Hacker News Reader

Comment by chevreuil | Hacker News Reader

I'm a bit new to bitcoins, but is it technically possible for the bitcoins community as a whole to make a blacklist of bitcoins addresses and "ban" the stolen bitcoins ? Such blacklist would daunt robbers and enforce public trust in bitcoins.

View on HN

This is not technically speaking impossible, but the Bitcoin community has a visceral hatred for the idea, because it allows off-blockchain-entities to effectively deprive them of the use of their coins. It also undermines trust in the currency generally, since why accept Bitcoins if there is the possibility that you'd be paid with black Bitcoins instead of white Bitcoins, when you're practically speaking guaranteed that all dollars are green.

Also "Take all the coins that went through Silk Road. Now, floodfill forward." (probably) colors most of the network black.

Since the blockchain is a consesus of a majority of miners, could we not roll the blockchain back to before Mtgox screwed the pooch?

Nobody who sold anything for bitcoin since before the rollback point would consent to this.

Well, the supply of BTC is finite, so simply excluding stolen BTC's has some additional problems. May be better than not addressing it, but while BTC provides a mechanism for following them through the transaction chain, it's not that simple to ID what addresses contain "stolen" BTC. What if the thieves are able to launder them through unwitting proxies? For example, steal a bunch of BTC, sell them on another exchange immediately, and now, how do you blacklist those "stolen" bitcoins without screwing over an innocent bystander?

Because transactions are recorded in a public blockchain, couldn't that be a big downside for anyone accepting bitcoin whether or not the coins appear on a blacklist/warning list. If a sending wallet address is associated with some contested activity (e.g. someone getting sued, or indited), I could imagine that those BTC could easily get swept up in the legal actions to unwind or resolve the activity.

This vs accepting cash which is fungible, and would need some other evidence associating the buyers money with the contested activity. At least the resolution activity there would likely be stopped at one level from receiving the cash, but with BTC, you happen to be able to track that one specific coin right through multiple layers of transactions. I can see lawyers tracking all the way out to the current holder of a given BTC.

edit: Upon a bit more side reading, I think the tracability of a given BTC is a bit overstated here.

That is assuming you can "blacklist" addresses before the transaction takes place. Or they could just create a new BTC address.

Are coins able to be differentiated from a wallet?

Sometimes, yes. Not always - it depends on how the transactions inside the wallet are organised, which is not usually displayed unless you go looking for it.

Not that it matters - if 100BTC go into a wallet, and an hour later 100BTC comes out of that wallet, it's fairly irrelevant whether or not they're the same coins.

Well, it does matter - if 100 stolen BTC go into a wallet that has 900 BTC already, and then 1000 deals of 1BTC go out to different wallets... then you blacklist and seize all 1000 outgoing BTC or some arbitrary 100 BTC or some specific (how) 100 BTC?

I'm pretty sure your logic is flawed. Someone is already screwed, its sort of why police can confiscate stolen goods even if you paid for them.

I'd like to know if it would be feasible to regulate in someway to claim ownership of said coins and have them returned should they turn up in some sort of regulated clearing house / exchange. Caveat: I know this is in no way possible right now, yet as soon as this block chain gets large enough we are going to have some form of centralization going on, and with that I am certain it will be regulated in some way eventually. That is, if it lasts that long.

What exactly is the plan to deal with a multi terabyte block chain anyways?

It would be possible if enough miners started supporting a blacklist, but the real problem is not enforcing it, but who decides which coins are "stolen"?

Bitcoin is decentralized, and that's the benefit of it. Creating a global block list would go against that.

Others have proposed such measure. And it sounds like a good thing on its face.

The problem is that who then decides which coins are "bad"? Does the US Government get to decide? How about coins that fund organizations that the US Government doesn't care for?

My personal opinion is that no bitcoin should ever be tagged as better or worse than any other one. By messing with the fungibility of the currency, we would do way more harm in the long run than good.

In principle everybody can decide for themselves which bitcoin they are willing to accept (there's no need for a central authority to do this).

If enough participants agree that bitcoin from a certain source are 'tainted', they become less valuable (similar to what we have seen at the Mt Gox exchange).

Bitcoin are very clearly distinguishable and thus there's no reason for them to be long-term fungible.

But what if I steal a Bitcoin and exchange it directly to USD. If the coin is banned later my counterparty, who acted in good faith, is left with an empty bag.

In that case, it's like any other stolen good. If you accept stolen property, you don't hold title to it, whether or not your intentions were honest.

So now both the BTC and the USD are now stolen? You mean that conversion doubles the number of stolen goods?

This is no different from real life scenarios. Suppose someone stole a $5000 ring, sold it for $2500. The ring is still stolen, the police can and will confiscate the ring, so the buyer is out of the $5000 ring and their $2500 paid for the stolen property. The ring is stolen from the owner, the money is stolen from the buyer.

If the police confiscate the ring they will return it to the original owner, they don't just keep it.

Yea--keep the loot; won't bother to retrieve stolen bikes at flea markets; cruise the streets looking for marginal DUI's; always handing out tickets for marginal infractions. I look at them as Tax Collectors. For protection, I would have more luck printing out a Physibe gun.

I think that would depend on jurisdiction but I don't think reclaiming would be workable in this scenario.

Imagine this: I exploit malleability and deposit directly in my BTC-e account, exchange to LTC etc, etc on dozens of exchange and finally to USD. I cash out to cash and disappear. I of course gave my final stop false information. So now my last victim gets a claim, if this last victim happens to be an exchange and it is forced to pay up and the amount is somewhat significant that exchange is now insolvent. Whose problem is that? The exchange declares bankruptcy and their customers get a haircut.

This won't happen, it does more harm than good.

You're describing money laundering, which scrubs the stolen property of its association with a crime. Its a technique which can obviously be successful, but is a crime in its own right.

Traditionally, this is not the case with money. The money asset is different from all other assets in this respect. This matter was settled in Scotland over 300 years ago. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2260952

The result is that even if you can prove that someone else holds a dollar bill that was stolen from you at some point, you do not necessarily have the right to get it back.

See also the Wikipedia article on the principle of "Nemo dat quod non habet" ("no one gives what he doesn't have"): http://en.wikipedia.org/wiki/Nemo_dat_quod_non_habet

Until Bitcoin is legal tender, it's more like a commodity than money.

"legal tender" is a strange concept. For example, £5, £10, £20 and £50 notes are not legal tender in Scotland. But I don't think most Scottish people consider those notes to be "more like a commodity than money."

Great. Go steal some Bitcoins and have some fun then.

I'm not sure what happens if stolen Euros or gold are accepted as payment. These aren't legal tender in the US, so if they are exempt from the aforementioned rule, then bitcoins might be as well.

The main issue here is that once a Bitcoin enters a wallet, it's indistinguishable from the other BTC in that wallet. So you'd have to blacklist whole wallets, and since you can't deny payments, people possessing stolen BTC would simply tip anyone trying to enforce this scheme.

while in theory possible, this approach has not been done because it is said to be a slippery slope down the lines of being against "bitcoin neutrality".

once the feature exists to treat one set of coins different from another, it leaves the protocol open to control by centralized parties - they could ban the use of "unidentified coins", etc.

Absolutely impossible. One of the major positives of bitcoin is that accounts cannot be frozen by any authority.

Making arbitrary decisions to ban bitcoins seems fundamentally antithetical to the whole exercise.

Impossible. You'd have to somehow convince ALL miners to not process them.

Fungibility prevents you from simply blacklisting these coins.

http://themonetaryfuture.blogspot.it/2013/12/why-bitcoin-fun...

Actually you just need to update the code and push it via the update mechanism.

Code of what? Bitcoin is not one central code base with a global update system.

Reply on news.ycombinator.com