organisations: https://www.elliptic.co/ https://www.elliptic.co/

spzb 7y ago

Not a cryptocurrency expert either but I suspect there will always be someone willing to launder the cryptocoins for a large enough commission.

mbreese 7y ago
How can you launder something with a traceable serial/transaction number? I don’t think it’s possible. The best you can do is mix it with enough other transactions that it becomes murky as to the final destinations. Ex: If half of the bitcoins used to buy a car were fraudulent, would you need to return half the car?
- GuthL 7y ago
  So, it is slightly more complicated than a serial number. In some sense, everytime you make a transaction, you burn all the input coins and creates new coins for the same value, each assign to the respective recepient. Tracking them is not straight forward. Most OTC are not very tech savvy and I can imagine one either being criminal but stupid for bringing it to Bitfinex or simply non criminal but did not do their due diligence and KYC the seller (which is very surprising knowing the space)
- shkkmo 7y ago
  If bitcoin is not treated as legal currency, then the person you bought the car from would be required to return half the coins you have them to the original owner as they would qualify as stolen property. This risk would have to be managed by contracts, insurance, and/or quick exchange for safer assets.
- lawn 7y ago
  The point isn't to make the coins themselves clean, it's to exchange them for something clean. So a laundering service could specialize in buying tainted coins and to sell them off to other unsuspecting people, pocketing the difference. In return they could provide clean coins for their customers.
  - lawlessone 7y ago
    you can pay bitcoin to mine bitcoin or other cryptos. Thus getting "clean coin"

aphextim 7y ago

The thing is that 96 bitcoin could be thrown through a mixer of sorts. Take the 96 bitcoin, split it into 96 different addresses with 1 bitcoin, then mix those 96 individual addresses to multiple new addresses and then reassemble them elsewhere. This is a horrible explanation, but explains the general idea. You could also mix from Bitcoin to Monero or another currency and back again through various pairs. There are lots of things out there to attempt to trace the bitcoins back to the source since every transaction is always logged, however if people keep rearranging coins on various addresses it does make it harder. Having a blacklist registry of all bad/stolen coins would be great if implemented, however I don't know how feasible it would be.

JumpCrisscross 7y ago
> 96 bitcoin could be thrown through a mixer One, mixer output could be, by default, added to the registry as laundering proceeds. Or two, the subunits could be traced through the mixer, thus retaining their black marks.
- rini17 7y ago
  This may result in tainting large part of bitcoin in circulation. If someone buys a coffee with tainted coins, is the cafeteria now responsible for querying the registry to reject the transaction? Or it risks to have whole daily turnover, if spent together, end up tainted?
  - PeterisP 7y ago
    I'not saying that it's going to happen, but it certainly seems plausible to have laws that merchants who violate some blacklist forfeit their daily turnover, there are existing laws with much, much harsher consequences.
- derefr 7y ago
  Many upstanding people—and even large companies like payment processors!—process their received funds through a mixer “just to be safe”, i.e. to escape any coincidental untoward paper-trail that attaches to their funds two or three steps back. You know how they say that every US dollar bill has a little cocaine on it? Using your suggestion, every dollar bill would be marked tainted as drug proceeds.

martindevans 7y ago

What stops fraudulent reports? e.g. 1. I pay you 1 BTC 2. Wait until I receive whatever I paid for 2. Now I tell you to send me 0.5BTC or else I'll report the entire 1BTC as ransom payment. The blacklist is just a new and very powerful tool for additional fraud!

nkrisc 7y ago
Presumably the registry could also have some mechanism of identifying those making the reports (maybe limited to insurance companies), and not just accept random reports of ransom payments. That makes it less ideal, sure, but it could help prevent the scenario you posed.

gwbas1c 7y ago

The problem with all schemes like this are political: Who defines what is "good" versus "bad?" What happens when the hackers use social engineering to muck with the people running the registry?

thekevan 7y ago

The hackers don't even need to add a whole sentence to get around that. "When we receive our 96 BTC, we'll release your data." Becomes: "When we receive our 96 BTC without it being reported to the fraud registry, we'll release your data."