This Might Sounds Strange: Bitcoin Violates the Principle of Money Fungibility

[AtheistAKASaneBrain]

If I'm willing to pay a premium for stacks of old USD's that don't have trace amounts of narcotics all over them, have I thereby broken the fungibility of cash for everyone?

Well I think its way more obscure with cash. With Bitcoin there is a global ledger, which is cool, but it introduces problems such as fungibiltiy or lack of it. Therefore, we need increase anonymity. We can't end up with Bitcoins that are more valuable because they are "fresh", this misses the point of fungibility.

[smoothie]

Centralized fiat is fungible by decree.

The only way for a decentralized money to be fungible is for its units to be completely indistinguishable. Sorry, but Bitcoin does not meet that requirement.

Now, perhaps you can argue if it will matter in the future, but the question of whether or not Bitcoin is fungible has been asked and answered. It simply is not

Satoshis are undistinguishable. If I spend two different inputs of one satoshi to the same output you will not be able to identify which is which.

You can't tell which of the two inputs they come from, but they're distinguishable from all other satoshis of other transactions.
The history of an output isn't a one single trail but a tree. Doesn't mean this history doesn't exist (and isn't potentially meaningful).

And you can distinguish bills from their serial number. Having a ledger of all transaction prior does not change the weight value of the Bitcoins. Electronic transaction are just the same.

How efficient is it to try to distinguish bills from each other using serial #?

Pretty damn tedious. It isn't like each bill is in a format that is instantly able to be analyzed across the globe.

How many people actually distinguish dollar bills by serial? Not many I presume because it is inefficient unlike bitcoin's transparent ledger.


I think it does change the weight value given it can be more efficiently scrutinized against globally and able to setup road blocks (black lists) through a digital format.

Kind of hard to implement the same type of black listing system for physical cash.

[BoscoMurray]

If Bitcoin wants to be the best that a currency can possibly be, then surely we need:

1. As close as possible to 100% fungibility.
2. Privacy in transactions - the same as cash transactions.

Anything less than both of these is probably some kind of compromise and/or influenced by institutions (banks, gov, etc). Without the best efforts to achieve these two things, Bitcoin will never be as good as it could be. But that's OK, there is another.

[smoothie]

If Bitcoin wants to be the best that a currency can possibly be, then surely we need:

1. As close as possible to 100% fungibility.
2. Privacy in transactions - the same as cash transactions.

Anything less than both of these is probably some kind of compromise and/or influenced by institutions (banks, gov, etc). Without the best efforts to achieve these two things, Bitcoin will never be as good as it could be. But that's OK, there is another.

1 & 2 will never happen with bitcoin. Too much political hurdles to overcome to even make a change in the size of blocks, let alone adding anonymity features to the protocol.

[brg444]

If Bitcoin wants to be the best that a currency can possibly be, then surely we need:

1. As close as possible to 100% fungibility.
2. Privacy in transactions - the same as cash transactions.

Anything less than both of these is probably some kind of compromise and/or influenced by institutions (banks, gov, etc). Without the best efforts to achieve these two things, Bitcoin will never be as good as it could be. But that's OK, there is another.

1 & 2 will never happen with bitcoin. Too much political hurdles to overcome to even make a change in the size of blocks, let alone adding anonymity features to the protocol.

Bitcoin is not limited to its blockchain.

[brg444]

These recurring fungibility threads have FUD written all over them.

It is not a problem and will never be if you use Bitcoin as intended.

[BoscoMurray]

These recurring fungibility threads have FUD written all over them.

It is not a problem and will never be if you use Bitcoin as intended.

Why design it to rely on something when it can be built into the core protocol, eliminating "improper use"?

[brg444]

These recurring fungibility threads have FUD written all over them.

It is not a problem and will never be if you use Bitcoin as intended.

Why design it to rely on something when it can be built into the core protocol, eliminating "improper use"?

You don't have to rely on anything to use Bitcoin and not be involved with any of this "fungibility" FUD.

Quite the opposite: as long as you deal with your Bitcoin business in a purely peer-to-peer way, as Satoshi intended, this is not a problem.

A fully private chain involves trade-offs, it is not so simple as "stick ring signatures into Bitcoin and we're done here".

That's why sidechains are the most natural evolution if you desire to transact anonymously.

[binaryFate]

These recurring fungibility threads have FUD written all over them.

Well, next time I won't waste my time explaining myself if you label it as mere FUD in the end.

[brg444]

These recurring fungibility threads have FUD written all over them.

Well, next time I won't waste my time explaining myself if you label it as mere FUD in the end.

Did you start this thread?

I appreciate your "explanations", I simply disagree with them. I'm not certain whether you are involved or not with the Monero project but you should know I appreciate the efforts made toward more private alternatives.

I'm merely pointing out that there is a recurrent trend recently from certain pundits that seem interested in making this "fungibility" debate the next great "Bitcoin issue".

[Johnny Mnemonic]

Quite the opposite: as long as you deal with your Bitcoin business in a purely peer-to-peer way, as Satoshi intended, this is not a problem.

Right. As long as I don't use Bitcoin for anything that money is useful for, then fungibility won't be a problem  

So the future of all crypto commerce depends on everyone doing it correctly. Let's stick with localbitcoins and craigslist trades forever. And while we're at it we should all be living in coops. And fuck those businesses who refuse to accept your stolen money because of "liability concerns" ... they're obviously doing it wrong. Satoshi's vision has no room for such B.S. monetary principle's like fungibility.

[Johnny Mnemonic]

These recurring fungibility threads have FUD written all over them.

Well, next time I won't waste my time explaining myself if you label it as mere FUD in the end.

Did you start this thread?

I appreciate your "explanations", I simply disagree with them. I'm not certain whether you are involved or not with the Monero project but you should know I appreciate the efforts made toward more private alternatives.

I'm merely pointing out that there is a recurrent trend recently from certain pundits that seem interested in making this "fungibility" debate the next great "Bitcoin issue".

The problem is that it's becoming impossible to criticize bitcoin without it immediately being labelled "FUD". The criticism is necessary for it to evolve, but unfortunately a lot of people think that it's already perfect and no improvements can be made ... we can all just sit on this platform that was designed 6+ years ago and expect there to never be issues.

That's not the way the world works. There will always be incentives to do things that work against Satoshi's intentions, and there has to be constant evolution to stay ahead of that.

[binaryFate]

These recurring fungibility threads have FUD written all over them.

Well, next time I won't waste my time explaining myself if you label it as mere FUD in the end.

Did you start this thread?

I appreciate your "explanations", I simply disagree with them. I'm not certain whether you are involved or not with the Monero project but you should know I appreciate the efforts made toward more private alternatives.

I'm merely pointing out that there is a recurrent trend recently from certain pundits that seem interested in making this "fungibility" debate the next great "Bitcoin issue".

Ah sorry, I thought you were talking about all the conversation going on here, rather than the OP deciding to create a new thread.
We'll agree to disagree then

[brg444]

Quite the opposite: as long as you deal with your Bitcoin business in a purely peer-to-peer way, as Satoshi intended, this is not a problem.

Right. As long as I don't use Bitcoin for anything that money is useful for, then fungibility won't be a problem  

So the future of all crypto commerce depends on everyone doing it correctly. Let's stick with localbitcoins and craigslist trades forever. And while we're at it we should all be living in coops. And fuck those businesses who refuse to accept your stolen money because of "liability concerns" ... they're obviously doing it wrong. Satoshi's vision has no room for such B.S. monetary principle's like fungibility.

I'm guessing you also hail from the bizarro fiat zombies world where money is literally burning holes through pockets and you have got to spend it like RIGHT NOW.

Either way.. yes I do believe the future of crypto commerce depends on participants not relying on third parties.

I'm not sure why that sounds so strange? If that is not the plan why bother with crypto at all?

Again, I could careless if some fiat store starts using all kinds of blacklisting services I'll be glad to avoid doing business with them and as I've previously said they'll soon discover this is not an economically sustainable model. How will you feel, as a customer, being discriminated because a couple of your satoshis once crossed paths with "tainted" coins?

A relevant read:

https://bitcoinism.liberty.me/only-the-black-market-matters/

[brg444]

These recurring fungibility threads have FUD written all over them.

Well, next time I won't waste my time explaining myself if you label it as mere FUD in the end.

Did you start this thread?

I appreciate your "explanations", I simply disagree with them. I'm not certain whether you are involved or not with the Monero project but you should know I appreciate the efforts made toward more private alternatives.

I'm merely pointing out that there is a recurrent trend recently from certain pundits that seem interested in making this "fungibility" debate the next great "Bitcoin issue".

The problem is that it's becoming impossible to criticize bitcoin without it immediately being labelled "FUD". The criticism is necessary for it to evolve, but unfortunately a lot of people think that it's already perfect and no improvements can be made ... we can all just sit on this platform that was designed 6+ years ago and expect there to never be issues.

That's not the way the world works. There will always be incentives to do things that work against Satoshi's intentions, and there has to be constant evolution to stay ahead of that.

Of course.

The thing is... the fungibility of Bitcoin is hardly a thing you can criticize. Privacy issues? Sure, go right ahead but a careful analysis of the fungibility FUD shows that the arguments simply do not hold up. That is because most of them are looking at Bitcoin from behind fiat lenses which is the definition of trying to fit a square peg into a round hole.

Bitcoin exists so that you can work outside of this system. I understand it takes a bit of foresight to imagine a world where KYC/AML are not a thing anymore but understand that it is coming and it will be all because of Bitcoin.

[BoscoMurray]

These recurring fungibility threads have FUD written all over them.

It is not a problem and will never be if you use Bitcoin as intended.

Why design it to rely on something when it can be built into the core protocol, eliminating "improper use"?

You don't have to rely on anything to use Bitcoin and not be involved with any of this "fungibility" FUD.

Quite the opposite: as long as you deal with your Bitcoin business in a purely peer-to-peer way, as Satoshi intended, this is not a problem.

A fully private chain involves trade-offs, it is not so simple as "stick ring signatures into Bitcoin and we're done here".

That's why sidechains are the most natural evolution if you desire to transact anonymously.

You seem to dismiss the privacy/fungibility problem, and at the same time suggest a solution. If privacy/fungibility were not a problem, you wouldn't need a side chain to fix it.

Perhaps a side chain will give the privacy/fungibility desired. But then only coins which spend their entire life on that chain will remain private and fungible. Will people also need to check so they can be sure they are using a privacy side chain? There's that reliance again...  What if the side chain decides to remove its privacy features at some stage? Find a new one?

Fungibility issues are not FUD, they are fact. The evidence shows this - so the only example I know if is Coinbase, but that's just the beginning. Say at some stage government regulations stipulate tainted coins will not be accepted in certain institutions/retailers/wherever. Are your Bitcoins still fungible then?

There is also the fact that leaving Bitcoin unchanged is enabling one of the greatest surveillance tools of all time. It may not be as simple as sticking ring-signatures in there to fix it, however I think we should do something instead of ignoring a glaring problem.

[gentlemand]

These people violating fungibility by paying a premium for 'clean' coins are doing so on a purely voluntary and totally pointless basis. As soon as they move again they're contaminated. When exchanges and merchants have a two tier price structure is when I'd worry but there won't be anything left to worry about by that time.

[thejaytiesto]

And you can distinguish bills from their serial number.

Fiat money is fungible by law.
That is the only way to make items that can definitely be distinguished by the population (physically speaking for cash notes) fungible: enforce it by law!
This has always been the case in all fiat systems since this historical affair with the bank of Scotland in 1748: http://www.paybits.net/blog/why-fungibility-matters/

Now if you have a decentralized system such as a cryptocurrency, law is of no use. The only remaining way to obtain fungibility is therefore that items are indistiguishable. So we have: privacy <=> fungibility. QED.

Indeed, but what can be realistically done about this? You are either have full anonimity (something like Monero) or you have pseudoanonimity (something like Bitcoin). Is there something in between at all? It seems that unless you go 100% anonymous (or as anonymous as possible) by default, then you will not have a system that is as fungible as possible.

[Johnny Mnemonic]

I'm guessing you also hail from the bizarro fiat zombies world where money is literally burning holes through pockets and you have got to spend it like RIGHT NOW.

Actually, I'm part of this community because I want to see a future where decentralized crypto eventually replaces fiat. Sure, it's fun to be a hippie anarchist living outside "the system" for the time being. But some of us are trying to change the world. And in the real, modern world, consumers transact with businesses.

Either way.. yes I do believe the future of crypto commerce depends on participants not relying on third parties.

I'm not sure why that sounds so strange? If that is not the plan why bother with crypto at all?

It sounds so strange because crypto is supposed to be trustless! It shouldn't have to "depend" on anything! It shouldn't have to depend on businesses being cool and it shouldn't have to depend on people not shopping at Walmart and it shouldn't have to depend on us all using side chains.

Again, I could careless if some fiat store starts using all kinds of blacklisting services I'll be glad to avoid doing business with them and as I've previously said they'll soon discover this is not an economically sustainable model.

You should, because it's proof your money isn't equal! And pretending otherwise won't make it so.

How will you feel, as a customer, being discriminated because a couple of your satoshis once crossed paths with "tainted" coins?

I would feel shitty knowing that such discrimination wouldn't even be impossible if only Bitcoin were fungible.

And are you actually suggesting that businesses have never discriminated against their customers despite it being bad for business? Do you live in the United States?

A relevant read:

https://bitcoinism.liberty.me/only-the-black-market-matters/

The article seems to be making my point. I'm against the whole regulation and cleanliness direction. Improving Bitcoin's fungibility makes regulation more difficult, which doesn't exactly hurt the black markets.

[Johnny Mnemonic]

The thing is... the fungibility of Bitcoin is hardly a thing you can criticize. Privacy issues? Sure, go right ahead but a careful analysis of the fungibility FUD shows that the arguments simply do not hold up. That is because most of them are looking at Bitcoin from behind fiat lenses which is the definition of trying to fit a square peg into a round hole.  

Which argument doesn't hold up? The fact that the units aren't interchangeable? Hmm let's see:

So far we have:
- Exchanges refusing previously stolen coins
- Wallet services banning customers who use gambling sites
- Miners selling freshly minted coins at a premium

I don't know about you, but to me it's starting to seem like the units aren't interchangeable.