Finality does not exist in payments
bam.kalzumeus.com
bam.kalzumeus.com
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.
In my view, both matter when trying to understand a payment system.
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.
It can be, with a memorized seed phrase and some willpower. I'm still amazed that the technically inclined Bitfinex hackers managed to get their wallet seized.
We (the US govt) know you (the hackers) did it. Cough up the cash and go to prison for a long time or don't and go for much much longer.
Suddenly, the money is seized.
That said, there are arguments to be made about that money as a bargaining chip if you keep the wallets 'unseizable' (until you cough it up for an offer).
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.
That being said, I do think patio11 is technically correct, given his unconventionally strict definition of "finality".
Probability is at the core of Bitcoin's proof of work security mechanism. There is a non zero probability that I could rewrite the whole Bitcoin transaction history in the next 15 minutes, if my miner gets really, really, really lucky. The chances of that happening are of course abysmally small and not worth considering. For all practical purposes, Bitcoin transactions are final past a few confirmations.
I estimate the probability of a similar Bitcoin action to be small, but much larger than the "miner gets really, really, really lucky" scenario you propose. Do you disagree?
> I estimate the probability of a similar Bitcoin action to be small, but much larger than the "miner gets really, really, really lucky" scenario you propose. Do you disagree?
Of course, I agree. That being said, I'd still put the probability in the vanishingly small category, especially for any individual transaction that isn't an exploit, and not worth considering in the context of "finality", as the term is commonly used (and not as patio11 defines it).
The payment was still never actually reversed on Ethereum Classic. And that blockchain exists to this day. Sure, the amount of the not-actually-reversed transaction has lost value in $ at mark-to-market but it’s still the same amount of ether on the same blockchain as it’s always been.
In that sense a better term is that the payment was rejected by the community, or routed around, rather than reversed IMO.
Anyway, I just find this a really bad example in general because it’s 1 an exceptional case, most other hard forks haven’t been done just for transactions 2 it required almost the entire community to choose to follow the hard fork (which is the only thing that actually destroys value). Yes, it does show that you can do something like a payment reversal in crypto but it’s very hard and unlikely. In this case the exception proves the rule
In particular, Bitcoin mining is concentrated into a small number of pools, but the amount of actual power they hold is very questionable. Because nobody censors transactions, we can't know if miners would flee or not if they began to.
English banknotes are printed by De La Rue plc, but it's not like they have a stranglehold on the English economy. If they began to act up, their 'power' would dry up very quickly.
Also, even with 100% of miners cooperating, reversing a two week old transaction would still take two weeks. There are some technical issues with this, since new transaction would grind to a halt and it would generally be a mess.
Note how Ethereum wasn't miners collaborating (soft fork), it was a hard fork, which required no miner cooperation at all.
A hard fork of Bitcoin in this way is indeed possible, but would require the consent of a lot of entities. Ethereum is much more 'socially' centralized in terms of its governance process, and it was very obvious that if they didn't go along with it, then the big, centralized entity that held all the proceeds from the ICO would stop paying the developers, and the PR goons, and and and...
I'm not going to draw any conclusions about the future based on this, but we can observe that big players (Binance) have lost money, publicly considered 51% attacks, then backed down. We can also observe the fate of Marathon's OFAC pool - he didn't fly so good, who wants to try next?
> 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.
If the hacker had hidden their private keys in a secret location (or just memorized them), they could almost certainly have gotten away with it. The hackers were extremely neglectful. It's a testament to Bitcoin's security that it took so many years to be caught given this level of carelessness and the massive amount of money involved.
Some people in the Bitcoin community think the news is fake and intended to harm Bitcoin's reputation... We don't know what really happened behind the scenes. It's hard to believe that people can be so careless.
The article touches briefly on that. Some wire transfers can be reversed. It becomes more difficult when money starts moving around jurisdictions, but at least it's possible. Essentially no crypto transactions can be reversed.
Bitcoin transactions are hard to reverse (not strictly impossible, as shown by the recent example, and a few others of the same vein, but it requires to arrest the key owner and seize the key, which is obviously kind of hard) but practically all other cryptocurrencies are centralized enough to allow for transaction reversal (The ethereum hard fork after the DAO hack is the practical example of this). And I'm not even talking about weak chains for which an attacker can even reverse transaction against everybody else's will[1]…
[1]: https://www.coindesk.com/markets/2020/08/29/ethereum-classic...
> centralized enough to allow for transaction reversal
You can argue that the developers held outsized influence over the consensus mechanism early in Ethereum's lifecycle. You can also debate their recommendation & push to hard fork to a new ledger that undid the hack. But to argue that it is anywhere close to 'centralized' today is disingenuous at best.
It should be impossible for any one agent to change the record, but it is the nature of blockchains that consensus holds as "accepted fact". In the event a blockchain is ever relied upon for anything of social importance, the ability for consensus mechanisms to fork away from "systemic ruin" is a desirable trait.
I'm one of the few that argue the DAO Hack was a proof of concept for an ultimately 'required' capability for any critically important blockchain systems.
Ethereum devs have absolute power on ethereum. Things like EIP 1559, or Ethereum 2 illustrate this point really clearly: miners have zero power, neither do full nodes.
No matter what the algorithms (which can be patched anytime anyways) say, power is a social thing and in the case of Ethereum, the devs have literally complete power over it.
The storage is decentralized, the computation is decentralized, but power clearly isn't (and with PoS, it will become more centralized even on an algorithm point of view).
The foundational decentralization feature of a cryptocurrency is the fact that the blockchain is edited by a distributed network of competing people: yes I'm talking about the miners. If the miners have no power in your system, then their is no practical decentralization because mining is the only thing actually decentralized in a blockchain!
The migration to PoS isn’t some rug-pull on miners, they’ve known about it for years. If there was legitimate protest, they’d refuse to adopt new versions that incorporated the ETH kill switch. The reason they haven’t? They have no skin in the game - most are mercenaries for hire, operating through centralized pools, cashing out whatever they mine.
PoS is a superior system - more flexibility for decentralized participation (only benefit to pooling is convenience), and dramatically better for the environment at scale. Everyone who holds the asset (I.e. the people who should have the most say in platform operations) have invested in PoS, and want it. It’s widely supported.
Unwillingness to accept anything other than “bitcoin is the way” is just baseless faith in modern garb.
I've never said “bitcoin is the way”. Let me be clear, bitcoin is a giant CO2-emmiting turd invented by a libertarian who wanted to bring the gold standard back.
But, if you're doing PoS you're not in a permissionless blockchain anymore (since you need to buy staking power), that's it.
(And, BTW, if you don't need the sybil-resistance that permissionlessness implies, then you are in the realm of traditional distributed systems and using a blockchain is just path dependency at this point …)
So my point was that having to buy stake doesn't make Ethereum's proof-of-stake any more permissioned than proof-of-work, where you have to buy mining equipment.
For the DAO fork at least there was controversy. There was a little bit of controversy on 1559, but it was mostly from miners or people who had clear misunderstandings about how it worked. It ended up improving the user experience and, according to Coinbase, saving users a little money. Proof of stake has no noticeable pushback except in the mining subreddits, and has been part of the plan since 2014. If it had no support then the beacon chain wouldn't have 9 million ETH deposited.
For the DAO fork, people made the same claim, that the visible community actually misrepresented people's real feelings. But in the end, both sides got a chain of their own, and oddly enough, the side that had appeared more popular before the fork ended up having vastly more market value.
Why was this wire transaction not reversed? Apparently, they were about to get away with $1 billion USD but the hacker entered the global SWIFT code incorrectly by 1 character and so it was caught.
The fact that North Korea made off with $81 million USD, however, is rather unsettling, and even more so the fact that this was not reversed / caught.
Every authority along the way must be on board with the reversal. When the chain is broken, as when cash is laundered at a casino, somebody will be left holding the bag. You can't reverse the cash back out of thin air.
Had all the money been found still sitting pretty in an account, I assume things would have eventually been all settled.
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.
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.
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-cr...
This kind of argument shows up a lot, but is a classic example of "appeal to popularity". Whether bitcoin goes to $0 or $1,000,000 is mostly irrelevant when discussing technological and practical merits of bitcoin.
Where the price of bitcoin is relevant is when discussing it as a speculative investment. So what tends to happen is a conversation that was supposed to be about blockchain technology turns into one about blockchain speculative investing. This and appeals to greed/FOMO ("have fun staying poor") tend to drive me nuts about a lot of blockchain discussions.
> 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.
If a "no-coiner" has high ego investment in their position, what level of ego investment does someone holding cryptocurrency have? And what specifically does this article misunderstand about the fundamentals of bitcoin? Just stating that the article misunderstands something is not a very strong argument or rebuttal.
What I'm getting out of the article is that this is less relevant than people generally assume.
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-...
https://eur-lex.europa.eu/legal-content/EN/LSU/?uri=CELEX:31...
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.
https://www.snopes.com/fact-check/irs-taxpayers-stolen-items...
In what sense?
> The rightful owner cannot just steal it back.
The rightful owner doesn't get any special rights, so they can't trespass to get their property back. A policeman could get it back for them, though. If it's just lying there they can take it back themselves. I've heard stories where people find their stolen property on Craigslist, meet with the thief, and steal it back without using force. That's fine.
> Similarly if it wasn't yours, you wouldn't have to pay taxes on it
Ownership is a tricky concept. There are many rights and responsibilities associated with ownership. Owning a bike carries a different set of rights and responsibilities from owning a house. Paying taxes on something is an obligation typically associated with ownership, but since stealing something does not create many of the other legal rights associated with ownership I don't think it's sufficient to say that it demonstrates that it's "yours." Also, of course, no one actually pays the taxes.
What cop do you know would just steal property back for you? This a matter for courts.
> I've heard stories where people find their stolen property on Craigslist, meet with the thief, and steal it back without using force. That's fine.
What happens on Craigslist encounters is not exactly common law.
https://jgcrimlaw.com/blog/someone-stole-my-stuff-and-im-gon...
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...
If I leave a box with cash in your care and you steal it or are negligent, I can seek relief in the courts. If I win and you refuse to pay, the sheriff will seize assets and sell them to satisfy the order of the court.
Obviously, the answer is that cash is a good "first layer". The legal system is there to resolve disputes, not facilitate transactions.
Reversibility on a technical level and legal ownership are totally different things, it seems like many folks conflate them.
Disputes without transactions don’t mean much. The legal system (at least the civil portion of it) exists solely to facilitate transactions, it’s just that normally those transactions are formalised in contracts.
Providing an adjudication service who decisions can be enforced with state violence, makes it much easier for people to have confidence in the value of contracts, and thus perform more complex transactions. The civil courts provide exactly this service, for the pure purposes of making transactions between private individuals easier and more enforceable without individuals resorting to vigilante justice.
My point is that those two things are fundamentally different.
The reality is, unless you’re in a particular situation, like a Russia-based criminal who kicks the big up the chain, you’re not out of reach of the law.
The sovereign state is a concept. It's not even a real thing and it has no physical power.
> immune to the authority of the state
They definitively are, comparatively. If you are moving across borders, it is much safer to hold $10m in crypto than cash. Actually, you'll need to be legit, pay a bribe or use violence to move that much cash through borders. But anyone can do it with crypto as long as there are no other tips on him.
Well, one could argue that we, the people, want the sovereign state where there is some degree of social contract going on, to have that ultimate power.
Putting that power into a system that was designed by humans and almost by design can't be democratic and at best is meritocratic, is a very likely path to a Kafkaesque world.
Given that the relative advantage of cryptocurrencies is strongest for a variety of financial crime, I think the distinction matters even more. As the Bitfinex thieves are learning, cryptocurrency transactions are not as final as they would like.
Tracking down said thief and taking the bag of money back in this metaphor constitutes a new transaction. As is subpoenaing Dropbox and gaining access to the poorly encrypted list of private keys from these Bitfinex rapper/hackers.
Of course, this is all a bit arbitrary. So I don't think we'd have much to disagree if cryptocurrency proponents were open about that. But what we get is a lot of them talking about 100% irreversible transactions. That may be true in the technical jargon of a particular system, but is definitely not always true in the broader social context or in casual uses of the term.
P(seizure-of-assets) scales sharply up as one goes from none to some, and then sharply down as the number gets high.
This is utter hearsay, unreliable watercooler baseball, but it’s not one person who said that he was in Thailand chilling for most of the vest.
But I kind of have to cough up now: the rumor mill, and it was exactly that, has made credible claims that Socialcam was a dead end that got pimped to Autodesk as their path towards social media relevance, including some influential angel back-scatter, and then the principles promptly fucked off to Thailand and rested their vest until they got big jobs at YC on the back of building…Socialcam.
Twitch is a name everyone knows, AMZN got their money’s worth. The other highly YC-connected justin.tv stuff? Yeah, not a big splash.
The failed justin.tv-spin-off folks don’t care though, they never had any real competition because people who don’t have a locked-in outcome can’t afford to pursue impoverished, transient markets.
I wouldn’t shed too many tears though: no one from that crowd is doing badly. Bad companies failing and burning up the cap table is for the plebs.
I tend to get pretty cranky (as you can see) about the old-boys network that’s emerged around it, but that in no way diminishes the value to a founder of being in that network.
Maybe everybody knows it, but it certainly is worth reiterating. I find the notion of transaction finality as a spectrum very useful.
"Payments" perhaps means "Digital Payments"?
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.
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).
Store puts up a 'No returns' sign, you have finality.
For example if they knowingly sell you defective stuff or if medicine is tainted, etc., there are laws that override such a policy.
It doesn't rhyme.
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.
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.
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.
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.
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.
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.
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...
lo and behold
https://getproofed.com/writing-tips/idiom-tips-lo-and-behold...
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.
They are final.
https://bitcoin.stackexchange.com/questions/88289/what-is-tr...
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.
They can make you cough up an equivalent amount in fines, of course. But the original amount is gone.
The point the article was making is that transactions can and will be deemed illegitimate, both in the sense that mistakes are made, and in the sense that the legal framework will decide you have to reverse the payment. If you've buried cash and refuse to tell people where it is, you are in roughly the same place as refusing to reveal keys. You can be held accountable of course, in various ways.
I think the article was more making the point that any payment system that doesn't recognize this reality will have inherently limited uptake, which is probably true.
I was noting that there is nothing fundamentally different between say you accepting a payment in bitcoin and refusing to cough up the key when told to reverse it, or accepting a payment in cash and burying it then refusing to tell police where.
Fundamentally there are mechanisms to reverse this, or punish/constrain you for obstructing the process. Some payment systems have them built in at a very low level (CC chargebacks), some rely on professional standard (hold harmelss), etc. Some rely on court systems. That's a trade off of convenience vs. risk, but doesn't change the fundamental point that a payment system without a standard reversal mechanism is going to have limited use.
Agreed.
> That's a trade off of convenience vs. risk, but doesn't change the fundamentals.
There is. The ones that rely on court mechanisms aren't the payment mechanism being reversible, it's something else (the storage) that gives first.
It's true that if you keep it in your bank account, all transactions are reversible. But that's a statement about property rights, not about finality. If I have a solid means of "storing" my money, such as by burying it in my back yard, then the payment itself is irreversible. That's not true for cards, which are reversible even if your storage is 100% robust.
I'm not sure we agree on this being fundamental. At least you can define it as a categorical difference (sure) but not really a practical difference.
I think the articles points were twofold: 1) Property rights, or more generally the legal & regulatory systems, trump any rules imposed or agreed in your system of payments 2) Most payments systems feature reversal processes for necessary reasons (but if they don't, see (1) as fallback position)
Both of these seem important to understand if you want to understand how a payment system works or could work in the future, and also to understand your exposure/risk in using them.
People mostly understand the trade offs and limitations of cash; mostly probably don't understand them well for lots of payment systems.
1. Storage
2. Payment rail
If your storage is solid (e.g. keys in brain wallet, account in crooked bank, money in shoebox) and the payment rail is solid (e.g. gold, cryptocurrency, cash), you're good. (To clarify, "solid" here means "beyond the legal-regulatory system", which means the rules aren't trumped.) Otherwise, you aren't.
I say that Bitcoin has "finality," because it does the job of payment rail with 100% irreversibility.
Grant that Bitcoin is a mediocre storage (1). But the payment rail (2) truly is irreversible. The combined system of two disjoint parts, built out of bitcoin-as-storage and bitcoin-as-payment-rail, is not.
I think it is a mistake to believe this is a thing. You can be allowed to operate in gray areas for a bunch of reasons, or you can be small enough not to be too bothered about (e.g. shutting you down not deemed worth the effort); but this is a choice of those same systems, not in your control really.
Although to be fair, I guess this stuff really varies by jurisdiction. Otoh, where the gray areas get bigger, your chances of having that go against you are bigger also.
Whether such storage exists is a much better question. I think it depends on what you want to do with it. For example, if the Bitfinex guys were ideologically motivated, they could've spent all the money on, I don't know, political ads or whatever. More generally, I think you can certainly come up with storage that is outside the reach of a given threat actor in pursuit of a given goal.
I'm not saying bitcoin isn't a thing in the world; I was saying that I don't think that makes it "beyond the legal-regulatory system", or that that is really even a helpful/useful concept. I mean we can talk about various shadow economies, but they are just that - and not really in scope for OP article.
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.
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.
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.
The interesting thing in this whole conversation is assuming the person holding the key is the custodian of the funds, when it is more the key itself that is the custodian. The keys hold the funds, the person holding the keys can change but that is entirely outside the system but so is getting robbed on the side of the street of the cash in your pocket.
If you truly believe that, I don't think you understand how law enforcement works.
To my knowledge, this hasn't happened yet, but I strongly suspect that it's only a question of time. Embargoes/sanction lists are one of the most powerful mechanisms of law enforcement for governments – I doubt that they will continue to let cryptocurrencies undermine that for too long.
Definitely, but I don't think that mixers would be considered an acceptable "excuse" for dubious coin origin.
> The key holder has the ultimate power to simply throw away the key. There is no recourse for that.
True, but what is the utility of that?
I suppose the point is to not have something seized from you which you do not want taken.
Anyway, these questions are now outside of/unrelated to common sense understanding of what a "finalized" payment is.
> 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.
Just follow the link in the TFA if you want to verify that.
But to the entity who received the coins, it also doesn't matter where the coins went after someone took them by force. If you get paid for a day's work in cash and a robber steals it on your way home, you wouldn't say that your work payment transaction was reversed or that it hadn't been finalized up to the point of the robbery.
What if an employer paid you in coins, so you take your coins and go home, then tomorrow your employer decides to take back the coins they gave you since they were not happy with your work (or they're just jerks)? I think that would fit the layman understanding of "this was undone!" (i.e. the transaction wasn't final). If in this case, the underlying financial engines used two, none, or one transaction (as specifically defined by that engine), probably wouldn't matter to the one who no longer has their coins.
The government is certainly a different party that wasn't involved in the original transaction, right?
> What if an employer paid you in coins, so you take your coins and go home, then tomorrow your employer decides to take back the coins they gave you since they were not happy with your work (or they're just jerks)?
This can definitely happen, at least with checking accounts. It has happened to me once because an employer accidentally double-paid everyone, and they were able to withdraw one of the payments from our accounts. I'm not sure exactly how that works. It could just be that your employer essentially has full access to your checking account since you gave them your account and routing number. Incidentally, I was always curious what would have happened if I had moved everything out of my checking account before they make the correction. But regardless of how it is actually implemented in the banking system, it's pretty clear if your employer erroneously removed funds from your bank account, or if you cashed out the accidental second payment then quit your job, it would again just come down to the legal system.
So sure - it's technically reversible. But is this really a practical argument? It's like saying nobody is safe in public because you can be a victim of a terrorist attack any any moment. It's alarmist and practically wrong even if technically true.
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?
> 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-conspira...
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.
You could just as easily say that cash payments aren't final because you could lose your wallet after you put the cash in it, but using the example of Bitcoin and the federal government is going to get more clicks.
Wasn't the point that a certain amount of ambiguity around finality is the usual (and natural) state of payment systems?
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.