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Author Topic: The problem of stolen coins  (Read 7962 times)
zby
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March 03, 2012, 06:25:34 PM
 #41

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.
I suspect that governments can use that loophole regulate bitcoin - they can force the exchanges to check coins and then even people that transact outside of exchanges will start doing it as well - because coins that would not be accepted by exchanges will not have a full value.
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March 03, 2012, 06:33:05 PM
 #42


I suspect that governments can use that loophole regulate bitcoin - they can force the exchanges to check coins and then even people that transact outside of exchanges will start doing it as well - because coins that would not be accepted by exchanges will not have a full value.

exactly, it sucks but I'm pretty sure this is gonna happen

but it could also be a good thing, those bitcoins have to stay in the bitcoin economy! you have to spend them and the next holders will have to spend them too
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March 03, 2012, 07:27:31 PM
 #43

exactly, it sucks but I'm pretty sure this is gonna happen

A question: When some bank robbers rob a US bank, they sometimes get some bags of US Dollars with them. I don't know if all bills' serial numbers are stored in the bank system, perhaps it is for newly delivered USD bills that are just printed ? Anyway, the dollars that are stolen in a bank robbery, eventually makes it back into the economy, and even if the banks have the serial numbers, what they're likely to catch is innocent persons. For instance you buy an icrecream, and you get some bills in change, and then you give those bills to your niese, and she goes to the bank with her mother to deposit them in a savings account, and she gets rejected because the money stems from a bank robbery. That would not make sense.

Of course if it's possible to prove a direct connection, for instance a police raid in a house, finding a Van with gear that can be used in a robbery, and bunches of newly printed bills in a hidden room in the house, matching serial numbers stored at the bank, then it's pretty obvious who the money belongs to, and they have to be returned, and the holders of the money needs to be investigated. But once the money get's into circulation... lost cause. You can't expect every store everywhere to check that USD bills received from a customer is not coming from illegal activity.

Likewise if mtGox receives coins directly from a heist, they should freeze it and start an investigation. But I can't imagine a skilled cracker being that stupid..

So if we look at bitcoins as the internets answer to the real worlds cash, then it's only logical that stolen coins can't be blacklisted and tracked. It will only lead to a host of problems of which two are very obvious:

1. What if coins are tainted by malice ?
2. What if users encounter problems because a few weeks ago the coins they posess were stolen ?

We can't expect the average user to check if bitcoins he's about to receive are stolen, just as little we can expect a walmart customer to check every bill he receives in change against a list of usd bills stolen from usd banks.

So basically, blacklisting stolen on a large scale, will only lead to problems. Now, what we need to do is to make more secure services, reduce hot storage, and amp up security altogether. I guess if anyone runs a business where they handle large amount of coins, they can also afford dedicated servers which will reduce the risks of an insider heist.
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March 03, 2012, 09:03:32 PM
 #44

If I ever encountered that my bitcoins were stolen and I do not get my money's worth, I'd get straight out of bitcoin and never come back. Somehow I have the feeling, I won't be the only one with such a reaction. If this verfication is truly unstoppable and will really happen, bitcoin is doomed. The banks win. The governments win. Fire in the hole.

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March 03, 2012, 09:07:12 PM
 #45

If I ever encountered that my bitcoins were stolen and I do not get my money's worth, I'd get straight out of bitcoin

If I ever encountered (sic) that my dollars were stolen and I do not get my money's worth, I'd get straight out of dollars
If I ever encountered that my gold was stolen and I do not get my money's worth, I'd get straight out of gold.


It isn't the role of a currency to prevent improper use/transfer or ensure recovery.
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March 03, 2012, 09:26:48 PM
 #46

If I ever encountered that my bitcoins were stolen and I do not get my money's worth, I'd get straight out of bitcoin and never come back. Somehow I have the feeling, I won't be the only one with such a reaction. If this verfication is truly unstoppable and will really happen, bitcoin is doomed. The banks win. The governments win. Fire in the hole.

Now imagine you sell something and then find out they paid you from a tainted account. What do you do? you just have a tainted account now. Best case scenario, you made an account solely for that sale, worst case scenario your account with all it's coins is also tainted.

Someone said in a previous post that you have to give it all back to their original owner (let's say Bitcoinica or Slush) and take the hit yourself. You can also try to be a bit of a bitcoin policeman and hold the sale until you verify ownership thoroughly. In any case the whole system suffers. If this becomes commonplace then Bitcoin is fucked, we'd need to work in a system where this is not possible.

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March 03, 2012, 10:42:02 PM
 #47

If I ever encountered that my bitcoins were stolen and I do not get my money's worth, I'd get straight out of bitcoin and never come back. Somehow I have the feeling, I won't be the only one with such a reaction. If this verfication is truly unstoppable and will really happen, bitcoin is doomed. The banks win. The governments win. Fire in the hole.

Now imagine you sell something and then find out they paid you from a tainted account. What do you do? you just have a tainted account now. Best case scenario, you made an account solely for that sale, worst case scenario your account with all it's coins is also tainted.

Someone said in a previous post that you have to give it all back to their original owner (let's say Bitcoinica or Slush) and take the hit yourself. You can also try to be a bit of a bitcoin policeman and hold the sale until you verify ownership thoroughly. In any case the whole system suffers. If this becomes commonplace then Bitcoin is fucked, we'd need to work in a system where this is not possible.

not necessarily

you don't have to convert those bitcoins to fiat money, you can use them in the bitcoin economy

if there are less bitcoins exchangeable for fiat, that makes them more valuable too, and those bitcoins that are tainted still hold the same value even though they're not exchangeable

but yeah better if bitcoin2 doesn't have this problem
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March 03, 2012, 11:44:33 PM
 #48

If I ever encountered that my bitcoins were stolen and I do not get my money's worth, I'd get straight out of bitcoin and never come back. Somehow I have the feeling, I won't be the only one with such a reaction. If this verfication is truly unstoppable and will really happen, bitcoin is doomed. The banks win. The governments win. Fire in the hole.

Now imagine you sell something and then find out they paid you from a tainted account. What do you do? you just have a tainted account now. Best case scenario, you made an account solely for that sale, worst case scenario your account with all it's coins is also tainted.

Someone said in a previous post that you have to give it all back to their original owner (let's say Bitcoinica or Slush) and take the hit yourself. You can also try to be a bit of a bitcoin policeman and hold the sale until you verify ownership thoroughly. In any case the whole system suffers. If this becomes commonplace then Bitcoin is fucked, we'd need to work in a system where this is not possible.

not necessarily

you don't have to convert those bitcoins to fiat money, you can use them in the bitcoin economy

if there are less bitcoins exchangeable for fiat, that makes them more valuable too, and those bitcoins that are tainted still hold the same value even though they're not exchangeable

but yeah better if bitcoin2 doesn't have this problem

If others take these measures, your BTC are less valuable. Simply because a number of users won't take them.

It's not something you can just decide upon. The moment distinguishing on origin becomes commonplace, there is no opt-out.

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March 04, 2012, 12:42:16 PM
 #49

Meanwhile back in the real world....a lot of the time money involved in bank robberies has usually been tainted by the dye pack exploding. Try spending some of that tainted money. It is a great deterrent that banks use to try and keep down robberies, not that it always works, b/c there will always be people stupid enough to try and rob them. Then there are counterfeit bills, which are also a form of stolen money. When a person tries to use a counterfeit bill and it is detected, they lose the bill(s). And they have some 'splainin' to do. Businesses that have not done due dilligence on the money they are given and try to deposit a counterfeit bill at the bank lose that money. Nobody reimburses them, it is a loss. It encourages the business to check the bills more thoroughly the next time.

I don't see what the issue is in doing due diligence and seeing where the coins being paid to you are coming from via the blockexplorer. There are very very few bitcoin businesses that require instantaneous action upon receiving bitcoins. Most can wait at least an hour or so before taking action. More than enough time for the receiver to check out the incoming transaction. Plenty of time while waiting on the standard 6 confirmations, actually. And still far less hassle than paypal.

You want people to trust Bitcoin, you want them to use it as a store of value, a currency. And you want to have absolutely zero consequences when a thief steals it, or rips people off. It is kinda like asking people to bank in Somalia. This is one of the many reasons why widespread adoption of Bitcoin will not happen.
muyuu
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March 04, 2012, 02:25:09 PM
 #50

Meanwhile back in the real world....a lot of the time money involved in bank robberies has usually been tainted by the dye pack exploding. Try spending some of that tainted money. It is a great deterrent that banks use to try and keep down robberies, not that it always works, b/c there will always be people stupid enough to try and rob them.

You seem to believe there are no successful bank robberies anymore? prolly nothing that's given publicity, and reasonably so, but there are actually many successful bank robberies nowadays.

Then there are counterfeit bills, which are also a form of stolen money. When a person tries to use a counterfeit bill and it is detected, they lose the bill(s). And they have some 'splainin' to do. Businesses that have not done due dilligence on the money they are given and try to deposit a counterfeit bill at the bank lose that money. Nobody reimburses them, it is a loss. It encourages the business to check the bills more thoroughly the next time.

So you're putting note checking and blockchain scrutinizing at the same level? do you honestly believe the common folk can be reasonably expected to have knowledge of the working in the blockchain?

I don't see what the issue is in doing due diligence and seeing where the coins being paid to you are coming from via the blockexplorer. There are very very few bitcoin businesses that require instantaneous action upon receiving bitcoins. Most can wait at least an hour or so before taking action. More than enough time for the receiver to check out the incoming transaction. Plenty of time while waiting on the standard 6 confirmations, actually. And still far less hassle than paypal.

Trading BTC isn't just for nerdy businesses... in theory it's for everybody.

You want people to trust Bitcoin, you want them to use it as a store of value, a currency. And you want to have absolutely zero consequences when a thief steals it, or rips people off. It is kinda like asking people to bank in Somalia. This is one of the many reasons why widespread adoption of Bitcoin will not happen.

No. But the reality is that you can do very little to find out who stole the money, and what's happening now is that the burden of proof is being switched over, ending with presumption of innocence.

Let's say someone sells a product or service in the Silk Road and then simply doesn't want to tell MtGox (many things that are legal in some places are serious crimes in Japan). Coins lost? this concept of taint is not even explicitly defined anywhere in the community. How much taint is enough taint to warrant getting your coins confiscated in an exchange unless you disclose the origin of your transactions fully? this opens the door to things like regional boundaries for money and government taxation. My stance about this is total opposition.

This whole concept introduces a big degree of uncertainty about fungibility. It undermines bitcoin massively. I'm really not ready to accept any coins right now with all this mess going on, I will just mine for the time being. Considering alternative cryptocurrencies at this point but most if not all of them are prone to the same problems. Might start coding my own but I have too much in my plate already.

In other words: don't get your coins stolen. Problem solved. The way the protocol works right now, having private keys in a shared medium is RECKLESS and is akin to leaving your wallet with your credit cards and their pins written onto them in a bar.

TLDR: criminal individuals are a problem but criminal government and institutions are a bigger problem. The whole point of bitcoin is not to let them take control of what you do with your money. "Money does not commit crimes. People commit crimes."

TLDR2: anonymity can be opt-out, as in you proving beyond protocol means that you did some transaction. What it cannot be is opt-in (you have to give proof of origin for your transactions beyond protocol means, on demand). In this case there is barely any anonymity at all. Even having it opt-out requires some infrastructure to guarantee it holds, like exchanges who give clear conditions on the BTC they accept and such.

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March 04, 2012, 03:43:03 PM
 #51

Stolen btc are a problem, currently there are over 800.000 stolen bitcoins... so the most wealthy people in our new economy are criminals... awesome! thats what we wanted all along... oh wait, thats what we already have today... criminals ruling the world...

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March 04, 2012, 03:49:49 PM
 #52

Stolen btc are a problem, currently there are over 800.000 stolen bitcoins... so the most wealthy people in our new economy are criminals... awesome! thats what we wanted all along... oh wait, thats what we already have today... criminals ruling the world...

Where are you getting this 800,000 number?
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March 04, 2012, 03:54:17 PM
 #53

Try spending some of that tainted money. It is a great deterrent that banks use to try and keep down robberies, not that it always works, b/c there will always be people stupid enough to try and rob them. Then there are counterfeit bills, which are also a form of stolen money. When a person tries to use a counterfeit bill and it is detected, they lose the bill(s).

As you know, Bitcoins can't be counterfeited. And the way bitcoins become tainted is that somebody claims they were stolen. In some cases the robbery of bitcoins are easy to prove, in other cases... you get the point.

So, what's your suggestion for a solution to this problem? How do we deal with stolen coins?
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March 04, 2012, 04:15:37 PM
 #54

Try spending some of that tainted money. It is a great deterrent that banks use to try and keep down robberies, not that it always works, b/c there will always be people stupid enough to try and rob them. Then there are counterfeit bills, which are also a form of stolen money. When a person tries to use a counterfeit bill and it is detected, they lose the bill(s).

As you know, Bitcoins can't be counterfeited. And the way bitcoins become tainted is that somebody claims they were stolen. In some cases the robbery of bitcoins are easy to prove, in other cases... you get the point.

So, what's your suggestion for a solution to this problem? How do we deal with stolen coins?

There is no solution but to up the security measures. I'm afraid everything else will eventually destroy bitcoin. Whoever did the theft has managed to make a lot of people nervous about obtaining tainted coins at exchanges. Normally, flooding the markets with stolen coins would drive down prices, perhaps cause further panic selling and yet be an opportunity for other to buy coins cheaply. Now, people might think twice before buying again if what they are buying may in part be stolen. Also, it's not going to get better, depending on how tainted is too tainted to resell. I'm in fact thinking about selling out even my mined coins if there are further signs that money/coins will be stopped from flowing freely. So, if MtGox f**** up and not just investigates but confiscates stolen coins for real, I'm going all out.

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March 04, 2012, 04:38:41 PM
 #55

Yes, the only reasonable solution is to make it easy to secure coins (and for people to actually do it). If "tainted" coins become a thing, the endgame is either a spectrum of taintedness on all coins or no one using the system anymore.
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March 04, 2012, 04:59:47 PM
 #56

Yes, the only reasonable solution is to make it easy to secure coins (and for people to actually do it). If "tainted" coins become a thing, the endgame is either a spectrum of taintedness on all coins or no one using the system anymore.

The later is more likely.  I mean for the casual user Bitcoin is already too complex.  In time easier clients and more direct fiat to Bitcoin access will make Bitcoin more accessible.

The concept of "tainted coins" is fucking stupid.
Bitcoin has irrevocable transactions .... PERIOD.  If you advertise it does but then it doesn't it is going to confuse less savy users.

Say a user who buys some Bitcoins from someone tries to use them and finds out they are tainted?  So he is just SOL now?  Do you think he is going to call Bitcoin a scam?  Think he is going to encourage other people to use it.

Protect your coins because they are irreversible.  People trying to change that with complex "taintendess" bullshit will be the ones who destroy Bitcoin.  Not the banks, not some rogue entity with a 51% attack, not governments short sighted Bitcoin users who can't grasp the concept of irreversible.


So community, it Bitcoin irreversible or not?
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March 04, 2012, 05:10:34 PM
 #57

Tainted coins = Your plan is too complex therefore it will fail
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March 04, 2012, 06:51:23 PM
 #58

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.
The problem with chairs is that they can be stolen. It's interesting that chair designers are most interested in comfort and looks, and not in the fact that their products can be stolen.
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March 04, 2012, 07:02:46 PM
 #59

Yes, the only reasonable solution is to make it easy to secure coins (and for people to actually do it). If "tainted" coins become a thing, the endgame is either a spectrum of taintedness on all coins or no one using the system anymore.

The later is more likely.  I mean for the casual user Bitcoin is already too complex.  In time easier clients and more direct fiat to Bitcoin access will make Bitcoin more accessible.

The concept of "tainted coins" is fucking stupid.
Bitcoin has irrevocable transactions .... PERIOD.  If you advertise it does but then it doesn't it is going to confuse less savy users.

Say a user who buys some Bitcoins from someone tries to use them and finds out they are tainted?  So he is just SOL now?  Do you think he is going to call Bitcoin a scam?  Think he is going to encourage other people to use it.

Protect your coins because they are irreversible.  People trying to change that with complex "taintendess" bullshit will be the ones who destroy Bitcoin.  Not the banks, not some rogue entity with a 51% attack, not governments short sighted Bitcoin users who can't grasp the concept of irreversible.


So community, it Bitcoin irreversible or not?
That's all find - but it might not mean much what we decide here - if a court sends an order to MtGox to return stolen bitcoins could they not cooperate?
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March 04, 2012, 07:30:00 PM
 #60

That's all find - but it might not mean much what we decide here - if a court sends an order to MtGox to return stolen bitcoins could they not cooperate?

OF COURSE THEY SHOULD.  But that isn't what is being discussed at all.

When someone steals something the rule of law applies.  It is the responsibility of law enforcement not a currency to ensure assets are recovered and dishonest people punished.

That has nothing to do with an ad-hoc non-fungible tainted coins nonsense.

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