
Sanitizing Bitcoin: This Company Wants To Track 'Clean' Bitcoin Accounts - SlipperySlope
http://www.forbes.com/sites/kashmirhill/2013/11/13/sanitizing-bitcoin-coin-validation/
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nwh
It's a completely pointless task that will just hurt innocent people.

Bitcoin transactions are by their nature traceable through the blockchain- but
ownership of them is not. In it's simplest form I might sell a coin to
somebody for cash, the blockchain does not show this change of ownership and
an outside observer now thinks that they are still monitoring the same persons
transactions. If they were "blacklisted" then suddenly the sold coins are
worthless, even though the original seller has had no adverse impact.

It has interesting extensions, where you are able to destroy other people's
funds by tainting them with your stolen ones. The Bitcoin system does not, and
can not support a system where the user can accept and reject funds. You can
ignore inputs, but that gets very messy very quickly.

You end up in a situation where only institutionally "clean" coins are
allowed, and the system collapses. How this ever came to fruition I'll never
know.

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1337biz
_weed out ‘bad actors’ – like the Dread Pirate Roberts – from the legitimate
Bitcoin business world_

People of the world:

For the greater good please send all your Dollar bills and coins that were
ever used for illegal activities to my doorsteps.

This is you last chance to win the war on drugs, terrorism, children,
religion, or whoever else your demons might be!

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rictic
Am I missing something? Between mixers and single-use addresses - not to
mention every mundane transaction that hasn't opted into into this tracking
scheme - the odds of them being able to say much about a typical address seem
practically nonexistent.

I can see some strong similarities to DRM. There are large organizations that
would very much like for a technical impossibility to exist, leading some to
step forward to sell a fundamentally flawed patchwork to them whose primary
impact is inconvenience for end users.

~~~
thwarted
Has anyone developed the bitcoin equivalent of the "Final Ultimate Solution to
the Spam Problem (FUSSP) Response"[0] yet?

[0] [http://www.dmuth.org/fussp.html](http://www.dmuth.org/fussp.html)

~~~
alexkus
Ironic given that Bitcoin grew out of the idea of a 'Proof-of-work' token that
was proposed as a FUSSP itself.

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oleganza
In the worst case, white market Bitcoin transactions will be no more tracked
than cc/paypal/swift/sepa transactions. On the bright side, people will have
much harder money and state will have much less power (no deficit spending
whatsoever).

In reality though, the contamination of the market by Bitcoin will happen much
faster than anyone could set up a framework of tracking it. Black markets will
grow huge. A lot of intellectual work can avoid taxation easily. Especially,
when younger generation finds itself in a situation of economic disaster that
was created by their parents and grandparents. Teens will be less likely to
tolerate all this banking nonsense.

~~~
sliverstorm
Bitcoin, at least right now, is literally the antithesis of hard money. It has
no backing, either political (e.g. Fed) or economic (e.g. gold-backed). Value
fluctuates wildly. A week from now it could be worth $1,000 or it could be
worth $1.

~~~
oleganza
1\. There's no problem with "backing". Gold is backed by gold. Bitcoin is
backed by Bitcoin. Bitcoin is not broken while being in the open for plenty of
people to exploit it. Just like anyone interested may try to synthesise gold
at a cost lower than the market price.

2\. Every early venture is also very volatile. Facebook, Twitter, Google, the
web itself and the internet were volatile in the beginning. A lot of
uncertainties, legal issues, security issues etc. Only when they reach half of
the potential market, they start looking stable and glorious. I bet when gold
was started to be used as a currency it was uncertain, competing with previous
currencies and prices were fluctuating a lot.

3\. Bitcoin can't be suddenly worth 1$ tomorrow for economic reasons. Only for
technical reasons (but then it is more likely to become worthless).
Economically, no big holder of bitcoin is going to crash the price by cashing
out publicly if there is a way to sell steadily and/or privately. Which
happens already. SecondMarket's BIT gets all its coins and money purely
privately, without anyone noticing much changes.

Since almost no one is holding Bitcoin-denomitated debts, no one is hurt by
having Bitcoin price _rising_ unexpectedly. It only boosts interest. So if it
stays around $430 for the months or grows to $1000, no one will be hugely
disappointed. Even if drops now to $300, only a fraction of holders will
suffer losses, while majority of others is still well in profit.

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vinchuco
since all Bitcoin transactions are public and pseudonymity given by opaque
addresses is our ONLY financial privacy protection, services like this should
be considered a direct and malicious attack on Bitcoin system.

~~~
sliverstorm
The information is all there, and all public, right from the start. This is no
more an attack on Bitcoin, than taking wood from beneath a "Free Wood" sign is
theft.

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Fuxy
I was just wondering given that 75% of US currency is tainted by drug traces
we can safely assume it was used in illegal transactions.

So if we compare this to "dirty" bit-coins how do you determine if a coin is
dirty. How recent does this transaction have to be for the legitimate
organization to refuse it because if a bit-coin is considered dirty forever
after being involved in a dirty transaction that wouldn't work.

I'm probably missing some intricacies of how the block-chain works since you
can do transactions of any size not necessarily 1 bit-coin.

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SlipperySlope
Essentially ...

"Their plan is to compile a database of the known identities associated with
Bitcoin addresses in the hope that Coin Validation will become the one-stop-
identity shop for law enforcement when trying to find out who’s doing
something nefarious with Bitcoin, while providing a red-flag system for
businesses who have customers trying to use Bitcoin that’s associated with
illicit use."

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biff
The lack of anonymity holds Bitcoin back from being an effective digital
equivalent to cash.

I was just thinking about this the other day. If you have one well-meaning
blacklist on certain Bitcoins, you could have dozens. Stolen coins, drug
coins, "Democrat" coins, coins spent on Sunday. Like anti-spam lists, each
Bitcoin user could choose which blacklists to pay attention to when receiving
coins, but won't necessarily be privy to all the lists that divvy his
seemingly fungible pool of Bitcoin into coins that are more portable and coins
that are not.

It's not unworkable to have one list that everybody pays attention to, though
even that is contentious. It's the ones that will follow that should really
cause concern.

------
jaekwon
This was bound to happen, and cannot be stopped from happening, given the
nature of bitcoin.

It's not the end for bitcoin anonymity. There will always be a market for
"dirty" coins, and there won't be one definition of "dirty" either. The
countermeasure is a multitude of such tracking tools, each operating on an
opt-in basis, each with a different definition of "dirty". Then merchants and
users would be able to choose what provenance has what value.

In fact, there is an opening now for someone to build an alternative system
that isn't associated with regulators. One that perhaps might help us track
stolen coins, like those from Pirate@40. On the other hand as a voluntaryist I
happen to believe that DPR (the other pirate) deserved his coins, and I would
accept his coins at face value.

If such an open-data solution existed, then I would feel inclined to support
merchants and exchanges that reported their bitcoin addresses, knowing that
(a) if their funds get stolen, people have the opportunity to reject the
stolen coins thus reducing their value and the incentive to steal and (b) the
public can perform audits on these bitcoin exchanges. On the other hand I
wouldn't feel comfortable with a closed solution where the data gets walled
off from the public, which selectively benefits those with access to the data.

The future of bitcoins will be full of unexpected surprises that seem obvious
in hindsight. I think this is one of them. To the moon!

------
headgasket
Short form:My BTCs are for sale, the ones I found the password for. I'll be
buying some more equities on the US and Canadian markets.

I must be terribly dull, but I fail to see why bitcoins have any store value
at the moment. As a medium of exchange, I see their use. But taxes are payable
in sovereign currency, and 20% of the worlds economy is taxed by 1 entity
accepting only USD. Sovereign entities are not about to relinquish the power
of inflating the money supply. And if I want to park money, I want to be able
to pay my taxes with it when the time comes.

The p2p currency of exchange I get, as well as the distributed POW that has a
reward priced in this currency. But what prevents a network of persons (or
trustworthy entities) to clone it into one that has more legitimacy? What does
BTC have over litecoins?

As a matter of fact, Litecoins are really more distributed as the proof of
work uses a GPU instead of SHA256 that is now mostly computed by ASICs; GPUs
are in every modern computer and the POW computation would not benefit from a
significant speed up with ASICs. This is a better distribution platform if the
breadth and width is what prevents a fork of the blockchain.

And if LTC became too expensive, volatile, etc, as an exchange medium, GPUC
could be an alternative, ad nauseum.

Basically the point is: there seem to be a decreasing return on the network
effect of a p2p unit of exchange, not the opposite(as for the fax machine, or
facebook). This law of diminishing return, IMHO should bring to an end sooner
or later this bubble caused by people failing to see the difference between a
unit of exchange and an asset.

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bjourne
What's so hard about it? Have a public registry of transactions that are
deemed illegal or theft. Refuse to accept transactions by bouncing them back.
So if you are the receiver of 1 btc from anyone on the blacklist you have to
create a transaction that returns the 1 btc to the sender. If the address
doesn't do that, then that address is also put on the blacklist. Since all
bitcoin transactions are public, it is trivial to verify whether the receiver
of the btc complies or not.

It could work almost exactly like Spamhaus which tracks email spammers (which
coincidentally also happens to be pseudonymous) and smtp servers relaying
spam.

As long as enough people opt in to the blacklists it would make life very hard
for thieves. Whoever controls the blacklist would gain a lot of power yes, but
since opting in would be voluntary you could always decide to use a different
blacklist.

~~~
mynewwork
1) Perfect for harassment, repeatedly send .000001 btc to someone, to force
them to keep sending it back or be blacklisted

2)What happens when someone using blacklist A accepts payment that looks
clean, only to find out they are now blacklisted on list B? No one could use
bitcoin for something like ebay transactions, for fear that the payment they
received might be blacklisted by some list.

~~~
bjourne
1\. It would be trivial to implement feature in bitcoin clients to
automatically bounce transactions from blacklisted addresses.

2\. The situation is the same as if someone irl where to accidentally purchase
stolen goods. Or as if you where accidentally spamlisted because you forgot to
secure your smtp server. Your options would be:

a) Return the bitcoins and clear your status. b) Argue your case with the
operators of blacklist B. c) Ignore your blacklisting and just don't do
business with those who follow blacklist B. If they blacklist addresses for
frivolous reasons, more people will ignore their list and it won't matter if
you are on it or not.

A decent client could automatically keep the blacklists updated so it would
hardly be any burden for normal users.

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bestest
so, this company is trying to become the bitcoin sanitation authority? as I
said before -- it would be a bad thing as there's never a way to know if the
stain is valid 100%. and, where there's authority -- there's corruption. I
hope it fails.

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shazow
The strength of something like this becomes evident in the optimistic future
when governments (or at least accountants) decide to help opted-in users to
report their taxes from Bitcoin-related transactions.

As others mentioned, it's not practical to try and enforce this on people who
want to circumvent it, but there is certainly value in improving convenience
of accounting for those who want it.

The Intuit-for-Bitcoin market is still practically non-existent, so expect to
see more such announcements as the promise of Bitcoin's legitimacy continues
favourably.

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Flenser
If bitcoin clients ever adopt the zerocoin protocol then there wouldn't be
anything to track:

[http://zerocoin.org/](http://zerocoin.org/)

Although they seem to think that the protocol should not allow anonymity for
some transactions:

[http://zerocoin.org/q_and_a#what-about-money-
laundering](http://zerocoin.org/q_and_a#what-about-money-laundering)

------
Tenoke
I couldn't stop screaming in my head 'THIS COMPLETELY GOES AGAINST THE
ANARCHIST-LIBERTARIAN ROOTS OF BITCOIN' while reading this.

~~~
krapp
It occurs to me that Bitcoin can either be an anarchist-libertarian weapon
against capitalism, or it can have mainstream success, but probably not both.

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VMG
I wonder what the laundering rates will be and what the economy of "dirty
coins" will look like.

