Untaint for a fee using out-of-band transactions and large mining fees

[Peter R]

Although I very much doubt the dystopian future envisioned by a few here.  You know, the future where coin tainting authorities blacklist coins of people they don't like and the coin police confiscate coins from honest users just because they may have been used to buy illicit goods 14 transactions back.  I think that is tinfoil-hat talk.  I believe most people want a free and fair system, and so bitcoin will stay free and fair.

But I thought of a way to untaint any coin today and I wanted to share it in case it hasn't been discussed (although I'm sure it has).  

When a new block is found, the miner is permitted to reward himself with a coinbase transaction equal to the block reward (currently 25 BTC) plus the sum of all transaction fees included in the block.  In a certain sense then, these newly generated coins come pre-tainted: a bit of taint was peeled off every fee-paying transaction included in the block.  So each newly generated coin can be traced back to a lot of addresses.

It's not very useful to define taint in this way, so blockchain.info for instance does not include it.  If you perform taint analysis on a newly generated coin, you'll find zero taint.  

But what this means is that you could untaint any coin if you knew a willing and trustworthy miner.    Let's say you control the private key to an address that contains 10 BTC that you wish to untaint.  You'd create a transaction that takes as inputs these 10 BTC and outputs something like 1 mBTC.  You basically give everything away (9.999 BTC) as a miner's fee.  

You can't broadcast this transaction publicly on the network, as you'd certainly lose your coins.  Instead, you'd send this transaction over a private back-channel to a miner offering the untainting service.  When the miner finds a block, your 9.999 BTC gets added to his coinbase transaction.  The miner deducts a few percent for the service, and sends you back your coins, completely untainted.  

Of course, a tainting authority could become more sophisticated and trace taint through coinbase transactions too, but this quickly becomes unmanageable I think for reasons that I won't get into as this post is already long enough...

[AnonyMint]

You can't control which miner wins the next block. Just buy new coins directly from a miner.

[DannyHamilton]

You can't control which miner wins the next block. Just buy new coins directly from a miner.

No, but if you have an agreement with a mining pool, you can send the transaction directly to them without broadcasting it.  Then, as long as they agree not to broadcast the transaction until it is in one of their blocks (and why would they with a "fee" like that!) it will make it into their next block.

Of course, orphaned blocks could become a bit of a problem.

[eldentyrell]

https://bitcointalk.org/index.php?topic=499692.0

(I don't post in self-mod threads)

[Peter R]

You can't control which miner wins the next block. Just buy new coins directly from a miner.

This is why the post title refers to "using out-of-band" transactions.  Like DannyHamilton said above, you don't broadcast the transaction publicly--you only make the cooperating miner aware of the transactions.  

Like Danny also said, one risk is an orphaned block (which would then publicly expose your transaction), but this risk can be statistically mitigated by untainting coins using as many transactions as necessary to reduce the expected loss variance to an acceptable level.  

[Peter R]

(I don't post in self-mod threads)

Previous to a few weeks ago, I never started self-mod threads either.  But what I've found--especially after the removal of Newbie jail--is that self-mod threads are typically of higher quality now.  The trolls know they can't behave too badly or else you'll just delete their comment--so they don't bother.  I haven't actually deleted a single comment yet.   

You have a lot of good ideas, BTW, and I've always enjoyed reading your comments. 

[Peter R]

I think that is tinfoil-hat talk.  I believe most people want a free and fair system, and so bitcoin will stay free and fair.

Unfortunately I don't think so.  Sadly most people today would rather have security than freedom.  That sucks, but it's how it is.

It is telling that you re-started my thread in another non-self moderated thread (https://bitcointalk.org/index.php?topic=499692.0).  I assume this was due to concern that I would delete comments that I disagreed with or behave badly in some way.

But that's sort of a metaphor for why you don't think bitcoin will stay free and fair, right?  You were distrusting, assuming the worst in my intentions.

Whether bitcoin turns into an evil system is a similar question as whether most people will choose to post in your thread or my thread.  You thread is the free thread, so that would have appeal to many.  But my thread has priority, includes the prose that kicked this conversation off, and maybe others agree with my troll-defence concept, so my thread has this advantage.    

But one thing is very clear though: If I start behaving badly and abusing people's trust in my responsibility to perform sensible moderation, then your free thread will definitely become dominant.  It is for this reason, that bitcoin will remain free and fair.  

Bitstamp is already demanding receipts for mining hardware.  This can be done.  Semiconductor fabrication is already heavily licensed.  I have to be pretty creative with the EAR paperwork when taping out to overseas foundries.

Again, I think this says more about you than anything else.  Just like how you wouldn't post in my moderated thread (assuming the worst about my intentions), you are also assuming the worst about BitStamp's intentions here.  

I think this is all just a dog&pony show.  BitStamp is a business and they are covering their ass--performing due diligence if you will.  Bitcoin is under a lot of scrutiny, and the new exchanges need to appear diligent.  This is for optics.  Would you honestly not do something similar if you ran a multi-million dollar exchange?

[AnonyMint]

But one thing is very clear though: If I start behaving badly and abusing people's trust in my responsibly to perform sensible moderation, then your free thread will definitely become dominant.  It is for this reason, that bitcoin will remain free and fair.

Logic fail.

No it will remain congruent with the will of the majority. Binding together in a collective is never free and fair. It is always the subjugation of individual degrees-of-freedom to the least common denominator and the greatest collective theft.

It is his freedom to post in his own thread as well as yours that is free and fair. Take away that option and we are in totalitarian molassas where the bright new ideas have no prayer in hell to be implemented.

[Peter R]

But one thing is very clear though: If I start behaving badly and abusing people's trust in my responsibly to perform sensible moderation, then your free thread will definitely become dominant.  It is for this reason, that bitcoin will remain free and fair.

It is his freedom to post in his own thread as well as yours that is free and fair. Take away that option and we are in totalitarian molassas where the bright new ideas have no prayer in hell to be implemented.

My argument is that the option can never be removed because we have the freedom to innovate.  The point of this thread was to describe a new way to untaint coins.  Based on your earlier comment, it sounds like you hadn't considered that this would even be possible.  I'm sure other possibilities exists too that neither of us have considered.  

In the darkness, there's always a crack.  

[AnonyMint]

You moved the goal posts, but I am in agreement with where you placed them now.

[dserrano5]

It amazes me the way this thread has gone off topic . I guess this discussion is more interesting than the OOB untainting.

[Peter R]

It amazes me the way this thread has gone off topic . I guess this discussion is more interesting than the OOB untainting.

Yes, I have failed as a moderator!  I don't like deleting comments, but it is important to keep the thread on topic.  This thread is about using out-of-band transactions and large mining fees to untaint coins.  


Edit: I just deleted a post from AnonyMint, but then it hit me that with a slight twist it was actually on topic and a good idea (now I've really failed as a moderator lol).  

Instead of sending the coins to untaint with a large mining fee using a non-public backchannel, just send the coins normally to the untainting service.  They would then perform the large-mining-fee transaction themselves.  The fee they charge you for the service would already take into account the expected loss due to orphaning.  In other words, you are exchanging old coins for newly-created coins (at a small fee).  The miner doesn't care about taint because the chain of taint breaks using the large-mining-fee method that I proposed earlier.  

[JusticeForYou]

The idea of taint with time will quickly go away. Imagine trying to seize every dollar out there with traces of 'taint' on them.

The services that 'seize' tainted coins will quickly find themselves in lawyers fees up to their noses.

BTW: You could just avoid the whole issue and sell the wallet.dat in 'Cas Coins', Bitcoin Bearer Bonds, etc... I mean if you know a miner that would go into this system of washing why transmit the coins to him at all on the network, just send him the wallet.dat?

[Peter R]

The idea of taint with time will quickly go away. Imagine trying to seize every dollar out there with traces of 'taint' on them.

The services that 'seize' tainted coins will quickly find themselves in lawyers fees up to their noses.

I completely agree, and addressed this with my opening paragraph.  But, I know some people are worried about this, and I wanted to show that with technical innovation there would be a way to fight back in an unlikely future.  Any tainting scheme would turn into a legal and technical mess.  

BTW: You could just avoid the whole issue and sell the wallet.dat in 'Cas Coins', Bitcoin Bearer Bonds, etc... I mean if you know a miner that would go into this system of washing why transmit the coins to him at all on the network, just send him the wallet.dat?

Yes, you are right and this would likely be the preferable method.  The miner can untaint the coins himself.

[AnonyMint]

The idea of taint with time will quickly go away. Imagine trying to seize every dollar out there with traces of 'taint' on them.

The services that 'seize' tainted coins will quickly find themselves in lawyers fees up to their noses.

I completely agree, and addressed this with my opening paragraph.

The government can provide immunity against civil lawsuits, by declaring it to be a legal or even required activity.

[Peter R]

The idea of taint with time will quickly go away. Imagine trying to seize every dollar out there with traces of 'taint' on them.

The services that 'seize' tainted coins will quickly find themselves in lawyers fees up to their noses.

I completely agree, and addressed this with my opening paragraph.

The government can provide immunity against civil lawsuits, by declaring it to be a legal or even required activity.

AnonyMint, this thread is about untainting using non-publically broadcast transactions with large mining fees.  You are highly active in many other threads where you can discuss tangential issues related to tainting.  I will delete these comments shortly. 

This is not about "silencing your voice"; your comments at bitcointalk are prolific and verbose.  This is about not derailing every thread into a fear-based story of a dystopian future.