5 ms·

Actually, it's the opposite as far as censorship resistance goes. Because all transactions are public, any bitcoin can be traced and tainted. Taints can be enfo

by wahern 5y ago

Actually, it's the opposite as far as censorship resistance goes. Because all transactions are public, any bitcoin can be traced and tainted. Taints can be enforced easily because the process of detecting tainted coins can be cheaply automated by all involved. Mixers are of little consequence, just like money laundering schemes aren't a magical loophole around laws regulating transactions and tracking asset ownership. Paper fiat is much better in this regard as bills are much more difficult to trace and taint. The infrastructure isn't in place to comprehensively enforce serial tracking. More importantly, there are usually laws that guarantee the fungibility of bills, which means it's usually very difficult as a legal matter to force a current, honest holder of a circulating bill to relinquish it. Such laws exist precisely because of the difficulty of cheaply tracking the provenance of bills. A large country like the U.S. could easily mandate verification by its citizens and businesses of all bitcoin transactions against a central registry. Then in a blink of an eye it could begin flagging bitcoins the way car VINs can be flagged. Sure, you can send it to people not subject to the mandate or otherwise willing to risk accepting it, but the value of that bitcoin is now diminished as compared to the rest of them because the market will be smaller. Transparency means they're not perfectly fungible, yet perfect fungibility is what you need for censorship resistance. To avoid the cost of receiving coins from illegal activity there'll be various escrow and insurance schemes which will make bitcoin transactions even less efficient than they currently are. The flip-side, however, is that for law abiding people without privacy concerns, bitcoin might prove an excellent asset store. Nobody could steal it from you, at least not without fooling the legal system and/or central authorities, which [ideally] would require alot of non-anonymous, conspicuous activity. Which is why NFTs are enticing. Relatedly, NFTs make no sense without a centralized, easily queryable database linking legal ownership of an asset to the NFT. But, ironically, it would be the central database, not the NFT itself, that truly establishes ownership. Similar to how land title registries, not occupation of a piece of real estate or chain of title, establish rightful ownership in jurisdictions with such registries.

mrb 5y ago
«Taints can be enforced» You can't. You would need to control 100% of miners.
- simonebrunozzi 5y ago
  You can, in practice, by forcing exchanges like Coinbase, Binance, Kraken, etc, to refuse tainted coins. Their value in the market would instantly go down.
  - mrb 5y ago
    If you don't control miners you have to do something even harder: You would need to control or force 100% of exchanges, 100% of merchants, in fact 100% of all participants in the Bitcoin network to reject tainted coins. See how this can't work? The tainted coins remain usable everywhere and anywhere that doesn't track tainted coins. The owner of such coins only has to find a SINGLE such party to be able to launder the coins. And then what? The poor shmuck who wasn't aware they received tainted coins, eg. an online store in Oceania, would get scolded by The Tainted Coins Authority who would maybe decide, after investigation, he was a victim, and would "untaint" the coins. Multiply these incidents by a thousand per day. Unworkable. Who funds all this effort? And who actually would be "The Tainted Coins Authority"? It sounds just like a centralized thing that pretty much all Bitcoin exchanges & participants are against.
    - wahern 5y ago
      You're confusing the technical aspects of Bitcoin--concensus on which entity possesses a Bitcoin--with someone's ability to derive value from that possession. If the government passes a law that says nobody is allowed to transfer a US $100 note with serial 123-456-789, then if it catches you transferring the note, it can penalize you. It doesn't need to void the transfer that changed possession as technically defined by the system. It needn't care about what happens to that particular note, it only cares about your behavior. And through controlling your behavior (as all laws do, good and bad), it can ultimately effect how the system is used, even the parts not directly under its control or authority. For a variety of reasons it's very cost prohibitive to enforce such a system for paper fiat. But most of those costs disappear in a transactional system that is inherently electronic, online, and real-time. There are still costs--like needing to maintain and make available a blacklist, and compliance costs for both users and legal authority--but they're still unfathomably cheaper than requiring and enforcing verification when passing a bill to a clerk at a grocery store. FWIW, forgery of paper currency also imposes costs. The street value of a US $100 bill is actually worth slightly less than 5 x $20 bills. But the cost is very small because enforcement is difficult. A bank may refuse deposit of a forged note, but a store can almost as easily pass it on directly to another payee as when it received it. The more places you can easily utilize and enforce verification, then the more difficult it is to pass on forged bills, diminishing the value of forging bills in the first place. And this happens even if forged bills can be and are still exchanged among some subset of people. Unsurprisingly, this ease of verification is precisely what makes Bitcoin so seemingly useful. You can't forge Bitcoin because provenance is easy (i.e. relatively cheap) to track and enforce. But fundamentally that ease of identification cuts both ways--easy to detect forgery, but even easier to match a Bitcoin against a blacklist registry. And if its cheap for you to make the match, then there's less inherent cost to burdening someone with a legal mandate to make that verification. (And it's even easier to verify compliance because the government could regularly taint a Bitcoin, test passing it on, and track it as it goes through the system. Everybody who accepts it is busted, at least up to the last entity that didn't verify the legal identity of a payee, but you can impose even costlier fines in that case, which we actually do today--ever apply for a mortgage recently?)
kkjjkgjjgg 5y ago
There are ways to anonymize Bitcoin transcations, but I don't know how reliable they are. But there are other coins that attempt to be anonymous by default. I don't think it is a fundamentally unsolvable aspect.
- acdha 5y ago
  That’s the part covered by this: > Mixers are of little consequence, just like money laundering schemes aren't a magical loophole around laws regulating transactions and tracking asset ownership. The key is understanding that governments don’t just say “oh, it involves computers, guess we have to give up”. Once something grows to the point where it’s worth caring about, blockchains are easily censored as we’ve seen in e.g. China. It’s not just that they’re a complex high-volume network stream which is easily blocked but, more importantly, that most of what people want to do happens in the real world where those governments control things. If businesses are required to report their customers, a blockchain doesn’t help you because the auditors are going put them out of business if they don’t comply. If you are linked to a mixer or anonymous coin network, congratulations, you’re now at risk of being charged as an accomplice for the worst crime committed using that system – better hope you can prove and they care that you weren’t knowingly helping them! (Are you sure that service isn’t run by the police so you can pay them to make a confession?) All of this is fully retroactive, too: you might think you’ve evaded attention but that changes when someone you transacted with turns over their transaction history. How many of the people you’ve transacted with are you willing to go to jail for rather than testify against them? If the government published a list of tainted addresses involved in illegal activity, it’s going to be quite expensive to ignore it since whoever does do is taking on both the risk of prosecution and a reduced pool of potential buyers. All of those things cut into legitimate usage: most people have alternatives so if a blockchain isn’t cheaper people aren’t going to touch it if it involves legal risks.
  - kkjjkgjjgg 5y ago
    Nobody expects governments to simply give up. But for a country to have to go full China to be able to prevent the use of Bitcoin is still quite an effort. And even if that happens, you can memoize your master key and try to escape into another country. Much easier than if you have to transport several pounds of gold. So it isn't perfect yet, but still a lot better than any other approach. The argument "but it is against the law" (like money laundering) isn't really a good argument against an attempt to hedge against unfair governmental interventions.
Animats 5y ago
The infrastructure isn't in place to comprehensively enforce serial tracking. It is in China, since 2013.[1] ATMs which do "cash recycling", giving out bills they took in earlier, have the hardware for it, because they have to do a detailed scan of incoming bills for counterfeits and wear anyway. [1] https://hkmb.hktdc.com/en/1X09V6YK/hktdc-research/ATMs-to-provide-banknote-serial-numbers https://hkmb.hktdc.com/en/1X09V6YK/hktdc-research/ATMs-to-pr...
- wahern 5y ago
  But does China restrict paper fiat transactions? The basic question is whether you can force forfeiture of an innocent receiver of a tainted bill. You can always legally do this, but it diminishes the utility of the medium--the very purpose of currency, afterall, is to provide an efficient substitute for barter, and the greater the fungibility the greater the efficiency. Is the benefit in suppressing criminal activity worth the cost imposed on economic activity? The more potential innocent, protected receivers, the greater potential for effective money laundering, the less effectively you can suppress illegal activity. The cost is a function of determining provenance at the point of a transaction, and the benefit a function of degree of ubiquity. This cost is most minimal when all transactions already occur electronically, online, and in real-time, as with Bitcoin. Similarly, it's precisely such a system where you can impose the burden most ubiquitously--literally every individual and every transaction subject to your legal authority without very much technical effort. So it's with something like Bitcoin where you're most likely to see heavy reliance on tracing and tainting because shifting the burden onto innocent receivers imposes the least cost to them individually and to the transaction system generally. By contrast, paper fiat is the place you're least likely to see this strictly employed, so long as it remains a substantial medium for exchange. (Rather, the tracing is most useful for catching criminals, not passively diminishing their ability to utilize the transactional system itself.) AFAIU, not only does China have systems in place to more ubiquitously trace bills at certain points in the system, they're also actively encouraging (i.e. forcing) a shift to electronic payment platforms. The details of precisely what they're doing, when, and how I don't know much about. But the basic principles and concepts are clear, making the trajectory of what they need to accomplish easy to predict. Especially in jurisdictions with long established, legally mandated fungibility guarantees regarding paper fiat, many Bitcoin advocates are unwittingly ushering in the future they claim to fear most.

by wahern 5y ago

mrb 5y ago

«Taints can be enforced» You can't. You would need to control 100% of miners.

simonebrunozzi 5y ago
You can, in practice, by forcing exchanges like Coinbase, Binance, Kraken, etc, to refuse tainted coins. Their value in the market would instantly go down.
- mrb 5y ago
  If you don't control miners you have to do something even harder: You would need to control or force 100% of exchanges, 100% of merchants, in fact 100% of all participants in the Bitcoin network to reject tainted coins. See how this can't work? The tainted coins remain usable everywhere and anywhere that doesn't track tainted coins. The owner of such coins only has to find a SINGLE such party to be able to launder the coins. And then what? The poor shmuck who wasn't aware they received tainted coins, eg. an online store in Oceania, would get scolded by The Tainted Coins Authority who would maybe decide, after investigation, he was a victim, and would "untaint" the coins. Multiply these incidents by a thousand per day. Unworkable. Who funds all this effort? And who actually would be "The Tainted Coins Authority"? It sounds just like a centralized thing that pretty much all Bitcoin exchanges & participants are against.
  - wahern 5y ago
    You're confusing the technical aspects of Bitcoin--concensus on which entity possesses a Bitcoin--with someone's ability to derive value from that possession. If the government passes a law that says nobody is allowed to transfer a US $100 note with serial 123-456-789, then if it catches you transferring the note, it can penalize you. It doesn't need to void the transfer that changed possession as technically defined by the system. It needn't care about what happens to that particular note, it only cares about your behavior. And through controlling your behavior (as all laws do, good and bad), it can ultimately effect how the system is used, even the parts not directly under its control or authority. For a variety of reasons it's very cost prohibitive to enforce such a system for paper fiat. But most of those costs disappear in a transactional system that is inherently electronic, online, and real-time. There are still costs--like needing to maintain and make available a blacklist, and compliance costs for both users and legal authority--but they're still unfathomably cheaper than requiring and enforcing verification when passing a bill to a clerk at a grocery store. FWIW, forgery of paper currency also imposes costs. The street value of a US $100 bill is actually worth slightly less than 5 x $20 bills. But the cost is very small because enforcement is difficult. A bank may refuse deposit of a forged note, but a store can almost as easily pass it on directly to another payee as when it received it. The more places you can easily utilize and enforce verification, then the more difficult it is to pass on forged bills, diminishing the value of forging bills in the first place. And this happens even if forged bills can be and are still exchanged among some subset of people. Unsurprisingly, this ease of verification is precisely what makes Bitcoin so seemingly useful. You can't forge Bitcoin because provenance is easy (i.e. relatively cheap) to track and enforce. But fundamentally that ease of identification cuts both ways--easy to detect forgery, but even easier to match a Bitcoin against a blacklist registry. And if its cheap for you to make the match, then there's less inherent cost to burdening someone with a legal mandate to make that verification. (And it's even easier to verify compliance because the government could regularly taint a Bitcoin, test passing it on, and track it as it goes through the system. Everybody who accepts it is busted, at least up to the last entity that didn't verify the legal identity of a payee, but you can impose even costlier fines in that case, which we actually do today--ever apply for a mortgage recently?)

kkjjkgjjgg 5y ago

There are ways to anonymize Bitcoin transcations, but I don't know how reliable they are. But there are other coins that attempt to be anonymous by default. I don't think it is a fundamentally unsolvable aspect.

acdha 5y ago
That’s the part covered by this: > Mixers are of little consequence, just like money laundering schemes aren't a magical loophole around laws regulating transactions and tracking asset ownership. The key is understanding that governments don’t just say “oh, it involves computers, guess we have to give up”. Once something grows to the point where it’s worth caring about, blockchains are easily censored as we’ve seen in e.g. China. It’s not just that they’re a complex high-volume network stream which is easily blocked but, more importantly, that most of what people want to do happens in the real world where those governments control things. If businesses are required to report their customers, a blockchain doesn’t help you because the auditors are going put them out of business if they don’t comply. If you are linked to a mixer or anonymous coin network, congratulations, you’re now at risk of being charged as an accomplice for the worst crime committed using that system – better hope you can prove and they care that you weren’t knowingly helping them! (Are you sure that service isn’t run by the police so you can pay them to make a confession?) All of this is fully retroactive, too: you might think you’ve evaded attention but that changes when someone you transacted with turns over their transaction history. How many of the people you’ve transacted with are you willing to go to jail for rather than testify against them? If the government published a list of tainted addresses involved in illegal activity, it’s going to be quite expensive to ignore it since whoever does do is taking on both the risk of prosecution and a reduced pool of potential buyers. All of those things cut into legitimate usage: most people have alternatives so if a blockchain isn’t cheaper people aren’t going to touch it if it involves legal risks.
- kkjjkgjjgg 5y ago
  Nobody expects governments to simply give up. But for a country to have to go full China to be able to prevent the use of Bitcoin is still quite an effort. And even if that happens, you can memoize your master key and try to escape into another country. Much easier than if you have to transport several pounds of gold. So it isn't perfect yet, but still a lot better than any other approach. The argument "but it is against the law" (like money laundering) isn't really a good argument against an attempt to hedge against unfair governmental interventions.

Animats 5y ago

The infrastructure isn't in place to comprehensively enforce serial tracking. It is in China, since 2013.[1] ATMs which do "cash recycling", giving out bills they took in earlier, have the hardware for it, because they have to do a detailed scan of incoming bills for counterfeits and wear anyway. [1] https://hkmb.hktdc.com/en/1X09V6YK/hktdc-research/ATMs-to-provide-banknote-serial-numbers https://hkmb.hktdc.com/en/1X09V6YK/hktdc-research/ATMs-to-pr...

wahern 5y ago
But does China restrict paper fiat transactions? The basic question is whether you can force forfeiture of an innocent receiver of a tainted bill. You can always legally do this, but it diminishes the utility of the medium--the very purpose of currency, afterall, is to provide an efficient substitute for barter, and the greater the fungibility the greater the efficiency. Is the benefit in suppressing criminal activity worth the cost imposed on economic activity? The more potential innocent, protected receivers, the greater potential for effective money laundering, the less effectively you can suppress illegal activity. The cost is a function of determining provenance at the point of a transaction, and the benefit a function of degree of ubiquity. This cost is most minimal when all transactions already occur electronically, online, and in real-time, as with Bitcoin. Similarly, it's precisely such a system where you can impose the burden most ubiquitously--literally every individual and every transaction subject to your legal authority without very much technical effort. So it's with something like Bitcoin where you're most likely to see heavy reliance on tracing and tainting because shifting the burden onto innocent receivers imposes the least cost to them individually and to the transaction system generally. By contrast, paper fiat is the place you're least likely to see this strictly employed, so long as it remains a substantial medium for exchange. (Rather, the tracing is most useful for catching criminals, not passively diminishing their ability to utilize the transactional system itself.) AFAIU, not only does China have systems in place to more ubiquitously trace bills at certain points in the system, they're also actively encouraging (i.e. forcing) a shift to electronic payment platforms. The details of precisely what they're doing, when, and how I don't know much about. But the basic principles and concepts are clear, making the trajectory of what they need to accomplish easy to predict. Especially in jurisdictions with long established, legally mandated fungibility guarantees regarding paper fiat, many Bitcoin advocates are unwittingly ushering in the future they claim to fear most.