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Fungible simply means “interchangeable”, legality has nothing to do with it [0] (especially, it seems to me, in regards to a system that doesn’t seem explicitly

by garren 5y ago

Fungible simply means “interchangeable”, legality has nothing to do with it [0] (especially, it seems to me, in regards to a system that doesn’t seem explicitly subject to legal constraints like bitcoin.) One bitcoin is, in theory, interchangeable with any other without a loss of value. However, bitcoins with a dubious history of transactions can, and apparently are, being refused in some circumstances. Clearly some bitcoins have less utility, less value, than others. The traceability of a bitcoin leads to it possibly being rejected in some transactions, not because ant given bitcoin is (again, in theory) no different than any other, but because one bitcoin’s history may be tainted. The “blood diamond” analogy seems appropriate - such a diamond remains a diamond, and is technically no different from a comparable “clean” diamond, but reputable dealers and customers will avoid them. Effectively rendering these diamonds of less value than others. In theory bitcoins are fungible. In practice they are not. [0] https://www.merriam-webster.com/dictionary/fungible https://www.merriam-webster.com/dictionary/fungible

bb88 5y ago
So when you accept BTC, how do you know if you'll be able to pass it on again? Is there a blood coin list? EDITED TO ADD: Here's something interesting about tainted coins. The commenter took out a Blockfi loan on coins he's had since 2020. The person he bought them from used BISQ. Then Blockfi recalled the loan immediately. https://old.reddit.com/r/CryptoCurrency/comments/skxpr7/blockfi_horrible_loan_experience_fortune_lost/ https://old.reddit.com/r/CryptoCurrency/comments/skxpr7/bloc...
- wmf 5y ago
  You hire a company like Chainalysis to do risk analysis for you.
  - deleted 5y ago
    [deleted]
  - gingeropolous 5y ago
    yes because thats clearly how money should work.
    - vntok 5y ago
      That's how diamonds and gold work. You wouldn't accept blood diamonds for example, it would reflect poorly on you.
      - labawi 5y ago
        You wouldn't accept diamonds, it would reflect poorly on you. They are mostly a non-scarce fleecing operation backed by a marketing gimmick.
        vntok 5y ago
        Diamonds are scarce. Manufactured scarcity still results in actual scarcity.
      - MerelyMortal 5y ago
        I wouldn't accept diamonds at all, as they're not money like gold is (and definitely not fungible in either sense of the arguments). "Diamonds are bullshit" and people only think they have value because of a De Beers marketing campaign in the early 1900s. https://priceonomics.com/post/45768546804/diamonds-are-bullshit https://priceonomics.com/post/45768546804/diamonds-are-bulls... Plus a ton of other discussion: https://www.google.com/search?q=diamonds%20are%20bullshit https://www.google.com/search?q=diamonds%20are%20bullshit
        vntok 5y ago
        Well diamonds are fungible for any definition of the word you may choose and for the vast majority of the stones. Some of them are unique in that they're very large, very pure, have been worked on so much they are identifiable, have an IAG number engraved, etc. but the vast, vast majority of diamonds you can trade at any diamond shop in a very fungible manner, no questions asked.
  - bb88 5y ago
    Interesting. If I go to the website: https://www.chainalysis.com/ https://www.chainalysis.com/ Their big tag line is "Building Trust in the Blockchain". I thought BTC was above needing to do that.
idiotsecant 5y ago
Exactly. Any crypto system that doesn't have the ability to break the chain of custody of 'tainted' coins is doomed to irrelevancy. Think about it - on day 0 no coins are tainted. Let's say on week 1 5% of coins are tainted and effectively frozen, leaving 90% of coins in circulation. The illegal activity doesn't stop - it just taints more coins. Maybe week 2 5% of those remaining get tainted, week 3 5% of the remaining after that, etc... Eventually you asymptotically approach absolute uselessness. I think Monero and Ethereum have both thought about this and i'm sure others exist out there too. BTC is stuck in a development graveyard and can't think about things like this- it seems doomed to irrelevancy.
- flir 5y ago
  The tainted coins are the same as lost coins. There's already a solution baked into bitcoin for that (divisibility).
  - ulrikrasmussen 5y ago
    The theoretical maximum number of satoshis in existence per person on earth is just short of 266,000. That's assuming all 21m coins are minted and that none are lost. I feel like this is already quite a small number if you want to represent a global currency, so can the system really afford to continuously burn away BTC at a relatively large rate?
    - cozzyd 5y ago
      It puts a hard cap on income inequality!
      - 8ytecoder 5y ago
        That’s not how it works. Income inequality is not just the “number” of coins but what it’s worth as opposed to something - with inequality it becomes everyday goods and services. The cost of goods can easily continue to worsen inequality. There’s only one real world soft limit - a revolution that resets the clock.

by garren 5y ago

bb88 5y ago

So when you accept BTC, how do you know if you'll be able to pass it on again? Is there a blood coin list? EDITED TO ADD: Here's something interesting about tainted coins. The commenter took out a Blockfi loan on coins he's had since 2020. The person he bought them from used BISQ. Then Blockfi recalled the loan immediately. https://old.reddit.com/r/CryptoCurrency/comments/skxpr7/blockfi_horrible_loan_experience_fortune_lost/ https://old.reddit.com/r/CryptoCurrency/comments/skxpr7/bloc...

wmf 5y ago
You hire a company like Chainalysis to do risk analysis for you.
- deleted 5y ago
  [deleted]
- gingeropolous 5y ago
  yes because thats clearly how money should work.
  - vntok 5y ago
    That's how diamonds and gold work. You wouldn't accept blood diamonds for example, it would reflect poorly on you.
    - labawi 5y ago
      You wouldn't accept diamonds, it would reflect poorly on you. They are mostly a non-scarce fleecing operation backed by a marketing gimmick.
      - vntok 5y ago
        Diamonds are scarce. Manufactured scarcity still results in actual scarcity.
    - MerelyMortal 5y ago
      I wouldn't accept diamonds at all, as they're not money like gold is (and definitely not fungible in either sense of the arguments). "Diamonds are bullshit" and people only think they have value because of a De Beers marketing campaign in the early 1900s. https://priceonomics.com/post/45768546804/diamonds-are-bullshit https://priceonomics.com/post/45768546804/diamonds-are-bulls... Plus a ton of other discussion: https://www.google.com/search?q=diamonds%20are%20bullshit https://www.google.com/search?q=diamonds%20are%20bullshit
      - vntok 5y ago
        Well diamonds are fungible for any definition of the word you may choose and for the vast majority of the stones. Some of them are unique in that they're very large, very pure, have been worked on so much they are identifiable, have an IAG number engraved, etc. but the vast, vast majority of diamonds you can trade at any diamond shop in a very fungible manner, no questions asked.
- bb88 5y ago
  Interesting. If I go to the website: https://www.chainalysis.com/ https://www.chainalysis.com/ Their big tag line is "Building Trust in the Blockchain". I thought BTC was above needing to do that.

idiotsecant 5y ago

Exactly. Any crypto system that doesn't have the ability to break the chain of custody of 'tainted' coins is doomed to irrelevancy. Think about it - on day 0 no coins are tainted. Let's say on week 1 5% of coins are tainted and effectively frozen, leaving 90% of coins in circulation. The illegal activity doesn't stop - it just taints more coins. Maybe week 2 5% of those remaining get tainted, week 3 5% of the remaining after that, etc... Eventually you asymptotically approach absolute uselessness. I think Monero and Ethereum have both thought about this and i'm sure others exist out there too. BTC is stuck in a development graveyard and can't think about things like this- it seems doomed to irrelevancy.

flir 5y ago
The tainted coins are the same as lost coins. There's already a solution baked into bitcoin for that (divisibility).
- ulrikrasmussen 5y ago
  The theoretical maximum number of satoshis in existence per person on earth is just short of 266,000. That's assuming all 21m coins are minted and that none are lost. I feel like this is already quite a small number if you want to represent a global currency, so can the system really afford to continuously burn away BTC at a relatively large rate?
  - cozzyd 5y ago
    It puts a hard cap on income inequality!
    - 8ytecoder 5y ago
      That’s not how it works. Income inequality is not just the “number” of coins but what it’s worth as opposed to something - with inequality it becomes everyday goods and services. The cost of goods can easily continue to worsen inequality. There’s only one real world soft limit - a revolution that resets the clock.