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Author Topic: Is bitcoin just for criminals and terrorists?  (Read 9431 times)
fergalish
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June 01, 2011, 08:22:36 PM
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There have been several articles about bitcoin in mainstream press lately.  I'm too lazy to type them out, but one of the arguments is that bitcoin will probably be used by criminal and terrorist organizations (C&TO).

Now, I quite like bitcoin even though I'm a bit nervous about the unbridled capitalism it might usher in, but I'd hope that'd be better than the unbridled, what, fascism? that's taking over the western hemisphere.  So, in short, I'm kind of hoping that bitcoin will succeed and governments will cede some economic power to the public.  That means I hope bitcoin doesn't get branded as money for criminals and terrorists and so become outlawed.  That means we need to find an argument as to why bitcoin won't be useful for such organizations.  Here's a first try.

As things stand,  C&TO have to 'clean' their money.  They have to recycle it through... damned if I know, fake shops, stuff like that. Whatever the core of their wealth is, it's something physical or traceable - banknotes, jewellery, electronics, bank accounts, whatever.  Bitcoins are neither physical nor traceable, so... C&TO's wet dream, right...?  Wrong.

Anyone wishing to destroy C&TOs need to attack on multiple fronts and destroy or remove the source of wealth.  Right now, with physical & traceable things, that's difficult, and whoever does it becomes a target for retribution.

With bitcoin, a geeky teenager in a city on the other side of the world could hack a C&TO's computer and steal their wallet.dat.  Once word gets out that the C&TO can no longer pay it's henchmen, it would silently evaporate.  Alternatively, an informant could steal the wallet.dat, or maybe even an insider who decides to cross his mates.  And no-one would ever know who it was.  The anonymous geeky teenager or whoever does it would have to be careful about spending those bitcoins so as not to expose himself, but that's easily done with a few passes through an anonymizer.

Therefore: C&TO's won't be so interested in bitcoins.  You can't protect them easily enough.

Thoughts?
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June 01, 2011, 08:28:13 PM
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Quoting an email I sent recently...

With bitcoin, every transaction is written to a globally public log,
and the lineage of each coin is fully traceable from transaction to
transaction.  Thus, transaction flow is easily visible to well-known
network analysis techniques, already employed in the field by
FBI/NSA/CIA/etc. to detect suspicious money flows and "chatter."  With
Gavin, bitcoin lead developer, speaking at a CIA conference this
month, it is not a stretch to surmise that the CIA likely already
classifies bitcoin as open source intelligence (no pun intended).

[...]

Attempting major illicit transactions with bitcoin, given existing
statistical analysis techniques deployed in the field by law
enforcement, is pretty damned dumb.   Smiley

trentzb
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June 01, 2011, 08:30:27 PM
 #3

With bitcoin, a geeky teenager in a city on the other side of the world could hack a C&TO's computer and steal their wallet.dat.

Why would a geeky teenager stop at stealing just a "C&TO" wallet.dat?
Jaime Frontero
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June 01, 2011, 08:42:52 PM
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if you would care to clearly and unambiguously define:

1.) the differences between criminal behavior, immoral behavior and illegal behavior, and

2.) the point at which a terrorist campaign (see: U.S.A. ca. 1770-1779, or Israel ca. 1947-50) becomes a heroic effort by the good guys

...i would be happy to reply.
fergalish
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June 01, 2011, 09:03:37 PM
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if you would care to clearly and unambiguously define:
1.) the differences between criminal behavior, immoral behavior and illegal behavior, and
2.) the point at which a terrorist campaign (see: U.S.A. ca. 1770-1779, or Israel ca. 1947-50) becomes a heroic effort by the good guys
...i would be happy to reply.
Just for the sake of argument, let's use "The Law" as our yardstick.  The point of this is to counteract arguments that attack the validity of bitcoin in an honest law-abiding world.  Therefore, we must show why any entity that uses bitcoin specifically to circumvent the law, runs a risk not presented by traditional currency or assets.

Why would a geeky teenager stop at stealing just a "C&TO" wallet.dat?
Maybe he wouldn't  Undecided but you make a good point.  The informant or insider might still be a valid possibility.
Jaime Frontero
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June 01, 2011, 09:24:58 PM
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if you would care to clearly and unambiguously define:
1.) the differences between criminal behavior, immoral behavior and illegal behavior, and
2.) the point at which a terrorist campaign (see: U.S.A. ca. 1770-1779, or Israel ca. 1947-50) becomes a heroic effort by the good guys
...i would be happy to reply.
Just for the sake of argument, let's use "The Law" as our yardstick.  The point of this is to counteract arguments that attack the validity of bitcoin in an honest law-abiding world.  Therefore, we must show why any entity that uses bitcoin specifically to circumvent the law, runs a risk not presented by traditional currency or assets.


mmmph.

Quote
...an honest law-abiding world.

there is no such thing as both honest and law-abiding.  laws are designed such that people cannot avoid breaking them - and most especially when endeavoring to maintain rigorously honest relationships with other individuals - thusly ensuring the 'right' of the state to do whatever it would like with its citizens.

so yes then - Bitcoin is just for criminals and terrorists.
fergalish
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June 01, 2011, 09:31:48 PM
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mmmph.
Pleeeeease... just for the sake of argument?  Just so we all have a common ground from which to build our argument that bitcoin will not be useful to the bad guys?
ben-abuya
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June 01, 2011, 09:37:58 PM
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To me, Bitcoin is exciting precisely because it lets you do things the government doesn't want you to do. Isn't that the whole point?

http://lamassubtc.com/
Lamassu Bitcoin Ventures
Jaime Frontero
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June 01, 2011, 09:39:57 PM
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mmmph.
Pleeeeease... just for the sake of argument?  Just so we all have a common ground from which to build our argument that bitcoin will not be useful to the bad guys?

i'm sorry - i wasn't really intending to be flippant.

but the facts are that Bitcoin will be very useful to everybody.  bad guys (however you care to define them) included.

the point is that it's just a currency.  it has no moral or ethical attributes.  and no impact at all on what people choose to do with their lives - for good or ill.
Cusipzzz
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June 01, 2011, 09:45:01 PM
 #10

The argument that 'every transaction is in a public log' therefore criminals can be tracked is ridiculous. Anyone with enough sense to use bitcoin who wants to cover their tracks can easily use mtgox/mybitcoin other ewallet providers as mixing agents and end up with 'clean' coins (assuming they received 'dirty' ones from a Justice department sting operation trying to trace them or something).

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xf2_org
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June 01, 2011, 10:03:29 PM
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The argument that 'every transaction is in a public log' therefore criminals can be tracked is ridiculous. Anyone with enough sense to use bitcoin who wants to cover their tracks can easily use mtgox/mybitcoin other ewallet providers as mixing agents and end up with 'clean' coins (assuming they received 'dirty' ones from a Justice department sting operation trying to trace them or something).

It's not saying anything that https://en.bitcoin.it/wiki/Anonymity doesn't already say.

Modern network flow analysis means you can glean a lot of watching encrypted conversations.  Even without the plaintext, you gain a lot of data about timing, length of the conversation, etc. from observing the bursts of data, over time. It is easy to extrapolate that to bitcoin.

Bitcoin is so open that it's more open than the [partially shadowed] banking system that currently exists.  Our P2P network provides much more open source intelligence than the banking community volunteers, I'm betting, and on a more real-time basis.  Banking systems, no matter how much privacy-killing identity data they dump to the gov't, tend to be slow, often giving the appearance of immediacy by creating a book entry at transaction time, yet handling full settlement in large batches at a later time.

Further, Bitcoin is also so small that large or consistent flows of money are more readily visible, no matter how much mixing occurs; large ripples in a small pond.

So I will always object to calling bitcoins "anonymous, untracable money" because in reality, bitcoins are slightly less anonymous and more traceable than [paper] US dollars.  Telling new bitcoin users that it is anonymous and untracable is quite misleading, because most new users will not take inhuman precautions to make it so.

What makes bitcoins interesting are their global nature, fixed money supply, low cost, and instant transactions.  Anything with a globally public log is going to require a lot of work to be truly anonymous.  Most people won't meet that bar, and probably don't care to either.

MoonShadow
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June 01, 2011, 10:07:47 PM
 #12

To me, Bitcoin is exciting precisely because it lets you do things the government doesn't want you to do. Isn't that the whole point?

Yes, that is the whole point.  It's true that payments can be tracked from a known user to other known users, and in this manner establish a chain of custody.  The problem for LEOs is that establishing a trustworthy link between a bitcoin address (or even an online identity and a real world identity, as one particular government contractor found out to his own detriment recently due to trying to link members of Anonymous to real users on Facebook) to a particular person or organization is not trivial.  And this issue become more difficult with the increase in data set size (the number of bitcoin users) and economic velocity (how fast the currency travels from one person to the next).  So the difficulty that LEOs will have is that they literally will not be able to maintain the resources to pursue all these avenues of activity.  Only the most important (in the eyes of government) activity to prosecute will be actively tracked, which in practice means "terrorism".  The units with the budgets to actually figure who owns which bitcoin address will not care about some random geek ordering LSD for a rave.

"The powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent meetings and conferences. The apex of the systems was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations. Each central bank...sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world."

- Carroll Quigley, CFR member, mentor to Bill Clinton, from 'Tragedy And Hope'
cloud9
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June 01, 2011, 10:35:32 PM
 #13

The argument that 'every transaction is in a public log' therefore criminals can be tracked is ridiculous. Anyone with enough sense to use bitcoin who wants to cover their tracks can easily use mtgox/mybitcoin other ewallet providers as mixing agents and end up with 'clean' coins (assuming they received 'dirty' ones from a Justice department sting operation trying to trace them or something).

Check mybitcoin.com 's terms of use.  They keep extensive records and will be sharing it with whomever if legally ordered.  Laundering bitcoin is not an inherent feature of bitcoin.  It is a willful act.  Laundering bitcoin or cash is illegal.  You will however easily be able to proof where you got your bitcoins from through the publicly available transparent blockchain. Buying digital goods and services is not always illegal.  Depends on what it is.  May Bitcoin DIGITAL RIGHTS TO CRYPTOGRAPHIC KEY CERTIFICATES (backed by a capital intensive network of machines securing this) be transferred, bartered, bought or sold? Is there some law forbidding this?

Disclaimer:  Postings of Cloud9 are only individual views of opinion and/or musings and/or hypothesisses.  On a non-authoritative, peer-to-peer public forum, you do not need permission from Cloud9 to derive your own conclusions or opinions, so please do.  Calculations and assumptions to be verified.
MoonShadow
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June 01, 2011, 10:38:56 PM
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The argument that 'every transaction is in a public log' therefore criminals can be tracked is ridiculous. Anyone with enough sense to use bitcoin who wants to cover their tracks can easily use mtgox/mybitcoin other ewallet providers as mixing agents and end up with 'clean' coins (assuming they received 'dirty' ones from a Justice department sting operation trying to trace them or something).

Check mybitcoin.com 's terms of use.  They keep extensive records and will be sharing it with whomever if legally ordered.

Yes, if legally ordered by a court in New Zealand.  How responsive NZ's legal system to the want's and needs of other nations remains to be seen.

"The powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent meetings and conferences. The apex of the systems was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations. Each central bank...sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world."

- Carroll Quigley, CFR member, mentor to Bill Clinton, from 'Tragedy And Hope'
cloud9
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June 01, 2011, 10:40:57 PM
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The argument that 'every transaction is in a public log' therefore criminals can be tracked is ridiculous. Anyone with enough sense to use bitcoin who wants to cover their tracks can easily use mtgox/mybitcoin other ewallet providers as mixing agents and end up with 'clean' coins (assuming they received 'dirty' ones from a Justice department sting operation trying to trace them or something).

Check mybitcoin.com 's terms of use.  They keep extensive records and will be sharing it with whomever if legally ordered.

Yes, if legally ordered by a court in New Zealand.  How responsive NZ's legal system to the want's and needs of other nations remains to be seen.

Well then the legalized framework is in place for that aspect through international treaties.

Disclaimer:  Postings of Cloud9 are only individual views of opinion and/or musings and/or hypothesisses.  On a non-authoritative, peer-to-peer public forum, you do not need permission from Cloud9 to derive your own conclusions or opinions, so please do.  Calculations and assumptions to be verified.
MoonShadow
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June 01, 2011, 10:42:54 PM
 #16

The argument that 'every transaction is in a public log' therefore criminals can be tracked is ridiculous. Anyone with enough sense to use bitcoin who wants to cover their tracks can easily use mtgox/mybitcoin other ewallet providers as mixing agents and end up with 'clean' coins (assuming they received 'dirty' ones from a Justice department sting operation trying to trace them or something).

Check mybitcoin.com 's terms of use.  They keep extensive records and will be sharing it with whomever if legally ordered.

Yes, if legally ordered by a court in New Zealand.  How responsive NZ's legal system to the want's and needs of other nations remains to be seen.

Well then the legalized framework is in place for that aspect through international treaties.

Perhaps.  It's a good reason to be suspicious of using an online wallet provider if one intends to do anything that would get your government upset, but for the kinds of trades that one would use paypal for, mybitcoin.com is ideal.

"The powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent meetings and conferences. The apex of the systems was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations. Each central bank...sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world."

- Carroll Quigley, CFR member, mentor to Bill Clinton, from 'Tragedy And Hope'
airdata
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June 01, 2011, 11:51:05 PM
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Well, alot of people are finding out about bitcoin from articles that are being written about ' Silk Road '.  So, the ignorant masses are seeing that and associate bit coins w\ buying illegal things online so that it can't be traced.

Which is what some people do!  but, that's not what bitcoin is.
ben-abuya
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June 01, 2011, 11:53:23 PM
 #18

Money laundering seems custom made for a good p2p app. I'm sure these will make an appearance at some point. Bitcoin is just the beginning, a whole economy will grow up around it.

http://lamassubtc.com/
Lamassu Bitcoin Ventures
xf2_org
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June 02, 2011, 12:02:47 AM
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Yes, that is the whole point.  It's true that payments can be tracked from a known user to other known users, and in this manner establish a chain of custody.  The problem for LEOs is that establishing a trustworthy link between a bitcoin address (or even an online identity and a real world identity, as one particular government contractor found out to his own detriment recently due to trying to link members of Anonymous to real users on Facebook) to a particular person or organization is not trivial. 

Quite true.

Though, bitcoin users should keep in mind that any gov't tracking usage patterns of "anonymous" VISA debit/gift cards is going to turn around and use exactly the same statistical analysis and tracking technology on bitcoin.

Bitcoins are easier to track than paper dollars, that's for sure.

cloud9
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June 02, 2011, 12:03:24 AM
 #20

The argument that 'every transaction is in a public log' therefore criminals can be tracked is ridiculous. Anyone with enough sense to use bitcoin who wants to cover their tracks can easily use mtgox/mybitcoin other ewallet providers as mixing agents and end up with 'clean' coins (assuming they received 'dirty' ones from a Justice department sting operation trying to trace them or something).

Check mybitcoin.com 's terms of use.  They keep extensive records and will be sharing it with whomever if legally ordered.

Yes, if legally ordered by a court in New Zealand.  How responsive NZ's legal system to the want's and needs of other nations remains to be seen.

Well then the legalized framework is in place for that aspect through international treaties.

Perhaps.  It's a good reason to be suspicious of using an online wallet provider if one intends to do anything that would get your government upset, but for the kinds of trades that one would use paypal for, mybitcoin.com is ideal.

Your local wallet's addresses can be explored on http://blockexplorer.com/ just type one of the addresses you recently sent coins to in the box and click on the addresses in the table to explore.  Also:

http://forum.bitcoin.org/index.php?topic=11134.msg158948#msg158948

Disclaimer:  Postings of Cloud9 are only individual views of opinion and/or musings and/or hypothesisses.  On a non-authoritative, peer-to-peer public forum, you do not need permission from Cloud9 to derive your own conclusions or opinions, so please do.  Calculations and assumptions to be verified.
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