Bitcoin Forum

The potential lack thereof?

There haven't been many or any legal precedents set so far. When they do it'll either be reassuring or there'll be some good old panic. The fact that each jurisdiction can't decide what it actually is isn't helping.

Eventually the FUNGIBILITY issue of bitcoin will make headlines and will be in article titles in the press. <--------------- Smoothie Prediction   

Just a fund prediction I'm making before it happens on a much more apparent scale.

Right now the focus is "BLOCK SIZE"....that will change...

Bitcoin is perfectly fungible. Anyone who claims otherwise is confusing economic concepts.

definition: Fungibility is the property of a good or a commodity whose individual units are capable of mutual substitution. That is, it is the property of essences or goods which are "capable of being substituted in place of one another."

Bitcoin is perfectly fungible. Anyone who claims otherwise is confusing economic concepts.

Bitcoin is perfectly fungible. Anyone who claims otherwise is confusing economic concepts.

we already had this discussion.
maybe bitcoin is technically fungible (because any coin can always be send an mixed) but practically you have problems when using coins which where stolen (eg bitstamp hack) or why do you think new minted coins are sold with a premium?

And don't forget what will happen afterwards...

wow really? lol


here is the definition of the economic concept of FUNGIBILITY:

You sure you want to claim that it is "perfectly fungible"?

If someone decides not to accept some bitcoins vs other bitcoins ....then it is no longer "perfectly fungible".

I can draw and deface a bank note, does that make fiat not "perfectly fungible"?

wow really? lol

I'm sorry but it is increasingly apparent to me that you are making a tragic mistake of conflating very different economic concepts.

For one, individual perception of value is quite different from the market's perception of value.

Bitcoin's traceability might make it interesting for someone with a collector's mindset but it has no impact on its fungibility.

It would be one thing for the market to disagree on the value of individual satoshis but this is absolutely impossible as they are totally undistinguishable from one another. Let me use two different examples to show why your analysis fail:

- Certain gold artifacts are valued at way more important prices then the actual market worth of their weight in gold. Does that make gold a "collectible"?

- A lot of people enjoy collecting notes and coins from certain years. A bundle of cash stolen from a bank might be identified and refused in certain circumstances because of its serial number. Does that make cash a "collectible"?

These two examples, I believe, demonstrate that what you refer to as an absence of fungibility is simply a consequence of individual or authorities attaching subjective value to an item because of its history but this is not an indictment on the monetary system itself!

Imagine one individual in possession of one of these gold artifacts or a special 20$ note attempts, for some unknown reason, to either trade his gold item to a pawnshop or deposit the 20$ at the bank.

What do you guess happens? If we assume the guy running the pawnshop doesn't know or care about the "symbolic" value of the item and is only concerned with its weight in gold no amount of history is going to bring him to buy said item for more than its market worth. Same for his "special bill", the cashier at the bank could not careless if it was used by Al Capone to do lines of cocaine, to her it's worth 20$ and no more.

The same logic applies for Bitcoin. If I am in possession of one of Mt. Gox's stolen coin and send it to Bitstamp, the market is not going to offer me a premium or refuse to buy it. Sure some nerds might cry foul and alert the exchange. In that case I could still head to fucking China and sell the same coin for market price on whatever their equivalent of localbitcoin is and no one will ask me any question.

Let's pretend I have one of Satoshi's wallet address and decide to send him a bitcoin. How can you tell which one is mine from his stash?

In fact I do believe there is quite a lot of people that have sent him dust or coins over the years. If somehow he decides to move this lot of coins to an exchange are people somehow going to make a distinction between his original coins and whatever amount that was sent to him by these clowns? Of course no because they can't!

This effectively demonstrates that your logic does not hold. The market could careless whatever coin Satoshi decides to move, it is not the coins that matter because THEY ARE INDEED FUNGIBLE. It is their owner's decision that has a psychological impact on the market because they can identify ownership through the public ledger. Let's say we pretend that somehow someone is able to tie Satoshi's identity to a wallet/coins from...2013. Surely you would agree that the psychological impact on the market would be the same whether he decides to move these coins to BitStamp or the "original" ones.

All of this is to say you are confusing privacy and traceability and somehow making this aspect of Bitcoin an indictment on its fungibility. Again, this is a mistake.

I can draw and deface a bank note, does that make fiat not "perfectly fungible"?

imagine this:
 - you payed in a store with that dollar
 - the store get robbed and the owner got killed
 - one employee remebered this dollar was still there
 - news reports this with an image with that dollar

is this dollar still fungible or will the thief has problems paying with it?

Assuming the merchant that may accept it is paying attention to the bills coming in...yes they would have problems paying with it.

Most people aren't paying attention to the serial numbers on their bills.

It's not accessible for many to lookup which serial numbers of bills were tied to a specific crime/theft.

Yes, I addressed it in another thread, here's the slightly modified version:

Perfectly fungible is what you said. Your bolded example above proves my point that bitcoin is not perfectly fungible as in your example an exchange/site can refuse to exchange or accept a particular set of coins coming from certain addresses.


Just because you say something, doesn't make it true.  :)

The mere fact that you know stolen coins came from an address to another address...removes the fungibility portion. Who cares which coin was exactly the coin that was part of a scam? The point is that some of them (or all of them) are linked to a known crime/theft/scam.

NOT KNOWING which exact coin is related to a scam/crime/theft is not the way I would define bitcoin being "PERFECTLY FUNGIBLE".

I think you have your concepts/terminology mixed up.

we already had this discussion.
maybe bitcoin is technically fungible (because any coin can always be send an mixed) but practically you have problems when using coins which where stolen (eg bitstamp hack) or why do you think new minted coins are sold with a premium?

Let's imagine I have some coins that I stole during Evolution's demise. Are you willing to swap all of your coins for mine?

Or put differently: if I borrow your car for a month, and at the end of that month I give you back the same make, same model, same year, same colour car, is that ok?

Bitcoin isn't fungible for the same reason that you won't appreciate me giving you some random car in exchange for yours, regardless of the properties of that car.

Indeed, and as you explain we have established that Bitcoin is "technically fungible" which is really all that matters. Fungibility is a property inherent to a system. It is not dependent on human preferences.

BS the FBI stole hundreds of thousands of poeple coins, and had no problem selling it on the open market.

well we need to agree to disagree then.
i want to use money without thinking about thefts or checking its history.
it doesnt help me if is "technically fungible" when i cant use it that way.

we already had this discussion.
maybe bitcoin is technically fungible (because any coin can always be send an mixed) but practically you have problems when using coins which where stolen (eg bitstamp hack) or why do you think new minted coins are sold with a premium?

All US money is numbered, so unless you have a large block of $100 sequential bills it is hard to trace. Fiat is traceable to a point, so is Bitcoin. I really have no idea why fungibility is so concerning. Bitcoin has mixers, convenience stores, grocery stores are fiat mixers, along with that nice restaurant you enjoy.

I don see this being an issue, but maybe my tinfoil hat isn't on tight enough?


Ufo

https://www.reddit.com/r/Bitcoin/comments/3mea6b/bitpay_is_blacklisting_certain_bitcoins_rejecting

Here's an economic concept: the market places a 10% premium on freshly minted zero-taint BTC over 'gently used' coins.  Good luck with your stolen Evolution coins!

Bitcoin doesn't meet the highest 'can't be evil' / 'can't be non-fungible' technical standard because the code may be modified with black/white/grey/red lists of forbidden/allowed coins/taints.

So no need to even get into the more significant (but more general issue) of socioeconomic interchangeability.

Here's an economic concept: the market places a 10% premium on freshly minted zero-taint BTC over 'gently used' coins.  Good luck with your stolen Evolution coins!

Bitcoin doesn't meet the highest 'can't be evil' / 'can't be non-fungible' technical standard because the code may be modified with black/white/grey/red lists of forbidden/allowed coins/taints.

So no need to even get into the more significant (but more general issue) of socioeconomic interchangeability.

I think not. What you are observing is a result of Bitcoin's traceability.

If I can obfuscate the provenance of what you call a "tainted" coin by use of crypto and other technologies then no one will refuse it.

It seems to me you are the one confusing terminologies. Bitcoin does not discriminate one coin from another. Within the system they are perfectly fungible. Only human preferences and personal subjective value could lead one coin to be refused.

http://trilema.com/2014/guidance-there-is-no-such-thing-as-bitcoin-taint/

Indeed, and as you explain we have established that Bitcoin is "technically fungible" which is really all that matters. Fungibility is a property inherent to a system. It is not dependent on human preferences.

BS the FBI stole hundreds of thousands of poeple coins, and had no problem selling it on the open market.

You will, it's a matter of setting up the technology to do it. Monero is cool cause it comes with that feature baked in but it isn't impossible with Bitcoin.

I would also suggest that situations where you wouldn't be able to spend your coin are rare occurrences.

All US money is numbered, so unless you have a large block of $100 sequential bills it is hard to trace. Fiat is traceable to a point, so is Bitcoin. I really have no idea why fungibility is so concerning. Bitcoin has mixers, convenience stores, grocery stores are fiat mixers, along with that nice restaurant you enjoy.

I don see this being an issue, but maybe my tinfoil hat isn't on tight enough?


Ufo

imbécilités

https://www.reddit.com/r/Bitcoin/comments/3mea6b/bitpay_is_blacklisting_certain_bitcoins_rejecting

Yeah sure THAT definition of "Fungibility" of Bitcoin is not dependent upon human preferences. But who cares?

Bitcoin does not use itself. Humans do. That's what matters and that's what gives bitcoin VALUE,.....HUMANS.

If people don't accept your BTC because they have come from a path that leads back to an address of coins that were illegally taken from someone else, then fungibility in terms of its use with HUMANS is broken and not perfect. This is assuming that the receiving party of your tainted bitcoins is not accepting them.

You are basically arguing a definition that is irrelevant to the discussion at hand of why I started this thread.

 ::)

how about you don't use fiat for your Bitcoin business?

do you understand how likely it is or easy it would be for coins to cross path with other "tainted" ones.

this is absolutely a non-issue

Collectors pay a premium for weird things. That doesn't mean that bitcoin is not fungible.
With respect to fiat, collectors have paid millions of dollars for nickels. So that doesn't change anything about fiat's fungibility.

lol so it isn't perfectly fungible then right?

Of course nothing is impossible, but I would think that the unsettlement of the "block size" debate (pretty much one line of code) can't be decided upon. Yet you think the developers of bitcoin can add an entire set of code to allow UNLINKABILITY and UNTRACEABILITY?

Even bitcoin mixers leave someone with coins tracing back to its origin (assuming some stolen were mixed).

I beg to differ on that one.

Yet you think the developers of bitcoin can add an entire set of code to allow UNLINKABILITY and UNTRACEABILITY?

Sorry but that doesn't make any sense. The lists you speak of arbitrary human concepts. A USGian parasites kangaroo court AML/KYC bullshit.

I am confident I could trivially sell stolen Evolution coins on most p2p markets in major international cities today. Only fiat businesses such type of lowly scheme. They are a sham.

Don't let anyone ever tell you your Bitcoin is not as good as another. Individuals currently pay a premium on market because of a lack of private alternatives against traceability. This is a technological problem that will certainly be solved seeing the progress being made. When we do get there anyone still entertaining this notion that Bitcoin is not fungible will surely be looked at in a funny way and any money spent on "clean" coins will be money wasted.

http://trilema.com/2014/guidance-there-is-no-such-thing-as-bitcoin-taint/

it's so non issue that bitpay is blacklisting certain bitcoins...yeah lol  ::)

Haha. You got to br joking. That is a long way before we will make headlines for whatever rrason.

If they don't accept your bitcoin because it was linked to a scam, that's the way it is.

There is such thing a as bitcoin taint because what if I choose not to accept bitcoins coming from the bitcoinica theft? One example of showing how fungibility does not 100% exist is enough to break your "perfect fungibility" claim.

Bitcoin uses no such things as blacklists nor does it taint coins. If such a list exist it is maintained by fiat interests and the rational thing to do is to avoid doing business with such entities.

If you participate into a transactions under such "rules" it is your voluntary choice as this is not how Bitcoin is ought to be used. Being that it is a peer-to-peer currency the only occasion where you should encounter such problem is when dealing with exchanges & USGians "bitcoin wallet services".

What you are looking at is an history of outputs. Each units within the system is indistinguishable.

And btw I don't have to go to china I can do it in my backyard.  

So if I stole bitcoin and sent it to a mixer and someone else got the coin and tried to spend it and let's say that merchant flagged that address because it was linked to a hack/scam/theft...how did mixing the coins fix anything other than allowing the thief to get away with the crime?

The "fungibility issue" you speak of is also a human construction. One that is irrelevant to a Bitcoin economy and that is only an example of how hard wired your brain is on fiat.

You're right, this flagging addresses and blacklisting transactions from addresses won't help, it will ultimately start getting abused, think about it. You sell coins to someone, a cash trade so no identities were involved and after that you go to a forum and start yelling my coins were hacked/stolen and ask Miners and others to flag that address. Now the person who bought those coins is fu**ed, he paid for them and didn't do anything wrong and he's the one who is now called a thief and can't spend his coins? I really hope no more sites start doing this and even bitpay should stop doing this, if they're really doing this i.e.

It is perfectly fungible, what I am saying is you might be stupid enough to do business with people that believe or enforce this sham of "blacklists" and "taint" but that's not Bitcoin's problem.


Yes

https://github.com/ElementsProject/elementsproject.github.io/blob/master/confidential_values.md

Why in hell would you use bitpay  ???

You're right, this flagging addresses and blacklisting transactions from addresses won't help, it will ultimately start getting abused, think about it. You sell coins to someone, a cash trade so no identities were involved and after that you go to a forum and start yelling my coins were hacked/stolen and ask Miners and others to flag that address. Now the person who bought those coins is fu**ed, he paid for them and didn't do anything wrong and he's the one who is now called a thief and can't spend his coins? I really hope no more sites start doing this and even bitpay should stop doing this, if they're really doing this i.e.

Listen, it doesn't matter what an idiot might accept or not because in a not so long future people will be desperate to purchase Bitcoin and let me tell you he will not get picky.

You are right it isn't bitcoin's problem. It is the user's problem.

But isn't that a cop out?

If there was a system that removed this possibility of blacklisting then I think we would be on to something.  ::)

Bitcoin is here to serve people. If there is a problem with it, I think it should be fixed.

Block size is not something super critical that it needs to be done now...but this fungibility problem I believe is something that should be taken more seriously by the core developers.

Look you are fighting a strawman here I absolutely agree that privacy and traceability matters need to be addressed but fundamentally disagree that this issue has anything to do with Bitcoin intrinsic fungibility.

The problem is that users are not yet using it as intended. Most people are still dealing with third parties and traditional financial institutions when dabbling in their "Bitcoin finance".

No individual is actively aware of "tainted" coins and it makes absolutely no sense for them to be if they follow proper business etiquette. Stolen coins is 99% of the time the result of suckers who were irresponsible with their coins.

So if I stole bitcoin and sent it to a mixer and someone else got the coin and tried to spend it and let's say that merchant flagged that address because it was linked to a hack/scam/theft...how did mixing the coins fix anything other than allowing the thief to get away with the crime?

How would the merchant have "flagged" that address? Surely this means he administers a list probably maintained by a third party to validate his Bitcoin transactions?

If so then allow me to ask you what kind of merchant you deal with? I understand a lot of people feel warm and fuzzy about the novelty of Bitcoin transactions but maybe it is time to consider how stupid the idea is to pay a fiat accepting merchant with Bitcoin. (The BitPay model).

Unless you deal with someone or a business on a peer-to-peer basis it really is not worth it as this is when you expose yourself to such shenanigans.

Any bitcoin business that went along with say adding code that obfuscated transactions to a point that there is unlinkability and untraceability would have problems with regulators assuming they were AML/KYC compliant etc or whatever the regulation is.

First off, I do understand why you would think there is. Honestly. You're used to a certain system, you grew up in a certain system, you expect the trappings of that system anywhere you go.

Ever gone camping, fishing, hiking, and turned your eyes looking for the faucet or power outlet or wifi modem lights or whatever ? Sure, rationally you know and understand that you're in the bellybutton of fucking nowhere, and there never was and never existed such a thing as you're looking for within a hundred miles. Nevertheless, at some level, your brain expects that faucet. What do you mean nobody has ever laid a hundred miles of pipe/cable/bacon trails all the way to right over here ?! Impossibru!

There lies the issue with your logic.

In the world we are heading for these type of things don't exist. This is what I mean when I propose you are too mindfucked on fiat to see straight.

At the chance you have cared to read and didn't quite grok this part this is what Mircea means here:

http://trilema.com/2014/guidance-there-is-no-such-thing-as-bitcoin-taint/#selection-39.0-45.507

How? Easy if everything is public on the block chain any transaction can be traced back to when the coins were created.

Determine the addresses where a theft occured and trace from there.

Pretty simple. Blockseer does this in a visual format.

Just because I used that example does not mean it doesn't exist to have legal implications elsewhere.

let's say it is outlawed to deal in blacklisted addresses determined by your local government...yes you can move but to a certain degree what if that happens in that other country?

You're paranoiac. Nobody cares to go through this to enter in a transaction, what the hell are you thinking? No proper user wallet as they exist today keeps such lists of transactions. Bitcoin-qt does not include a circumstantial account of every coin and transactions in the network, only inputs and outputs. Why do you care if you accept a stolen bill, a "tainted" bitcoin? Are you really going to look up the story of each bitcoin you are trying to purchase. Have you?

How exactly do you propose they enforce this blacklist.

Simple I don't propose they do.

But it is possible it could happen.

Simple I don't propose they do.

But it is possible it could happen.

I'm telling you they can't.

Seems very unlikely because everyone's spent outputs are constantly being combined with everyone else's spent outputs.
If you were a regulator and wanted to implement blacklisting, how would you get around this issue?

Everyone's spent outputs combined with everyone's spent outputs? Not all the time.

LIke I said in the OP there will come a day when a new user will buy bitcoins (say locally for cash) and when he goes to use them at a business or exchange or where ever they will be rejected. Not 100% of the time...but it will happen and we all know how the media today loves to jump on anything bitcoin related that is negative.

Please reference the OP as it was a prediction and just that.

Just because you say something doesn't make it true. I believe it is possible. I'm sure some people thought that something called the "income tax" was impossible...it is unjust in my mind but it exists.

Governments these days are getting away with a lot, so I believe there are things we wouldnt dream would be put into place and enforced upon us.

LIke I said in the OP there will come a day when a new user will buy bitcoins (say locally for cash) and when he goes to use them at a business or exchange or where ever they will be rejected. Not 100% of the time...but it will happen and we all know how the media today loves to jump on anything bitcoin related that is negative.

What you are saying is absolute nonsense.

The only possible ways to enforce blacklists into Bitcoin is to hard code them in the protocol. Otherwise any peer on the network can transact with any other peer and his bitcoin will not be subjected to any discrimination whatsoever.

Any other scenario involves trust in a third party which means you are really in fact not using Bitcoin at all. 

For the millionth time this is only true if you choose to do business with a company who does not actually accept bitcoin but fiat. If you happen to transact with a user or a company in a peer-to-peer manner on the Bitcoin network there will never be such a thing as "transaction rejected".

You ignore the possibility that P2P transactions could exist where you are required by your government to run the paying address through something built on top of bitcoin (even just a website)

For the millionth time this is only true if you choose to do business with a company who does not actually accept bitcoin but fiat. If you happen to transact with a user or a company in a peer-to-peer manner on the Bitcoin network there will never be such a thing as "transaction rejected".

For what it is worth, I don't intend to run the XT client any time soon, but if XT provided actual fungibility fixes, I think a lot of us could probably overlook the hard fork concerns on blockchain size and become its greatest evangelists.

If people largely comply with that, we've already lost.  

The whole point of Bitcoin is that its permissionless and peer to peer.

The fact that people will have to worry about which merchants will accepted all btc and which may reject btc based on some list is not a good thing for encouraging mass adoption.

If BTC was perfectly fungible this concern would not exist.

VC: So, BitPay, is there any good news pertaining to our $30M+ investment?

Now that is something new that I haven't thought of. Unless you are in the business of sabotaging bitcoin's reputation that could be seen as potential new area to focus on, in order to erode people's trust that they have on bitcoin.

Now let's review back on the potential loophole. Fungibilty... If you consider the issue on tainted coins you received without yourself knowing the history behind it, 'Yes' there's no denial that will be a problem. But however, on the flipside, it will not become an issue as long as coins get properly mixed and you are dealing only with reputable person. But chances it can still happen to you being victimized is still there.

Bitcoin can never be a perfect system, fiat neither but hey, those who are into the exploits business will use that to their full advantage.

So does this mean you think bitcoin developers will never implement a truly private and untraceable functionality (unlinkability and untraceability between addresses)?

Monero does a pretty good job of this from what I have seen and experienced.

And in no way am I trying to erode people's trust in bitcoin, just merely discussing the potential pitfalls when talking about fungibility.

Like I've said I don't see it as a big issue. There are certainly more important things to worry about like the blocksize debate which we need to seek a consensus in order to move ahead. But I certainly see the fungibility part getting blown out of proportion and then exploited. Tiny issue become a big one.

Monero is Monero. That is a feature. But having looked at bitcoin, I'm sure there is way by the developers to work something on it... which I think they are be in the position to comment, not me.

Now that is something new that I haven't thought of. Unless you are in the business of sabotaging bitcoin's reputation that could be seen as potential new area to focus on, in order to erode people's trust that they have on bitcoin.

Now let's review back on the potential loophole. Fungibilty... If you consider the issue on tainted coins you received without yourself knowing the history behind it, 'Yes' there's no denial that will be a problem. But however, on the flipside, it will not become an issue as long as coins get properly mixed and you are dealing only with reputable person. But chances it can still happen to you being victimized is still there.

Bitcoin can never be a perfect system, fiat neither but hey, those who are into the exploits business will use that to their full advantage.

The fact that people will have to worry about which merchants will accepted all btc and which may reject btc based on some list is not a good thing for encouraging mass adoption.

If BTC was perfectly fungible this concern would not exist.

I'm afraid it will indeed be a big problem in the future just because every coin can be tracked through the blockchain. Fiat does not have this problem, unless you steal it from a cash truck and your fiat gets a good splash of paint on it..

How will you know what coins you will be paid with? Impossible. After you receive some supposedly linked coins, you will never be able to spend them? Quite a problem.

The problem with having a transparent blockchain is the lack of fungibility. This is way gmaxwell is working hard on features like confidential transactions. We NEED to improve the anonymity on Bitcoin before it goes mainstream. You don't want people's money being rendered useless because of a lottery based on the origin of said money (if its legit or if it has a trace of some criminal activity which you had no idea and no control of).

Stop conflating two very different issues. Privacy/traceability != fungibility

The two are in practice almost identical unless you are giving identifying information only to a privileged party (bank, government, etc.) in which case fungibility may exist at the discretion of that entity, or fungibility is enforced (by law). The former is certainly not the case in Bitcoin and likely never will be. The latter is theoretically possible but unlikely. If the units have a visible and distinct history that has at least the possibility for them to become non-fungible since actors may attach importance to properties of that history.

This has already happened in Bitcoin with actors such as Coinbase and apparently now Bitpay identifying coins by a "good" or "bad" history. Whether this will become more or less common is a matter of speculation, not the properties of the system itself. That the properties of the system can give rise to these issues is proven by experience.

well, it depends on how much effort goes into it.
one can lift fingerprints off the #20 bill, analyze chemical residue on it, etc., however, apart from criminal cases, nobody does this.

Ok, I'll grant you that, but is it really a big deal if it outputs aren't combined "all the time"? 
The people that have the "hottest" Bitcoins are obviously going to go to the most trouble to
mix and detaint them...and they do that already not because of blacklisting, but because
they need to remain anonymous and stay out of jail for theft.

It's not about ANONIMITY, it's about FUNGIBILITY

You can try to be (somewhat) anonymous on the BTC network, but that doesn't mean the coins are fungible

Ask yourself...
If you earn a legal income in BTC, will you voluntarily mix your coin with criminals?

It's not about ANONIMITY, it's about FUNGIBILITY

You can try to be (somewhat) anonymous on the BTC network, but that doesn't mean the coins are fungible

Ask yourself...
If you earn a legal income in BTC, will you voluntarily mix your coin with criminals?

It's not about ANONIMITY, it's about FUNGIBILITY

You can try to be (somewhat) anonymous on the BTC network, but that doesn't mean the coins are fungible

Ask yourself...
If you earn a legal income in BTC, will you voluntarily mix your coin with criminals?

...

You might not have a choice.

What are you going to do if I'm a criminal and decide to "taint" your Bitcoin by sending bits to your wallet? Sell your bitcoins?

What are you going to do if I'm a criminal and decide to "taint" your Bitcoin by sending bits to your wallet? Sell your bitcoins?

Let's pretend I have one of Satoshi's wallet address and decide to send him a bitcoin. How can you tell which one is mine from his stash?

I'm guessing you mean send some bits to one of his addresses. I suspect "taint" applies to txouts rather than addresses. He can avoid "tainting" his bitcoins with your bits by simply never spending your txout -- even though he has the private key.
 

It would help if you were a big time miner and minted your own fresh coins, where you develop some kind of way to mix your own coins with your brand new ones... other than that particular instance, I don't see mixers or stuff of the like being very helpful.

Pretend a well-known thief was committed via bitcoins to the tune of millions of dollars (I know, it's a stretch, but let's pretend nonetheless). The crime was reported to authorities, thus anybody having direct information pertaining to the crime but fails to report their findings would, in fact, be committing a crime themselves. Follow me so far?

Enter BitPay.

Tainted coins were presented to BitPay (read: I present to you evidence of a very bad crime), but they turn the customer away (read: Thanks, but we don't want no part of this). At this point, BitPay is privy to evidence related to a major heist. It's bad enough if they just let the entity go with a "Thanks, but no thanks!" as per their new public stance on the taint issue, but they now would put their very existence in jeopardy if they opted to not report the evidence to the proper authorities themselves. But, if they do report each and every suspected instance to the authorities, as they must, that would 100% be badder for them and Bitcoin, the latter self-explanatory, while the former would consist of doling out resources so to not be in foul with authorities spanning the globe (not just in the US). Demanding resources that BitPay has demonstrated they no longer have.

BitPay just announced to the world that they would not accept tainted coinage. Genius! Now that they have demonstrated to authorities that they possess the means to help track criminals, they've put themselves in positions to 100% having to follow through with each and every suspected transaction by not only rejecting the coins, but turning in the suspects sans letting them know that that's the case, for you don't tell suspects that they're goin' be reported. YOU JUST DO IT!

And that's how you destroy your venerable brand in ONLY a few short days. Again, GENIUS!

if bitcoin is not fungible, then it is not money, it is as simple as this
BTW, marshals sold tainted bitcoin from silk road and someone (silicon valley VCs, etc) bought them.
I don't think that this bitcoin is tainted anymore de facto, but if you look at these coins history, it would look pretty bad, right?
If bitcoin IS money, then it cannot be at fault what someone did with it any more than you cannot control what someone did with a $20 bill.

It would actually make economic sense for a criminal holding a large amount of tainted Bitcoins to do just that with a portion of the tainted Bitcoins.

I suspect there will come a day that a regulated payment processor will be required to send the tainted coins to a government wallet.
If you are lucky, you can claim your coins back when you provide identity information and the source of the coins
if you are unlucky, the government will put you in jail and you loose your coins.

For privacy, I use blockchain.info's SharedCoin (a type of mixer) to avoid linking my BTC spends/transfers to my main wallet.  Has there been any indication that using a service like that could prevent a company from being willing to transact with you?

Of course, if the answer is no, this brings to mind a question like: why wouldn't a person with BTC from an undesirable source just use a mixer?

For privacy, I use blockchain.info's SharedCoin (a type of mixer) to avoid linking my BTC spends/transfers to my main wallet.  Has there been any indication that using a service like that could prevent a company from being willing to transact with you?

Of course, if the answer is no, this brings to mind a question like: why wouldn't a person with BTC from an undesirable source just use a mixer?

But then people might not like that and stop using payment processors and just deal directly in Bitcoin.
Once a critical mass is reached, people won't need to convert to fiat as much.

1. There is risk sending your bitcoins to be mixed.

2. I guess they can do it. Ultimately it doesn't remove the trail of where the bitcoins go. Yes the thief may get away with it but someone will be possibly blacklisted with their coins should those coins be coming form an undesirable source.

Mixers are ultimately poor workarounds. You are trusting that the mixer service is not keeping logs. It's a centralized measure. It requires trust, it's not a real solution. Also it's annoying as hell that everytime you use Bitcoin you have to first send it to some mixing service to guarantee privacy. Something needs to be done about this so this privacy is by default in-built in every wallet without needing to trust some mixing company.

what  have never understand about mixing: it seems mixing needs a constant flow of "white" bitcoins to mix with. where do they come from?

why does anyone sending their clean coins there and pay a fee for mix them with tainted ones?

huh?

I'm confused.  Maybe I don't understand Bitcoin transactions well enough.   

I thought once incoming transactions reach the Bitcoin address, you can either spend them or not -- you don't
get to say which of the inputs of other parties count toward your transaction.  If I'm wrong, please explain.

You might not have a choice.

What are you going to do if I'm a criminal and decide to "taint" your Bitcoin by sending bits to your wallet? Sell your bitcoins?

if bitcoin is not fungible, then it is not money, it is as simple as this
BTW, marshals sold tainted bitcoin from silk road and someone (silicon valley VCs, etc) bought them.
I don't think that this bitcoin is tainted anymore de facto, but if you look at these coins history, it would look pretty bad, right?
If bitcoin IS money, then it cannot be at fault what someone did with it any more than you cannot control what someone did with a $20 bill.

For privacy, I use blockchain.info's SharedCoin (a type of mixer) to avoid linking my BTC spends/transfers to my main wallet.  Has there been any indication that using a service like that could prevent a company from being willing to transact with you?

Of course, if the answer is no, this brings to mind a question like: why wouldn't a person with BTC from an undesirable source just use a mixer?

I'm not sure about other wallets, but in Bitcoin-qt you can enable "coin control features" and select which inputs you want to spend.

But then people might not like that and stop using payment processors and just deal directly in Bitcoin.
Once a critical mass is reached, people won't need to convert to fiat as much.

I wasn't aware of that.  I assume that only goes one level deep.  In other words, if I have stolen coins (.5 BTC) and normal coins (.5 BTC)
and I send that to another address of mine, and then send you 1 BTC, you can't separate out the stolen coins from the normal coins.

I'm not sure about other wallets, but in Bitcoin-qt you can enable "coin control features" and select which inputs you want to spend.

that is true indeed.

If people start trying to blacklist coins I will do everything in my power to stop them and I suggest everyone else do the same because blacklisting would harm bitcoin beyond anything we've seen so far.

That would help your peers or people you are in communication with. But not everyone.

You can't stop black listing.

It's kind of in the gray area. I isn't in full force but it isn't something you can just squish (unless we are talking major bitcoin protocol code changes).

You can separate them until the two are spent together, since they are separate outputs as explained in the last few posts. Once they are spent together, they can't be separated.

What I expect will likely happen in a system with widespread regulation and blacklist once they are mixed (spent) together is that you would then have to send the 1.0 to some government (or other third party service) address, along with your identifying information, and you would get the 0.5 clean back.

You can fight it by boycotting any service that uses or supports blacklisting coins. That much is within your power.

Yes, but in a limited space (ecosystem wise) currently, boycotting any business that is a major player in the space does limit your ability and others to transact with bitcoin.

You basically take those businesses off of your list to do deals with. Essentially limiting your options even more.

Hopefully this wont be a wide spread problem. As if it gains traction I can see boycotting being irrelevant especially if most large BTC businesses start implementing blacklists.

You can separate them until the two are spent together, since they are separate outputs as explained in the last few posts. Once they are spent together, they can't be separated.

What I expect will likely happen in a system with widespread regulation and blacklist once they are mixed (spent) together is that you would then have to send the 1.0 to some government (or other third party service) address, along with your identifying information, and you would get the 0.5 clean back.

That would be the end of bitcoin, since there's going to be some amount of taint going on almost all the time.  Can't see it happening.

Agreed, you will get people that are unlucky and receive coins from an exchange that did not support blacklisting, and then that user will have effectively lost money.

So effectively you are saying that if people using an unregulated exchange that is not compliant they will lose money, and therefore the end of Bitcoin? Is that really what I just read?

I'm saying if Service A supports blacklisting, and Service B does not, and User recieves blacklisted coins from Service B, which does not blacklist, and tries to use them at Service A, they will not be able to.

So effectively you are saying that if people using an unregulated exchange that is not compliant they will lose money, and therefore the end of Bitcoin? Is that really what I just read?

If I get Bitcoins privately from my friend Alice and her coins had some taint and I then used those Bitcoins to buy a T shirt on a web shop and then they tried to cash those Bitcoins out to their bank account with Bitpay and Bitpay told me I don't get my T shirt but if I send them a scan of my passport I can get half my money back, then either it would be the end of Bitcoin or it would be the end of people using payment services.

What happens if your friend Alice gives you counterfeit cash, you go to spend it in a store, and they confiscate it?

not a good analogy since the conterfeit cash would be 100% "tainted". 

---

What happens if your friend Alice gives you counterfeit cash, you go to spend it in a store, and they confiscate it?

Counterfeit cash is more easily detectable, and if it's a good counterfeit it will probably fool other people too.

Maybe. I've seen stores uses counterfeit detector pens quite a bit, and in a few cases run the bills through a machine (usually only larger bills). Banks routinely run cash you deposit through fancier machines and probably catch more. I don't do any of these when I get cash from a friend, and I wouldn't necessarily detect whatever it is those tests are doing.

The point is, you can lose money this way, so losing money due to receiving bad Bitcoin is nothing qualitatively new. I'm not saying it is a good thing though.

There are very few bitcoin services currently that do not have at least one alternative.

I'm saying if Service A supports blacklisting, and Service B does not, and User recieves blacklisted coins from Service B, which does not blacklist, and tries to use them at Service A, they will not be able to.

Counterfeit cash is more easily detectable, and if it's a good counterfeit it will probably fool other people too.

Bitcoin must stay strongly (although not perfectly) fungible, otherwise people will lose confidence in a major way.
That's the bottom line.  I think we all agree on that.  I'm all for adding features to Bitcoin that will help that.
Perhaps if the LN is incorporated as a second layer, it will be able to add those features.

Just as there are oddballs out there willing to do stress tests for no particular reason, there'll be armies of people looking to taint as many coins as possible with little drops of evil. I really can't see how they'll be able to prevent endless dilution.

Bitcoin must stay strongly (although not perfectly) fungible, otherwise people will lose confidence in a major way.
That's the bottom line.  I think we all agree on that.  I'm all for adding features to Bitcoin that will help that.
Perhaps if the LN is incorporated as a second layer, it will be able to add those features.

Just as there are oddballs out there willing to do stress tests for no particular reason, there'll be armies of people looking to taint as many coins as possible with little drops of evil. I really can't see how they'll be able to prevent endless dilution.

Does LN add untraceability and unlinkability?

Where is it at in development?

I keep hearing about it but only seen theoretical scenarios drawn up on how it would work.

If not, then I'm confused why you mentioned it.

It seems that bitcoin will be regulated similar to cash at first. Then at a later stage, when the blockchain trace technology get more mature, there will be a public police database that is open to every one, certain coins might have a flag in this database, thus will not be accepted by any formal merchant application that is aware of this database. So every thief can not spend his coins and they all reduce the coin supply thus contribute to the rising value of bitcoin  ;D

But since there is almost no way to prove that you lost your bitcoin, it is very difficult to flag certain coins at all. Take for example the Bitpay loss of 5000 coins, they have no way to prove that those 5000 coins are not under their control, thus it is almost impossible for insurance company and police to register those coins as tainted, otherwise everyone would just claim the coins in top 100 address are stolen and get all those coins flaged  ::)

From this point of view, legally it is almost impossible to blacklist certain coins

Just as there are oddballs out there willing to do stress tests for no particular reason, there'll be armies of people looking to taint as many coins as possible with little drops of evil. I really can't see how they'll be able to prevent endless dilution.

Bitcoin would eventually end with barely any "clear coins". This tainting and blacklisting thing is as dumb as it gets. We need to make all Bitcoins the same, otherwise some Bitcoins may be more valued than others. We need more privacy as well.

Mixers are ultimately poor workarounds. You are trusting that the mixer service is not keeping logs. It's a centralized measure. It requires trust, it's not a real solution. Also it's annoying as hell that everytime you use Bitcoin you have to first send it to some mixing service to guarantee privacy. Something needs to be done about this so this privacy is by default in-built in every wallet without needing to trust some mixing company.

Maybe. I've seen stores uses counterfeit detector pens quite a bit, and in a few cases run the bills through a machine (usually only larger bills). Banks routinely run cash you deposit through fancier machines and probably catch more. I don't do any of these when I get cash from a friend, and I wouldn't necessarily detect whatever it is those tests are doing.

The point is, you can lose money this way, so losing money due to receiving bad Bitcoin is nothing qualitatively new. I'm not saying it is a good thing though.

You can separate them until the two are spent together, since they are separate outputs as explained in the last few posts. Once they are spent together, they can't be separated.

What I expect will likely happen in a system with widespread regulation and blacklist once they are mixed (spent) together is that you would then have to send the 1.0 to some government (or other third party service) address, along with your identifying information, and you would get the 0.5 clean back.

Bitcoin would eventually end with barely any "clear coins". This tainting and blacklisting thing is as dumb as it gets. We need to make all Bitcoins the same, otherwise some Bitcoins may be more valued than others. We need more privacy as well.

..... how did we even get into counterfeiting?

"Bad Bitcoin"? Wtf... I know you have some Monero to sell but this is beyond ridiculous

If I get Bitcoins privately from my friend Alice and her coins had some taint and I then used those Bitcoins to buy a T shirt on a web shop and then they tried to cash those Bitcoins out to their bank account with Bitpay and Bitpay told me I don't get my T shirt but if I send them a scan of my passport I can get half my money back, then either it would be the end of Bitcoin or it would be the end of people using payment services.

Because the question was what happens when you receive Bitcoins from someone and when you try to spend them you find they are blacklisted and lose money. That's very much analogous to counterfeiting.

Bitcoin exists precisely to enable monetary sovereignty & bypass any of these stupid fiat rules.

How about merchants will stop using BitPay because fiat will be.. ya know... dead.

people will stop using payment processors when businesses stop using payment processors.
That will only happen when bitcoin is much much less volatile and much much more liquid.

In other words, that will only happen when the critical mass is reached.
Conclusion, fungibility will be an issue for BTC until critical mass is reached.

=> We need to ask our self the question if a token that isn't fungible has the ability to reach critical mass.

It seems that bitcoin will be regulated similar to cash at first. ... {more stuff}

But since when do governments obey their own laws?

It remains to be seen whether that ever actually happens. The way Bitcoin is used today it is predominantly nonsense, given that most usage is exchanges which are all regulated by fiat rules (except, somewhat, BTC-E which also seems to have issues with fungibility anyway), Coinbase/Circle, and Bitpay. The rest is negligible.

I agree with you about the original stated goals, but it hasn't worked out that way at all after 6 years. I don't rule out that it may still evolve in that direction but it seems a bit of a long shot given the high degree of influence that the pro-regulation crowd has in the ecosystem. It also seems plausible that the next adoption surge, if it happens, will be Wall Street money which will also be very pro-regulation.

No, they don't obey another government's law, so it is likely coins blacklisted in one country will be totally fine in another country. Unless world's government all united (Is that possible?), the black list just makes the coin going for a round trip abroad

It seems to me the predominant use of Bitcoin today is holding.

Then I guess it's a toss up between general black market activities and speculative trading.

That's probably true.


That's probably incorrect. The last study I saw put Bitpay (maybe also including other smaller processors) and black market activities in rough parity, speculation being larger than both.

As for the rest of  your comments about secret trading desks and such, well maybe. It's unproven and largely unprovable so I guess I'll just wait and see how and if that develop into something significant enough to become obvious, because it currently isn't.

Obviously I cannot prove it but I am confident much more Bitcoin moves OTC than on exchanges.

I''m not. If it were it would show up in blockchain analysis, at least under the category of "unknown". It doesn't. Most activity is fairly easy to categorize (speculation, mining, legal and illegal payments). Certainly there is some that isn't but not some massive hidden economy that is larger than all the known exchanges. It just isn't so

Where can one find such analysis?

How do you differentiate legal & illegal payments from OTC trading activities?

I don't know, maybe someone can point to some, but I've seen various reports published once or twice a year for the past few years.

The way you differentiate is by identifying what you can, and it seems a lot can be identified with reasonable confidence (probably not perfectly). If there is a huge swath of unknown that can't be then you ask these questions, but that has really never been the case.

Even gross statistics like coin movement on the blockchain relative to reported exchange volume shows a reasonably tight relationship over time. If there were massive amounts of money fleeing capital controls and FATCA now, that relationship would be break down (unless you think this was going on three years ago when FATCA wasn't in force at all and Bitcoin was $20). Instead it hasn't really broken down.

Don't buy all the hype. Some of it might turn out to be true, but be skeptical.

Where do you get these numbers?

For example: https://blockchain.info/charts/tx-trade-ratio?timespan=all&showDataPoints=false&daysAverageString=1&show_header=true&scale=0&address=

Shows no dramatic change since 2013.

It is not the gross amount that matters, it is the ratio, and especially (since the ratio on its own is largely an uncalibrated number) the change in the ratio.

"Bad Bitcoin"? Wtf... I know you have some Monero to sell but this is beyond ridiculous

It took me a second, but I now appreciate the #bitcoin-assets 'there are no tainted Bitcoins, only tainted institutions' POV.

I love the smugness of that serene maxim, and look forward to the day when it has practical value for those of us with <100 BTC.

OTOH, I believe (smooth will have to back me up with The Science) that Bitcoins are not perfectly fungible at the protocol level because they are uniquely identifiable, and thus may be discriminated against (ie, considered "bad") by individuals, if not in the aggregate.

AFAIK, the Monero protocol couldn't tell "good" coins from "bad" ones even if it wanted to, so its coins are perfectly fungible (no matter what, and without need to invoke rosy assumptions about the future of crypto vs fiat).

Bitcoin Black/Whitelists: technically trivial to implement and enforce, commonly done in status quo (eg stolen Evolution coins at BTCE)

Monero Black/Whitelists: technically impossible to implement or enforce (is it true?)

I still don't see how that holds true.

As smooth himself has pointed out, once two satoshis are spent from two different inputs to the same output they are indistinguishable.

once two satoshis are spent from two different inputs to the same output they are indistinguishable.

This tweet by Davout sums up the situation perfectly

https://i.imgur.com/sz20qH0.png

Coins/satoshis/etc. are not uniquely identifiable as you say, although it is possible to define a rule which would do so. For example, I think some of the colored coin schemes use a rule that if you mix colored and non-colored coins, the colored coins come out in a particular sequence (for example, the first input might directly flow to the first output, etc.). An alternative rule, of course, is that mixing colored and uncolored coins simply destroys the coloring. Both can work. Assuming that people are going to observe a similar convention for regular Bitcoins is a bit contrived but not impossible.

Putting that aside, what exists on the blockchain are not coins but outputs, and outputs are uniquely identifiable because each has a unique history. That is very close to the definition of not being fungible, because fungible means interchangeable. How people choose to interpret that history is again up to them, but we've seen numerous examples of people doing it, so it is implausible to flat out say that people won't do it.

If you want to argue that anyone who tries to implement rules like this will be rendered irrelevant when the crypto singularity comes and fiat fails, and anyone who attempts to pay attention to the unique of different outputs will be laughed at, then I don't necessarily disagree, but mostly I'll just wait to see you on the other side/moon.

For now we have the reality that outputs are very much not fungible. Some can be safely used with Coinbase/Bitpay/etc. and some can not.

Those "two satoshis" may be indistinguishable, but they are inexorably linked by their common tx.  Hence, the anti-taint cottage industry of mixers and tumblers and shufflers and Darkcoins (lol).  And (more significantly) the booming trade in blockchain analytics.

Let's set aside considerations of fungibility at the recipient level (maybe I'm sending BTC to MPEX, where they don't GAF where my BTC has been).  There is still a privacy-driven fungibility issue for the sender.

IE, a confidential transaction is not, from my sender POV, equal to a public one.  Maybe I don't want my ex-wife/IRS/boss to know where I'm sending BTC.  The public and private tx are not interchangeable, and that's why people pay proportionally extra (directly and in the form of TTP risk) for fresh coins and mixed/joined/tumbled/shuffled ones.

Yes, that tweet may have induced my 'there are no tainted Bitcoins, only tainted institutions' epiphany.

I don't like those tainted institutions any more than davout and you do.

But they could not exist if Bitcoin was perfectly anonymous

My claim is that anyone that uses Bitcoin as it is meant to be should absolutely not be concerned over fungibility.

I absolutely disagree with your conclusions, outputs are only non fungible in transactions involving third-parties which is not representative of Bitcoin's design.

Moreover it can certainly be argued that these occurrences are marginal and nothing more than distractions. 

Yes, that tweet may have induced my 'there are no tainted Bitcoins, only tainted institutions' epiphany.

I don't like those tainted institutions any more than davout and you do.

But they could not exist if Bitcoin was perfectly fungible.

You'll never get a notice from Poloniex saying "Hey buddy, we don't like the guys you sent your Monero to, so we're closing your account."

Polo doesn't know that; Polo can't know that (because stealth addresses and ring signatures).

A few months ago, I opined that Monero enables defections which Bitcoin cannot (https://bitcointalk.org/index.php?topic=68655.msg11460798#msg11460798).

This conversation has helped begin putting meat on the bones of that claim, as I'm finding the concept of 'perfect' (ie, exhaustive of all use cases) fungibility an interesting distinction from Bitcoin's circular 'good enough, assuming you are already rich, lol' version.

Two satoshis are exactly alike much like two atoms of gold are indistinguishable and can be perfectly substituted.

I can taint gold and make it somewhat traceable using radioactivity. That doesn't make gold non-fungible but only traceable to a certain extent.

TLDR; When people speak of Bitcoin's fungibility "issue" they really are referring to a privacy/traceability one. 

Merchants are forbidden to accept Monero: since we cannot tell where you money comes from it is not legal and you should use the transparent alternative

This is incorrect. Any counterparty to a transaction can define things any way they like. If someone doesn't like your coins they can choose not to deal with you, or charge you more. It doesn't take a third party to impose such a view. It is purely a social convention how much weight to attach to to the history. If it becomes widespread, then it won't matter what third parties say, because people won't want coins with problematic histories. If history is widely ignored, then obviously it won't matter.

The important point is that nothing about the technology forces people to behave in one manner or the other.


I guess that depends whether you are the one dealing with the "complications" related to people paying attention to coin histories. I know several such people personally. It isn't marginal to them.

I do not disagree that there is a privacy issue and I obviously support any attempts at improving this aspect.

The whole point of my intervention is this thread is that fungibility and privacy are two different concepts that are too often conflated.

Bitcoin, fundamentally, is absolutely fungible. Perfectly so in fact. Two satoshis are exactly alike much like two atoms of gold are indistinguishable and can be perfectly substituted.

I can taint gold and make it somewhat traceable using radioactivity. That doesn't make gold non-fungible but only traceable to a certain extent.

TLDR; When people speak of Bitcoin's fungibility "issue" they really are referring to a privacy/traceability one. 

...anyone that uses Bitcoin as it is meant to be should...

I'm curious who it is these people you refer to are dealing with?

Fiat institutions? That would make sense. Else I can't see how there'd be any important amount of individuals out there carefully examining the provenance of the coins and checking them against any blacklists or what not. I'm not saying it doesn't happen but that seems like a somewhat far-fetched scenario.

More resourceful individuals will show up on the marketplace that won't be bothered by such folklore.

This again is incorrect.

We discussed a few posts back that two satoshis coming out of the same transaction (even if different outputs) are indistinguishable (though only if no social convention develops which would distinguish between outputs of the same transaction, as I explained).

But two satoshis from two different transactions are absolutely distinguishable. The have different histories and therefore can be trivially distinguished. It therefore becomes non-fungible (i.e. non-interchangable) if people choose to attach some significance to that difference. The technology or physical properties do not determine fungibility here, people do.

It certainly would be non-fungible if some important property were recognized to apply to the radioactive gold (for example if it were stolen). People would routinely check gold with a geiger counter before accepting it and you would not be able to substitute your radioactive gold for non-radioactive gold.

TLDR; When people speak of Bitcoin's fungibility "issue" they really are referring to a privacy/traceability one. 

You would have essentially zero privacy and anonymity but the coins themselves would still be inherently fungible.

This tweet by Davout sums up the situation perfectly

https://i.imgur.com/sz20qH0.png

Do you understand then how subjective your definition of fungibility is?

From your POV any medium of exchange that is suspect to traceability by any means is non fungible.

About Bitpay blacklisting coins, what else can we add about the morons that just got hacked $2 million of their money via a simple email. No comment really!

Privacy and fungiblity are different concepts, but perhaps there is some overlap?  The fact people often conflate them would indicate this.

When individual or groups of satoshis may be (on the basis of unique traits or general taint) identified and discriminated for/against, how is Bitoin "absolutely fungible?"

If Bitcoin is "absolutely fungible" then how did BTCE [do whatever they did] with the Evolution coins?

I see your point about gold (in spite of the tenuous radioactivity example).  (Non-radioactive) gold is fungible, even if a particular institution acts in a particular way towards some particular customer's particular gold.

But wouldn't the gold be be even more (ie exhaustively) fungible if it could somehow negate the ability of any and all institutions to discern its provenance, thereby destroying the possibility of non-interchangeability in all particular instances?

BTW, if it was illegal for merchants to accept XMR, we'd just use shapeshift or https://xmr.to/ and be on our fungibility-not-affected way!   8)

Hey I'm just using the dictionary man


That is not what I said.

What I said is the intrinsic properties make something inherently fungible only when there is no useful traceability (or other physical distinguishability). Otherwise if individual units can be distinguished and then it is up to people, not technology or science, to decide whether it is fungible in practice or not. The obvious example here is paper money. Not only is it fungible by law (we'll ignore that here) but it is fungible only because people don't for the most part ever pay any attention to the serial numbers. If people started doing so, fungibility could only be restored by creating money (such as metal coins) without serial numbers.

Obviously intrinsic indistinguishability properties provide stronger fungibility than people do, and because the Bitcoin ledger doesn't have those properties, this thread exists.


Agree with you there but it isn't just them doing it.

Okay, let me try this way:

Monero is perfectly distinguishable from any other forms of money therefore if some social convention somewhere prescribes they will not accept it then it is non-fungible.

"Fungibility refers only to the equivalence of each unit of a commodity with other units of the same commodity. Fungibility does not relate to the exchange of one commodity for another different commodity" https://en.wikipedia.org/wiki/Fungibility

Also, from the same source:

"A good is fungible if one unit of the good is substantially equivalent to another unit of the same good of the same quality at the same time and place."

Notice the wiggle word in there. Fungibility is subjective.

Fungibility does not imply liquidity, and vice versa. Diamonds can be readily bought and sold (the trade is liquid) but individual diamonds, being unique, are not interchangeable (diamonds are not fungible). Indian rupee bank notes are mutually interchangeable in London (they are fungible there because law) but they are not easily traded there (they cannot be spent in London).

mircea_popescu:this actually works as an argument. bitcoin needs no assaying, which makes it more fungible than something that does.

Here's another take on this from Mr. Popescu:

Wishfully, it is true.

In actual fact people are building businesses (with I'm guessing millions of dollars of funding) to provide the assaying service i.e. blockchain analysis.

Bitcoin would eventually end with barely any "clear coins". This tainting and blacklisting thing is as dumb as it gets. We need to make all Bitcoins the same, otherwise some Bitcoins may be more valued than others. We need more privacy as well.

How about merchants will stop using BitPay because fiat will be.. ya know... dead.

Right, this just might be the most stupid thing I've read all week.

If you enter a transaction that involves any type of blacklisting it is your own undoing and you deserve it.

Bitcoin exists precisely to enable monetary sovereignty & bypass any of these stupid fiat rules. Government doesn't have any right to know or be aware of the existence of any wallet in my possession therefore any coin I receive I'm free to spend at its current market value, no matter what its history is.

I mean who the hell are we kiding here!? We have the USG currently trying to get their hand on every chip of all DNM and either keep it for themselves or "sell it" to their friends possibly over market price.

You think they really give a damn where the coins are coming from?

If you wanna use Bitpay, Coinbase, Circle and all them USG exchanges then by all means no one is stopping you or your rapist's interests but Bitcoin don't play these batty-boys games.

But then don't you dare fancy you using Bitcoin.

Cause Bitcoin is a peer-to-peer market and what you're doing doesn't sound like bitcoinating to me.

Try telling THAT to every new bitcoin newbie and see how many of them run away.

There will always be people who don't know any better and it happens to them. Bad things happen to good people all the time.

You can't stop all of it. But to say "you deserve it" is a bit hard especially if they are just trying to buy something with bitcoin or convert out to buy something with fiat.

This is already completely wrong right from the start of your post.

At first (i.e. right now), Bitcoin is being regulated such that participants see a need to trace the blockchain and identify suspicious coins (or suspicious uses of coins) and take what the deem to be appropriate action on the basis of that information. Businesses do not routinely trace cash, outside of some major criminal investigations as mentioned earlier on this thread.

That Bitcoin is not functioning in the real world the way your mental model suggests that it should ought to give you reason to reexamine your model.

No, they don't obey another government's law, so it is likely coins blacklisted in one country will be totally fine in another country. Unless world's government all united (Is that possible?), the black list just makes the coin going for a round trip abroad

This is a serious issue that I'm concerned with as well. I think this will give the authorities a good reason to dismiss BTC.

It seems to me the predominant use of Bitcoin today is holding. Then I guess it's a toss up between general black market activities and speculative trading. If we're to believe Trace Mayer the notion that Bitcoin is already used worldwide to escape capital controls is understated. He himself suggests that a OTC trading desk in Switzerland trades more BTC on average than most major Bitcoin exchanges to help clients circumvent FATCA regulations.

All of this to illustrate that the amount of Bitcoin that moves through Coinbase/Circle/Bitpay/Bitstamp is, in fact, negligible if we are to account for the whole of Bitcoin's economy. At the very least we can be confident saying that was is publicized and readily available to the naked eye is not the "predominant" way Bitcoin is being used.

Therefore I'm very tentative in putting any value into the rest of your statement. Yes, I recognize that your average bitcointalk & reddit users might not be privy to actual legitimate use cases of Bitcoin at this stage of the game. That is where the figurative attempt to put round bitcoin pegs into fiat square holes creates such confusion and this illusion that Bitcoin's success is impeded by "blacklists" and "tainted coin". Of course this illusion did not spawn on its own and it is the careful fabrication of fiat institutions and banking parasites interested in either capturing Bitcoin and its users or straight out perpetuating FUD in an attempt to undermine the users faith.

Link where trace made that claim?

Where do you get these numbers?

I just did a "gross calculation" and a quick roundup of major exchanges + approximate total of minor ones brings me to about 3,500,000 BTC in volume over the last 30 days. That includes OKCoin's obviously bogus 1,850,000 reported volume.

This chart seems to indicate the blockchain sees an average of 250,000 BTC volume per day. 7,500,000 over 30 days.
https://blockchain.info/charts/estimated-transaction-volume?showDataPoints=false&timespan=&show_header=true&daysAverageString=7&scale=0&address=

I think it's clear there's a lot left to be accounted for.

It took me a second, but I now appreciate the #bitcoin-assets 'there are no tainted Bitcoins, only tainted institutions' POV.

I love the smugness of that serene maxim, and look forward to the day when it has practical value for those of us with <100 BTC.

OTOH, I believe (smooth will have to back me up with The Science) that Bitcoins are not perfectly fungible at the protocol level because they are uniquely identifiable, and thus may be discriminated against (ie, considered "bad") by individuals, if not in the aggregate.

AFAIK, the Monero protocol couldn't tell "good" coins from "bad" ones even if it wanted to, so its coins are perfectly fungible (no matter what, and without need to invoke rosy assumptions about the future of crypto vs fiat).

Bitcoin Black/Whitelists: technically trivial to implement and enforce, commonly done in status quo (eg stolen Evolution coins at BTCE)

Monero Black/Whitelists: technically impossible to implement or enforce (is it true?)

Monero could also be subject to arbitrary USG regulations.

Since people are willing to go to such a stretch to come up with scenarios that supposedly undermine's Bitcoin fungibility then how about this:

Merchants are forbidden to accept Monero: since we cannot tell where you money comes from it is not legal and you should use the transparent alternative. "You don't have anything to hide anyway, do you?"

So rather than blacklists certain "tainted" coins they would effectively blacklist the use of an anonymous currency. Now that wouldn't make Monero non fungible would it?

...

Bitcoin: Absolutely fungible, even when it isn't.  Because No True Bitcoiner.
Monero: Private and unlinkable.  Can't be not-fungible.

BTW, if it was illegal for merchants to accept XMR, we'd just use shapeshift or https://xmr.to/ and be on our fungibility-not-affected way!   8)

If someone is not able to make proper use of Bitcoin then he shouldn't bother. I really don't care if this scares away a few newbies. Bitcoin is really not something you should sell to newbies anyway. It's really not a consumer-ready tool, at least not as it currently exists.

If you are trying to buy something with bitcoin from a fiat accepting merchant: your problem, not Bitcoin's.

If you depend entirely on exchanges to cash out to fiat: your problem, not Bitcoin's.

Government restrictions on amount of Bitcoin to be transactions with.

http://www.coinfox.info/news/3205-mexican-government-places-bitcoin-and-cash-on-the-same-footing

Interesting

Interesting? Bad. Although not (yet) as restrictive as to be expected in the US/EU.

In my opinion it is imperative for the survival of Bitcoin that significant privacy improvements (default confidential transactions) are implemented as soon as possible. Because such improvements are not trivial they should be a #1 priority right now. I really hope that developers find the time and resources to address this serious fungibility issue. Now that two most government friendly figures Gavin and Mike have their own altcoin to work on, I really hope they won't interfere with more FUD-talk.

ya.ya.yo!

If people start trying to blacklist coins I will do everything in my power to stop them

Interesting? Bad. Although not (yet) as restrictive as to be expected in the US/EU.

In my opinion it is imperative for the survival of Bitcoin that significant privacy improvements (default confidential transactions) are implemented as soon as possible. Because such improvements are not trivial they should be a #1 priority right now. I really hope that developers find the time and resources to address this serious fungibility issue. Now that two most government friendly figures Gavin and Mike have their own altcoin to work on, I really hope they won't interfere with more FUD-talk.

ya.ya.yo!

So nothing?
We are mostly powerless.

Government restrictions on amount of Bitcoin to be transactions with.

http://www.coinfox.info/news/3205-mexican-government-places-bitcoin-and-cash-on-the-same-footing

Interesting

Government restrictions on amount of Bitcoin to be transactions with.

http://www.coinfox.info/news/3205-mexican-government-places-bitcoin-and-cash-on-the-same-footing

Interesting

That's the right way to regulate bitcoin, IMO

Due to the coin can move instantly to abroad, and it is impossible to enforce an international regulation around the globe, the most possible way is to treat it as cash, so that all the cash regulations today applies to bitcoin. This will save the regulators a hell lot of resource and effort while still have the risk under control in the current regulation framework

Large transactions will have to follow AML and KYC regulations, and resulting in further conflict between users and regulators

about zerocash. This is what can be found on the website (http://zerocash-project.org/index)


There are some issues with this protocol

1) fungibility: by introducing basecoins, payment processors, exchnages, governments etc can force you to use these basecoins. When you use the zerocoins, you are flagged by default. Basically there is no difference when you use the ConfidentialTransactions-Sidechain or coinjoin.
2) zerocoin transactions will probably be larger, so people will try to avoid paying the fees by making as little zerocoin transactions as possible
3) due to the fact that eventually only people who want to hide a crime will use the zerocoins, it will be possible that when you get coins out, there is a possibility to link those coins to coins that were put into the zerocoin-pool. So it's tricky... Be aware of this or you'll use your anonimity.

compare this to XMR:
1) when mixin 0 isn't possible anymore (soon^TM) all transaction outputs (except the minted coins) are mixed by default. So you can't be forced not to use mixing.
2) because all tractions will have a minimum mixin, you can't avoid paying the fees. Paranoid people pay more for higher mixin.
3) everybody uses mixin, so it's impossible to detect money flows on the network

Your friend Alice gives you two $10 bills. One is good, one is bad. You take both to buy a $20 T-shirt. Now what?

You set up a JoinMarket to automate the process, then profit.   8)

Use the two $10 bills where both shows up as good ones. I mean not all jurisdictions will use the same regulation.

Hey I'm just using the dictionary man


That is not what I said.

What I said is the intrinsic properties make something inherently fungible only when there is no useful traceability (or other physical distinguishability). Otherwise if individual units can be distinguished and then it is up to people, not technology or science, to decide whether it is fungible in practice or not. The obvious example here is paper money. Not only is it fungible by law (we'll ignore that here) but it is fungible only because people don't for the most part ever pay any attention to the serial numbers. If people started doing so, fungibility could only be restored by creating money (such as metal coins) without serial numbers.

Obviously intrinsic indistinguishability properties provide stronger fungibility than people do, and because the Bitcoin ledger doesn't have those properties, this thread exists.

Obviously intrinsic indistinguishability properties provide stronger fungibility interchangeability than people do, and because the Bitcoin ledger doesn't have those properties, this thread exists.

You do have some very strong views. Border line religious in my opinion.

How do you expect bitcoin to be adopted if NO new people come to use bit coin? it's not a perfect system and thus shouldn't be dismissed as a perfect system that newbs shouldn't use. I'm pretty sure Satoshi wanted new people to start using bitcoin. If that never happens and they keep getting turned away...what's the point of Bitcoin anymore?

The true value that Bitcoin brings to the table is not "everyone gets to write into the holy ledger", it is instead "everyone gets to benefit from sane and non-inflationary financial instutions whose sanity and honesty are ensured by the holy blockchain".

BS the FBI stole hundreds of thousands of poeple coins, and had no problem selling it on the open market.

crosspost from me about zerocash, on topic here as well...

Zerocash is supposedly going to be an alt coin that links to bitcoin. One huge question is, Who is going to secure the zerocash chain/network?

Pretty much.

It only takes a couple of business opportunities lost to a competitor for a "merchant" to think twice about this whole blacklisting shenanigan.

As I understand it, they're planning just a regular alt, not a sidechain. I infer from that it will have its own miners like any other alt, although I suppose merge mining is a possibility (if they want to be foolish).

The technology may of course be used by others in different ways too.

https://i.imgur.com/4JE5GJm.png

I mean seriously...if they had a problem with people having privacy then they should ban all Curtains to all houses/homes.

No need, they just scan through the walls anyway.

True but that doesn't exactly show what a person is doing behind said walls/windows/etc.

Would that work on a thick concrete wall?

I wanted to open the discussion up to the following question:

What is the difference between PRIVATE vs Anonymous to you?

Sure, let's move to yet another subject neither the govs nor the noobs understand, and fill it with as much fud and drama as with the blocksize circus.


PS: if you have coins you fear that are tainted with bad bad behaviour, i'll buy them for say 3/4 of the amount.. helluva deal here ;)

That's the right way to regulate bitcoin, IMO

Due to the coin can move instantly to abroad, and it is impossible to enforce an international regulation around the globe, the most possible way is to treat it as cash, so that all the cash regulations today applies to bitcoin. This will save the regulators a hell lot of resource and effort while still have the risk under control in the current regulation framework

Large transactions will have to follow AML and KYC regulations, and resulting in further conflict between users and regulators

What is JoinMarket?
https://cloud.githubusercontent.com/assets/5016303/10127657/0878ce88-657c-11e5-92e7-d726b872f633.png (https://github.com/chris-belcher/joinmarket/wiki)

Not disputing this helps with privacy, but as I said before, this doesn't help with fungibility...

If you solve the privacy issue you will realize the nonexistence of the fungibility "issue"

What is JoinMarket?
https://cloud.githubusercontent.com/assets/5016303/10127657/0878ce88-657c-11e5-92e7-d726b872f633.png (https://github.com/chris-belcher/joinmarket/wiki)

So a round of JoinMarket is equivalent to adding a Cryptonote mixin of 1?

What is JoinMarket?
https://cloud.githubusercontent.com/assets/5016303/10127657/0878ce88-657c-11e5-92e7-d726b872f633.png (https://github.com/chris-belcher/joinmarket/wiki)

So if I am in no hurry to mix my coins I can run Yield Generator and be a Maker and get some extra BTC in the end? Sounds like a good deal.