Mike Hearn, Foundation's Law & Policy Chair, is pushing blacklists right now

[Carlton Banks]

HAL: "I know that you and Frank were planning to disconnect me, and I'm afraid that's something I cannot allow to happen."

Everybody sing it: "DAISY, DAISY..." 

  Daisy, Daisy,
    give up your nonce please do.
  I'm still hash-ing,
    all for the filthy Jew.

(BTW, it's a joke people!  I should not have to explain it, but it's associated with various conspiracy theories.)

Really? Thought I'd heard enough Kubrick conspiracy theories to last a lifetime, not another one!

I always thought it was just an ironic song for HAL to have been taught; HAL was married to mankind, he was basically a servant that became contemptuous of his master, but started out trying to do everything to please, he couldn't afford a "carriage" (i.e. genuine corporeal form), but he was taught/programed to idealise his marriage to mankind ("you'll look sweet, upon the seat" etc). It also seems to represent a kind of life-flashes-before-your- eyes, the computer has a soul, childhood regression sort of thing.

Kubrick was a smart guy, but people read too much into it. Kind of inevitable with symbolic storytelling, when you think about it.

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[ErisDiscordia]

If the core development team is at the slightest risk of becoming politicized or even just influenced through links to the foundation, then it should be decoupled from the foundation immediately.

It seems obvious this is quickly becoming bitcoin's achilles' heel.

Hmmm, excuse my ignorance on this matter but what is the legal status of the Bitcoin Foundation and where does it get its funding?

I just had a thought that core developers could be on the payroll of the community. I think the Bitcoin community could and should lead by example and provide a model of financing the developers based on voluntarism. I know we have our fair share of people believing that voluntary cooperation can solve any sort of problem.

It's not hard to imagine. Each person working on/with the protocol can report their activities and progress and we, appreciative of their hard work as we are, sent some BTC their way. This way if some of them are not performing to the expectations of the Bitcoin community, we can not only voice our concern in a thread like this, but simply withdraw funding.

Just a thought.

EDIT: personally I would not withdraw funding to anyone discussing or entertaining any idea. Freedom of expression is dear to me and there is no such thing as thought crime.

[rocks]

The protocol needs to be designed to autonomously resist and reject regulatory attacks the same way it's designed to resist technical attacks. If that leads to them trying to make bitcoin illegal, good. Let them show their hand. It would be a sign of weakness. It means they are afraid and we're on the right path.

This is exactly why technical solutions to regulatory threats are required.

The US provides the illusion of freedom by saying you are free to do as you choose, but then creates a regulatory burden which effectively bans individual choice (and enacted through unelected agencies). People will be told "yes bitcoin is legal, but you have to follow this complicated system of laws/regulations which damage positive attributes of the system".

So far Bitcoin has created effective technical solutions to technology-based attacks. Going forward effective technical solutions are required to regulatory-based attacks.

Effective technical solutions to regulatory attacks will "force them to show their hand" as you well stated.

[Lauda]

If the core development team is at the slightest risk of becoming politicized or even just influenced through links to the foundation, then it should be decoupled from the foundation immediately.

It seems obvious this is quickly becoming bitcoin's achilles' heel.

Anonymous developers is what we need. At least anonymous to the public, so that they can't be influenced.

[bitcoin.newsfeed]

I am amazed that The Foundation is even discussing this kind of topic with USA regulators. Bitcoin is worldwide currency, not US currency !

[niniyo]

The fact is that bitcoins are not perfectly fungible because each coin has its own unique history.  You could argue the same about physical paper notes, but the history is hidden and not recorded anywhere, whereas the bitcoin blockchain forms a complete authoritative history with built-in proof.  For those who are trying to protect bitcoin's fungibility by shutting down efforts to use the blockchain history to identify individual money flows, I think this is akin to closing your eyes and blocking your ears and wishing it all away.  The fact is that the information is there already in the core technology, and you cannot stop people from looking at the history of a transaction.  You can't "force" someone to accept all coins as equal, unless you are going to put a gun to their head.

So, whenever something is "technically possible", which this coin validation stuff is, then it's only a matter of time until it is implemented.  Some will choose to use it, others will choose to ignore it.  But all of this stuff is layered on *top* of the core bitcoin system, and it is the core system which fully supports doing this.  Unless the underlying bitcoin system changes, then all we can do is trust others to ignore the history of coin flows.  Crypto currency is built around being trustless, so it seems a little fragile to just "hope" that coin history will be overlooked.

If the underlying technology is not changed, I see that three types of taint could naturally evolve:

Green coins: coins whos owner has identified themselves legally to authorities, so there is an identity and contact information attached to them.  business owners can accept these knowing that they are fully co-operating with governments.
Red coins:  coins flagged as being involved in a crime.  anyone who accepts these knows that they won't be spendable with green-only merchants, so they are potentially worth less.
White coins: unknown coins which are neither green nor red (no identity known, but not linked to any known crime).

I see that there would be a whole series of different shades of "pink coins", when red gets diluted into white coins.

In terms of game theory, I think that some may wish to avoid green coins just as much as red coins.  Because, if you wish to remain anonymous, accepting green coins makes this difficult because you know you are only a hop away from an identifiable person, who can then be contacted to give up details on who they sent the coins to.  For black market deals, white coins would be the most valuable, as they cannot be traced back to any identity and also are not associated with any known crime.

The CoinJoin idea tries to fight redlists by getting people to voluntarily mix their coins together, so that a majority of coins have a pink tinge.  If most coins are tainted, then vendors have a strong incentive to ignore redlists, or at least lower their threshold for the "shade of pink" that they will accept.  It is not clear why someone with perfectly white coins would voluntarily mix their coins and receive pinkish coins back.  So it may turn out that coin mixing is mostly just moving around red coins.

This is just my theory about how one possible future could look.  We really need to fix the underlying technology if we want to avoid coin taint.  It seems futile to just try to ignore the reality by asking people to ignore the information that is clearly there in the blockchain.

[Lauda]

I am amazed that The Foundation is even discussing this kind of topic with USA regulators. Bitcoin is worldwide currency, not US currency !

Exactly! The world doesn't spin around the US.

[Carlton Banks]

We really need to fix the underlying technology if we want to avoid coin taint.  It seems futile to just try to ignore the reality by asking people to ignore the information that is clearly there in the blockchain.

Ok, but this could be applied to fiat cash if it was such a big problem, and yet it isn't. Cash could've had a barcode on it since the 1970's, all merchants could have been forced to check all bills, or risk having their profit margins hit by confiscated "illegal" money. And yet it never happened, precisely because of the same main issue the Bitcoin "hardcore" are using to debate with: loss of fungibility.

The problem is that legislators are seeking to use information against the system, and it will affect the value of the currency. But we will only have to evolve again, and it will be a real nail in the coffin for cartel style central banking monetary systems. The very fact that this has been seized upon as the best way to regulate Bitcoin in over 4 years of being able to contemplate such controls, it's a testament to the power of this innovation.

Also, vote with your feet everyone. Which is better, living in the United States, or living your life using cryptocurrency? I know which I prefer.

[niniyo]

Ok, but this could be applied to fiat cash if it was such a big problem, and yet it isn't. Cash could've had a barcode on it since the 1970's, all merchants could have been forced to check all bills, or risk having their profit margins hit by confiscated "illegal" money. And yet it never happened, precisely because of the same main issue the Bitcoin "hardcore" are using to debate with: loss of fungibility.

The problem is that legislators are seeking to use information against the system, and it will affect the value of the currency. But we will only have to evolve again, and it will be a real nail in the coffin for cartel style central banking monetary systems. The very fact that this has been seized upon as the best way to regulate Bitcoin in over 4 years of being able to contemplate such controls, it's a testament to the power of this innovation.

Also, vote with your feet everyone. Which is better, living in the United States, or living your life using cryptocurrency? I know which I prefer.

It's a good point, the same could be done with cash but it would destroy its value.  I suppose they don't care if they destroy bitcoin's value.  There seems to be just one solution - implement zerocoin or some other system that gives full fingibility to bitcoin.

Even if it's just the united states doing redlisting, I could see it having a global influence.  For example, imagine an exchange that has 2 different prices, one for clean coins and another for all coins.  The clean coins could have a premium because dirty coins can't be spend with US merchants.  People will naturally prefer the non-tainted coins even if they don't plan on spending them with taint-cooperative merchants.  It's like with physical currency, if you have a choice between a nice shiny coin or an old black stained coin, you will keep the shiny clean one (this is known as Gresham's Law).

[SebastianJu]

This idea is already useless from the start. I mean its to fight scams right? But any scammer that isnt fully stupid will collect the coins and change it to good ones instantly. I mean you never know before that its a scam. And then, when its a known scam, the coins are marked. And completely innocent people will lose possibly everything.

This is completely useless for preventing scams. This is the same for the mentioned ransomware. In order to get your files back you might pay the bitcoins directly into a mixer. The scammer gets his clean coins and the tainted coins have created a second victim.

Great idea /Irony off

[Adrian-x]

If the core development team is at the slightest risk of becoming politicized or even just influenced through links to the foundation, then it should be decoupled from the foundation immediately.

It seems obvious this is quickly becoming bitcoin's achilles' heel.

Hmmm, excuse my ignorance on this matter but what is the legal status of the Bitcoin Foundation and where does it get its funding?

I just had a thought that core developers could be on the payroll of the community. I think the Bitcoin community could and should lead by example and provide a model of financing the developers based on voluntarism. I know we have our fair share of people believing that voluntary cooperation can solve any sort of problem.

It's not hard to imagine. Each person working on/with the protocol can report their activities and progress and we, appreciative of their hard work as we are, sent some BTC their way. This way if some of them are not performing to the expectations of the Bitcoin community, we can not only voice our concern in a thread like this, but simply withdraw funding.

Just a thought.

EDIT: personally I would not withdraw funding to anyone discussing or entertaining any idea. Freedom of expression is dear to me and there is no such thing as thought crime.

I also thought this morning that the community could fund an audit of the QT client. - I like possible ideas of managing this decentralised via N of M smart contracts where donators become signatures'.

[niniyo]

If you have a choice between spending a nice shiny coin or an old black stained coin, you will spend the old black stained one. People will naturally prefer to spend the tainted coins wherever the tainted coins are accepted. What's the problem?

Because unlike with legal tender, there is no face value to bitcoins.  So naturally the clean coins will sell for a higher price than tainted coins.  I imagine that sophisticated launderers will purchase red coins for half price on the black market, and do all the work required to get them officially removed from the red list.  For those of us with pink coins who don't want to have to verify ourselves with CoinValidation & co, we'll have to suffer the reduced prices.

[leopard2]

Almost all paper cash contains traces of cocaine etc; so they are tainted. Should they be taken out of circulation?
Many paper bills have been used for illegal purposes at some point; so they are tainted too. Would you use cash if a pig could seize them from you just for one of these reasons? Or even worse, do that remotely? Probably not.

The reason why cash is safe is due to the fact that the tainting is not traceable or detectable (normally).

Once there is a mechanism like that, BTC will be destroyed. There are enough alternatives out there that could soak up the market cap, however..

[UncleBobs]

And for the last time I don't give a fuck about Bitcoin's legal status, and neither should anyone else. In fact, we should assume that's illegal and make sure our infrastructure is robust enough that it doesn't matter.

Sometimes I think you're about the only MAN on this forum, Justus.

[niniyo]

Once there is a mechanism like that, BTC will be destroyed.

The mechanism is already there - it's called the blockchain.  However there are two variables which control the effectiveness of this strategy:

1) Businesses compliance with redlists/greenlists
2) Users' voluntary compliance by registering their information on a greenlist.

The more we feed it, the more it effects fungibility and the more it encourages new businesses/users to pay attention to coin colour.  Unfortunately, governments probably do have enough power to incentivise businesses/users enough to get the ball rolling with this.

[justusranvier]

And for the last time I don't give a fuck about Bitcoin's legal status, and neither should anyone else. In fact, we should assume that's illegal and make sure our infrastructure is robust enough that it doesn't matter.

Sometimes I think you're about the only MAN on this forum, Justus.

I know I'm not the only one thinking that, but since I've already long ago resigned myself to being on all the watchlists anyway, I don't mind saying it out loud.

[solex]

And for the last time I don't give a fuck about Bitcoin's legal status, and neither should anyone else. In fact, we should assume that's illegal and make sure our infrastructure is robust enough that it doesn't matter.

Sometimes I think you're about the only MAN on this forum, Justus.

I know I'm not the only one thinking that, but since I've already long ago resigned myself to being on all the watchlists anyway, I don't mind saying it out loud.

Justus: the John Connor for Bitcoin.

[Lauda]

How about we vote him off the foundation?

[solex]

How about we vote him off the foundation?

For an error in judgment, describing a tracking/taint method as a response to tackling cryptolocker? No.

[solex]

How about we vote him off the foundation?

For an error in judgment, describing a tracking/taint method as a response to tackling crypolocker? No.

Why not?

Because that just seems over-the-top. Giving up the chair in the legal forum should be sufficient. He has done fantastic work for Bitcoin over years.