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Author Topic: Decentralised crime fighting using private set intersection protocols  (Read 23525 times)
Mike Hearn
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March 23, 2013, 10:04:50 PM
 #1

Introduction

One of most commonly raised issues with Bitcoin is that of crime and punishment. Over the past 40 years our societies have, through both fair means and foul, built an integrated anti-money laundering system that attempts to let governments trace the proceeds of crime.

Trying to fight crime through chasing money flows is an intuitively attractive proposition - much crime is motivated by profit, so it stands to reason that if you could somehow make it hard to use the profits of crime, you’d reduce all kinds of unrelated crimes simultaneously. Killing N birds with one stone, so to speak.

Evidence that existing AML approaches are worth the cost is limited - governments seem to rarely study the topic and when they do, findings that it isn’t working very well are simply used to justify making the system ever more pervasive and extreme (e.g. lower reporting thresholds).

However, crime (or fear of crime) is a very common concern amongst citizens and politicians are highly responsive to that, and therefore also highly responsible to requests from law enforcement. The worst case scenario is for Bitcoin vs fiat to be presented as a choice between either freedom or the rule of law because most people would prefer to have both, but given a binary choice we know that many will actually choose the latter over the former. The approach of the USA post 9/11 being a good example.

Can we have our cake and eat it? By that I mean, can we build an approach to fighting crime through finance which is Bitcoin-ish, that is:

  • Decentralized
  • Open
  • Democratic (or market based, take your pick)
  • Private
  • Effective at raising the bar for criminals
  • Potentially acceptable to lots of people with a wide range of political views, so it can be positioned as a credible alternative to just banning Bitcoin or imposing untenable AML requirements on its users?

I think the answer is yes, and we can do it by combining tainting with private set intersection protocols.

Note that the definition of “crime” is not what you might expect and I will go into that later.

Overview

PSI protocols allow a client in posession of a set to intersect its set with that of the server, such that the client doesn’t learn what’s in the servers set (beyond the elements that intersect), and the server doesn’t learn what’s in the client’s set at all (not even the intersection). PSI can be implemented using garbled circuits. Huang, Evans and Katz showed that with optimization generic MPC can either beat or match custom protocols but with greater genericity in their paper “Private Set Intersection: Are Garbled Circuits Better than Custom Protocols?”:

http://rt.cs.virginia.edu/~evans/pubs/ndss2012/psi.pdf

Let us imagine that in the market there is an arbitrary number of what I’ll call blacklist providers. Some may be operated by governments, others may be operated by communities that self police (for instance, the Bitcoin Police group here on this forum). To give an extreme example, the Silk Road might operate one themselves for the purposes of handling scammers. Blacklist providers maintain sets of outputs that are blacklisted or tainted in some way, for instance because the owner reported them stolen or because it’s believed they are owned by some criminal enterprise.

End users have wallet apps that subscribe to zero or more blacklists. The users themselves choose which blacklists to use. On receiving a payment they proceed to trace backwards recursively adding outputs to their client set. The depth to trace is discussed later. Once that set is calculated they do a private set intersection with their chosen blacklist providers.

If a transaction is flagged this way, what to do is up to the end user. They could report it. They could not report it but refuse to deal with the counter-party. They could ignore it. If the counterparty is trusted, they could be asked where they got the money from and the process of walking backwards through the graph of real people or entities can begin to try and identify the culprit.

The privacy provided by these protocols is important in two ways:

  • End user privacy: the provider of the blacklists doesn’t know what is in the users output set, nor when there’s a hit. This prevents blacklist providers trying to engage in global surveillance. It also means that providers cannot easily mandate any kind of action when a flagged transaction is found, because they do not even know when it occurs.
  • Server privacy: the blacklist themselves can be secret, encouraging usage. In many cases victims of theft don’t want to announce to the world that they were hacked or scammed, this scheme means only the blacklist operator needs to know of their predicament. It also means outputs can be tainted or blacklisted without the target necessarily finding out - even if the blacklist is open access and not restricted to particular parties, they’d have to be constantly checking it and repeat queries could be identified and blocked by simply requiring an anonymous account (or passport/fidelity-bond).

Definition of crime

One issue with trying to fight crime in an international, decentralized financial network is the fact that there’s no one definition of what bad behaviour is. Most obviously, different jursidictions have different laws. Less obviously, the laws of a country may not accurately reflect the feelings of its citizens, e.g. in oppressive regimes or when large numbers of ordinary people end up criminalized (war on drugs, etc).

Fortunately, a list-of-blacklists approach automatically solves this problem for us. If each blacklist represents a particular class of behaviour and nobody except the user knows when there a hit on the blacklist, then the difficulty of tracing a “guilty” party increases dramatically with each hop in the chain of trades which does not result in blocking/reporting.

Let’s make this concrete. On this forum there are lots of libertarians. The libertarian philosophy emphasizes private property rights (theft is bad), and individual freedom (you should be able to get high if you want to). In a highly libertarian society, whilst some entity may serve a blacklist of outputs involved in the drugs trade many people may choose not to check it - or alternatively, to check it and then ignore the outcomes. Even if the government runs that blacklist there’s no way to know when there was a hit.

Alternatively, some private institution may run a blacklist that deals only with theft - if money is stolen via hacking then the outputs can be added to the blacklist set so people who believe theft is bad (ie, nearly everyone) and that the provider is trustworthy can check against it. Note that there’s no automatic punishment of these transactions here, so there’s no concern with people maliciously reporting their own legitimate payments as theft … all that would happen is when the legitimate receiver tries to respend the coins and is questioned/reported/flagged they would show evidence that the payment was real (like, a signed payment request) and the malicious party would be ignored by the blacklist provider in future.

In this way, investigation of crime can be decentralized, both allowing far more huge and effective scale than existing AML whilst simultaneously allowing people to exercise their own judgement over what is bad. The fewer people that are checking a particular blacklist, the more effort is required to recursively ask  people “where did you get this money from?” and therefore the likelyhood of prosecution drops in line with societies collective lack of interest.

How deep to trace

One obvious problem is that if the taint depth is fixed, then any bad guy can just generate a tree of transactions deeper than that and know they won’t ever be flagged. The depth can be specified in terms of time rather than tree depth, but this is also an arbitrary magic number that can be gamed - for many crimes waiting a while may not be a big deal.

One possibility is to use whitelists for tracing. Let’s call a hub of economic activity like an exchange, popular merchant or even tax collector a nexus. Nexuses can serve private sets of outputs that they have themselves checked against blacklists. Therefore you can keep tracing until you find a hit against one of the whitelists, at which point you don’t need to go any further - you know that part of the tree is clean. If you're a nexus you then add those outputs to your own private set. Eventually the outputs can be dropped according to some specific formula determined by the cost of the nexuses resources.

If the recursive exploration gets too large without hitting a nexus, that is itself a sign that the transaction may be suspicious, but it’s a signal that’s hard to game because in most cases the counterparty won’t know what the depth profile of your average transaction looks like.

Resource consumption and full-set attacks

PSI protocols can be implemented using generic multi-party computation but it was previously assumed that this would be too slow, and special protocols had to be designed. The previously linked paper dispels this notion with measurements of real implementations and shows that with sufficiently smart optimization, generic MPC with Yao’s garbled circuits can match or beat the best known specific protocols. Note that the paper also contains a nice overview of how garbled circuits work if you aren’t familiar with the topic.

The UTXO set size is currently 4M. Even with a 32 bit set size (4 billion possible outputs in the blacklist), according to their results it is possible to run the multi-party computation in around 10 seconds. Admittedly that is with a LAN and desktop computers, not smartphones and WANs. However there have been more optimizations since and real-world demonstration of intersection of sets from large universes such as contact lists that run on Android phones, so by the time anyone actually implements this scheme it’s very likely to be feasible due to better algorithms and hardware.

One advantage to using generic garbled circuits is that you can easily add auditing on top to prevent a client attempting to upload, for example, the entire UTXO set and thus stripping server privacy. The size of the set to intersect can be limited to some reasonably small value and accounts/passports/fidelity bonds used to prevent or block scraping attacks in which someone tries to enumerate the entire set by submitting lots of queries.

Government attacks

It should be obvious that this scheme is not intended to resist a maximally coercive government. Bitcoin itself cannot work inside a totalitarian police state because a currency must be widely accepted to be useful, and thus people must publicly advertise that they accept it. An unconstrained government can just fine, jail or kill anyone who advertises that they accept Bitcoin.

Instead this scheme is designed to be an acceptable proposal to existing western governments that are somewhat democratic. It balances the desire to fight crime with the need for privacy and blocking abuse by the state. In practice, all democracies recognize this balance is important and (try to) constrain what the police can do.

One failure mode is that governments may try to mandate police produced “superblacklists” that merge things the user cares about stopping with things the user doesn’t - given a match, it’s impossible to know what the reason for blacklisting was, and given the requirement for everyone to use it, auditing compliance is fairly easy using sting operations.

There isn’t any good solution to this beyond the people demanding that the blacklists be fine grained (i.e. one for drug offences, one for theft, one for corruption, etc). It’s hard to argue against such a setup because it only adds information to the system: having undifferentiated blacklists is tantamount to admitting that some laws don’t enjoy wide support but you want to enforce them anyway. It’s a position that’s trivially reduced to “I don’t believe in democracy”, which is a difficult position for a politician to hold over the long run.

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March 23, 2013, 11:00:12 PM
 #2

The problem I see is that users will converge on a set of blacklists whether they agree with the reason for blacklisting or not. Here's how (so you can explain what I've missed Smiley )

Suppose someone obtains some coins through a drug deal, and I don't care about that, so I happily accept his drug money for some other service. When I later try to spend that drug money, a large number of people refuse to accept, so I'm forced to use clean money for that transaction. This essentially means that the drug money is unspendable, and hence worthless, or simply worth less than clean money. I decide I'm not making that mistake again, so even though it's against my political principles, I refuse to accept drug money in future. I'm now one more person who has cut off anyone using drug money.

Combine the above with the fact that the majority of people don't want any trouble at all - even when completely innocent, and so will choose not to accept money on any of the blacklists run by governments, and you end up with a situation where your money is worth the most if it's not on any of the blacklists.

People in general are lazy, stupid and only willing to fight for their political beliefs when they personally are being persecuted, so I think the idea that we'll have some happy equilibrium representing what the majority believe in will not happen.

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March 23, 2013, 11:03:56 PM
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Quote
Suppose someone obtains some coins through a drug deal, and I don't care about that, so I happily accept his drug money for some other service. When I later try to spend that drug money, a large number of people refuse to accept, so I'm forced to use clean money for that transaction. This essentially means that the drug money is unspendable, and hence worthless, or simply worth less than clean money.

If the only people who think that crime is acceptable are you and the drug dealer, then yes, you're hosed. But then you should be hosed because the group consensus is that this behaviour is very bad and should be stopped.

For something like selling some weed, probably you can find other people who don't care. The money isn't quite as convenient as regular money and that would be reflected in, perhaps, you charging a higher cost to accept blacklisted coins (that is another action you can take beyond reporting, refusing or ignoring). But ultimately by the time it hits someone who does care, you might be three or four hops along in the trading chain and then the cost to the police to recursively figure out who got the money from who (and get warrants, etc) is so high that it's not worth it anymore and they move on to fry bigger fish.

Your example might be more applicable to crimes with a much stronger group consensus, like trading hard-core child porn.
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March 23, 2013, 11:52:31 PM
 #4

Mike this is really cool and thought provoking. How did this come up? Is this your work? Is bitcointalk.org the first place it appeared? What is the motivation behind the work?

Thanks

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March 24, 2013, 12:16:47 AM
 #5

I don't know of any other proposals to use PSI protocols for crime fighting, but the general idea of taint has been around for a while. And yes this post is written and researched by me. I try and find ways extensions to Bitcoin could impact on society, in particular, to solve common objections to the concept of crypto-currency.
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March 24, 2013, 12:32:09 AM
 #6

Maybe we should also add RFID chips to paper money and keep databases of 'bad paper notes' so criminals can only trade between themself so their money isnt worth as much as 'clean money' anymore.

Or maybe you should quit working on bitcoin, makes me sad to hear something like this from a bitcoin dev Sad

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March 24, 2013, 01:06:10 AM
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do you hear the words coming out of your mouth???   taint the blockchain...are you fucking nuts?  letting people get to pick and choose who can or cant use their money? ummm..cause we dont like you? I think this goes against the whole principle of btc.

" Even if the government runs that blacklist"  ...wow.



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March 24, 2013, 02:04:18 AM
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Won't this make vigilantes pop up? wanna be superheroes? death squads?

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March 24, 2013, 03:15:30 AM
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do you hear the words coming out of your mouth???   taint the blockchain...are you fucking nuts?  letting people get to pick and choose who can or cant use their money? ummm..cause we dont like you? I think this goes against the whole principle of btc.

" Even if the government runs that blacklist"  ...wow.




These technologies should be anticipated and discussed because if feasible it is likely they will be built eventually. He did not suggest adding this to the protocol itself. It would be an additional service provided on top of Bitcoin. The technical considerations are interesting ones and this is worth discussing even if one disagrees for political reasons.

We are participating in one of the greatest experiments in history.
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March 24, 2013, 03:21:45 AM
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Maybe we should also add RFID chips to paper money and keep databases of 'bad paper notes' so criminals can only trade between themself so their money isnt worth as much as 'clean money' anymore.

Or maybe you should quit working on bitcoin, makes me sad to hear something like this from a bitcoin dev Sad



The proposed my Mike technology is potentially making Bitcoin less perfect currency because it is an attack on one important property which is necessary for money. I refer here to fungibility http://en.wikipedia.org/wiki/Fungibility.

It will anyway be countered by more advanced mixers and in the end will not be effective and will only increase amount of dust in the blockchain.




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March 24, 2013, 03:30:05 AM
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It will anyway be countered by more advanced mixers and in the end will not be effective and will only increase amount of dust in the blockchain.

Another way it can be countered is by off-chain transactions, for instance with chaum banking that provides absolutely secure privacy with math, or by trusted hardware coins.

Of course, one of the first blacklists will be for anyone providing or using genuinely private off-chain transactions...

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March 24, 2013, 03:53:53 AM
 #12

Look...I am neither young nor dumb enough to not realize that there WILL be regulations...and I am for the rule of Law. Criminals just plain suck. At least career criminals do in my mind. Everyone makes mistakes tho. What happens to those people? Added to a blacklist...for...say a DUI. Now that persons coin is not worth as much because they are a credit risk? That being said I dont think whitelists and blacklists will sell very well to the masses anyway. Who is to say what is put on such lists and by whom? Some as yet to be named central authority? Yes...these concepts do need to be discussed. I fear something like this would lead to stratification and classification of individuals.

I am still trying to wrap my head around the whole bitcoin concept to be completely honest...I have this feeling that it will be the catalyst for a brighter future for mankind and I am humbled and honored to be a witness.
Let's not fuck it up.

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March 24, 2013, 04:13:37 AM
 #13

Who do we appoint to operate said blacklists?  And how do we enforce them?  If nobody cared about setting their clients up to reject flagged coins, it wouldn't matter.  It would have to be enforced by law for it to catch on, as the vast minority which chooses a couple of flags will find it very troubling when Jack wants to send Sally some coins but Sally can't accept his money when it's tainted by a flag passed down by 20 people who don't care for flagged coins.  So Sally would either have to turn her flags off temporarily to trade with her good friend Jack, or tell Jack off.

Now lets say blacklist operators are privately owned (which they cannot be, for nobody will pay for this service, so they will have to be subsidized)  Privately owned blacklist operator owner Sandy agrees that if you slip her a small fee, she'll scrub your coins off (by deleting their flags)  Now you have clean coins, ready to make a drug purchase all over again.  Uh oh!  Time to invoke a law: coin scrubbing is now illegal.  The blacklist operators continue to decline as their non-businesses conduct non-business, and the general public continues to pay for them to perform a service of figuring out which coins need flags and why.  By the time any court can figure out what theft has officially happened (or any crime involving the coin, really) the coins could be passed down several, several times, either to mules, or actual people.  So the guy holding the tainted coin attempts to pass it down, but the next guy has all his flags checked, not because he gives two bits about crime, but because he doesn't want someone else's tainted coin that is now completely worthless.  Ensue a downward spiral of money being rendered useless and people finding it harder and harder to conduct business as they realize they're holding onto hot money.

Now let's assume half of a society has their flags on, and are not accepting tainted coin.  This creates a subculture, the same one we've always had, which is perfectly a-okay in trading their tainted coin for criminal goods.  We can now call these coins blackcoins: the coins which are blacklisted.  It's like black market credit, at that point.  Unless people are forced to refuse flagged coins, they won't, or won't always.  You still have a system for people to commit criminal acts, and as long as a large portion of the population is okay with using the blacklisted coins as tender, they will continue to be used.  At least until Sandy lowers her prices.

A system such as this will go against everything Bitcoin is designed for: privacy, and freedom.  Privacy and freedom mean, however you feel about crime, that it is private, and free.  It cannot be used as a tool to fight crime and remain completely functional.  Assigning a system such as this to Bitcoin would be the same effect as banning guns; the coin isn't committing any crimes, and should not be held suspect.  If Sally wants to buy headphones from Jack, she shouldn't have to worry if her money was suspected of being used to hire a hitman several years prior.  Doll over a few years, and all 21 million eventually become tainted--do they reset the flags?  And if they do, why bother with the system?  It's an inconvenience, and will hinder trade in the hopes of moral correctness.

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March 24, 2013, 06:07:29 AM
 #14

I don't know of any other proposals to use PSI protocols for crime fighting, but the general idea of taint has been around for a while. And yes this post is written and researched by me. I try and find ways extensions to Bitcoin could impact on society, in particular, to solve common objections to the concept of crypto-currency.
Thank you Mike! You addressed a very valid obstacle to adaption and present danger to our investment. We have to show the way otherwise we will be shown and possibly wont like it.

Since block chain traversing algorithms are not feasible on an SPV or a server trusting client, this flagging might be service(s) that customer could consult. Mining pools might also differentiate themselves by mining "clean" blocks according to their definition of purity.
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March 24, 2013, 08:36:50 AM
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How do you separate good and bad and what levels of tainted coins is acceptable? Why wouldn't someone just go collect some very tainted coins, and then dust a many good addresses.

Problem really is that once you have transaction the coins are yours. And if client's flag it the receiving address is also bad. Tough luck if you didn't use fresh one... I just see too many problems and issues...

Tracking the stuff is all fine, but not-accepting them is hard and destructive...

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March 24, 2013, 09:51:53 AM
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There are a few misconceptions in the comments, maybe not everyone fully understood what I was getting at.

  • Who is appointed to run the blacklists? Nobody in particular. That's the point. It is or can be a form of community self policing. Silk Road could run a blacklist. The police could run a blacklist. In the eyes of the system they'd be equals. Who pays for them? Depends on the kind of issue we're talking about, right? Any time you have a community that wants some kind of self-policing, there could be such a thing. I doubt it'd be expensive to run. If you want some kind of ultra-libertarian completely privatised police force you could use assurance contracts to pay for them.
  • How do we enforce them? We don't. It's up to the users to decide what to do when a transaction is flagged. Rejection is not necessary, you can as well just accept the coins and then inform someone else who can follow up/investigate. If you think the whole system is bullshit, then just don't check any lists or ignore any flaggings if you do. Problem solved.
  • What if everyone ends up with tainted coins? Taint can be removed because when it passes through the hands of a nexus that is known to take some kind of useful action on a blacklist hit, they can add their own outputs to the whitelist and the graph traversal stops there. Eg, if somebody steals coins and sends them to Mt. Gox, then Mt. Gox can go ahead and file a police report and then add their own outputs to their nexus whitelist. Wallets stop searching at that point because you trust Mt. Gox to "clear the taint". So it isn't possible for taint to last forever (you'd eventually have to stop searching due to resource usage anyway, even if you don't hit a nexus).
  • How can this be used against the innocent? If a blacklist routinely ends up including outputs that are not associated with any kind of real criminal activity (as judged by the person/entity checking it), then it'd make sense to just stop using it. Remember, this is a community based solution. Nobody has the power to centrally stop or block transactions. If your salary ends up on a blacklist intended for identifying money used in the child porn trade, and you're innocent, then you should be able to make a loud noise through the press, etc, and people would realize that this list is being abused. So they'd stop checking it.

Vladimir says, people would just use coin mixing and the system wouldn't work. Yes, indeed, tx graph obfuscation breaks such an approach. At least if they don't take each other into account. It'd be up to the user community to trade those things off. For instance, you could engage in a mix but only accept old coins that don't appear in any of your blacklists.

But there's something to consider - we all benefit from a stable society that isn't overrun by murderers and thieves. If you're deliberately impeding legitimate investigations into real crimes, whether it be by the police or otherwise, you're really just undermining the source of your own wealth. I think most people would understand that.

Here's an example. Let's say there's a blacklist called the emergency response list. It's used only in the most serious and time critical cases. The operator is the police and they ask subscribers to inform them immediately on encountering a hit. Bob the executive comes home from work early one day and discovers his girlfriend in bed with another guy. Enraged, he grabs a hammer and smashes both their skulls in. Realising what he's done he goes on the run. The girlfriends mother comes round an hour later and discovers the crime scene. She phones 911 and says that her daughter is dead along with another man, and Bob has disappeared.

The police ask the mother who Bob's employer is, and they then phone up the employer and ask them for the output set used to pay Bob's last salary. Those outputs are added to the emergency response list. Bob goes into a gas station and tries to refill his getaway car, when he pays the shopkeepers terminal flags the transaction. Bob still gets his gas but once he's out the door, the shopkeeper phones up the police and reports the guys location.

What about someone else who Bob paid money to? Their coins are also tainted. They're in a fashionable chain of restaurants and when they try to pay the bill, their transaction is flagged too! The restaurant owner also calls the police and describes the guy at the table, the response is "ah nope, that's not him", the bill is paid and the guy goes on his way - moderately inconvenienced for a few minutes, but not hopelessly so. What's more, because the restaurant chain is big, well known, and has policies for what blacklists they check and what they do, they are a nexus. When the chain pays its waiters at the end of the day it puts the salary outputs onto its own whitelist and then when the waiter spends his money, nothing is flagged.
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March 24, 2013, 10:05:32 AM
 #17

Mike, this is not black and white. And I do not think any side of the argument has a clearly winning argument. Yes your scenario is understandable and "Bob the Murderer" is a bad guy and cops shall go after him and apprehend him etc... Nobody wants to save his behind. But now replace "Bob the murderer" by "Bob the Human Rights activist" who pissed off "Mallory the Drone herder" and in similar scenario Bob is being taken out together with the gas station and its owner by a drone.

I personally would prefer if some aspects of society such as money remained neutral and cops instead of spying on everyone would just do their job without unlimited Orwellian powers.

But again this is political and philosophical issue. Technically your proposal is sound and even in spirit of Bitcoin decentralization. If such solution is available it is up to the society to figure out how to use it and how to not.

 

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March 24, 2013, 10:26:07 AM
 #18

First Jeff Garzik says to the WSJ: "We want to work with authorities".
Now Mike Hearn with this post.

Can I say these 2 dudes are now officially creeping me out without you guys calling me paranoid?  Undecided

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March 24, 2013, 11:11:53 AM
 #19

Yes. The assumption is that if Bob is really a human rights activist, then he either won't get blacklisted (because that kind of nonsense would result in people quickly abandoning the list), or he'll be able to persuade whoever he trades with not to report him. That lack of central control is key.

I don't know if it's really worth trying to implement such a scheme but whether we like it or not, Bitcoin is born into a world run by people who strongly believe in "follow the money" as a crime fighting technique. And if the people with an agenda are able to scare the other people into thinking Bitcoin means unstoppable crime waves then it's going to end up banned, simple as that. And then you won't be able to use it either.

That's why it's important to have credible proposals that meet-in-the-middle with acceptable compromises for everyone.
Carlton Banks
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March 24, 2013, 11:21:30 AM
 #20

"A pack of wolves and a flock of sheep voting on what's for dinner" is the phrase that immediately springs to mind. You forget how easily these systems are exploited, and assume that ordinary human beings are clinically rational automatons.
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