[LEAKED] Private Bitcoin Foundation Discussions On Blacklisting, more (ZIP dump)

[ajax3592]

What uniqueness about Bitcoin will be left if it remains no more an open source currency ?
It will turn useless and won't serve the actual purpose that Satoshi made it to

[Mooshire]

Boycott the foundation. They don't deserve to represent the community when they make decisions against us.

[ffssixtynine]

Everyone: Stop and actually read and take in what's being discussed. It's like villagers with torches and pitchforks burning anyone who has a broomstick. There is nothing being pushed forwards here and most of those people stand to lose out if bad things are done to Bitcoin. They are not stupid. The grief that Mike is getting is utterly ridiculous.

p2pbucks - You've missed my point entirely. Of course all this can be done in USD and of course banks have laundered money etc etc etc. The point was that they don't do it in full view of the entire world. The moment it is in full view of everyone, the media and politicians and 'the people' will be whipped up into hysteria. This will happen, it's inevitable. It may not be terrorism, it may be theft or extortion.

There is some awesome stuff in the posts provided in the leak. Take care to read them. For example (on redlists):

Moreover, I think the "redlisting" of coins is a slippery slope. Here is how things could progress:

You start with informing people of coins that were used for crime

People start discriminating against tainted coins

Someone from the US government would have the bright idea of redlisting coins that passed through wallets of "terrorist organizations", so say Wikileaks gets redlisted

People that don't know better can't tell a difference between coins redlisted for crimes and ones redlisted by politicians for "war on terror", so they discriminate against them both.

Term "terrorist" or whatever is the flavour of the month gets extended to more and more organizations that are inconvenient for the US - Anonymous, some foreign journalists that report on war crimes, government of a country that is "at war" with US or "harbouring terrorists", etc.

Soon the redlist becomes a political tool - we start discriminating against the grey area. Say some place does research on human embryos or human cloning in a country where that is legal, but since some western country thinks that their law trumps over regional law, they start redlisting their addresses.

Transactions and addresses are started to be added to it indiscriminately because some government agency says they are tied to this or that crime. Whoever is keeping the redlist can't say no since they have some order from the agency, and they can't tell anyone why they are adding those since they have a gag order.

Soon you start having a currency controlled by the political powers of one country that houses whoever is making the redlist since they can muscle their way into controlling it.

There are many more like it. For my part, I can see a clear difference between people who are looking at the technical and legal problems from those who understand the human nature issues that will result (on both sides). I'm yet to see anyone pushing hard to do any of this, just people discussing what the options and ramifications are.

How many of your have actually read the documents properly? It's like demonstrating against a film that you haven't seen just because someone said it's blasphemous and will destroy morality. It's terrible depressing to see from a group of people who claim to want freedom of speech but then launch massive personal and unwarranted attacks when someone apparently says things they don't like (and I mean apparently because this is all being totally misrepresented).

[wtfvanity]

In my view, this "redlist" process has already gained enough steam that it will be implemented in one form or another.

If Satoshi were still in this 3d reality I'm sure he would be opposed to this ridiculous perverting of his ideal and supportive of altcoins that are true to the principles of freedom and independence.

Bitcoin is now the bloated IBM of the 1970's and destined to become a secondary player to these emerging altcoins stars.

It's not like you don't have your alt coin spammed in your signature. The only thing you could have done to make your post a little more retarded was to actually link your alt coin in your post, and not just your signature. Your post wreaks of ulterior motive. Try posting such argument under an account that doesn't have such a heavy agenda.

[ffssixtynine]

Since people aren't going to read these and will just take an uninformed view, I'll post some snippets:

I am also concerned that this system can be abused, could not be efficient and can represent concrete risks for Bitcoin that shouldn't be ignored. That is why I think these discussions are very important and shouldn't be taboo.

On fungibility, one difference with Bitcoin is that you can't see the money until you irreversibly received it, so you can't refuse it in a traditional sense and the same is true for the people who will receive this money from you. You can't be persecuted for accepting redlisted money. Where I see a real risk for fungibility, however, is that you can be persecuted for spending this money without reporting if you're denounced by the people who will receive money from you.

Another unsolved problem is that I hardly see independent organizations maintaining redlists; third parties generally can't witness crimes or have financial incentives to maintain their list. I am therefore concerned that:

1. Lists would be mainly government maintained.
2. Persecuting users for not reporting will be tempting (complicity).
3. Abusing the system for political reasons will be tempting (and opaque to the public).
Edit: 4. Persecuting miners for processing redlisted coins transactions will be tempting (fully anonymous miners might become more rare as the network scales).

I think we shouldn't automatically reject any idea that could (efficiently) improve this system. Obviously, there is a big difference between discussing and adopting these ideas.

[ffssixtynine]

We must keep this discussion going! If we can't find a good technical solution, somebody else will make one. And we might not like it.

I'm confident we can creatively code our way through this issue. For instance, what if we created a decentralized, fuzzy redlist, without a central authority deciding which transactions were bad or good? Is there an economic solution to this problem?

If we decide that no decent system is possible, we still need to scope out the possibilities. We need to be one step ahead.

I would say no, there isn't a technical solution. It'll always end up a political football and rife for abuse by the wrong people on all sides.

I am honestly surprised, bordering on appalled, by the largely positive reaction to this proposal.

Then again, I'm completely new here, so I probably shouldn't.

Any such attempt, to create a database of tainted coins to remove them from circulation, is a direct attack on Bitcoin's fungibility. And because of the relative ease with which the property of being tainted can spread (any shared address will do the trick, presumably) or could even be entirely faked ("Bill stole my coins. Mark them as stolen, please." Who will do the detective work on this claim, Bitcoin Police?), Bitcoin's fungibility is not just threatened, but at the real risk of being completely destroyed over time.

There are ways to cooperate with (law enforcement) authorities and try to limit the usefulness of Bitcoin as a tool for criminal activities, but blacklisting coins is not one of them. It is a surefire way to destroy this fantastic little (5B USD) experiment we have going here.

please do elaborate on those other ways you mention. For instance, how do you think CryptoLocker should be tackled.

The way any worm/malware should be fought? System security, user education, if possible, real world criminal prosecution? But maybe I'm missing the weight of your question.

Here's one question I have yet to see an answer for: Why should Bitcoin, which in many ways resembles, or perhaps can be seen as the next evolutionary step following cash, be held to an entirely different (moral, and legal) standard than cash?

The problems Bitcoin should tackle are ease of transaction, persistency of store of wealth, [more grandiose goals go here], but "making financially motivated crimes near-impossible, at the cost of crippling the core functionality of the currency" is not among them, in my opinion.

[ffssixtynine]

System security and user education won't solve this problem, just because of the law of large numbers.

Let's say conservatively, there are about a billion people using the internet (the true number is higher these days I think, 1B is the number I used to see some years ago). And let's say about 90% of them use Windows. so that's 900 million.

Let's also say that thanks to brilliant virus scanners, spam filters and super education, 99% of users who are sent CryptoLocker DON'T get infected. But unless Windows goes full iPhone and totally bans unapproved software, no defence system will be perfect: let's say 1% of people get whacked.

So that's 0.01*900,000,000 = 9,000,000    (we can assume that after a few years everyone got mailed at least one scam mail with CL attached just because it's free to send)

How many Bitcoin users do you think there are in total, today? 1 million? With a generous definition of "user", perhaps a bit more.

No matter which way I slice these numbers, it seems left unchecked CL could grow at least as fast or faster than Bitcoin itself, to the point that there are more victims than genuine users. And let's face it, 99% of people are not protected.

You say, "real world criminal prosecution" but to prosecute you must find, and I don't see a good way to track these people down. That's kind of the point of exploring this topic.

Here's one question I have yet to see an answer for: Why should Bitcoin, which in many ways resembles, or perhaps can be seen as the next evolutionary step following cash, be held to an entirely different (moral, and legal) standard than cash?

What makes you think cash is held to a different standard? You realise that cash is not 100% fungible, right? If you're found to have forged money, you lose it, even if it's not your fault. And that really sucks because counterfeit currency is not really a rare problem. In the Economist today there is a story saying 1 in 4000 British bank notes are fake!

What's more, if you turn up at a bank with a giant pile of cash, or indeed at a real estate agent, they are expected to treat that carefully and possibly file reports if it seems suspicious.

So cash is not fungible, it's actually very much non-fungible, as anyone who tries to spend large amounts of it at once will discover.

However, I don't think we need to hurt Bitcoin's fungibility to find bad guys and make them prosecutable. See my reply to Piotr for why I think that.

Only have limited time now, I'll re-join the discussion tomorrow. Just two brief remarks:

re: CryptoLocker. The problem with those extrapolations is that they sound about right, maybe they will turn out to be right, but they are very much 'back of the napkin' calculations. I would rather not risk core functionality of Bitcoin to combat a problem that is real, but far from certain to be catastrophic. How exactly is CryptoLocker different from any of the other malware that has been plagueing average users for more than the past decade, causing significant damage, but ultimately not being any threat to the system itself (be it Internet usage in general, online banking, etc.).

re: fungibility. The counterfeit argument is a strawman. Counterfeit money is by definition not real money, so it is not a limitation of fungibility of the actual currency. Also, you will note that I didn't simply say blacklisting coins will limit fungibility, I argued that, because of the ease with which the property of being marked as "used in criminal activity" can spread, it is an actual risk that diminish fungibility enough to make Bitcoin unusable.

There's actually two issues at stake here:
The first is the question of having a way for someone who has paid bitcoins under duress, or had them stolen, to tell others about it, so that those of us who sympathize and want to help (or are required by law to help) can help provide information about the inputs they received, to help track down the original criminal.
In a perfectly voluntary world, I can see such a system being a great idea in theory: The more horrible the crime, the more likely everyone in the chain is willing to cooperate with tracking down the originator. There's still the issue of how such lists are constructed, and how the credibility of the victims is established, but multiple competing lists could keep the process honest (the way spam filter lists work). In the absence of a legal obligation to cooperate, this system works pretty nicely.

The second issue is that we do not live in anything close to a voluntary world, or even one in which governments limit the scope of their authority.
A government would almost immediately spawn their own redlist, and make it a requirement for all businesses to use it.
As you mention, they wouldn't be able to mark "Wikileaks's addresses" directly. What they can do however is mark all addresses as tainted. Every single one. Then the moment I spend any money, the merchant has to report information on my person to the redlist operator (my government). This very quickly removes privacy from the system. Essentially, a redlist system can be expanded by legal authorities to be mostly indistinguishable from CoinValidation's own proposal (by making 'marked' the default state of any funds). The cooperation we've seen between intelligence agencies tells me that we can reasonably assume the results of such a fishing expedition would be shared between most countries.

Nothing we do affects the feasability of this approach from the government. They could mandate it right now, and we can't stop it from coming into existence.
But I would be wary of building the tools you proposed, precisely because that would be making their task easier. Maybe we can actually build it once the threat has subsided due to (insert libertarian utopia of your choice here).

Now I disagree with those who are calling for your head, it seems they're getting a little spooked at how easily such a scheme could come into existence. Let's not shoot the messenger, especially when he's limited himself to a theoretical discussion. There's plenty of people who actually deserve our ire (the CoinValidation thing is positively vile, and they're openly trying to get legislators on their side).

[ffssixtynine]

I figured I'd throw in some comments about the worst case scenario as well:
Assume that this redlist idea is implemented, taken to the extreme ('marked' by default) and legally required on the entire planet. What's the net effect?

It splits coins into two categories: white market and grey market. White market coins are tied to identities very strongly, and are the only way you can buy from law-abiding merchants. Grey market coins are no longer in the possession of any known actors, but they still are usable (barring core protocol changes). It's pretty easy to move funds from white market to the grey market (coinjoin, reminting through transaction fees, zerocoin). But moving money in the other direction exposes you to scrutiny. Where does that leave us?

Well that's the situation with regular money today! I can take cash out in large quantities, and go buy grey market goods trivially, but the guy I buy from won't be able to use it to pay his mortgage without jumping through hoops. Of course bitcoin makes this divide even more stark (since it tracks funds perfectly), but it's the same fundamental stituation. And unlike the regular financial system, grey market bitcoins would preserve almost all of their attractive properties (instant transfer, divisibility, security). They'd just trade at a discount relative to the clean coins (based on how hard it is to launder them).

TLDR: While not desirable, the worst-case outcome of this doesn't kill bitcoin, not even close.

I came here this evening because I knew there would be a thread on tainted coins in light of the launch of CoinValidation. I wanted to make it know that I am strongly opposed to any action that threatens the fungibility (real or perceived) of Bitcoin.

I wish that all of the Law and Policy Committee threads got this much attention. There are quite a few topics that I see as more important to developing into comprehensive positions(see links below for some samples) but unfortunately they don't draw the same level of attention as this topic. Someone says "coin tracking" and Bitcoin Foundation" in the same sentence and things get weird fast.

As far as the Mike's original discussion prompt, I have (of course) a short response and a long response

Short:
If the Bitcoin Foundation is to arrive at a coherent policy on the subject of coin tracking/tainting, it should follow along the same lines as what Jeff Garzik previously outlined, "On stolen coins and transaction blacklists." To oversimplify and pick one quote out of the article, "Stolen coins are fundamentally a legal, not technical concept." (There's so much more, I hope everyone reads his full post but this is the "short" response.) All in favor say aye? "Aye."

Let's not make the mistake of reinforcing any perception that bitcoin is intertwined with crime and nefarious activity. Our response to the use of bitcoin by people engaged in "anti-social" behavior should be "bitcoin is a protocol/network/whatnot that is agnostic to who uses it so long as that use is compatible with its basic operation, now go be better at law enforcement and catch the bad guys. We'll be over here coding and feeding homeless people with this awesome new technology."

Long:
CryptoLocker and its ilk are not "bitcoin problems." Transaction fees, block size, double-spends, these are bitcoin problems.  It's not even a "second degree" bitcoin problem like Money Transmission and KYC laws, or banking embargoes. It's as much a bitcoin problem as it is an email problem.  I despise people who victimize others. CryptoLocker is horrible, and I want to eradicate it. The good news is that there are technological and social means to defeat CryptoLocker and other harmful tools. The bad news is that this is a human/social problem, not a technological one. A percentage of the global population has and will continue to consistently victimize people using the means at their disposal. More good news: the same platforms that allow CryptoLocker to harm people also enables tools that neutralize it. (See Brian Krebs' writeup)

Coin tracking is not a Bitcoin Foundation issue. As a thought leader, our organization may have a position on the subject(see  first bullet point of my "Short" response for what I think that position should be), and we can be in favor/against/neutral, but our position will remain just that, a position, its power enforced by peer pressure. Coin tracking, and the problems it is intended to solve are, I believe, outside of our purview. There are people and organizations dedicated to solving those problems. I'm pretty sure they're WAY ahead of us in building those solutions.

We're a non-profit organization encouraging the development and use of an open source software project. Let's focus on ensuring that bitcoin remains solid at the core level, work to reduce the barriers to use by providing comprehensive educational material and showing that bitcoin provides a wide range of benefits for consumers, and everyone else(see proposed position papers below, and add to them!)

"We are determined to keep Bitcoin rooted in its core principles: non-political economy, openness and independence." From our "About" page.

Read Jeff Garzik's article, I'm tired.

Mike, I'm sorry your thought prompt got turned into "BURN THE WITCH!" I think there may be a confusion between a free exchange of ideas on a relevant topic and a decree. I appreciate that there has been some productive conversation on the subject, and I think it exposes what seems to be a raw nerve.

In summary, and staying on topic, I think that if we decide that we need a formal position on coin tracking it should be that we recognize that it will happen, it's not in our realm of responsibility.

PSA, there's a lot of topics that I think are more time-sensitive that need to be developed and built into coherent positions that we can present to the public. Links below. (FFS: Removed)

[ffssixtynine]

Given this is the "Law and Policy" committee, there has been scant discussion given to the real world legal impacts such a coin-tainting scheme would have.

You do realize that this would be a massive legal liability thrust upon most merchants? Oh, so you sold them the hamburger even though your BTC client said there was a 84% degree of coin-taint? What...you mean you by company policy don't even check that because you think its a "voluntary" part of the client? So accepting stolen goods is a "company policy"?

The simple fact is, given the litigious  nature of the modern world, the inclusion of such a "feature" would have debilitating effects.

I think everyone appreciates Mike's bringing this topic up, and his desire to eradicate CryptoLocker, but Bitcoin is *absolutely* the wrong square peg to try and nail into that round hole.

From a strategic perspective, trying to make envision ways Bitcoin can be more like Paypal plays to their strength.

At its core we must think of Bitcoin as a protocol. As long as a transaction is valid, it should be propagated through the network, and written in the blockchain. No questions asked. We understand that some might abuse the system, but that is the cost of doing business. Imagine if we proposed a redlist for TCP/IP instead. "This user visited 20% gambling sites, 10% adult sites, etc." No one would be comfortable with that proposition.

As John Stahl stated, while terrible this is not Bitcoin's problem. We are not the global money police. Furthermore, I think the userbase understands the worst case scenario in terms of fungibility. Any coin client that implemented coin tracking would simply be abandoned, so I highly doubt that anyone will write code for this.

The anti-redlisters here (myself included) seem to have been putting up solid arguments describing why its a bad Idea from "it feels against the spirit of bitcoin" to solid concerns about the unanticipated (and anticipated ones) emergent results of such a change. What I haven't seen to much is why would this really be a good thing? How would it really protect us? Or stop Cryptolocker? From what I can gather you would have a bunch of red flags floating around that either effectively do nothing (except be a huge annoyance having to clear the red flags which I know I'm not going to do.) or everyone goes crazy about them and we make bitcoins practically unusable.

I just don't see how this actually solves the problem. At least I see no way it adds anything we don't already have with the public ledger. In essence you could already report a cryptolocker incidence to some sort of investigator. and they can follow the money until it goes into a mixer. But if you have the redlisting. Won't you just taint the mixer anyways? And you have gained nothing.

In some senses Bitcoin already has way more tracking then cash does. But its not going to solve the problem. the problem is bad people doing bad things. And you can't sacrifice everything in order to try and stop a couple bad people. they will simply find another way. Not that we shouldn't fight them. But fight them in other ways. Not by disassembling Bitcoin.

Law enforcement is the job of Law enforcement not cash. So if you want to really stop this fund an internet police force. I'm on board with that. make it decentralized also to avoid corruption with mutual checks and balances and punishments.

tainting, redlisting, blacklisting, whitelisting, None of these should be part of bitcoin or any widely accepted protocol overlaying bitcoin.

"Oh hello there owner of the redlist. Here is a gag order for you to keep this conversation secret. You see, there is this organization that is leaking government information in an act of treason. Here is a warrant for you to redlist those addresses. If you don't comply, we will be forced to assume you are aiding the terrorists in getting their money and take you to court and put you away for treason as well." RememberLavabit?

As it goes, if the redlist is supposed to be successful, people will need to make it global. Global usually means "run in the US", which means "controlled by the US". If you have multiple redlists, they are worthless - people could just trade coins redlisted under list A for those redlisted under list B as long as A is green under B and vice versa.

[ffssixtynine]

Just a suggestion, wouldn't the famous "90% of dollar bills carry traces of cocaine" quote be an interesting example somewhere of what is fungibility and why it is essential? Along with the neutrality of technology arguments ( emails don't prevent you from sending Cryptolocker, computers are not defect because they let you open cryptolocker.exe ).

All in all, regarding the initial example of this thread, I think Cryptolocker indeed is a problem that cannot be ignored. As opposed to other usual forms of crime, there is no "physical hook" that can be used to investigate and restrict these harmful activities. Should they grow without restrictions, it is possible that Bitcoin will lose a lot of its users and be marginalized, further more as governements will adopt an increasingly severe stance and as merchants will want not to be associated with Bitcoin anymore.

Take the US War on Drugs for example - the expense of a $Trillion in labourer's (tax) capital to no measurable effect on use or adoption rate over decades, coupled with an incarceration rate (and subsequent lives disrupted/destroyed) an order of magnitude beyond anything else in the developed world is a case in point. The recent findings that private sector prison management companies (these should have been anticipated) lobbied for and were awarded state/county guarantees for minimum incarceration rates to minimize future corporate risk profiles is a truly icky case in point wrt unintended consequences. But it's just one among a constellation of examples I condense and subsequently draw cause/effect conclusions from.

Interestingly, you strike me as someone more than able of coming to the same conclusions, and for the same reasons - a wish to let people lives their own lives as they see fit, and to reduce harm from others. Which begs the question.... what are you trying to accomplish by airing this subject again? As a Bitcoin coder, you're already acutely aware that CoinValidation is a pointless hiccup - a nascent waste of time/effort capital - because the first effective layered/integrated bitcoin mixer instantly makes it irrelevant, and there is obvious enormous, distributed vested interest in the value of a bitcoin to make that happen. Are you trying to stir the pot and get peeps  to make it happen sooner?

XXXXX: I hear you loud and clear, but honestly I wouldn't worry about this issue. My own personal take on the matter is that as long as Gavin is lead programmer and Jon is Executive Director, we and Bitcoin are in good hands, and if that changes I'm cashed out until Bitcoin 2.0. Just my personal gut feeling of course, but if I can give a possibly apt example: in the private sector, many high tech startups, small and weak and undercapitalized, typically take an approach called "operating in stealth mode". In other words, they say one thing publicly but their real capabilities and internal plans are held very close to the chest. Otherwise, the large corps could do an end run around them and eat their lunch, and then eat them. Do these large corps know this goes on? Well yes, of course they do. Wheels within wheels.

This idea is outright crazy. You are digging the grave for the bitcoin. Developers and users in Europe will not tolerate this and create a fork. Only thing you can achieve is the creation of an American Bitcoin whose value will rapidly collapse. Whoever supports any efforts of coloring coins AND is holding bitcoin at the same time is irrational. He is destroying the biggest benefit of the bitcoin and devaluating his own stake.

Even thinking about coin coloring by members of the foundation is a scandal. It is like a politician proposing to abandon the right to vote. I am deeply concerned and outraged about this discussion.

If you need to see that you are acting against the majority of the members of this foundation, have a vote!

This is a bad idea (in my opinion), but it requires no changes to the core consensus of bitcoin. There would be no fork. In fact this system could be implemented as a patch on top of any wallet without the help of any core devs.
If regulators decide they want to do this, they can do it over our objections and with very little effort.

[proudhon]

Thank you, ffssixtynine.

[ffssixtynine]

Me, and many others in the bitcoin community are deeply concerned about Mike Hearn pushing for coin taint.  We feel that if the Bitcoin Foundation is even going to consider mentioning this in the upcoming government meeting, that we can no longer stand behind them.  This is serious.  Coin taint is even worse than increasing the 21 million limit.  Since the chairman of Law and Policy is involved here, I would like to call for a vote against this, and a clear stance from the Bitcoin Foundation.  I know many of the board members are supporters of mixing coins even more, so something like this can never happen again.  It would be a good message to the bitcoin community to confirm that the foundation supports keeping coins anonymous, instead of going in the opposite direction.

This disturbs me. Nobody is implementing anything. This is just a theoretical discussion.

You really want to censor a discussion on technical possibilities?
Since when is the bitcoin community into censorship?

Mike Hearn is one of our best assets. He works fucking hard! Who is going to step up for this job if you all threaten to recall people who hold conversations on tough topics?

Adam Back, as usual, has an excellent response:

This is not about crime, nor identifying perpetrators, its about fungibility; they are (perhaps surprisingly) orthogonal payment system properties.

An electronic cash system, must have irrevocability, which as we discussed here is how bitcoin can achieve low cost and efficiency relative to credit cards & paypal.   Coin anonymity is necessary for fungibility, but that is strictly about fungibility, identity level privacy is separate.
-https://bitcointalk.org/index.php?topic=333882.msg3585877#msg3585877

Irreversibility of transactions is a key attribute of Bitcoin, and a key reason why Bitcoins have value. The reality is any type of blacklist, redlist, whatever you want to call it, marks coins as "different" Even worse, this can and will happen after the fact. Adam's point about costs is also apt:

Destroy [Bitcoin's] fungibility and the costs float up to meet credit cards and paypal.

-https://bitcointalk.org/index.php?topic=333882.msg3582302#msg3582302

While people see Bitcoin as representing a variety of things, one of the most common beliefs in the community is that Bitcoin should be a low-cost and irrevocable method of payment. I think what's interesting about this recent flare up, is from the sounds of it perhaps what Coin Validator is planning to do is simply a technically misguided way for businesses to verify the identities of those they transact with. Sure the technical details are all wrong - from what they've said it's based on trusted addresses, a major privacy concern - but the basic concept of making it easier to determine the legal identities of who you choose to transact with is reasonable in some circumstances.

On the other hand what Mike Hearn is bringing up, yet again after a thorough discussion and heavy criticism the last time, is about the coins themselves. Now ask yourself: Do we want a world where it was common for normal, average, businesses to find out that the cash money they received in good faith is suddenly suspect because apparently someone multiple steps back did something illegal in some jurisdiction to get it? No sane business would choose to accept such cash if they had an alternative, and when considering whether or not to accept Bitcoin, businesses do have alternatives already like PayPal and credit cards.

The fact that Bitcoin transactions can be traced using publicly available data, broadcast to the whole world, is a flaw, end of story. It's a flaw bad enough that regulators are beginning to take notice, warning about the privacy dangers of Bitcoin! The flaw is a consequence of the underlying technology, but we can and should fix it to the best of our abilities. Embedding this flaw even deeper into the way we use Bitcoin would be a serious mistake and the Foundation should make it absolutely clear to the community that they will not make that mistake.

[ffssixtynine]

We've had the theoretical discussion before, multiple times. The technology involved isn't very interesting from a legal perspective and doesn't deserve more discussion. There's near consensus in the community that it's a very bad idea, for multiple reasons, regardless of your thoughts about privacy and anonymity.

If you want to discuss it further, knock yourself out. But there is every reason for community members to be worried when someone in a position of power - Mike Hearn is chair of the Foundation Legal and Policy committee - starts promoting a discredited and dangerous idea yet again. It's like finding out in 1940 that the chair of your local electricity board thinks the town needs a direct current feed and that Tesla guy got it all wrong. Sure, his arguments for DC may sound convincing to some people who are unfamiliar with the technology, but the discussion's long been settled in favor of AC by those who are.

Maybe you don't understand how censorship works. If you threaten to fire somebody for discussing a topic, that's censorship.

Look, if Mike Hearn had taken an action that you disagreed with, then go ahead and recall him. But in this case, all he's done is raise a topic for discussion!

Let me put it a different way—you don't want a Law & Policy Chair who talks about the benefits of Coin Tainting. Do you agree? You want to recall any chair who talks about that?

That's censorship.

Grow some balls and prove him wrong if you disagree. Use your intelligence to engage in debate. Don't pretend to recall him for raising the issue.

Wow, such dangerous radical thoughts! This man is trying to destroy Bitcoin! Hide your children!

Seriously? We'll talk about rebuking Mike Hearn when he actually agitates in favor of the approach. Until then this is a witch hunt.

"I don't have any particular opinion on what we should talk about. I'm aware of the arguments for and against such a scheme. I'm interested in new insights or thoughts" - Mike Hearn

Yes, this is about counterproductive censorship. Mike is giving you the space to discuss the idea, alternative ideas, new thoughts, concerning a real controversial problem nobody really dare speaking about exactly because of what you're doing. It's easy to vote against something exactly because nobody wants the risks and the efforts of thinking about solutions and be criticized in return.

I personally am wary of this system and remain unconvinced, but I appreciate that Mike is bringing the subject on the table, even if it doesn't produce any new solution in the end, it just needs to be discussed.

We have discussed coin taint ad nauseam in the past, on the bitcoin forums.  I sometimes have the feeling this board is like 'the elite' and doesn't even read what's going on somewhere else.  Either way, you don't have to take my word for it, I'm just voicing other people's opinions.  If they want his head for even considering coin taint at this point, that's them.  He could have stayed up to date.  And if he wouldn't be in the power position he is in right now, it would probably be a very different story.  But from past discussions people are very worried that he's the type of guy thats ready to comply with whatever government demands.. and they want someone who's willing to fight for what 90% of the community stands for: 21 million, complete privacy, and decentralisation.  If you touch on the holy trinity it's going to backfire big time.

He's presenting blacklists as an idea that should be taken seriously. As I say, the discussion has happened, and we have near consensus that they are a bad idea; he's in a very small minority. What the Foundation's policy should be when it comes to blacklists is something that the community has a pretty good rough consensus on - we'll still have healthy debate about the details, but the basic idea has been rejected as a bad idea by almost everyone.

It is perfectly reasonable to continue researching the topic - people didn't stop researching DC after AC was accepted as the way to go. Sure enough, some really remarkable advancements in technology have made DC the right choice again in certain specific circumstances. (e.g. long distance undersea power transmission) But when it comes to coin taint, those kinds of potential advances in the underlying understanding are very far removed from anything the Foundation would want to put down in writing as a policy now, just the same way that the chair of an electricity board in the 40's would be at best deceptive to be telling the general public that DC was a viable option that merits serious consideration in the here and now.

Except that very little of the discussion (there or here) is actually about what he wrote.  Mostly it is the usual cast of instigators whipping up an angry mob, and the mob then being angry about something that they don't understand.

Mike wrote about "A", and now you are here bitching about "B" because a group of people knew that a fraction of the bitcointalk mob can be counted upon to fly off the handle without bothering to think and understand the topic.  Congratulations, you are today's winner sucker.  Feel good about being used?

P.S.  If even 10% of the crap about this that I've read on the bitcointalk forums today were true, I'd be pissed off too.

P.P.S.  Context is important.  The location of the topic in question has meaning.  Why do you suppose it is in Law and Policy?  Do you understand the bigger picture in and around that forum?

(Don't shoot the messenger peeps!)

[ffssixtynine]

In my head, I picture people sticking their fingers in their ears and going "LALALALALAL DON'T TALK ABOUT COINTAINT LALALALAL"

Or maybe somebody in a funny hat pointing their finger at Mike and shouting "BLASPHEMY!"

It is fine if y'all want to pretend that coin-tracking won't happen if the Foundation ignores it, and maybe it is such a hot-button issue that the Foundation should ignore it right now.

But it will happen anyway, because the technology to make it happen is pretty straightforward, and any victim of CryptoLocker will be VERY sympathetic to law enforcement tracking "dirty" coins. More than sympathetic, I think we should expect a lot of pressure on law enforcement to DO SOMETHING.

The above was posted by Gavin.

I have emphasised the point I was also making. This doesn't mean do something, it means absolute and complete preparation for how to deal with it. In order to do that, you have to be able to discuss it without being burned at the take. That's just too shoot oneself in the head.

Despite the lies tossed around elsewhere, the foundation membership is almost entirely composed of people with very strong opinions in favor of decentralization, opposed to regulation, opposed to taint enforcement, in favor of freedom, etc.  The foundation is not a secret cabal hell bent on handing control of bitcoin over to some government.  Also, neither the foundation itself, nor any member or group of members, has any magical power to coerce people into accepting changes to the client or protocol.

Also -- it's very poor form to publicly post discussions from here to elsewhere. Whoever did that should read our meta section and think about why that wasn't helpful.

- I want to comfirm that my posts here are only being done so because the zip was made public and people are reacting to them without reading them. I am not a member of the Foundation and I have removed names in almost all cases, altho the materials are freely available.

I also firmly believe that the Foundation urgently needs to make their position on this absolutely clear - with no room for uncertainty. I think Mike was very naive when starting out on this road without that being the case. The community, both within the Foundation (from the looks of it) and outside of it, were always going to be in uproar at the mere discussion.

[ffssixtynine]

XXXX and XXXX, You probably don't realize it but you're raising hell against a very important member of this community here, on reddit, bitcointalk... This creates a smear campaign, often misinformed and radical. This concerns me a lot. Mike doesn't deserve that, nobody does. You don't need to target a person to oppose to an idea

This should probably be at least one "good conduct" rule if we don't want to lose engaged members one by one as soon as they touch a sensitive subject. We need members that are able to confront sensitive questions. The future is not simple, and things will be much worse if we are disorganized from the inside.

I get you dislike blacklists/tainting/(tracking scheme of the day). I do too. But Mike is right that we should hash out in full detail the pros and cons of the approach. Because when an external party tries to get regulators to push this kind of thing, it would be nice to have reasoned counter arguments at the ready. The coin validation guys are the first, and many others will try in the next few years. They don't need the cooperation of any core devs to do this, they can drag all of us into it.

And if it looks like we can't win that battle, we should know which variant best preserves users' privacy, so that at least we can do effective damage control. It would suck, but we won't make it better by sticking our heads in the sand. Mike's post was a variant of tainting that mostly avoids the fungibility problems. I still thing it's a bad idea, because of just how easily it could be turned back into its nastier cousins, but it's nice to know that we have slightly less crappy options, should it come to that.

I mean look around this subforum. 90% of it is figuring out how to deal with the regulatory nonsense thrown our way. If and when Mike does more than just discussing a sensitive topic (If he writes up a draft position for the foundation that supports some taint variant, for example) then you'll be justified in your complaints.

Fwiw I finally got around to signing up because of this issue, either Mike or the foundation wheren't doing a whole lot to clear up the misunderstanding on bitcointalk and the discusion there is ignoring the fact tracking coins is already possible.

Since the Foundation aren't, I am.

Exactly. Taint (and the calculation thereof) is even a feature on the blockchain.info-Website. Anybody could implement some kind of blacklist/taint feature on a website within a few hours. Since it's possible it should be discussed - independent from one's personal standpoint.

Yes and there's no reason a discussion can't cover both sides, making it accessable to all users and making it more difficult for all.

Thanks to Jon for trying to clear things up on bitcointalk, looks like its impossible over there though as the thread title invites a flame response before any of the discussion (lol) is read.

^This.

Can I suggest this is not really about coin tainting, but about organisational politics.  We all would love Bitcoin to be free from the shackles of human opinion.  Unfortunately however brilliant Satoshi’s idea was it needs help from clever and hard-working people in the core dev team to support its growth.

If I might go off piste for a moment.

Let’s say I am a fund manager and I see Barry Silbert’s trust return 200% plus gains in a few weeks,  and think to myself, should I put 0.1 or  even 1% of my managed assets into this thing.  What is the first question I would ask, “who’s in charge” answer “no one”.  Well that’s not really true is it, the core dev team have an enormous responsibility and can guarantee that any change they have to effect will piss substantial sections of the user community off.

May I suggest the foundation prepares itself to be the Mexican pinata for the broader Bitcoin community.  I am not sure if this is already happening, but it needs to bring together the strong voices of the core dev team the foundation board and rapidly growing businesses to build organisational confidence.  If people see that diverse well informed opinions from intelligent actors that have a great deal to loose can come to consensus through a pre-defined and transparent process they may not like the outcomes but can get involved or make a choice to go elsewhere.

[fligen]

no names = out of context.

[ffssixtynine]

Some regulators in the USA have apparently expressed concern that irreversible transactions undermine consumer protection.

In this position I will argue that Bitcoin allows consumers to choose between irreversible and dispute mediated transactions. Furthermore I will argue that this flexibility is a significant win for consumers, resulting in cheaper and more reliable transactions, higher quality protection and superior results for the economy.



Definition. Consumer protection mechanisms have over time become widely adopted across many jurisdictions and payment networks. They are the mechanism by which consumers are insulated against non-delivery by a merchant (whether malicious or accidental), as well as hacking and outright fraud. Additionally, they protect honest merchants by preventing competitors gaining an unfair market advantage via dishonest or other deemed unacceptable behaviours.

Chargebacks. A chargeback is a common form of dispute mediation implemented in credit card networks. Chargebacks allow consumers to dispute a charge on their account and if successful, get it reversed. Typically this results in the merchant having the money taken back out of their account, and possibly fined or being ejected from the card network. Chargebacks can occur for a variety of reasons, such as non delivery of goods, being billed for a service that was not wanted, resolution of administrative errors and unacceptably low quality. However the most common reason is use of stolen credit card details. Merchants are allowed to fight chargebacks and win the dispute in approximately 40% of cases.

Identity theft. Because credit cards can be charged only with details that must be given to online merchants to make a purchase, theft of these details is extremely common. Although ultimately caused by the "pull" design of credit card systems, merchants end up paying the price - transactions caused by theft of credentials result in an automatic win by the consumer.

Friendly fraud. The combination of chargebacks and lax card security can result in serious abuse. So called "friendly fraud" is where ordinary consumers initiate fraudulent or grossly unfair chargebacks. Because card networks compete harder to obtain users than merchants, they have little incentive to resolve this problem. An example would be that the porn industry has much higher chargeback rates (and thus fees) than normal, due to consumers legitimately purchasing pornography and then claiming it wasn't them when caught by their partners.

Professional fraud. Some payment providers have inadequate dispute mediation procedures in place. For example, PayPal requires proof of postage from a seller or else the buyer automatically wins any dispute. This leads to a common scam in which a fraudster purchases an item from a seller online, pays via PayPal and then picks it up in person from the victims front door. Hours after the fraudster has left, the payment is reversed and because no postage was involved, the victim loses both the goods and the money.

Financing of terrorism. The chargeback structure combined with the dominance of a handful of payment networks yields little incentive to create better security or dispute mediation procedures. Criminals know this and exploit that fact. Stolen credit card details can cost as little as $3.50 on the black market. Once obtained by "carders" they can be pumped for money. Because the identity details are all stolen anti-money laundering requirements do not help with finding the perpetrators. This was used to great effect by an al-Qaeda cell investigated as part of Operation MAZHAR. Over $3 million was raised for the Iraqi insurgency via carding.

Additional costs. One reason that credit card transactions are so expensive is the cost of dealing with fraudulent chargebacks. Many businesses implement their own risk analysis systems and review procedures above and beyond those provided by banks and card networks, because they find it to be the only way of controlling fraud rates. Even so, large losses are inevitable, and those losses are passed on via price rises and fees.



Bitcoin and consumer protection. Bitcoin was explicitly designed to learn from the mistakes of existing payment networks. Bitcoin does not implement chargebacks. By default, transactions are irreversible, but if buyer and seller agree they can include a third party dispute mediator into a suspended transaction. This mediator is not an escrow agency and does not hold the money at any point. Rather, in the case of dispute they can select a winner. If there is no dispute, they need do nothing at all and the payment will be cleared as normal. The use of this technique is rare in 2013 due to the lack of easy to use graphical interfaces for it, however simplicity will likely improve in due course.

Flexibility and specialisation. By separating the act of settling a dispute from the act of processing a payment, Bitcoin allows buyers and sellers to agree on any mutually satisfying choice of mediator. By avoiding the need to trust the mediator to hold the money, the market for mediation services becomes more competitive and fluid. Specialised trades can be mediated by individual domain experts or small businesses. Ordinary every day trades, like selling some second hand goods in person, can be handled by larger companies that may be able to have agents on the ground. Over time, mediators will arise that draft their own quality standards, and they will compete on the fairness and justice of their procedures.

Incentives to develop security. Bitcoin is already significantly more secure than existing card networks because you do not hand out any credentials or steal-able identity details to make payments. But by preventing users from pushing the costs of hacking onto merchants (who can do nothing about it), Bitcoin also incentivises the creation of a market for innovative security products that explore the balance between convenience and protection. For example, users may prefer to keep a small amount of money on their smartphone with no password or PIN at all, for quick access. They may place larger sums into specialised hardware devices that are specifically hardened against viruses and hackers. They may choose to deposit their bitcoins with a third party that handles security and indemnifies them against loss. Whatever the consumers preference, there can and will be a product that satisfies them.

Efficiency and low cost. Many transactions in practice do not need a third party mediator because the business itself is capable of satisfactorily resolving disputes. Major supermarket chains, for instance, will typically choose to please all but the most unreasonable customers rather than take the hit to their reputation. By avoiding the often inappropriate and expensive chargeback mechanism these businesses can reduce their overheads and pass those savings on to consumers. The website bitcoinstore.com is a successful example of this - they manage to undercut even Amazon by accepting payments only in Bitcoin thus saving money on fraud management, yet it is difficult to find an unhappy customer.

Conclusion. By using sophisticated cryptographic technology, Bitcoin separates the act of clearing a payment from the act of mediating disputes. This is a superior approach that will create entirely new ecosystems of entrepreneurial mediation firms that compete on the quality not only of their consumer protection, but also their merchant protection. Innovative security mechanisms will protect users from hacking and theft. Indeed, many examples of such products already exist.

[ffssixtynine]

no names = out of context.

I'm reflecting the actual conversations minus the technical parts. I'm not pasting everything as that would be pointless. You can go look in the zip if you want names.

Now please actually read what I'm posting and if you think it is not reflective then I suggest you do a better job. I'm clearly posting both sides and I'm not cherry picking. In fact I've barely found anyone saying anything positive about blacklisting etc.

[ffssixtynine]

Bitcoin allows consumers to choose between irreversible and dispute mediated transactions.

This is a simple and very elegant formulation.

When I travel my dogs stay at a local boarding kennel that charges me 3% extra to pay with a credit card to cover the fees.  (They should charge me more for the chargeback risk, but apparently that is not a big problem for that merchant.)

I can choose to carry enough cash to pay for the boarding, or pay extra for the convenience of not having to lug wads of paper around that have been who-knows-where before ending up in my pocket.

Similarly, with Bitcoin, the buyer can choose to pay with something convenient like a credit card—where available—or enjoy a discount from a merchant who is willing to accept Bitcoin.

How could something that simple be controversial?

[tiaguitah]

~thanks for the leaks