What's funny is that because the bitchain (the transaction history of EVERY BITCOIN EVER) is public knowledge, one could easily blacklist stolen bitcoins (simply blacklist the wallet that received the stolen goods and all subsequent receiving wallets, and refuse to accept bitcoins from any of them).
The difficulty would be making the blacklist fast but accurate, i.e. there'd need to be high standards of proof that coins were stolen rather than traded fairly. But if blacklisting took too long the thief could already have fenced the coins for real assets before the blacklist took effect.
Ultimately it could end up looking like credit card fraud alerts - suspicious bitcoin transactions could be put on hold (temporarily blacklisted) until confirmed by the wallet owner. But at that point you lose anonymity. I guess you can't have anonymity and accountability...
How would this work though? You have 4m worth of blacklisted bitcoins. What happens if you go to a legitimate store, like NameCheap, and buy a domain using those bitcoins. You're going to add NameCheap to the blacklist now, because these coins went through them?
Well, you could say NameCheap wouldn't accept those coins in the first place, but can you really expect every store and person to be using this list?
What happens if you take those 4m worth of bitcoins, send 3m to your own wallets, and distribute 1m to random wallets of strangers? How do you know which wallets to blacklist? All of them? You're just going to put tens of thousands of people in the dark, and say their bitcoins are now worthless and blacklisted, because they received a random payment?
Hmm, I didn't realize you could send money to people without their consent. That would make blacklisting more difficult. But if receiving the bitcoins was indeed unintentional on their behalf, you could just temporarily blacklist them until they returned the stolen bitcoins to the original owner.
In theory this could lead to attacks where small amounts of stolen bitcoins are continually deposited in victims' accounts, but that could be avoided if the exchanges themselves enforced the blacklist and refused to process transactions from blacklisted accounts (except back to the theft victim).
> Well, you could say NameCheap wouldn't accept those coins in the first place, but can you really expect every store and person to be using this list?
It would certainly require a cultural shift in bitcoin use, yes. I just find it funny that the entire transaction history is public record, yet bitcoins can still be stolen!
> I didn't realize you could send money to people without their consent.
I think the point of blacklisting would mean that miners wouldn't include transactions from those addresses in blocks. Once the transaction is in a block then there's not much that can be done, so blacklisting will require cooperation among a majority of miners.
People aren't going to maintain such lists individually. So you'd want some central operators, like the antispam DNS services. But then they have to decide what counts as "stolen". Ordered something and then claim it doesn't arrive - who do you believe? You're back to the paypal situation, except rather than reversing transactions you're declaring bitcoins "stolen".
Not to mention the difficulties of running a collaborative central operator in a community of radical individualists.
Can I maliciously transfer my stolen bitcoins to rich/famous people and get their accounts frozen? Is there a minimum transfer, of will 1 satoshi per account be enough? What if I feed them into a bitcoin tumbler before the theft is discovered, does whoever was selling on silkroad that day get their account frozen?
For that matter, can I start stealing bitcoins, and transferring them all to known FBI controlled addresses in order to 'pin' those attacks on the FBI?
It's "normal" to use a different address for each transaction (even when you spend from an address, you spend all of it, sending your "change" to a new address). But I don't know whether you could deliberately send to existing addresses.
One possible group would be a consortium of parties that are interesting to transact with. Say Paypal decided to mess around, they might have a blacklist.
People that received tainted coins could repudiate them with high fee transactions to invalid addresses (so that most of the coins go back into the network as mining fees). I guess 'invalid address' is the wrong language, but you get the idea, an address with no private key.
No no no no no. This sounds like a nice idea on the surface but it would be terrible. It would destroy the fungibility of Bitcoin, making some coins worth less because they could only be spent freely in countries that don't follow the same blacklists, or on the black market. It would be a huge fucking mess.
The difficulty would be making the blacklist fast but accurate, i.e. there'd need to be high standards of proof that coins were stolen rather than traded fairly. But if blacklisting took too long the thief could already have fenced the coins for real assets before the blacklist took effect.
Ultimately it could end up looking like credit card fraud alerts - suspicious bitcoin transactions could be put on hold (temporarily blacklisted) until confirmed by the wallet owner. But at that point you lose anonymity. I guess you can't have anonymity and accountability...