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Everything about Bitcoin seems silly to me. What exactly was "stolen" here? What if they just restore from yesterday's backup? Is there a bitcoin equivalent

Everything about Bitcoin seems silly to me. What exactly was "stolen" here? What if they just restore from yesterday's backup? Is there a bitcoin equivalent of the ink packets regular banks use to track stolen cash?

ajross 15y ago
The bitcoins are the data. If you steal their files, you can spend their money anonymously and there's nothing anyone can do about it. Restoring from a backup just gets them a bunch of worthless bitcoins that have already been spent. And the answer to the second question is "absolutely not". The lack of tracking is a primary requirement that was designed into the system from the start.
- blario 15y ago
  There is no lacking of tracking built into bitcoin. In fact it's exactly the opposite. Everything is tracked within bitcoin. The one exception is with stolen bitcoins, like what had happened. Those bitcoins show up as owned by the rightful owner... And when spent and tracked, would appear to have been spent by that person, instead of the thief.
  - ajross 15y ago
    You're right. I was imprecise. The transactions themselves are trackable, so with backups you know to "who" your specific bitcoins were transfered. But the "who" is just a number, and anonymous. And you can create as many identities as you want. Essentially: bitcoins are anonymous because money laundering in the bitcoin world is perfect and free.
    - wmf 15y ago
      Eventually the money has to come out somewhere, though.
mey 15y ago
Bitcoin is designed to be a cash replacement using digital cryptography. As such, one of the design decisions was to make transactions non-reversible (the conditions where this would not be true aren't relevant). Basically once the transactions of originating account, destination account, and amount is entered into the distributed ledger/transaction log, it can't be removed, since the majority of systems believe it. Thus is the original account tries to use those same "coins" (really tokens) the network would reject it, as that account not having access to those coins.
wmf 15y ago
What if they just restore from yesterday's backup? If every Bitcoin user rolled back the block chain by a day then the theft essentially didn't happen. But you can't get everyone to agree to do that. Is there a bitcoin equivalent of the ink packets regular banks use to track stolen cash? All Bitcoin transactions are public, so it's possible to trace thefts. But when a transaction has both tainted and untainted inputs the output ends up partially tainted and you end up with a lot of innocent people holding BTC that's lightly tainted (sort of like having 100 $1 bills of which two were marked by police — what is the probability that you're a criminal?). http://anonymity-in-bitcoin.blogspot.com/2011/07/bitcoin-is-not-anonymous.html http://anonymity-in-bitcoin.blogspot.com/2011/07/bitcoin-is-... http://news.ycombinator.com/item?id=2800790 http://news.ycombinator.com/item?id=2800790 https://bitcointalk.org/index.php?topic=56170.0 https://bitcointalk.org/index.php?topic=56170.0 https://bitcointalk.org/index.php?topic=67609.0 https://bitcointalk.org/index.php?topic=67609.0 http://bitcoin.stackexchange.com/questions/2119/is-there-any-way-the-bitcoin-network-could-resist-a-viral-tainted-coin-tagging-s http://bitcoin.stackexchange.com/questions/2119/is-there-any...
- drewcrawford 15y ago
  > But you can't get everyone to agree to do that. Bitcoin is essentially a network of mutual trust, right? It is possible to get enough machines on the network to vote to void the transaction. It is even possible to set up some kind of body or bodies that investigate thefts, and make recommendations about which transactions the community should void. Of course, now we're inching towards a central bank, and so whether such a step would be "in the spirit of Bitcoin" I don't know, but it's probably a requirement if Bitcoin is to be taken seriously as a safe medium of exchange for business purposes. Of course, perhaps it doesn't want to be used as such, which is fine. > sort of like having 100 $1 bills of which two were marked by police — what is the probability that you're a criminal? The convention in the real world is that you are deprived of the stolen property you've received even if you did not know that they were stolen. This may seem undesirable, but it does incentivize ordinary people to perform some basic checks that they are not purchasing stolen goods. Allowing innocent people to keep stolen goods may seem like a fair course of action, but it also can increase the market for stolen goods, and incentivize for thievery, ultimately leading to an escalating situation.
smithzvk 15y ago
Well, I think that there is something like the ink packet for bitcoins, or there could be. I may be wrong (and please correct me if I am mistaken), but it is my understanding that every Bitcoin transaction is public (just peruse the block chain), it's just that they are transfered between possibly unknown parties. You could track where those bitcoins went (the thief's account), and where that thief subsequently spent or laundered those bitcoins. You can trace them as far as you like though they would quickly get combined with bitcoins that came from legal means and then you can only give lower and upper bounds on how many bitcoins are illegal in each wallet. We could, as a society, decide that we will not accept bitcoins transfers from addresses that are reported to have taken any stolen bitcoins, whether directly implicated or implicated by violating the rule I just described. We could also decide that the only way to get your address back into good standing is to, for instance, transfer whatever coins that could possibly be ill-gotten into a bitcoin sink (an account that everyone agrees to never accept transfers from, basically dead bitcoins). You can even come up with more continuous proposals; not just illegal or legal, but rather you can have a 90% clean account, and it is clear how that translates to value of your bitcoins when dealing with people who won't accept illegal coins. This is in many ways like an ink-packet. That doesn't get the other person their bitcoins back, but it removes the financial incentive to steal. Of course this is probably ripe for abuse. It would definitely be a way to screw over whoever you were sending money too, but it wouldn't be a charge reversal. You lose the money but the other party gets no spendable money.
- epequeno 15y ago
  Addresses in the bitcoin system are designed to be disposable, you can generate as many as you want. Adding an address that you can prove was involved in theft to a blacklist is wasted effort. Edit: Also, the use of "anonymizers" in the bitcoin ecosystem is common. Silk Road has something they call tumbler which masks transactions in such a way that you can't really say for sure where the bitcoins are coming from.
  - smithzvk 15y ago
    If you look at the Anonymity page on this wiki, it basically states that being able to generate as many addresses as you want is not much protection. The coins still need to be transfered between your wallets, and that means people can track whether a wallet has received any funds from an address that has been reported as having stolen coins (after the theft was reported, of course) In fact, I think it is down right easy to do. https://en.bitcoin.it/wiki/Anonymity https://en.bitcoin.it/wiki/Anonymity I assume that "tumbler" is basically as good as any eWallet service with a bit of obfuscation on the transactions in and out. That is fine, if you trust someone enough to take you coins, mix them with a bunch on other peoples money, and then send them back to when you need them, you can remain pretty anonymous. This is because that person/organization can do virtual funds transfers off of the bitcoin block chain record. However, in the scenario where address are marked as dirty or clean, that eWallet supplier is going to find him/herself in the possession of many dirty bitcoins and will have to burn them. In the Silk Road example, if people use stolen bitcoins on that network, all bitcoins that get sent in are tainted by that (to some percentage) and the value of the entire working volume of Silk Road bitcoins in the "tumbler" laundering machine is lessened. This means that either Silk Road passes that loss of value on to the sellers, possibly pissing them off, or they throw those bitcoins away (or send them back) and tell the person paying with them to pay again from a clean address because that money was reported as stolen.

ajross 15y ago

The bitcoins are the data. If you steal their files, you can spend their money anonymously and there's nothing anyone can do about it. Restoring from a backup just gets them a bunch of worthless bitcoins that have already been spent. And the answer to the second question is "absolutely not". The lack of tracking is a primary requirement that was designed into the system from the start.

blario 15y ago
There is no lacking of tracking built into bitcoin. In fact it's exactly the opposite. Everything is tracked within bitcoin. The one exception is with stolen bitcoins, like what had happened. Those bitcoins show up as owned by the rightful owner... And when spent and tracked, would appear to have been spent by that person, instead of the thief.
- ajross 15y ago
  You're right. I was imprecise. The transactions themselves are trackable, so with backups you know to "who" your specific bitcoins were transfered. But the "who" is just a number, and anonymous. And you can create as many identities as you want. Essentially: bitcoins are anonymous because money laundering in the bitcoin world is perfect and free.
  - wmf 15y ago
    Eventually the money has to come out somewhere, though.

mey 15y ago

Bitcoin is designed to be a cash replacement using digital cryptography. As such, one of the design decisions was to make transactions non-reversible (the conditions where this would not be true aren't relevant). Basically once the transactions of originating account, destination account, and amount is entered into the distributed ledger/transaction log, it can't be removed, since the majority of systems believe it. Thus is the original account tries to use those same "coins" (really tokens) the network would reject it, as that account not having access to those coins.

wmf 15y ago

What if they just restore from yesterday's backup? If every Bitcoin user rolled back the block chain by a day then the theft essentially didn't happen. But you can't get everyone to agree to do that. Is there a bitcoin equivalent of the ink packets regular banks use to track stolen cash? All Bitcoin transactions are public, so it's possible to trace thefts. But when a transaction has both tainted and untainted inputs the output ends up partially tainted and you end up with a lot of innocent people holding BTC that's lightly tainted (sort of like having 100 $1 bills of which two were marked by police — what is the probability that you're a criminal?). http://anonymity-in-bitcoin.blogspot.com/2011/07/bitcoin-is-not-anonymous.html http://anonymity-in-bitcoin.blogspot.com/2011/07/bitcoin-is-... http://news.ycombinator.com/item?id=2800790 http://news.ycombinator.com/item?id=2800790 https://bitcointalk.org/index.php?topic=56170.0 https://bitcointalk.org/index.php?topic=56170.0 https://bitcointalk.org/index.php?topic=67609.0 https://bitcointalk.org/index.php?topic=67609.0 http://bitcoin.stackexchange.com/questions/2119/is-there-any-way-the-bitcoin-network-could-resist-a-viral-tainted-coin-tagging-s http://bitcoin.stackexchange.com/questions/2119/is-there-any...

drewcrawford 15y ago
> But you can't get everyone to agree to do that. Bitcoin is essentially a network of mutual trust, right? It is possible to get enough machines on the network to vote to void the transaction. It is even possible to set up some kind of body or bodies that investigate thefts, and make recommendations about which transactions the community should void. Of course, now we're inching towards a central bank, and so whether such a step would be "in the spirit of Bitcoin" I don't know, but it's probably a requirement if Bitcoin is to be taken seriously as a safe medium of exchange for business purposes. Of course, perhaps it doesn't want to be used as such, which is fine. > sort of like having 100 $1 bills of which two were marked by police — what is the probability that you're a criminal? The convention in the real world is that you are deprived of the stolen property you've received even if you did not know that they were stolen. This may seem undesirable, but it does incentivize ordinary people to perform some basic checks that they are not purchasing stolen goods. Allowing innocent people to keep stolen goods may seem like a fair course of action, but it also can increase the market for stolen goods, and incentivize for thievery, ultimately leading to an escalating situation.

smithzvk 15y ago

Well, I think that there is something like the ink packet for bitcoins, or there could be. I may be wrong (and please correct me if I am mistaken), but it is my understanding that every Bitcoin transaction is public (just peruse the block chain), it's just that they are transfered between possibly unknown parties. You could track where those bitcoins went (the thief's account), and where that thief subsequently spent or laundered those bitcoins. You can trace them as far as you like though they would quickly get combined with bitcoins that came from legal means and then you can only give lower and upper bounds on how many bitcoins are illegal in each wallet. We could, as a society, decide that we will not accept bitcoins transfers from addresses that are reported to have taken any stolen bitcoins, whether directly implicated or implicated by violating the rule I just described. We could also decide that the only way to get your address back into good standing is to, for instance, transfer whatever coins that could possibly be ill-gotten into a bitcoin sink (an account that everyone agrees to never accept transfers from, basically dead bitcoins). You can even come up with more continuous proposals; not just illegal or legal, but rather you can have a 90% clean account, and it is clear how that translates to value of your bitcoins when dealing with people who won't accept illegal coins. This is in many ways like an ink-packet. That doesn't get the other person their bitcoins back, but it removes the financial incentive to steal. Of course this is probably ripe for abuse. It would definitely be a way to screw over whoever you were sending money too, but it wouldn't be a charge reversal. You lose the money but the other party gets no spendable money.

epequeno 15y ago
Addresses in the bitcoin system are designed to be disposable, you can generate as many as you want. Adding an address that you can prove was involved in theft to a blacklist is wasted effort. Edit: Also, the use of "anonymizers" in the bitcoin ecosystem is common. Silk Road has something they call tumbler which masks transactions in such a way that you can't really say for sure where the bitcoins are coming from.
- smithzvk 15y ago
  If you look at the Anonymity page on this wiki, it basically states that being able to generate as many addresses as you want is not much protection. The coins still need to be transfered between your wallets, and that means people can track whether a wallet has received any funds from an address that has been reported as having stolen coins (after the theft was reported, of course) In fact, I think it is down right easy to do. https://en.bitcoin.it/wiki/Anonymity https://en.bitcoin.it/wiki/Anonymity I assume that "tumbler" is basically as good as any eWallet service with a bit of obfuscation on the transactions in and out. That is fine, if you trust someone enough to take you coins, mix them with a bunch on other peoples money, and then send them back to when you need them, you can remain pretty anonymous. This is because that person/organization can do virtual funds transfers off of the bitcoin block chain record. However, in the scenario where address are marked as dirty or clean, that eWallet supplier is going to find him/herself in the possession of many dirty bitcoins and will have to burn them. In the Silk Road example, if people use stolen bitcoins on that network, all bitcoins that get sent in are tainted by that (to some percentage) and the value of the entire working volume of Silk Road bitcoins in the "tumbler" laundering machine is lessened. This means that either Silk Road passes that loss of value on to the sellers, possibly pissing them off, or they throw those bitcoins away (or send them back) and tell the person paying with them to pay again from a clean address because that money was reported as stolen.