Bear in mind that the connection between these addresses is tenuous at best. There's very little to suggest that the same person owns all of these transactions. The paths are fairly convoluted, it could be a normal user or a mixer or an internal wallet. You'd never know by design.
As I've mentioned before, this sort of thing is usually correct in that same way a broken clock is.
I hope you'd agree with "Jed McCaleb once controlled the donation address 1EuMa4dhfCK8ikgQ4emB7geSBgWK2cEdBG."
While it's unclear precisely how that donation address is related to all of this, I assume that people traced money flowing out of it and into an Mt. Gox cold storage wallet, thus establishing that the person who controlled the donation address was involved with the people who control the cold storage addresses.
If so, then it's hard to see how to disagree with "If the Bitstamp address 1PAzo was funded with coins deposited by Jed McCaleb or one of his associates, and simultaneously two Mt. Gox cold storage wallets were depleted, and the chain of withdraws eventually lead from the cold storage wallets to 1PAzo, then it's extremely likely that Jed or an Mt. Gox owner is trading Mt. Gox cold storage coins on Bitstamp."
It sounds like you're worried that a chain of transfers doesn't prove ownership. For example, someone could randomly send all their bitcoin to someone else for no reason. But in practice, the only reason to give large amounts of BTC to someone else is either because you're buying something from them, repaying a debt, or you're cooperating with them. Regardless of which of those it turns out to be, the Mt. Gox cold storage wallets are the property of the Mt. Gox customers. Using them to buy something or repay a debt would be fraud. Transferring them to an associate with the intent of laundering them via Bitstamp would also be illegal, of course.
I can't think of any other explanations for why the BTC would change ownership except perhaps that they were stolen yet again. But theft can be ruled out if the identity of the Bitstamp account turns out to be a cohort of Mt. Gox.
(You mentioned that it could be a mixer, but that can be ruled out in this case because it'd make no sense for Mt. Gox to launder bitcoins and then deposit them into a bistamp account that has someone's real-world identity attached to it. Also, when bitcoins are being mixed using a mixer, it transfers the coins in a pretty distinctive way that indicates a mixer is being used, such as by randomizing the BTC amounts rather than always transferring e.g. 150BTC or 50BTC or some other nice-for-humans value. I assume that if a mixer is being used here, it'd be possible to show that the transfers are behaving in a way consistent with a particular bitcoin mixer implementation.)
Since there are no plausible explanations about how the bitcoins might change ownership, why would it be unreasonable to proceed with the assumption that the ownership hasn't changed, unless proven otherwise?
Bear in mind that this is the same sort of analysis that attributed large amounts of the initially mined coins to "Satoshi", when they were in fact core developer Gregory Maxwell's. There's a lot of room for error, especially when the email in question has an address in between with no attributable person behind it.
That's fine though, because at that point our theory has been proven wrong. So I propose we take the best guess that fits the available evidence and act accordingly. In this case, that action has already been taken: to notify Bitstamp that if the person trading those coins is an associate of Mt. Gox, then there's a high probability that illegal trades are occurring on their servers. This would let them take an action like freezing the account until they can provide an explanation about where the coins came from. (We're slowly turning into Paypal...)
analysis that attributed large amounts of the initially mined coins to "Satoshi", when they were in fact core developer Gregory Maxwell's
Hm? I think this is being read in a confused way— that some gazillion coins are mine or something.
Basically people were going around claiming that _all_ the unspent coins during a particular time period were "satoshi's"— and this is a claim which is obviously untrue on its face, if nothing else because there are other people who mined blocks during time (and lost them), including myself. Thats all. Nothing especially interesting.
Reliably analysis from historical data is pretty lossy. Bitcoin exists in an odd equilibrium where speculative analysis from the chain alone is both enough to frequently break privacy but often not enough to make reliable inferences.
In hindsight I see how people have read this in a way I didn't intend, I'm being bitten by HN's two hour editing window. I meant that people picked out a large amount of coins as "satoshi's", and you mentioned that some of them were yours. If I could edit or delete the parent I certainly would.
> Bear in mind that this is the same sort of analysis that attributed large amounts of the initially mined coins to "Satoshi", when they were in fact core developer Gregory Maxwell's.
Citation or redaction, please.
If Gregory Maxwell owns a life-changing sum of early bitcoins, it is certainly news to me. If he does not, then you are making claims that could endanger the life and well being of someone who has worked very hard in service of the bitcoin community.
Anecdotally, I think I remember that incident, but unfortunately I don't remember precisely where I heard it.
There have been a lot of very-wrong analyses of the blockchain which have gotten people riled up about one thing or another and then turned out to be bogus. The whole process has sometimes shown unsettling parallels with numerology. It's good that nwh is reminding everyone to try to be as skeptical as possible.
It'll be interesting to see whether the evidence turns out to match the story.
The only incident I can think of was a paper by Adi Shamir and Dorit Ron claiming Satoshi had a connection to Silk Road, and the actual owner of the coins (Dustin Trammell) came forward and demonstrated that (a) the coins were his and (b) the transaction was with MtGox not Silk Road. Gregory Maxwell was not involved in any way:
He's mentioned it on the forums directly, though I'm not in a position to dig it up right now. It's fairly easy to infer that he sold a lot at low prices, from his posts it doesn't seem that he is particularly rolling in the stuff. Probably best not to speculate on such things too much though unless he specifically brings it up.
The question, as msantos points out, is whether bitcoins are money or goods. If they are money, then handling stolen bitcoins are not illegal, and the rightful owner of them doesn't even have the support of the legal system to get them back: http://en.wikipedia.org/wiki/Nemo_dat_quod_non_habet
I would argue that bitcoins are money, and not goods. Goods have use value, bitcoins do not - they only have exchange value. They have no use in and of themselves.
TL;DR: 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.
I wouldn't say that is related to bitcoins (the currency). They've just put data into the blockchain. The tokens you and I trade as money (bitcoins) don't get a use value because someone has put ASCII art into the blockchain.
I'd argue differently because the bitcoins are destroyed in the process. In my view, they become the ASCII art. But I suppose it could just as easily be said that you purchased ASCII art hosting from the blockchain.
I see your point. I guess I just think it's insufficient that it has some use value, for it to be called a good instead of money. My point is that they are mainly (almost entirely) money.
I mean, US dollar bills can also be stacked together and lit on fire, thereby having use value as firewood, or you can write notes on them, making them a notepad, but they are still money because their exchange value completely dwarfs their tiny use value (if one can quantify such things).
Seems like people are clutching at straws here. We shouldn't go making fact-less accusations that the coins are being sold when we technically don't have any proof, the link is very weak at best. Given Mt Gox's collapse and surprising lack of security or due-care, it wouldn't surprise me if it were true, but there is a massive if there.
This seems a bit silly. Why is this made public? If this was a private conversation then they could set a trap. Now whoever is making these transactions will simply stop and wait for a new opportunity.
That's not the question... the question was why put this on pastebin and have it posted to HN. If this was communicated in a more private manner, you could have actually done something with the information, such as find the people who are moving these coins.
Now, if there is anything nefarious going on, the parties responsible probably know that others are watching.
Because a not-insignificant-enough number of "smart" hacker news folks got very burned by a get rich quick scheme and they won't let it go.
Snake oil and charlatans? There's an app for that.
The cognitive dissonance is maddening. Something so esoteric and technical, which required great intelligence to even use, let alone build the cottage industry around... continues to make these intelligent young, white, libertarians look like simple con targets.
The shovel and panning sellers made loads (mining rigs and exchanges). Everyone else who hasn't exited is holding the bag.
If you lived through the dotcom bubble, this is a repeat in slowreck motion. People will lose 95-100% of their investments until the rest freak out and bolt.
Very smart, young, white guys built up expensive trading stations and lost their shirt daytrading on dotcoms. It's like buying a mining... nevermind - nobody's listening.
This is an excessively cynical, misanthropic view of events. I know a lot of people who could be described as "long bitcoin" and while there's no doubt a few opportunistic types, most are genuinely excited and actively involved in something they truly believe in.
Your bitter prognostications about "young white libertarians" says more about you than anything else, IMO. And invoking the dot com bubble doesn't help your point - the internet was, indeed, the next big thing, but the bubble was misinformed and 10 years too early. Long term, though, "dot com" was and is real, and many are hoping and working towards cryptocurrencies travelling the same path.
Sometimes I still can't get my head around how something that isn't real is worth anything... Argh, I must be too old to understand now :)
I was closely involved in a startup in the first bubble, I remember the hopes and dreams and hype and VCs throwing tons of money to invest into ludicrous stuff,and coffee machines so big and expensive... It looks all the same now, the rich want to get richer and call it "innovation" (I saw a prototype of something huge that was "invented in the 90's by some young fellows, unfortunately it was too early, way too early...and saw it again "invented" by someone else many years later and called "Facebook") and the young programmers (they're called hackers now I believe) were just happy to code and get their pat on the back, feeling special,with stock option promises (I was one of them, I must be an old hacker now :) ... So many smart people working super hard( although pizza and wine at midnight was cool)...
Do you feel special and useful guys? Or does it take $19B to be real special?
You do realise that the current value of bitcoin is 5x what it was a year ago? "Burned" is not the correct word for that.
But that's not why bitcoin is important. bitcoin uses cryptography and peer to peer technologies in a very clever way to create the first internet transferrable, widely accepted currency where you don't need to trust someone else like a government or a bank. It's a true peer to peer currency.
So you have to have maddening cognitive dissonance in order to be interested in something YOU are not interested. The arrogance and ignorance is strong in you.
Its a "public" copy of the message, it's been no doubt emailed to the person in question as well. Posting it here, on reddit and on bitcointalk is just the author being pushy.
What if there was a way to tag bitcoins as stolen and declare them null and void? Would this not disincentivize thieves? Could we prevent abuse of such a system?
This is a really contentious issue. Depending on how late the coins are marked as stolen, some number of legitimate transactions may have been made with them.
What burden does this place on users to be certain that they're receiving "legitimate" coins?
You could set up an independent organization to track and identify stolen coins, and then convince merchants and exchanges to voluntarily refuse transactions involving them. If a few large entities refused to do business with addresses linked to stolen coins -- and the tainted addresses were fairly few in number -- then a lot of actors would be forced to follow suit to maintain their relationships with the initial core group of boycotters.
If you want the BTC network itself to reject stolen bitcoins, there's no need to stop there: if you had community agreement, you could just as easily reverse thieving transactions and make the victims whole.
The problem with the tagging approach, is how would you verify the tag was genuine? You would have to add some sort of central authority which every peer could implicitly trust and that would undermine the whole concept of bitcoin...
The term used for this is coloured coins. It's possible to do, and there are forms of coloured coins in use. The question is not of how to do it, but whether it is desirable to have coloured coins.
It's like adding a new rule to how a piece moves in chess. You could easily imagine some of the advantages caused by a change, but not all of the consequences.
Whether or not it's the same thing, it uses the same mechanics. You can link the output of one transaction to the input of the next, and construct a chain of transactions that says "This 0.125 BTC transaction uses bitcoins that were originally stolen from MtGox / bitcoins that were originally in the pile designated as marking ownership of my shares of stock".
The question is whether that's a meaningful thing to measure. If you have bitcoins that are more valuable than normal, because they're shares of stock, then you'll make sure they're not mixed with "normal" coins. That's the idea of the Coloured Coins project. But if you have bitcoins that are less valuable than normal, because they're stolen goods, then you'll try hard to disguise that fact. You'll immediately spend them on goods or currency, or deposit them into a Coinbase account and then withdraw them later (so you get different coins back), or just throw them into a mixer with the other coins that need to be laundered.
The person who ends up holding the tainted coins could be perfectly honest, and have acquired them from a perfectly honest source, who in turn acquired them from a perfectly honest source. Is it fair to tell them that their money is suddenly worthless, when they had no way of knowing anything was wrong?
What prevents a particular mark from being interpreted as some measure of validity, though? If such marking can represent ownership of another asset, could it not represent some other concept, too?
The term is probably "coin validation" -- it breaks the finality of bitcoin transactions, creates a single point of regulatory exposure, and IMO will destroy bitcoin if widely adopted.
I think that would require an authority deciding whether bitcoins were truly stolen. Otherwise, couldn't anyone could just claim a transaction was a theft?
It's a very interesting development as it shows that stolen bitcoins can be tracked indefinitely unlike FIAT.
Now, what you propose though, is against the freedom bitcoins is assumed to stand for (on the ethics side).
On the technical side that's very possible, as of today, if everyone plays along and I mean literally everyone, especially mixers.
How could one track down bitcoins flushed into public mixers? I guess they could do this as well, if the BTC were tagged and thus refused by the mixers or even worst hold captives and resend them to original issuer. However, you only need 1 TOR hosted mixer to lose track of the wallets.
On the other side imagine the practical chaos: I make a huge transaction of non-tangible goods in a situation where you can't prove that the service/product was delivered. Then I just tag these bitcoin that once belonged to my wallet as stolen if the other party doesn't give them back :-) you see where this is going right? :-)
Actually, unlike any commodity or any currency with a physical representation. What makes other currency not traceable is the notes and coins, not the fact that they are fiat or not.
side note: has "fiat" now become synonymous with non-crypto currency the same way hacker has become a swear word ?
Yes fiat has become a word of derision amongst the cryptocoin community, completely ignoring the fact that cryptocoins are essentially a form of fiat currency. Many crypto fans sidestep the fact that cryptos also don't have intrinsic value, and the networks aren't as a decentralized as one would think(handfuls of devs, early adopters, and pool and exchange operators hold a large sway over the networks and future of the coins).
Aren't "mixers" basically acting as money launderers in that scenario? In the real world that is illegal and frowned upon so it should be in the bitcoin world too. Suppose I'm running Honest Business Inc. Since all transactions are public info, I can easily refuse transactions from mixer addresses. I can even decide to refuse transactions from address which are < N nodes separated from mixers and so on. If everyone in bitcoin land decided to freeze out blackmarket addresses it would make it very hard for crooks to use their stolen coins.
>It's a very interesting development as it shows that stolen bitcoins can be tracked indefinitely unlike FIAT.
You can track dollar bills by their serial number. It's basically the same thing as what's going on here, except that few people record the serial numbers of their bills.
Hmm, not in real life. I can write a script that parses the blockchain and keeps track of the transactions.
How many people/authorities can do that with FIAT? Not to count the impossibility of actually tracking down FIAT that has not been used by a bank or authority that CAN actually control the unique number :-)
So in case 1 it's very easy to do, in second case is almost impossible outside very well defined scenarios (police trying to frame drug dealers, etc.)
> What if there was a way to tag bitcoins as stolen and declare them null and void?
When you say that sentence, replace the word bitcoins with gold. I say this because in essence, bitcoins are a finite resource that have perceived value. They also are harder to obtain the more people mine them. Now think about what would happen if someone stole gold and an authority (which doesn't exist) declared the stolen gold null and void. Someone, somewhere with lower ethics would be very happy to take the "null and void" gold because the fact that it's stolen has absolutely impact on it's value.
Gold is much easier to melt and cast in new “clean” ingots. It’s not possible to trace it, so nobody could declare some of it void. But each Bitcoin transaction is public, so it’s easy to see the origin of each Bitcoin.
But I think this idea has many technical and psychological problems . You essentially need to fork the Blockchain and convince the “51%” to use the new fork where these Bitcoins are illegal.
Doge recently changed some details of the mining procedure using a hard fork, but they have a strong central organization and they pretend that Doge is not a serious coin. An equivalent change in Bitcoin would be much more difficult.
Is it really not possible to trace gold? I was under the impression that for much of the gold out there you could use the "footprint" of contaminations in the gold to infer the age (since mining) and procedence to a certain degree.
Of course, if you melt it in a top-notch facility, they'd probably be able to heat out the contaminants (or remove them chemically?), but people trading in stolen or otherwise "hot" gold probably don't have access to such facilities.
I guess that removing the contaminant traces is very difficult or impossible (unless you have a very hi-tech facility), adding a few contaminants looks easier. Anyway, mixing gold from different source should give a new contaminant composition that makes it very difficult to trace.
> When you say that sentence, replace the word bitcoins with gold.
Let's suppose that this gold is Nazi gold, taken from Jews. You know that Nazi gold will be traced to you(because each gold atom has an address). Would you still accept that gold as payment?
I'm not an expert on bitcoin though, so my analoy could be way off.
> What if there was a way to tag bitcoins as stolen and declare them null and void? Would this not disincentivize thieves?
It would both disincentivize thieves and honest users.
It was decided in a legal case over 300 years ago in Scotland that it would ruin the point of money if stolen money were - like all other goods - the property of their original owner: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2260952
I think it makes sense to apply the same principle to bitcoins.
there is no such thing as an individual "bitcoin". It's just a numerical balance associated with a wallet. There is no way to mark a certain subset of bitcoins as invalid.
At best you could flag wallets, and any wallets who've made transactions with those wallets, etc., etc. which is basically what the people on reddit are doing to "trace" the coins. But, as many have mentioned before, it is not a very accurate way to trace the transactions especially if a service like a tumbler is used.
In theory, this is already possible. Anyone can patch the client to reject transactions containing such coins; the key is getting enough adoption for it to be meaningful. (I imagine starting by forking mining-specific applications like cgminer would be more effective than forking the client apps, since you really want to get 51% of the network to reject these transactions for it to mean anything.)
cgminer never sees anything but the block header, it makes no decisions at all about which transactions to include in a block. The client is still the thing that does that.
You can modify clients to reject coins from the given address. If more than 50% of the network has modified clients, it will be very hard to spend the coins for thief.
As I've mentioned before, this sort of thing is usually correct in that same way a broken clock is.