Bitcoin Forum

I have been pondering over the ramifications concerning multi-signature transactions in bitcoin. While there are some very useful capabilities that can be enabled with this feature, I am concerned that there are some highly undesirable potential consequences as well.  Please convince me that I am just being paranoid, and that these fears are unjustified.

Suppose all of our grandest dreams are realized, and bitcoin has become a world-wide currency.  You buy gas with it, you purchase your groceries with it, and you pay your taxes with it.  There are no central banks, inflation is a thing of the past, and bitcoin has been declared a world-wide legal tender.

Unfortunately, not all members of the U.S. government are happy about their loss of control over the world's finances that bitcoin brought about.  Consequently, they pass a law that all payments made by the U.S. government must send to addresses set up with multi-signature transactions.  The receiver of the bitcoin payments retains one signature, but the U.S. government retains the other.  The law is sold to the public as a security measure.  After all, if a thief steals a person's bitcoin wallet, the thief cannot spend the coins without first getting approval from the U.S. government.  Of course, this requires that the valid owner of the bitcoins must have some form of government ID, similar to a credit card, to identify himself when he tries to spend his bitcoins so the U.S. government can validate the transaction as authentic.

The receiver has no choice but to accept payment in this way, because bitcoins have been declared legal tender, so it is illegal to refuse bitcoins as payment.  Having to identify oneself to spend bitcoins is somewhat annoying.  However, the added security is worth it to most people.

Several years pass, during which the U.S. government convinces other governments to adopt the same policy and form an alliance.  Collectively, they form the World Transaction Federation, or WTF.  After the vast majority of countries have adopted this practice, the U.S. government decides that security can be tightened even further and gets all of the WTF members to sign a treaty stating that bitcoins signed by WTF members can only be spent to receiving addresses similarly signed by WTF members.

Several more years pass, and the world-wide bitcoin economy keeps chugging along, with a greater and greater percentage of the total bitcoin supply falling under WTF control.  Finally, after the WTF controls 99.9% of all bitcoin currency, the WTF collectively decides that the world economy would greatly benefit if the WTF could control the supply of money directly, rather than having to perform its work in the straightjacket of bitcoin.  Consequently, they pass a law that states that no WTF member can sign any bitcoin transaction, except those that exchange bitcoins for some lovely freshly printed bank notes.  Not to fear, though.  The notes are backed in value by gold.  So there is nothing to worry about...

LMAO at WTF! I like how you think. I also like how you write.

~Bruno~

Hence, the State of the World Today.

They would declare Bitcoin a terrorist plot, and nations not making it illegal an "Alliance of Evil" long before that ever occurred. They'd probably arrange for some lucrative (for them) false flag financial meltdown event and blame it on Bitcoin as the impetus for making it illegal. "They" would never allow loss of control like that. Some people would whoop and holler but the average peon would be happy that their safety is being watched over by the govt.

Pretty much this.

Let's not mince words. Bitcoin has the potential to be a tool of financial freedom so powerful it could completely shake up the status quo.

It also has the potential to be a tool of financial control so complete it could qualify as a Mark of the Beast^(tm).

It all depends on the people. If everyone rejects government involvement and refuses to allow centralization, we win. If everyone just accepts government controlling it and forcing you to use it a certain way, we're doomed.

I don't see the problem with the OP scenario. I have suggested this numerous times. It simply gives tracking capability to law enforcement. It does not remove privacy and doesn't give away control of your balance. Now if you are saying that this WTF (nice) can actually control your spending, that's another story and I doubt anyone would allow any government to do that to the Bitcoin network law or no law.

That's not how multisig as far as I understand them will work.. You will always have a secured backup wallet with both keys.

If the WTF is signatory on a multi-sig transaction then that presumbly means they would exert control over each and every legal transaction. One can easily imagine they would maintain blacklists of addresses at a minimum and block transactions. With more sophistication they could go further, controlling spends based on time, total volume, economic indicators etc.

The natural result would would be forming a new blockchain without those controls and which in this context would be treated as illegal, black market transactions by the WTF.

At least they would not be able to print money. Without that privilege, governments won't be nearly as powerful and corrupt as they are now. It's still not such a bad scenario. You can always still trade gold.

If you can send a coin to an arbitrary address, you can send it to yourself to remove any restrictions. If you can't send it to an arbitrary address, then it's not a Bitcoin and existing vendors won't accept it. This works out the same as if a government created a new currency on a separate blockchain, and offered to trade it for bitcoins. It might catch on, but it would be less valuable than Bitcoins and people probably wouldn't get them confused.

I prefer Standard Transaction Federated Union.

This.

Stop blaming technology for weak minded people.

Could the govt subvert Bitcoin and uses it to enforce a loss of freedom?  Sure however the same thing could be said of the internet too.

The solution isn't a fear of tehcnology.  The solution is standing up for your rights.  Soapbox -> BallotBox -> Ammo Box.

or just accept the dominance is either than resistance and get with the program. 

I think his story was tongue in cheek.  Remember most of the world currency was gold at one time, then redeemable for gold, then backed but not deemable for Gold, and then finally backed by nothing.  History would likely repeat itself.  Within 50 years it would be back to pure fiat.

The example was tongue in cheek, to illustrate the extreme case.  However, the concern is real.

If you allow multi-signature transactions in the blockchain, that essentially means that all parties must agree to spend the coins in that transaction.  If one party has more military authority than the others, in that they can impose their will on the other parties without ramification, a problem potentially arises.  This is especially true if that party is willing to just let those coins rot in the block-chain forever.  The government wouldn't be the slightest bit concerned if you can't spend your money.  All they would be concerned about is whether they are exerting control.


It is not a matter of people giving up their responsibilities.  I'm not talking about you giving the government one of your signatures.  What I am saying is that when the government first gives you payment, that payment will be delivered with the government first generating two signatures, and then giving you one of them.  After all, they are the ones starting out with the bitcoins, so they hold all the cards.  Your only option is to refuse payment.  But, government employees and business that serve the government don't really have that option.  It is not reasonable to expect that even a significant fraction of people working for the government would refuse payment.  And, even if they did, there would be plenty more stepping in to take their place.

If a government has the capability to exert control, and has the need to do so, it will exert control.  Once a government has their hooks in one multisig transaction, they can refuse to allow coins to be spent unless they have hooks in the subsequent transactions as well.  Bitcoin without multisig capabilities does not give governments this hook.  Bitcoin with multisig does.  Whether you see this as a problem or not, is purely up to you.  However, I believe that this goes against the original spirit of bitcoin.

Poe's Law. http://rationalwiki.org/wiki/Poe%27s_Law (http://rationalwiki.org/wiki/Poe%27s_Law)

The good thing about bitcoin is it's easy to create a new blockchain with different characteristics, so if bitcoin was ever corrupted by govt's people could just start a new non-scam blockchain.

So far, I think the pace of technological change has outrun governments' ability to figure out how to use it to exert control.

Maybe governments will get more nimble, but I'm going to continue betting that entrepreneurs and individuals will continue to widen the gap between the new freedoms that technology enables and what the law allows.

RE: multisignature transaction dangers:  I'm completely convinced the (large, practical) benefits far outweigh the (small, theoretical) risks that it'll be abused by some repressive government(s).

Wait, so OP's scenario is plausible?? I thought the multisig transaction idea was suppose to have a backup wallet where you didn't need anything else to have access to your Bitcoins?

Multisig is like requiring two people to know only half of a password each, instead of both of them knowing the full password.

Plausible in the sense that you would accept having a "joint" account with the govt. People don't do that now so it seems unlikely they'd be very willing later. I think the idea was that thru a series of moves the govt convinces people that having a joint account with them for their own protection is a good idea. Personally I can't imagine many people feeling good about having a "joint" account with the govt now or in the future.

Be safe, Let Big Brother watch over your money.

Multi-sig is just what it's name implies - multiple signatories [addresses] needed to spend the money. A backup wallet is only an example usage based on the idea that the backup has both addresses present whereas the normal wallet does not.

I understand that but I thought when this idea was first presented it was said that the user would keep both key's a in a backup wallet so you couldn't be held hostage with your service provider.

small theoretical risk =/= plausible.  There is a small theoretical risk that all life on the planet will be exterminated via events we either will not be able to detect or will be powerless to stop.  :)

Plenty of people, in a sense, have this, at least in the U.S. It's called a bank.

Government thinks you're a criminal? Boom, your account is frozen. They think you owe them something? Boom, they take the money out directly. The fact that they don't do it that often doesn't mean it never happens. And most people still wouldn't DREAM of not having a bank account, or worse, banking with some *unregulated* bank that doesn't do what the government tells it to.

I've even heard the sentiment expressed in this forum that letting government take a little bit of control of bitcoin in some form or fashion is a good thing because it lends bitcoin legitimacy! To my mind, the idea of there being a push toward government-controlled (read: "regulated") multisig accounts isn't just plausible, it's a question of "when", not "if."

This crossed my mind a while ago, happy i'm on the same page with others. So we would have a great benefit with increased wallet protection and easier escrow but any government could adopt bitcoin as legal tender and force everyone use the multisig too. Crippling the Bitcoin client to generate only multisig with a predefined gov key would be easy given that the project is open-source.

Yes, that's the use-case I care most about -- you have control over all of your keys, you just put them in multiple places so if you lose control of (say) your computer you don't lose your bitcoins.

But there are other use-cases, like you agreeing to let the government control half the keys, so the government can "guarantee" the transactions, etc.  I can imagine the PR campaign: "It is just like Federal Deposit Insurance (FDIC), only for Bitcoin!"

I don't think that will ever happen, though. I know I wouldn't trust the government to keep the keys to my money safe and secure, I don't think most people would, either. More likely is most people will trust banks to hold half the keys, and the governments will then regulate the banks like they do today to get information about who is paying who for what....

I see, ty for the explanation.

Excellent thread! I agree that having govt-controlled multisig accounts is just about time.
When somebody asks why would people want to give up control to govt, they miss one point.
The point is that most of the people will probably hear about this stuff from govt in a first place.
It's like "have you heard our govt came up with this new currency bitcoin to save us from financial collapse?"
So for them it will be the only way to do business and get their salaries. They wouldn't even know that once bitcoin was free.

The question is whether they will be able to technically outlaw non-govt controlled transactions.
Since P2SH addresses are clearly distinguishable from normal ones, they might just declare original ones illegal,
forcing current businesses to convert

This may hasten the day that a govt adopts bitcoin as a national currency. Bring it on!

If the govt gains power because people give them the power to control their money, then good for them. But then we will have a lot of people who may decide to jump the fence and run for it. Good for them too.

More people using bitcoins = progress. And at whatever cost.

I have been thinking it would be great to have an alt-coin designed around creating easy to set up currencies for small countries. It would include automatic taxation, inflation, and redistributionist rules. It would be able to contact a central government server so that taxes could automatically be passed to the separate bureaucracies of government. No need for a treasury, this will automatically be passed down the pipeline. Toss in merged mining and miners all around the world will have a little of that country's money, and will help with exports.

Basically you can have "smart" money that will behave according to publicly known rulesets, and with absolute transparency. The country could mint their own bills (or ahem printcoins :) and they could be deposited in your digital wallet by scanning them (no bank needed). Counterfeiting would be quickly detected, no one would need to control the production of money, and the government can add in whatever nasty little controls that they like.

The perfect stage for a compromise between liberty and authoritarian self-empowerment.

The day the evil gov't gets into bitcoin, I am out of it (and into the wild alt-coin west).
I wonder why the poster who like taxes and regulations got in in the first place. 

Well if you consider the scenario when instead of creating its own blockchain govt announces bitcoin to the masses.
They then release their official client (which is originally compatible with bitcoin) and tell people that they can mine for bitcoins to help our economy grow.
Imagine the whole population of US compared to our little community here, no one would even remember us after that.

They do a few tricks however, they make sure that default addresses in their client are multisig with second key belonging to govt.
They also build the mining capability into the client so that people would start mining right away.
The only way to make it compatible with bitcoin network is if the latter supports multisig (which it is going to right about now).
The final step after critical mass was reached they release update to their client (maybe automatically) that outlaws the original addresses.
300 million miners across US would outhash the existing network with new rules turning current bitcoin community into a bunch of outlaws...

A : The problem is that we who know about Bitcoin have significant control over the news pipe. (can't cover this up)
B : They would just start their own chain from scratch or with premined coins ;).

A: I don't think that any of our current news pipes would compare to Mr president Obama telling his dear citizens that our economic situation is swiftly approaching a point of no return and we have just come up with a great idea how to fix it, a new currency - bitcoin!

B: This way they won't be able to destroy bitcoin, in my scenario they will!

What would be the incentive to support that blockchain and not ddos it?
[edit] I think you were kidding.

If the question what is the point for govt to support bitcoin - the answer is to take control over it via multisig.
If the question what is the point for current bitcoin community to support govt-hijacked bitcoin network is because you probably have some investments in bitcoins already and you will loose them if you quit that network.

But if a govt decides to start an alt block chain, would you support it if

or would you?

The trick is that Bitcoin is a brand, people will learn that it is decentralized international and all good, so when the govt says they support bitcoin people will buy into it. Only to learn later that govt took control over it. If govt announces alt-chain well the bitcoin community might start to argue that it is bad and corrupted and that our public chain is better. At least we would keep our ways intact and will be able to continue building the infrastructure.

So the solution seems to be:
1) Get to the masses before govt does. Then people will know that there is open source client as well not just the govt one.
2) Make sure that format of P2SH addresses doesn't make a particular scheme easily recognizable
If the format of (user key + govt key) is easily recognizable from format (user key  + another user key) then the second format can be outlawed.

Banks are essentially an extension of the government.  So, I could see a government placing trust in a bank to keep/manage the government keys since they have control of the banks anyway.


You feeling good about it or agreeing to it is irrelevant.  Here's the basic way I see this happening:

1) You pay your taxes in bitcoin to whatever government you are a citizen.  The bitcoins you use to pay your taxes may be single signature or multisig, it doesn't matter.  They will accept any kind of bitcoins whatsoever.  In fact, they would prefer you sent them bitcoins that weren't multisig so that they could then "brand" them with their own signature, thereby increasing their influence over the system.

2) You file your taxes and declare how much of a tax return the government owes you.

3) The government generates a multisig transaction containing the number of coins needed to pay your tax return.

4) The government sends you one of the two signatures to that transaction along with an ID card to identify yourself when you want to spend the coins.

5) At this point, you have two options.  You can either spend the coins in a government approved transaction, or you can choose to not spend the coins ever.  The government doesn't care, because they consider your tax return paid in full, whether you like it or not.

6) If you choose to spend the coins, the government has veto-power over where and how you can spend them.  They use this veto-power to ensure that the person receiving the coins accepts them with a multisig transaction in which the government has a signature.  If the recipient refuses, the government refuses to let you spend them.  In essence, once a bitcoin is "branded", it will forever remain branded regardless of how many transactions it goes through.

This whole process does not require the government to outlaw normal single signature transactions.  Nor does it require them to create their own client that prevents normal bitcoin transactions or fork off an entirely new block-chain.  All it requires is for them to be patient.  Over time, more and more bitcoins would be branded and fall under government control.  Eventually, the vast majority of coins would be branded in this way, giving them sway over pretty much the whole network.

Now, there are both benefits and drawbacks to this.  You will have to decide whether you think the benefits outweigh the costs.  I just thought I should bring it to everyone's attention that multisig transactions open up this possibility.

You have literally zero idea what you are talking about so Standard Transaction Federal Union.

I will be happy to STFU, as soon as someone explains where the flaw in my logic lies.  If this is not an actual possibility, I truly want to know.

Please enlighten me.

It doesn't matter what governments want. We will want law enforcement to protect us from using bitcoin to harm us, but beyond that goverment will no longer be able to print money. They will take the tax money we give them for the services we need and no more.

Yes.  There will only ever be 21 million bitcoins.  This point I concede.

Coins aren't branded with signatures in some permanent way. There is no difference between sending coins by signing with one sig or with two. If you get sent coins that used to be encumbered by A or (B or C or D) or (D and E) it makes no difference, whatever the inputs were have no bearing on what the outputs can be.

In general though if the government passes a law requiring us to wear shoes on our heads it isn't safe to assume people will actually wear shoes on their heads.

You need something more convincing than "the government will tell us to hand our money over". Getting our gold money took generations, and now we have so many more advantages.

The cost to the govt of checking that all citizens are wearing shoes on their heads at all times is prohibitive.  The cost to the govt of checking that one of their keys is present in every Bitcoin transaction is not.

Very unlikely they would ever care about taxing alpaca socks, but if this hypothetical did happen the barrier to entry is probably just the Treasury Dept. asking AT&T to kindly let them borrow the fiberoptic line they installed for the NSA, then send out requests to ISPs for the identity behind every IP address that originates a transaction without a govt key.

I see the confusion.  I apparently used a poor choice of words to express myself before. 

I understand that there is not really a permanent "brand" on the bitcoin transactions.  I was using the term "brand" to signify a chain of government signatures, and didn't explain myself well enough.  Let me drop the term "brand", and make another stab at explaining what I was driving at.

Suppose we have a transaction that requires two signatures, A and B, where each signature is held by different individuals: person(A) and person(B).  Each of those individuals has veto-power over spending the bitcoins represented by the transaction.  Because of that, either individual can impose whatever restrictions he wants before agreeing to sign.  One possible draconian restriction that person(A) could insist on is the requirement that the coins be sent only to transactions that person(A) can sign.  If person(B) doesn't like that, tough.  Person(A) doesn't have to sign if his conditions aren't met.  Of course, if person(A) doesn't have sufficient protection, person(B) can just beat the hell out of person(A) to force him to sign.

Because of this, an entity that has signed a multisig transaction can potentially leverage his veto-power to gain leverage on subsequent transactions.  In the hands of a government, that leverage can be very strong.  That is all I'm saying.

In any case, I believe that Gavin answered my basic question about this, when he said that multisig transactions do actually allow for the possibility of this happening, even though he thinks it to be unlikely to ever happen.  I am satisfied with that and don't need to belabor the point any further.

There is another danger though even if bitcoin rejects the idea of multisig all together.

Govt can always come up with their own network built with multisig in mind where one key always belongs to them.
Make this network hash-compatible with bitcoin and start merge-mining it. Of course people won't know anything about it.
Once govt network gains a lot of power, they can suppress any activity on bitcoin network via merged mining
exactly how Luke-Jr did it with CoiledCoin.

So the the only way we can fight it is not by suppressing multisig because it's irrelevant, but gain more support from the masses before govt does.
This year they will be busy with elections, so we have to hurry up and propel bitcoin to the Moon :)
I think Bitcoin magazine would do a great job here.

Good points all around.