> Property that had been granted currency had a different legal status from property that didn't. Let's assume that a good has been stolen and sold by the thief to a third party, a shopkeeper, who innocently accepts it not knowing that it has been stolen. For most forms of property the original owner could sue the third party and get the stolen article back. But not if that good is one of the few to be considered by society to have currency, wrote Macleod. When an article is said to have currency, or to be current, the original owner cannot chase the third party to recover stolen property. So in our example, our shopkeeper gets to keep the stolen good, even if its stolen nature has been proven in court.
Side note, the talks of micropayments and currency use has shifted due to high fees and a paradoxical aversion to updating the network to reduce clogging.
Paradoxical aversion to upgrade the network much like California has a paradoxical aversion to increasing the speed limit to improve highway throughput.
It's so strange to me... commutes would be much shorter if cars were allowed to drive 150, and your roads would be able to move more people per day, too.
You've attempted to create a false equivalence here.
Increasing bandwidth and reducing fees is trivial and would be user friendly. Dynamic blocksize and fees as implemented on Monereo [1] would be a good example of a dev community that can implement forward thinking designs without ideological constraints to exploit the user experience for the financial benefit of a minority.
Not least because it's fungible, presumably. There's no difference between the money that the thief gave the shopkeeper and the money he gave someone else or kept for himself.
There's a papertrail on all the stolen mt gox coins. I have to believe that some attorney somewhere is working on a case to recover them from whoever has them currently.
That's almost $6 billion dollars worth of bitcoins that have tenuous ownership.
Anybody could report some bitcoin as stolen and make a claim on it at any point in time if the private key for that bitcoin ever became public or was cracked.
All you have to do is come across a private key of an old account with no bitcoin in it and then announce to the world that it was your account and it was stolen and the money should be returned to you regardless of who has it now.
Also, any transaction can have multiple inputs and outputs. If your btc is stolen and combined with 10 other accounts and then funneled into 37 completely different accounts, you now have some percentage rightful claim on 37 different accounts. If each of those 37 create transactions get combined with other bitcoin inputs and have more outputs you could end up with some dilute percentage of all bitcoin accounts holding some claimed stolen coins.
You could also just move the funds, from address a to address b, then buy something from some merchant, say monero from shapeshift, and claim some dastardly fellow hacked into your account and stole the funds from address a. Now do you have a claim against shapeshift?
Ultimately this is still legally undecided, and will remain so until a court decides it. Given that cryptocurrency exchanges have operated in a legal and straightforward way by treating cryptocurrencies as money, I suspect that courts will tend towards preserving the status quo.
It is true that in other legal contexts courts and governments have decided to treat Bitcoin as a commodity, but they have no problem calling it "money" when requiring exchanges to register as money service businesses. This is not inconsistent because the definitions of "money" and "commodity" are local to each law; tax law has a narrower definition of money than the laws regulating money service businesses.
So it would be perfectly reasonable and consistent to say that, for the purposes of title, cryptocurrencies are treated as money regardless of the way they are treated elsewhere in the law.
Even if Bitcoins are treated as a commodity for property law purposes, title is unlikely to follow them in practice. If I take some BTC from source A and put it in an address, and then some BTC from source B and put it in the same address, the two lots of BTC are now mixed up in a single address. In cases where this occurs as a physical process (e.g. putting petrol in a car) the law (at least in the UK, I don't know about anywhere else) treats the mixing as a one-way step. So if you put petrol in your car and then find you can't pay, the garage is not allowed to siphon the petrol back out because they will inevitably take some of your petrol as well as their own. Once the mixing has happened the petrol is your property, although of course you still have to identify yourself and accept the debt, or be guilty of "making off without paying". Similar arguments apply to food at a restaurant.
By a similar argument, it can be argued that once stolen Bitcoins have been mixed with others in a common address it is not possible to distinguish the stolen bitcoins. Hence they become the property of the person who has acquired them.
Whether these arguments will actually persuade a court remains to be seen, but the legal situation is more complex than the original article lets on.
> but they have no problem calling it "money" when requiring exchanges to register as money service businesses.
Is that because they treat Bitcoin as "money", or because they treat Bitcoin as a "money transfer" mechanism, that is, a way to send money to someone else?
> If I take some BTC from source A and put it in an address, and then some BTC from source B and put it in the same address, the two lots of BTC are now mixed up in a single address.
That simplified view is not how Bitcoin actually works. In your example, the single address now has two separate and distinct "unspent transaction outputs", one for the transaction from source A, the other for the transaction from source B. The mixing will happen only once they are spent, since the wallet software can use either of them, or both, as the input(s) for the outgoing transaction; but before that happens, they could easily be separated.
In fact, there is no real or virtual object which could be called a "Bitcoin". The Bitcoin blockchain is a distributed ledger which records statements like "of the combination of the previously unspent outputs A, B, and C, an amount of X will go to a new output D with key K, an amount of Y will go to a new output E with key L, and the rest will go to whoever generates a valid block which includes this transaction"; the unit of measurement for these amounts is what is "Bitcoin". Saying an address "has X Bitcoin" is a simplification for "the address has the keys corresponding to a set of unspent transaction outputs, which together sum to an amount of X Bitcoin".
So the "stolen Bitcoins" are "spent" the moment they are transferred to a new address, and can't ever be given back (a transaction output can only be spent once). What can be given back is a new set of transaction outputs, with the equivalent amount of Bitcoin. Whether that makes a material difference for the courts, I can't say, but it at least muddles the waters a bit more.
How different is this _really_ from storing money in my checking account? The bank doesn't allocate individual stacks of bills for each account, they just have a number which is how much money of mine they are holding (which is created from a series of deposits and withdrawals).
A checking account is closer to the intuitive "this account has X amount of money"; the transactions are "add X money to the account" and "subtract X money to the account".
With Bitcoin, it's as if you had thousands of tiny checking accounts, every time you received money created a new one, and you could withdraw each account only once, and always for the full value (if you wanted to use only part of an account, you had to send the rest to a new account).
The main difference is that anyone can create a practically untraceable address as many times as they want. So if you have a lot of tainted Bitcoin and you want to obscure the source without risking putting it through a mixer, you can create N addresses and start sending coin to (and through) them.
Compared to checking accounts; I can't just generate a thousand checking accounts that don't belong to any identity and generate a transaction history that appears to show many transactions occurred between hundreds of parties.
It's still not as good as mixing with other Bitcoin of alternate origin (if I only have the tainted coins at the beginning, I will still have 1000 accounts with only all of the same tainted coins when I am done, and a careful analysis will show that these 1000 addresses were funded entirely by the original tainted coins). But each seller cannot be expected to perform this careful analysis, and as you are able to exchange known tainted coins for clean coins and mix them, you can increase the uncertainty that a legitimate transaction is taking place that is separate from the one that originally generated your ownership of the tainted coins.
Imagine that on average 1 unspent output gets signed over to 3 unspent outputs. 1 -> 3 -> 9 -> 3³ -> 3⁴ ... 3^n outputs that would need to be restituted.
Imagine the average number of times that an unspent output gets spent a year is 50.
So, this means that after one year, it will be necessary to hunt down name, address, and whereabouts of up to 3⁵⁰ unspent output owners, many of which will turn out to be the same persons, but you cannot know that upfront. The more time passes by, the worse the problem gets.
So, that means that you could easily end up suing something like 100,000 individuals in 190+ jurisdictions.
That is even more unrealistic than the failed attempts of the MPAA trying to sue bittorrent users.
You see, someone sitting on stolen bitcoins will keep exchanging them back and forth for other cryptocurrencies until he has nothing left from his original stash. Therefore, you will most likely not even be able to sue the original thief.
I know what the blog article says, but I don't think that's how this works. They don't generally go after the 100k end people who have fragments of the stolen coins in your example, they just go after the 3 who received the stolen coins and say they have to make restitution. Otherwise you could get out of any financial liability for receiving stolen goods just by flipping to someone else. One of the things that regulators, prosecutors and counsel for wronged parties take into account is how likely they are to get restitution based on a particular construction of the case, so they may choose to pursue a party where the theory of liability is a bit tortuous if it allows them to sue a party with deep pockets where they are more likely to be able to get restitution for example.
I am familiar with how tracing cash and securities transactions on behalf of wronged parties was done in a couple of frauds and that's how it worked there (although those cases didn't involve bitcoin it must be said).
//edited to explain more clearly that I had read the article so understand the point the parent was making in that context
So, now you need the identities along the transmission chain too, up to: 1+3¹+3²+3³+3^n = (3^(n-1)-1)/(n-1).
It only makes the problem worse. Most of these identities cannot be recovered. It is not realistic to believe that the first 3 identities in the chain will be recovered. It may very well end up being identities further down the chain.
Furthermore, you will still need to try until you can find an identity in a jurisdiction in which you can sue.
Imagine that you find someone at step 12 with some fraction of the coins, who lives in Japan, and who bought the coin fractions at an exchange. Are you sure that the Japanese courts will cooperate with your recovery efforts?
By the way, the MPAA mostly stopped suing bittorrent users in Europe and elsewhere, because "Pirate parties" started springing up and gaining increasingly more elected seats. At that point, we are no longer talking about what the law would be, but what it should be, and things started looking bad for the MPAA. So, they backed off.
Suing lots of random people on rather flimsy grounds would very soon get political too.
Furthermore, as Von Clausewitz nicely argues in "Vom Kriege", war is just the continuation of the political negotiations but then by other means. So, that would be the next step, if even the political confrontation would fail. It was not that the MPAA was ever going to win.
> "Indeed, given the high volume of fraud and default in the bitcoin network, chances are most bitcoins have competing claims over them by now. Put another way, there are probably more people with legitimate claims over bitcoins than there are bitcoins. And if they can prove the trail, they can make a legal case for reclamation."
Fungibility is something other cryptocurrencies have and that could be added to bitcoin via a hard fork.
That's one of the strengths of cryptocurrencies: they can adapt. And, in my opinion, which version is most valuable is decided by the community -- not the miners, but the people who are buying and selling.
The problem is after it changes owners through exchanges and tumblers. It's like stolen cash being deposited into a bank and given back to someone it was stolen from 5 years and hundreds of transactions before.
It wouldn't be fair to anyone if we did that with cash, and it's not fair to try to enforce that with bitcoin.
This post on Reddit explains how in 1749, a court sided with the Royal Bank of Scotland in its legal challenge to a request for such a blacklist. The RBS argument was that making money responsible for the acts of its previous holders would "render the Notes absolutely useless":
I wonder how some of the legal doctrines described would treat stolen zcash, since anonymity of some transactions can be guaranteed mathematically (assuming some cryptographic assumptions). If a jurisdiction would, for a broker that didnt keep good records, place liability/taint pro rata on all its depositors, would it follow that all participants in the zcash network are similary pro rata responsible for reimbursing stolen coins in the eyes of that jurisdiction?
If all zcash is pro-rata considered "stolen" when one is, then you could argue that zcash participants are all knowingly transferring stolen goods (since it's public knowledge that some portion of the zcash is stolen). That'd be enough to shut down the network at the interface with the state-sanctioned banking system.
All these legal theories will not matter, because the entire problem will immediately become dangerously political.
When the protesters started marching in 2011 in Syria, Bashir thought that he could solve the problem by putting a lot of them in jail. Well, outside the small area that he still controls today, the entire Syrian police force has been exterminated. They are all dead now.
The political situation in many countries is already explosive without provocation. The state-sanctioned banking system is generally hated. Too many people already are looking to overthrow the ruling elite. All that they still need, is a flimsy excuse.
Could you imagine the guy who wrote this article in a bar with Satoshi in 2008 telling him the whole project should be abandoned because of this issue?
What's funny about bitcoin is that there are all kinds of ways it could have failed, but it didn't. The government could have kicked down the door at any moment with all kinds of trumped up legal stuff, but they didn't. What happened?
Yep, will be a serious liability of BTC. I wager it will take some for the risk to actualize. The crypto craze continues until it doesn't. And when it plummets, devoid of any legitimate value, it will fall hard and prove just another blip on the screen for those who aren't laughing to the bank now.
You've got a lot of hubris saying that. You don't think this hasn't been repeated before?
The truth is that a currency gains more utility when people value it more which in turn makes it more valuable. Until you see that you will continue to be blindslided by it's growth.
No it doesn't. That is the difference with money. If you acquire a $10 note in good faith as payment for something, the history of the note doesn't matter.
> Property that had been granted currency had a different legal status from property that didn't. Let's assume that a good has been stolen and sold by the thief to a third party, a shopkeeper, who innocently accepts it not knowing that it has been stolen. For most forms of property the original owner could sue the third party and get the stolen article back. But not if that good is one of the few to be considered by society to have currency, wrote Macleod. When an article is said to have currency, or to be current, the original owner cannot chase the third party to recover stolen property. So in our example, our shopkeeper gets to keep the stolen good, even if its stolen nature has been proven in court.