Underestimate blockchain at your peril [LWN.net]

Underestimate blockchain at your peril

Posted Jan 11, 2018 12:14 UTC (Thu) by zdzichu (subscriber, #17118)
In reply to: Underestimate blockchain at your peril by ras
Parent article: Welcome to 2018

Jumping from blockchain to cryptocurrencies has the same problem as jumping to “just another data structure”.
Forget about cryptocurrencies and think about other uses of the blockchain. That's where innovation is.

to post comments

yes, hashchaining is useful

Posted Jan 12, 2018 3:38 UTC (Fri) by Garak (guest, #99377) [Link] (47 responses)

Yes, hashing data that includes hashes is an often useful technique. As it has been for a long time. Cryptocurrencies however provide far more entertainment in the mainstream news. I was into Ayn Rand at the end of the last millenium, and though it makes enough sense, the fact that something (not gold, lol) is challenging 'fiat currency' ranks pretty highly interesting in my book. But sure, there is lots of room for innovation in lots of places. And lots of interesting big power machiavellian politics impeding certain subsets of it to varying degrees. Interesting Times.

yes, hashchaining is useful

Posted Jan 12, 2018 9:08 UTC (Fri) by anselm (subscriber, #2796) [Link] (46 responses)

the fact that something (not gold, lol) is challenging 'fiat currency' ranks pretty highly interesting in my book.

So far cryptocurrencies are “challenging” fiat currency only in the way a bicycle courier challenges FedEx. I'm not holding my breath.

yes, hashchaining is useful

Posted Jan 12, 2018 10:17 UTC (Fri) by Garak (guest, #99377) [Link] (18 responses)

I wouldn't have held my breath that bitcoin would have hit $100, let alone $1000, or $10,000. But all of those things happened. It's easy enough to wait another year or two and see what the plot of the market cap of the top 10 cryptocurrencies looks like. $300,000,000,000 worth of bicycle courier market is interesting to me, but I can understand how others are dismissive of that relatively small number. Time will tell.

yes, hashchaining is useful

Posted Jan 12, 2018 13:41 UTC (Fri) by NAR (subscriber, #1313) [Link] (16 responses)

Those numbers look enticing - but can you actually sell significant volume of bitcoin at that price?

yes, hashchaining is useful

Posted Jan 12, 2018 18:57 UTC (Fri) by dd9jn (✭ supporter ✭, #4459) [Link] (15 responses)

I got notice today that BitWala shutted operations down because their bank account has been closed. So, I guess selling is getting harder.

alleged 'illusion of bitcoin liquidity'? Citation requested.

Posted Jan 12, 2018 20:50 UTC (Fri) by Garak (guest, #99377) [Link] (14 responses)

I haven't seen any news articles about people holding bitcoins that haven't been able to sell. Sure there are news articles about people who contracted with companies to hold their bitcoin for them. But that is a different thing. As far as my understanding goes today, anyone holding a (key to) a solid bitcoin can open a Coinbase(tm) account, and get >$10,000 of USD in exchange for that bitcoin. If you have a story of anyone who in the last 6 months had a bitcoin, and tried to cash-out but couldn't, please provide a citation. Or a means of contacting them to be interviewed for a routine journalistic investigation of the issue.

alleged 'illusion of bitcoin liquidity'? Citation requested.

Posted Jan 12, 2018 23:37 UTC (Fri) by anselm (subscriber, #2796) [Link] (13 responses)

As far as my understanding goes today, anyone holding a (key to) a solid bitcoin can open a Coinbase(tm) account, and get >$10,000 of USD in exchange for that bitcoin.

Possibly. But whether they will get an amount that is closer to $12,000 (like today) or closer to $19,000 (like four weeks ago) is anyone's guess. Next week it might be $10,000 or $20,000, or for that matter $5,000 or $50,000. The problem is that the Bitcoin trading volume is generally so low that single transactions can raise or drop the exchange rate by tens of dollars. You may be able to sell one Bitcoin every so often but selling larger amounts at one go risks a “flash crash” – in April 2017, trades of only 100 Bitcoin, together with a configuration error, briefly sent the exchange rate on the GDAX exchange from $1180 to $0.06 (which was good for those people who managed to pick up some Bitcoins at that price at GDAX, and, because the general Bitcoin price index depended to a fairly large extent on the GDAX price, not so good for people whose Bitcoin positions were automatically liquidated while the “crash” was going on; fortunately these people were eventually reimbursed by the exchange). There were periods in the recent past when trading volume was so low that, in order to keep the price up, some exchanges resorted to “painting the tape”, i.e., having bots do back-and-forth transactions in order to pretend that there are trades going on, which given that Bitcoin does have transaction volume issues is a nuisance because these transactions tend to clog the block chain.

It should also be noted that there is no single universal exchange rate for Bitcoin; what is posted as “the” exchange rate is really a weighted average of Bitcoin prices at various exchanges. The actual spreads can be considerable and that of course is an incentive to clever programmers to engage in automated arbitrage, so actually converting Bitcoin to real money can in fact be more difficult than it seems.

alleged 'illusion of bitcoin liquidity'? Citation requested.

Posted Jan 13, 2018 0:49 UTC (Sat) by Garak (guest, #99377) [Link] (12 responses)

"The problem is that the Bitcoin trading volume is generally so low that single transactions can raise or drop the exchange rate by tens of dollars."

Yeah, at $10K+ that really doesn't sound like a significant problem to me.

alleged 'illusion of bitcoin liquidity'? Citation requested.

Posted Jan 13, 2018 2:20 UTC (Sat) by anselm (subscriber, #2796) [Link] (11 responses)

To be exact, that was tens of dollars when Bitcoin was around $1000. Make that hundreds of dollars now – it may be insignificant for you, but many people don't like that sort of volatility a whole lot. Anyway, it doesn't detract from the fact that converting larger amounts of Bitcoin into real money is difficult because it tends to mess with the exchange rate more than it ought to for a purported “currency”.

The fact of the matter is that Bitcoin, for all the hype, is mostly uninteresting for people who want to buy or sell legitimate stuff in the real world. Why would anyone want all the hassle, the delays, and the volatility when one could just as easily use actual money (or for that matter PayPal or a credit card) and be done? Even vocal Bitcoin supporters apparently prefer to hang on to their Bitcoin over using their Bitcoin to buy goods. OTOH, those companies that do offer Bitcoin payment usually arrange it such that Bitcoins go through an exchange and they receive their money in a real currency, like US dollars – they never want to touch actual Bitcoins.

Many companies which dipped their toe into the water accepting payment in Bitcoin have stopped again simply because the actual (very low) number of customers who want to pay in Bitcoin doesn't justify the complications. For example, the soap manufacturer WhollyHemp introduced Bitcoin payment and found that, after an initial burst, only around 0.2% of their total sales were paid for via Bitcoin. In fact they conducted A/B testing on their site and noticed that when customers were advised that payment in Bitcoin was possible, gross sales went down by nearly 6%. Not a great incentive. (The Mozilla Foundation ran similar tests in 2014 and found that adding a “Donate in Bitcoin” button to the main campaign form would have cost them $140,000 over the course of their campaign, simply because the added complexity tended to turn away potential contributors.)

alleged 'illusion of bitcoin liquidity'? Citation requested.

Posted Jan 13, 2018 2:46 UTC (Sat) by Garak (guest, #99377) [Link] (10 responses)

your comment reads as someone who doesn't appreciate that technology improves over time. Which seems weird here on LWN. Here over the years we watch all kinds of software based technology evolve over years from buggy fragile proof of concept, to relatively rock solid. I'm not dissuaded by your limited anecdotes. For every problematic scenario you describe, there are 100X more ordinary successful transactions. This is why the market cap of the top ten cryptocurrencies is in the hundreds of billions of dollars. Yes, no doubt a lot of unwise speculation along the lines of the 2007ish bad loan ponzi scheme that led to the bank bailouts, which apparently in turn led to the text message the creator of bitcoin first embedded in the deployment. But it's still hundreds of billions of dollars worth of confidence that the system basically seems to be functioning. And I haven't heard nearly as much complaint about users of litecoin/etherium/dogecoin. From my perspective, it sounds like those are functioning well for a lot of people. Maybe they too have their anecdotes of problematic days amongst the years. NYSE and Nasdaq have been known to take days or hours off from time to time.

The software and it's design will improve over the years. The fact that it works as much as it does, already, is something the marvel at. Nobody here is hyping it as 'ready for primetime', or 'done and perfect'. We do however see that it in fact is a functioning system already. And quite stable. For all the complaints about volatility, I see something that for most weeks of it's several years of life has been very stable.

I'm still in awe that it has already got years under its belt of having achieved it's initial design intent. I consider that pretty fucking amazing and cool. About how I felt about Linux in 2000. And Linux in 2010 and 2018 kick the living shit out that. I'm looking forward to seeing what cryptocurrencies look like 5 and 10 years from now. I think a lot of people will be very impressed (unless Trump launches too many nukes before then).

alleged 'illusion of bitcoin liquidity'? Citation requested.

Posted Jan 13, 2018 10:33 UTC (Sat) by anselm (subscriber, #2796) [Link]

Perhaps the Bitcoin guys will eventually get their act together and figure out some way to fix the more egregious problems. But how often do you want to fork the blockchain getting there?

The difference between Bitcoin and Linux is that for Linux to advance, all that needs to happen is Linus Torvalds putting new changesets into git. With Bitcoin, you need to convince a large swathe of the user base that what you want to change is actually a good idea, and there is people's money involved (even if to a considerable degree it is only Monopoly money). This means that even changes that are fairly simple from a technical POV (like increasing the block size) become huge issues when viewed from the social/political angle, and it tends to limit the scope of technical fixes you can actually accomplish within an existing crypto-“currency”. Imagine what would happen if whenever Linus Torvalds was to publish a new version of the Linux kernel, more than half of the existing user base had to decide to adopt that new kernel before it could become official (and that's without these people having a financial stake in the old kernel).

OK, so you say that at some point there will be a completely new cryptocurrency that takes care of all of Bitcoin's problems and starts without Bitcoin's historical baggage, and we will all be using that instead of Bitcoin. Leaving aside the fact that it is unclear whether taking care of all of Bitcoin's problems is even possible, the problem with that is that Bitcoin takes up not just considerable mindshare but also billions of dollars' worth of people's “money”, and that makes it even more difficult for new alternatives to gain traction. Bitcoin had the big advantage that when it came out it was basically the only game in town, but anything new and different must be obviously better than Bitcoin to get anywhere at all – and that means “obviously better” to people who even now have no clear picture of how Bitcoin actually works and where its problems really are. If businesses have a hard time justifying buying into the major incumbent cryptocurrency, what makes you think they'll go for the flavour of the week instead? (Since you're so fond of comparing Bitcoin to Linux, imagine where Linux would be if when it came out people hadn't already been used to using Windows, and the computer industry hadn't been convinced – by hook or by crook – that Windows was the way to go. After all, in the real world, the fact that Linux was obviously better than Windows in various important and tangible respects, like being virtually virus-proof, didn't help its widespread adoption at all. Now imagine that Windows is Bitcoin and Linux is your favourite new cryptocurrency.)

alleged 'illusion of bitcoin liquidity'? Citation requested.

Posted Jan 13, 2018 21:01 UTC (Sat) by nix (subscriber, #2304) [Link] (8 responses)

For every problematic scenario you describe, there are 100X more ordinary successful transactions. This is why the market cap of the top ten cryptocurrencies is in the hundreds of billions of dollars.

That doesn't follow. As I've noted repeatedly, all the market cap indicates is that bitcoin is being mined, and that people are piling into it and pushing its exchange rate with the dollar up. It does not indicate that any actual transactions are happening (which would not affect the market cap, whatever the hell a "market cap" is supposed to be for a currency: that's a term you'd use for instruments being invested, which rather proves my point). Transactions for actual goods in a currency (as opposed to in and out of it) affect neither the amount outstanding nor its exchange rate.

I'm still in awe that it has already got years under its belt of having achieved it's initial design intent.

Insofar as the initial design intent included statements by its early adopters that it would allow effortless microtransactions, have transaction fees so low as to be imperceptible and certainly far lower than, say, Visa, and be a useful store of value, it has totally failed.

alleged 'illusion of bitcoin liquidity'? Citation requested.

Posted Jan 13, 2018 22:05 UTC (Sat) by anselm (subscriber, #2796) [Link] (7 responses)

As I've noted repeatedly, all the market cap indicates is that bitcoin is being mined, and that people are piling into it and pushing its exchange rate with the dollar up. It does not indicate that any actual transactions are happening

Right. “Market capitalisation” makes sense if, for example, you're talking about a publically traded company, where it tells you how much money you would need to buy all the stock (IOW, what the company is “worth”). With crypto-“currencies”, this is obviously silly since you can't buy or sell Bitcoin-the-currency the way you could a company. Bitcoin's “market cap” doesn't reflect the money that has been put into it nor the money that you could reasonably get out of it – there may be 300 billion dollars in Bitcoin according to its “market cap”, but if anyone tried to sell Bitcoin to the value of even an appreciable fraction of that, the dollar price of Bitcoin would just crash. For crypto-“currencies”, “market cap” is a bogus measure that crypto-“currency” advocates like to sling around but it doesn't tell you anything interesting or worthwhile.

What you really need to look at to gauge interest in a crypto-“currency” is its trading volume, and for Bitcoin that is really slim, especially considering that these days most Bitcoin transactions are between Chinese day traders.

alleged 'illusion of bitcoin liquidity'? Citation requested.

Posted Jan 14, 2018 7:27 UTC (Sun) by Garak (guest, #99377) [Link] (6 responses)

"What you really need to look at to gauge interest in a crypto-“currency” is its trading volume, and for Bitcoin that is really slim,"

I wouldn't personally characterize millions of transactions per month as 'really slim', but I can understand how others are dismissive. Again, this is just one cryptocurrency. There will be more in 2019 and beyond, by my prediction. The technologies will continue to improve. The politics will remain interesting to watch.

https://en.wikipedia.org/wiki/Bitcoin#/media/File:BTC_number_of_transactions_per_month.png

alleged 'illusion of bitcoin liquidity'? Citation requested.

Posted Jan 14, 2018 11:10 UTC (Sun) by farnz (subscriber, #17727) [Link] (2 responses)

To put that number into perspective, existing cash alternatives like credit and debit cards between them handle millions of transactions per hour. In the UK, there are around 3.7 billion card transactions per quarter, which is nearly 2 million transactions per day. Put another way, this means that every single person in the UK (adults and children between them) averages a card transaction every 2 days. One million transactions per month implies that Bitcoin as-is could only replace cards for 70,000 people (globally) or so at current rates of trading.

This would not be an issue if Bitcoin was set up such that transaction fees and time would fall if there were more users; however, that's not how Bitcoin works, and transaction delay and fees are already higher than card networks.

Where this does compare adequately is with shares - it's about the same trade rate as the average NASDAQ security. But then, that leads to the question; what, exactly, is Bitcoin, if it's supposed to be compared to shares in something, not to currency instruments?

alleged 'illusion of bitcoin liquidity'? Citation requested.

Posted Jan 15, 2018 9:56 UTC (Mon) by james (guest, #1325) [Link] (1 responses)

I think you mean nearly 2 million transactions per hour -- two million per day is way too low!

alleged 'illusion of bitcoin liquidity'? Citation requested.

Posted Jan 15, 2018 10:04 UTC (Mon) by farnz (subscriber, #17727) [Link]

I did, yes. Off-by-one when counting my time units. Thanks!

The rest of my maths looks OK - it's just that one that I broke when confirming units, so the point still stands that Bitcoin isn't set up to serve a town of 100,000, let alone a country.

alleged 'illusion of bitcoin liquidity'? Citation requested.

Posted Jan 14, 2018 11:35 UTC (Sun) by anselm (subscriber, #2796) [Link] (2 responses)

The interesting thing to note about that picture is how the number of transactions isn't going up the way it used to (which it presumably would if Bitcoin was really catching on). This is because Bitcoin is running up against its built-in transaction limit. Credit card networks can typically handle 10,000 times the transactions per unit of time that Bitcoin can, and unlike Bitcoin they can build out their capacity if they have to.

alleged 'illusion of bitcoin liquidity'? Citation requested.

Posted Jan 18, 2018 3:01 UTC (Thu) by Garak (guest, #99377) [Link] (1 responses)

but bitcoin isn't the only cryptocurrency. Hopefully wikipedia will have (or already has) stats on all the top cryptocurrencies. And I expect bitcoin and its competitors to continue working on and solving their scaling problems. To the point that the political challenge will come more into focus. (Nations pushing back against the competitors to their traditional currency)

alleged 'illusion of bitcoin liquidity'? Citation requested.

Posted Jan 18, 2018 9:24 UTC (Thu) by anselm (subscriber, #2796) [Link]

So far nations don't appear to have a lot to worry about, and until crypto-“currencies” become useful to let normal people buy legitimate stuff that is actually worth having, with less hassle than doing it with actual money, a credit card, or PayPal would require, that is unlikely to change.

The problem with Bitcoin is that the issues it is facing now are mostly built into the system by design and are difficult to fix because the fixes require not only technical solutions but also political buy-in from entities that are strongly invested in the status quo (remember that something conceptually quite simple like increasing the block size resulted in a blockchain fork that gives no indication of going away). This also impacts other crypto-“currencies” because many of them basically hang off Bitcoin in some way (if only that you can only buy them using Bitcoin).

Remember that the people who benefit most from a crypto-“currency” are the ones who get in on it early and can hoard a comparatively large share of the available “coins” while they are still easy to acquire. The fabled Satoshi Nakamoto, for example, apparently sits on more than 1 million Bitcoins, which would be a nice retirement package if you could actually convert it, or an appreciable fraction of it, to real money (which you can't). Similar considerations apply to most other “coins”, where the main idea behind an ICO is to get people to give you free money without your having to deal with pesky entities like the SEC.

yes, hashchaining is useful

Posted Jan 12, 2018 16:59 UTC (Fri) by nix (subscriber, #2304) [Link]

I don't see why you have this fixation on exchange rates. All that says is that speculators are piling into it, not that it's actually *useful* for anything other than as a speculative instrument. (Indeed, wildly rising exchange rates are the sort of thing you don't want to see in a currency, because it degrades its utility as a store of value.)

yes, hashchaining is useful

Posted Jan 12, 2018 16:58 UTC (Fri) by nix (subscriber, #2304) [Link] (26 responses)

Now, now! Bicycle couriers are practical and useful for all sorts of purposes (try getting a package through rush-hour London via FedEx in less time than a bicycle courier.)

yes, hashchaining is useful

Posted Jan 12, 2018 18:53 UTC (Fri) by anselm (subscriber, #2796) [Link] (25 responses)

Sure. I don't disagree that bicycle couriers have their uses – just like BitCoin is copacetic if you want to collect ransom payments from people whose files you have surreptitiously encrypted. It's only that they are unlikely to become a full replacement for the likes of FedEx anytime soon.

(In fact, once suborbital rocket launches become commercially viable for cargo, FedEx will be able to accept packages in Tokyo and deliver them in San Francisco the day before. Beat that, bicycle couriers.)

yes, hashchaining is useful

Posted Jan 12, 2018 20:55 UTC (Fri) by Garak (guest, #99377) [Link] (24 responses)

"BitCoin is copacetic if you want to collect ransom payments from people whose files you have surreptitiously encrypted. "

Setting aside the vocab lesson, people who would even consider paying ransom to hackerZ instead of going to their adequate backups deserve extremely little sympathy. Yes, I know it makes for successful sensational clickbait mainstream journalism, but this is LWN. We understand hard disk failure rates and off-site backups around here.

yes, hashchaining is useful

Posted Jan 12, 2018 21:31 UTC (Fri) by Cyberax (✭ supporter ✭, #52523) [Link] (23 responses)

Bitcoin also enables untraceable (for now) money laundering.

It's also a real enabler for a number of underappreciated industries like people kidnapping that are stymied by over-regulation right now. An honest kidnapping enterprise simply can't collect ransoms without payments being easily traced by the government. Even cash is not king anymore for any serious purpo$e$.

allegations of bitcoin being used for untraceable money laundering

Posted Jan 12, 2018 22:24 UTC (Fri) by Garak (guest, #99377) [Link] (18 responses)

disclaimer: I'm the sort of person who is not very impressed with Tor(tm).

"Bitcoin also enables untraceable (for now) money laundering."

Suppose I am a successful crack cocaine dealer wishing to untraceably launder a stack of $100,000 USD utilizing Bitcoin, without fearing that ordinary procedures available to the FBI could be used to get me locked up in jail. How would I go about doing that _exactly_? I am skeptical. If what you said was true, I would expect a search for "anon" or "untra" on the wikipedia bitcoin page to have more interesting results.

allegations of bitcoin being used for untraceable money laundering

Posted Jan 12, 2018 23:01 UTC (Fri) by Cyberax (✭ supporter ✭, #52523) [Link] (17 responses)

"You're holding it wrong" (tm)

Look at exchanges. You basically put your money into an exchange's wallet, do some trades between alt-currencies and get back a fresh new Bitcoin wallet. Law enforcement will have to request logs from the exchange to trace the funds (good luck with it, yeah).

Many exchanges also provide helpful trading APIs so you can even automate this process, chaining several of them together.

allegations of bitcoin being used for untraceable money laundering

Posted Jan 13, 2018 0:45 UTC (Sat) by Garak (guest, #99377) [Link] (16 responses)

"Law enforcement will have to request logs from the exchange to trace the funds"

The Horror. The Horror. Next thing you know, we'll be forcing the donut patrol to stand up and walk across the street instead of hacking across the street from the comfort of their chair.

allegations of bitcoin being used for untraceable money laundering

Posted Jan 13, 2018 4:59 UTC (Sat) by Cyberax (✭ supporter ✭, #52523) [Link] (15 responses)

This is not "walking across the street", this is "climbing Everest". Some of the exchanges might not have a legal address at all, some might be registered in China. Good luck getting the logs.

The situation used to be similar in classic banking, but putting pressure on real banks is easy because they have to be a part of the SWIFT network and they have to have correspondent accounts in major banks. Eventually the most egregious "washing machine" banks were forced to fix their behavior.

With Bitcoin one doesn't need any government registration to open a money laundry. And this is not a theory, there are tons of them operating right now.

allegations of bitcoin being used for untraceable money laundering

Posted Jan 13, 2018 7:52 UTC (Sat) by Garak (guest, #99377) [Link] (14 responses)

"The situation used to be similar in classic banking, but putting pressure on real banks is easy because they have to be a part of the SWIFT network"

Except perhaps(?) for banks that are willing to engage in criminal money laundering, and choose not to be part of any government mandated network? I don't quite yet (but perhaps i haven't thought about it enough) see how Bitcoin is the true enabler of the moneylaundering scenarios you describe. Please try to walk me through the details, illustrating a few common examples of historical non-bitcoin based moneylaundering techniques, as well as bitcoin ones.

Yeah, thinking about having a foreign bank criminally cooperating, I can't see that using Bitcoin makes anything easier or more hidden from the FBI/IRS. At some point, the supposedly clean money needs to end up in a U.S. bank. Whether it came from a fly-by-night foreign bitcoin exchange, or a fly-by-night foreign bank or entity posing as a foreign bank, doesn't seem to fundamentally change the equation AFAICT??

allegations of bitcoin being used for untraceable money laundering

Posted Jan 13, 2018 8:08 UTC (Sat) by Garak (guest, #99377) [Link]

Or perhaps another angle to try to suss out the heart of the issue would be to compare any scenario you might think of, to an alternate using physical gold, instead of bitcoins. Sure, there may be increased shipping fees, but lets presume that is not a burdensome enough overhead to worry about, as the real optimization targeted is ability to not to have a greater chance of being arrested for the moneylaundering and/or other crimes.

I.e. what is it about the gold version of the scenario, compared to bitcoin, that makes it easier for the authorities to catch the bad guys?

allegations of bitcoin being used for untraceable money laundering

Posted Jan 13, 2018 8:54 UTC (Sat) by Cyberax (✭ supporter ✭, #52523) [Link] (12 responses)

> Except perhaps(?) for banks that are willing to engage in criminal money laundering, and choose not to be part of any government mandated network?
A bank that is not connected to the SWIFT network will be rather useless, since it won't be able to accept wire transfers. It'll be limited to cash operations only.

> I don't quite yet (but perhaps i haven't thought about it enough) see how Bitcoin is the true enabler of the moneylaundering scenarios you describe. Please try to walk me through the details, illustrating a few common examples of historical non-bitcoin based moneylaundering techniques, as well as bitcoin ones.
It's quite easy. Basically, a bank is used as an intermediary for payments between fictitious companies, registered with fake documents. This is usually made possible by (usually intentionally) lax due diligence from the bank's side.

So when the law enforcement comes, they simply are not able to find who made payments and who are the ultimate beneficiaries of the fake companies.

Example: http://eng.lsm.lv/article/economy/economy/latvian-banks-w...

allegations of bitcoin being used for untraceable money laundering

Posted Jan 13, 2018 9:21 UTC (Sat) by Garak (guest, #99377) [Link] (11 responses)

"It'll be limited to cash operations only."

And how is that a problem(ic significant limitation) in the given context? It seems to me the only fundamental difference between cash, gold, and bitcoin as far as the situation with the criminals and authorities is concerned, is that the criminals have to pay less money to ship fewer kilograms of mass across national boundaries. So it benefits the criminals, but only as a small shipping overhead cost. Not as a cost of being more or less able to evade detection and apprehension by authorities. However I keep seeing implications that this fundamentally is about something different than shipping costs of gold or paper currency.

allegations of bitcoin being used for untraceable money laundering

Posted Jan 13, 2018 23:36 UTC (Sat) by Cyberax (✭ supporter ✭, #52523) [Link]

You can not easily ship large amount of currency between countries. That's also why "laundromat" banks are now mostly extinct.

With Bitcoin trans-border transactions are easy. You can have a "washing machine" exchange in Peru that is doing laundry for gangsters in Croatia buying drugs from Afghanistan. With pretty much zero chances for the law enforcement to track monetary flows, as you don't need anything but a server to set up a new exchange.

Heck, there are even "exchange goes out of business" sureties that use Etherum now.

allegations of bitcoin being used for untraceable money laundering

Posted Jan 17, 2018 14:11 UTC (Wed) by mstone_ (subscriber, #66309) [Link] (9 responses)

I guarantee that if you try to board a commercial flight with $100k worth of gold, questions will be asked.

allegations of bitcoin being used for untraceable money laundering

Posted Jan 17, 2018 22:11 UTC (Wed) by edgewood (subscriber, #1123) [Link] (8 responses)

Current price of gold is $43/gram. Let's call that $40 to be conservative and make the math easy. So $100,000 in gold is 2.5 kilograms, a little over 5.5 pounds.

Gold is 19.3 grams per cubic centimeter, so 2.5 kilos of gold occupies a little less than 130 cubic centimeters. Therefore $100k of gold fits into a box a little smaller than 7.2 cm on both sides and 2.54 cm deep (less than 3 inches on a side and an inch deep).

If I were working for Dr Evil and was tasked with commercially transporting gold, I'd want to do some testing on what gold looked like on an Xray machine vs aluminum or steel, but feel fairly confident I could hide that small of an amount of material from anything less than a disassembly inspection.

Or just charter a private jet and take a million or two in a suitcase.

allegations of bitcoin being used for untraceable money laundering

Posted Jan 17, 2018 22:41 UTC (Wed) by farnz (subscriber, #17727) [Link]

Gold appears opaque on an airport x-ray, and opaque blocks get your luggage opened and hand-checked - as would (e.g.) a gold-lined suitcase. Your box is big enough to be worth a manual check, and most countries (USA included) require you to declare high value items if you're crossing an international border, which would cover your gold box.

Fundamentally, the state is well aware of the risks of gold smuggling, and already knows how to catch it for any commercially viable amount - you'd have to carry under $10k at a time to even have a chance of slipping the net.

allegations of bitcoin being used for untraceable money laundering

Posted Jan 17, 2018 22:49 UTC (Wed) by karkhaz (subscriber, #99844) [Link] (6 responses)

Gold is totally opaque to x-rays, which is very unusual, so it appears completely black on airport scanners. Thus, I hope you're not flying to/from the US, lest you end up dealing with TSA agents of the same breed that held up a guy for bringing his Nobel Prize medal through.

http://www.telegraph.co.uk/news/worldnews/northamerica/us...

> ‘What’s it made out of?’ I said, ‘gold.’ And they’re like, ‘Uhhhh. Who gave this to you?’ ‘The King of Sweden.’

allegations of bitcoin being used for untraceable money laundering

Posted Jan 17, 2018 23:19 UTC (Wed) by nybble41 (subscriber, #55106) [Link] (4 responses)

> Gold is totally opaque to x-rays, which is very unusual, so it appears completely black on airport scanners.

Solid gold, sure. But what about a wad of gold thread, or a gold-based aerogel, or thin perforated plates? One of gold's useful properties is the wide range of shapes it can be formed into, and at least some of those shapes should allow some x-rays through—perhaps enough to make it look less suspicious on the scanner.

allegations of bitcoin being used for untraceable money laundering

Posted Jan 18, 2018 0:35 UTC (Thu) by andresfreund (subscriber, #69562) [Link]

I think it'd still show up. But it seems to be easy enough to "hide" it along the structural support of your carry on and such.

allegations of bitcoin being used for untraceable money laundering

Posted Jan 18, 2018 1:07 UTC (Thu) by karkhaz (subscriber, #99844) [Link] (2 responses)

Which brings us very neatly to the other witty anecdote about mischief with Nobel Prizes: György de Hevesy dissolved a pair of Nobel Prize medals into a flask of aqua regia so that they wouldn't be stolen by the Nazis, and then precipitated the gold out of the solution after the War so that the Nobel committee could re-cast the medals.

https://en.wikipedia.org/wiki/George_de_Hevesy#World_War_...

I suppose you could try similar thing if you could find a shampoo bottle or some other inconspicuous container, that would not itself be dissolved by aqua regia---as long as you remember not to bathe in it after you land.

allegations of bitcoin being used for untraceable money laundering

Posted Jan 18, 2018 1:11 UTC (Thu) by sfeam (subscriber, #2841) [Link]

It would still be opaque to X-rays

allegations of bitcoin being used for untraceable money laundering

Posted Jan 18, 2018 2:17 UTC (Thu) by anselm (subscriber, #2796) [Link]

This would probably fall foul of the ban on large amounts of liquids that is in force for hand luggage. That is, if you disregard the fact that aqua regia is bright orange in colour and emits fumes, which would make it very conspicuous anywhere outside of a chemistry lab (you could probably put an Irn-Bru label on the bottle to make the colour believable but you should make sure no Scots get near – they might drink from it).

No airline will let you take dangerous chemicals on board, anyway. And it's not really good for the gold, either.

allegations of bitcoin being used for untraceable money laundering

Posted Jan 18, 2018 4:54 UTC (Thu) by Cyberax (✭ supporter ✭, #52523) [Link]

So alloy it with titanium or aluminum and use it to cast one of the "metallic" luggage bags: https://www.amazon.com/Goplus-Aluminum-Suitcase-Briefcase...

Extra X-Ray thickness will not be noticeable because gold will be spread over a large surface area. Extra weight will also be hard to detect.

It's like you guys never smuggled gold, rare earths and plutonium into the United States.

yes, hashchaining is useful

Posted Jan 12, 2018 22:54 UTC (Fri) by nix (subscriber, #2304) [Link]

I hope criminals keep thinking this, because it's flat-out wrong. Bitcoin is insanely traceable: every single transaction ever is immutably recorded in the blockchain. Of course, real-world identities aren't recorded in there... but at some point your average criminal is going to want the gains in an actual currency he can actually spend, and that's when real-world identities get involved, and that's when the law is pouncing. :)

yes, hashchaining is useful

Posted Jan 14, 2018 12:01 UTC (Sun) by ras (subscriber, #33059) [Link] (2 responses)

> Bitcoin also enables untraceable (for now) money laundering.

All joking aside, Bitcoin is no longer the favoured way of doing this. Unlike Bitcoin, Monero was designed to be anonymous. That doesn't really matter while mixers and it's equivalents like SatoshiDICE are tolerated. But now that Bitcoin's fees are $34 versus $4 for Monero, the oppressed traders you mention are discovering the benefits of privacy guaranteed by crypto, not government disinterest.

Give these people were the true backbone of Bitcoin, this enlightenment may well be the death knell the end of the first successful crypto currency to crawl out of the primordial cyber soup. It''s sad to watch, but I guess future generations will view it with the same disinterest they have for the extinction of the Lucy's (Australopithecus afarensis) mob.

> Suppose I am a successful crack cocaine dealer wishing to untraceably launder a stack of $100,000 USD utilizing Bitcoin, without fearing that ordinary procedures available to the FBI could be used to get me locked up in jail. How would I go about doing that _exactly_?

Create an wallet, which is effectively a random number that no one can trace. Ensure payment is made to said random number. This effectively arranges for the transfer of traceable fiat to a random number, denominated in Bitcoin. That isn't much use until you reverse the process. Here are two approaches:

1. Redeem those bitcoins in a country / bank that is out of reach of your country, or

2. Transfer the funds to a mixer. Eg, bet the entire lot at SatoshiDICE. The money from your anonymous wallet will put into the pool of all other bet placed at the time. SatoshiDICE will then transfer the outcome of your bet from that mixed pool to a wallet you nominate. I have no idea what the odds or payout are, but you can imagine it might be double if you win, or perhaps 3% less if you lose. In the long run you will lose 1% or something. That's the house fee for the laundering service.

This sort of privacy was always available to someone who was willing to pay a few $10K for it, as the Panama Papers made plain. Of course the Panama Papers are also the reason I used the word "was" and not "is". Now crypto currencies make this sort of privacy available to the rest of us. But as Cyberax points out the "rest of us" includes ransomware and kidnappers, so maybe that's not such a great thing. But the libertarians should be happy, as we are all equal now.

> A bank that is not connected to the SWIFT network will be rather useless, since it won't be able to accept wire transfers. It'll be limited to cash operations only.

Yes, that's true. But have you looked at Ripple's client list? It's bloody big, and it wants to replace SWIFT. And banks connected to Ripple but not SWIFT *can* accept wire transfers from other banks connected to Ripple. Not that this has anything to do with crypto currencies. Even Ripple's internal currency, RXP, which they call a crypto currency has very few of the properties I said above all crypto currencies had in common.

yes, hashchaining is useful

Posted Jan 18, 2018 3:08 UTC (Thu) by Garak (guest, #99377) [Link]

"1. Redeem those bitcoins in a country / bank that is out of reach of your country, or"

That doesn't result in 'clean money' that you can spend in your home country and not have trouble explaining where it came from to the first authorities that decide to ask.

Likewise, if you have the cooperation of a corrupt foreign casino, you can always claim to have just won the money at that casino. So make sure that whatever you describe isn't boiling down to something that is not a more effective strategy than that.

as much techno-liberty/privacy/security as you can afford, sigh

Posted Jan 18, 2018 5:10 UTC (Thu) by Garak (guest, #99377) [Link]

"Of course the Panama Papers are also the reason I used the word "was" and not "is". Now crypto currencies make this sort of privacy available to the rest of us."

Hashtag - "As Much Privacy, Security, and Freedom as you can afford."

The important aspect of bringing parity between the rich elites and the masses as far as advanced technological capability (vis a vis privacy, security, currency liberty, and all other fun stuff) is that it facilitates the only forseeable way to get law/{s,enforcement} to begin to balance justice amongst those classes. That and the Leaker method you highlighted. But absent the ability to conjure a Snowden, the way to get good law wrt to tech based privacy/currency-liberty is to enable the masses to be as nefarious as the monied elites previously were. If the shenanigans are only being pulled by the 0.1%, it's too easy for them to get their mainstream media pal$ to hype the narrative that better laws aren't needed. That and the imbalance was clearly a form of injustice to begin with. Of course there will always be lots of ways the rich will be more powerful, but it seems worthwhile to level the bigger playing fields as much as and whenever possible.