Bitcoin censorship for Russian addresses?

[o_e_l_e_o]

Then again, this is exactly the kind of problem that exchange KYC is supposed to solve. So let the exchanges take care of matters themselves.

Exactly this. Rather than a country trying to control all the miners within their borders and forcing them not to include some transactions (which would be next to impossible to enforce), while also lobbying other governments to do the same impossible task, it would be far easier and far more likely that they simply tell all centralized exchanges to blacklist certain addresses and freeze certain accounts. Bitcoin itself is censorship resistant. Centralized exchanges are not.

Ukraine surely does want this to happen, it seems... Not on a block mining level, but directly on the centralized exchanges: Ukraine to issue legal demands on crypto exchanges to freeze Russian accounts

The Ukrainian government have had a surprisingly logical approach to bitcoin throughout this entire crisis. Accepting bitcoin donations to help fund their military and humanitarian efforts, and calling on exchanges rather than miners or the network to restrict Russia users. Although I don't agree with a blanket ban affecting many entirely innocent users, it makes a nice change to most governments who would come out with some nonsense about banning bitcoin or censoring mining instead.

[1715107450]

1715107450

[BlackHatCoiner]

It's impossible to censor the transactions, realistically. Let's assume the miners could understand in what part of the world the money go to, and that's a big assumption as it's nearly impossible: Miners are scattered.

Alright, so even if the United States were able to censor every transaction their citizens received, they wouldn't be able to control the network. There are also miners in Europe, Russia, China etc.; if their intention is to kick Russians out of Bitcoin, they'll fail. Initially, one Russian pool will be able to include transactions that aren't approved by the United States.

You can't censor others from using Bitcoin unless you also censor yourself by attacking to your own money.

[pooya87]

Alright, so even if the United States were able to censor every transaction their citizens received, they wouldn't be able to control the network. There are also miners in Europe, Russia, China etc.; if their intention is to kick Russians out of Bitcoin, they'll fail. Initially, one Russian pool will be able to include transactions that aren't approved by the United States.

More importantly, you can pressure pools easier than you can pressure miners, specially if they are home miners not some big mining farm. And when a pool turns malicious (that is censor transactions) that kills the pool quickly. We saw what happened to MaraPool when they announced they were censoring transactions. They first got some miners disconnected from their pool, which affected their hashrate a little since almost all of their hashrate is from their own operation but then their stock got dumped hard (47% to be exact) which forced them to announce they no longer censor transactions in less than 3 weeks to rescue their crashing business.

[larry_vw_1955]

I read this article today that talks about the possibility of bitcoin censorship.

Isnt this just going to make russians have to pay a price premium for bitcoin? kind of like what happened in korea?

anytime a government cracks down on something be it drugs or bitcoin, prices soar. for the people in that country that is...

[Pmalek]

There is an old Bitcoin documentary where one of the speakers talks about censorship.
The topic of discussion was WikiLeaks. In 2011, major financial companies and services such as VISA, MasterCard, PayPal, and some US banks cut their ties  with WikiLeaks. That meant that they could no longer receive donations. The person talks about how frightening it is when you think about what power the US government has that they can basically kill off the money flow for anyone that they consider a threat. 

And what happened? WikiLeaks started accepting Bitcoin. Despite all their efforts to stop their operations, WikiLeaks can still receive Bitcoin donations even today. 10-11 years after. Bitcoin passed a big exam and proved to be exactly as advertised - censorship resistant.

[dkbit98]

Isnt this just going to make russians have to pay a price premium for bitcoin? kind of like what happened in korea?

Nobody know what's going to happen but I don't think Korea can be compared with Russia that is one of the biggest countries in the world with much more resources.
I don't know anyone from Korea but I know that countries with sanctions always have higher price for foreign currency exchange.
It's easy for some central authority to block someone bitcoin address, but it's trivial for anyone to generate new address without connection to old that is blocked.
This would be the endless game of cat and mouse.

anytime a government cracks down on something be it drugs or bitcoin, prices soar. for the people in that country that is...

Maybe it's about time time for normal people to crack down on governments and fake elite who is controlling them all.
Than we won't have crazy decision from any side and we won't have to make war for someone else all the time.

[pooya87]

Isnt this just going to make russians have to pay a price premium for bitcoin? kind of like what happened in korea?

anytime a government cracks down on something be it drugs or bitcoin, prices soar. for the people in that country that is...

I don't know which Korea and what story exactly you are talking about but it sounds like the cases are very different. A country cracking down on its own people is very different from a second country trying to sanction the other country. The later shouldn't lead to any price rise unless we are talking about some weird situation where people of that sanctioned country had no way of buying bitcoin but from a foreign country, which I don't think is likely.

[Mario Vella]

Wait but isn't the point of cryptocurrency is decentralization? That censorship sounds very centralized for me or probably I am missing something. That is bad for bitcoin in my eyes.

[BlackHatCoiner]

That censorship sounds very centralized for me or probably I am missing something.

Read the replies.

[pooya87]

Wait but isn't the point of cryptocurrency is decentralization?

Not quite.
Cryptocurrency is as the name suggests, currencies that rely on cryptography (and blockchain technology) they don't have to be decentralized. We already have many centralized or semi-centralized cryptocurrencies. To name a few: XRP, USDT, BNB, ETH, Libra, el Petro,...

The difference is that decentralization makes the cryptocurrency different from traditional currencies and sets it apart. Which in turn gives it a purpose to exist. Otherwise a centralized cryptocurrency has little to no reason to exist which is why they usually are worth very little and they always continue getting dumped until they die.

[AlexGC]

What is a russian Bitcoin Address?
The problem I see here is that most wallets identified as having russian clients, is that they have all CIS clients combined (which includes Ukranian).
An Example is the Binance CIS deposit wallet https://glasschain.org/btc/wallet/73871491
Same goes for p2p exchanges heavily used in Russia AND Ukraine like Bitzlato https://glasschain.org/btc/wallet/89298296

So even saying that this wallet is "russian" is horribly wrong as you might understand.

I don't think on a blockchain level, there is anything one can do or should be doing as its at best a heuristic logic that is highly inaccurate.

the OFAC (Office of foreign asset control from the US Treasury) has a sanction list with bitcoin addresses on it and if they put addresses (who belong to russians) on the list, then they certainly will have trouble depositing their coins into any reputable exchange but thats all I know they can do.

There is no way one can be sure an address is "russian"

[o_e_l_e_o]

There is no way one can be sure an address is "russian"

No, but that won't stop centralized exchanges and blockchain analysis companies from creating a list of addresses which they think are linked to Russian users, sharing that with various governments, and blacklisting those addresses from their systems.

If a user completes KYC on a centralized exchange, then they can easily be identified as Russian or living in Russia by their uploaded documents. Any address which deposit coins to that account will be deemed "Russian", as will any address which receives a withdrawal from that account. Any addresses linked through common input heuristics to those addresses will be similar deemed to be "Russian". Coins and transactions will then be traced both forward and backward to try to identify other addresses or wallets belonging to these users. These heuristics are inaccurate as you point out, but that has never stopped these companies from using them or governments from relying on them. Many innocent users will get caught up in this censorship, but neither the exchanges nor the government will actually care.

The best solution remains to avoid centralized exchanges or any other service which takes custody of your coins.

[BitcoinGirl.Club]

The best solution remains to be to avoid centralized exchanges or any other service which takes custody of your coins.

With the current adoption of bitcoin and overall cryptocurrency, it is not much easy to avoid those centralized exchanges especially for those who are not much internet savvy and not with the crypto for some years, also do not understand the technology.

Couple opinions I have.
1. Have more p2p exchanges but here the problem is when the exchanges gets bigger they starts to comply kyc. If I am not wrong then with Localbitcoin we have experienced this. But still having more p2p exchanges give the bitcoin users and overall crypto users some space.
2. I am not sure if this is possible to create completely decentralized exchange like all those DEX on alt chains. If that could be done then we will enjoy full benefit of decentralization.

If a user completes KYC on a centralized exchange, then they can easily be identified as Russian or living in Russia by their uploaded documents.

Yes they can but if the Russian account holder send bitcoin (withdraw) to an address then the exchange can not tell that that address owned by the same Russia guy. I could get paid for a job that I did or for any service and the guy could pay me. But that does not make my address Russian owned. There are tools to trace back bitcoin but I do not think one can tell 100% that an address x is owned by a person y unless the address x is owned by a centralized service and they have KYCed the person.

[BlackHatCoiner]

2. I am not sure if this is possible to create completely decentralized exchange like all those DEX on alt chains. If that could be done then we will enjoy full benefit of decentralization.

Have you checked Bisq?

I could get paid for a job that I did or for any service and the guy could pay me. But that does not make my address Russian owned.

Correct, and that's he said too. It just doesn't matter if it's really Russian owned or not. If a government starts dictating what's Russian and what's not, centralized exchanges are unfortunately doomed to obey to this nonsense.

It is irrational to consider Russian some of the addresses that a Russian used to transact with, but it's as irrational as to behave Bitcoin as non-fungible. We've seen this before with bitcoins that were blacklisted from some exchanges due to "illicit activity".

[o_e_l_e_o]

1. Have more p2p exchanges but here the problem is when the exchanges gets bigger they starts to comply kyc. If I am not wrong then with Localbitcoin we have experienced this. But still having more p2p exchanges give the bitcoin users and overall crypto users some space.

It's not more P2P exchanges we need, but rather more decentralized P2P exchanges we need (or even just more people using the ones we do have). LBCs might be P2P, but it is completely centralized, hence the KYC requirements.

2. I am not sure if this is possible to create completely decentralized exchange like all those DEX on alt chains. If that could be done then we will enjoy full benefit of decentralization.

It is easy to trade any coin for any other coin in a decentralized and trustless way. The difficulty comes when you want to start trading coins for fiat. Trading for fiat will never be as easy as trading for other crypto because, well, fiat is slow and clunky and centralized.

It is irrational to consider Russian some of the addresses that a Russian used to transact with, but it's as irrational as to behave Bitcoin as non-fungible.

Exactly. As soon as a single transaction has been made, the bitcoin in question could have moved to the ownership of someone else on the other side of the world. But exchanges will treat any addresses linked to a KYC account as belonging to that individual, whether or not they actually are.

[BitcoinGirl.Club]

Have you checked Bisq?

I will need to find some time to play around with this. I heard about these desktop apps but really never looked at them when learnt that the fees for trade are much higher than those centralized exchanged. But yes, I get it, every good thing has a price to pay. Thanks.

It is irrational to consider Russian some of the addresses that a Russian used to transact with, but it's as irrational as to behave Bitcoin as non-fungible.

Exactly. As soon as a single transaction has been made, the bitcoin in question could have moved to the ownership of someone else on the other side of the world. But exchanges will treat any addresses linked to a KYC account as belonging to that individual, whether or not they actually are.

Talking about "illicit activity". Imagine you are buying BTC in a P2P trade. You have no way to know (unless you go and do some extensive research with free or paid tools available. Even if you have I do not think none of us spend time of researching) the coins those are coming from a blacklisted address. This always worries me but still lucky that I did not fall for this trap yet.

[BlackHatCoiner]

This always worries me but still lucky that I did not fall for this trap yet.

It depends on what's your usage. If you're thinking of depositing your coins to a centralized exchange someday, then it's justified to look up for weird transaction activity whatsoever. If that's not the case, then you have much less things to worry, especially if:

• You run your own full node.
• You transact with people who behave alike.

[BitcoinGirl.Club]

If that's not the case, then you have much less things to worry, especially if:

• You run your own full node.
• You transact with people who behave alike.

I get it but what percentage of crypto user do you think is running a full node and trading P2P with their known network. I never found any study about it but I am assuming the number is so little that we may not find many. The vast majority even those of us who are with crypto for years, are using centralized exchange. Some even do not care to move their coins from a custodial wallet, trapped by the false security they provide.

Imagine crypto is available to everyone like the fiats are, only then we will be able to get the full benefit of crypto. We gonna need more educational projects which will eventually help people to understand why we need decentralized currency system over the centralized entities.

[LoyceV]

If a user completes KYC on a centralized exchange, then they can easily be identified as Russian or living in Russia by their uploaded documents.

Yes they can but if the Russian account holder send bitcoin (withdraw) to an address then the exchange can not tell that that address owned by the same Russia guy. I could get paid for a job that I did or for any service and the guy could pay me.

I'm pretty sure that happens quite often. Many people don't even use their own wallet, but keep everything on an exchange. And some people use exchanges to send or receive third-party funds for a trade. Such as this case:

If in 2020 you sell 600$ to me by taking perfect money and now resent to me that amount of dogecoin now which is about 70k$. Then how you will allow this 70k$ deduction from you, are how you will refill this 70k$? It is totally non-sense.

The Netherlands tried (but failed) to require proof of ownership from each address before being allowed to withdraw. Such an requirement would invalidate the "excuse" of saying the address used at an exchange isn't yours.

[BlackHatCoiner]

I get it but what percentage of crypto user do you think is running a full node and trading P2P with their known network.

Few. Start using it, be convinced that a decentralized p2p exchange works and others will follow. It wouldn't make sense to have something that respects your privacy, is less susceptible to censorship and is less used. Those who'll remain to centralized exchanges wouldn't want to use it essentially in the first place.

We gonna need more educational projects which will eventually help people to understand why we need decentralized currency system over the centralized entities.

I believe there are enough, and people who stick with "HODLing" do make their researches. I don't believe those few exchanges will have gone soon, but maybe in the long term they just don't get the same attention.