
Bitcoin Is Being Monitored by an Increasingly Wary U.S. Government - em3rgent0rdr
http://www.newsweek.com/2016/12/23/virtual-currencies-bitcoin-being-monitored-us-government-532063.html
======
wheelerwj
In 2013, HSBC was fined for failing to appropriately monitor nearly $700B(B as
in BILLION) in transactions between Mexico and the US alone. [1] Yet we're
supposed to be more worried about digital currency because of $600 (dollars,
not millions or billions, just dollars) worth of bitcoin found its way to the
Gaza strip? [2]

The only interesting part of this article is that post publication, the
bitcoin numbers were updated by a source from the Dept. of Treasury.

This article is just FUD and nonsense during a slow news cycle. Banks and wire
transfers will continue to be the primary vehicle for money laundering and
terrorism financing for the foreseeable future.

[1] [https://www.bloomberg.com/news/articles/2013-07-02/hsbc-
judg...](https://www.bloomberg.com/news/articles/2013-07-02/hsbc-judge-
approves-1-9b-drug-money)

[2] [https://www.thecipherbrief.com/column/private-sector/new-
fro...](https://www.thecipherbrief.com/column/private-sector/new-frontier-
terror-fundraising-bitcoin-1089)

~~~
rebuilder
The article specifically says Bitcoin is thought to be too transparent for
terrorists to use seriously, and that the gov't is more worried about the
possibility of new, les traceable cryptocurrencies being developed.

~~~
lostlogin
Or are they worried about the idea of a future where their spending is
transparent?

~~~
mark_l_watson
Excellent point. Here in the US, we have payoffs to government officials on
the local, state, and national levels.

I like the idea of a Bitcoin like currency with 100% transparency in universal
use. Privacy is important to me, but if everyone on earth had access to all
financial transactions that would help stop corruption. Use case: turning my
personal software agent to free to evaluate candidates in upcoming elections,
not invest in companies if I dislike who they do business with, etc.

~~~
icebraining
There are many ways to evade such a system already. For example, one of our
ex-PMs didn't get any money from a certain company; they just paid €25M to
another guy, who was such a friend that he paid for the ex-PM's home, hired
his wife and driver, bought thousands of copies of his book, etc.

~~~
kahnpro
Wow, he sounds like a really great guy! Everyone needs a friend like that.

------
blorgle
This is some serious FUD, pretty standard for Newsweeks bitcoin reporting,
which included harassment of Dorian Nakomoto.

This is probably an unpopular opinion on HN, but let's face it, P2P protocols
like bitcoin are relatively easy to disrupt for nation state actors,
especially the US!

For a relatively small cost, the blockchain could be flooded with bogus junk
to DoS. The bootstrap mechanism could easily be MITMd to netsplit new nodes.
Those are just technological mechanisms off the top of my head, which assume a
perfect hypothetical cryptocurrency with none of the teething problems that
all of the actual cryptocurrencies have.

ISIS could come up with "Terrorcoin" (which is the underlying vague threat of
the article) but without any mechanism to transfer those coins to a fungible
real world currency, it's useless anyway.

Go home Newsweek, you're drunk.

~~~
riprowan
> For a relatively small cost, the blockchain could be flooded with bogus junk
> to DoS.

It's certainly possible for a government to pay to consume the available space
in a blockchain with a very small capacity limit such as Bitcoin has, but I
think you miss the very important dynamics that undermine this attack vector -
namely that such an attack is a wealth transfer from the attacker to the
defender. This is antifragility at its finest.

Let's say that some acronym-agency decided to "spam" the blockchain as you
suggest.

The result would not be a "DoS-like" disruption to the mining or node network
itself, but just an increase in the cost to make a transaction (we've seen
this in the so-called "spam attacks" on the Bitcoin blockchain in the last
year). Beyond a certain transaction cost, the demand for space in the
blockchain will just diffuse to a competing crypto with cheaper transactions
and be harder to trace. Oops.

Moreover, in the meantime, the attacker is simply transferring his wealth to
the miners in the form of artificially high fees. The miners will happily
accept the attackers money and use it to build more mining capacity. If blocks
stay full, eventually miners will decide to mine larger blocks, raising the
cost of the attack. How polite of the attacker to pay the mining network to
build out capacity to handle his attack!

The result is that all the activity you hoped to suppress just diffuses to
other cryptos and becomes harder to track. Meanwhile the attacker is
subsidizing a better mining network. That's a bad attack.

Relaxing (or removing) the block size constraint doesn't help the attacker.
With a higher constraint, the attacker must spend more to fill up the
blockchain, raising the cost of the attack and increasing the wealth transfer
from the attacker to the miner.

Bitcoin clients like Bitcoin Unlimited that would make the limit a dynamic
variable create a whole new wrinkle for the attacker: because such a limit is
an emergent network property, the attack cannot even really be accurately
planned or budgeted - the attacker literally has to hit a moving target.

But let's say our attacker doesn't care about plan or budget. As the attacker
fills space on our "Unlimited" blockchain, blocks could bloat to the maximum
size tolerated by a supermajority of the node network - the "emergent"
blocksize limit. This is exactly the same size the "preplanned" blocksize
limit would eventually ratchet up to in a sustained block-filling attack, the
only difference is the mechanism used to raise the limit.

IOW, if you think this "spam attack" through - regardless of the block size
limit - the network will automatically adjust to make the cost of the attack
as expensive as possible, minimizing the disruption to normal users and
maximizing the wealth transfer from the attacker to the miner.

The fact that blockchain "spam attacks" are actually wealth transfers from the
attacker to the mining network is the primary reason why these events cannot
even be correctly viewed as "attacks" \- _these are paying customers!_

A blockchain spam attack is exactly like trying to shut down Starbucks by
planting a million stooges at every store to purchase lattes so that regular
customers can't shop there. Starbucks gets rich from all the money the
attacker is feeding it, and organic demand for coffee just shifts to other
stores.

TL;DR I think there's no such thing as a blockchain spam attack - the worst
that an attacker could do might be to raise transaction prices on the Bitcoin
blockchain and keep them artificially high for long enough that demand for
_Bitcoin_ transactions eventually collapses and (counterproductively for our
attacker) goes to other cryptos.

~~~
SomeStupidPoint
The US, China, et al would likely be able to blackhole most of the Bitcoin
network packets on the backbone and _definitely_ could simply take down the
network with a traditional DoS. Ever won a fight for bandwidth with your
upstream router?

The real question is whether they could use protocol or cryptography
weaknesses to break it with less effort. Something like a weakness in the hash
or signing methods could allow them to disrupt the network state in a
basically unrecoverable way with many fewer packets and not requiring a
persistent attack.

~~~
zrm
The problem with that attack is that Bitcoin is not very high bandwidth which
makes it easy to put behind an anonymizer.

You could DoS the anonymizer but now you're into large collateral damage and
the anonymizer may not be in a country where your agents control the backbone.

~~~
SomeStupidPoint
I agree you could harden a cryptocurrency, I was merely pointing out that
Bitcoin is not. (And would require reaching consesus or having a fork to
become one.)

Further, Im not sure that there's an anonymization network that could sustain
being the consensus network backbone without also leaking the information to a
pervasive, persistent adversary.

Things like TOR likely can already be penetrated by the US or China or Russia,
and things like FreeNet are likely too slow to reach global consesus fast
enough to prevent diverging chains.

Also, DoSing the network doesn't require you deanonymize them, merely that you
can fill most of their anonymous routes with traffic (or that you can drop
packets along them). This is problematic, because the network fundamentally
must publish routes. The underlying architecture isn't meant to operate in
truly adverse conditions.

~~~
riprowan
> DoSing the network doesn't require you deanonymize them, merely that you can
> fill most of their anonymous routes with traffic

At best if you're "successful" then you merely take all the current Bitcoin
users and scatter them into a hundred different competing and more anonymous
cryptos. Oops.

In the south we have fire ants. The thing about fire ants is that if you
disrupt the nest you had better kill them all, because if you mess with a nest
today, in a few days you'll have 5 nests to deal with. And so on.

Crypto is like fire ants in this regard.

~~~
SomeStupidPoint
1\. The strength of a currency is its ability to be exchanged, so forcing them
onto several (possibly themselves compromised) networks increases transaction
costs and changes the economics significantly. Similarly, hardened networks
likely impose additional overhead. Finally, smaller networks are easier to
perform 51% attacks on. If you can break it in to 10 networks, you only need
1/10th the power to 51% them each in turn.

2\. My point was about the strength of the bitcoin network as it stands. And I
think you agree that it's both vulnerable and non-trivial to fix, so Im not
actually sure what your point is.

------
rwallace
Leah McGrath Goodman, I could almost swear I've seen that name before
somewhere. Google... oh yeah, she was the one who did that story about that
Japanese-American guy being the inventor of Bitcoin, the one that turned out
to be a rather irresponsible fabrication.

Looking at this story, the first couple of paragraphs talk about a nonvirtual
currency created by a bunch of racists. Why? Does that have anything to do
with Bitcoin? As far as I can tell, no, it's just an attempt to smear by
insinuation.

Then it starts into "but terrorists". Stopped reading at that point.

I'm not saying Bitcoin doesn't have flaws. By all means let them be discussed
fairly and with intellectual honesty. I don't think this article is the place
to look for that discussion.

~~~
mr_spothawk
clearly, this is fluff. the trouble for me is evaluating whether this fluff is
a float: 'we will outlaw zcash', or a flop: 'the authorities should outlaw
zcash'.

------
cesarb
I don't know if it's just me, but this article seems to give a creepy "the USA
is the only that matters" vibe. For instance, the sentence "[...] while this
may be handy for privacy-savvy Americans, it can make it much harder for the
government and law enforcement to fight terrorists and criminals [...]" sounds
as if only privacy-savvy USA citizens matter, while privacy-savvy people from
the rest of the world can get lost.

Also, the idea of a foreign country being able to disrupt transactions all
over the world, with the people having no recourse other than appealing to
said foreign country, is creepy. If someone in Austria wants to send money to
Brazil, that should be a matter only between Austria and Brazil (or perhaps
the rest of the Eurozone, since their currency is shared), and a third-party
country shouldn't be able to arbitrarily interfere on a whim.

~~~
kahnpro
That's because this is a propaganda piece from a propaganda rag.

------
imagist
> [V]irtual currencies could undermine America’s long-standing ability to
> disrupt the financial networks of its foes and even permanently upend parts
> of the global financial system.

This is one of the most compelling reasons we should adopt Bitcoin. The
nationalism that tells us that we should be concerned about this is appalling.

------
davidgerard
This was written by the same journalist who claimed Dorian Nakamoto was
Satoshi.

You can make Bitcoin literally unusable with about $1000 worth of transaction
spam. The same applies to any non-hypothetical blockchain-based currency I can
think of, including the fancy new ones. _If only_ the International Bankers
had $1000 spare on hand!

I mean, I think Bitcoin is garbage, but this is a relentlessly terrible and
incompetent article.

~~~
nullc
You spend too much time in the r/buttcoin echo chamber. You're getting sloppy
with the facts. :) $1000 worth of transaction "spam" would have basically no
effect today-- that is only about two blocks worth of transaction fees.
Meaning your costly 'disruption' would be unnoticeable against normal block
finding variance.

[Come on-- do you really want to be part of the Wikipedia Review of Bitcoin
skepticism? I think Bitcoin deserves better critics than that.]

------
sowbug
The U.S. needs an explicit constitutional right to privacy.

------
anondon
The main point of the article seems to be that anonymous cryptocurrencies pose
a threat to US national security since the US Governmeent can't just cut off
access to funding for terrorists which supposedly was very effective so far.

Ignoring all the BS in the article, is this argument valid?

~~~
tajen
Wasn't middle-East terrorism _funded_ by US and Europe in the first place?
Isn't Newsweek posing a threat to the CIA (and NSA) by arguing for the ban of
cryptocurrencies for illegal operations? If they want to continue their
illegal things, they do need smuggling currencies, and it's the role of the
American citizen to enable them to do it.

~~~
throw2016
The Saudis are the principal funders and ideological exporters of terrorism
and our closest friends in the region so it doesn't take genius to figure out
what is happening.

Its nearly impossible for terrorists organizations and certainly not anything
like ISIS to exist without state support. Its now well know they are being
funded by Turkey, Saudis and the US intelligence forces.

So we are funding terrorism on one hand and then spending billions of dollars
on to build a surveillance state to protect ourselves from our own actions,
both of which benefit the state, intelligence agencies and defence
contractors.

I think things are now are farce level and democracy is near meaningless if
these state actors are allowed to do whatever they want.

------
panarky

      Rand’s research into the dangers of virtual currencies is not meant
      as an attack on bitcoin, Baron said. He believes the currency’s
      publicly visible ledger of transactions is too transparent
      to attract terrorists, criminals or enemies of the state. “I do not
      see bitcoin as the go-to currency for terrorists,” he says.
      “As it stands, it does not offer enough anonymity.”

------
gnipgnip
Perhaps they should worry about "goods" the "terrorists" are allegedly
exchanging it for.

------
moeadham
Not sure what is going on at Newsweek, but if they are publishing this, it
can't be good.

------
edblarney
It's worth mentioning, that in many areas wherein there are not many Tor
users, the mere use of Tor can flag authorities as to who might be 'up to
something'.

The guy who bombed the boston marathon I believe was caught in this manner:
they knew someone in the building was doing something nefarious, and they
looked to see who downloaded Tor. Bingo. Or something like that.

I'm not against Bitcoin and understand it's principles - that said - it's the
most obvious use case is perhaps for situations in which people want to get
around the law.

It wouldn't surprise me at all if anyone using bitcoin is flagged somewhere in
an NSA database.

~~~
hiddencost
You're thinking of the fake Harvard bomb threat. He was the only tor user
during the time the email was sent.

~~~
edblarney
Yes, correct, sorry, I felt I was off on something when I wrote that.

------
Grangar
Remember, this is the same website that named Dorian Nakamoto as Satoshi, a
man who hadn't even heard of Bitcoin before.

------
divbit
I wonder if donation through anonymous currencies could be protected under the
first amendment through religious freedom (e.g. Bible: Matthew 6:3 )

------
appleflaxen
first they ignore you

then they make fun of you

then they fight you

and then you win

------
shitgoose
"white supremacists town in south africa, terrorism, human trafficking, money-
laundering and many other types of criminal activity. Putin's cronies and
Iran's money launderers."

he forgot child pornography.

journos like this one are a disgrace to humanity. utter contempt for reader's
intelligence.

