Bitcoin Forum

Given that every transaction is listed in the blockchain, why not identify the double spent Bitcoins and stop them in their tracks, make them worthless, and reissue the Bitcoins?  Or would that just pass the buck as it were, putting the bad debt where ever the stolen bitcoins are now?  It would be pretty difficult to spend that much money on merchandise that quickly.

there never was double spends.

Only bad money managing from Gox

I can understand that they may be fiat broke but how can they have fewer Bitcoins than their legal transactions indicate?

there never was double spends.

Only bad money managing from Gox

You send me 10BTC.

I lose those BTC by some means.

You ask for your BTC back.

I say I have halted withdrawals of your BTC because $PROBLEMS

You say, "it's OK, grifferz must have my BTC because trades have indicated it"

I sit on a big blue ball.

There were double withdrawals though. And at least Mt Gox should have a record of by who..

You could probably get a pretty good idea with careful examination of the blockchain, but you'd need Mt Gox's withdrawal records to be sure.. but the exact same amount withdrawn to the same address more than once, combined with hash padding issues seems like a good place to start.. Cross referenced with Mt Gox withdrawal records and their KYC records and it seems like you should be able to knock on someone's door and ask some good questions.. 

Back to the missing Bitcoins and the original question.  Identify the Bitcoins and stop them in their tracks.  Whether double spent or stolen, mine are mine and if MtGox sent them to someone else that's theft.

Back to the missing Bitcoins and the original question.  Identify the Bitcoins and stop them in their tracks.  Whether double spent or stolen, mine are mine and if MtGox sent them to someone else that's theft.

Back to the missing Bitcoins and the original question.  Identify the Bitcoins and stop them in their tracks.  Whether double spent or stolen, mine are mine and if MtGox sent them to someone else that's theft.

You're not a newbie based on the post count... you should know by now that what you suggest is impossible. Even if it was possible, it would not be fair: The "illegal" bitcoins may have been part of hundreds of transactions after leaving Gox. Those transactions may be totally normal trades between people who had no idea that you would later declare their money illegal. Who are you to say those trades are now void?

Who am I?  the rightful owner of those Bitcoins.

Who am I?  the rightful owner of those Bitcoins.

You send me 10BTC.

I lose those BTC by some means.

You ask for your BTC back.

I say I have halted withdrawals of your BTC because $PROBLEMS

You say, "it's OK, grifferz must have my BTC because trades have indicated it"

I sit on a big blue ball.

D&T is right: MtGox was the owner of those bitcoins. The only thing you had was a solemn promise from MtGox that they would give you a same number of bitcoins when you wanted them.

Sadly you are not.   If you don't have the private key for "your" bitcoins then you have no bitcoins.  What you do have is an IOU from MtGox to repay you x BTC at such time when you choose to withdraw them.  You own debt from MtGox.  MtGox has failed to honor that debt.  That is the problem with debt.  It is often not repaid.  The advantage of Bitcoin is that it has no counterparty risk however if you hand over your Bitcoins in exchange for IOUs then you are giving up that advantage.

If you don't have the private key for "your" bitcoins then you have no bitcoins.

As for saying you are the rightful owner.  Says who?  Based on what evidence?   Who judges that evidence?  How do they have the master control key for the Bitcoin network?

Who am I?  the rightful owner of those Bitcoins.

You're not a newbie based on the post count... you should know by now that what you suggest is impossible.

But why not stop those bitcoins from being traded ASAP.

How would you identify those specific bitcoin as _yours_?

There aren't specific, numbered, bitcoins. Bitcoin is just a ledger system.

Bitcoin that I deposit at an exchange, would most likely, be used on someone else's subsequent withdrawal from that exchange within the hour. The exchange keeps track of what I deposited, internally.

Same way that when you put USD 200 in cash into an ATM to deposit into your savings account, that money isn't collected later in the day, and put into a box in the vault, labelled "nanonano's monies", waiting for you to withdraw it later from your box.

You depend on the bank, and the exchange, to faithfully keep track of how much belongs to who, and if they are wrong, through no fault of the customer, it is on the bank/exchange, to reimburse you. It would be completely wrong to claw back monies from a 3rd party who had done nothing wrong, depriving them of _their_ monies, so you could have yours.

=squeak=

non-sequitur

But why not stop those bitcoins from being traded ASAP.  If somewhere down the road a decision is made that the stolen/missing Bitcoins belong to the rightful owners and those transactions with stolen/missing Bitcoins are not valid then freezing them now would limit the damage and to argue otherwise aside from arguing as the devil's advocate is suspect.  A pain in the ass for the blockchain yes but better sooner than later.

Every Bitcoin has a history.  If MtGox did not assign specific Bitcoins to my MtGox Bitcoin holdings, it at least has a history of what Bitcoins were double spent or stolen.  Identifying those that were stolen and freezing those so no more transactions can be conducted with those is what's necessary.  And yes, if a 3rd party bought those stolen coins the third party would lose not the rightful owner, MtGox and by extension myself.

I can see how those deluded with the anonymity of Bitcoin could be worried that their trades on Silk Road or Silk Road 2 could be traced back to them but they'd have to be idiots not to realize that the blockchain is a record of every trade.

Organized crime ran into the problem of computers tracking money in US banks a long time ago.  They moved to hanging valuable artwork on their walls and the like.  What to do with the money was/is a real problem for organized crime.

You'll argue that I should explain exactly how the stolen/missing Bitcoins can be tracked or identified.  I can't.  But I've never argued I could.  Perhaps somebody on the board of the Bitcoin Foundation can.

Every piece of bitcoin _that_is_transacted_on_the_blockchain_ has a history... all of the coin within MtGox, do  not have a history on the blockchain.

The blockchain shows coin going into MtGox, and coin coming out to MtGox... not which accounts within MtGox, holds what.

As far as the blockchain is concerned, all that coin, belongs to addresses held by MtGox.

When you deposit coin to MtGox, once your MtGox account is credited, the coin that arrived at your deposit address is moved to MtGox's wallet. (the deposit address is only used so MtGox knows who gets credited for what). Once in MtGox's operating wallet, that coin may be used for a withdrawal, or may be moved to cold storage if the operating wallet contains too much. When those moves happen, that coin is not recognizeable as yours anymore, and even the amounts of the pieces have changed.

What you think of as "yours", is no longer "yours"... and no longer exists.

=squeak=

edit: also, you are getting your terminology wrong... a double-spend, is different than MtGox having sent coin, twice... a double-spend involves two transactions trying to reference the same piece of coin as inputs to the transaction. MtGox's problem, had more to do with losing track of what it was sending, and sending more, without knowing what it sent earlier, did go through, so MtGox sent more than one valid transaction, where a double-spend, only one transaction would have succeeded.

Please define how you are attempting to use the term "trade" in this context?We are arguing no such thing...

We are arguing that you don't know what the fuck you are talking about and we are trying to drop some knowledge on you that you are ignoring.

=squeak=

After the US government seized Bitcoins, the Bitcoin Foundation considered making those specific Bitcoins worthless.  They questioned why allow the seizing government to profit and to gain the leverage of perhaps dumping those Bitcoins to effect Bitcoin value at some critical juncture.  They would likely have brainstormed how to do that back then.  If MtGox can identify how and when it got ripped off of which Bitcoins perhaps the Bitcoin Foundation can make those worthless for the time being or until it's sorted out.

Because Bitcoin is decentralized.  You say "stop" those "bad" Bitcoins.  Who stops them and who decided which ones are bad?

The central agency of bitcoin thefts and disputes?  What is the level of proof?  What if someone lied and just said coins were stolen?  Is there an appeal process?  How does this agency pay for itself (you don't think thousands of people investigating millions of disputes a year is going to be done for freee)?  Maybe we should put a 2% tax into the network on each transactions to fund the central agency of bitcoin thefts and disputes?  What happens when a government puts guns to the heads of people in the agency and says "forcibly confiscate the coins of these political disidents"?

Bitcoin is decentralized.  There is no appeal to a central authority.
Bitcoin is like cash.  If you leave your wallet on the subway and someone steals it you aren't getting the money back.
Bitcoin is like cash.
Bitcoin is like cash.
Bitcoin is like cash.  Start treating it like cash.

The Bitcoin Foundation doesn't control my node (or anyone's node).  Bitcoin is a consensus system.  So you want it so whatever coins the Foundation says are worthless, become worthless.  You can't possibly see the problem with having an entity with an off switch to the entire Bitcoin network, an absolute central power in a "decentralized network"?

Can't think of any way that could be possibly be abused?  Nobody will agree to a Bitcoin where a single entity can at will freeze coins.  Bitcoins works on consensus if people don't agree to that fork, it will never be used.

Amen

I take $100 out of an ATM in $20 bills.  The ATM has recorded those serial numbers.  I immediately get mugged.  I identify the mugger to the police.  The money is seized.  The twenty dollar bills are identified as those I withdrew from the ATM.  The mugger gets tried, convicted, goes to jail or gets counseling (liberals) and I get my $20 bills back.

I take $100 out of an ATM in $20 bills.  The ATM has recorded those serial numbers.  I immediately get mugged.  I identify the mugger to the police.  The money is seized.  The twenty dollar bills are identified as those I withdrew from the ATM.  The mugger gets tried, convicted, goes to jail or gets counseling (liberals) and I get my $20 bills back.

I take $100 out of an ATM in $20 bills.  The ATM has recorded those serial numbers.  I immediately get mugged.  I identify the mugger to the police.  The money is seized.  The twenty dollar bills are identified as those I withdrew from the ATM.  The mugger gets tried, convicted, goes to jail or gets counseling (liberals) and I get my $20 bills back.

You are apparently not sober.

If you had any common sense you would recognize that this example is unrealistic. In the real world, the mugger will not be caught immediately, but spend those bills before he gets caught.  ::)

Not sure about US law (maybe D&T can comment?), but German law is crystal clear on that. If someone accepts money in good faith (as part of a legal transaction) then he owns that money. It is not possible to legally acquire stolen goods, but money is an exception (§935 BGB).

Without such a provision, trade would not be possible. Any grocer would have to fear that, at some point, the police seizes some of his money because the mugger said he bought some groceries at that store, using the stolen money.

BTC has to be the same way, or it is not electronic cash. No one, absolutely fucking no one would accept BTC anymore, since he could never be sure whether some of that BTC is tainted and gets seized or redlisted later on.

But I have a feeling you know this already, who is paying you for promoting redlisting?  >:(

Not sure about US law (maybe D&T can comment?), but German law is crystal clear on that. If someone accepts money in good faith (as part of a legal transaction) then he owns that money. It is not possible to legally acquire stolen goods, but money is an exception (§935 BGB).

btw. the solution is not asking for more fascism but good old fiduciary trust; using segregated storage such as proposed by Coinkite. Malled transactions would fail in such a case, due to the fact that people could steal only from themselves.

That is my understanding.  Good faith is the important part.  Obviously it doesn't protect someone who knows (or should have a reasonable suspicion) that the money is the proceeds of a crime.   Doing otherwise would undermine the confidence in the currency, much like the OP proposal would fatally undermine the confidence in bitcoin.  If a merchant, user, or exchange can accept Bitcoins in good faith and then have those coins rendered worthless through no fault of their own .... why would they want to accept a bitcoin?  Even if they are interested in crypto-currency they would just support a coin without that risk.

Who am I?  the rightful owner of those Bitcoins.

Good faith is the important part.

no, trustlessness and fungibility is the important part

The exploitation of MtGox to the point it fails is in itself an abuse that should not be allowed to succeed.

What if you got your cash from the grocery store in change instead of a bank? Do you have the serial numbers then?

I mean if you think using a bank is preferable, be my guest...

I was speaking more on the law.  Bitcoin is trustless and fungible and should remain so.  That doesn't mean that someone can't be arrested by law enforcement.  Generally speaking accepting currency in good faith for goods or services is not a crime even if the currency is the proceeds of a crime.  The accepting party acting in good faith is not liable for the return of the funds.  However knowingly accepting stolen funds is generally speaking a crime and rarely are criminals allowed to keep the proceeds of a crime.

Why, exactly, are you even involved with bitcoin in the first place if you think like that?

Perhaps you should go back to dealing with fiat, and stay there.

=squeak=

You send me 10BTC.

I lose those BTC by some means.

You ask for your BTC back.

I say I have halted withdrawals of your BTC because $PROBLEMS

You say, "it's OK, grifferz must have my BTC because trades have indicated it"

I sit on a big blue ball.

Flagging the stolen Bitcoins and fractions thereof in a way that clearly lets the potential buyer or store know the Bitcoin is questionable and may at some future date be redlisted would be a start.  The thief should not be allowed to profit from the theft.  

Do you even consider what you say?

The idea your reply addresses?

You are on my ignore list now.

Flagging the stolen Bitcoins and fractions thereof in a way that clearly lets the potential buyer or store know the Bitcoin is questionable and may at some future date be redlisted would be a start.  The thief should not be allowed to profit from the theft. 

I was speaking more on the law.  Bitcoin is trustless and fungible and should remain so.  That doesn't mean that someone can't be arrested by law enforcement.  Generally speaking accepting currency in good faith for goods or services is not a crime even if the currency is the proceeds of a crime.  The accepting party acting in good faith is not liable for the return of the funds.  However knowingly accepting stolen funds is generally speaking a crime and rarely are criminals allowed to keep the proceeds of a crime.

Theft of Bitcoins the result of which I have fewer Bitcoins, deprives me of my capacity to spend those Bitcoins.  What kind of fungibility is that?

It refers only to the equivalence of each unit of a commodity with other units of the same commodity. Fungibility does not describe or relate to any exchange of one commodity for some other, different commodity.

Why do you think each Bitcoin has a serial number, anyway? What has the serial number, each BTC? Each satoshi?

If you send 1.5BTC to 1AAAAA... and I later send 2BTC there, when the owner of that key later sends 3BTC to 1BBBBB... and 0.5BTC is change to 1CCCCC, which Bitcoins are yours and which are mine?

Theft of Bitcoins the result of which I have fewer Bitcoins, deprives me of my capacity to spend those Bitcoins.  What kind of fungibility is that?

But this smacks of a pissing contest without benefit.

Theft of Bitcoins the result of which I have fewer Bitcoins, deprives me of my capacity to spend those Bitcoins.  What kind of fungibility is that?

But this smacks of a pissing contest without benefit.

hes got Some ballz...

I take $100 out of an ATM in $20 bills.  The ATM has recorded those serial numbers.  I immediately get mugged.  I identify the mugger to the police.  The money is seized.  The twenty dollar bills are identified as those I withdrew from the ATM.  The mugger gets tried, convicted, goes to jail or gets counseling (liberals) and I get my $20 bills back.

But this isn't what you are demanding. The real example would be:

You take 5*$20 from the atm. Get mugged. Mugger exchanges the 5*$20 for a $100 bill at a store. Police catches the thief and tells you that after he gets convicted, you'll hopefully get $100 from him. You refuse this proposal and demand that the police go to the store get the five twenties that belong to you. If the store has given those twenties as change in the mean time, police must according to you find the customers and confiscate the twenties from them.

This is essentially what you are asking**. Does this still seem reasonable to you?


**) except you didn't really have 100$, you had an IOU for 100$ and still demand to get some specific twenties back (I'm not sure which twenties exactly)

Humm, mugger steals almost half a billion (US billion) dollars in btc.  Not to inconvenience anyone we say Good Luck, don't spend it all in one place, and that's that.  Half a billion dollars in btc isn't something the owner can fix with a Hey mom, bail me out.

I notice you didn't answer whether you thought the demands in the example were reasonable. You just changed the angle... In any case, it's not about "inconveniencing" anyone, it's a basic principle of how _all_ money works.

~$428,000,000 dollars.  Makes it the second largest heist in recorded history aside from the value of art looted by Nazis.

http://listverse.com/2009/12/01/10-largest-robberies-in-history/

hes got Some ballz...

I hope he's flying coach to NYC for the federal indictment.

They just bought a three letter domain name (and those tend to go for six figures) with depositor funds.  I guarantee you he isn't going by coach.  It isn't like it is his or the company's money he is spending.

The Iraq treasury heist by Saddam's son amounted to 1 billion but 2/3rds was recovered.   The dollar value of the missing MtGox btc is greater than what's outstanding from that treasury heist and more than the next largest heist in recorded history.

Not a crime?  It will be difficult to convince many of that.   And if he is found not guilty of any criminal wrongdoing, some will say the New York banks pulled strings to have that verdict so as to undermine confidence in Bitcoin.

If he knew of ongoing btc disappearances before the holidays then left for a vacation only to return to find the number of missing btc had quickly risen to 770btc in his absence, would that be criminal negligence?

You keep (intentionally) ignoring this question.  Who would do this?  On what authority?  How would they do it?

In related news the top 500 bitcoin addresses are mine and were just stolen please freeze them.

Failure to understand Bitcoin will indeed cost investors billions. 744,408 BTC stolen (http://www.scribd.com/doc/209050732/MtGox-Situation-Crisis-Strategy-Draft) (nearly 7% of total mined coins to date) and some people seem to be cheering like this is a good thing because they don’t like (long despised) MtGox. This is far far from over.  Where did those stolen coins go? Well check your wallet because they were likely fed back to the markets. If you have been buying bitcoins on any exchange chances are you have some of the stolen loot yourself. These stolen coins can be traced back to their true owner in a direct chain of title thanks to the block chain. If you don’t think this matters you don’t understand the legal system and the principle of Nemo dat quod non habet (http://en.wikipedia.org/wiki/Nemo_dat_quod_non_habet)

Under both American and English law the original owner of stolen property can demand ownership be returned to him if he can prove a chain of title (something the blockchain conveniently provides). The only recourse for an innocent buyer of stolen goods (and only in some jurisdictions) is to argue the exchange it was bought from had an implied warranty and he can try to sue the exchange after returning the coins to the true owner. MtGox is insolvent good luck there. BTC-e is run by anonymous folks think they will stick around in the face of massive lawsuits?
...
Regardless expect all future exchanges to require both rigorous identity checks prior to buying and selling as well as fine print stating that anyone who supplies coins to a market is ultimately responsible in the event those coins are determined to be “black” or stolen goods in the future.

Still think there is no need for truly anonymous cryptocurrency?

There is no chain of title from the depositor to the current owner of a coin.  MtGox being off blockchain and pooled funds makes sure of that. You can trace a particular "coin" back to MtGox, but the trace stops there.  You can't trace back further than that.
....
application of demo dat rule is not a forgone conclusion when it comes to bitcoins.  It doesn't apply to legal tender and it also doesn't apply to bearer instruments (i.e. casino chip), or negotiable instruments (i.e. a check).  It is at least plausible a judge would rule that bitcoins are more like those exceptions than real property.  Until we see a court case we won't know for sure.  I am not a judge so what I think matters little but a bitcoin has more in common with a casino chip (a bearer instrument) then it does with a car (which is a unique specific piece of real property).

Still the application of demo dat rule is not a forgone conclusion when it comes to bitcoins.  It doesn't apply to legal tender and it also doesn't apply to bearer instruments (i.e. casino chip), or negotiable instruments (i.e. a check).  It is at least plausible a judge would rule that bitcoins are more like those exceptions than real property.  Until we see a court case we won't know for sure.  I am not a judge so what I think matters little but a bitcoin has more in common with a casino chip (a bearer instrument) then it does with a car (which is a unique specific piece of real property).

Note: to be clear I am not saying I have the answer just pointing out the law is pretty slow to react to technological changes.  This and countless other questions will eventually be decided but the timescale is measured in decades.

Your assumption that the courts will rule that bitcoin should be treated like cash rather then a commodity is in my opinion foolishly optimistic. I have no horse in this race (not a MtGox customer). But at the very least this creates huge legal uncertainties for bitcoin.

I'm not that interested in how the law is currently interpreted in some specific jurisdiction right now (no horse in the race either), but I would like to see someone actually argue why bitcoin should not have the same exception as these existing exceptions "to facilitate trade and commerce by favouring security of transactions over the protection of property rights in certain common, but risky, trading situations". Personally I have problems making a good case against that.

There is no chain of title from the depositor to the current owner of a coin.  MtGox being off blockchain and pooled funds makes sure of that. You can trace a particular "coin" back to MtGox, but the trace stops there.  You can't trace back further than that.

There is no chain of title from the depositor to the current owner of a coin.  MtGox being off blockchain and pooled funds makes sure of that. You can trace a particular "coin" back to MtGox, but the trace stops there.  You can't trace back further than that.

The depositors didn't have any "coins" directly and thus have no claim with the actual thief (if one exists).

Jim Sinclair pointed out that banks legally own depositors' funds as soon as the depositors hand those funds over to the banks. The money becomes the banks and the "depositors" actually become unsecured creditors holding promises to pay. Previously the banks were obligated to pay back this loan on demand with cash. Under the new Federal Deposit Insurance Company - Bank of England (FDIC-BOE) plan revealed this year, however, these promises to pay become equity in the bank, which won't be able to be used as payments for bills, which is why most people have money in the bank in the first place.

The point is that your money is not yours while it is "deposited" with a bank.

MtGox had its coins stolen (or embezzled).  The depositors traded Bitcoins for IOUs payable by MtGox.  Much like a bank there is no individual depositor's money.   The bank has a liability to the depositor.  If a bank is robbed it is the bank's money that is being stolen.

Now in the US we have deposit insurance but even if we didn't the bank couldn't just say "sorry that was your particular $100 bill stolen is last weeks robbery).  The banks funds were stolen and the liability the bank owes the depositor still exists.

Now in this case when MtGox lost their coins, they lost the ability to repay those IOUs.  In the size of the theft was smaller MtGox couldn't just say "sorry that was your coins stolen" the liability (IOU) would remain and depositors could seek damages against MtGox.  I know we went a long way round but while MtGox may have a claim against any coins that can be traced back to MtGox, no depositor would.

it will hold all monetary sums and all Bitcoins deposited by each Member in its Account, in that Member's name as registered in their Account details, and on such Member's behalf.

Members agree that, whenever a Transaction is made, the Platform sends and receives the monetary sums and/or Bitcoins from the Buyer and the Seller’s Accounts in their name and on their behalf, through the IT system in place on the Platform at the time of the Transaction.

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Still the application of demo dat rule is not a forgone conclusion when it comes to bitcoins.  It doesn't apply to legal tender and it also doesn't apply to bearer instruments (i.e. casino chip), or negotiable instruments (i.e. a check).

Breuer told a press conference in New York that Mexican drug traffickers deposited hundreds of thousands of dollars each day in HSBC accounts. At least $881m in drug trafficking money was laundered throughout the bank's accounts.

It is at least plausible a judge would rule that bitcoins are more like those exceptions than real property.  Until we see a court case we won't know for sure.  I am not a judge so what I think matters little but a bitcoin has more in common with a casino chip (a bearer instrument) then it does with a car (which is a unique specific piece of real property).

Note: to be clear I am not saying I have the answer just pointing out the law is pretty slow to react to technological changes.  This and countless other questions will eventually be decided but the timescale is measured in decades.

Still the application of demo dat rule is not a forgone conclusion when it comes to bitcoins.  It doesn't apply to legal tender and it also doesn't apply to bearer instruments (i.e. casino chip),

Note: to be clear I am not saying I have the answer just pointing out the law is pretty slow to react to technological changes.  This and countless other questions will eventually be decided but the timescale is measured in decades.

Coins get spent into Mt. Gox's pool, so there is clear chain of collective ownership of the pool.


This depends on the contact with Mt.Gox. Most banks have a clause which says that deposits are unsecured creditors and not allocated nor unallocated storage. Whereas most other vaults/accounts in the world are allocated or unallocated storage.

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http://dollarvigilante.com/blog/2013/11/04/plans-in-place-for-a-us-bank-bail-in.html

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However I assume Mt.Gox would not have many customers if there had such a fine print in their Terms of Service. The presumption is these deposits into Mt.Gox were balances for an account with an exchange.


Mt.Gox was not a bank. Did they have a banking license to take deposits? I don't think so.


Not any more! Read what I quoted above. Now the banks can give you worthless equity in the bank instead.


That depends on the contract Mt.Gox had with its account holders. In any case, the court can apply the demo dat rule on behalf of Mt.Gox.

A copy of the Terms of Service (http://web.archive.org/web/20130112215235/https://mtgox.com/terms_of_service) is available on way back archive. Looks like you made the wrong assumption:

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Because the government needs for legal tender and checks to be fungible, as it is the government's (i.e. banksters') money and banking system. And very rich (banks) need the casinos to launder their drug money (http://www.theguardian.com/business/2012/dec/11/hsbc-bank-us-money-laundering) (did you forget about HSBC recently).

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Bullshit. It is quite clear a judge will rule that Bitcoins are property and not creditors to Mt.Gox.

At least do some research before you spout off your often wrong mouth.

I don't see why it is an issue. You can't trace cash either - you couldn't trace any money prior to electronic payments.

Cash you can, since each bill has a serial number.

My understanding is that it's more like water. In my example, when the first guy sends 1.5L(BTC) to 1AAAAA, that address now has a bucket of water with 1.5L in it and you can trace the history of that bucket. When I send 2L there, 1AAAAA now has two buckets of water, each with individual histories. When 1AAAAA spends that water to someone else, he's pouring 3L into a new bucket for 1BBBBB and 0.5L into a new bucket for 1CCCCCC. You can tell that those two new buckets were made from the output of the two input buckets, but you have no way to say what water in 1BBBBB or 1CCCCC's buckets came from which input from 1AAAAA.

With more complicated with more inputs and outputs. If Gox did a transaction with 20 inputs (one of which are your coins), and 100 outputs, which of those 100 outputs are yours? Who can you go before the judge and say "that guy got my money"?

Cash you can, since each bill has a serial number.

My understanding is that it's more like water. In my example, when the first guy sends 1.5L(BTC) to 1AAAAA, that address now has a bucket of water with 1.5L in it and you can trace the history of that bucket. When I send 2L there, 1AAAAA now has two buckets of water, each with individual histories. When 1AAAAA spends that water to someone else, he's pouring 3L into a new bucket for 1BBBBB and 0.5L into a new bucket for 1CCCCCC. You can tell that those two new buckets were made from the output of the two input buckets, but you have no way to say what water in 1BBBBB or 1CCCCC's buckets came from which input from 1AAAAA.

With more complicated with more inputs and outputs. If Gox did a transaction with 20 inputs (one of which are your coins), and 100 outputs, which of those 100 outputs are yours? Who can you go before the judge and say "that guy got my money"?

duties of the US government:  establish justice, insure domestic tranquility, provide for the common defense, promote the general welfare, and secure the blessings of liberty to ourselves and our posterity

Making money 'trackable' is good business and makes sense and would probably come under the first three of the above.  If it didn't make sense Las Vegas would have left their casino chips untraceable but no, they realize the RFID identification and tracking of casino chips makes good sense for them and offers a level of protection they need.

Not sure what the demo dat rule is.  Perhaps that there is a uniqueness to the stolen property?  I see that dollars have serial numbers and now so do casino chips.  So if the demo dat rule doesn't apply to seralized numbered dollars it doesn't apply to casino chips even tho now they have rfid tags internally (saw it on CSI used as evidence) so maybe the demo dat rule does apply to serialized numbered dollars.  It likely applies to serialized numbered dollars having been marked with an explosive dye pack from a bank robbery.

On Friday, 2 BTC were stolen from me. I am considering reporting this to law enforcement. This means that anyone who receives BTC which derives from my stolen 2 BTC will be liable to return them back to me.

Can every satoshi of those missing Bitcoins be traced?  I'd bet that would be a yes. 

Those are general clauses listed in the preamble - they give no power. You should be looking at Article I, Section 8. The Federal government has only the enumerated powers expressed here and like a few others. The Federal government is also not granted a monopoly on currency, nor the power to forbid others from making currency, or using other currencies, or to require that private currencies are made according to certain rules. In fact, it only has the power to coin money from gold and silver (which never was traceable) - what you call the "dollar" is a counterfeit irredeemable paper ticket (i.e., a bill of credit). It is illegal for the federal government to issue bills of credit. What we call the "dollar" is illegal. So, you may be right that it could be a good idea, but the federal government just doesn't have the authority to do it - unless it could somehow put serial numbers on gold and silver coins, which would be very difficult, but not necessarily uncoinstitutional.

Hard to believe I am talking to someone on Bitcointalk who does not understand this already.

You are addressing the right of Bitcoin to exist.  I do not dispute the right of Bitcoin to exist.  I do not accept that the Bitcoin economy has a "right" to promote or facilitate criminal activity be it theft of Bitcoins from MtGox or movement of profits from of illegal drug sales out of the country or as that muckraking US official said at the Senate hearings, to be used to buy and sell children.

Why do you believe that to be so? A bitcoin isn't a thing, and it doesn't have a unique identifier. The general use over time of Bitcoin it it's own mixing service; by the time any court orders are issued to seize the Bitcoins withdrawn from Gox they most likely won't just be sitting around in some wallet. They'll be distributed in small fractions in a huge number of wallets of a correspondingly large number of people.

Again, even if you came up with enough consensus to get the Bitcoin protocol changed to allow the invalidation of coins and reissuing those sums to people who say they had them stolen, how do you decide what coins to take? Do you just based on a percentage of taint? What do you do when you successfully get your X Bitcoins taken back from people who had previously withdrawn them from Gox, and then they in turn have to sue you in Bitcoin Court because after all, most of them were probably just people who'd deposited in Gox and now are out their coins, same as you were.

Besides the technical challenges, who do you propose runs this court that you want to get everyone to agree on? The US Government? The Japanese? The Bitcoin Foundation? Some kind of consensus voting through the blockchain? The biggest draw of Bitcoin is that there isn't a central despot who can unilaterally choose monetary policy.

You should realize that this means all BTC you own and all the gains you accrue can be clawed back from you in the future.

Theft of BTC is very widespread even without the exchanges and with the Mt.Gox fiasco (and more to come because the government + banks can bankrupt all the exchanges, or even send in secret agencies to steal the keys).

For those readers trying to rationalize away the contract between accounts holders and Mt.Gox (https://bitcointalk.org/index.php?topic=486872.msg5407521#msg5407521), you have no legal standing. Bitcoin is not legal tender. So many governments have spoken on this already and declared it to be a commodity. Clearly we are looking at a big legal mess with Bitcoin which the government is going to have to solve holistically. Now you see I was correct from the very beginning in Bitcoin : The Digital Kill Switch (https://bitcointalk.org/index.php?topic=160612.0).

All you Bitcoin millionaires are going to be Bitcoin jailbirds and destitute.

For those who are rationalizing away the chain of ownership (I explained upthread (https://bitcointalk.org/index.php?topic=486872.msg5408045#msg5408045)) due to that the lack of physical nature to Bitcoin, you don't have any chance of winning that argument. If it wasn't owned, it wouldn't have value that can be exchanged. Even if we are trading fungible tokens in a pool, the tokens are still owned. Cripes, are you guys totally ingenuous or ignorant.

Oh, bold and red font.. Must be legit.

Continue to ignore it please. I will be watching all Bitards fall into the abyss together when the mess comes to the point that you can't find any one to buy your coins, yet you are liable for all the clawback amount.

Mansions will be confiscated. Paddy rides to debtors prison will be ensue when you can't pay.

Continue to ignore it please. I will be watching all Bitards fall into the abyss together when the mess comes to the point that you can't find any one to buy your coins, yet you are liable for all the clawback amount.

Mansions will be confiscated. Paddy rides to debtors prison will be ensue when you can't pay.

Wow this is a pretty broad assumption. You expect all governments everywhere to declare any Bitcoin holder as a criminal? Lol

Good luck coordinating that world wide.

You have a very low IQ.

They can access anyone along the chain of ownership, cherry picking someone in their jurisdication and who didn't use strong anonymity methods.

Orthogonal to that slam dunk, you are discounting the degree of tracking and cooperation that the G20 is doing and planning to do, in response the $150 trillion debt implosion coming and the need to confiscate all wealth to resolve this debt.

You are correct that Bitcoin millionaires have more to fear than Bitcoin paupers. Economy-of-scale favors going after the larger of the culpable.

Orthogonal point is the NSA+bankers have no incentive to prosecute when they can solve the problem by putting it on the merchant's back. And its their legal tender system they want to keep in power.

Whereas, crypto-currency can't be charged back and it threatens their power. So they will apply more effort.

Cant believe this stupid thread is still alive !

MtGox has an internal record? really?? and how am I to believe such a record has not been tampered with or generated two days back? ?

The Feds recently subpoened Mt.Gox to force them to retain trading records, so the chain of ownership will be known to law enforcement.

Rebuttal was already posted:

You think it's a given that MtGox has detailed, accurate and long term trading records? From a company that managed to lose all but 2000BTC out of 750,000BTC (if the story is true) before they noticed and pulled the plug?

You think it's a given that MtGox has detailed, accurate and long term trading records? From a company that managed to lose all but 2000BTC out of 750,000BTC (if the story is true) before they noticed and pulled the plug?

Perhaps in retrospect he found that attempted pose as an innocent playful geek, the sitting on a blue ball photo, was seriously embarrassing. His inner Walter Mitty then took him to dark places at which point he started imagining himself as engaging in a theft that would rank among history's greatest.

duties of the US government:  establish justice, insure domestic tranquility, provide for the common defense, promote the general welfare, and secure the blessings of liberty to ourselves and our posterity

Making money 'trackable' is good business and makes sense and would probably come under the first three of the above.  If it didn't make sense Las Vegas would have left their casino chips untraceable but no, they realize the RFID identification and tracking of casino chips makes good sense for them and offers a level of protection they need.

If you are concerned with that simply use USD. Or pokers chips lol