The most interesting thing about bitcoins is that when the cops come and seize your big pile of bitcoins, if it's on a truecrypted drive, and you don't give them the password, or they shoot you because you appeared armed with a USB drive, that just increases the value of the bitcoins in general and the cops can't use it to buy a new police helicopter. This is the most dangerous aspect of bitcoins by far. If properly protected, they cannot be confiscated.
(That's what the government hates the most: things that make it easy to subvert it. If you can subvert the government in some super difficult manner that requires a lot of effort, they don't care so much. If you can type in your paypal id and have anonymous money... that's too easy, and it makes them mad.)
I personally think the Fifth Amendment would protect you from being compelled to give up your password. But I really wouldn't want to test that theory in court.
I'm pretty sure there have been cases where you're required to hand over the password. But if you use truecrypt and make a shadow OS, you can hand over the password for the fake OS with nothing serious on it and they cannot prove the existence of a shadow OS to demand a password for. Some time ago someone also mentioned that if you remember a passphrase + key and sha it for your password, then you can legally say you don't remember your password even though you know (one possible way) to generate it.
The authors of the Federalist Papers were against a specific enumeration of individual rights because they feared that those rights would become the only ones we had. They were prescient in some ways, but I doubt any of them foresaw the entire Constitution being suspended.
That's the whole point of bitcoins. Anonymous, hard-to-trace payments. You can't get that kind of "freedom" without also being really attractive for illegal uses.
Bitcoin is designed to be subversive, and subversive means illegal as far as the government is concerned.
This is the main/only reason I'm not making any long term investment in Bitcoin.
I think it is entirely possible Bitcoin will provoke the mother-of-all battles for control over communication networks and how people use them. The outlines are very clear: Bitcoin allows nearly complete escape from the current financial regulatory systems that control currency movements and taxation. Trying to prevent people from moving money from one country to another or using Bitcoins for buying drugs, weapons, whatever is impossible without a truly draconian censorship and control regime in which private citizens are more or less forbidden from using encrypted communications.
I see government control over money as basically an immovable object - I don't think so-called constitutional protections mean anything when it comes to governments doing what they feel is necessary to maintain control. Internet freedom and encryption are not as much of an irresistible force as net-romantics would like to think.
If anything can force governments into legislating backdoors into all encryption systems and creating a clearly established set of "choke points" for control of data flows, it is the possibility of Bitcoin and other crypto-currencies to render basic imperatives of the modern nation state impossible to enforce.
It is more or less infinitely depressing to me, because as much as I would like to believe that the "good guys" are going to win, I doubt it. People generally don't realize how much we are already living in a dystopian panopticon, and Bitcoin is one of the rays of light shining through the cracks in the prison walls.
What is even more depressing to me is my own cowardice. I am too scared of the US government to even try to resist in any way, no matter how trivial. I would like to participate in Bitcoin and other projects, but I don't want to end up in a federal prison for conspiracy to assist in money laundering and tax evasion, as I imagine that any participation in Bitcoin will be interpreted by government prosecutors of the near-future.
It seems like it would be a lot easier to just shut down the USD-BTC exchanges. If people can't get money in or out of the system they don't need to worry about what happens inside the system. (I'm ignoring mining, since there's a serious limit on how large that can get.)
Not necessarily. If it became apparent that people could pay each other in bitcoins without being taxed, there would, eventually, be no point in have USDs at all.
>I see government control over money as basically an immovable object
Fyi, governments don't control money, the international reserve banking system does, centered on the Bank for International Settlements (BIS.org). Governments' enforcement arms are just their proxy. They'll be even less likely to tolerate an upstart competitor like bitcoin.
Another interesting tidbit. Imagine that bitcoin became the de-facto currency. Not only would the government be unable to tax, it would also be unable to control the financial systems it uses to affect markets. For example, the government can print a small amount of money for itself without causing hyper-inflation. This "inflation tax" would also be noncollectable. Further, the federal funds rate would be useless.
The government will always be able to tax its citizens. Even if all money were transferred anonymously, the government could tax you based on the value of the land you own.
Wait, doesn't that actually support what I'm saying? I recall a shooting war in which a lot of people died as part of the process by which slavery stopped being a reality in the USA. Or is that your point?
Which kind of slavery? Wage slavery is alive and well. It is the slavery of the 21st century, and continues today. Or can you quit your job without going bankrupt due to debt unlike me and millions of others like me?
Debt for an individual is a choice. However our monetary system mandates that some people or entities must always be in debt. If there were no debt there would be almost no money in circulation.
So while you say that debt is a choice, it is impossible for everyone to be debt-free. If everyone stopped borrowing (consumers, industry and government) in this country, we would have a complete economic breakdown.
This is like saying smoking is a choice: from the perspective of the single potential smoker, it is. From the perspective of the marketer this is unimportant as they don't need you to smoke, they just need some people to smoke.
Not really. You're not accounting for technological progress. The "reach" of governments (and other entities that hold the power) has expanded due to the technology. Communication was a lot slower and a lot less reliable in the 19th century. So was transport, for that matter.
I agree that's the perception, but the reality is that bitcoins are not inherently anonymous, in the same way that normal net traffic is not inherently anonymous.
Sure, you can use Tor, launder your bitcoins, and effectively become untraceable, but how many people actually do this, and do this correctly? Even Lulz Security, who presumably have a reasonable degree of technical expertise, didn't bother to use Tor when talking over IRC.
Also, Silk Road is kinda ridiculous anyway, because despite all that security and anonymising, in the end you have to give out a physical address that you'll visit in person.
Bitcoins are much less anonymous than normal net traffic, even. If someone sends you some money, you get to know the address it came from, and plug it in on http://blockexplorer.com/ and you can see which addresses that address got its money from, and how much, and you can trace it all the way back through history to find out which block generated the money and how it got to that address. Depending on how people consolidate their wallets, you can even see how much money they have.
I don't have to be routing packets for you to find all this out; every transaction goes to every node.
There are "laundering" services which try to play a shell game with addresses, but I think they're probably easy to reverse-engineer, at least probabilistically if not completely.
OTOH, unlike IPs, you can't pinpoint addresses to any location though or find out who owns what addresses for sure. I guess they're more pseudonymous than anonymous.
Anonymizing bitcoins is not difficult. For example, you can deposit your coins in an online wallet service, and then withdraw some fraction of that amount to an anonymous address. Because the wallet provider can pool its coins, the coins coming out can have absolutely no relationship to the coins going in, outside the private records of the wallet provider.
The wallet provider could, in principle, be subpoenaed / coerced /hacked / owned by the NSA. I imagine there will eventually be a Tor-like "onion" anonymization method, where bitcoins are routed through multiple such services, so that no single service need be trusted (except to not steal your money). The main challenge with these techniques is avoiding forms of traffic analysis, where I notice B$98.23 heading from A to B, and shortly thereafter, B$98.22 heading from C to D, and infer that these represent a single transaction chain despite being disconnected in the block chain record. Such attacks can be minimized by, e.g., settling on a fixed transaction amount for all transactions with a given service, and adding random delays commensurate with the transaction rate and degree of anonymity required.
That is the main/only reason I am making a long term investment in Bitcoin. Given the volatility I think the people speculating in Bitcoin purely for financial gain are nuts.
"Given the volatility I think the people speculating in Bitcoin purely for financial gain are nuts" - that's a strong statement mate. Any reasoning behind it or you just like insulting people?
Today's exchange rate range is 16.45 to 19.23. That's pretty typical, and some days are a lot worse. In the forums, the consensus seems to be that any attempt at economic analysis is largely a waste of time due to there being way too many unknowns. The Bitcoin "investors" and "speculators" just look like gamblers to me. That qualifies as "nuts" to this coward.
A lot of Bitcoin speculators have invested only what they can afford to lose. I don't think it's "nuts" to invest a few hundred dollars (for example) in something as technically interesting as Bitcoin. People probably lose more in a Vegas vacation.
True. I don't think you should view it as an investment, and certainly not a reliable one. At best, it's like investing in a startup you think has promise and is undervalued.
Should they make Tor illegal too then because it helps you stay anonymous? Should they make it illegal for people to sign-up with a fake name to social networks, websites and commenting systems?
Just because something is anonymous doesn't make it inherently bad. It's how you use it that can make it bad. If hackers can hack into sites anonymously, it doesn't mean we should ban all anonymity.
Tor is a case of one hand not knowing what the other was doing, in that LEAs hate it but it was developed by navy intelligence, and a lot of people had to use it in order for it to be effective. When law enforcement goes up against the military, law enforcement loses. That's not the case with bitcoin.
Drugs are a great market for bitcoin. If you're speculating against fiat currencies, you'll want to use a combination of gold, mining stocks, and bitcoins, but if you're just buying drugs on the Internet, and bitcoins are an option, I don't know why you'd use anything else.
Chuck Schumer exemplifies the Nanny State: You aren't enlightened as we politicians are. Therefore, we will make the decisions regarding your health for you.
Democracy should exist to create/manage public goods, not private ones. A drug or an electronic store of value that a group of adults voluntarily use isn't any of my business. Everything is Schumer's business, apparently.
What if someone under 18 uses the site to buy some pot? He might share it with his friends and they would all find bad movies to be hilarious for a few hours! Then they would be really sleepy!
Much better if the kids go to a real movie theater and pay $20 to eat artificial popcorn covered with artificial butter and wash it down with artificial sugar water.
Well, then parents might actually have to "parent", and teach their children things like "responsibility" and "moderation" so that when they're older than 18, they won't be "a drain on society".
Yes, we must get silkroad shut down. Kids will have to buy their drugs the old fashioned way (like mom & dad): on the bus, in a back alley, or from their senator, or somewhere equally perilous and sleazy. God forfend our little dumplings should be able to have their weed delivered safely by the fedex guy.
Despite the snark in the thread title, Sen. Chuck Schumer draws a reasonable conclusion. Bitcoin, despite its various other uses, theoretically can be used for money laundering.
On Silk Road there are lots of ways to money launder... one of the main ways is that you give someone bitcoins and they give you a "gift" on paypal so that there are no fees.
I think the odds are if Sen. Chuck Schumer can conceive that Bitcoins can be used for money laundering, other folks have thought of the exact same thing.
I.E. it is already being actively used to launder money.
uhhh... check your math bro -- as of this moment there are 6,453,450 BTC in existence -- and you can buy them for $18.24 a piece leading to -- 117,710,928M USD -- sure it isn't a billion but it's more than enough to hustle a few hundred k through whenever you want
"Hustling money through" is not exactly laundering. To launder you have to:
#1 get the money into bitcoin. How did you get it there in substantial quantity to begin with? There may be $100m of it in supply but how many people have a hundred k bitcoins they will readily exchange for cash? It has to be cash, if you put the money in a bank it's easily traced and therefore pointless.
#2 get the money out of bitcoin in such a way that you can pay taxes on it. Since you presumably can't buy houses, cars, or jet skis with bitcoin it's not very useful there. Even if you could buy a house or car, you'd still need to file taxes since the government can easily see that you bought a $500k house while claiming 0 income. The whole point of laundering money is to pay taxes on illegally gained cash so you can spend it. (Tax evasion is its own separate crime and industry, and I suspect bitcoin isn't very useful there either.)
So now you have to start a shell business that you can claim made all of those proceeds in bitcoin. It has to be one that doesn't legally require you to KYC (banking industry slang, meaning gather relevant info about the people you do business with) and report to the IRS. Then you have to find people to buy the hundreds of thousands of bitcoins from you.
Far easier to start a bar, buy alcohol, pour it down the drain, and claim you sold it. If I were laundering a few hundred grand a year I wouldn't waste time on bitcoin.
You are not wrong, unless there's some way to buy bitcoin by cash or some other untraceable means (Western Union?). I think many people are confusing laundering with other things like tax evasion. They're distinctly different.
No, you could buy bitcoins with unlaundered dollars, even with a credit card, and then launder the bitcoins themselves so that when you spend them they can't be traced back to the account you bought them with.
You can do that but it would serve no purpose. If you bought $100k bitcoins on a credit card, now the IRS has a paper trail. They'll want to know where that $100k you paid the credit card bill came from.
Even if you got the money in without being traced and spent them that's not laundering, it's tax evasion.
Contrary to popular belief and government propaganda, online poker players aren't any more likely to launder money than you are.
Back to the article, like another poster said, how is a bitcoin-based drug site any different in terms of anonymity than a cash-based one if you have to give your address out at the end anyway?
The winners are highly likely to evade taxes but have no need to launder. Money laundering is unnecessary because online gambling proceeds aren't illegal in most states, and even where they are the Silver Platter doctrine and the fact that AGs don't prosecute customers generally makes it not worth while. I played poker for a living in a state where it is illegal to do so and still just claimed taxes legally (which is unusual for a poker player).
The idea, in theory, is that the use of BitCoins cannot be tracked by a third party. That is to say, Silk Road, you and your dealer are the only ones who know about the purchase. In theory all three of you do not keep records of the sale, unlike credit card companies, which keep records of EVERYTHING.
All money is not created equal - there are host of laws related to taxation, tracking, and legality that apply to real-world currencies. Bitcoins are great because they have none of this baggage, but bitcoins are also a political non-starter for the same reason.
I don't see anything here about schumer 'bashing' bitcoin. What he says (in the source linked to by this article) is:
> "It's an online form of money laundering used to disguise the source of money, and to disguise who's both selling and buying the drug"
From the article, it's not clear what the "it" refers to; while it's possible it refers to bitcoin in general, it sounds more to me like he's talking about the use of bitcoin on silkroad, in which case I believe his statement is completely factual.
There's really not much remarkable here about bitcoin other than its appearance in a statement by a prominent senator and mention in a mainstream news article. If you accept that the government should be able to regulate or outlaw the drug trade, there's nothing remarkable here at all. I recognize that there is a significant population here who might think that drug sales and use should not be regulated, but the majority of the American public does not agree with you.
>From the article, it's not clear what the "it" refers to; while it's possible it refers to bitcoin in general, it sounds more to me like he's talking about the use of bitcoin on silkroad
Knowing what Bitcoin is and what money laundering is is enough to tell you that he's talking about Bitcoin, not Silk Road.
Legit business can and often are used to launder money, but a drug market cannot.
I never said I thought "it" referred to silk road. "It" clearly refers to the use of bitcoin. What's unclear is whether "it" is "all uses of bitcoin" or "the use of bitcoin on silk road."
Governments WILL kill BitCoin and any other attempts. They are already issuing their own.
Nowadays the whole point of sovereignity is that you can issue your fiat currency. Allowing and thus defacto accepting this currency would mean that sovereignity has been granted. And this will not happen.
Makes sense; Bitcoin is a monetary system outside of the control of a government. It's likely to be favored for transactions that are outside the control of a government. They're sure to not like this.
Its tough separating the wheat from the chaff. Presumably, Silk Road merchants aren't the first to ship drugs: it's pretty tough to detect without slowing everything down.
I really think this is the beginning of the end for bitcoins. Once the government starts going after the endpoints you will start to see the price of bitcoins dropping as everyone tries to liquidate them. I was wondering when this was going to happen. Maybe the next design will improve on these flaws?
I don't think that this is the beginning of the end. This is exactly the kind of scenario that has been anticipated, and discussed at length by bitcoin advocates. Obviously a government can try to ban them, but that's hardly going to render them worthless, just riskier to use for some.
I don't think this will happen. My prediction is that the price of drugs in bitcoins will go up as the difficulty of converting bitcoins to dollars increases. But as long as it's easy to buy bitcoins (which will be hard to regulate, just as it's hard to regulate the sale of illegal drugs), then there will be a market for people that have them.
Yes, but you don't need to sell your BitCoins, the people you are buying goods from are the ones that do that. It's similar to how you can't directly accept credit cards, but Amazon can, so they are still very useful.
When the governments decide to shut down Bitcoin, it will probably be in the "exchanging bitcoins for money" area, since that's relatively easy to regulate. But it's hard to convince Offshore Bank Of Unfriendly Country to not exchange Bitcoins for money in person, so big "dealers" will have no trouble making the trip and getting their cash. This will involve more effort, so prices for goods sold in Bitcoins will increase.
Similarly, if everyone could grow and sell their own pot, prices would come down. Make that illegal, and people want more money for their work. The same effect will occur if cashing out Bitcoins becomes difficult.
As a .onion site, the silk road is not subject to US jurisdiction. I understand that Sen. Chuckles want's it shut down, but it won't happen. The nature of the internet makes sites like this virtually impossible to stop.
There might not be a formal, publicly-accessible market, but two-party short-selling contracts could already be active. This is what an unregulated and anonymous currency feels like: you have no idea whether I have purchased half of the bitcoin market over the last few weeks just to unload all of it at once, in small chunks, before the market can adjust to the reduced value. In fact, you won't even know if that has already happened; you will just see a "market correction" when I sell.
HAHA this sucks for bitcoin, too bad this has been going on since the internet first started. In fact drug selling was one of the first activities on BBSs. Too bad for bitcoin, services like Pecunix have been harboring this kind of stuff for years.
