Ransoms and mixers

[Wary]

There was a topic recently: "what can kill bitcoin", and one of suggested answers was "A kid kidnapped, ransom paid in bitcoins, track lost in a mixer". Such a news would attract huge media attention and can seriously damage BTC reputation. What if, god forbid, taking BTC for ransom becomes common among kidnappers? Can we prevent it from happening, i.e. keep track of these coins?

And more generally, is there a way to keep track of "dirty" coins, while still having "honest" coins anonymous? So that real criminals won't be able to use their ill-gotten money, while honest tax-avoiders will still be safe?

Can it be done by some technical means, like coloured coins? Or by some reputation means? Something like this: there is a blacklist of "dirty" addresses (in a server or embedder in the blockchain). If the payment came from a "dirty" address, the transaction will be rejected by miners and eventually rolled back. As for mixers, to prevent from being associated with dirty money (and eventually getting blacklisted by miners), they would want to keep log of transactions, with addresses! An average mixer customer, naturally, won't come to a "tax-friendly" mixer, that reports them to authorities. But he also won't go to "dirty" mixer. First, because he (most likely) don't approve criminals. And second, because he don't want to get blacklisted himself. So, the honest folk will still enjoy their anonymity, while the Earth be burning under criminals' feet.

[1714754518]

1714754518

[🏰 TradeFortress 🏰]

A blacklist of coins will destroy Bitcoin because it will no longer be fungible.

Who decides blacklists? You destroyed the decentralized nature of it.

If this was introduced it WILL drop BTCUSD by more than any media attention on a ransom.

[Wary]

A blacklist of coins will destroy Bitcoin because it will no longer be fungible.

Not coins, of course. Blacklist of addresses. The coins will become fungible again when they returned to original owner. (More precisely, they can be spend by original owner after "criminal" transaction won't get confirmed for long enough and get rolled back).

Who decides blacklists? You destroyed the decentralized nature of it. If this was introduced it WILL drop BTCUSD by more than any media attention on a ransom.

51% of users decide, who else? There will be a tickbox "Don't use dirty money" on your wallet. And list of blacklisting sites to choose from. When the system evolve, there will be competing blacklisting sites, competing apeal courts, even competing bitcoin legislations. Normal law inforcement infrastructure (but based on reputation, rather than on force).

[🏰 TradeFortress 🏰]

Please go read more about Bitcoin and learn why this idea will never be implemented.

For one, users do not decide on anything. A 51% miner CAN refuse to relay any TXes coming from a certain address, this is known as a 51% attack and will make Bitcoin worth sub $0.01.

[QuestionAuthority]

A blacklist of coins will destroy Bitcoin because it will no longer be fungible.

Not coins, of course. Blacklist of addresses. The coins will become fungible again when they returned to original owner. (More precisely, they can be spend by original owner after "criminal" transaction won't get confirmed for long enough and get rolled back).

Who decides blacklists? You destroyed the decentralized nature of it. If this was introduced it WILL drop BTCUSD by more than any media attention on a ransom.

51% of users decide, who else? There will be a tickbox "Don't use dirty money" on your wallet. And list of blacklisting sites to choose from. When the system evolve, there will be competing blacklisting sites, competing apeal courts, even competing bitcoin legislations. Normal law inforcement infrastructure (but based on reputation, rather than on force).

Do you work for PayPal?

[moni3z]

Kidnapping for ransom where I live is all done by gangsters who target their own people who are wealthy immigrants. Back home this person will have extended family they can just pick up and hold for ransom. Immigrant here pays them in cash and doesn't bother calling the police, because cops here have no control over Vietnam/China/Phillippines/Mexican/Guatemalan or Russian corrupt police that are paid off by the gang.

Usually what happens is some gangster here will walk up to you on the street and intimidate/tell you in person so there is no phone or written record for evidence. Marks also don't cooperate with local police here since they know back home the gangsters have free reign over their family so testifying in court is not an option for them. These guy's are never caught, don't need bitcoin and basically operate with impunity though the police do follow the known/suspected one's around a lot but nothing comes of it.

tl;dr they don't need bitcoin, nor will they have any future use for it unless Vietnam magically becomes not corrupt

[edmundedgar]

Please go read more about Bitcoin and learn why this idea will never be implemented.

For one, users do not decide on anything. A 51% miner CAN refuse to relay any TXes coming from a certain address, this is known as a 51% attack and will make Bitcoin worth sub $0.01.

This is a horrible idea that would seriously degrade the usefulness of Bitcoin, but it wouldn't _necessarily_ involve 51% of miners.

In theory if everybody's client software had some code to check the blacklist of coins that passed through certain addresses, the end users could refuse to accept them as payment. Law enforcement (or the mafia, or anyone with an ability to take revenge on arbitrary people) could encourage them to cooperate with the tainting by threatening action against people who accepted those coins.

Obviously you'd need quite a lot of blacklist-enforcement to make it work, but you wouldn't even need 51% of users to _want_ to enforce the blacklist to make this at least partly effective, because if I know that the people I want to pay may not be willing to take a coin with address X in its ancestry, it's worth less to me as well, so I would rather avoid receiving it.

There's a similar effect at the miner end, where if you control a small proportion of mining power and are prepared to do things that aren't ordinarily economically rational, you can change the incentives of profit-seeking miners and get them to obey your laws instead of Satoshi's. See this post by TierNolan for an example, also discussing a small proportion of miners enforcing a taint, and profit-seeking miners going along with it because it's in their interests:

https://bitcointalk.org/index.php?topic=179612.msg2098123#msg2098123

[Edited for clarity]

[🏰 TradeFortress 🏰]

, the end users could refuse to accept them as payment.

That's a hard fork.

It is important for people to know that you, as an end user, has VERY limited influence in what can happen. You want the block size to be 2 MB? You can't, you will end up in a hard fork.

[edmundedgar]

, the end users could refuse to accept them as payment.

That's a hard fork.

It is important for people to know that you, as an end user, has VERY limited influence in what can happen. You want the block size to be 2 MB? You can't, you will end up in a hard fork.

No, enforced at the user end it isn't a hard fork like the block size thing. In this case there's only one version of the blockchain which everyone agrees on, but when you try to buy your alpaca socks with a tainted coin the alpaca farmer refuses to accept your transaction as payment, so if you want your socks you'll have to use a different coin.

Here the blockchain is as it always was and miners will happily add tainted coins to the shared ledger, but the Bitcoins it records are no longer fungible: Some of the Bitcoins it shows on the ledger are worth less than others because they're harder to spend.

The countermeasure, as Tiernolan says on the post I linked, is lots and lots of mixing, so that if the alpaca farmer won't take this Bitcoin, he can't take any Bitcoin.

[🏰 TradeFortress 🏰]

It IS hard fork because you cannot choose to accept transactions or not in the current protocol.

You are going to end up with 2 versions of the blockchain: those who assumes all coins to an address are valid (current clients), and those who only assume coins to an address that has accepted it is valid. This is the very definition of a hard fork.

[edmundedgar]

It IS hard fork because you cannot choose to accept transactions or not in the current protocol.

Sure you can. I'm not talking about whether a miner would add it to a block, I'm talking about whether I'd accept it as payment for the socks you want to buy from me.  This is a private contract between you and me, and I can apply any conditions I like. For example, if I was very superstitious, I might refuse to take payment from an address with "13" in it.

You are going to end up with 2 versions of the blockchain: those who assumes all coins to an address are valid (current clients), and those who only assume coins to an address that has accepted it is valid. This is the very definition of a hard fork.

No, you just have one version of the blockchain, and the miners will include transactions in the blockchain without discriminination, but the user won't accept some transactions as payment.

[Wary]

Do you work for PayPal?

Do I sound like this? Shame on me But seriously, if you have trade, you have money disputes. Which disputes resolution scheme would you suggest? "Caveat emptor"?

[edmundedgar]

Do you work for PayPal?

Do I sound like this? Shame on me But seriously, if you have trade, you have money disputes. Which disputes resolution scheme would you suggest? "Caveat emptor"?

Caveat emptor is a good system in a lot of cases. In a lot other cases you're better with accountability systems that are separate from the payment mechanism. For example, when I bought a cup of coffee for 100 yen at MacDonalds then got it home and found it was full of coffee grounds, I took it back and they gave me a new cup. But if they hadn't I could have escalated by calling the MacDonalds consumer hotline, and if that failed the Consumer Protection Bureau. What I didn't do was ask the Bank of Japan to reverse the payment by cancelling my 100-yen coin.

If you do need to combine payment and dispute resolution, the Bitcoin way to do it would be to make an escrow transaction using multiple signatures, either the buyer and the seller (who both have to agree to release the funds) or the buyer, seller and a third-party (where two out of three can release the funds). This is better than relying on a dispute resolution service baked into the payment mechanism, because the buyer and seller get to choose the third-party.

BTW, the problem with making transactions reversible is discussed in the first paragraph of Satoshi's whitepaper. Reading that, separating out dispute resolution from payment looks like the main goal of Bitcoin:

Commerce on the Internet has come to rely almost exclusively on financial institutions serving as trusted third parties to process electronic payments. While the system works well enough for most transactions, it still suffers from the inherent weaknesses of the trust based model. Completely non-reversible transactions are not really possible, since financial institutions cannot avoid mediating disputes. The cost of mediation increases transaction costs, limiting the minimum practical transaction size and cutting off the possibility for small casual transactions, and there is a broader cost in the loss of ability to make non-reversible payments for nonreversible services. With the possibility of reversal, the need for trust spreads. Merchants must be wary of their customers, hassling them for more information than they would otherwise need. A certain percentage of fraud is accepted as unavoidable. These costs and payment uncertainties can be avoided in person by using physical currency, but no mechanism exists to make payments over a communications channel without a trusted party.

http://bitcoin.org/bitcoin.pdf

[Edited for clarity.]

[Wary]

tl;dr they don't need bitcoin, nor will they have any future use for it unless Vietnam magically becomes not corrupt

Now they can expand their business to US. More money. You don't need corrupted police if the ransom money is intractable. Imagine the headlines "Another bitcoin kidnapping! No American kid is safe anymore!"

[QuestionAuthority]

Do you work for PayPal?

Do I sound like this? Shame on me But seriously, if you have trade, you have money disputes. Which disputes resolution scheme would you suggest? "Caveat emptor"?

I suggest none. If I wanted safety and regulation I'd be using the US dollar. Bitcoin requires an education before use to guarantee your safety but it has benefits that are difficult to reproduce with fiat. I wouldn't give my 10 year old btc to go to the corner store to buy candy and I wouldn't want to use dollars to send money to someone in Germany in less time than it takes him to get his candy and for less money than a candy bar.

[AliceWonder]

We can't blacklist an address.
The problem with that, who is judge and jury?

Besides, if we did, you know the kidnappers wouldn't release the kidnapped until after it had been through several mixers.

[Wary]

For one, users do not decide on anything.

Things are not that bad. Just last month, BTC get new restriction on transactions. And it users that's decided to put it to force.

I'm referring to the "No dust" client version. It's users that decided to upgrade to it. If they would wanted the dust, the dust would stay. The same way we can upgrade to some "No dirty money" version.

BTW, the problem with making transactions reversible is discussed in the first paragraph of Satoshi's whitepaper.

Interesting reading. Thanks.

Which disputes resolution scheme would you suggest? "Caveat emptor"?

I suggest none.

That's exactly what "Caveat emptor" means. But I have to agree with you, edmundedgar and that Satoshi guy he mentioned

We can't blacklist an address.

Miners can. They don't have to include all transaction in the block, right? (That's why transaction fee was introduced, to give them an insentive).

The problem with that, who is judge and jury?

Ideally, the user. He decides which blacklist provider to use. Her choise should somehow be transferred to miners (say, through fees). I think, something like this can be done. Sure, this would require changes in protocol, but bitcoin is still in it's infancy and nobody knows how it would evolve in 5, 10 or 20 years. 

Besides, if we did, you know the kidnappers wouldn't release the kidnapped until after it had been through several mixers.

Won't help them if mixers keep the logs. See my original post.

[🏰 TradeFortress 🏰]

And it users that's decided to put it to force.

No, it's not. Ultimately the miners decided.

[AliceWonder]

Won't help them if mixers keep the logs. See my original post.

Mixers won't keep logs. That's the whole point of mixing.

Some may for a short period, but any criminal organization is more than capable of running their own mixers. They aren't that difficult to set up.

[Bitware]

There was a topic recently: "what can kill bitcoin", and one of suggested answers was "A kid kidnapped, ransom paid in bitcoins, track lost in a mixer". Such a news would attract huge media attention and can seriously damage BTC reputation. What if, god forbid, taking BTC for ransom becomes common among kidnappers? Can we prevent it from happening, i.e. keep track of these coins?

And more generally, is there a way to keep track of "dirty" coins, while still having "honest" coins anonymous? So that real criminals won't be able to use their ill-gotten money, while honest tax-avoiders will still be safe?

Can it be done by some technical means, like coloured coins? Or by some reputation means? Something like this: there is a blacklist of "dirty" addresses (in a server or embedder in the blockchain). If the payment came from a "dirty" address, the transaction will be rejected by miners and eventually rolled back. As for mixers, to prevent from being associated with dirty money (and eventually getting blacklisted by miners), they would want to keep log of transactions, with addresses! An average mixer customer, naturally, won't come to a "tax-friendly" mixer, that reports them to authorities. But he also won't go to "dirty" mixer. First, because he (most likely) don't approve criminals. And second, because he don't want to get blacklisted himself. So, the honest folk will still enjoy their anonymity, while the Earth be burning under criminals' feet.

Concern Tolls don't know common sense, critical thinking, nor history...

Humans have been bribing, ransoming, killing, converting stolen wealth, and every other 'evil' for thousands of years using the currency of the time... yak dung, tally sticks, fiat cash, silver, gold, etc.