If BTC is digital property, is BTC confiscation by developers considered theft?

[d5000]

In many countries, courts have ruled that Bitcoin and other "crypto-assets" can be considered digital property. Even in China, where many crypto-related (commercial) activities are banned.

Now we have the situation that some people are proposing changes to the Bitcoin software like the so called "BWP[1]-110" or "The Cat" that would confiscate some coins. There are also proposals related to the "Quantum computer threat" which would inhabilitate potentially vulnerable coins, for example those in P2PK outputs.

If such a proposal was to get successful (I hope it never is!) could then the people who lost their Bitcoins take legal action?

And against whom?

- Against the developers, who implemented it? I think if the confiscation was accidental due to a bug (and thus potentially reversible), this doesn't sound "correct", as it could be considered part of the risk if you use open source software. But proposals like BWP-110 are pursued in full awareness that they will confiscate coins. And "The Cat" even has confiscation as a goal, afaik, as do the "quantum confiscation" proposals. In these cases, I think there may be indeed a legal risk for the developers. Or could they argue that you could simply use the old version (forking away)?
- Against the miners who supported it, if it was a softfork? Maybe this is also a possibility, as these are those who are changing the protocol and who forked into a protocol which confiscates the coins. One could argue that if the proposal is only in the code, it still is only an inactive proposal, and the miners are those really "activating" the confiscation.

What do you think?

PS: If this has been discussed in another thread, I'm grateful for a link and let's continue there


[1] see https://bitcointalk.org/index.php?topic=5572483.msg66367379#msg66367379

[zasad@]

My thinking is very simple: Bitcoin is so expensive because no one in the world can stop or block transactions, freeze coins, and so on. This is a feature of the protocol. Developers can push forks that violate decentralization, but miners won't accept it. The coin's price will collapse, and miners will go bankrupt. I don't see the point in wasting huge amounts of electricity on a centralized protocol.

[DaveF]

I *think* it would depend on how they do it.

If they take the coins and send them someplace else that is theft.

If they change the rules to make them undependable then not theft but much worse.
Because that then shows that today we are not going to let you spend *these* coins for reasons # 1 and #2.
But tomorrow they can then change the rules to say we are not going to let you spend *those* coins for reasons #3 and #4.

It will never end. As they find things they don't like then they will ban those coins.
Oh, these coins came from a casino, you can't spend them.
https://www.reddit.com/r/Bitcoin/comments/2pfgjg/exposed_lukejr_plans_on_forcing_blacklists_on_all/


-Dave

[d5000]

If they change the rules to make them undependable then not theft but much worse.

From my (layman) point of view this could be compared with vandalism. Making coins unspendable is like destroying someone's property without the intention to appropiate their coins yourself.

There's a catch though: the 21 million coins limit. If coins are burnt or "taken out of circulation", some consider that makes all other coins more valuable, as the confiscated coins can't be sold anymore. So it's like a theft with the rest of the Bitcoin users as the beneficiaries. Are then all Bitcoin users thieves? Does that depend on the price surging after the confiscation event (according to that logic: if the price surges, then they're thieves)? These questions look funny, but maybe someone will try to exploit them legally if we really see such a proposal thrive.

So BWP-110 could in theory be seen as an additional legal risk for all Bitcoin users, at least those who have (e.g. by posts in this forum) supported the move ...

On the other hand, the confiscation event could also reduce the value of Bitcoins, because it reduces also the previsibility (you don't know if your coins will be the next ones to be confiscated!). It could reduce the utility of Bitcoin as a whole. That's what myself I'm fearing more than any legal discussion.

(As a side note: somebody could consider these coins "burned" and create an OP_RETURN protocol based on the "proof-of-burns" (like Counterparty did), which would be the transactions that led to the confiscation. But these coins would not be Bitcoins anymore. So this doesn't really "counter" the "theft" assumption.)

https://www.reddit.com/r/Bitcoin/comments/2pfgjg/exposed_lukejr_plans_on_forcing_blacklists_on_all/

I think these filters were policy based and thus not really a confiscation, it only would have made it more difficult for these transactions to propagate.

[DaveF]

,,,

https://www.reddit.com/r/Bitcoin/comments/2pfgjg/exposed_lukejr_plans_on_forcing_blacklists_on_all/

I think these filters were policy based and thus not really a confiscation, it only would have made it more difficult for these transactions to propagate.

They were just policy since that was all he could do at the time.
You don't think he would have done more if he could.

-Dave

[PrivacyG]

I wonder if the majority will stick to the 'confiscatable' Bitcoin or yet another 'Legacy' Bitcoin will appear with the current, older rules.  I fully agree with DaveF.  Like every thing else, you can clearly see that every time they get to put stricter laws in place they will only continue with even more restrictions later when things cool down.

I always bring this subject in to discussion but this is why I got very upset when theymos announced Mixer bans on the Forum.  It very rarely ends with a single rule because there is always something a little bit worse and if you do not ban that as well, why even ban the first thing.  Do both or none.  But if you do both then expect to ban a third thing.  It never ends.  Also, as discussed on the Coin Join topic.  Some people will be innocent and suffer from a ban too.

What this would do is it would make Governments extremely excited while a decent portion of us will definitely either stick to a version of Bitcoin with the current rules or permanently move to some thing that enforces actual fungibility such as Monero.

The Whitepaper should be clear enough.  Bitcoin should be fungible.  But it looks like so many people are trying really hard to make it non fungible and other than the interests of a few countries, I can not see why.

[zasad@]

Let's look at the economic aspect. No one in the world except the US can change the Bitcoin protocol. Bitcoin is integrated into the US economy, people and companies pay taxes, and investment funds use this asset. And suddenly someone decides to change the consensus rules. Not all miners are located in the US, and it will be very difficult to force other miners to accept the consensus.

[d5000]

I wonder if the majority will stick to the 'confiscatable' Bitcoin or yet another 'Legacy' Bitcoin will appear with the current, older rules.

Due to the issues I raised in this thread, it could be a legal risk for miners to support the "confiscatable" chain. So I guess at least some could indeed support a "Legacy Bitcoin" which hardforks away, in the case a "confiscation softfork" gets any majority. The question is of course if this Legacy Bitcoin would be able to hold a value close to the original one, it depends on which chain more coins are dumped (well, at least Luke seems to have lost a lot of his coins ...).

I fully agree with DaveF.  Like every thing else, you can clearly see that every time they get to put stricter laws in place they will only continue with even more restrictions later when things cool down.

But: Let's assume the question I raised in the OP is true and confiscations are considered theft, and developers and/or miners supporting such a move face legal risk. Wouldn't this mean that each of these steps to enforce stricter rules would become a risk too?

Let's look at the economic aspect. No one in the world except the US can change the Bitcoin protocol. Bitcoin is integrated into the US economy, people and companies pay taxes, and investment funds use this asset. And suddenly someone decides to change the consensus rules. Not all miners are located in the US, and it will be very difficult to force other miners to accept the consensus.

I doubt if even "the US" could change the Bitcoin protocol. The US miners according to a recent web search have a market share of about 37%. That would not be enough for a softfork. It would however be enough for a contentious hardfork.

We could imagine a scenario where the US massively buys Bitcoin as a strategic reserve and/or imposes any legislation that coins held by US institutions cannot be held on a chain with the feature X. X could be privacy, but also at least in theory data-storage related, e.g. we could imagine that they forbid US institutions holding coins on a chain where US military documents could be uploaded and distributed. And thus, as a reaction to this legal change, a Bitcoin developer group develops a hard-forking client with a protocol that confiscates coins.

But hardforks aren't that problematic regarding legal issues, because you always could support the original chain, and probably many outside the US would do that in this scenario. So no coins on the original Bitcoin chain would be confiscated.

The problem seems to me exclusive to softforks. It could be however an issue of hardforks where no alternative chain is mined at all, but I consider that very unlikely in such a controversial scenario.

[zasad@]

Let's look at the economic aspect. No one in the world except the US can change the Bitcoin protocol. Bitcoin is integrated into the US economy, people and companies pay taxes, and investment funds use this asset. And suddenly someone decides to change the consensus rules. Not all miners are located in the US, and it will be very difficult to force other miners to accept the consensus.

I doubt if even "the US" could change the Bitcoin protocol. The US miners according to a recent web search have a market share of about 37%. That would not be enough for a softfork. It would however be enough for a contentious hardfork.

We could imagine a scenario where the US massively buys Bitcoin as a strategic reserve and/or imposes any legislation that coins held by US institutions cannot be held on a chain with the feature X. X could be privacy, but also at least in theory data-storage related, e.g. we could imagine that they forbid US institutions holding coins on a chain where US military documents could be uploaded and distributed. And thus, as a reaction to this legal change, a Bitcoin developer group develops a hard-forking client with a protocol that confiscates coins.

But hardforks aren't that problematic regarding legal issues, because you always could support the original chain, and probably many outside the US would do that in this scenario. So no coins on the original Bitcoin chain would be confiscated.

The problem seems to me exclusive to softforks. It could be however an issue of hardforks where no alternative chain is mined at all, but I consider that very unlikely in such a controversial scenario.

If the US can't do this, then other countries have no chance. The recent publication of Epstein's emails has revealed many interesting details about Bitcoin and cryptocurrency entrepreneurs. Why fight a revolution when you can pay revolutionaries grants and salaries? 
I see the old dilemma: Code or Law. If law becomes paramount, then Bitcoin becomes pointless.

[d5000]

If the US can't do this, then other countries have no chance.

I was trying to figure out why you brought up the example of the US changing the protocol. But I think your reasoning is: If confiscation is considered theft, then the US could impose a protocol change which "rolls back" the confiscation. Or directly forbid the trading or mining of the "Confiscation Bitcoin" (e.g. the B?P-110 LukeCash).

However, actually all countries where Bitcoin is considered property and thus confiscation theft would be able to exercise pressure in that direction. Not only directly (via a law restricting confiscation) but more probably indirectly: as I speculated in the OP in such a scenario miners would have to take into account legal risks if they support a "confiscating" Bitcoin fork. People who lost coins due to the confiscation could sue them.

I see the old dilemma: Code or Law. If law becomes paramount, then Bitcoin becomes pointless.

I think this dilemma will not have a perfect solution.

Bitcoin is a social system: the consensus always will have a "social" element, where some groups exercise pressure their favourite features and try to prevent the adoption of features they don't like. There is no "perfect code" probably (in the sense of a Bitcoin protocol version which will be better than all other alternatives, for all possible use cases). There will always be tradeoffs. For example, Taproot increased the expressivity of the Bitcoin script language, but on the other hand many associate it with the Ordinals-caused congestion.

And that means that law can interfere in some ways with this "social agreement".

But confiscation probably is a red line that should be prevented at all cost. Only if there is really an existential threat, it should be possible, but with transition periods as long as possible. And I doubt even the quantum threat justifies confiscation.