Bitcoin Forum

Firstly, this is NOT a suggestion for a fork/change to Bitcoin itself. It's some thoughts that I've been pondering about an application of Bitcoin that could add legitimacy back to Bitcoin itself and hopefully allow for greater adoption in real world business.

Bitcoin's anonymity - or more accurately pseudonymity - seems to be a central focus of discussion. The pseudonymous transactions are understandably criticised in the press and by politicians. This criticism should be taken seriously by those (such as myself) who would like to see Bitcoin flourish and to become a 'grown-up' currency. It's hard to see large corporations such as Apple, Google or Sony PS3s(!?) accepting payment with a currency that has such strong associations with criminal activity*. In short, Bitcoin needs to grow up, cut its hair and get a job.

One of the ways Bitcoin could grow up is to make it possible to add legitimacy to a Bitcoin account for those who wish to do so. But before anyone jumps down my throat, I'm not suggesting that *every* Bitcoin account itself is legitimised, merely that an owner of an account *may* have a mechanism for attaching their account to an online identity. This post is about the feasibility of such a mechanism, what it may look like and how Bitcoin could give birth to its own saviour.

I've been eagerly anticipating the arrival of two technologies for a number of years: The first - a decentralised electronic currency and hey presto here it is! Although I've been suprised myself how long it took me to discover it (eventually a Reason TV video lead me here). The second - a robust decentralised compounded networked identity that allows us to gain trust based upon the type of peer to peer validation you would get in the real world. I believe that Bitcoin makes the second feasible and that the second could improve the legitimacy of the first.

Why the need for networked identity?
I'm based in the UK where the previous Labour government were intending to introduce national identity cards before there was a general backlash against them on the basis of civil liberties, costs and effectiveness. The whole scheme was slowly dismantled before the change in government finally put the stake through it's horribly murky black heart. Had the scheme actually been put into place then I'm sure that fraudulent identity cards would soon surface. I was reminded of this fact by a policeman who said that making some arrests became problematic when a single person could potentially own 5+ driving licences with different names on them but with the same picture. So big agency/government ID schemes are prone to abuse and once you have your hands on a big key - such as a passport - then you can start to open some big locks without you ever needing to revalidate.

Secondly, you don't want to take your passport, driving licence and copy of your birth certificate when you're at the library (Yep. I know. Who uses a library these days.). Don't take a gun to a snowball fight, right? You wan't your identity credentials to scale to the environment.

Thirdly, current methods of portable identification such as OpenID don't include your ranking or some indication of built up trust from multiple sources.

Fourthly, <strong>and this is my key point and where I think Bitcoin comes in</strong> - current methods of building up identity, both online and offline, often miss out on the references we get every day and from long term relationships. The very things that really indicate who we are such as:
 - friends and family who are willing to vouch for our identity
 - sending an email to a friend, client or colleague
 - a bank that you've been using for 20 years
 - a neighbour
 - work colleagues
 - a personnel record at work
 - doctor, dentist, optician, shop purchase
 - an online transaction

Your identity should ideally be built up by the compounding of all these minor transactions and relationships.

What benefit to business?
- It's cheaper? You're only requesting the level of identity required to balance with your perceived risk in the event of a an incorrect identification.
- Greater credibility of the identification.
- The opportunity to have very high level identification. The equivalent of passport level (and probably greater) clearance.
- The opportunity to have very low level identification. For example, anti-spam measures for email.
- Attributes such as your bitcoin address, name, telephone and home address may be amalgamated together and presented to a tax office as a method of legitimising bitcoin addresses for business transactions.
- Businesses that wish to keep within the law may only wish to transact with a business that have a bitcoin address registered with a tax office.

Advantages to a Bitcoin account holder
 - The ability to demostrate that a Bitcoin address is associated to your ident and thus the ability to quickly gain trust with a stranger.
- THe ability to legitimately trade and use bitcoin for business use.

How bitcoin may solve the problem
As I see it, one of the barriers holding networked identity back was that the references given from one peer to another had no value. An analogy would be the low cost of sending emails and the spam email problem that bitcoin supposedly has it's roots in. But bitcoin would appear to solve that problem as it may solve the spam email problem in the future. With Bitcoin we have a mechanism for electronically saying "I really mean this". That's an incredibly powerful tool.

What I've discussed here is a long way from a solution and I've really just laid down my thoughts in the hope that someone else might be add to the discussion and potentially tell me that it's crock or that somebody is already doing it. I feel like I'm looking at a load of tools and material in front of me and thinking "there must be some way to fit all this stuff together to solve two desirable goals of a decentralised currency and networked identity and that maybe the relationship might be symbiotic".

I look forward to hearing your thoughts.

BELOW - Just some initial thoughts on what might work/be desirable.
===========================================
I want to be able to give other people confidence that I am who I say I am.
I only want to disclose the amount of information that I feel the person requesting it needs.
I want access to the information to be flexibly priced so that the person requesting the information has a financial incentive to only request what is needed.
My identity should be easy to piece together from peers who are willing to say "Yes I know that guy/girl" as they would do in real life.
Institutions should be able to vouch for me such as a bank that I've always used since childhood.
Vouching for another should cost the person doing the vouching so that references are not given freely and retain value.
You shouldn't be able to just buy yourself trust.
It must be trivial to vouch for someone else for a very small fee. (e.g. Yes. I'm willing to vouch for this person's email address for 0.01 pence.)
If I vouch for an identity then I should be penalised if that identity is abused. (Note - this is different from the identity being used for nefarious purposes.) Ideally this should discourage a person from giving major positive references to someone who's identity they do not trust.
The system should be amoral.
The strength of my own identity should increase the value of the references I provide.
I should be able to abandon an identity and start a new one.
It should be possible to vouch for an identity attribute or group of attributes. I.e. (I'm his neighbour - yes he does live at X address OR I meet him down the pub and he does have red hair but I have no idea where he lives OR I've had business transactions with him and he does use xxxxx@example.com email address but I know very little else about him.
If an identity is stolen or compromised then it should lose credibility to the extent that it has been compromised. It should be possible to 'mend' - or if a major infiltration 'abandon' - a stolen identity.
A compromised identity should be recoverable with the assistance of peers or referees who are willing to revalidate.
Stolen identities must lose credibility quickly.
There must be an incentive for an entity requesting identification to pick up on stolen identities.
Ideally, identity theft would have sufficient disincentives that it would not exist.
I may wish to attribute a Bitcoin address to my identity to give confidence in business transactions and to allow for taxation, accountability etc.
I may wish to be 99% legit in my business dealing but make the equivalent cash withdrawals for illicit purposes.

Just my thoughts...

Discuss and play nice!

* Leaving aside for the purposes of this discussion whether they should be criminal at all.

Most of the things you've mentioned are superfluous.  

When you open a back account (at least here in the US), you're usually only required to submit two forms of official documentation to prove your identity.  This establishes enough trust generally for you to be able to write personal cheque to random merchants who have no idea who you are or what your reputation is. The fact that you have a bank account and can write cheques against it is good enough for most merchants. Encouraging them even more to accept your paper cheques, is the fact that their bank account which they'll be cashing it with, and in all likelihood, YOUR chequing account that they'll be cashing it AGAINST, are all insured by the FDIC (again, in the USA).

You're trying to re-invent the wheel here.  All bitcoin needs are trusted, insured banks.  The accounts issued from them should then be all the networked trust you need to do business.

This already is partly modeled in the GPG web of trust. Hmm, that's an idea - I wonder if I could put a Bitcoin address as a comment on my keyring.

convince/recruit/hire/establish bank in off-shore  for this purpose.

I quickly scanned the text and while I think it's a reasonable proposition (as a voluntary system, obviously), condescendent wording like "Bitcoin for grown-ups" and "cut its hair and get a job" is... not very appropriate in my opinion, and actually rather offensive.

I'm sorry. My intention wasn't to offend.

There is a need for a distributed system of reputation but I don't think identity should be a part of it.  It should allow users to reliably predict trust of trading partners who they have never met and do not know, based on trust connections between them.  There is a predictive algorithm that may be able to do this with some accuracy.  I don't think GPG web of trust does this, you have to build it yourself manually.



No, we don't want to place our trust in banks!  Utterly misguided.

YOU don't want to.

What is with this utterly fucking asinine idea with a lot of you children here that bitcoin belongs to you and should always be this anarcho-libertarian bastion of financial freedom?

Get a fucking clue.

Merchants and consumers DO WANT trusted banks.

YOU don't.

And in the grand scheme of all things financial, YOU don't fucking matter in the least.


EDIT: I respect your rage against present financial institutions, but suggesting "bitcoin banks" doesn't also suggest fractional reserve banking and fiat. You should have made that distinction yourself.

For example, I may wish to sell a valuable object to somebody over the internet and the value of that object is high enough that I'd really like to know their real name and address and that the Bitcoin address they've given me is an address used by someone with a significantly high reputation - a reputation that was costly (either financially or by sheer time/effort) that they wouldn't wish to tarnish that reputation. In that scenario, I would like to request their 'meatworld' identity attributes.

In smaller transactions, it might suffice just to know that the bitcoin address they're giving me is linked to their highly rated ebay username.

To put my rather lengthy - and to some, offensive - post in shorter terms...

Does anyone else here have an interest/thoughts on the possible synergy between Bitcoin and networked identity?

I was thinking of a peer-to-peer system that records successful transactions between people and then uses an algorithm to give a statistically reliable prediction of a successful transaction between two strangers who are, however, somehow linked, 'six degrees of separation', etc.  You could also pay a fee to a 3rd party to 'insure' the transaction, guaranteeing safety for whatever size you want, while maintaining a level of privacy (though not really anonymity).  I think this would be a very useful companion service to bitcoin.


No they do not, they want a secure way to store wealth.  Banks have been the usual way to do that for quite a while, people see them as a necessary evil.  If there were another way....

Btw, you are a strange fellow calling people childish while repeatedly chucking your toys out of the pram and going "WAAAAA".  :D

Yes, I think that 3rd party merchant services such as Dwolla Grid and ultimately some form of banking institutions will serve as de facto web-of-trusts.

Trying to somehow build this into Bitcoin or the bitcoin network somehow is just a waste of time.  We need reputable businesses built around BTC, not innate trust mechanisms.  The latter will follow from the former.

Yeah, here, have my French Tickler!

*THWOMP*

If there were another way...

What's your supposition on that?

My feeling is that "bank" immediately conjures up some image of ruthless tyrants raping people of their money and manipulating the value of currency and the like.

Well, Mt. Gox and TradeHill are a banks, any time you leave BTC or USD on them.  Dwolla is a bank.  You trust that both of these entities are secure enough to hold your assets, AND to facilitate trusted exchange between parties.

That's a bank for you! And I'm SURE you like using the services of Mt. Gox, TradeHill, and Dwolla.

Here, have another French Tickler, thisone's a bit dirtier though...

*THWOMP*

As the owner of a hopefully reputable business that's precisely what I'm getting at. I'd really like a mechanism to demonstrate that payments to a bitcoin receiving address are taxed and legitimate.

I certainly do not store assets on any of those sites, I do not trust them to hold assets on my behalf and no they are NOT banks.

You really are clueless.

At least in the US, you just report your income. The accuracy of each and every single transaction is really quite moot.  The IRS doesn't care about each transaction, unless they audit you. Then they want to see a "paper trail." This "paper trail" could amount to your own hand written invoices and receipts. As long as a potential investigator could follow your paper trail to get to people you've bought or sold with and verify transactions, you're all good.

Point is, this whole idea of such granular accountability being useful or even a necessity is silly.

Just do your business and keep records.

EDIT: For automation purposes such a service would be quite useful, but in reality you could be that mechanism yourself with your own records, so I just mean to stress that you don't need to go out of your way to have some kind of special records to show to the tax man other than the ones you make yourself.

Also, there's no mechanism to tax BTC right now anyway, so if that's your aim, write your congressman or congresswoman.

Again, YOU YOU YOU.

PLENTY of people keep sizeable assets on the exchanges, and on Dwolla.

Just because the Most Illustrious and Righteous aral of the Sublime Kingdom of Fuck-All doesn't, means very little.

I think your concrete brain might need to at least ATTEMPT to conceptualize the abstract idea I was conveying. The ultimate point being that almost ALL bitcoiners presently enjoy a number of entities that act as trusted stores of assets and exchange (a la banks).

Networked identity has more applications than just banking or even financial transactions.

Driving licences, Signing-in at the doctors, online stores, forum postings, email exchanges.

GPG web of trust is a nice idea but I was watching someone on IRC a few days ago giving a #bitcoin-otc trader a rating of 10 when they mistakenly thought the ranking system was a measure out of 10. His mistake was understandable given that theirs no cost or price mechanism involved in giving another person a ranking.

I have been thinking along similar lines. When I started mining Bitcoins 2 months ago, I was amazed to see that people use Bitcoin forums to create white and black lists. And the identities on the list where Forum Nick Names and email addresses. It is obvious to me that Bitcoin will not be accepted as a viable payment method until an Identity/Reputation/Trust system is implemented.

It is very good that Bitcoin is distributed and anonymous by design. But Bitcoin on its own is not enough for a Bitcoin based economy. The bottom line of any business transaction is that both parties can trust that they will receive what has been agreed to. Currently that is not possible using Bitcoin. I do not propose to change or enhance Bitcoin, but to design a distributed Identity, trust and sanctioning system that can use bitcoin for transactions. So it would be a layer on top of Bitcoin.

Trust is difficult to define. But an Ebay like reputation, managed by the whole peer to peer network just like Bitcoin transactions, seems implementable.

I thought I couldn't be the only one.


Exactly! And bitcoin allows us to put a cost against a rating and thus indicate that our rating is not trivial.