Bitcoin Forum

There have been several articles about bitcoin in mainstream press lately.  I'm too lazy to type them out, but one of the arguments is that bitcoin will probably be used by criminal and terrorist organizations (C&TO).

Now, I quite like bitcoin even though I'm a bit nervous about the unbridled capitalism it might usher in, but I'd hope that'd be better than the unbridled, what, fascism? that's taking over the western hemisphere.  So, in short, I'm kind of hoping that bitcoin will succeed and governments will cede some economic power to the public.  That means I hope bitcoin doesn't get branded as money for criminals and terrorists and so become outlawed.  That means we need to find an argument as to why bitcoin won't be useful for such organizations.  Here's a first try.

As things stand,  C&TO have to 'clean' their money.  They have to recycle it through... damned if I know, fake shops, stuff like that. Whatever the core of their wealth is, it's something physical or traceable - banknotes, jewellery, electronics, bank accounts, whatever.  Bitcoins are neither physical nor traceable, so... C&TO's wet dream, right...?  Wrong.

Anyone wishing to destroy C&TOs need to attack on multiple fronts and destroy or remove the source of wealth.  Right now, with physical & traceable things, that's difficult, and whoever does it becomes a target for retribution.

With bitcoin, a geeky teenager in a city on the other side of the world could hack a C&TO's computer and steal their wallet.dat.  Once word gets out that the C&TO can no longer pay it's henchmen, it would silently evaporate.  Alternatively, an informant could steal the wallet.dat, or maybe even an insider who decides to cross his mates.  And no-one would ever know who it was.  The anonymous geeky teenager or whoever does it would have to be careful about spending those bitcoins so as not to expose himself, but that's easily done with a few passes through an anonymizer.

Therefore: C&TO's won't be so interested in bitcoins.  You can't protect them easily enough.

Thoughts?

Quoting an email I sent recently...

With bitcoin, every transaction is written to a globally public log,
and the lineage of each coin is fully traceable from transaction to
transaction.  Thus, transaction flow is easily visible to well-known
network analysis techniques, already employed in the field by
FBI/NSA/CIA/etc. to detect suspicious money flows and "chatter."  With
Gavin, bitcoin lead developer, speaking at a CIA conference this
month, it is not a stretch to surmise that the CIA likely already
classifies bitcoin as open source intelligence (no pun intended).

[...]

Attempting major illicit transactions with bitcoin, given existing
statistical analysis techniques deployed in the field by law
enforcement, is pretty damned dumb.   :)

Why would a geeky teenager stop at stealing just a "C&TO" wallet.dat?

if you would care to clearly and unambiguously define:

1.) the differences between criminal behavior, immoral behavior and illegal behavior, and

2.) the point at which a terrorist campaign (see: U.S.A. ca. 1770-1779, or Israel ca. 1947-50) becomes a heroic effort by the good guys

...i would be happy to reply.

Just for the sake of argument, let's use "The Law" as our yardstick.  The point of this is to counteract arguments that attack the validity of bitcoin in an honest law-abiding world.  Therefore, we must show why any entity that uses bitcoin specifically to circumvent the law, runs a risk not presented by traditional currency or assets.

Maybe he wouldn't  :-\ but you make a good point.  The informant or insider might still be a valid possibility.

mmmph.


there is no such thing as both honest and law-abiding.  laws are designed such that people cannot avoid breaking them - and most especially when endeavoring to maintain rigorously honest relationships with other individuals - thusly ensuring the 'right' of the state to do whatever it would like with its citizens.

so yes then - Bitcoin is just for criminals and terrorists.

Pleeeeease... just for the sake of argument?  Just so we all have a common ground from which to build our argument that bitcoin will not be useful to the bad guys?

To me, Bitcoin is exciting precisely because it lets you do things the government doesn't want you to do. Isn't that the whole point?

i'm sorry - i wasn't really intending to be flippant.

but the facts are that Bitcoin will be very useful to everybody.  bad guys (however you care to define them) included.

the point is that it's just a currency.  it has no moral or ethical attributes.  and no impact at all on what people choose to do with their lives - for good or ill.

The argument that 'every transaction is in a public log' therefore criminals can be tracked is ridiculous. Anyone with enough sense to use bitcoin who wants to cover their tracks can easily use mtgox/mybitcoin other ewallet providers as mixing agents and end up with 'clean' coins (assuming they received 'dirty' ones from a Justice department sting operation trying to trace them or something).

It's not saying anything that https://en.bitcoin.it/wiki/Anonymity doesn't already say.

Modern network flow analysis means you can glean a lot of watching encrypted conversations.  Even without the plaintext, you gain a lot of data about timing, length of the conversation, etc. from observing the bursts of data, over time. It is easy to extrapolate that to bitcoin.

Bitcoin is so open that it's more open than the [partially shadowed] banking system that currently exists.  Our P2P network provides much more open source intelligence than the banking community volunteers, I'm betting, and on a more real-time basis.  Banking systems, no matter how much privacy-killing identity data they dump to the gov't, tend to be slow, often giving the appearance of immediacy by creating a book entry at transaction time, yet handling full settlement in large batches at a later time.

Further, Bitcoin is also so small that large or consistent flows of money are more readily visible, no matter how much mixing occurs; large ripples in a small pond.

So I will always object to calling bitcoins "anonymous, untracable money" because in reality, bitcoins are slightly less anonymous and more traceable than [paper] US dollars.  Telling new bitcoin users that it is anonymous and untracable is quite misleading, because most new users will not take inhuman precautions to make it so.

What makes bitcoins interesting are their global nature, fixed money supply, low cost, and instant transactions.  Anything with a globally public log is going to require a lot of work to be truly anonymous.  Most people won't meet that bar, and probably don't care to either.

Yes, that is the whole point.  It's true that payments can be tracked from a known user to other known users, and in this manner establish a chain of custody.  The problem for LEOs is that establishing a trustworthy link between a bitcoin address (or even an online identity and a real world identity, as one particular government contractor found out to his own detriment recently due to trying to link members of Anonymous to real users on Facebook) to a particular person or organization is not trivial.  And this issue become more difficult with the increase in data set size (the number of bitcoin users) and economic velocity (how fast the currency travels from one person to the next).  So the difficulty that LEOs will have is that they literally will not be able to maintain the resources to pursue all these avenues of activity.  Only the most important (in the eyes of government) activity to prosecute will be actively tracked, which in practice means "terrorism".  The units with the budgets to actually figure who owns which bitcoin address will not care about some random geek ordering LSD for a rave.

Check mybitcoin.com 's terms of use.  They keep extensive records and will be sharing it with whomever if legally ordered.  Laundering bitcoin is not an inherent feature of bitcoin.  It is a willful act.  Laundering bitcoin or cash is illegal.  You will however easily be able to proof where you got your bitcoins from through the publicly available transparent blockchain. Buying digital goods and services is not always illegal.  Depends on what it is.  May Bitcoin DIGITAL RIGHTS TO CRYPTOGRAPHIC KEY CERTIFICATES (backed by a capital intensive network of machines securing this) be transferred, bartered, bought or sold? Is there some law forbidding this?

Yes, if legally ordered by a court in New Zealand.  How responsive NZ's legal system to the want's and needs of other nations remains to be seen.

Well then the legalized framework is in place for that aspect through international treaties.

Perhaps.  It's a good reason to be suspicious of using an online wallet provider if one intends to do anything that would get your government upset, but for the kinds of trades that one would use paypal for, mybitcoin.com is ideal.

Well, alot of people are finding out about bitcoin from articles that are being written about ' Silk Road '.  So, the ignorant masses are seeing that and associate bit coins w\ buying illegal things online so that it can't be traced.

Which is what some people do!  but, that's not what bitcoin is.

Money laundering seems custom made for a good p2p app. I'm sure these will make an appearance at some point. Bitcoin is just the beginning, a whole economy will grow up around it.

Quite true.

Though, bitcoin users should keep in mind that any gov't tracking usage patterns of "anonymous" VISA debit/gift cards is going to turn around and use exactly the same statistical analysis and tracking technology on bitcoin.

Bitcoins are easier to track than paper dollars, that's for sure.

Your local wallet's addresses can be explored on http://blockexplorer.com/ just type one of the addresses you recently sent coins to in the box and click on the addresses in the table to explore.  Also:

http://forum.bitcoin.org/index.php?topic=11134.msg158948#msg158948

This is true, but it doesn't change anything.  You can search your own addresses and see what you paid for because you have the secret knowledge necessary to make sense of that info because you were the one who did it.  Give those same addresses to your cop buddy, and send him to the blockexplorer site, and ask him if he can figure out what you bought or from whom without your help.

Silk Road takes deposits on their site, which winds up being a concentration point of illegal activity.  It will show up quite clearly on a heat map, and could potentially be identified by depositing and withdrawing a certain amount of tracked coins, at certain intervals.  A tech-savvy cop buddy could observe (a) bitcoin-like network activity at Bob's house, and (b) a flow towards the Silk Road "concentration" in the block chain.  Observe several data points over time, and you can build a decent body of data evidence.  Or simply observe Bob's web browser and BlahBlah Tor Site generating network activity at similar moments.

Serious anonymity takes a lot of work, and is darned near impossible if you are making a "noticeable" impact on the network, with your activity.

New users should get into bitcoin with their eyes open. Various amounts of tracking are already done with cash-purchased prepaid phones and debit cards.  If it's an electronic record, it can be data mined for patterns of money flows.  The government is quite skilled in picking signal out of noise, even encrypted noise.

This is still easier said than done.  Like anyone else, Silk Road's internal escrow system can use a different address for every trade.  In practice, this means that successful trades simply show up in the blockchain as A -> B, and then sometime later B -> C.  If you can associate B to Silk Road, you can then assume that both A & C are dealing in illicit goods over Silk Road; but not only can you still not prove that, you don't know who they are and you can't find other Silk Road addresses as a result because even teh normal client will use exact value transactions without mixing them.  And if the values are a round number common on Silk Road, say an even 10 BTC, then even knowing who A is doesn't tell you if C was his dealer, as Silk Road could pay out to the dealer from any single matching transaction.  This is exactly how the bitcoin laundry works.  The client doesn't do this kind of thing right now, but it can be done.

I hear a lot of talk about this but I'm not sure I get it.

Aren't USD used to do everything illicit and illegal under the sun including pay for assassinations, war, and environmental destruction?
Aren't USD just as easy or easier to hide from the tax man's thugs than bitcoins?  The IRS has no hidden camera in my mattress. 
Don't most  "C&TO"  use USD to do business?

 


   

In this thread a bunch of people who know nothing about anonymity or computer security or money laundering (and Creighto) talk about why Bitcoin is worse than USD at protecting "criminals"

Also how are they going to tell Bob is using Bitcoin at a given time? Doesn't Bob use Tor to obfuscate protocols? How do they find Bob in the first place? I don't think you guys understand the model. I will make it short for you.

"Criminals" win
Feds lose and walk off with their tails between their legs

kthnxbye

This has gone a bit off-topic.  The point was that a bitter insider or a police/law accomplice could, maybe, quite easily bring about the financial ruin of a criminal organisation.

I mean, how many of you would trust your best friend with your wallet.dat?  Would you ask him to turn around when you type your passwoord or passphrase?  Is your wallet.dat even encrypted?  I daresay any C&TO that deals in bitcoins will take serious measures to protect their wallet.dat(s), but it would just take one person, one time, to take it all away from them.  Therefore, C&TO's will not deal in bitcoins. 

That's the hypothesis.  Is it valid?

However C&TOs currently handle their finances will lead to the answer.

Perhaps they'll buy insurance.

Only if the organization is small and has a central command & control that is paranoid about their funds, and keeps them all in the same place.  Like any organization, C&TO's are really just groups of people acting in concert.  Bitcoin lends itself well to the movement of funds in any case, and the most likely use of Bitcoin for any organization is the compensation to their dispersed agents.  A snitch could easily get a low ranking agent's wallet.dat, but how useful that data is to tracking the funds of the organization in general depends on just how savvy they really are.  We've all seen the stupid pot dealers, they are the one's who end up in jail.  But what about the smart one's?  I've personally met a professional dealer that used a day job in the construction industry as 'cover' and was never prosecuted even though he was a 'known' criminal who had been arrested repeatedly.  Capturing an agent's wallet.dat makes tracking of funds possible but it doesn't make it likely or useful; as this requires much classic investigations beyond the digital realm.  A captured wallet.dat only lets the police watch the payments of one guy, it still doesn't tell them who the other agents are or anything about them.  For all the cops know, the wallet.dat that they captured could be the agent's personal wallet.dat, and they could be watching him buy carrots.  By definition, if the cops are watching an agent and have his wallet.dat, they already believe him to be an agent.  The data in the blockchain doesn't add any new evidence to this end, although it could be used in court to prove payments had been made in larger amounts than he paid for in taxes.

Ahh, but now they know you have a mattress and where to look. :)

I don't know that that's true.  Look at the government - if bitcoins take off, then the way the government handles its finances will be *very* different.  Me too.  Most people too.  C&TO's too, I presume, if they buy into it.



I'm not talking about obtaining a C&TO's wallet.dat so you can trace their activity.  I'm talking about obtaining the wallet.dat, then transferring the funds to your own wallet.dat, leaving the C&TO without any funds to pay their dispersed agents.  I mean, as long as a C&TO has their funds locked away in traditional assets, it's not easy to it all away at once.  But if a significant part of their wealth was in a wallet.dat and they lost that?  Picture, heck I dunno, a TO paying for an illegal arms shipment.  Both the buyer and the seller will appoint some individual to ensure the safe transfer of the BTCs, meaning you might have a wallet.dat worth millions of dollars.  For this reason, I think C&TOs might be reluctant to transfer into bitcoin-land.

The best defence would probably be to have all funds split into multiple wallet.dats, with no individual ever obtaining access to them all, but that seems far from perfect.

Crypto currency does make it easy to move money around and has some anonimity. But it is more transparent than the banking system and is much easier for Law Enforcement to track suspicious activity.

Whatever system in question - crypto or not, without solving the roots of where criminality stems from, law enforcement is hassling the rest of society without just doing their job.

Majority of laws are made at the whims and fancies of the politicians to serve their own ends, which unduly burden the vast majority of law abiding citizens and stifles them from freely conducting their activities.

If we have a crypto currency with trust in the individual identities and bound by a common, moral and ethical set of principles, then Law Enforcement or governments will have no moral legitimacy in trying to criminalize that crypto economic platform.

This is one of the things Noble Nation (https://www.noblenation.net) is aiming to solve.

Of course no. Bitcoin is freedom. Why only terrorists should use it?

Terrorism is one of the most worn out excuses implementing more regulations and limitations upon people.

I don't think that you can say that bitcoin is ONLY for them...but many of THEM use it...like all other technologies in our world

I think you may be confusing bitcoin with the US dollar... which for one century has been the number one store of wealth of criminals worldwide.

Okm, everybody can use cryptocurrency, including terrorism and so on, but let be real, at current time someone is financing those antisocial acts and i don't think that they have a lot of bitcoins. This argument is just an argument in the lack of it.

Of course not, everyone can use bitcoin not just for illegal activities but the main purpose here is we need to be decentralized people right now thinking when and where they should put their money. in the first place governments knows best for us they know how much money we have in our bank account, so bitcoin is here to help and get rid in our banks.

Disruptive innovations always face with resistance

Cars also can be used by terrorist to bomb

Any tool can be misused by bad people. Crypto is just a tool.

They are magnifying and blaming a wrongdoing because of bitcoin but when will they blame firearms like guns?

Nope I don't think so there are tons of people who are using it for their living,
I don't really think that they are considered as criminals or terrorist just because they are earning their money through bitcoin.