What if bitcoins that can be tracked back to Silk Road are declared 'illegal'?

[zby]

Update: I posted this - and then I realized that the sellers can use a new address for each transaction - so this would never be effective.

Just a thought experiment.  My understanding is that every bitcoin can be tracked back through the list of all accounts it has been in up to the transaction that generated it.  Sure there are online mixers where you can exchange bitcoins - but what if the government would not care how many hops the bitcoins go through and instead declared that if they ever were in some bitcoin account (like Silk Road sellers account or Wikileaks account) - then they are illegal.  Sure maybe most users would not care where their bitcoins come from - but many would start checking the origin of theirs.

[beeph]

Just a thought experiment.  My understanding is that every bitcoin can be tracked back through the list of all accounts it has been in up to the transaction that generated it.  Sure there are online mixers where you can exchange bitcoins - but what if the government would not care how many hops the bitcoins go through and instead declared that if they ever were in some bitcoin account (like Silk Road sellers account or Wikileaks account) - then they are illegal.  Sure maybe most users would not care where their bitcoins come from - but many would start checking the origin of theirs.

first off how is this a thought 'experiment' .. its more of a hypothetical isnt it?  I kid, I kid.. I was trying to be like one of the typical douches on here.. anyhoo.... it makes me think back to the 80's when like 90% of 100$ bills had cocaine residue on them or some stat like that..

and i think  like everytime u inhale one of those oxygen molecules was at one time inhaled by osama bin laden and adolf hitler too, cuz of avocados number being like 6 x 10 ^ 23 .  LOL so maybe we should make oxygen illegal .. haha TERROAR couldnt happen without it.

[JoelKatz]

Just a thought experiment.  My understanding is that every bitcoin can be tracked back through the list of all accounts it has been in up to the transaction that generated it.  Sure there are online mixers where you can exchange bitcoins - but what if the government would not care how many hops the bitcoins go through and instead declared that if they ever were in some bitcoin account (like Silk Road sellers account or Wikileaks account) - then they are illegal.  Sure maybe most users would not care where their bitcoins come from - but many would start checking the origin of theirs.

I can't wrap my brain around what it would mean for a particular BitCoin to be illegal. This also seems particularly illogical as it punishes only innocent people -- the criminals will launder the BitCoins long before accounts can be added to the government's list.

[Jaime Frontero]

what if every twenty dollar bill with traces of cocaine on it were declared illegal?

[hugolp]

Just a thought experiment.  My understanding is that every bitcoin can be tracked back through the list of all accounts it has been in up to the transaction that generated it.  Sure there are online mixers where you can exchange bitcoins - but what if the government would not care how many hops the bitcoins go through and instead declared that if they ever were in some bitcoin account (like Silk Road sellers account or Wikileaks account) - then they are illegal.  Sure maybe most users would not care where their bitcoins come from - but many would start checking the origin of theirs.

Its possible but:

1. The USA government is not the government of the world.
2. It would be really hard to make people check the bitcoins they get. It would be basically unenforceable.

[shockD]

As the above poster says, declared illegal by who?

How would that possibly be enforced?

So, hypothetically they're declared illegal by... somebody and.........

[TheGer]

Upload them to and exchange.

[Tasty Champa]

From what I know, what silk road and exchanges are doing is a blueprint for what we will need in the future so that bitcoins will remain stately to the whole ideological concept of bitcoins.

[Capitan]

What happens when you receive a fraction of  a bitcoin? Does each coin have a guid, ahdn if I receive .5 of coin "A", does my wallet literraly track that I have 1/2 ownership of coin "A"? And this works all the way down to eight decimal places?

[Jaime Frontero]

What happens when you receive a fraction of  a bitcoin? Does each coin have a guid, ahdn if I receive .5 of coin "A", does my wallet literraly track that I have 1/2 ownership of coin "A"? And this works all the way down to eight decimal places?

you don't have "1/2 ownership of coin "A"".

you have a value equal to 0.5 BTC.

if somebody gives you a US quarter in change, it's not part of some dollar bill (or coin), is it?

[JoelKatz]

What happens when you receive a fraction of  a bitcoin? Does each coin have a guid, ahdn if I receive .5 of coin "A", does my wallet literraly track that I have 1/2 ownership of coin "A"? And this works all the way down to eight decimal places?

For any value in the system, that value has an origin point and a chain of custody. You don't really get .5 of any particular coin. If I mined 50 bitcoins and want to send .5 BTC to you, what I do is form a transaction that works like this:

1) It imports the 50 bitcoins I mined.
2) It exports .5 BTC to you.
3) It exports 49.5 BTC to me.

I certify the transaction by signing it with the private key that corresponds to the public key specified when I mined the original 50 BTC.

Transactions work by importing bitcoins in from one or more sources and exporting bitcoins out to one or more sources.

Your .5 BTC isn't really half of any particular bitcoin. It can be tracked back to its origin(s) but so can any.

For example, I could just as well have imported in 50 bitcoins I mined and 35 bitcoins I got from someone else, exported .5 BTC to you and the remaining 84.5 BTC to someplace else. It is meaningless to ask whether your .5 BTC came from the 50 I mined or the 35 I got from someone else.

[Alex Beckenham]

What happens when you receive a fraction of  a bitcoin? Does each coin have a guid, ahdn if I receive .5 of coin "A", does my wallet literraly track that I have 1/2 ownership of coin "A"? And this works all the way down to eight decimal places?

Yeah, it's not going to work...

Let's say I decide to buy something for 100 btc from Vendor A; When I send that amount it gets consolidated into ONE address.

Vendor A then decides to buy 2 items for 50 btc each, from Vendor B and Vendor C.

It is then discovered that of my original 100 btc, 50 btc came from selling drugs.

So who's coins are now 'dirty'?

Vendor B's coins
Vendor C's coins
Both (all 100 btc is now dirty)
Neither (all 100 btc is now clean)

[JoelKatz]

Let's say I decide to buy something for 100 btc from Vendor A; When I send that amount it gets consolidated into ONE address.

Vendor A then decides to buy 2 items for 50 btc each, from Vendor B and Vendor C.

It is then discovered that of my original 100 btc, 50 btc came from selling drugs.

So who's coins are now 'dirty'?

Vendor B's coins
Vendor C's coins
Both (all 100 btc is now dirty)
Neither (all 100 btc is now clean)

And whatever choice you make, you don't hurt the person who you need to hurt -- the person who sold drugs or the person who bought them. By the time you could do something, it's too late to hurt anyone but innocent people.

[zby]

Let's say I decide to buy something for 100 btc from Vendor A; When I send that amount it gets consolidated into ONE address.

Vendor A then decides to buy 2 items for 50 btc each, from Vendor B and Vendor C.

It is then discovered that of my original 100 btc, 50 btc came from selling drugs.

So who's coins are now 'dirty'?

Vendor B's coins
Vendor C's coins
Both (all 100 btc is now dirty)
Neither (all 100 btc is now clean)

And whatever choice you make, you don't hurt the person who you need to hurt -- the person who sold drugs or the person who bought them. By the time you could do something, it's too late to hurt anyone but innocent people.

First - as I've already stated in the update above - I don't think that this can be effective any more - but for other reason.  As to hurting innocent people - this is not much different from counterfeited dollar bills - it is the receiver who is responsible to check for the validity of the bill.

[bitrebel]

I guess I would  have to launder my bitcoins. 

[Alex Beckenham]

As to hurting innocent people - this is not much different from counterfeited dollar bills - it is the receiver who is responsible to check for the validity of the bill.

Yeah, but we're talking drug money... how can anyone receiving a genuine USD banknote for example, know that it has a bad guy's serial number on it, or a microgram of cocaine?

[JoelKatz]

First - as I've already stated in the update above - I don't think that this can be effective any more - but for other reason.  As to hurting innocent people - this is not much different from counterfeited dollar bills - it is the receiver who is responsible to check for the validity of the bill.

The receiver has an obligation to check the validity of the bill because they *can* check the validity of the bill. If I receive bitcoins from you, there is no way I can check whether you gained them illegally or not unless they're already on some kind of list. In every realistic case, the illegality of the source will never be discovered until after the bitcoins have been transferred. It is not at all analogous to counterfeit currency to hold the recipient responsible for not checking something he could not have checked.

We treat a possessor of counterfeit currency as not innocent because he could have discovered through reasonable effort that the currency was not valid and because the currency was never valid. Invalidating currency after it has been transferred is much different.

A better analogy would be the government taking a $20 bill from you that you could prove you got from an ATM machine because the serial number was recorded as having been used by someone 800 miles away to buy drugs two months ago.

[SmokeAndMirrors]

Even if they knew whether or not you were buying from silkroad, for all they know you could have bought a lollypop or a pair of sunglasses. There's no connection between the item bought and the bitcoins. No receipts, no paper trail.