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Author Topic: Governments/regulators may eventually actually *like* Bitcoin. - coin blacklists  (Read 3893 times)
julz
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December 02, 2011, 06:01:09 AM
 #1

See my question on stackexchange regarding a viral 'tainted-coin tagging system'
http://bitcoin.stackexchange.com/questions/2119/is-there-any-way-the-bitcoin-network-could-resist-a-viral-tainted-coin-tagging-s

Basically the issue is that due to the public blockchain, regulators could publicize coin-address blacklists which affect the spendability of your coins with audited exchanges and merchants.

Such blacklists would eventually allow governments to instantly create and remove sanctions on businesses, other countries etc.
The sanctions could be applied gradually e.g starting out as a 1% tax - or be a complete ban and penalties for anyone accepting coins with a bad transaction in it's history.

Don't want to risk accepting pedocoins or terrorcoins in your wallet?  Better use software which subscribes to our list so that your coins are clean!

As there would be multiple regulators around the world with constantly updating databases of 'tainted' coins - the wallet software would need to be smart enough to subscribe to them and let you know where you can and can't spend certain coins, or what premium you would have to pay for someone to accept them etc.

In a world where bitcoins are somewhat mainstream - I presume 'clean' coins would be in high demand and exchange at a significant premium to coins which are tainted and thus less spendable.

I don't see any way of stopping this sort of thing happening - and although it'll give many people the horrors, I suspect that ultimately it's the possibility of this kind of regulation which might make governments see bitcoin as better to embrace and regulate than try to outlaw.



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December 02, 2011, 06:04:26 AM
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>blacklists

Nobody, no server is adopting this bullshit. When and if mass adoption of this garbage occurs, me and every other man with principles is out and we're going to adopt a blockchain that isn't regulated by parasites. You can keep your parasites; I will remain accountable only to myself and an objective blockchain.

Actually, go start your own StatistCoin with blacklists and sell it to the Treasury Department and the central banks: that's what should be done.

In all seriousness, it's not in the best interest of a node to blacklist things. It would find itself quickly alienated from the network over more open and preferable nodes. There are more amoral men than prudes.
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December 02, 2011, 06:10:42 AM
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>blacklists

Nobody, no server is adopting this bullshit. When and if mass adoption of this garbage occurs, me and every other man with principles is out and we're going to adopt a blockchain that isn't regulated by parasites. You can keep your parasites; I will remain accountable only to myself and an objective blockchain.

Actually, go start your own StatistCoin with blacklists and sell it to the Treasury Department and the central banks: that's what should be done.

Look.. I'm bringing this up not because I want it, but because I recognize it as an inevitability *if* bitcoin gets a certain level of success.
You can jump overboard and try some other chain at that point if you want - but good luck on getting merchants using it. 

However - you may as well just only trade in bitcoins which are marked tainted with other people who agree to use tainted coins.  Dirty bitcoins will work just as well as a separate chain if you only want to do blackmarket stuff - you just won't be able to spend them with a large percentage of others on the network.


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julz
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December 02, 2011, 06:20:50 AM
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In all seriousness, it's not in the best interest of a node to blacklist things. It would find itself quickly alienated from the network over more open and preferable nodes. There are more amoral men than prudes.

I agree to an extent, but perhaps only in the current environment.   (but did you really mean amoral ??)

If bitcoin was in use at supermarkets - they would have no choice but to comply with the regulators system.
I bet the majority of people would rather switch their wallet to 'clean' mode than get gradually increasing penalties at the checkout because they accept marked coins.  Sad but true.

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December 02, 2011, 06:25:36 AM
 #5

anyway.. I know it's a difficult pill to swallow - but just like a security flaw, it's surely best to discuss the ramifications of this early on?

For example - would such a blacklist system stop an organisation such as wikileaks getting funding via bitcoin?
Not really.  They wouldn't be able to use any published address - but with a private address per transaction they could still get donations and still spend their bitcoins. They may have trouble getting an account on an Exchange in their own name - but in a world where bitcoin is more widespread that mightn't be a big deal anyway.

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December 02, 2011, 06:34:54 AM
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I kind of like the idea of a block lever blacklist.  Or more accurately, a built in mechanism for the user to optionally choose to honor a blacklist set of their choice in a straightforward manner.

The main goal would be discourage anyone from attempting to contaminate the blockchain in some manner.  I could imagine that when the 'internet kill switch' is well entrenched, there could be some sort of an 'internet 9/11' event which would require connectivity to be severally disrupted for a significant period of time.  My concern is that Bitcoin may not be robust against such a situation, particularly if dedicated efforts were made to damage it in such an event.  A usable blacklist framework, if it were pre-installed and available to be democratically selected might make it so that such damage were unlikely to succeed (and thus unlikely to be attempted.)


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December 02, 2011, 06:37:05 AM
 #7

Of course the problem then is, who decides who goes on the blacklist, and who watches the ones who make the decisions?

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December 02, 2011, 06:40:02 AM
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Of course the problem then is, who decides who goes on the blacklist, and who watches the ones who make the decisions?
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December 02, 2011, 06:46:32 AM
 #9

Just technically speaking how is someone going to not accept coins going to one of their addresses? Can't someone just spew terror satoshis to every address?

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December 02, 2011, 06:48:21 AM
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Of course the problem then is, who decides who goes on the blacklist, and who watches the ones who make the decisions?

You are probably not questioning my 'block level' idea, but I'll answer that anyway (as it is formed in my mind.)

The most obvious people to trust would be the development team of Bitcoin itself since they already require a fair amount of:
 - trust
 - watching
 - adopting bits from
by virtue of working on the code.

But generally, I would suggest that anyone can put up any list they like.  If a majority of people choose to honor it, it becomes a close to 'the law' as things get in an open-source world.  That's basically what happens with the code base itself.

And again, I would suggest that just having such a thing which could be credibly deployed would avoid any need to actually deploy it.  That would be the point.


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December 02, 2011, 06:53:43 AM
 #11

a built in mechanism for the user to optionally choose to honor a blacklist set of their choice in a straightforward manner.


You can bet that if we had such a system implemented in bitcoin a few months ago -a fair slice of the users would have opted into a blacklist listing missing mybitcoin coins, bitomat.pl coins or allinvain coins etc.  

Especially if for example a few players such as mtgox said they would freeze and donate any such tainted deposit to a predetermined charity/faucet (after submitting a request to the blacklist operator for re-marking just that portion of tainted coins 'cleaned').






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julz
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December 02, 2011, 06:59:44 AM
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Just technically speaking how is someone going to not accept coins going to one of their addresses? Can't someone just spew terror satoshis to every address?

Receiving such bad coins would be no big deal *if you subscribe to the blacklist*.
(hence why I referred to it as 'viral' in the stackexchange question)

Just don't give anything of value in return - and make sure you're using wallet software that is subscribed, so it won't use them as input on another transaction.
(or the software may allow you to select and spend those specific poison coins back to the sender so you can ask them to resend 'clean' coins or abort the deal)

The software might also be able to spend them over to a quarantine wallet I guess.

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December 02, 2011, 07:00:57 AM
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a built in mechanism for the user to optionally choose to honor a blacklist set of their choice in a straightforward manner.


You can bet that if we had such a system implemented in bitcoin a few months ago -a fair slice of the users would have opted into a blacklist listing missing mybitcoin coins, bitomat.pl coins or allinvain coins etc.  
...

I doubt it.  Honoring such a black list would be effectively halting Bitcoin and all the transactions at a certain point in time and starting it back up again when it is safe to do so.  It would not be a practical solution to anything but a terminal attack on Bitcoin.  At least that is the way I would design and implement it.


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December 02, 2011, 07:08:51 AM
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a built in mechanism for the user to optionally choose to honor a blacklist set of their choice in a straightforward manner.


You can bet that if we had such a system implemented in bitcoin a few months ago -a fair slice of the users would have opted into a blacklist listing missing mybitcoin coins, bitomat.pl coins or allinvain coins etc.  
...

I doubt it.  Honoring such a black list would be effectively halting Bitcoin and all the transactions at a certain point in time and starting it back up again when it is safe to do so.  It would not be a practical solution to anything but a terminal attack on Bitcoin.  At least that is the way I would design and implement it.



You may be right that people wouldn't honour the list for fear that they'd already inadvertently received the taint.
Perhaps it would only work if there was only a small percentage fee on taint - which was cranked up every now and then.

Even a zero-penalty taint blacklist might be useful - the community could more easily see where the stolen coins were coming from.




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December 02, 2011, 07:15:00 AM
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Just technically speaking how is someone going to not accept coins going to one of their addresses? Can't someone just spew terror satoshis to every address?

Receiving such bad coins would be no big deal *if you subscribe to the blacklist*.
(hence why I referred to it as 'viral' in the stackexchange question)

Just don't give anything of value in return - and make sure you're using wallet software that is subscribed, so it won't use them as input on another transaction.
(or the software may allow you to select and spend those specific poison coins back to the sender so you can ask them to resend 'clean' coins or abort the deal)

The software might also be able to spend them over to a quarantine wallet I guess.


Ah, okay.  Might actually be popular with people who want to take coins and not deliver.

Those 'tainted' coins aren't going to just sit there either.  People are going to take them to the clean/taint exchange.

The government is going to tell people to freeze/take coins, it's already starting, just not particular coins yet.

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December 02, 2011, 07:16:43 AM
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Don't worry about goverments/nation states. Eventually bitcoin and similar projects will spark globally distributed decentralized tribal groups which will replace them.

I think the schedule is about several decades but I think we will see the actual "First distributed republic" by the end of this one. Watch how various groups, web-communities and movements interact online to etimate the probability of a distributed war.

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December 02, 2011, 07:19:25 AM
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The government is going to tell people to freeze/take coins, it's already starting, just not particular coins yet.

mm.. yes.
Bitcoin seems like it may be far from the anonymous libertarian dream many saw it as - but I still think it levels the playing field somewhat.

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December 02, 2011, 07:21:46 AM
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Besides, there are too many jurisdictions to let you implement this globally. I'd just send them to my colleague in Nigeria and he'd send me clean ones. I guess if they take it seriously and push it long enough (decades even), this could put some pressure on owners of tainted coins. In ideal conditions, these coins would only be used in the black market. They would exchange for less than clean coins, but would still be exchanged. Bob would buy some to sell later to Alice who's looking to make an illegal purchase. They could try to destroy this market totally by making it illegal to relay black coin transactions, but I'm guessing a parallel network would be created to verify those transactions anyway.
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December 02, 2011, 07:28:00 AM
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Besides, there are too many jurisdictions to let you implement this globally. I'd just send them to my colleague in Nigeria and he'd send me clean ones. I guess if they take it seriously and push it long enough (decades even), this could put some pressure on owners of tainted coins. In ideal conditions, these coins would only be used in the black market. They would exchange for less than clean coins, but would still be exchanged. Bob would buy some to sell later to Alice who's looking to make an illegal purchase. They could try to destroy this market totally by making it illegal to relay black coin transactions, but I'm guessing a parallel network would be created to verify those transactions anyway.


I didn't think of them trying to stop mere relaying of tainted-coin transactions..  I don't really see how they'd know if your node just relayed.

They could however penalize the miners for including tainted transactions in a block by tainting the reward - so yes, you'd probably end up with miners specializing in those transactions and willing to accept their block reward as tainted because they charge higher fees for tx inclusion. That would make black market transactions much slower though - as you'd have to wait for a black market miner to hit a block. 

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December 02, 2011, 07:29:47 AM
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You may be right that people wouldn't honour the list for fear that they'd already inadvertently received the taint.
Perhaps it would only work if there was only a small percentage fee on taint - which was cranked up every now and then.

Even a zero-penalty taint blacklist might be useful - the community could more easily see where the stolen coins were coming from.


I an not fully understanding what you are saying I think.  Here's the situation which concerns me:

Say that at a certain point in time, some threat requiring activation of an 'internet kill switch' pops up.  Suddenly, for all intents and purposes, all networks are off-line.  Fairly soon critical infrastructure would be wired back in, but that would be large corporations, and there would be significant packet level filtering.  Consumer grade connectivity may be out for a long time.  Months.  And as it came back on-line it would also probably be carefully analyzed and regulated.  I could even imagine a situation where encryption was only allowed between authorized endpoints (like people and their banks.)

Obviously such a scenario would spur interest in mesh networks and the like, but the technologies are extremely immature and untested, and anyone deploying them would likely be labeled a 'terrorist' which would complicate development.

Bitcoin seems to be developed under the assumption that peer-to-peer communications are available in a wide-spread and relatively reliable manner.  I fear that Bitcoin could fail if that happens to not be the case, particularly if it were actively exploited by competent attackers during such a time of limited connectivity.

So, I would envision the 'block level blacklist' capability of Bitcoin being useful for a situation where there was a very obvious and very clear need to simply black out the entire economy for as long as needed in order to save it.  Actually, in such dire (and probably far-fetched) circumstances, it might be fairly tenable and make the most sense to simple upgrade the client software in order to get going again.


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