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What if there was a way to tag bitcoins as stolen and declare them null and void? Would this not disincentivize thieves? Could we prevent abuse of such a system

by jrlocke 13y ago

What if there was a way to tag bitcoins as stolen and declare them null and void? Would this not disincentivize thieves? Could we prevent abuse of such a system?

tinco 13y ago
Would it disincentivize exchange developers to have sane security architectures? Who would declare them null and void? What's to stop any movement from declaring non-stolen bitcoin as null and void?
Mchl 13y ago
Question 1: Who would have the power to do that?
- orthecreedence 13y ago
  The US government, obviously.
iancarroll 13y ago
That would be centralizing the system, no?
annon 13y ago
Since there is a fixed number of bitcoins, there would still be incentive by causing faster deflation by removing coins from the pool.
r0muald 13y ago
I think that would require an authority deciding whether bitcoins were truly stolen. Otherwise, couldn't anyone could just claim a transaction was a theft?
DomBlack 13y ago
The problem with the tagging approach, is how would you verify the tag was genuine? You would have to add some sort of central authority which every peer could implicitly trust and that would undermine the whole concept of bitcoin...
atmosx 13y ago
It's a very interesting development as it shows that stolen bitcoins can be tracked indefinitely unlike FIAT. Now, what you propose though, is against the freedom bitcoins is assumed to stand for (on the ethics side). On the technical side that's very possible, as of today, if everyone plays along and I mean literally everyone, especially mixers. How could one track down bitcoins flushed into public mixers? I guess they could do this as well, if the BTC were tagged and thus refused by the mixers or even worst hold captives and resend them to original issuer. However, you only need 1 TOR hosted mixer to lose track of the wallets. On the other side imagine the practical chaos: I make a huge transaction of non-tangible goods in a situation where you can't prove that the service/product was delivered. Then I just tag these bitcoin that once belonged to my wallet as stolen if the other party doesn't give them back :-) you see where this is going right? :-)
- gutnor 13y ago
  > unlike FIAT. Actually, unlike any commodity or any currency with a physical representation. What makes other currency not traceable is the notes and coins, not the fact that they are fiat or not. side note: has "fiat" now become synonymous with non-crypto currency the same way hacker has become a swear word ?
  - baddox 13y ago
    He doesn't say that fiat is the only untraceable form of currency.
  - Klinky 13y ago
    Yes fiat has become a word of derision amongst the cryptocoin community, completely ignoring the fact that cryptocoins are essentially a form of fiat currency. Many crypto fans sidestep the fact that cryptos also don't have intrinsic value, and the networks aren't as a decentralized as one would think(handfuls of devs, early adopters, and pool and exchange operators hold a large sway over the networks and future of the coins).
  - atmosx 13y ago
    I can't speak for others, but I have nothing against FIAT :-)
deleted 13y ago
[deleted]
cbhl 13y ago
In theory, this is already possible. Anyone can patch the client to reject transactions containing such coins; the key is getting enough adoption for it to be meaningful. (I imagine starting by forking mining-specific applications like cgminer would be more effective than forking the client apps, since you really want to get 51% of the network to reject these transactions for it to mean anything.)
- stormbrew 13y ago
  cgminer never sees anything but the block header, it makes no decisions at all about which transactions to include in a block. The client is still the thing that does that.
Lerc 13y ago
The term used for this is coloured coins. It's possible to do, and there are forms of coloured coins in use. The question is not of how to do it, but whether it is desirable to have coloured coins. It's like adding a new rule to how a piece moves in chess. You could easily imagine some of the advantages caused by a change, but not all of the consequences.
- waterlesscloud 13y ago
  That's not what colored coins are. Colored coins are coins which have been used to mark ownership of another asset, like say a share of stock.
  - TophWells 13y ago
    Whether or not it's the same thing, it uses the same mechanics. You can link the output of one transaction to the input of the next, and construct a chain of transactions that says "This 0.125 BTC transaction uses bitcoins that were originally stolen from MtGox / bitcoins that were originally in the pile designated as marking ownership of my shares of stock". The question is whether that's a meaningful thing to measure. If you have bitcoins that are more valuable than normal, because they're shares of stock, then you'll make sure they're not mixed with "normal" coins. That's the idea of the Coloured Coins project. But if you have bitcoins that are less valuable than normal, because they're stolen goods, then you'll try hard to disguise that fact. You'll immediately spend them on goods or currency, or deposit them into a Coinbase account and then withdraw them later (so you get different coins back), or just throw them into a mixer with the other coins that need to be laundered. The person who ends up holding the tainted coins could be perfectly honest, and have acquired them from a perfectly honest source, who in turn acquired them from a perfectly honest source. Is it fair to tell them that their money is suddenly worthless, when they had no way of knowing anything was wrong?
  - Pacabel 13y ago
    What prevents a particular mark from being interpreted as some measure of validity, though? If such marking can represent ownership of another asset, could it not represent some other concept, too?
fragsworth 13y ago
This is a really contentious issue. Depending on how late the coins are marked as stolen, some number of legitimate transactions may have been made with them. What burden does this place on users to be certain that they're receiving "legitimate" coins?
thefreeman 13y ago
there is no such thing as an individual "bitcoin". It's just a numerical balance associated with a wallet. There is no way to mark a certain subset of bitcoins as invalid. At best you could flag wallets, and any wallets who've made transactions with those wallets, etc., etc. which is basically what the people on reddit are doing to "trace" the coins. But, as many have mentioned before, it is not a very accurate way to trace the transactions especially if a service like a tumbler is used.
- TophWells 13y ago
  Correct.
- wmf 13y ago
  To understand tainting you really need to work on the level of outputs, not wallets.
saalweachter 13y ago
You could set up an independent organization to track and identify stolen coins, and then convince merchants and exchanges to voluntarily refuse transactions involving them. If a few large entities refused to do business with addresses linked to stolen coins -- and the tainted addresses were fairly few in number -- then a lot of actors would be forced to follow suit to maintain their relationships with the initial core group of boycotters. If you want the BTC network itself to reject stolen bitcoins, there's no need to stop there: if you had community agreement, you could just as easily reverse thieving transactions and make the victims whole.
joeblau 13y ago
> What if there was a way to tag bitcoins as stolen and declare them null and void? When you say that sentence, replace the word bitcoins with gold. I say this because in essence, bitcoins are a finite resource that have perceived value. They also are harder to obtain the more people mine them. Now think about what would happen if someone stole gold and an authority (which doesn't exist) declared the stolen gold null and void. Someone, somewhere with lower ethics would be very happy to take the "null and void" gold because the fact that it's stolen has absolutely impact on it's value.
- gus_massa 13y ago
  Gold is much easier to melt and cast in new “clean” ingots. It’s not possible to trace it, so nobody could declare some of it void. But each Bitcoin transaction is public, so it’s easy to see the origin of each Bitcoin. But I think this idea has many technical and psychological problems . You essentially need to fork the Blockchain and convince the “51%” to use the new fork where these Bitcoins are illegal. Doge recently changed some details of the mining procedure using a hard fork, but they have a strong central organization and they pretend that Doge is not a serious coin. An equivalent change in Bitcoin would be much more difficult.
  - sentenza 13y ago
    Is it really not possible to trace gold? I was under the impression that for much of the gold out there you could use the "footprint" of contaminations in the gold to infer the age (since mining) and procedence to a certain degree. Of course, if you melt it in a top-notch facility, they'd probably be able to heat out the contaminants (or remove them chemically?), but people trading in stolen or otherwise "hot" gold probably don't have access to such facilities.
    - gus_massa 13y ago
      I guess that removing the contaminant traces is very difficult or impossible (unless you have a very hi-tech facility), adding a few contaminants looks easier. Anyway, mixing gold from different source should give a new contaminant composition that makes it very difficult to trace.
cLeEOGPw 13y ago
You can modify clients to reject coins from the given address. If more than 50% of the network has modified clients, it will be very hard to spend the coins for thief.
runeks 13y ago
> What if there was a way to tag bitcoins as stolen and declare them null and void? Would this not disincentivize thieves? It would both disincentivize thieves and honest users. It was decided in a legal case over 300 years ago in Scotland that it would ruin the point of money if stolen money were - like all other goods - the property of their original owner: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2260952 http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2260952 I think it makes sense to apply the same principle to bitcoins.

by jrlocke 13y ago

What if there was a way to tag bitcoins as stolen and declare them null and void? Would this not disincentivize thieves? Could we prevent abuse of such a system?

tinco 13y ago

Would it disincentivize exchange developers to have sane security architectures? Who would declare them null and void? What's to stop any movement from declaring non-stolen bitcoin as null and void?

Mchl 13y ago

Question 1: Who would have the power to do that?

orthecreedence 13y ago
The US government, obviously.

iancarroll 13y ago

That would be centralizing the system, no?

annon 13y ago

Since there is a fixed number of bitcoins, there would still be incentive by causing faster deflation by removing coins from the pool.

r0muald 13y ago

I think that would require an authority deciding whether bitcoins were truly stolen. Otherwise, couldn't anyone could just claim a transaction was a theft?

DomBlack 13y ago

The problem with the tagging approach, is how would you verify the tag was genuine? You would have to add some sort of central authority which every peer could implicitly trust and that would undermine the whole concept of bitcoin...

atmosx 13y ago

It's a very interesting development as it shows that stolen bitcoins can be tracked indefinitely unlike FIAT. Now, what you propose though, is against the freedom bitcoins is assumed to stand for (on the ethics side). On the technical side that's very possible, as of today, if everyone plays along and I mean literally everyone, especially mixers. How could one track down bitcoins flushed into public mixers? I guess they could do this as well, if the BTC were tagged and thus refused by the mixers or even worst hold captives and resend them to original issuer. However, you only need 1 TOR hosted mixer to lose track of the wallets. On the other side imagine the practical chaos: I make a huge transaction of non-tangible goods in a situation where you can't prove that the service/product was delivered. Then I just tag these bitcoin that once belonged to my wallet as stolen if the other party doesn't give them back :-) you see where this is going right? :-)

gutnor 13y ago
> unlike FIAT. Actually, unlike any commodity or any currency with a physical representation. What makes other currency not traceable is the notes and coins, not the fact that they are fiat or not. side note: has "fiat" now become synonymous with non-crypto currency the same way hacker has become a swear word ?
- baddox 13y ago
  He doesn't say that fiat is the only untraceable form of currency.
- Klinky 13y ago
  Yes fiat has become a word of derision amongst the cryptocoin community, completely ignoring the fact that cryptocoins are essentially a form of fiat currency. Many crypto fans sidestep the fact that cryptos also don't have intrinsic value, and the networks aren't as a decentralized as one would think(handfuls of devs, early adopters, and pool and exchange operators hold a large sway over the networks and future of the coins).
- atmosx 13y ago
  I can't speak for others, but I have nothing against FIAT :-)

deleted 13y ago

[deleted]

cbhl 13y ago

In theory, this is already possible. Anyone can patch the client to reject transactions containing such coins; the key is getting enough adoption for it to be meaningful. (I imagine starting by forking mining-specific applications like cgminer would be more effective than forking the client apps, since you really want to get 51% of the network to reject these transactions for it to mean anything.)

stormbrew 13y ago
cgminer never sees anything but the block header, it makes no decisions at all about which transactions to include in a block. The client is still the thing that does that.

Lerc 13y ago

The term used for this is coloured coins. It's possible to do, and there are forms of coloured coins in use. The question is not of how to do it, but whether it is desirable to have coloured coins. It's like adding a new rule to how a piece moves in chess. You could easily imagine some of the advantages caused by a change, but not all of the consequences.

waterlesscloud 13y ago
That's not what colored coins are. Colored coins are coins which have been used to mark ownership of another asset, like say a share of stock.
- TophWells 13y ago
  Whether or not it's the same thing, it uses the same mechanics. You can link the output of one transaction to the input of the next, and construct a chain of transactions that says "This 0.125 BTC transaction uses bitcoins that were originally stolen from MtGox / bitcoins that were originally in the pile designated as marking ownership of my shares of stock". The question is whether that's a meaningful thing to measure. If you have bitcoins that are more valuable than normal, because they're shares of stock, then you'll make sure they're not mixed with "normal" coins. That's the idea of the Coloured Coins project. But if you have bitcoins that are less valuable than normal, because they're stolen goods, then you'll try hard to disguise that fact. You'll immediately spend them on goods or currency, or deposit them into a Coinbase account and then withdraw them later (so you get different coins back), or just throw them into a mixer with the other coins that need to be laundered. The person who ends up holding the tainted coins could be perfectly honest, and have acquired them from a perfectly honest source, who in turn acquired them from a perfectly honest source. Is it fair to tell them that their money is suddenly worthless, when they had no way of knowing anything was wrong?
- Pacabel 13y ago
  What prevents a particular mark from being interpreted as some measure of validity, though? If such marking can represent ownership of another asset, could it not represent some other concept, too?

fragsworth 13y ago

This is a really contentious issue. Depending on how late the coins are marked as stolen, some number of legitimate transactions may have been made with them. What burden does this place on users to be certain that they're receiving "legitimate" coins?

thefreeman 13y ago

there is no such thing as an individual "bitcoin". It's just a numerical balance associated with a wallet. There is no way to mark a certain subset of bitcoins as invalid. At best you could flag wallets, and any wallets who've made transactions with those wallets, etc., etc. which is basically what the people on reddit are doing to "trace" the coins. But, as many have mentioned before, it is not a very accurate way to trace the transactions especially if a service like a tumbler is used.

TophWells 13y ago
Correct.
wmf 13y ago
To understand tainting you really need to work on the level of outputs, not wallets.

saalweachter 13y ago

You could set up an independent organization to track and identify stolen coins, and then convince merchants and exchanges to voluntarily refuse transactions involving them. If a few large entities refused to do business with addresses linked to stolen coins -- and the tainted addresses were fairly few in number -- then a lot of actors would be forced to follow suit to maintain their relationships with the initial core group of boycotters. If you want the BTC network itself to reject stolen bitcoins, there's no need to stop there: if you had community agreement, you could just as easily reverse thieving transactions and make the victims whole.

joeblau 13y ago

> What if there was a way to tag bitcoins as stolen and declare them null and void? When you say that sentence, replace the word bitcoins with gold. I say this because in essence, bitcoins are a finite resource that have perceived value. They also are harder to obtain the more people mine them. Now think about what would happen if someone stole gold and an authority (which doesn't exist) declared the stolen gold null and void. Someone, somewhere with lower ethics would be very happy to take the "null and void" gold because the fact that it's stolen has absolutely impact on it's value.

gus_massa 13y ago
Gold is much easier to melt and cast in new “clean” ingots. It’s not possible to trace it, so nobody could declare some of it void. But each Bitcoin transaction is public, so it’s easy to see the origin of each Bitcoin. But I think this idea has many technical and psychological problems . You essentially need to fork the Blockchain and convince the “51%” to use the new fork where these Bitcoins are illegal. Doge recently changed some details of the mining procedure using a hard fork, but they have a strong central organization and they pretend that Doge is not a serious coin. An equivalent change in Bitcoin would be much more difficult.
- sentenza 13y ago
  Is it really not possible to trace gold? I was under the impression that for much of the gold out there you could use the "footprint" of contaminations in the gold to infer the age (since mining) and procedence to a certain degree. Of course, if you melt it in a top-notch facility, they'd probably be able to heat out the contaminants (or remove them chemically?), but people trading in stolen or otherwise "hot" gold probably don't have access to such facilities.
  - gus_massa 13y ago
    I guess that removing the contaminant traces is very difficult or impossible (unless you have a very hi-tech facility), adding a few contaminants looks easier. Anyway, mixing gold from different source should give a new contaminant composition that makes it very difficult to trace.

cLeEOGPw 13y ago

You can modify clients to reject coins from the given address. If more than 50% of the network has modified clients, it will be very hard to spend the coins for thief.

runeks 13y ago

> What if there was a way to tag bitcoins as stolen and declare them null and void? Would this not disincentivize thieves? It would both disincentivize thieves and honest users. It was decided in a legal case over 300 years ago in Scotland that it would ruin the point of money if stolen money were - like all other goods - the property of their original owner: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2260952 http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2260952 I think it makes sense to apply the same principle to bitcoins.