Decentralised crime fighting using private set intersection protocols

[TheButterZone]

This is one of the first posts that makes me think twice about being on the bitcoin bandwagon to the extent I've been. The thought of cashing out some bitcoins even crossed my mind. It crossed my mind. That's all I'm saying. I continue to be skeptically optimistic and mindful.

This.

At this point, I'd really only want to know if I'm receiving stolen coins. I'm not sure how to implement this, other than some sort of insurance/revocation program. "If you want to ensure your stolen bitcoins may be returned, 1) use a monitor that alerts via email, SMS, or other electronic method, on withdrawals from each address 2) sign messages of 'stolen key' with your private keys containing BTC and keep paper backups of the signatures 3) input the signatures to our system as soon as they are stolen from. We will blast an alert to all participating clients that any BTC detected to be sent from your keys within {a certain period of time just before inputting the signatures} should be suspected stolen."

I'm not that familiar with it, but it seems sort of like a PGP revocation certificate.

Obviously there are some more details to work out, such as confirming identity of the original keyholder for returning their BTC safely, but I think it would deter crime, be pro-victim, and still maintain liberty. Much like concealed weapons under the clothes of law-abiders deter violent criminals because they don't know who is armed, the thieves would have to fear that they are dealing with a participating client who will see a red flag pop up when they receive the stolen BTC, and hold the coins for return to the victim rather than receive any benefit. The only way for thieves to get around this would be to immediately mix the coins at a service they know they won't be red-flagged at, or hope the reaction time of the revoker is slow, so they can benefit before then.

[mughat]

I think it is helpfull to think of Gold in this discussion.

Guld used in chrims is still just gold. No reason to blacklist it or burn it in hell.

Chriminals should be delt with in court not in the money transfer system.

[mokahless]

I think it is helpfull to think of Gold in this discussion.

Guld used in chrims is still just gold. No reason to blacklist it or burn it in hell.

Chriminals should be delt with in court not in the money transfer system.

This.

And on that note, let's let this thread die.

[whitenight639]

Mike did you go and meet the CIA with Gavin, is this your brief, to see what the consensus is on this idea?


So many problems with this for a start you underestimate the size of the black market, if this was implemented every 3rd coin would be tainted thereby reducing spendable coins in the "normal economy",

Also you propose that anybody can lodge an addition to the blacklist with an acusation of fraud and the owner of these coins has no idea, sounds like flight lists, one should have the right to face his his accuser or at least know he has been accused!


Also this whole system would enforce guilt by association, If i live next door to Osama Bin Ladin and he seems like a pleasant guy so i do a small job for him and then I can't spend my money and have law enforcement after me.


Money is an exchange of labour or goods, I do not want my sweat going to waste because of some do-gooder- Statist-sheeple didn't like the guy I bought my bitcoins off.


Money should be neutral, nobody wants to know that the paper fiat they got given in change from the corner shop was used by some pedo, or hooker, some things we do not want to know.

[Blowfeld]

Mike, did you say DMCA was "balanced"?  As are all laws written by industry.

In the present design, trackability and fungibility are more or less the same.  Trackability and fungibility are (or should be) distinct properties and the discussions should be independent.

I'm sorry, Mike, but this thread demonstrates quite clearly that Bitcoin is the most Orwellian currency in the history of mankind.  (Trackability)

Without fungibility, I think Bitcoin is doomed.  Rather than spending time figuring out how to ruin Bitcoin, effort should be spent on how to adapt Bitcoin (or another cryptocurrency) to be completely fungible.

[zebedee]

hazek, please read the first post in this thread all the way through. It has an entire section on the definition of crime. And it should be clear that it's an optional layer on top. Actually I thought you would quite like it, it's a rather libertarian way to handle (the proceeds of) crime as the whole thing is more or less market based and government is not a special player.

Agreed, I quite like it.  It's amazing and disappointing how many people apparently lack reading comprehension, or the ability to understand an argument with a bit of subtlety to it.

Particularly when they've already had to make such steps in accepting bitcoin anyway.

Thanks for the informative and interesting post Mike.

[phelix]

This whole discussion shows one thing: Bitcoin is not safe because it is not anonymous enough.

We will have to find ways to make it resistant to control or come up with a better solution altogether.

[d'aniel]

I'm sorry, Mike, but this thread demonstrates quite clearly that Bitcoin is the most Orwellian currency in the history of mankind.  (Trackability)

Without fungibility, I think Bitcoin is doomed.  Rather than spending time figuring out how to ruin Bitcoin, effort should be spent on how to adapt Bitcoin (or another cryptocurrency) to be completely fungible.

Whoa, ease off on the hyperbole.  I don't think you're giving our modern fiat currencies nearly enough credit (especially where physical cash will be phased out).  For example, how do you freeze an account under this proposal?  Can you still keep the existence of bitcoins you own secret?  Is (worldwide) coin mixing still a (potential) option when necessary?  Are anonymous, off-blockchain transactions still a (potential) option?

I also think you're underestimating how much serious coordination among all the governments of the world it would take to force a non-voluntary, repressive version of this that's actually effective.  This is not to say a voluntarily used version couldn't be effective - or at least more effective than the current tracking systems in place, whatever that's saying.  But it would at least be harder to abuse, and police would have to actually make phone calls and knock on doors, rather than simply scrape a database without any meaningful consent.

And all the while, as adoption spreads, the human component of the network expands, along with awareness of monetary privacy issues and the political capital required to actually resist, rather than simply hide from, such abuses of power.  I believe people would be much more willing to make a fuss about something that affects them directly, like being enlisted as spies to their fellow citizens, than the current situation where they never actually see the abuse of privacy.  I also believe more aware people will be more willing to adopt better solutions as they may arise.

[caveden]

As many others here, I'm very uneasy with the possibility of Bitcoin losing fungibility.

But anyway, this is undeniable:

like it or not, Bitcoin's architecture easily permits this, regardless of Mike's opinion about it.

It's perfectly possible to implement such thing. It's actually possible to implement much nastier things (think of a government-mandated whitelist). Mike Hearn has a point when he says that, in the event of a government trying to impose its regulation, the usage of a totally voluntary and decentralized system like this is preferable. But, should we be "compromising in advance"? Wouldn't that be "negotiating against ourselves"?

Governments can do much worse than killing Bitcoin fungibility. The problem, as always, are governments themselves, not this voluntary system Mike is proposing.

Perhaps we should focus on implementing p2p, anonymous mixing services. Such mixing systems would be essential to keep the "market-based checks-and-balances" Mike describes in OP, if such system ever comes to existence.

[d'aniel]

As many others here, I'm very uneasy with the possibility of Bitcoin losing fungibility.

But anyway, this is undeniable:

like it or not, Bitcoin's architecture easily permits this, regardless of Mike's opinion about it.

It's perfectly possible to implement such thing. It's actually possible to implement much nastier things (think of a government-mandated whitelist). Mike Hearn has a point when he says that, in the event of a government trying to impose its regulation, the usage of a totally voluntary and decentralized system like this is preferable. But, should we be "compromising in advance"? Wouldn't that be "negotiating against ourselves"?

Governments can do much worse than killing Bitcoin fungibility. The problem, as always, are governments themselves, not this voluntary system Mike is proposing.

Perhaps we should focus on implementing p2p, anonymous mixing services. Such mixing systems would be essential to keep the "market-based checks-and-balances" Mike describes in OP, if such system ever comes to existence.

If I didn't think my blacklist providers or their investigators were abusing their authority, then I'd participate in this, and I probably wouldn't even feel like I was "compromising" in doing so.  If it proved effective, then I'd continue to participate.  At the very least it shows a good faith effort by the community, and helps build political capital.  And maybe it even helps to track down some legitimately shitty people.

[behindtext]

operating blacklists for tainted coins is an exercise in futility. i understand that mike and others want to "play ball" with the authorities and give them similar abilities to what they currently have to stave off negative regulatory action.

my immediate response to this push for self-regulation is that LE needs to do their own damn homework. the inventor(s) of bitcoin clearly put a lot of thought and work into the system in an attempt to empower the individual at the expense of the state. if the state wants to clamp down on nefarious activity on bitcoin, they can dig through the public tx ledger like anyone else.

the idea of blacklisting currency because it was misused is as stupid as sitting in a bank for 3 hours to open an account.

[hashman]

Thanks for sharing thought process with us. 

However this is not the way to go about fighting crime, whatever that might mean to you.  No matter how fancy your money is, if people are mentally ill, children abused, adults sexually repressed, people put into top-heavy power roles with no checks, facism not avoided, mental illnesses allowed to spread from generation to generation, and inefficient and short-sited resource division is continued, we all know what the result will be.  More crime.  Freezing peoples money isn't going to do shit apart from getting the people who control the freezing to be tempted to join the corruption.   

TL/DR:  Regulatory Capture. 

The people who run the blacklists WILL become the people doing whatever it is you are trying to stop. 

[Murphant]

This whitelist/blacklist approach to criminality linked bitcoins seems very interesting due to its decentralized aspect, at least in theory. I find the Spamhaus analogy to be quite appropriate. While I am uncertain of the overall efficiency of AML laws in our societies, I agree that some compromise will probably have to be done eventually.

However, the loss of fungibility still makes me uneasy. Would it be easy/free to get a coin whitelisted? I believe the hassle of tainted coins not being accepted or causing a delay in a restaurant might be excessive. A more reasonable option would be if the restaurant accepting the payment without a word and then reporting the event to the appropriate authorities if they deem it necessary. Thus regular users really wouldn't care if their coin was tainted or not, and enterprises would not want to discriminate for fear of driving away consumers with tainted coins. The downside I see is that enterprises would have no real incentive to do appropriate reporting other than being good citizens, and I believe that mandatory reporting would be against the spirit of Bitcoin although this might end up being what happens.

Sadly, it seems to me that this whole proposal would be made useless by the use of mixers. Bad guy Bob could simply use a mixer and be done with it, having received fresh coins. Some mixers, centralized or decentralized, could adopt as a policy to only accept untainted coins, but then that might incentivize some mixers to accept tainted coins and change a higher fee. While I would think that most people who use these tainted mixers would have something to hide (otherwise why pay the extra fee and received possibly tainted bitcoins?), these mixers would still provide plausible deniability for the origin of the coins. This would make the whole proposal useless. I also believe in the necessity of mixers for the anonymity of Bitcoin and I wouldn't want them banned if that were even possible.

In any case, I believe that the Bitcoin community needs to address these concerns and discuss them instead of doing witch hunts for statist pawns. Mike's proposal might not be perfect both for technical and ideological reasons, but the community needs to seriously consider what is going to happen when governments around the world start making laws.

[caveden]

While I would think that most people who use these tainted mixers would have something to hide (otherwise why pay the extra fee and received possibly tainted bitcoins?), these mixers would still provide plausible deniability for the origin of the coins.

If the majority of coins being mixed are tainted, you would still get tainted coins out. True, that should make it difficult to discover which particular taint applies to you, but tainting only should never be enough to criminalize anybody anyway. The whole idea, if I got it right, was to help law enforcement to find criminals.
What I'm saying is that the coins getting out of this "blacklisted mixers" would still sound some alarms...

[Murphant]

What I'm saying is that the coins getting out of this "blacklisted mixers" would still sound some alarms...

Yes, it will sound some alarm, but whoever is receiving these tainted coins does not know, by design of the mixer, who sent them these coins. They have an address since the transaction is visible in the blockchain, but they may not know anything about whom that address belongs to.From a law enforcement perspective, the trail dies. In this case, is there anyone that benefits from the knowledge that these coins are "tainted"?

Edit: quote formatting

[caveden]

It seems you made some mistakes with your quotes there...

Answering your question: If mixers end up segregated among "blacklisted" and "non-blacklisted", somebody receiving coins coming out of "mostly blacklisted mixers" would be able to:

• Know the coins have a high degree of blacklisted taint
• Know the coins likely got through some mixer (that's visible)

These two things might lead people to believe that those coins might be hiding something. That alone is not enough to prosecute anybody (at least not in places where the most basic justice principles are still respected, like innocent until proven guilty), but it might give some tips.

[Murphant]

These two things might lead people to believe that those coins might be hiding something. [...] it might give some tips.

Indeed, anyone can see that the coins might be hiding something: that is why they are tainted.  One point I didn't mention is that the coins might be recognized as tainted only after a mixing or after a transaction. Just imagine Bob steals some bitcoins and quickly uses a mixer, tainted or untainted. After an hour or so, the coins are reported stolen and whoever got them in the mixing is "stuck" with tainted coins. Now what? The fact that the coins are tainted does not give any "tips" to anyone. People knew that these coins were shady, which is why some entity marked them as tainted in the first place. The only information you gain on the perpetrator is that he used a mixer, which can be seen by observing the blockchain anyways. All this information could have been derived without this whole taint proposal.

Thus, in this case, the taint is useless.

[Peter Todd]

Thus, in this case, the taint is useless.

It gets better than that: the tainted coins can be thrown away by spending them to transactions, either obviously in one big high-fee transaction, or as a bunch of low-fee transactions - possibly even as an input to a network security assurance transaction.

Now are all coins derived from the coinbase outputs of the blocks in question tainted? It's easy to argue that they should be: miners can easily accept transactions privately with little risk of losing the fees due to an orphan, and large miners can still afford to return the fraction of the transaction corresponding to the hashing power they control even if the transaction is submitted to the network normally. It's already common for money to be laundered through gambling establishments by simply accepting the cut the casino takes as overhead.

[Murphant]

the tainted coins can be thrown away by spending them to transactions

While this is true, it would be hard to launder large amounts of money in that way due to the rather small tx fees at the moment. I understand the analogy with a Casino's profits, but it seems to me that the creation of a block is a rather hefty price to pay for laundering such a sum. Take into account that a miner who is able to mine a bloc and "clean" such shady transactions could instead have cashed in on regular tx fees for other transactions. These regular tx fees not received represent a loss for the miner. Thus, it seems to me that the coins should become clean once they are included in a tx fee simply because it is not efficient for a miner to participate in such a cleaning scheme.

[Hermel]

At this point, I'd really only want to know if I'm receiving stolen coins.

And you are not alone. There is a lot of talent and money currently not flowing into the Bitcoin economy due to such concerns. Today, it is the wild west. If you want to make Bitcoin a currency mainstream users feel comfortable with, there must be some possibilities to track down severe criminals. What if Bitcoin becomes the first choice for ransom? After the third time you read a headline like "kidnappers demand 10'000 BTC ransom to release 5-year old Alice", you will start to doubt whether you still want your friends and relatives to think of you as the "bitcoin-guy". What will happen sooner or later is that someone opens a database of stolen Bitcoins. Once it becomes relatively easy to verify whether a Bitcoin was stolen or not, legal pressure will form on exchanges and merchants to not accept them. In most countries, knowingly handling stolen goods is a crime. So step by step, we will get those blacklists in one form or another. And it is better to get them sooner and in a way we can shape - than to passively watch them appear.

To conclude: I'm with Mike on this.