12 ms·

Finality does not exist in payments

104 points by smitop 5y ago

FredPret 5y ago
“Technosociolegal”
janandonly 5y ago
There is a misleading, or more correctly put, wrong, statement here about bitcoin transactions not being final. They are final. https://bitcoin.stackexchange.com/questions/88289/what-is-transaction-finality https://bitcoin.stackexchange.com/questions/88289/what-is-tr...
- topher200 5y ago
  From the beginning of TFA: > An extreme example which proves the point: the cryptocurrency enthusiast community largely believes that code is law, “not your keys, not your coins”, etc. Many crypto enthusiasts would say that the Bitcoin protocol does not prohibit reversing transactions but provides a security guarantee which suggests that the likelihood of a reversal after an hour is infinitesimal. > And yet: someone sent $70 million worth of Bitcoin in 2016, and that transaction was partially voided, with the reversal being worth slightly more than $70 million due to Bitcoin volatility. This didn’t happen an hour later; it happened in 2022. How? > The answer is nowhere in the Bitcoin whitepaper or any codebase. A full recounting of it is outside the scope of this anecdote, but it rhymes with “If you and the United States federal government disagree whether a transaction is final, you are wrong.” That is true for notorious Bitcoin thefts, but also true for wire transfers, conveyances of real estate, credit card payments, and graverobbing. “Possession is nine-tenths of the law,” so the saying goes, but the state can conjure as many tenths as required if it is motivated to.
  - DennisP 5y ago
    "How" is easy: they were storing their private key in an online account and the government found it. Nothing in Bitcoin was reversed. The government confiscated their funds in the same way that criminals steal any other bitcoins with poorly-secured keys. Just follow the link in the TFA if you want to verify that.
    - jonas21 5y ago
      That's exactly the point. If you define the universe to include only Bitcoin, then yes, transactions are final. But if you define the universe to include the real world, then the answer is no, not really -- governments will almost always find a way to reverse the transaction, whether it's seizing your private key, or holding you in contempt of court until you divulge it.
      - repomies69 5y ago
        It is not "reversing the transaction", it is just seizure. If you have spent the Bitcoin on a lamborghini, government will confiscate the lambo. Criminals however typically spend the stolen money on hookers and drugs. Seizure or confiscation has nothing to do with "reversing the transaction", calling it that is just stupid, mixing terms unnecessarily is just unnecessary and confusing here.
      - tshaddox 5y ago
        The transaction was final though, in the real world. The fact that the government can physically find your private key (or physically compel you to give it to them) and use it to make new transactions is irrelevant. All you're pointing out is that after you receive money in a transaction you can later participate in a different transaction using that same money.
        wewtyflakes 5y ago
        To the entity holding the coins, whether it is a single Bitcoin transaction as per the protocol of Bitcoin, or multiple transactions, makes no difference... ultimately they will or wont be holding a certain number of Bitcoins. To then say, "well technically that was _two_ transactions" seems irrelevant, since to the entity (no longer) holding the coins, things have been effectively reversed. I think may just be highlighting a disconnect between the writer of the article using the term transaction as understood by a layperson, and people who want to use the term transaction as per specific meaning of a particular protocol.
        5y ago
- kobieyc 5y ago
  Yeah, major wtf by this author. Clearly didn't do their homework.
  - deleted 5y ago
    [deleted]
- Qworg 5y ago
  If you saw the "technosociolegal" position at the top, you'd appreciate a broader perspective. Why is the couple who held the bitcoin from the hack being prosecuted? How were those funds being unwound if the transaction is final? If all of the exchanges were to denylist coins from a hack, do they actually exist or have they been taken away?
  - DennisP 5y ago
    Nothing was "unwound." The government found the criminals' private key, which they were unwisely storing in an online account. That allowed the government to make a new transaction, moving the funds wherever they liked. From the link in the article: > special agents obtained access to files within an online account controlled by Lichtenstein. Those files contained the private keys required to access the digital wallet that directly received the funds stolen from Bitfinex https://www.justice.gov/opa/pr/two-arrested-alleged-conspiracy-launder-45-billion-stolen-cryptocurrency https://www.justice.gov/opa/pr/two-arrested-alleged-conspira...
    - lxgr 5y ago
      > Nothing was "unwound." The government found the criminals' private key, which they were unwisely storing in an online account. That allowed the government to make a new transaction, moving the funds wherever they liked. This is how "unwinding" works in almost all payment systems: Creating a second transaction to (partially or fully) offset the effects of the original one.
      - DennisP 5y ago
        Fine, but the government has no special power over Bitcoin in this regard. If they hadn't found the key, they wouldn't have been able to issue that transaction, and any common thief who found the key could have done what they did.
        lxgr 5y ago
        The relevant meta-point here is that the government is uniquely positioned to come into possession of most keys that it wants (or more indirectly, render them useless by including them on sanction/embargo lists).
- tsatsawayy 5y ago
  I think that's the point that the author is trying to make. If the federal government disagrees with the bitcoin blockchain, then the blockchain is wrong. It doesn't really matter what the code says, or what bits are inscribed somewhere. Finance and ownership are ultimately enforced by armies, not computer programs. This is one reason why some people think that cryptocurrencies are playing with fire. It's also why major exchanges won't make it easy to cash out laundered bitcoins to USD.
  - beaned 5y ago
    > If the federal government disagrees with the bitcoin blockchain, then the blockchain is wrong It isn't, though. The record is kept, and in fact the government needs to submit to the blockchain's laws to move any coin around.
    - lxgr 5y ago
      > The record is kept It is kept in the same sense that you can draft a contract declaring you the owner and supreme ruler of the moon. > in fact the government needs to submit to the blockchain's laws to move any coin around No, it's the opposite: Everybody moving around coins has to submit to applicable laws – or face the consequences of violating them.
      - beaned 5y ago
        I don't think you understand how the Blockchain works or what the proper concept of a finalized payment is. The government cannot undo a Bitcoin transaction. If the keys are accessible, they can seize the coin and create a new transaction to redistribute according to the law. If the keys are not accessible, then they are totally powerless to do anything at all. The government submits to the blockchain's rules the same way everyone else does. That's kind of the point.
        deleted 5y ago
        [deleted]
        5y ago
- zaphar 5y ago
  There has been at least one fork that reversed bitcoin transactions. They are in no way final in practice even if the "spec" claims that they are.
  - int_19h 5y ago
    The resulting fork isn't Bitcoin, though, so no Bitcoin transactions are reversed in this manner.
    - zaphar 5y ago
      Actually the non-bitcoin fork is the one that didn't reverse the transactions. Bitcoin proper is the one that did reverse them if memory serves. I'll grant that sometimes memory does not serve though and I'm just too lazy to grab the citation right now.
      - smitop 5y ago
        I think you're thinking about this incident? https://en.bitcoin.it/wiki/Value_overflow_incident https://en.bitcoin.it/wiki/Value_overflow_incident In that case, ~9 hours of transaction history were reversed because of a transaction that resulted in an overflow in the main (and I think only at the time) Bitcoin client allowing the creation of unlimited Bitcoin.
DennisP 5y ago
> partially voided, with the reversal being worth slightly more than $70 million due to Bitcoin volatility. This didn’t happen an hour later; it happened in 2022. How? > The answer is nowhere in the Bitcoin whitepaper or any codebase. A full recounting of it is outside the scope of this anecdote, but it rhymes with “If you and the United States federal government disagree whether a transaction is final, you are wrong.” Following the link in that quote, that didn't happen because Bitcoin wasn't final after all, just because the government "disagreed." It happened because the government found the criminals' private keys, and made a new transaction. Back to the first article, it continues with this: > That is true for notorious Bitcoin thefts, but also true for wire transfers I'm wondering how it is then that theft by wire fraud is a serious problem these days.
- alisonkisk 5y ago
- lxgr 5y ago
  What do you mean by "theft by wire fraud"? As far as I understand, "wire fraud" has almost nothing to do with wire transfers.
  - DennisP 5y ago
    I mean by sending someone fraudulent wire instructions. It's been a problem in real estate transactions, mainly with consumers receiving instructions by email. Also, businesses have been hit in social engineering attacks that end up with instructions to send a wire. These situations can be reversed if discovered fast enough, but after a few hours the funds are moved internationally and you're very unlikely to get your money back.
    - repomies69 5y ago
      It depends on how well the fraud is executed, how long time has been passed since the fraud happened and also on the amounts and people/organisations involved. Technically kalzumeus might be right, however practically it almost always makes sense to think that wire transfer is final, and treat it that way. If a con man tricks you into wiring funds to a wrong address, it is quite likely gone. However with credit card payments you can be more relaxed, and so on.
eatbitseveryday 5y ago
I'm surprised the writing did not mention cash. Was the first thing I thought of. Digital transactions can be toyed with, but cash has no record, and no automated means to reclaim it. "Payments" perhaps means "Digital Payments"?
- RandomLensman 5y ago
  No automated means, but if you get a receipt then you could actually try to reverse it (depending on local laws etc.). So even there little finality in a lot of everyday situations.
  - audleman 5y ago
    > if you get a receipt then you could actually try to reverse it Store puts up a 'No returns' sign, you have finality.
    - oblio 5y ago
      In many places that's not enough. For example if they knowingly sell you defective stuff or if medicine is tainted, etc., there are laws that override such a policy.
- beaned 5y ago
  Yeah, this bothered me, too. His choice of definition for payments is unclear because it leaves out that very obvious and pervasive method. He also describes a Bitcoin transaction as not being "final" because it was seized by the government. This isn't really what most people mean by finality. So you never really know what he means throughout the article due to imprecision and it comes off as not compelling.
  - alisonkisk 5y ago
    What does finality mean? When I get paid by credit credit card it's "final", because that transaction can't be cancelled, only a new transaction can be created to undo it without my consent. Patrick loves to write coyly, but his point is simple: If the government can find the money they can take it back from you. What he misses is that it only works if they can find the keys (or the next best thing -- your body).
Qworg 5y ago
I wish he would have delved into the cost of finality or reversals - this is a core driver of the cost of an entire system, either in time or in money.
- RandomLensman 5y ago
  Both sides are expensive. Early finality can create costs, and ability to reverse also means effort. I think, most legal systems are setup to make reaching finality on material things pretty expensive (but also very difficult/impossible to challenge once it reaches finality). Overall, societies seem to work well that way given the pretty long track record.
cool_dude85 5y ago
>some times and places, is “no takesies-backsies.” Like much of the child law, it both rhymes It doesn't rhyme.
- BurritoAlPastor 5y ago
  You’re saying “takesies” does not rhyme with “backsies”? As a counterexample, what would be a word that would rhyme with one but not the other?
  - cool_dude85 5y ago
    Fakesies to rhyme with takesies and cracksies to rhyme with backsies. Is there a dialect of English commonly spoken where "fake" and "back" rhyme?
    - jcranmer 5y ago
      Would the Northern Cities Vowel Shift do it?
      - jordanekay 5y ago
        No.
  - spatley 5y ago
    Are you intending to say that there is a transitive property of rhyming? And that if that if A does not rhyme with B then there may not exist a word C that rhymes with both A and B? If so, your ideas are intriguing to me, and I wish to subscribe to your newsletter.
  - schoen 5y ago
    I think the issue is that English rhyme requires a near-match of the last stressed vowel and of all following sounds until the end of the word. So you can sometimes just match the last syllable and get a rhyme, but not always, depending on where the stress falls. For example, "example" rhymes with "sample" but not with "people" because the stress is on the second-to-last syllable. But "redact" and "exact" rhyme, despite only agreeing in the last syllable, because that's the last syllable that's stressed. "Takesies" and "backsies" are both stressed on their first syllables, so they would need to match from that vowel on in order to be perceived as a natural English rhyme, and they don't.
eternityforest 5y ago
Finality may exist in transactions, but I'd rather it didn't, or at least, that it was easier to opt out of. In fact, I wish banks had an option to require an extra authentication factor for any transactions that isn't easy to trace and reverse, like ATMs or crypto purchases.
- nradov 5y ago
  ATMs already have two factor authentication (card plus PIN). What more do you want? Many banks will reimburse customers for losses if their ATM card is stolen, and modern ATMs even have surveillance cameras to assist with investigations. There's also a daily withdrawal limit (typically under $1000) which mitigates the damage.
  - eternityforest 5y ago
    $1000 limits aren't much of a mitigation. That's a years savings that could be wiped out in minutes. The cameras help a lot, and ATMs are somewhat OK, but nothing stops a person from using crypto to launder a stolen card. If they bought gold, someone could track their address. If they bought it in person they'd be on camera. A way to restrict transactions that go outside of easy to track places would help a lot of people. Of course, using 2FA for your Google account also stops most of that...
tantalor 5y ago
> low and behold lo and behold https://getproofed.com/writing-tips/idiom-tips-lo-and-behold-or-low-and-behold https://getproofed.com/writing-tips/idiom-tips-lo-and-behold...
mediocregopher 5y ago
Let's swap "bitcoin" for "cash" here, since the mechanics remain the same but there's less emotional baggage. If someone tried to make the argument to me that cash doesn't have finality because your shoebox-in-the-closet-full-of-cash can be stolen from you, I would say they're stretching the definition of "transaction finality" in order to make a banal point.
- RandomLensman 5y ago
  Isn't the point that you don't just get to decide whether or not the cash is legally yours? So you might have possession of the box of cash, but might not be the owner, for example.
  - bko 5y ago
    Sure, but that money you stole buried in your backyard is still yours. The rightful owner cannot just steal it back. Similarly if it wasn't yours, you wouldn't have to pay taxes on it and the IRS still expects taxes on stolen property https://www.snopes.com/fact-check/irs-taxpayers-stolen-items-illegal-income/ https://www.snopes.com/fact-check/irs-taxpayers-stolen-items...
    - RandomLensman 5y ago
      Not a lawyer, but I think in a lot of jurisdictions the money still belongs to person it was stolen from, i.e., you only have possession, but don't own it - so not yours.
      - polynomial 5y ago
        And yet you still have to pay taxes on it.
    - littlestymaar 5y ago
      It's “your” the same way an Ikea shop is all “your” if you manage to get lock-in during the night[1]. Sure you have it, but if the authorities ever know that you have it you're screwed: you don't own it. Btw, the IRS rule you're referring is just a hack to be able to at least charge people for tax fraud if the police cannot prove that you were involved in criminal activities. (Like how Al Capone got eventually caught for tax fraud). [1]: https://7news.com.au/technology/tiktok/tiktok-video-of-logan-ikea-challenge-by-teens-sparks-illegal-trespassing-warning-c-2380533 https://7news.com.au/technology/tiktok/tiktok-video-of-logan...
Shank 5y ago
This is, incidentally, a good time to bring up the fact that when Citi accidentally wired $900m to various lenders for Revlon, Inc., many recipients opted to hold onto the money and take the matter to court. They won principally because New York law entitled them to keep the money, because it was effectively a repayment on a loan. Normally, the "hold harmless" part is true and wires are reversed, but that only happens if there isn't a very good reason (like a law that errs in your favor and a large sum of money) on the table. See: https://www.bloomberg.com/opinion/articles/2021-02-17/citi-can-t-have-its-900-million-back https://www.bloomberg.com/opinion/articles/2021-02-17/citi-c..., and the opinion directly: https://assets.bwbx.io/documents/users/iqjWHBFdfxIU/rrBrQQPB7_i8/v0 https://assets.bwbx.io/documents/users/iqjWHBFdfxIU/rrBrQQPB...
aeturnum 5y ago
I think the important part of this discussion is that the finality of payments sit outside of the mechanics of the financial system. For instance - when a wire transfer is "reversed" that is accomplished with another wire transfer (or some other series of administratively triggered actions). For both cryptocurrency and normal currency the system is a series of transactions that are treated as valid for a particular period of time. The decision to consider a transaction final or not exists outside of that accounting system. The fatal flaw of crypto currencies (edit: in this regard!) is they have comparably high fees built into the mechanics of their accounting systems. What a bank can do for "free" (really just very low cost) in fiat would compete for scarce transaction slots in crypto.
- dmurray 5y ago
  > What a bank can do for "free" (really just very low cost) in fiat would compete for scarce transaction slots in crypto. This doesn't seem to be the problem. If 1% of transactions need a second transaction to reverse them, we can amortize this cost over all transactions and say reversibility adds on average 1% to transaction costs - hardly significant when choosing a payment mechanism. Reversing significantly more transactions than that isn't normal. If you try to reverse 10% of your credit card payments, you'll soon need a new credit card issuer.
yanmaani 5y ago
I think I want to disagree with the central point of the article here: As a payment mechanism, Bitcoin is final. As a store of value, it isn't unseizable. But from a technical PoV, they still had to make a new transaction in order to reverse the effects of the old one. I want to clarify that this isn't just a technical point: if I have $100 in account A, and I use a card processor to move it to account B, and then the holder of that account withdraws it, then the card processor can still reverse the transaction, leading B with a debt of $100. (This is actually a common scam: you send someone $1000 with a 'soft' payment method, like a check, then you have them buy gift cards and send the codes. Once the check bounces, you split.) If I do the same thing in Bitcoin, that's not possible. If Bitfinex hackers had used Bitcoin qua payment processor to move $70MM, then exchanged the Bitcoin into something else, the Bitcoin transaction could never have been reversed. Only the custody, which is a different thing.
- lxgr 5y ago
  The distinction is certainly one worth making (reversibility within the ledger vs. "meta-reversibility" in the context of the social/legal system that ledger is embedded), and not just at an academic level as underlined by your example. In my view, both matter when trying to understand a payment system.
  - yanmaani 5y ago
    I don't understand - how is the custody even part of the payment system, though? For example, if I keep all my money in the bank, then cash is only as reversible as my bank account is solid. But "cash as a payment method is reversible, if you store the proceeds in a bank account" is not a statement that tells you anything about cash, it's a statement about my bank account. It would be a solid article if it attempted to argue the point it proves, which is that "there is no such thing as unseizable". But it doesn't, so it isn't.
- wpietri 5y ago
  You're right about the technical distinction, but I think you're incorrect that Bitcoin is truly final. Bitcoin may not have reversed a transaction yet, but it's technically feasible. Note that Ethereum did it: https://futurism.com/the-dao-heist-undone-97-of-eth-holders-vote-for-the-hard-fork https://futurism.com/the-dao-heist-undone-97-of-eth-holders-... Bitcoin mining is very concentrated, so if one or more of the major miners is robbed, it's entirely plausible that similarly situated entities would collaborate and just undo the transaction.
marcell 5y ago
The author posted a full throated and mocking anti-bitcoin article in 2014 [1] when the bitcoin price was $300. Since then, bitcoin has thrived, and so has cryptocurrency in general. BTC is up 100x since Peter posted his original article. A lot of anti-bitcoin crowd gets ego invested in their opposition, and the result is articles like this, which misunderstand the fundamentals of bitcoin. [1] https://www.kalzumeus.com/2014/08/05/harry-potter-and-the-cryptocurrency-of-stars/ https://www.kalzumeus.com/2014/08/05/harry-potter-and-the-cr...
- lxgr 5y ago
  In what way would you say that the current article is misunderstanding the fundamentals of Bitcoin? I'd argue that it merely contextualizes in-system (technical) finality in the larger context of "social/legal finality".
  - marcell 5y ago
    See another reply above mine: transactions never got reversed on blockchain. Outside chain activities, like seizing private keys, are fundamentally different in bitcoin.
    - stickfigure 5y ago
      I'm not sure this is so different from "reversing" charges in the traditional banking system. It's not like someone issues a DELETE FROM to remove the original transfer; they just create a new transfer that puts the money back. Just like bitcoin.
      - beaned 5y ago
        It's not just like Bitcoin, because if the keys aren't accessible, nothing can be done.
    - lxgr 5y ago
      Yes, as a system, Bitcoin does not offer an "undo button" in the way that other payment systems do. What I'm getting out of the article is that this is less relevant than people generally assume.
andi999 5y ago
In what sense are international money transfers with western union supposed not to be final?
miohtama 5y ago
Finality does exist in the payments. It may not exist in consumer (fiat currency) payments, but it definitely exists. The EU has a directive Settlement finality - Directive 98/26/EC that address this problem specifically. If there were no finality, markets would need to price in more risk in every transaction. > WHAT DOES THIS DIRECTIVE DO? > It guarantees that financial product transfer and payment orders can be finalised, mainly by mitigating problems arising from a participant’s insolvency. https://ec.europa.eu/info/law/settlement-finality-directive-98-26-ec_en https://ec.europa.eu/info/law/settlement-finality-directive-... https://eur-lex.europa.eu/legal-content/EN/LSU/?uri=CELEX:31998L0026 https://eur-lex.europa.eu/legal-content/EN/LSU/?uri=CELEX:31...
louloulou 5y ago
What ridiculous framing. The transaction wasn't reversed. Some people stole some bitcoin from Bitfinex in 2016, and then the US gov stole it from them in 2022. What exactly got reversed?
vmception 5y ago
How do people simultaneously misunderstand what the bitcoin community believes and how the code works? This person, and many others, believe that the US government undermined “code is law” by doing the exact thing that the code is law people believe. Uh… what? There are literally so many people that think something omniscient happened. Good marketing by the US government? If you have the keys you have the coin. The government obtained the keys because they were in plain text after brute forcing a zip file, and moved the coin. Its not even clear they were looking for that. Everyone is on the same footing here. I dont understand this article. What a long winded essay for these misunderstandings.
panqueque 5y ago
Thought experiment: What would have happened if the hackers had distributed the funds among millions of wallets held by regular people - including wallets owned by police officers, judges and other government officials? Would it be possible/feasible to confiscate the illicitly acquired funds? Would people even want that after receiving a bribe they couldn't technically refuse?
syntheweave 5y ago
Finality is a mundane occurrence within the world: destruction of a physical asset - not a financial instrument - is definitely final. And crypto does have a notion of "burning" tokens(by sending them to a random place, rendering them inaccessible to all parties) that has proven to be useful as an equivalent finalization. What isn't final about crypto is rather the entirety of the system. When using it you consent to the inner part of it - the on-chain record - being final, while the overall framework is not and can be reformed with hardforks, protocol upgrades etc. TradFi does the inverse: the overarching framework of international finance is taken to be final, ultimately enforced through political and military power - while the day-to-day details of the system are negotiable. The underlying utilitarian proposition of introducing crypto - irrespective of the ideological - is that making an entire financial system open, fungible and mutable is net beneficial towards the goal of economic coordination, even if some aspects like consumer payments may remain traditional in nature.

104 points by smitop 5y ago

“Technosociolegal”

There is a misleading, or more correctly put, wrong, statement here about bitcoin transactions not being final. They are final. https://bitcoin.stackexchange.com/questions/88289/what-is-transaction-finality https://bitcoin.stackexchange.com/questions/88289/what-is-tr...

topher200 5y ago
From the beginning of TFA: > An extreme example which proves the point: the cryptocurrency enthusiast community largely believes that code is law, “not your keys, not your coins”, etc. Many crypto enthusiasts would say that the Bitcoin protocol does not prohibit reversing transactions but provides a security guarantee which suggests that the likelihood of a reversal after an hour is infinitesimal. > And yet: someone sent $70 million worth of Bitcoin in 2016, and that transaction was partially voided, with the reversal being worth slightly more than $70 million due to Bitcoin volatility. This didn’t happen an hour later; it happened in 2022. How? > The answer is nowhere in the Bitcoin whitepaper or any codebase. A full recounting of it is outside the scope of this anecdote, but it rhymes with “If you and the United States federal government disagree whether a transaction is final, you are wrong.” That is true for notorious Bitcoin thefts, but also true for wire transfers, conveyances of real estate, credit card payments, and graverobbing. “Possession is nine-tenths of the law,” so the saying goes, but the state can conjure as many tenths as required if it is motivated to.
- DennisP 5y ago
  "How" is easy: they were storing their private key in an online account and the government found it. Nothing in Bitcoin was reversed. The government confiscated their funds in the same way that criminals steal any other bitcoins with poorly-secured keys. Just follow the link in the TFA if you want to verify that.
  - jonas21 5y ago
    That's exactly the point. If you define the universe to include only Bitcoin, then yes, transactions are final. But if you define the universe to include the real world, then the answer is no, not really -- governments will almost always find a way to reverse the transaction, whether it's seizing your private key, or holding you in contempt of court until you divulge it.
    - repomies69 5y ago
      It is not "reversing the transaction", it is just seizure. If you have spent the Bitcoin on a lamborghini, government will confiscate the lambo. Criminals however typically spend the stolen money on hookers and drugs. Seizure or confiscation has nothing to do with "reversing the transaction", calling it that is just stupid, mixing terms unnecessarily is just unnecessary and confusing here.
    - tshaddox 5y ago
      The transaction was final though, in the real world. The fact that the government can physically find your private key (or physically compel you to give it to them) and use it to make new transactions is irrelevant. All you're pointing out is that after you receive money in a transaction you can later participate in a different transaction using that same money.
      - wewtyflakes 5y ago
        To the entity holding the coins, whether it is a single Bitcoin transaction as per the protocol of Bitcoin, or multiple transactions, makes no difference... ultimately they will or wont be holding a certain number of Bitcoins. To then say, "well technically that was _two_ transactions" seems irrelevant, since to the entity (no longer) holding the coins, things have been effectively reversed. I think may just be highlighting a disconnect between the writer of the article using the term transaction as understood by a layperson, and people who want to use the term transaction as per specific meaning of a particular protocol.
        5y ago
kobieyc 5y ago
Yeah, major wtf by this author. Clearly didn't do their homework.
- deleted 5y ago
  [deleted]
Qworg 5y ago
If you saw the "technosociolegal" position at the top, you'd appreciate a broader perspective. Why is the couple who held the bitcoin from the hack being prosecuted? How were those funds being unwound if the transaction is final? If all of the exchanges were to denylist coins from a hack, do they actually exist or have they been taken away?
- DennisP 5y ago
  Nothing was "unwound." The government found the criminals' private key, which they were unwisely storing in an online account. That allowed the government to make a new transaction, moving the funds wherever they liked. From the link in the article: > special agents obtained access to files within an online account controlled by Lichtenstein. Those files contained the private keys required to access the digital wallet that directly received the funds stolen from Bitfinex https://www.justice.gov/opa/pr/two-arrested-alleged-conspiracy-launder-45-billion-stolen-cryptocurrency https://www.justice.gov/opa/pr/two-arrested-alleged-conspira...
  - lxgr 5y ago
    > Nothing was "unwound." The government found the criminals' private key, which they were unwisely storing in an online account. That allowed the government to make a new transaction, moving the funds wherever they liked. This is how "unwinding" works in almost all payment systems: Creating a second transaction to (partially or fully) offset the effects of the original one.
    - DennisP 5y ago
      Fine, but the government has no special power over Bitcoin in this regard. If they hadn't found the key, they wouldn't have been able to issue that transaction, and any common thief who found the key could have done what they did.
      - lxgr 5y ago
        The relevant meta-point here is that the government is uniquely positioned to come into possession of most keys that it wants (or more indirectly, render them useless by including them on sanction/embargo lists).
tsatsawayy 5y ago
I think that's the point that the author is trying to make. If the federal government disagrees with the bitcoin blockchain, then the blockchain is wrong. It doesn't really matter what the code says, or what bits are inscribed somewhere. Finance and ownership are ultimately enforced by armies, not computer programs. This is one reason why some people think that cryptocurrencies are playing with fire. It's also why major exchanges won't make it easy to cash out laundered bitcoins to USD.
- beaned 5y ago
  > If the federal government disagrees with the bitcoin blockchain, then the blockchain is wrong It isn't, though. The record is kept, and in fact the government needs to submit to the blockchain's laws to move any coin around.
  - lxgr 5y ago
    > The record is kept It is kept in the same sense that you can draft a contract declaring you the owner and supreme ruler of the moon. > in fact the government needs to submit to the blockchain's laws to move any coin around No, it's the opposite: Everybody moving around coins has to submit to applicable laws – or face the consequences of violating them.
    - beaned 5y ago
      I don't think you understand how the Blockchain works or what the proper concept of a finalized payment is. The government cannot undo a Bitcoin transaction. If the keys are accessible, they can seize the coin and create a new transaction to redistribute according to the law. If the keys are not accessible, then they are totally powerless to do anything at all. The government submits to the blockchain's rules the same way everyone else does. That's kind of the point.
      - deleted 5y ago
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      - 5y ago
zaphar 5y ago
There has been at least one fork that reversed bitcoin transactions. They are in no way final in practice even if the "spec" claims that they are.
- int_19h 5y ago
  The resulting fork isn't Bitcoin, though, so no Bitcoin transactions are reversed in this manner.
  - zaphar 5y ago
    Actually the non-bitcoin fork is the one that didn't reverse the transactions. Bitcoin proper is the one that did reverse them if memory serves. I'll grant that sometimes memory does not serve though and I'm just too lazy to grab the citation right now.
    - smitop 5y ago
      I think you're thinking about this incident? https://en.bitcoin.it/wiki/Value_overflow_incident https://en.bitcoin.it/wiki/Value_overflow_incident In that case, ~9 hours of transaction history were reversed because of a transaction that resulted in an overflow in the main (and I think only at the time) Bitcoin client allowing the creation of unlimited Bitcoin.

DennisP 5y ago

> partially voided, with the reversal being worth slightly more than $70 million due to Bitcoin volatility. This didn’t happen an hour later; it happened in 2022. How? > The answer is nowhere in the Bitcoin whitepaper or any codebase. A full recounting of it is outside the scope of this anecdote, but it rhymes with “If you and the United States federal government disagree whether a transaction is final, you are wrong.” Following the link in that quote, that didn't happen because Bitcoin wasn't final after all, just because the government "disagreed." It happened because the government found the criminals' private keys, and made a new transaction. Back to the first article, it continues with this: > That is true for notorious Bitcoin thefts, but also true for wire transfers I'm wondering how it is then that theft by wire fraud is a serious problem these days.

alisonkisk 5y ago
lxgr 5y ago
What do you mean by "theft by wire fraud"? As far as I understand, "wire fraud" has almost nothing to do with wire transfers.
- DennisP 5y ago
  I mean by sending someone fraudulent wire instructions. It's been a problem in real estate transactions, mainly with consumers receiving instructions by email. Also, businesses have been hit in social engineering attacks that end up with instructions to send a wire. These situations can be reversed if discovered fast enough, but after a few hours the funds are moved internationally and you're very unlikely to get your money back.
  - repomies69 5y ago
    It depends on how well the fraud is executed, how long time has been passed since the fraud happened and also on the amounts and people/organisations involved. Technically kalzumeus might be right, however practically it almost always makes sense to think that wire transfer is final, and treat it that way. If a con man tricks you into wiring funds to a wrong address, it is quite likely gone. However with credit card payments you can be more relaxed, and so on.

eatbitseveryday 5y ago

I'm surprised the writing did not mention cash. Was the first thing I thought of. Digital transactions can be toyed with, but cash has no record, and no automated means to reclaim it. "Payments" perhaps means "Digital Payments"?

RandomLensman 5y ago
No automated means, but if you get a receipt then you could actually try to reverse it (depending on local laws etc.). So even there little finality in a lot of everyday situations.
- audleman 5y ago
  > if you get a receipt then you could actually try to reverse it Store puts up a 'No returns' sign, you have finality.
  - oblio 5y ago
    In many places that's not enough. For example if they knowingly sell you defective stuff or if medicine is tainted, etc., there are laws that override such a policy.
beaned 5y ago
Yeah, this bothered me, too. His choice of definition for payments is unclear because it leaves out that very obvious and pervasive method. He also describes a Bitcoin transaction as not being "final" because it was seized by the government. This isn't really what most people mean by finality. So you never really know what he means throughout the article due to imprecision and it comes off as not compelling.
- alisonkisk 5y ago
  What does finality mean? When I get paid by credit credit card it's "final", because that transaction can't be cancelled, only a new transaction can be created to undo it without my consent. Patrick loves to write coyly, but his point is simple: If the government can find the money they can take it back from you. What he misses is that it only works if they can find the keys (or the next best thing -- your body).

Qworg 5y ago

I wish he would have delved into the cost of finality or reversals - this is a core driver of the cost of an entire system, either in time or in money.

RandomLensman 5y ago
Both sides are expensive. Early finality can create costs, and ability to reverse also means effort. I think, most legal systems are setup to make reaching finality on material things pretty expensive (but also very difficult/impossible to challenge once it reaches finality). Overall, societies seem to work well that way given the pretty long track record.

cool_dude85 5y ago

>some times and places, is “no takesies-backsies.” Like much of the child law, it both rhymes It doesn't rhyme.

BurritoAlPastor 5y ago
You’re saying “takesies” does not rhyme with “backsies”? As a counterexample, what would be a word that would rhyme with one but not the other?
- cool_dude85 5y ago
  Fakesies to rhyme with takesies and cracksies to rhyme with backsies. Is there a dialect of English commonly spoken where "fake" and "back" rhyme?
  - jcranmer 5y ago
    Would the Northern Cities Vowel Shift do it?
    - jordanekay 5y ago
      No.
- spatley 5y ago
  Are you intending to say that there is a transitive property of rhyming? And that if that if A does not rhyme with B then there may not exist a word C that rhymes with both A and B? If so, your ideas are intriguing to me, and I wish to subscribe to your newsletter.
- schoen 5y ago
  I think the issue is that English rhyme requires a near-match of the last stressed vowel and of all following sounds until the end of the word. So you can sometimes just match the last syllable and get a rhyme, but not always, depending on where the stress falls. For example, "example" rhymes with "sample" but not with "people" because the stress is on the second-to-last syllable. But "redact" and "exact" rhyme, despite only agreeing in the last syllable, because that's the last syllable that's stressed. "Takesies" and "backsies" are both stressed on their first syllables, so they would need to match from that vowel on in order to be perceived as a natural English rhyme, and they don't.

eternityforest 5y ago

Finality may exist in transactions, but I'd rather it didn't, or at least, that it was easier to opt out of. In fact, I wish banks had an option to require an extra authentication factor for any transactions that isn't easy to trace and reverse, like ATMs or crypto purchases.

nradov 5y ago
ATMs already have two factor authentication (card plus PIN). What more do you want? Many banks will reimburse customers for losses if their ATM card is stolen, and modern ATMs even have surveillance cameras to assist with investigations. There's also a daily withdrawal limit (typically under $1000) which mitigates the damage.
- eternityforest 5y ago
  $1000 limits aren't much of a mitigation. That's a years savings that could be wiped out in minutes. The cameras help a lot, and ATMs are somewhat OK, but nothing stops a person from using crypto to launder a stolen card. If they bought gold, someone could track their address. If they bought it in person they'd be on camera. A way to restrict transactions that go outside of easy to track places would help a lot of people. Of course, using 2FA for your Google account also stops most of that...

tantalor 5y ago

> low and behold lo and behold https://getproofed.com/writing-tips/idiom-tips-lo-and-behold-or-low-and-behold https://getproofed.com/writing-tips/idiom-tips-lo-and-behold...

mediocregopher 5y ago

Let's swap "bitcoin" for "cash" here, since the mechanics remain the same but there's less emotional baggage. If someone tried to make the argument to me that cash doesn't have finality because your shoebox-in-the-closet-full-of-cash can be stolen from you, I would say they're stretching the definition of "transaction finality" in order to make a banal point.

RandomLensman 5y ago
Isn't the point that you don't just get to decide whether or not the cash is legally yours? So you might have possession of the box of cash, but might not be the owner, for example.
- bko 5y ago
  Sure, but that money you stole buried in your backyard is still yours. The rightful owner cannot just steal it back. Similarly if it wasn't yours, you wouldn't have to pay taxes on it and the IRS still expects taxes on stolen property https://www.snopes.com/fact-check/irs-taxpayers-stolen-items-illegal-income/ https://www.snopes.com/fact-check/irs-taxpayers-stolen-items...
  - RandomLensman 5y ago
    Not a lawyer, but I think in a lot of jurisdictions the money still belongs to person it was stolen from, i.e., you only have possession, but don't own it - so not yours.
    - polynomial 5y ago
      And yet you still have to pay taxes on it.
  - littlestymaar 5y ago
    It's “your” the same way an Ikea shop is all “your” if you manage to get lock-in during the night[1]. Sure you have it, but if the authorities ever know that you have it you're screwed: you don't own it. Btw, the IRS rule you're referring is just a hack to be able to at least charge people for tax fraud if the police cannot prove that you were involved in criminal activities. (Like how Al Capone got eventually caught for tax fraud). [1]: https://7news.com.au/technology/tiktok/tiktok-video-of-logan-ikea-challenge-by-teens-sparks-illegal-trespassing-warning-c-2380533 https://7news.com.au/technology/tiktok/tiktok-video-of-logan...

Shank 5y ago

This is, incidentally, a good time to bring up the fact that when Citi accidentally wired $900m to various lenders for Revlon, Inc., many recipients opted to hold onto the money and take the matter to court. They won principally because New York law entitled them to keep the money, because it was effectively a repayment on a loan. Normally, the "hold harmless" part is true and wires are reversed, but that only happens if there isn't a very good reason (like a law that errs in your favor and a large sum of money) on the table. See: https://www.bloomberg.com/opinion/articles/2021-02-17/citi-can-t-have-its-900-million-back https://www.bloomberg.com/opinion/articles/2021-02-17/citi-c..., and the opinion directly: https://assets.bwbx.io/documents/users/iqjWHBFdfxIU/rrBrQQPB7_i8/v0 https://assets.bwbx.io/documents/users/iqjWHBFdfxIU/rrBrQQPB...

aeturnum 5y ago

I think the important part of this discussion is that the finality of payments sit outside of the mechanics of the financial system. For instance - when a wire transfer is "reversed" that is accomplished with another wire transfer (or some other series of administratively triggered actions). For both cryptocurrency and normal currency the system is a series of transactions that are treated as valid for a particular period of time. The decision to consider a transaction final or not exists outside of that accounting system. The fatal flaw of crypto currencies (edit: in this regard!) is they have comparably high fees built into the mechanics of their accounting systems. What a bank can do for "free" (really just very low cost) in fiat would compete for scarce transaction slots in crypto.

dmurray 5y ago
> What a bank can do for "free" (really just very low cost) in fiat would compete for scarce transaction slots in crypto. This doesn't seem to be the problem. If 1% of transactions need a second transaction to reverse them, we can amortize this cost over all transactions and say reversibility adds on average 1% to transaction costs - hardly significant when choosing a payment mechanism. Reversing significantly more transactions than that isn't normal. If you try to reverse 10% of your credit card payments, you'll soon need a new credit card issuer.

yanmaani 5y ago

I think I want to disagree with the central point of the article here: As a payment mechanism, Bitcoin is final. As a store of value, it isn't unseizable. But from a technical PoV, they still had to make a new transaction in order to reverse the effects of the old one. I want to clarify that this isn't just a technical point: if I have $100 in account A, and I use a card processor to move it to account B, and then the holder of that account withdraws it, then the card processor can still reverse the transaction, leading B with a debt of $100. (This is actually a common scam: you send someone $1000 with a 'soft' payment method, like a check, then you have them buy gift cards and send the codes. Once the check bounces, you split.) If I do the same thing in Bitcoin, that's not possible. If Bitfinex hackers had used Bitcoin qua payment processor to move $70MM, then exchanged the Bitcoin into something else, the Bitcoin transaction could never have been reversed. Only the custody, which is a different thing.

lxgr 5y ago
The distinction is certainly one worth making (reversibility within the ledger vs. "meta-reversibility" in the context of the social/legal system that ledger is embedded), and not just at an academic level as underlined by your example. In my view, both matter when trying to understand a payment system.
- yanmaani 5y ago
  I don't understand - how is the custody even part of the payment system, though? For example, if I keep all my money in the bank, then cash is only as reversible as my bank account is solid. But "cash as a payment method is reversible, if you store the proceeds in a bank account" is not a statement that tells you anything about cash, it's a statement about my bank account. It would be a solid article if it attempted to argue the point it proves, which is that "there is no such thing as unseizable". But it doesn't, so it isn't.
wpietri 5y ago
You're right about the technical distinction, but I think you're incorrect that Bitcoin is truly final. Bitcoin may not have reversed a transaction yet, but it's technically feasible. Note that Ethereum did it: https://futurism.com/the-dao-heist-undone-97-of-eth-holders-vote-for-the-hard-fork https://futurism.com/the-dao-heist-undone-97-of-eth-holders-... Bitcoin mining is very concentrated, so if one or more of the major miners is robbed, it's entirely plausible that similarly situated entities would collaborate and just undo the transaction.

marcell 5y ago

The author posted a full throated and mocking anti-bitcoin article in 2014 [1] when the bitcoin price was $300. Since then, bitcoin has thrived, and so has cryptocurrency in general. BTC is up 100x since Peter posted his original article. A lot of anti-bitcoin crowd gets ego invested in their opposition, and the result is articles like this, which misunderstand the fundamentals of bitcoin. [1] https://www.kalzumeus.com/2014/08/05/harry-potter-and-the-cryptocurrency-of-stars/ https://www.kalzumeus.com/2014/08/05/harry-potter-and-the-cr...

lxgr 5y ago
In what way would you say that the current article is misunderstanding the fundamentals of Bitcoin? I'd argue that it merely contextualizes in-system (technical) finality in the larger context of "social/legal finality".
- marcell 5y ago
  See another reply above mine: transactions never got reversed on blockchain. Outside chain activities, like seizing private keys, are fundamentally different in bitcoin.
  - stickfigure 5y ago
    I'm not sure this is so different from "reversing" charges in the traditional banking system. It's not like someone issues a DELETE FROM to remove the original transfer; they just create a new transfer that puts the money back. Just like bitcoin.
    - beaned 5y ago
      It's not just like Bitcoin, because if the keys aren't accessible, nothing can be done.
  - lxgr 5y ago
    Yes, as a system, Bitcoin does not offer an "undo button" in the way that other payment systems do. What I'm getting out of the article is that this is less relevant than people generally assume.

andi999 5y ago

In what sense are international money transfers with western union supposed not to be final?

miohtama 5y ago

Finality does exist in the payments. It may not exist in consumer (fiat currency) payments, but it definitely exists. The EU has a directive Settlement finality - Directive 98/26/EC that address this problem specifically. If there were no finality, markets would need to price in more risk in every transaction. > WHAT DOES THIS DIRECTIVE DO? > It guarantees that financial product transfer and payment orders can be finalised, mainly by mitigating problems arising from a participant’s insolvency. https://ec.europa.eu/info/law/settlement-finality-directive-98-26-ec_en https://ec.europa.eu/info/law/settlement-finality-directive-... https://eur-lex.europa.eu/legal-content/EN/LSU/?uri=CELEX:31998L0026 https://eur-lex.europa.eu/legal-content/EN/LSU/?uri=CELEX:31...

louloulou 5y ago

What ridiculous framing. The transaction wasn't reversed. Some people stole some bitcoin from Bitfinex in 2016, and then the US gov stole it from them in 2022. What exactly got reversed?

vmception 5y ago

How do people simultaneously misunderstand what the bitcoin community believes and how the code works? This person, and many others, believe that the US government undermined “code is law” by doing the exact thing that the code is law people believe. Uh… what? There are literally so many people that think something omniscient happened. Good marketing by the US government? If you have the keys you have the coin. The government obtained the keys because they were in plain text after brute forcing a zip file, and moved the coin. Its not even clear they were looking for that. Everyone is on the same footing here. I dont understand this article. What a long winded essay for these misunderstandings.

panqueque 5y ago

Thought experiment: What would have happened if the hackers had distributed the funds among millions of wallets held by regular people - including wallets owned by police officers, judges and other government officials? Would it be possible/feasible to confiscate the illicitly acquired funds? Would people even want that after receiving a bribe they couldn't technically refuse?

syntheweave 5y ago

Finality is a mundane occurrence within the world: destruction of a physical asset - not a financial instrument - is definitely final. And crypto does have a notion of "burning" tokens(by sending them to a random place, rendering them inaccessible to all parties) that has proven to be useful as an equivalent finalization. What isn't final about crypto is rather the entirety of the system. When using it you consent to the inner part of it - the on-chain record - being final, while the overall framework is not and can be reformed with hardforks, protocol upgrades etc. TradFi does the inverse: the overarching framework of international finance is taken to be final, ultimately enforced through political and military power - while the day-to-day details of the system are negotiable. The underlying utilitarian proposition of introducing crypto - irrespective of the ideological - is that making an entire financial system open, fungible and mutable is net beneficial towards the goal of economic coordination, even if some aspects like consumer payments may remain traditional in nature.