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Author Topic: The problem of stolen coins  (Read 7981 times)
stochastic
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March 03, 2012, 07:51:07 AM
 #21

If someone stole dollar bills that were marked - police will use that to track him down and also, I am not a lawyer but, I think that if you know that these particular bills were stolen - then accepting them would mean complicity wouldn't it?

I agree that we have to treat the bitcoins as cleared once they go through a few transations - this looks like the only logical conclusion - but I think at least the main exchanges need to make some declaration in this matter.  This of course means that the thieves now need to make some transfers from the original accounts to their other accounts.  Their current problem is that it is all public and people can register the IP addresses that are used to announce the new transactions, but I guess they'll use TOR for this.  Another thing is that the miners can refuse registering these transactions - but this would also work only on a very short term - eventually someone will register them.


There was a case where someone robbed a armored truck that picks up money from businesses.  They messed up somehow and lost some of the bricks of cash near a relatively poor neighborhood.  The police swarmed in that place to collect the stolen cash.  Usually if a person find something that does not belong to them, then they have to report it to the police and the rightful owner has some amount of time to claim it.  (here is a question, would you rather have an ounce of gold or an ounce of $100 bills?)

If I buy some items from someone that that person got by stealing it, then if those items were tracked backed to me the police would confiscate them.  They can do this 2 ways.  One it is not my property and another person is claiming it is theirs.  The courts will decide.  Second, it is evidence of a crime being committed.  This is part of the liability of being in the pawn shop business.  When a person pawns an item or sells it to the pawn shop, the pawn shop business has to record the item.  That record goes to the police, so that in case a stolen item is reported and matches the pawn record, that item can be given back to the victim.

The problem with money is that it can be stolen.  Luckily the next bitcoin will take ease of theft into account.  It is interesting in the bitcoin white paper that Satoshi was more interested in theft by chargebacks and not other forms of theft.


I think the hard part is providing evidence that the coins were indeed stolen.  How bitcoinica could now prove that the transactions were done illegaly?

How could Bitcoinica prove they were the original owners of the coins?

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March 03, 2012, 08:40:08 AM
 #22

That story about the bricks isn't the issue at all. If the stolen coins randomly show up with a third party and you have full knowledge and power to give them back to the rightful owner then fine. But what will actually happen is that goods or services will be traded for the coins possibly multiple times and instead of the person with faulty security taking the loss it will be a random bitcoin user. That makes no sense, it just moves the loss from those with weakest security to bitcoin users at large.

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March 03, 2012, 09:11:01 AM
 #23

Money is only money and Bitcoins only Bitcoins.

Online wallets are a security risk and Bitcoins wouldn´t be stolen when they would stored offline.
But a lot of people want to speculate with Bitcoins or want use the comfortability of online wallets but the price of this comfortability is a higher security risk.

I mean that Bitcoin isn´t made for online wallets.

To decrease the risk of stolen Bitcoins reduce the amount of them in online wallets (exchanges) and don´t speculate. ;-)


Then I have a idea, what would happen if there was a black list of stolen addresses which could be blocked in the Bitcoinclient or would be better sent back to the stolen address automatically?
But otherwise this black list could be misused and the effort to validate the list is very high because everybody could say that Bitcoins were stolen.

But I would prefer encrypted offline wallets with "smaller" online wallets for the daily payments.
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March 03, 2012, 09:40:58 AM
 #24

I think it is inevitable we will end up verifying that bitcoins did not came through dirty transations on every occassion. With paper money this isn't easily possible, with bitcoin yes by its very nature. Especially when governments start recognizing it as money.

The question is, where do we get this list of tainted addresses from? Is it possible to avoid having some central authority to maintain it?

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March 03, 2012, 10:37:47 AM
 #25

Police people, not the money they use.

+1

Money is money. The people who think money has an agenda or intention in itself are the ones against Bitcoin.

+1 for both of them

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March 03, 2012, 11:55:39 AM
 #26

It's back.  Now after bitcoinica publicized the thieves transactions the question is even more nagging.  Everyone can follow where the money goes.  MtGox support wrote in one thread that they don't expect those coins to come to them - but I think it is inevitable that at some point they will and MtGox needs to make some declarations.  Will they accept coins with a track going back to the stolen amounts and let the thieves laundry them?  What will do other exchanges?  I have been asking this question ever since the first MtGox hack and it will be coming back again and again - so it might be a good time now to settle it down.

It's a very difficult question.

1. The attacker(s) who stole the coins is probably not dumb, so he won't shuffle the coins to mtGox and dump them right away.
2. The coins could be spent in numerous ways, they could be exchanged to fiat money through exchanges or otc-trades, or they could be used to purchase goods.
3. There exists no central registry of stolen coins, and since the exchanges are not regulated, attempting to have them all applying a black list will be futile.

Then, what if an exchange suspects that funds stem from illegal activity ? If they have reason to believe so, would the right way to go about it be to contact law enforcement and initiate an investigation, and if the investigation could not prove that the coins are stolen, then they would be returned to the account holder. But there are many what if's. What if a person buys 100 BTC online, and then transfers these coins to MtGox, and then mtGox freezes the coins, because they come from criminal activity, how can mtGox know if these coins are being held by an innocent 3rd party, or if it's the attacker that have just moved them between different addresses ?

Say the attacker offloads coins at an exchange that deals in virtual currencies only, does some trading there and then withdraws the bitcoins again, then he might have washed his coins, as the original coins from the heist are paid out to other customers or is still left at the site wallet.

As far as I can see, when coins are stolen, there are so many ways to hide your tracks and to get away with it that unless a thief is catched redhanded in a physical location, there's not much one can do really. And also if there were to be blacklisting of coins, what would stop anyone from blacklisting other people's coins ?  I'm sure there could be clever methods of attempting to prevent that, but sooner or later it could happen. Imagine you moved 2K BTC to mtGox, and then for whatever reason (perhaps somebody just didn't like you), they claim that these coins are stolen, and then mtGox freezes your account, wouldn't be much fun, would it ?

I'm sorry to say this, but I think both customers and merchants needs to learn from the numerous security breaches and take appropriate measures to protect their funds. Once coins are lost, there's likely no recourse, unless you're lucky enough to work with highly specialized law enforcement that deals with computer crime. I guess most constables would just scratch their head saying, "Eh.. bitcoins you say ??", followed with a blank stare.
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March 03, 2012, 11:57:27 AM
 #27

Bitcoin is already hard for the common folk to understand and now we are adding an extra layer of complication when we all need to know how to track the origins of every transaction.

This only makes BTC less attractive for casual usage and impedes its adoption.

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March 03, 2012, 01:18:33 PM
 #28

I'm going to say some things that you might not like - I definitely don't like this idea but...
As time passes by - more and more people get interested in Bitcoins, more and more thefts will happen. If we start marking Bitcoins as 'dirty' - some time later we will have almost 99% of the coins being marked as bad.

What should an average Bitcoin user do if 99% if his income is 'dirty'? Is he actually responsible for some event that had happened long before he even got to know what Bitcoin is?

Tracing stolen coins and returning them back to the owner is good at first or second step of transacting those coins. And only if you are 100% sure that previous owner lost them and current owner have stolen them.

As it have been said previously - money is money. Community should try to block theives but we shouldn't go absolutely crazy about it. And I think that community should accept this concept as default. This will be hard to do - exactly as it is hard for someone to accept Bitcoin as the completely new paradigm. But if we don't do this now - we will arrive to that point anyway: Bitcoin stands for new opportunities but it also brings new problems. And people will have to learn to live with them.

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March 03, 2012, 01:26:52 PM
 #29

Bitcoin is already hard for the common folk to understand and now we are adding an extra layer of complication when we all need to know how to track the origins of every transaction.

This only makes BTC less attractive for casual usage and impedes its adoption.

But it's a feature of Bitcoin. Bitcoins are highly traceable.
You're implying that people should ignore it but it's not gonna happen.
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March 03, 2012, 01:33:44 PM
 #30

Bitcoin is already hard for the common folk to understand and now we are adding an extra layer of complication when we all need to know how to track the origins of every transaction.

This only makes BTC less attractive for casual usage and impedes its adoption.

But it's a feature of Bitcoin. Bitcoins are highly traceable.
You're implying that people should ignore it but it's not gonna happen.

It's also a feature of Bitcoin that you cannot reliably link a transaction to a person once there is a hoop in between you and him.

You can make all guesses you want but encouraging the confiscation of coins based on conjectures looks criminal to me.

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March 03, 2012, 01:38:12 PM
 #31

I'm going to say some things that you might not like - I definitely don't like this idea but...
As time passes by - more and more people get interested in Bitcoins, more and more thefts will happen. If we start marking Bitcoins as 'dirty' - some time later we will have almost 99% of the coins being marked as bad.

What should an average Bitcoin user do if 99% if his income is 'dirty'? Is he actually responsible for some event that had happened long before he even got to know what Bitcoin is?

Tracing stolen coins and returning them back to the owner is good at first or second step of transacting those coins. And only if you are 100% sure that previous owner lost them and current owner have stolen them.

As it have been said previously - money is money. Community should try to block theives but we shouldn't go absolutely crazy about it. And I think that community should accept this concept as default. This will be hard to do - exactly as it is hard for someone to accept Bitcoin as the completely new paradigm. But if we don't do this now - we will arrive to that point anyway: Bitcoin stands for new opportunities but it also brings new problems. And people will have to learn to live with them.

money is money, but bitcoins are not like coins or bank notes, they're bank wire transfers

it's up to you if you accept bitcoins of unknown origin, just remember the risks..

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March 03, 2012, 01:45:30 PM
 #32

It's also a feature of Bitcoin that you cannot reliably link a transaction to a person once there is a hoop in between you and him.

You can make all guesses you want but encouraging the confiscation of coins based on conjectures looks criminal to me.

I agree with you, it's a pain in the ass and it hinders Bitcoin, I'm just saying it's inevitable.

I don't even know if that kind of thing can be improved in the protocol..
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March 03, 2012, 03:38:03 PM
 #33

If anyone would like to launder bitcoins for any reason, feel free to contact me. I will only charge a 3% fee.

I don't work with exchanges, so I don't really care about dirty coins (as long as they can buy my coffee and my alpaca socks - and I can always launder them on printcoin bills). Just pass them through about 10 different addresses before passing them on to me. Feel free to contact me via an alias.

.....


If anyone gets blocked from exchange using dirty bitcoins, just say you got them from me - a known launderer. I can make it truth for a small fee.

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The money wants to be free. Opposition to this believe just creates openings for profit.

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March 03, 2012, 03:57:11 PM
 #34

If anyone would like to launder bitcoins for any reason, feel free to contact me. I will only charge a 3% fee.

I don't work with exchanges, so I don't really care about dirty coins (as long as they can buy my coffee and my alpaca socks - and I can always launder them on printcoin bills). Just pass them through about 10 different addresses before passing them on to me. Feel free to contact me via an alias.

.....


If anyone gets blocked from exchange using dirty bitcoins, just say you got them from me - a known launderer. I can make it truth for a small fee.

.....

The money wants to be free. Opposition to this believe just creates openings for profit.


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March 03, 2012, 05:09:56 PM
 #35

I'm going to say some things that you might not like - I definitely don't like this idea but...
As time passes by - more and more people get interested in Bitcoins, more and more thefts will happen. If we start marking Bitcoins as 'dirty' - some time later we will have almost 99% of the coins being marked as bad.

What should an average Bitcoin user do if 99% if his income is 'dirty'? Is he actually responsible for some event that had happened long before he even got to know what Bitcoin is?

Tracing stolen coins and returning them back to the owner is good at first or second step of transacting those coins. And only if you are 100% sure that previous owner lost them and current owner have stolen them.

As it have been said previously - money is money. Community should try to block theives but we shouldn't go absolutely crazy about it. And I think that community should accept this concept as default. This will be hard to do - exactly as it is hard for someone to accept Bitcoin as the completely new paradigm. But if we don't do this now - we will arrive to that point anyway: Bitcoin stands for new opportunities but it also brings new problems. And people will have to learn to live with them.

What the community decides is one thing what would an exchange do after receiving a court order is another thing.
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March 03, 2012, 05:37:27 PM
 #36

There is no problem of stolen coins beyond not getting your coins stolen.

Trying to have a solution to this non-problem will kill Bitcoin and likely whatever comes next will need to ensure such "solutions" aren't possible.
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March 03, 2012, 06:00:40 PM
 #37

There is no problem of stolen coins beyond not getting your coins stolen.

Tell that to those that get their accounts frozen

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March 03, 2012, 06:02:40 PM
 #38

There is no problem of stolen coins beyond not getting your coins stolen.

Tell that to those that get their accounts frozen



That's not a stolen coins problem. I would say it's a greed problem.

muyuu
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March 03, 2012, 06:12:51 PM
 #39

There is no problem of stolen coins beyond not getting your coins stolen.

Tell that to those that get their accounts frozen



Right, now we all have this problem of having to make complex verifications about where BTC are coming from if we want to deal with MtGox and possibly other exchanges/users as well in the future.

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jwzguy
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March 03, 2012, 06:22:34 PM
 #40

The solution - use exchanges that don't overstep their bounds.

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