7 ms·

The coming political battle over Bitcoin

66 points by zonotope 13y ago

betterunix 13y ago
Like most of Bitcoin, the coming battle will be primarily about hype and speculation, with only a tiny minority of people actually fighting anything. The government is not terribly worried about alternative currencies, as long as the financial institutions that deal in those currencies follow the same laws as everyone else: https://en.wikipedia.org/wiki/List_of_community_currencies_in_the_United_States https://en.wikipedia.org/wiki/List_of_community_currencies_i...
- eridius 13y ago
  Arguably, the government should be concerned, because it's hard to tax someone when you can't track their finances.
  - gojomo 13y ago
    There are many ways Bitcoin is easier to track than cash.
    - sliverstorm 13y ago
      Although, I'm sure the government wouldn't mind if people went on believing that Bitcoin can't be tracked... :)
    - glomph 13y ago
      Everyone says this, and I have repeated the mantra, but I am curious how one would go about following a trail of bitcoin transactions. Lets say you intercept a drug deal, know the final bitcoin address that money goes into. So you have that info. You can also follow the trail back arbitrarily far getting address after address. How does this net you anyone more information? How would you 'convert back' into a human name or address?
      - stfu 13y ago
        Would be interested in that too. What if I just hold me bitcoin wallet locally and and create ids for "critical" transactions that I use only through public internet access points.
      - maxerickson 13y ago
        There are lots of systems with address-information associations. Collecting that information is going to yield lots of human names. Something like the Coinbase merchant pages contained a surprising amount of information, and they were intentionally published.
        glomph 13y ago
        Presumably Law Enforcement couldn't compel Coinbase to disclose all the names they had though? They would need some kind of probable cause?
      - gojomo 13y ago
        How? See my response to eridius in sibling comment.
    - tocomment 13y ago
      I've been wondering. Isn't bitcoin truly anonymous if people simply exchange private keys (wallets)? It would basically be just like cash then.
      - oafitupa 13y ago
        I never thought of that, brilliant.
        tocomment 13y ago
        sarcasm or no?
      - DennisP 13y ago
        It would be, since it's not on the blockchain. But the purpose of the blockchain is to prevent people from giving you some coins, then giving else the same coins. If they just hand over their wallet, they could hand over the same wallet to someone else later. The recipient could send the wallet's bitcoins to another address right away, but then the sender might as well have done that in the first place. Still, in the rare case where you need an anonymous transfer from someone you completely trust, this might be the way to go.
    - eridius 13y ago
      Different meaning to the word "track". Yes, it's far easier to trace a given bitcoin backwards through the various transactions, but tying any particular transaction to a particular person can be difficult or impossible, depending on how much care the person takes. As a trivial example, if I create a brand new bitcoin wallet, accept a transaction of 100btc into the wallet, and then send that 100btc on to someone else, there's nothing that ties the wallet to me. I just received and then spent $10k (at approximate current valuation last I checked), but the IRS has no way to a) count this as $10k income for me, and b) track the $10k I then spent.
      - gojomo 13y ago
        If authorities obtain the cooperation of either the sender-to-you, or the receiver-from-you, they can find out who they thought they were dealing with, and why. You should probably assume that all businesses/exchanges with fixed addresses and traditional bank accounts will cooperate with authorities. And, some fair proportion of others, as well, including even those involved in explicitly illegal activities (who may be informants/plants, from the beginning or once discovered). So if 'your' Bitcoin is received several hops from any of the known nodes/addresses, and after your spend goes several hops before arriving at a known node/address... you may be safe. That is, if you're small-scale, use Bitcoin only with others who avoid reporting requirements, and no big priority investigation peels back the links one by one using all the tools and pressure available to the state. And, if other security compromises and traffic analyses don't prematurely reveal your correspondent nodes. But ultimately, a financial-enforcement agency might be running their own operation much like blockchain.info... with 1000X the resources, and various extra private sources of information. Every error by any participant -- mixing different outputs, client bugs revealing identity correlations, announcing pubkey-to-identity associations, matching time-online with time-of-spends, providing historic data after being targeted by an audit or prosecution, etc. -- would constantly improve the map of balances-to-real-world-entities. And like playing a game of 'minesweeper', a few lucky hits by enforcement, even years down the road, might suddenly illuminate large portions of the network. The blockchain never forgets! And, a few policy changes could supercharge this map. Legislate that if you're an above-ground operation, you must register your public keys. Any balances received from unregistered/tainted addresses are subject to forfeiture (or a punitive excise tax), but balances received from registered addresses are OK. Bitcoin's public blockchain makes this possible, and it's not possible with cash. All the above-ground businesses and users then register their addresses, and stop accepting -- or quickly report under penalty of law -- received funds from unregistered addresses. The gaps in the enforcement map then shrink pretty fast. You might also then have, within one blockchain, both 'dark' and 'light' balances that usually don't mix and aren't 1-to-1 interchangeable. To spend your 'non-taxable' coin on things like food or rent, you'd have to swap it for registered coin, through some legitimate-looking (and thus likely tax-paying) transaction. That's just money laundering, and it's no easier and probably much harder than with real cash businesses. (Are you sure the person willing to give you 'light' balances in return for your 'dark' balances is not and will never be an informer?)
  - alan_cx 13y ago
    Who voted this down and why? From what I can see, its pretty much a statement of fact. A horrible fact, sure, but surely pretty much true. OK, given the numbers involved, its almost beneath worth bothering about, right now. But if it does grow, so will concern. Government should be concerned from its POV. "We", me included, might well think, "well, sod them, ha, ha, cant get our money", and all that. But "we" would, right? Government, no matter how shitty, still has to look out of government interests. That's it job. Well, one of them, anyway.
  - deleted 13y ago
    [deleted]
- tsotha 13y ago
  I think this is probably not true. The government (the US government, anyway) is printing enormous amounts of dollars because it's not collecting enough in taxes to pay for the services it provides. If everyone switched over to bitcoins that would no longer work.
  - betterunix 13y ago
    The government has been collecting taxes on cash transactions since long before Bitcoin was conceived. How is Bitcoin harder to tax than cash, when there is a public transaction record?
    - tsotha 13y ago
      The problem isn't that the government won't be able to collect taxes. The problem is it can't print bitcoins to cover the difference between what it collects in taxes and what it spends.
      - betterunix 13y ago
        As I said earlier, the government is fine with alternative currencies, despite the fact that it cannot print those currencies or manipulate their supply. At the end of the day, all that matters is that most American business is conducted with USD. It is partly because of the government's effectiveness at collecting taxes that businesses continue to use USD, even when alternatives are available. Even the majority of businesses that accept Bitcoin payments only do so via an exchange service/payment processor, because what they really want are payments in USD. Like I said, the government's real concern is that Bitcoin businesses follow the law and abide by the regulations that every other financial service in this country follows. Many of those regulations and laws were created to serve the interests of law enforcement, by targeting the weak point in any black market transaction: moving money out of the black market (money laundering). Bitcoin is not unique in this regard: exchanges, like MtGox, remain weakpoints in the Bitcoin economy. Now, I bring this up in every Bitcoin conversation, but let's just pretend that there was some kind of independent Bitcoin economy that did not require exchanges to survive. This would be superficially similar to the economic system in many developing nations, where people keep two sets of books: legitimate payments (on the record), and "black" money (off the record). With Bitcoin, however, it would still be possible for the government enforce regulations even on this hypothetical underground economy. The reason lies in the poor security provided by the Bitcoin protocol: anyone who computes hashes faster than the rest of the network combined can deny confirmations on transactions, and can do so selectively (a "51% attack" as the Bitcoin community likes to refer to it). The government might just assemble their own hardware for doing this, or go after miners operating in the USA. Thus miners are a second exploitable weakpoint in Bitcoin. So really, the government has nothing to fear from Bitcoin. They know this, and anyone who thinks otherwise is somewhere on the spectrum of "delusional."
confluence 13y ago
> History doesn't repeat, but it does rhyme. - Mark Twain If your currency isn't a liquid consumable good (like say tide detergent - look it up) or isn't backed by a nation state, it will get crushed as soon as it becomes popular enough. Do you honestly think governments around the world are just going to stand around while people start ditching their currency systems? No, they'll shut you down through violent, economic or legal means, and one way or another every alternative fiat currency goes down. Yes, I went there. Bitcoin is a fiat currency, it is something without any intrinsic value (unlike say copper), and is only valuable so long as the people controlling the computation (computational fiat) say it is, and others demand it. Some will claim that Bitcoin is decentralized. I'll counter claim that it appears to be in theory, but in reality it really isn't. If I were to shut down every bitcoin exchange (either through extreme legal, violent or economic means), I'd easily kill bitcoin overnight, mostly through destroying trust and inciting fear in adopters than from actually stopping exchange. And if you don't believe governments are capable of this, you seriously have to read some more history. Governments are extremely dangerous, especially when it comes to economic control of scarce resources. Do not underestimate them. That's not to say that governments are inherently bad, but merely that they act in their own interests, and that if you are on the wrong side of their interests, the magnitude of their power, and the size of the prizes that are at stake, will probably end up with you being dead (most revolutions fail). At the end of the day the guy with the nuke makes the rules. Let's just hope he isn't too psychopathic.
- wslh 13y ago
  I have an argument against the idea that a government (US) will shut it down. The Bitcoin market can reveal/signal information that is not available or it's difficult to get from other sources. Information that can be used in a positive way, like using web searches for economic predictions and alerts.
- nwzpaperman 13y ago
  Perhaps it's time to revisit what the definition of fiat is and how that contrasts with a cryptocurrency like bitcoin. Definition of FIAT http://www.merriam-webster.com/dictionary/fiat http://www.merriam-webster.com/dictionary/fiat 1: a command or act of will that creates something without or as if without further effort 2: an authoritative determination : dictate <a fiat of conscience> 3: an authoritative or arbitrary order : decree <government by fiat>
plusbryan 13y ago
> Julian Assange of Wikileaks, which might have benefited from dealing in Bitcoins. Of all the relevant photos they could have headlined this article with, they choose this?
- grimtrigger 13y ago
  I think he looks handsome
- alan_cx 13y ago
  Yeah, I thought it was a bit of a weak link. I suppose they had to put a pretty picture of something up, and there aren't any other faces known related to BC which even most geeks would recognise, let alone the average reader. Perhaps it could be said that Assange represents the struggle between freedom and government. Freedom of information, freedom of money, and government crack down type stuff. Kinda works, no?
redthrowaway 13y ago
Is the author, Timothy B. Lee (email address leet@wp.com), that TBL or is it an odd coincidence?

66 points by zonotope 13y ago

Like most of Bitcoin, the coming battle will be primarily about hype and speculation, with only a tiny minority of people actually fighting anything. The government is not terribly worried about alternative currencies, as long as the financial institutions that deal in those currencies follow the same laws as everyone else: https://en.wikipedia.org/wiki/List_of_community_currencies_in_the_United_States https://en.wikipedia.org/wiki/List_of_community_currencies_i...

eridius 13y ago
Arguably, the government should be concerned, because it's hard to tax someone when you can't track their finances.
- gojomo 13y ago
  There are many ways Bitcoin is easier to track than cash.
  - sliverstorm 13y ago
    Although, I'm sure the government wouldn't mind if people went on believing that Bitcoin can't be tracked... :)
  - glomph 13y ago
    Everyone says this, and I have repeated the mantra, but I am curious how one would go about following a trail of bitcoin transactions. Lets say you intercept a drug deal, know the final bitcoin address that money goes into. So you have that info. You can also follow the trail back arbitrarily far getting address after address. How does this net you anyone more information? How would you 'convert back' into a human name or address?
    - stfu 13y ago
      Would be interested in that too. What if I just hold me bitcoin wallet locally and and create ids for "critical" transactions that I use only through public internet access points.
    - maxerickson 13y ago
      There are lots of systems with address-information associations. Collecting that information is going to yield lots of human names. Something like the Coinbase merchant pages contained a surprising amount of information, and they were intentionally published.
      - glomph 13y ago
        Presumably Law Enforcement couldn't compel Coinbase to disclose all the names they had though? They would need some kind of probable cause?
    - gojomo 13y ago
      How? See my response to eridius in sibling comment.
  - tocomment 13y ago
    I've been wondering. Isn't bitcoin truly anonymous if people simply exchange private keys (wallets)? It would basically be just like cash then.
    - oafitupa 13y ago
      I never thought of that, brilliant.
      - tocomment 13y ago
        sarcasm or no?
    - DennisP 13y ago
      It would be, since it's not on the blockchain. But the purpose of the blockchain is to prevent people from giving you some coins, then giving else the same coins. If they just hand over their wallet, they could hand over the same wallet to someone else later. The recipient could send the wallet's bitcoins to another address right away, but then the sender might as well have done that in the first place. Still, in the rare case where you need an anonymous transfer from someone you completely trust, this might be the way to go.
  - eridius 13y ago
    Different meaning to the word "track". Yes, it's far easier to trace a given bitcoin backwards through the various transactions, but tying any particular transaction to a particular person can be difficult or impossible, depending on how much care the person takes. As a trivial example, if I create a brand new bitcoin wallet, accept a transaction of 100btc into the wallet, and then send that 100btc on to someone else, there's nothing that ties the wallet to me. I just received and then spent $10k (at approximate current valuation last I checked), but the IRS has no way to a) count this as $10k income for me, and b) track the $10k I then spent.
    - gojomo 13y ago
      If authorities obtain the cooperation of either the sender-to-you, or the receiver-from-you, they can find out who they thought they were dealing with, and why. You should probably assume that all businesses/exchanges with fixed addresses and traditional bank accounts will cooperate with authorities. And, some fair proportion of others, as well, including even those involved in explicitly illegal activities (who may be informants/plants, from the beginning or once discovered). So if 'your' Bitcoin is received several hops from any of the known nodes/addresses, and after your spend goes several hops before arriving at a known node/address... you may be safe. That is, if you're small-scale, use Bitcoin only with others who avoid reporting requirements, and no big priority investigation peels back the links one by one using all the tools and pressure available to the state. And, if other security compromises and traffic analyses don't prematurely reveal your correspondent nodes. But ultimately, a financial-enforcement agency might be running their own operation much like blockchain.info... with 1000X the resources, and various extra private sources of information. Every error by any participant -- mixing different outputs, client bugs revealing identity correlations, announcing pubkey-to-identity associations, matching time-online with time-of-spends, providing historic data after being targeted by an audit or prosecution, etc. -- would constantly improve the map of balances-to-real-world-entities. And like playing a game of 'minesweeper', a few lucky hits by enforcement, even years down the road, might suddenly illuminate large portions of the network. The blockchain never forgets! And, a few policy changes could supercharge this map. Legislate that if you're an above-ground operation, you must register your public keys. Any balances received from unregistered/tainted addresses are subject to forfeiture (or a punitive excise tax), but balances received from registered addresses are OK. Bitcoin's public blockchain makes this possible, and it's not possible with cash. All the above-ground businesses and users then register their addresses, and stop accepting -- or quickly report under penalty of law -- received funds from unregistered addresses. The gaps in the enforcement map then shrink pretty fast. You might also then have, within one blockchain, both 'dark' and 'light' balances that usually don't mix and aren't 1-to-1 interchangeable. To spend your 'non-taxable' coin on things like food or rent, you'd have to swap it for registered coin, through some legitimate-looking (and thus likely tax-paying) transaction. That's just money laundering, and it's no easier and probably much harder than with real cash businesses. (Are you sure the person willing to give you 'light' balances in return for your 'dark' balances is not and will never be an informer?)
- alan_cx 13y ago
  Who voted this down and why? From what I can see, its pretty much a statement of fact. A horrible fact, sure, but surely pretty much true. OK, given the numbers involved, its almost beneath worth bothering about, right now. But if it does grow, so will concern. Government should be concerned from its POV. "We", me included, might well think, "well, sod them, ha, ha, cant get our money", and all that. But "we" would, right? Government, no matter how shitty, still has to look out of government interests. That's it job. Well, one of them, anyway.
- deleted 13y ago
  [deleted]
tsotha 13y ago
I think this is probably not true. The government (the US government, anyway) is printing enormous amounts of dollars because it's not collecting enough in taxes to pay for the services it provides. If everyone switched over to bitcoins that would no longer work.
- betterunix 13y ago
  The government has been collecting taxes on cash transactions since long before Bitcoin was conceived. How is Bitcoin harder to tax than cash, when there is a public transaction record?
  - tsotha 13y ago
    The problem isn't that the government won't be able to collect taxes. The problem is it can't print bitcoins to cover the difference between what it collects in taxes and what it spends.
    - betterunix 13y ago
      As I said earlier, the government is fine with alternative currencies, despite the fact that it cannot print those currencies or manipulate their supply. At the end of the day, all that matters is that most American business is conducted with USD. It is partly because of the government's effectiveness at collecting taxes that businesses continue to use USD, even when alternatives are available. Even the majority of businesses that accept Bitcoin payments only do so via an exchange service/payment processor, because what they really want are payments in USD. Like I said, the government's real concern is that Bitcoin businesses follow the law and abide by the regulations that every other financial service in this country follows. Many of those regulations and laws were created to serve the interests of law enforcement, by targeting the weak point in any black market transaction: moving money out of the black market (money laundering). Bitcoin is not unique in this regard: exchanges, like MtGox, remain weakpoints in the Bitcoin economy. Now, I bring this up in every Bitcoin conversation, but let's just pretend that there was some kind of independent Bitcoin economy that did not require exchanges to survive. This would be superficially similar to the economic system in many developing nations, where people keep two sets of books: legitimate payments (on the record), and "black" money (off the record). With Bitcoin, however, it would still be possible for the government enforce regulations even on this hypothetical underground economy. The reason lies in the poor security provided by the Bitcoin protocol: anyone who computes hashes faster than the rest of the network combined can deny confirmations on transactions, and can do so selectively (a "51% attack" as the Bitcoin community likes to refer to it). The government might just assemble their own hardware for doing this, or go after miners operating in the USA. Thus miners are a second exploitable weakpoint in Bitcoin. So really, the government has nothing to fear from Bitcoin. They know this, and anyone who thinks otherwise is somewhere on the spectrum of "delusional."

confluence 13y ago

> History doesn't repeat, but it does rhyme. - Mark Twain If your currency isn't a liquid consumable good (like say tide detergent - look it up) or isn't backed by a nation state, it will get crushed as soon as it becomes popular enough. Do you honestly think governments around the world are just going to stand around while people start ditching their currency systems? No, they'll shut you down through violent, economic or legal means, and one way or another every alternative fiat currency goes down. Yes, I went there. Bitcoin is a fiat currency, it is something without any intrinsic value (unlike say copper), and is only valuable so long as the people controlling the computation (computational fiat) say it is, and others demand it. Some will claim that Bitcoin is decentralized. I'll counter claim that it appears to be in theory, but in reality it really isn't. If I were to shut down every bitcoin exchange (either through extreme legal, violent or economic means), I'd easily kill bitcoin overnight, mostly through destroying trust and inciting fear in adopters than from actually stopping exchange. And if you don't believe governments are capable of this, you seriously have to read some more history. Governments are extremely dangerous, especially when it comes to economic control of scarce resources. Do not underestimate them. That's not to say that governments are inherently bad, but merely that they act in their own interests, and that if you are on the wrong side of their interests, the magnitude of their power, and the size of the prizes that are at stake, will probably end up with you being dead (most revolutions fail). At the end of the day the guy with the nuke makes the rules. Let's just hope he isn't too psychopathic.

wslh 13y ago
I have an argument against the idea that a government (US) will shut it down. The Bitcoin market can reveal/signal information that is not available or it's difficult to get from other sources. Information that can be used in a positive way, like using web searches for economic predictions and alerts.
nwzpaperman 13y ago
Perhaps it's time to revisit what the definition of fiat is and how that contrasts with a cryptocurrency like bitcoin. Definition of FIAT http://www.merriam-webster.com/dictionary/fiat http://www.merriam-webster.com/dictionary/fiat 1: a command or act of will that creates something without or as if without further effort 2: an authoritative determination : dictate <a fiat of conscience> 3: an authoritative or arbitrary order : decree <government by fiat>

plusbryan 13y ago

> Julian Assange of Wikileaks, which might have benefited from dealing in Bitcoins. Of all the relevant photos they could have headlined this article with, they choose this?

grimtrigger 13y ago
I think he looks handsome
alan_cx 13y ago
Yeah, I thought it was a bit of a weak link. I suppose they had to put a pretty picture of something up, and there aren't any other faces known related to BC which even most geeks would recognise, let alone the average reader. Perhaps it could be said that Assange represents the struggle between freedom and government. Freedom of information, freedom of money, and government crack down type stuff. Kinda works, no?

redthrowaway 13y ago

Is the author, Timothy B. Lee (email address leet@wp.com), that TBL or is it an odd coincidence?