Gold collapsing. Bitcoin UP.

[marcus_of_augustus]

If whitelisting becomes a thing, I will make a point by only accepting black (non-whitelisted) coins.

whitelisting is dead on arrival. The technologies already exist to partially if not mostly obviate any such mis-guided efforts, it is only a matter of time for refinement, usability, improvements and probably even better fundamental advancements.

At this stage, I would say bitcoins are about as good as cash. If someone robs a bank and gets away with a bag of loot they cannot just go around spending that in size at will. It might be left to go mouldy under the ground somewhere or divided up into hundreds or thousands of smaller parts. Bitcoins are similar, you could sit on "hot" coins for years or divide them up, wash them through Cayman's accounts. But being programmable money those features will inevitably be improved upon. Law enforcement needs to look ahead and start making plans for when solving crime is not as simple as "follow the money", which was always a bad idea anyway since it ushered in the police state of money and took away basic freedoms.

[1714032178]

1714032178

[1714032178]

1714032178

[smooth]

Sidechains could address all of these recently mentioned problems and many more.  I'm holding out to see if people come to their senses in time.  
...

Speaking of, any recent news from Blockstream?

I just checked their blog and it hasn't changed from when Iast looked a some weeks ago.  That's a little disappointing.  I've not really even researched things enough to know if they have some public code repo.  That's often a way to tell something about the activity of a project.  Lastly, I don't really out very often on troll-talk these days and don't know of any active conversations like the enjoyable one we had with Adam a few months ago.   I should follow things more closely for personal financial reasons, but I've been more interested in other things lately.

Adam still posts, he posted an update on a ring signature cryptographic scheme yesterday: https://bitcointalk.org/index.php?topic=972541.msg10842017#msg10842017

Here's their repo: https://github.com/Blockstream

[cypherdoc]

tv,

Would you mind telling me exactly how, from a technical standpoint, you would even white or black list BTC?

Given that there is no such thing as a coin but just a series of inputs and outputs, what do you taint and how is that sustainably identifiable throughout the life of a "coin"?

Just make people register.  That was Yifu's angle as a principle at CoinValidation.  UTXO's which are not registered to a known user or entity (e.g., Coinbase or blockchain.info) would halt a transaction from being valid.  Very easy to justify in the name of 'fighting terrorism and child exploitation' and whatever.  You can go before congress and argue all kinds of economic mumbo-jumbo about fungibility and freedom and what-not if you like.  Good luck with that.

Sharp eyed viewers might notice that if one does not register, one cannot pay one's taxes.  And there are well established ways to make people pay their taxes in almost all but the most failed of states.  I'll register my stash the day I'm mandated to do so (which is why my conception of the best strategy is to avoid a mandate ever being practical rather than to resist compliance after it is been mandated.)

As a function of my Coin Validation service, I'd also run a service for miners so that they can ensure that they don't waste their time mining unvalidated UTXO's as inputs and their transaction set thus remain clean. If the choice is between taking this easy and popular step of using my government chartered service, and facing shutdown of their network support and confiscation of their gear, it will be a fairly easy decision in most cases.  It seems to me that the new inverted bloom filter thing it could be remarkably efficient for a miner to ensure that they are not wasting their time with transactions which are going to be legally invalid because they contain unvalidated inputs.  A side benefit of using a sorted transaction set.

I also find your suggestion that the likes of Russia and China are going to change their policies and welcome crypto-currencies with open arms to be laughable.  And in case you have not noticed, piss-ant countries without nukes pretty much do what they are told by whoever's sphere of influence they fall under. Sure, there is a chance that your rosy dreams about totalitarian countries suddenly discovering the joys of individual freedom and geo-political power politics will come to pass, but I'm not betting a huge percentage of my financial statement on it.

this is exactly the sort of drivel i'd expect from your socialistic mindset.  "i'd just mandate it be so".

notice that there is no depth to your assertions as they just represent your lips flapping once again.  let me spell it out for you.  the working assumption here is that there will be mass disobedience of your pronouncements as most ppl who are even remotely familiar with how the protocol works understands that it is impossible to "taint coins" as there is no such concept in reality.  the trick for you is how to enforce your pronouncements.  there are just inputs and outputs which get split & joined constantly giving "coins" that are ever lessening shades of grey as time goes by.  and w/o a mechanism to identify owners of whatever unit you choose to monitor be it addresses or UTXO's, there is plausible deniability at every hop.  the only way to prove someone guilty of a theft is to catch them with the private keys on their computer used at the time of the theft.

[cypherdoc]

...

Iirc, Yifu's idea was to white list addresses, not UTXO's.

Yifu was specifically interested in identifying in pinning individual identification meta-data to that which exists in the blockchain as I recall things.

So your idea is to taint UTXO'?  How do you do that given they can be split, joined ad infinitum?

We've been through this years ago.  Of course you taint UTXO's and summate them to characterize a wallet (as if it matters.)  It's not only possible to have a percent taint, it's relatively trivial.  It's also fairly trivial to associate UTXO's to other metadata and flags.  That would be the heart of a validation service, and it is very far from rocket science.

You are trying to say that Bitcoin has no scaling problems and because there is no danger of to many UTXO's (which pretty much will always need to be in fast access (which is, parenthetically, a long ago solved problem for large players who operate football field sized datacenters)) and at the same time that the UTXO set is so complex that they could not be analyzed even though the entire system is highly deterministic.  Which is it, bro?

People who use multibit-type clients will probably not even know any difference.  Let the server to the heavy lifting.  Just push the 'upgrade' button and a nice little 'percent taint' is a new addition which rapidly becomes one more feature.  The handful of ancient dinosaurs who run a full node can easily check transactions against my government chartered service as needed.  In fact, for PR reasons, I'll even make this free.  This will allow folks to call Bitcoin a 'peer-2-peer' system if they can stifle a chuckle when doing so.

the concept of taint is all or none.  either coins are spendable or they're not.  for a UTXO that has 25% taint, is it spendable or not, bro?

you still haven't answered my question about how the US gvt could get away with the hypocrisy of auctioning off the SR coins while at the same time tainting others drug coins.  that is more of a political question and i already know your answer.

[tvbcof]

the concept of taint is all or none.  either coins are spendable or they're not.  for a UTXO that has 25% taint, is it spendable or not, bro?

WTF are you talking about?  If you want to send me a transaction consisting of 100% validated UTXO's, I'll except them at 100% face value.  If you want to throw in a fraction which are unvalidated I'll discount them accordingly.  If/when unvalidated UTXO's cannot be mined or take a long time I'll stop accepting them altogether or accept an accourdingly deeper discount.  This is utterly trivial.  Coinbase will do it automatically which is why I'll just accept payment from you through them.

you still haven't answered my question about how the US gvt could get away with the hypocrisy of auctioning off the SR coins while at the same time tainting others drug coins.  that is more of a political question and i already know your answer.

Not hypocritical at all.  You bought some coins at the auction?  Register and validate them.  No big deal.

I anticipate that as things are rolled out probably every single UTXO will be considered clean by default.  Nobody is stopping you from validating any of them so you've got no complaints...unless you are a criminal or whatever and don't want to register...

[smooth]

you still haven't answered my question about how the US gvt could get away with the hypocrisy of auctioning off the SR coins while at the same time tainting others drug coins.

It is written into the law that seizure auctions clean the title, same as with seized cars, houses, etc. If anything that might be one reason for strong interest in these auctions. If you are a buyer with repetitional concerns the only two ways to buy known untainted coins are from a government auction or direct from a (reputable and verifiable) miner.

[cypherdoc]

the concept of taint is all or none.  either coins are spendable or they're not.  for a UTXO that has 25% taint, is it spendable or not, bro?

WTF are you talking about?  If you want to send me a transaction consisting of 100% validated UTXO's, I'll except them at 100% face value.  If you want to throw in a fraction which are unvalidated I'll discount them accordingly.  If/when unvalidated UTXO's cannot be mined or take a long time I'll stop accepting them altogether or accept an accourdingly deeper discount. This is utterly trivial.  Coinbase will do it automatically which is why I'll just accept payment from you through them.

you still haven't answered my question about how the US gvt could get away with the hypocrisy of auctioning off the SR coins while at the same time tainting others drug coins.  that is more of a political question and i already know your answer.

Not hypocritical at all.  You bought some coins at the auction?  Register and validate them.  No big deal.

I anticipate that as things are rolled out probably every single UTXO will be considered clean by default.  Nobody is stopping you from validating any of them so you've got no complaints...unless you are a criminal or whatever and don't want to register...

that's assuming you or anyone else has the ability to determine whether or not a UTXO has 100% cleanliness.  i'd say it depends on who is doing the analysis.  you yourself admitted, after i pointed it out, that you might indeed have stolen coins from allinvain in your wallet.  should we lock down your coins?

if it's so trivial, tell us how splitting out UTXO's works technically.  wallet software follows a particular logic of UTXO selection when assembling for a specific tx which i've not been able to get a good sense of and i'm sure you haven't either.  there's no such thing as "UTXO control" like there is "coin control" for addresses, afaik.  tell us how you would construct a tx to select or exclude certain UTXO's that you'd deem tainted.  from what i do know, the wallets select the most suitably "sized" UTXO's which when combined together fits the tx amount so as to minimize splitting and efficiently packages the tx at the least cost in terms of fees and data requirements.  furthermore, for a UTXO that has 0.15% "taint", tell us how you'd split that out practically.  stop pretending that Coinbase has a way to do this when you don't know that.

what you're proposing is "possible" is mostly likely not possible and certainly is not "practical".  i've never seen any wallet with the ability to allow users to spend certain UTXO's.  what would be the point except to satisfy your socialistic mandates?

[Erdogan]

the thing is, the gvt is not going to get involved in a situation where drug dealers steal coin from other drug dealers and then try to sell them off on an anonymous exchange in Bulgaria.  they only care if they themselves can get their hands on the BTC which in this Evo case, they cannot.  so they'll just let the community shoot it out and the final result will be just like every other theft in Bitcoinland since Day 1; nothing.

The govt's role is super simple:

 - Mandate a license and enforce it on key retailers and service providers of the on-line wallet type (e.g., Coinbase...who probably won't take much convincing...)

 - Charter a service (e.g., CoinValidation) or two which do validation.

The licensee just uses a simple API from the validator.

When this occurs I will require that if you want to send me BTC, you do it through my Coinbase account.  Yes, I'm vehemently opposed to the whole system, but I'm not going to take a bullet by absorbing your unvalidated BTC which I may not be able to spend and have to trade to someone else who will also will value unvalidated BTC at a lower rate.

To make matters worse, anyone who is enough of a chump to accept unvalidated BTC will find people wishing to dump them beating a path to one's door.

I would also caution against assuming that a validation solution cannot work because of the difficulty of the task.  Validation need not be anything remotely precise or even accurate.  I think we'll find that the amount of liability protection afforded to a validating service in association with their charter would make the vaccine manufactures blush.

TPTB have a good friend in Mr. Andresen and thus a very strong hand.  I won't go into the game theory, but there are still a bunch of ways to overplay the hand that they have here.  A person who is on the ball, and who has a bit of luck, may be able to come out of this thing fairly well.

It's not super simple. There is a reason why you do not pay tax when you buy firewood from your neigbor. He and you say no. There is a reason why they can not say: You to can not have sexual intercource, how could you think that, here it is WE who decide who is to have sex and not to have sex. But the people says no, no way. There is a reason they can not say that you have to go to church every sunday. Everybody say no, no way, basta! This is also what people will say to the blacklists or the whitelists. They will say, no, not a chance, basta, the coins are mine. Mine! Get out of my face. That is what everybody will say. Not super simple at all. Without support, they can do nothing. Whitout you giving them resources, they have no resources. Bitcoin will make that clear to a lot of people.

[cypherdoc]

you still haven't answered my question about how the US gvt could get away with the hypocrisy of auctioning off the SR coins while at the same time tainting others drug coins.

It is written into the law that seizure auctions clean the title, same as with seized cars, houses, etc. If anything that might be one reason for strong interest in these auctions. If you are a buyer with repetitional concerns the only two ways to buy known untainted coins are from a government auction or direct from a (reputable and verifiable) miner.

i know how the gvt couched this situation.  my point is that there are alot of ppl in the community who think they should have returned the coins to the owners who left them on SR or flat out destroyed them.  by selling them off under their own interpretation of the law, the gvt risks eroding faith in its sense of fairness in that application of the law.  b/c of that, there will be alot of ppl transacting despite any attempt of gvt to "taint" coins.  and then it becomes a matter of whether or not the gvt can trace what they've deemed tainted, hence the debate btwn tvbcof and me, as to whether or not they will be able to do this from a technical and politically correct way.

[smooth]

you still haven't answered my question about how the US gvt could get away with the hypocrisy of auctioning off the SR coins while at the same time tainting others drug coins.

It is written into the law that seizure auctions clean the title, same as with seized cars, houses, etc. If anything that might be one reason for strong interest in these auctions. If you are a buyer with repetitional concerns the only two ways to buy known untainted coins are from a government auction or direct from a (reputable and verifiable) miner.

i know how the gvt couched this situation.  my point is that there are alot of ppl in the community who think they should have returned the coins to the owners who left them on SR or flat out destroyed them.

There is no precedent for that. Property of all kinds involved in various illegal activities and most especially the drug trade is routinely seized, auctioned, and the new owner gets a clear title.

Returning could possibly be argued, if there was no evidence that was part of illegal activity (I understand there was some small amount of legal trade on SR). That would of course only be a tiny minority of cases. But there is no precedent for destroying otherwise ordinary property that is otherwise legal to own (as opposed to illegal drugs for example). Seize and sell is the norm.

I have no strong opinion the feasibility of tainting, whitelisting, etc. but putting that aside I certainly believe the government can seize tainted, partially tainted, etc. coins and sell them as clean untainted, whitelisted, whatever coins under existing law.

[KSGuy]

To try and get back on topic, I'd like to own some gold. I've been picking up silver lately to add to my collections, I'd like to add gold as well.
What I'd really like is one of the bitcoin coins in silver and gold each with 1 bitcoin loaded on them.

[tvbcof]

that's assuming you or anyone else has the ability to determine whether or not a UTXO has 100% cleanliness.  i'd say it depends on who is doing the analysis.  you yourself admitted, after i pointed it out, that you might indeed have stolen coins from allinvain in your wallet.  should we lock down your coins?

 - grandfather all UTXO at a point in time.
 - validate UTXOs from then forward by the simple metric: 'do we know who is responsible for them?'

This is as simple as the filter for general cryptography which we are likely to see:

 - packet has a govt back-door?

These things are really very simple.  If you want to sooth yourself by imagine them as complex, suit yourself, but don't whine and bitch when you lose your ass.

if it's so trivial, tell us how splitting out UTXO's works technically.  wallet software follows a particular logic of UTXO selection when assembling for a specific tx which i've not been able to get a good sense of and i'm sure you haven't either.  there's no such thing as "UTXO control" like there is "coin control" for addresses, afaik.  tell us how you would construct a tx to select or exclude certain UTXO's that you'd deem tainted.  from what i do know, the wallets select the most suitably "sized" UTXO's which when combined together fits the tx amount so as to minimize splitting and efficiently packages the tx at the least cost in terms of fees and data requirements.  furthermore, for a UTXO that has 0.15% "taint", tell us how you'd split that out practically.  stop pretending that Coinbase has a way to do this when you don't know that.

Formulating a spend from select UTXO's is a _very_ simple problem.  It's not often needed these days (though it's been done to try to deal with the dust problem) but it's uncommon because it is not very useful rather than because it is difficult.

As for identifying a UTXO as validated or not (to decide whether to spend it) that is not possible because there is no validation service at present.  Here again, it does not mean that it is a difficult problem.

I do suggest that you brush up on how to formulate transactions from abstract UTXO's in a desired way before the USGavincoin alt is pushed out.  You can thank me later.

what you're proposing is "possible" is mostly likely not possible and certainly is not "practical".  i've never seen any wallet with the ability to allow users to spend certain UTXO's.  what would be the point except to satisfy your socialistic mandates?

OK.

[cypherdoc]

that's assuming you or anyone else has the ability to determine whether or not a UTXO has 100% cleanliness.  i'd say it depends on who is doing the analysis.  you yourself admitted, after i pointed it out, that you might indeed have stolen coins from allinvain in your wallet.  should we lock down your coins?

 - grandfather all UTXO at a point in time.
 - validate UTXOs from then forward by the simple metric: 'do we know who is responsible for them?'

there you go again with the socialist attitude. "just make it so" says you.  care to tell me how all gvts worldwide will coordinate this simple action?  and tell us how you would tell "who is responsibel for them"?  wake me up when they do and maybe i'll pay attention to your FUD.  and even if they do, i see no discussion from you as to how to practically implement your pronouncements. 

This is as simple as the filter for general cryptography which we are likely to see:

 - packet has a govt back-door?

These things are really very simple.  If you want to sooth yourself by imagine them as complex, suit yourself, but don't whine and bitch when you lose your ass.

this is just you being a pessimist again.  you really do think the gvt is all powerful, don't you?

if it's so trivial, tell us how splitting out UTXO's works technically.  wallet software follows a particular logic of UTXO selection when assembling for a specific tx which i've not been able to get a good sense of and i'm sure you haven't either.  there's no such thing as "UTXO control" like there is "coin control" for addresses, afaik.  tell us how you would construct a tx to select or exclude certain UTXO's that you'd deem tainted.  from what i do know, the wallets select the most suitably "sized" UTXO's which when combined together fits the tx amount so as to minimize splitting and efficiently packages the tx at the least cost in terms of fees and data requirements.  furthermore, for a UTXO that has 0.15% "taint", tell us how you'd split that out practically.  stop pretending that Coinbase has a way to do this when you don't know that.

Formulating a spend from select UTXO's is a _very_ simple problem.  It's not often needed these days (though it's been done to try to deal with the dust problem) but it's uncommon because it is not very useful rather than because it is difficult.

the dust problem was not dealt with via filtering UTXO's.  it was dealt with by increasing the tx fee.

As for identifying a UTXO as validated or not (to decide whether to spend it) that is not possible because there is no validation service at present.  Here again, it does not mean that it is a difficult problem.

Alex Waters has figured out it won't work.  you should too.

I do suggest that you brush up on how to formulate transactions from abstract UTXO's in a desired way before the USGavincoin alt is pushed out.  You can thank me later.

why don't you spare us all some time and tell us how you would technically separate out taint from a set of UTXO's with varying percentages of taint all within the same address?  not only that, but tell us how you would make it practical and easy for avg Bitcoiners to comply with your law?

[cypherdoc]

let me ask you a further simple question. 

let's say you receive 2 inputs of 0.5 BTC into the same new address, thus creating 2 UTXO's of 0.5 BTC each.  one of them is 100% tainted, the other perfectly clean.  you now want to spend 0.5 BTC to buy an ipad.  according to your laws, will you allow it?  if so, why?  i could argue that you have 1 BTC in that "address" that is 50% tainted uniformly, therefore, it would illegal to spend even the clean 0.5 BTC.  how fair is that?  again, i am not aware of any wallet software that allows you to preferentially pick certain UTXO to be spent.  or what if you want to spend 0.51BTC for a laptop?  ignore tx fees for both these examples.  would you allow that?  i could argue that you're "dipping into" the tainted UTXO thus it should not be allowed. 

the flipside is you could argue that you're just a merchant that innocently received these coins from ordinary customers who also claim they have no idea where they got them.  therefore, they should be allowed to be spent.  ppl will spend their coins no matter what laws you pronounce and it will be up to you to enforce them in a reasonable manner.

[tvbcof]

there you go again with the socialist attitude. "just make it so" says you.  care to tell me how all gvts worldwide will coordinate this simple action?  and tell us how you would tell "who is responsibel for them"?  wake me up when they do and maybe i'll pay attention to your FUD.  and even if they do, i see no discussion from you as to how to practically implement your pronouncements.

Dude, I've had at least a foot in the Socialist bathtub all my life.  Now more like part of a toe, but I understand it fairly well.  Why would you think that that makes my insights into how this group thinks invalid?  Wouldn't it be just the opposite?

this is just you being a pessimist again.  you really do think the gvt is all powerful, don't you?

Just generally it's better strategy to overestimate and adversary than to underestimate one.  But yes, I think that governments have quite a lot of power in general and very much so here in the U.S.  Currently.

the dust problem was not dealt with via filtering UTXO's.  it was dealt with by increasing the tx fee.

I didn't mean to imply that it was the only way, or even an important one (and I should have made that more clear.)  Some good Sameritan type (Todd iirc) cooked up some deal which would scour a wallet for small UTXO's and aggregate them into a spend (into the ether as I recall the details.)

Generally speaking, formulating a spend is like reaching into your pocket and rifling around for change (UTXOs).  You can take the time to pick out the 90% and wheat-tails, and/or make pretty close change, or just give the teller a handful and let them sort it out.  None of these operations are difficult and all will work fine.

Alex Waters has figured out it won't work.  you should too.

I consider Waters to be a repulsive puke and irrelevant enough at this point to not to go out of my way looking for his works.  Guo same.   I may skim their stuff if there was a link handy just to see if they may be up to new mischief or continuing said from the past.  For this reason I will only guess that 'won't work' means it would ruin Bitcoin rather than be any particular technical challenge.  Well, no shit!  Anyone with a brain could have figured that out in a matter of seconds just as I did as I read about their new CoinValidation company.

why don't you spare us all some time and tell us how you would technically separate out taint from a set of UTXO's with varying percentages of taint all within the same address?

Well, the question displays a lack of understanding, but for shits-n-giggles here is some quasi-metacode:

Code:

while UTXO in wallet && desired spend not achieved:
  check validation using api
  if unvalidated && recip_is_retard_who_might_accepts_it
    add to transaction
  else
    add to transaction

not only that, but tell us how you would make it practical and easy for avg Bitcoiners to comply with your law?

Use Coinbase or Multibit.

[tvbcof]

let me ask you a further simple question. 

let's say you receive 2 inputs of 0.5 BTC into the same new address, thus creating 2 UTXO's of 0.5 BTC each.  one of them is 100% tainted, the other perfectly clean.  you now want to spend 0.5 BTC to buy an ipad.  according to your laws, will you allow it?  if so, why?  i could argue that you have 1 BTC in that "address" that is 50% tainted uniformly, therefore, it would illegal to spend even the clean 0.5 BTC.  how fair is that?  again, i am not aware of any wallet software that allows you to preferentially pick certain UTXO to be spent.  or what if you want to spend 0.51BTC for a laptop?  ignore tx fees for both these examples.  would you allow that?  i could argue that you're "dipping into" the tainted UTXO thus it should not be allowed. 

the flipside is you could argue that you're just a merchant that innocently received these coins from ordinary customers who also claim they have no idea where they got them.  therefore, they should be allowed to be spent.  ppl will spend their coins no matter what laws you pronounce and it will be up to you to enforce them in a reasonable manner.

Firstly, note that when things are working after the switch (grandfathering and initial validation) you should never have an unvalidated UTXO in your wallet, and if you do, that's your fault.  Should have used Coinbase if you could not work it out for yourself.

Secondly, your 'address' is irrelevant.  It's needed to sign stuff but that's about it.  It's not a factor in formulating spends.  That is just straight up aggregation of UTXO's and acceptance of change.  If you don't have the appropriate UTXO's to make the desired spend that the recipient will accept, you don't have the money.

It could be in practice that a validation service can re-validate an unvalidated UTXO, but I expect that it will cost you the price of an investigation...and then some as their profit margin.  I would expect that part of a government charter would allow a validation service to perform such actions.

Lastly, try to imagine the look on Big Brother's face when you complain that his requirements are destroying Bitcoin.  Seriously, Bitcoin's best hope is probably that the govt considers Bitcoin more useful alive than dead.  They probably do currently for the honeypot effect, and in the future they very well might in order to detract from exploration of alts.  In order to do so, they may actually be pretty relaxed about things.

[cypherdoc]

let me ask you a further simple question. 

let's say you receive 2 inputs of 0.5 BTC into the same new address, thus creating 2 UTXO's of 0.5 BTC each.  one of them is 100% tainted, the other perfectly clean.  you now want to spend 0.5 BTC to buy an ipad.  according to your laws, will you allow it?  if so, why?  i could argue that you have 1 BTC in that "address" that is 50% tainted uniformly, therefore, it would illegal to spend even the clean 0.5 BTC.  how fair is that?  again, i am not aware of any wallet software that allows you to preferentially pick certain UTXO to be spent.  or what if you want to spend 0.51BTC for a laptop?  ignore tx fees for both these examples.  would you allow that?  i could argue that you're "dipping into" the tainted UTXO thus it should not be allowed. 

the flipside is you could argue that you're just a merchant that innocently received these coins from ordinary customers who also claim they have no idea where they got them.  therefore, they should be allowed to be spent.  ppl will spend their coins no matter what laws you pronounce and it will be up to you to enforce them in a reasonable manner.

Firstly, note that when things are working after the switch (grandfathering and initial validation) you should never have an unvalidated UTXO in your wallet, and if you do, that's your fault.  Should have used Coinbase if you could not work it out for yourself.

Secondly, your 'address' is irrelevant.  It's needed to sign stuff but that's about it.  It's not a factor in formulating spends.  That is just straight up aggregation of UTXO's and acceptance of change.  If you don't have the appropriate UTXO's to make the desired spend that the recipient will accept, you don't have the money.

It could be in practice that a validation service can re-validate an unvalidated UTXO, but I expect that it will cost you the price of an investigation...and then some as their profit margin.  I would expect that part of a government charter would allow a validation service to perform such actions.

Lastly, try to imagine the look on Big Brother's face when you complain that his requirements are destroying Bitcoin.  Seriously, Bitcoin's best hope is probably that the govt considers Bitcoin more useful alive than dead.  They probably do currently for the honeypot effect, and in the future they very well might in order to detract from exploration of alts.  In order to do so, they may actually be pretty relaxed about things.

no, but i don't want to start at the grandfathering.  i want to start with allinvains theft.  no doubt, you have some of his coins in your wallet.  humor me and go back and find out which of your UTXO's and what % of those UTXO's have his coins in them.  you might want to read this thread first:  https://bitcointalk.org/index.php?topic=583579.0

i'll bet you have no idea where to start and would have a difficult time at best finding out just what you have today.  btw, here's the algorithm:

https://bitcoin.stackexchange.com/questions/1077/what-is-the-coin-selection-algorithm/29962#29962

[tvbcof]

no, but i don't want to start at the grandfathering.  i want to start with allinvains theft.  no doubt, you have some of his coins in your wallet.  humor me and go back and find out which of your UTXO's and what % of those UTXO's have his coins in them.  you might want to read this thread first:  https://bitcointalk.org/index.php?topic=583579.0

i'll bet you have no idea where to start and would have a difficult time at best finding out just what you have today.  btw, here's the algorithm:

https://bitcoin.stackexchange.com/questions/1077/what-is-the-coin-selection-algorithm/29962#29962

Assuming that the word on the street was correct and allinvain's former coins were on the market when I was buying, it is only more likely that some of the UTXO's accessible with keys in my wallets are closer in hops than most compared to the ones which at one point (purportedly) were associated with a secret key residing on allinvain's windoz box.  They still passed through at least one transaction to get into Tradehill and another to get out, then whatever sorting I did on my side.  I thought that one of the recent posters did a pretty good job of explaining this basic idea to you, and more generally, that it is pretty intuitive that nobody has stolen BTC to the extent that the term 'BTC' makes any sense here (unless it was a secret key which was stolen and the thief has yet sign any transactions with it.)

Put another way, the BTC I control have been fairly well 'laundered' through Tradehill, or would be if 'laundering' did not automatically imply a criminal event which I certainly and Tradehill probably did not participate in.  As I say, I can prove both my fiat and my BTC transactions with Tradehill if I needed to bother which is entirely unlikely in any realistic implementation of 'validation'.

A glance at the diagrams from your link indicates that the guy's rather tedious exercise in meaninglessness is kind of a waste of time if he's not talking about UTXO's (and discrete STXO's for historic analysis.)  That's the only thing which matters.  If he's simplifying them into block diagrams, fine, but it's not inherently interesting enough to be worth my time.  A validation service may concern themselves with such things if they get into re-validating stuff as I described before, but that's a small side-show to the salient core aspects of their business.

[sickpig]

Decentralized exchanges will destroy any fungability worries because there will be no way to choose what kind of coins get traded to you or that you can trade to someone else.

On that matter I've always wondered if a decentralized exchange could work for something else than decentralized crypticurrencies. I.e. I'm not able to imagine such a market place where you can trade fiat for btc (in both ways) in a "decentralized" fashion. Am I missing something obvious?

[smooth]

Decentralized exchanges will destroy any fungability worries because there will be no way to choose what kind of coins get traded to you or that you can trade to someone else.

On that matter I've always wondered if a decentralized exchange could work for something else than decentralized crypticurrencies. I.e. I'm not able to imagine such a market place where you can trade fiat for btc (in both ways) in a "decentralized" fashion. Am I missing something obvious?

The hard part is verifying that the fiat transfer actually occurs (and can't be reversed).

As far as decentralized exchanges I don't necessarily agree. If you might get back 'tainted' coins, and if that matters, people just won't use them, or only people with already -heavily-tainted coins would (which of course guarantees you will get tainted coins in a race to the bottom). Who would want to trade untainted coins and get tainted ones back?