Has a Bitcoin Transaction ever been censored?

[Picard78]

In the below video at 33:42 min Charlie Lee says that Litecoin (and Bitcoin) can be censored if the Litecoin was previously used in illicit activity.

https://www.youtube.com/watch?v=C_pTOomVtI8

Were there any Bitcoin transactions that were actually censored in the history of Bitcoin?

Thank you

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[ranochigo]

Depends on what you mean by censored.

There was once a patch on Bitcoin Core that could be used to filter and refuse to mine known gambling addresses (those of satoshidice and on-chain gambling). This wasn't particularly effective as a lot of miners and users didn't run this.

Exchanges has been and are still closing accounts if the origins of the coin has been tainted (either through a gambling site or illicit activities). They are still actively doing so, Binance and Coinbase are good examples.

Miners ultimately decide which transactions should be included. If they want, they can collectively refuse to mine certain coins though that has never been the case.

[YOSHIE]

Were there any Bitcoin transactions that were actually censored in the history of Bitcoin?

I'm a little difficult to understand what you mean "Bitcoin transactions on censorship".

I don't know what you mean 'censorship'.

However, maybe the topics below can help you to find the answer.
Try reading the topic below.

Topic: The Bitcoin Origins - Explore Bitcoin History and Secrets

Topic: The History Of Bitcoin!

If your question, is in the topic please let me know.

[NeuroticFish]

Were there any Bitcoin transactions that were actually censored in the history of Bitcoin?

I think that you have misunderstood it.
The network doesn't care about the source of money. 99% sure the miners also don't care.
The recipient of the money, a company, may however do censoring. That's the "beauty" of custodian wallets  

If you do a search for account closed gambling wallet site:bitcointalk.org you'll find that some exchanges / wallets may not allow money coming from gambling.
Also the wallets known to be related to known hacks are being watched and most exchanges may seize those coins.


I think that this is the censoring Charlie Lee was talking about, not about actual transactions.

[UserU]

I think that you have misunderstood it.
The network doesn't care about the source of money. 99% sure the miners also don't care.
The recipient of the money, a company, may however do censoring. That's the "beauty" of custodian wallets  

If you do a search for account closed gambling wallet site:bitcointalk.org you'll find that some exchanges / wallets may not allow money coming from gambling.
Also the wallets known to be related to known hacks are being watched and most exchanges may seize those coins.


I think that this is the censoring Charlie Lee was talking about, not about actual transactions.

I experienced it first hand, not pretty. Wasted nearly 3 weeks on two failed attempts because one came from Freebitcoin and the other from a gambling site. And those were for withdrawing from the custodian wallet.

[stompix]

In the below video at 33:42 min Charlie Lee says that Litecoin (and Bitcoin) can be censored if the Litecoin was previously used in illicit activity.

No, he says if you send a transaction you can be blocked.
It simply means that once you make a transaction, which implies the ability to send and receive, you as a person can be refused service by a third party, and this, unfortunately, happens quite often, although a lot of times is used just as an excuse to fleece the users.

Depends on what you mean by censored.
There was once a patch on Bitcoin Core that could be used to filter and refuse to mine known gambling addresses (those of satoshidice and on-chain gambling). This wasn't particularly effective as a lot of miners and users didn't run this.

It wasn't at that time as the chain was never really clogged with transactions, the average block size was below 500kb before 2016 so it was not really affecting anything, but right now, the refusal of some pools to mine certain transactions would be far more effective and it will cost the ones on the blacklist a lot more to send and receive money as cheaper transactions will take your place in some blocks.

But the dangers of miners trying to censor transactions will go down with each reward halving, soon they will not afford to not include some transactions and let the competitors earn more.

[pooya87]

in a decentralized network nothing can be censored at all as long as that network remains decentralized. bitcoin network is completely decentralized as it has always been and in order to censor a transaction we must first see 100% centralization before it becomes possible.

the centralized world however can do whatever they want, as they have also done censorship in the past and are still doing it. for example when the centralized exchanges shut down an account or don't credit a deposit for weird reasons, that is a form of censorship.
but this has nothing to do with bitcoin itself.

[sheenshane]

in a decentralized network nothing can be censored at all as long as that network remains decentralized. bitcoin network is completely decentralized as it has always been and in order to censor a transaction we must first see 100% centralization before it becomes possible.

I tend to agree, unless if someone will decode the Bitcoin protocol network that originally built by the creator. It's decentralized and it should be censorship resistance. Bitcoin should be, transparent, immutable protocol code, and the last one is censorship resistance that everyone's could see and replayed on the blockchain, you can't completely hide information from others because it should be recorded by blockchain that can able to distributed ledger which means everyone can run with internet connections.

Probably there is censorship as comment above, but that is not on actual transactions. This is what on the third party that own by Bitcoin, example custodial wallet didn't accept Bitcoin that comes from gambling or Bitcoin address that marked as a scam by scam Bitcoin monitoring addresses service like Chainalysis.

[ranochigo]

It wasn't at that time as the chain was never really clogged with transactions, the average block size was below 500kb before 2016 so it was not really affecting anything, but right now, the refusal of some pools to mine certain transactions would be far more effective and it will cost the ones on the blacklist a lot more to send and receive money as cheaper transactions will take your place in some blocks.

But the dangers of miners trying to censor transactions will go down with each reward halving, soon they will not afford to not include some transactions and let the competitors earn more.

It was more of an issue in ~2013-ish when on-chain gambling was more prevalent. Agreed, it would not make sense for the miners economically. Barring the miners collectively having the same agenda (unlikely) or a 51% attack (very unlikely), I can't see censorship being implemented effectively besides perhaps a minor inconvenience from certain miners refusing to mine some transactions.

[Picard78]

There was once a patch on Bitcoin Core that could be used to filter and refuse to mine known gambling addresses (those of satoshidice and on-chain gambling). This wasn't particularly effective as a lot of miners and users didn't run this.

This is a good argument for having multiple implementations of the Bitcoin Protocol.

Exchanges has been and are still closing accounts if the origins of the coin has been tainted (either through a gambling site or illicit activities). They are still actively doing so, Binance and Coinbase are good examples.

Does Binance return the Bitcoin to the Sender before they close the account?

I am coming at this question from the angle of how I discuss and promote Bitcoin to my friends.  Based on the responses, I feel safe to still claim that you are your own Bank with Bitcoin.   As long as you control your Private Key you can send any amount of Bitcoin to anyone.  The caveat, however, is that if the Bitcoin you own is somehow "tainted", it may be rejected at Exchanges or other points of Centralization.

It's similar to if my friend is paid in counterfeit dollar notes but doesn't know it and then goes to the Bank to deposit the notes but the Bank rejects and possibly confiscates them.

I'll be honest this issue of fungibility takes some air out of the Bitcoin narrative.  Prior to today I promoted Bitcoin as "You control your Bitcoin and no one can stop you from sending it to someone else."

I have to be more careful with my narrative now. The narrative now has changed to "You control your Bitcoin and no one can stop you from sending it to someone else.  However, it's possible that an exchange or other central authority may reject your Bitcoin if it is tainted.  Ensure that you only transact with trusted parties."

[cryptomaniac_xxx]

I have to be more careful with my narrative now. The narrative now has changed to "You control your Bitcoin and no one can stop you from sending it to someone else.  However, it's possible that an exchange or other central authority may reject your Bitcoin if it is tainted.  Ensure that you only transact with trusted parties."

The question now is who decided which coins is tainted? Not bitcoin enthusiast (traders/investors), not exchanges. So this is a bad idea in my opinion. Can someone received a coin from Mt. Gox hack and never realized it? Definitely, that it mean that you are a criminal? I don't think so.

[ranochigo]

Does Binance return the Bitcoin to the Sender before they close the account?

IIRC, yes. They will send an email to tell you that they're closing your account and for you to withdraw.

I am coming at this question from the angle of how I discuss and promote Bitcoin to my friends.  Based on the responses, I feel safe to still claim that you are your own Bank with Bitcoin.   As long as you control your Private Key you can send any amount of Bitcoin to anyone.  The caveat, however, is that if the Bitcoin you own is somehow "tainted", it may be rejected at Exchanges or other points of Centralization.

I would say that what the services are postulating for the closure of accounts is toxic for the development of Bitcoin. That is also the reason why  I prefer having zero central authority when dealing with stuff like that. Some point in the future, most of the coins would've been tainted and it would only serve as alternate reasons for the exchange to avoid dealing with you. Until the regulatory pressure on Bitcoin eases, I doubt this would stop happening for major exchanges.

[jseverson]

The question now is who decided which coins is tainted? Not bitcoin enthusiast (traders/investors), not exchanges.

Traders won't care, but I'm sure exchanges run some kind of taint analysis on all coins they keep. They decide whether the coins are tainted or not, and can deny you their service on those grounds.

The good thing about this is that their analysis is mostly sophisticated enough to recognize that you just happened to find dirty coins on your hands, meaning you're very unlikely to get banned unless you're actually doing something shady. The bad thing is that they also have a very good idea of where your money is coming from and what you're doing with it, so you actually have very little privacy if you're using such a service.

If you're using Bitcoin P2P, which is how it was originally intended to be used, it can't be "censored".

[Picard78]

The good thing about this is that their analysis is mostly sophisticated enough to recognize that you just happened to find dirty coins on your hands, meaning you're very unlikely to get banned unless you're actually doing something shady.

This concept is very important and it is the way I envisioned the current Bitcoin ecosystem worked.  I believed that the only time an Exchange like Binance would reject my Bitcoin was if I was charged with a serious crime.  Since I don't see criminal behavior as applicable to me or my friends,  I wasn't concerned who I received Bitcoin from.

[Ucy]

Is he talking about Censored by centralized exchanges and other centralized means ? I am not sure if there is built-in mechanism in the Bitcoin Network to censor transactions. Such mechanism would be transparent and involve members of the Bitcoin (& litecoin) communities.

[witcher_sense]

I have to be more careful with my narrative now. The narrative now has changed to "You control your Bitcoin and no one can stop you from sending it to someone else.  However, it's possible that an exchange or other central authority may reject your Bitcoin if it is tainted.  Ensure that you only transact with trusted parties."

Bitcoin is censorship resistant and neutral meaning no one can stop your transactions and also you don't necessarily need to trust the party you are recieving coins from or the party you are sending coins to. There are no third parties or exchanges in bitcoin network, no one must comply with legislation, no one is in charge. There is no such thing like taint bitcoins when it comes to bitcoin protocol itself because it doesn't care what humans think. No one can censor you when you make transactions and operate within such neutral network, network ecosystem or its decentralized layers. Ensure that you only transact within the protocol in a pure peer-to-peer manner and you are fine. Bitcoin teaches us to transact without help of banks or exchanges, so if you need to buy bitcoin with fiat, then try the same approach and buy/sell in peer-to-peer way using bisq, localcryptos, hodlhodl and the like.

[o_e_l_e_o]

Does Binance return the Bitcoin to the Sender before they close the account?

Not always. If the exchange in question has decided your coins are "tainted" in some way, they may hold on to them and demand KYC. If you do not submit KYC (or if they are unhappy with the KYC you do submit), then your coins are essentially seized by the exchange.

The caveat, however, is that if the Bitcoin you own is somehow "tainted", it may be rejected at Exchanges or other points of Centralization.

This is true. The easiest way to get around this is to not use centralized exchanges. I trade exclusively peer-to-peer on platforms such as Bisq and LocalCryptos, and I spend my bitcoin both in person and online (also avoiding sites which use terrible privacy invading payment processors such as BitPay). I have never once encountered an issue spending/sending/trading my bitcoin.

The metric of "tainted" coins is only going to become more meaningless as time goes on. With ever more bitcoin being passed through mixers, coinjoins, and other privacy enhancing methods, it will only be a matter of time before every bitcoin in active circulation can be "tainted" in some way by some algorithm.

[Picard78]

Ensure that you only transact within the protocol in a pure peer-to-peer manner and you are fine.

Does this philosophy include the non-use of the Lightning Network then?

[Picard78]

Bitcoin teaches us to transact without help of banks or exchanges, so if you need to buy bitcoin with fiat, then try the same approach and buy/sell in peer-to-peer way using bisq, localcryptos, hodlhodl and the like.

According to coinmarketcap, Bisq has extremely low volume: USD $13,501 traded in the last 24 hours.  This doesn't seem like a viable option.

LocalCryptos has a markup of 8% in comparison to the KYC exchange I use to buy Bitcoin with Fiat.

HODLHODL seems to require trust?  These are the instructions included in the first trade I examined on the platform:

Please follow these steps to execute the trade:

1. You initiate the contact
2. I will fund the contract with BTC and give your my USDT address
3. You send USDT
4. Once confirmed, I will release BTC

Anyway, for me personally I am not too concerned about Tainted coins but it is an additional risk I feel compelled to explain to my friends now when introducing them to Bitcoin.

[o_e_l_e_o]

Bisq has extremely low volume: USD $13,501 traded in the last 24 hours.  This doesn't seem like a viable option.

The volume on all DEXs isn't great, but that doesn't mean they are not viable. I use Bisq regularly. Sometimes I have to wait a day or two to find an offer a like or for someone to accept my offer, but that is the nature of DEXs.

LocalCryptos has a markup of 8% in comparison to the KYC exchange I use to buy Bitcoin with Fiat.

Depends entirely on which fiat currency and which payment method you are using. It can be very variable, but you can easily trade with a markup of only a fraction of a percent if you are patient. If you don't like the markups being offered, then make your own offer instead.

HODLHODL seems to require trust?

The contract includes a 2-of-3 multi-sig escrow between buyer, seller, and HodlHodl. They will step in to resolve any conflicts. You can read more about it here: https://hodlhodl.com/pages/faq#what_does_contract_mean