7.5 Million in Bitcoins buried in landfill

Miscellaneous and Personal Stuff I Must Share
101

Let’s be clear on 2 things:

  1. Most forms of encryption are vulnerable to quantum computing attack. When those capabilities become widespread, all financial institutions will be at risk.
  2. There’s no such thing as a “Bitcoin”. If an older wallet with p2pk vulnerabilities has a significant balance that needs to be protected, then the holder just creates a new wallet and transfers the balance to it.

Banks have been playing a cat-and-mouse game with cryptographic vulnerabilities for at least 500 years now. This is not new and it will never change.

There’s a risk of alllowing any banking consumer to control their own banking secrets. No banking consumer is required to do that with Bitcoin, and it’s basically impossible for them to blunder into it.
Yes, I have no problem walking it back to that position.

I feel like it’s a reach to zoom in on a highly exceptional edge case in crypto, ignoring a simple hole in traditional banking that happens all the time, and pretend that they’re in any way comparable. No technology is bulletproof in isolation. It depends on social constructions of trust and security. If you want to compare 2 systems then it needs to be apples-to-apples, not one part of the tech stack vs. a different whole system.

The fact is that what you want from a bank account is that you can get your funds back, and if not, you’re protected. Nobody really needs to erase their fingerprints or shred their identity to lose access to their funds in a traditional bank account. Someone fakes your document, empties your account, routes it through multiple destinations to countries with weak banking protections. Maybe your bank’s fraud insurance isn’t so great. It’s unfortunately not common for people to lose millions of dollars that way in traditional banking!

So there are comparable risks, just in different shapes, and I’m not really willing to concede that’s a major flaw of Bitcoin without acknowledging the other side of the tradeoff, that Bitcoin doesn’t require you to rely on some other bank’s regulatory procedures. You can roll your own if you feel competent.

And I would like to add here that for that reason, DIY bitcoin is immune to risks of regulatory collapse. For people who think their money is entirely safe in American banks, all of that security is socially constructed. All it takes is for a combination of bad actors to erode regulation, erode overside, erode enforcement, and erode personal rights to introduce massive risks.

It is not unthinkable that a cabal of such rogues could gain control of the US government someday, resulting in widespread corruption of the banking system as we currently understand it. That day may be much, much closer than many of us are comfortable admitting.

102

This is true, but I would also point out that a DIY coiner also isn’t part of a fractional reserve banking system, they’re not making any government-backed loans. So if they screw up, it doesn’t add any systemic risk, just personal risk. And that person went to some effort to assume that personal risk, so y’know, I’m really not sure how much society is supposed to care about him.

103

Bitcoin isn’t really anonymous, since all transactions are visible to all parties. You don’t necessarily know who owns a given wallet, but if you’re engaging in transactions it won’t be too hard to figure out.

“You’re under arrest. How’d you get this kilo of coke?”
“I bought it from @HMS_Irruncible with Bitcoin.”
“What’s his wallet?”

And anyway, we society shouldn’t want an anonymous financial system. Suppose someone owes you money, and you get a judgement against him. When the courts can’t see his assets, how do you collect?

As I’ve said, I have yet to hear someone make a good use case for it.

104

Tracers in the Dark goes into detail about how anonymity has been breached in investigation of crypto crimes

105

I read something somewhere suggesting that the CIA was responsible for developing Bitcoin initially and if it’s completely traceable like that, I could see it. Other forms of currency; cash, gold, etc, aren’t as traceable as this.

106

That’s my pet hypothesis (well, them or one of the other three-letter agencies), but I don’t know if anyone else has ever found any evidence for it.

107

I don’t really care to get into the fundamental ignorance and misconception here, I’ve done it enough to realize it’s futile. I would just point out that people get away with massive financial crime in the existing heavily-documented financial system, so I don’t see how anyone could think it would actually be easier in a network with no documentary requirements, where it’s not hard for someone to create a thousand anonymous single-use wallets to structure transactions for anonymity.

By default the anonymity is not perfect. Nothing in the physical or informational world is free from observation, but with care the anonymity is more perfectable than the alternatives.

Again I don’t really care to get into the anonymity discussion. I’ve found that it’s almost always fueled by very fundamental misconceptions about how the tech works, held by people who actively hate the tech and everyone associated with it, meaning there’s zero chance of having a reasoned discussion about its strengths and weaknesses vis-a-vis anonymity.

108

It seems that virtually all your arguments to anyone in this thread are “you don’t know what you’re talking about and I don’t want to explain it to you.” with a side of “Other things also have problems.”

If I can tie a drug deal to a specific wallet, and a specific person to that wallet, it doesn’t matter if he has a thousand more. I know that this person is selling drugs and I can tie him to that transaction. That’s not anonymous. What about this is fundamentally incorrect?

109

Of course the anonymity isn’t perfect, and neither is anything else perfectly anonymous. But gold and cash are both a heck of a lot more anonymous than bitcoins. With gold, there’s no way at all to track who the prior owners of a given piece of gold were. Cash has serial numbers that could, in principle, be traced, except almost nobody ever records them (even if someone does turn up with bills that were known to have been stolen from a bank, say, they can just say “I dunno, I guess I got them in change from some store or another”, and there’s no way to make the connection).

Bitcoin, on the other hand, is only anonymous as long as it’s never actually used. Once you find out that someone received bitcoins (which might be as simple as them telling the police when asked, because they’re law-abiding individuals who don’t want to be involved in anything criminal), there’s a public record of the exact date and time when they got them, and what wallet they came from. And they can then look back in their records and say “Oh, yes, that must have been that fellow who ordered such-and-such product from me; I shipped it to this address”.

110

It’s exactly like the stock market. Dumping thousands of BTC into the market will have the same effect as dumping hundreds of thousands of MSFT shares into the exchange. Their prices will take a huge hit requiring months to recover from. Maybe even years for BTC. The smarter play would be more like selling 10 coins a month until he’s fully divested.

111

As pointed out above, tens of billions of dollars of bitcoin are traded every day. Unloading $1 billion worth at once might cause a momentary dip, but it would be a manner of hours for the price to recover, not months.

112

Bank records require a subpoena to obtain. But bitcoin records are entirely public - so someone like Sarah Meiklejohn can, without need to have police powers, do this:

To demonstrate the usefulness of this type of analysis, we
turned our attention to criminal activity. In the Bitcoin economy,
criminal activity can appear in a number of forms, such as
dealing drugs on Silk Road or simply stealing someone else’s
bitcoins. We followed the flow of bitcoins out of Silk Road (in
particular, from one notorious address) and from a number of
highly publicized thefts to see whether we could track the bit-
coins to known services. Although some of the thieves attempted
to use sophisticated mixing techniques (or possibly mix services)
to obscure the flow of bitcoins, for the most part tracking the
bitcoins was quite straightforward, and we ultimately saw large
quantities of bitcoins flow to a variety of exchanges directly from
the point of theft (or the withdrawal from Silk Road).

113

There was a case last year (no cite - sorry) where the operator of an illegal porn site was prosecuted and jailed.

All his transactions were in Bitcoin via the “dark web,” but at some point, he needed to exchange crypto for cash. Apparently, that was how the Irish Garda were able to identify and arrest him.

114

What I’m doing here is explaining one weakness at a time to anyone who cares to understand it, and I’ve had these conversations long enough to know that 2 things are true:

  1. The other party has fundamentally misunderstood the technology in whole or in part.
  2. When the misunderstanding is addressed, they roll the goalposts to some other aspect that they don’t understand.
  3. When all the misunderstandings are addressed, then they point to some high-profile case where a person with incredibly poor security practices got them caught, and pretend that the human error is evidence of a technical flaw.

I dropped by this thread to address the misunderstanding that Bitcoin is uniquely flawed because a wallet password can be lost. I have now demonstrated that. Folks who are determined to find a “gotcha” have now wheeled the goalposts all the way to phase 3 above. I’ve learned from experience that it’s all goalpost-rolling from here, nobody is going to learn anything new because their purpose is not to learn, so that’s where it is.

115

You see how the author trumpets the “cracked cases” where the suspect simply transferred funds from point A to point B? You see how they neatly hand-wave away the outcome of using “sophisticated mixing techniques (or possibly mix services)”? The author is selling a cat-and-mouse potboiler book, so they’re purposely talking about the lowest-hanging fruit, and framing it as if they cracked an unknown fatal flaw in the technology.

In reality, these so-called “flaws” are an intended and very well-known part of the tamper-proofing mechanism. Many criminals are sloppy, lazy, and dumb. They didn’t bother looking into security practices, they thought the tool would do everything for them. It’s like buying a sophisticated digital lock and setting the password to “1234”. Nobody did any sophisticated technical work here, a few hacks picked off some low-hanging fruit and sold it as some kind of mystery thriller pitched to an audience who’s none the wiser.

116

Sorry about that - I didn’t provide the source of the quote I provided. It was published in the December 2013 (Volume 38, Number 6) issue of Login, the newsletter of USENIX: The Advanced Computing Systems Association. The author is currently a professor of cryptology at University College in London, but she did the work she describes in UC San Diego.

117

Just FTR I stopped responding because your last point did not dispute anything that I have said, and indeed seemed to be conceding the point:

It’s almost as if that’s exactly what I said back in post 93.

The point of dispute was about access to accounts. There was no plausible way that humans would forever lose access to a traditional bank account, as is happening in the OP with bitcoin. Instead though you’ve been talking mostly about risks with transactions and haven’t described any plausible scenario of this kind of permanent account lock-out.
But at least you’re acknowledging that every time you discuss this topic there’s a goalpost-shift.

118

There was a poster here who irretrievably lost the password to his bitcoins. I can’t remember who it was, though. He posted about it, I’m guessing, 6 or 7 years ago. It happened several years earlier.

119

I don’t think that I posted about it previously, but I did lose my private key several years ago. I had purchased some bitcoin specifically to pay for a software license for a program that…did something. Anyway, I think I rounded it up one bitcoin when I purchased them, and each one was worth around $14 or $15 then. Theoretically, if I can find the private key, I own a bitcoin. The current value is over $100K, but I manage to think of it as a loss of just the original <$15 it was in 2011.

120

With those sorts of things over a decade or more, one also has to figure in the probability that you’d have cashed out your holding somewhere along the way.

Folks who got or bought early shares of e.g. Microsoft who actually held them for the whole ~40 years unto today have done real well. But a lot of early holders did sell out somewhere along the way. We all had a chance to buy some once it was publicly traded. Few of us did, and even fewer would have held them unto today. I for one did not. So it’s silly for us to kick ourselves about “If only I’d bought a few shares back in 1986 and held onto them, I’d be a fatcat now.”