https://en.wikipedia.org/wiki/List_of_community_currencies_i...
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?
Something like the Coinbase merchant pages contained a surprising amount of information, and they were intentionally published.
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?)
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.
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.
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."
That's not true. If you went to Vegas thirty years ago you would have been able to use casino chips anywhere in the city. You could use them to buy a burger or get your hair cut. That's no longer the case, because the Treasury Dept decided casino chips were being used as an alternate currency and started cracking down.
Various people have tried, over the years, to launch a competitor to the dollar and each time they've been shut down by the government.
The reason the government hasn't cracked down on bitcoins yet is there isn't enough business conducted in bitcoins for it to matter. It may also be they don't know exactly what to do, since there isn't a single person or group providing bitcoins. They may need new powers from Congress to do so, and you can be sure if ordinary people start using bitcoins that will happen.
>It is partly because of the government's effectiveness at collecting taxes that businesses continue to use USD, even when alternatives are available.
That makes no sense.
>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.
Because only a handful of techies and mathematicians really understand bitcoins. They're leery of getting stuck with a bunch of worthless bits on a thumb drive when they thought they had something of value. But that kind of thing can change quickly - there isn't anything more backing the US dollar than there is backing bitcoins.
>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."
I don't think you realize how money really works. Of course the government is not going to allow a currency it doesn't control supplant the dollar. If that happened the US government would go bankrupt.
That's not true."
Except that there are dozens of alternative currencies in use in the USA right now:
https://en.wikipedia.org/wiki/List_of_community_currencies_i...
">It is partly because of the government's effectiveness at collecting taxes that businesses continue to use USD, even when alternatives are available.
That makes no sense."
Well let's put it this way: what currency can you use to pay your taxes? Now, if you are a business that actually pays its taxes (as most do), what currency will you need to do business in? Even if a business wanted to use something other than USD, it would eventually have to trade whatever currency it used for USD when it came time to pay taxes.
"But that kind of thing can change quickly - there isn't anything more backing the US dollar than there is backing bitcoins."
USD is backed by the law: tax laws, debt laws, torts, fines, fees, etc. It is the currency the government deals in, and most businesses must deal with the government. That is the reason businesses accept Bitcoin payments via payment processors, ultimately getting USD.
"Of course the government is not going to allow a currency it doesn't control supplant the dollar. If that happened the US government would go bankrupt."
First of all, there is basically no chance of Bitcoin supplanting the US dollar, for the reasons outlined above. Try doing all your business in Bitcoin, and see what happens when the IRS comes around to ask why you did not pay any taxes.
That being said, even if by some miracle Bitcoin supplanted the dollar, the government would not go bankrupt, it would just start using Bitcoin. The switch from the gold standard did not bankrupt the government; why would a switch from fiat currency to Bitcoin bankrupt the government?
Despite the ramblings of certain libertarians and anarchists, this is not Zimbabwe, we are not bankrupt, and we are not expanding the money supply to avoid bankruptcy.
Right. They're all little joke currencies that don't affect anything. "Aww, that's cute. Your town trades tickets redeemable for an hour of work."
If any of them were adopted by a nontrivial number of people or if people started using bitcoins or euros or yen in significant quantities the government would definitely get involved in a very hostile fashion.
>Well let's put it this way: what currency can you use to pay your taxes? Now, if you are a business that actually pays its taxes (as most do), what currency will you need to do business in?
Doesn't matter. If people don't actually hold dollars and just change their bitcoins into dollars when they need to pay taxes the government doesn't gain anything by printing dollars. It just means every year when I go to pay my taxes I get many more dollars for my bitcoins than I did the previous year.
>USD is backed by the law: tax laws, debt laws, torts, fines, fees, etc.
Right. Nothing, in other words. The same was true for the Zimbabwe dollar until they gave up. It just means people will convert whatever they're holding into dollars when they need to deal with the government.
>First of all, there is basically no chance of Bitcoin supplanting the US dollar, for the reasons outlined above.
You haven't made your case for that at all. If the CPI goes back to what it was, say, in the Carter years (and it will), Bitcoins could supplant the dollar very quickly.
The biggest obstacle to adoption is the fact that you can't hold a bitcoin in your hand. But if that mental block was overcome people could switch over very quickly. Personally, I doubt it will happen because people will be reluctant to trust a virtual currency, and a few rumors about a mathematical flaw in the algorithm is all it would take to shatter any built up trust. But it's not impossible.
>That being said, even if by some miracle Bitcoin supplanted the dollar, the government would not go bankrupt, it would just start using Bitcoin. The switch from the gold standard did not bankrupt the government; why would a switch from fiat currency to Bitcoin bankrupt the government?
The switch from the gold standard didn't bankrupt the government, but a switch to the gold standard certainly would. You realize, do you not, that QE is nothing more than a sophisticated way to print money? The government could not pay the interest on the debt without the fed creating money and using bond purchases to drive down treasury rates.
>Despite the ramblings of certain libertarians and anarchists, this is not Zimbabwe, we are not bankrupt, and we are not expanding the money supply to avoid bankruptcy.
This is just wrong (except the part about us not being Zimbabwe). That's exactly what we're doing. The only reason we're getting away with it is the monetary contraction that occurred when the housing bubble collapsed. But that contraction is pretty much over. Balancing the budget without printing money at this point would require politically impossible decisions.
...kind of like Bitcoin. A couple thousand businesses willing to take Bitcoin via a payment processor? That's not even a blip on the radar of the financial world. You might as well be talking about Billy Bob's Hardware Depot, with over ten thousand customers served in 5 counties.
"If people don't actually hold dollars and just change their bitcoins into dollars when they need to pay taxes..."
Sounds like businesses will find a way to save money (and thus be more competitive) by avoiding the cost of converting between currencies and demanding USD up front (or penalizing customers who use Bitcoin, as many businesses already do with customers who use credit cards). There is also the matter of legal tender law: an American business cannot (legally) refuse to take payment in USD, but nobody is obligated to accept Bitcoin. It would take a breakdown of law enforcement in the USA, at a fundamental level, to make the situation you described possible.
">USD is backed by the law: tax laws, debt laws, torts, fines, fees, etc.
Right. Nothing, in other words. The same was true for the Zimbabwe dollar until they gave up."
If you think the law amounts to "nothing," then go ahead and ignore it. Don't bother with your taxes. Refuse to take USD payments and demand only Bitcoin. Put your money where your mouth is.
Take a brief look at what happened to the Zimbabwe dollar in 2008. Hyperinflation was certainly the primary problem, but the last step in the failure of the currency was the government's inability to enforce the law. People were illegally conducting business using foreign currency, and the government was unable to stop them. People ignored price freezes and illegally adjusted the prices of goods throughout the day. Ultimately, the government "gave up" and repealed laws that people were not bothering to follow.
You would have to be delusional to think that the US is even remotely near such a situation, or to even think that there are signs that such a situation will occur any time soon.
"The biggest obstacle to adoption is the fact that you can't hold a bitcoin in your hand. But if that mental block was overcome people could switch over very quickly."
That is not just a mental block. Requiring an Internet connection for every transaction raises the price of transactions, and needlessly so when we have a widely accepted way to make payments offline. No, ignoring confirmations is not a solution here. The trucker who delivered my car would not take a check, and for the same reason he would not have accepted a 0-confirmation Bitcoin payment; he wanted cash, because he could count it and could count on being able to spend it the next day.
"The government could not pay the interest on the debt without the fed creating money"
Or, you know, that other things: taxes. We may have a large debt, but we also have historically low tax rates.
"That's exactly what we're doing. The only reason we're getting away with it is the monetary contraction that occurred when the housing bubble collapsed"
Hm, you might be on to something there. Like, maybe the currency was issued to prevent the money supply from contracting. That would just be crazy, though; who ever heard of economists wanting to prevent deflation?
"Balancing the budget without printing money at this point would require politically impossible decisions"
Yeah, like across-the-board budget cuts. Not that we are likely to see anything resembling that:
None of those things actually back the dollar. They just make it a little more inconvenient to use another currency. But if inflation is high, the inconvenience will be a small price to pay.
>You would have to be delusional to think that the US is even remotely near such a situation, or to even think that there are signs that such a situation will occur any time soon.
If we really do have hyperinflation, which I think is likely within 15 years or so, the government will be no better off than Mugabe's.
>Or, you know, that other things: taxes. We may have a large debt, but we also have historically low tax rates.
That's true but misleading. We have historically low tax rates, but actual tax receipts are above historical averages. Back when tax rates were really high there were all sorts of tax shelters that are now illegal, and there were no cash transaction reporting requirements.
>Yeah, like across-the-board budget cuts. Not that we are likely to see anything resembling that...
Those budget cuts are tiny. The actual YOY reduction was insignificant. Real cuts on the order of what's necessary will have people rioting in the streets. There isn't enough money in the world to make good on all the promises the US government has made.
Printing money is the only way out, politically.