The problem with this is I don't think "ownership" of an amount of bitcoin has been legally established to be property.   It truly is nothing but ledger entries on a public database, not like taking control of physical property like blood diamonds or Nazi gold.

I think the legal framework will rely on laws concerning fraud, not stolen property.

If I coerce or fool you into giving me access to your online bank account, transfer the money to another account under my control,  Did I steal your property or did I defraud you?

Yes you can.  It should be stable so it acts more like a bond rather than a penny stock.   Stable, long-term investors will make a profit, day traders need to go back to pink sheet stocks.

Bond-like growth will encourage adoption.  Pump-and-dump games harm it.

Where would the legal liability begin?  Bitstamp can't be held accountable for not reading every bitcoin forum or respond to a random emails.   However, legal counsel representing the creditors should immediately notify Bitstamp that the funds are suspected stolen.

This will be a test of government involvment in bitcoin.  Since noone in governmental authority has currently declared these coins stolen, then the liability should be on the entity/person that put them into bitstamp, where bitstamp should give up the identity of the that entity/person when presented with the proper legal paperwork.  

If bitstamp is held liable for accepting coins that are later legally proven to be stolen, this will present a serious issue with the fungibility of bitcoin.

At any rate, if I were bitstamp, I'd probably freeze the funds and give the Japanese bankruptcy court an opportunity to lay claim to them out of due diligence, due to the large amount.

There are augmented-reality games where people must physically go to a location to play some sort of action in the game.

However, I can see more useful applications, such as temporal-geotagged digital images. 

Perhaps one design a system where proof of location is made by paying a small btc fee to a node that consists of a open wi-fi point.  If enough of a fee is sent to the node's dynamic bitcoin address, it will sign a bitcoin message certifying that the node was contacted over wifi at a certain time.  The location proof could be queried in some kind of decentralized database.  Secondly, nodes would have to overlap and communicate with each other, in essence, they would certify that they are in range of each other, and reported locations that appear to be outliers would be eliminated from the network.  Some kind of algorithm could be developed that establishes confidence of proof of location, depending on home many proofs that the locatee can obtain, and the trustworthiness of the locater nodes, based upon how many other nodes certify that node.

If there is a large enough user base of locatees willing to pay fees to local nodes for the service, the economic incentive to run a node should insure growth in urban areas where the user base is likely to use the service.

Cheating might be possible by establishing a relay point, and I'm not sure what can be done about that.

Just playing devil's advocate, but how do you know that the 2011 movements weren't a withdrawal from mtGox that went into someone else's non-mtGox cold storage?

Just curious, how much complexity do you enforce when generating a passphrase?

It would seem that running an extensive dictionary password attack could yield some ill-gotten dividends if you have a high enough usage.

Ok.   What is the reason for "fracturing" the balance on an address?  In my false understanding of the bitcoin address paradigm, I had assumed the sender proves that an amount is transferred to an address, and the balance of that address is determined by the public ledger of the blockchain as a sum of the valid inputs to and outputs from transactions -- thus the owner of the address can generate a valid transaction with a single input that can contain up to the balance of the sending address.

BTW, thanks all for explaining this.

Just a suggestion:  It would be nice if there was a better interface to show the bitcoin.   Perhaps a btc URI link, or use the code at blockchain.info that displays a pop-up window with the QR code for an address.  (look up an address on blockchain.info, then click the donate button that will show the code you need)

Be aware of doing preorders.  BFL has a history of not delivering on when promised.  The uncertainty of getting mining equipment in future time frame adds more risk to the economics of the mining operation.  I paid for a pre-ordered Jalapeno rig from BFL, by the time I got it up and running, I estimate about 2-3 years for that original investment to pay off, or maybe never as the network hashrate rises exponentially.    It's better to stick to equipment to be delivered in a short time frame, and buy something that can be paid off in 2-3 months of running it based on the current network hashrate.

Edit: At the point I committed to preorder, I calculated a 4 month payoff at the network hashrate at the time.

If you are referring to the paper "An Analysis of Anonymity in the Bitcoin System " by Fergal Reid & Martin Harrigan,  please note this very key statement in that paper:

Your magic NSA database of bitcoin-address-to-identities would be a large collection of circumstantial evidence, not definitive proof of associations to identities.  It could be used as probable cause for search warrants and subpenas, but without collaborating evidence, it is worthless by itself in an actual domestic criminal case.

Likewise, a magic NSA database of ip-address-to-identities is also circumstantial.   I may pay the bill for my residential internet service, but I allow my friends to use my wi-fi, the logs that associate their device's mac address to activity on my LAN is overwritten within 7 days.  I may be circumstantially suspect of any crimes committed through my residential IP address, but it is not definite proof.

If I were hypothetically motivated to commit some financial crime, I would most likely walk a kilometer to the large state university in my town, connect to the guest wi-fi network covering the entire campus and do my thing.   All they have is the mac address of my tablet and maybe some geo data.  If that tablet is never discovered by warrant, never registered or otherwise associated with me, it can't be used as evidence linking me to the activity.

You make the claim that "governments can remove your anonymous WiFi Hotspot."  I would like to see a reference to a paper explaining how this is done, or an understandable explanation based on facts.

Unless the standards of evidence drastically change in the USA,  I don't see how the government is going to prosecute and march off 10,000 financial criminals to ass-rape prison.  The idea is ludicrous, since there are plenty of financial crimes NOT involving bitcoin committed on Wall Street every day, and I have yet to see an assembly line of prosecutions.

If it gets included in a block that is orphaned by the main chain, it will be eventually mined and included in the main chain since it was never confirmed by the main chain.  Typically a high priority transancation that paid miners fees would be included in the orphaned block and the main chain block that replaced it.

Keep in mind that the block reward and the mining fees can't be spent until there are 100 confirmations on that block.

I have an imported address in my blockchain hotwallet.   It came from a paper wallet that was loaded with one transaction.

As it lived in my hot wallet, it was used for several send transactions that were less than the amount on the address.   The transactions that the blockchain wallet formed used the entire amount on the address as the single input, and sent the desired amount to the receiver as the first output, then on the second output, sent the change back to the input address.

There were several small transactions receiving funds.

On the final transaction, draining this address, blockchain generated a transaction that had inputs from 4 different address in my wallet, however, in made 5 different inputs to the transaction using amounts from earlier receive and change output from previous transactions.

The final transaction triggered a double miners fee because of the size.

Was there any technical reason why a transaction needs 5 different inputs from the same address?

That would make bitcoin look like more of a ponzi scheme, because very few would be able to cash out at $10,000.   The thing to look for is a slowly increasing price matching the rate of adoption and a consistent rise in trading volume.   The pump and dump games of the get-rich-quick speculators would slowly fade away.

Round 21856 was an orphaned block.  It was never added to the blockchain, therefore, no payout.

For one, wallets need to be more secure and less subject to hacking.   Once people can keep their bitcoin safe and secure without having to worry that some malware has installed a keylogger and transmitted a copy of their wallet file to a thief from a general purpose computing device, then the masses may adopt in masses.  

I think bitcoin as a currency will take off with the under-banked first.   Banks don't like to open accounts for people with bad credit.  Since they don't want these customers, and using a debit card with greendot involves a 1% load fee at the very minimum (more typically 5% or more if you can't load $500 at a time), plus monthly charges; there's going to be a lot of room for a cheaper system.  Think ubiquitous cash-BTC ATM machines and bills/rent that can be paid with bitcoin, just by scanning the QR code on your bill with your low-cost hardware wallet.   Eventually employers might have an option to have wages paid in bitcoin, but the price needs to be much more stable for that.

Merchants will start to love bitcoin transactions, since the time it takes to clear a bitcoin transaction (an hour) is much less than the time it takes to clear a credit card transaction or a check (weeks).

That's not really a loan, it is short selling.   If the price of bitcoin rises, the person making the loan of the commodity needs the borrower to come up with collateral or money to cover the short position, or they need to buy a bitcoin as collateral to cover themselves.  If the loan is unsecured, then you probably just lost a bitcoin.

Check the receiving address on blockexplorer.com, which should be clear of any of blockchain.info's database issues.   If your transaction is not there, then it was probably never transmitted to the network by blockchain.info.

If that's the case, download your backup file, import the private keys into MultiBit sweep them to a new address, and after that is confirmed,  resend the transaction.   If blockchain.info gets the transaction unstuck, it will be rejected by the network as a double-spend, if all the old addresses are empty.

If you're doing something really illegal, and you don't want to become a person of interest -- then sure, using a mixer might be a good idea to cover your tracks, especially if the conduit is used more than once.

But if they can't prove you ever had control of address B, and that's the only thing that links you to the crime committed with address C, then I wouldn't worry about the case ever going to trial.

But the original supposition brought up by Hopper/Anonymint is that the omnipresent black magic spy agencies can somehow map all addresses holding bitcoin to individual people and demand payment of stupid tax to compensate those that got ripped off by a hacker or a fraudster is ludicrous.