# Feds seize bitcoins - how & what then? **URL:** \ **Category:** Factual Questions\ **Created:** [October 3, 2013, 11:40am UTC](https://boards.straightdope.com/t/feds-seize-bitcoins-how-what-then/670260 "2013-10-03T11:40:39Z")\ **Posts on this page:** 11\ **Page:** 2
**Author:** ![DrDeth](https://avatars.discourse-cdn.com/v4/letter/d/b487fb/32.png) [@DrDeth](https://boards.straightdope.com/u/DrDeth)\ **Post date:** [October 6, 2013, 6:49pm UTC](https://boards.straightdope.com/t/feds-seize-bitcoins-how-what-then/670260/21 "2013-10-06T18:49:16Z")
Actually if the feds want to hurt Bitcoins they need to re-release the coins back into circulation, thus driving down the value. ---
**Author:** ![Measure\_for\_Measure](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/measure_for_measure/32/557_2.png) [@Measure\_for\_Measure](https://boards.straightdope.com/u/Measure_for_Measure)\ **Post date:** [October 6, 2013, 7:03pm UTC](https://boards.straightdope.com/t/feds-seize-bitcoins-how-what-then/670260/22 "2013-10-06T19:03:41Z")
> [@Nancarrow](#): > > Bitcoinistas see this as a strength rather than a weakness of bitcoin. It works fine as long as bitcoins are infinitely divisible, which I gather they are (they are currently stored to eight decimal places but I’m told this can be extended painlessly in the future as needed). I’m sold on the maths behind it. I have no understanding of economics, I’m told that permanent deflation is bad but I’m not convinced about that. Deflation is bad only insofar as it exists against the common currency you are operating with. Few get paid in bitcoins and they are used for only a very narrow set of transactions within any economy. Bitcoins are a lot like precious metals in an economy with fiat currency. Mostly harmless, insofar as deflation is concerned. ---
**Author:** ![Punoqllads](https://avatars.discourse-cdn.com/v4/letter/p/d2c977/32.png) [@Punoqllads](https://boards.straightdope.com/u/Punoqllads)\ **Post date:** [October 6, 2013, 11:11pm UTC](https://boards.straightdope.com/t/feds-seize-bitcoins-how-what-then/670260/23 "2013-10-06T23:11:16Z")
The best way for the Feds to both use the bitcoins to their advantage and to reduce the perceived value of bitcoins is to start using the acquired bitcoins in sting operations. ---
**Author:** ![sweet\_chemist](https://avatars.discourse-cdn.com/v4/letter/s/b5e925/32.png) [@sweet\_chemist](https://boards.straightdope.com/u/sweet_chemist)\ **Post date:** [October 6, 2013, 11:20pm UTC](https://boards.straightdope.com/t/feds-seize-bitcoins-how-what-then/670260/24 "2013-10-06T23:20:23Z")
Reading about the seizure made me wonder, does anyone know what do the authorities do with the cash they seize in a drug bust say? Do they keep it? Destroy it? ---
**Author:** ![DrDeth](https://avatars.discourse-cdn.com/v4/letter/d/b487fb/32.png) [@DrDeth](https://boards.straightdope.com/u/DrDeth)\ **Post date:** [October 7, 2013, 12:43am UTC](https://boards.straightdope.com/t/feds-seize-bitcoins-how-what-then/670260/25 "2013-10-07T00:43:13Z")
> [@Punoqllads](#): > > The best way for the Feds to both use the bitcoins to their advantage and to reduce the perceived value of bitcoins is to start using the acquired bitcoins in sting operations. Good point. ---
**Author:** ![DrDeth](https://avatars.discourse-cdn.com/v4/letter/d/b487fb/32.png) [@DrDeth](https://boards.straightdope.com/u/DrDeth)\ **Post date:** [October 7, 2013, 12:55am UTC](https://boards.straightdope.com/t/feds-seize-bitcoins-how-what-then/670260/26 "2013-10-07T00:55:48Z")
> [@sweet\_chemist](#): > > Reading about the seizure made me wonder, does anyone know what do the authorities do with the cash they seize in a drug bust say? Do they keep it? Destroy it? After the trial, it’s seized and spent. ---
**Author:** ![Capt.Ridley\_s\_Shooting\_Party](https://avatars.discourse-cdn.com/v4/letter/c/cc9497/32.png) [@Capt.Ridley\_s\_Shooting\_Party](https://boards.straightdope.com/u/Capt.Ridley_s_Shooting_Party)\ **Post date:** [October 7, 2013, 2:34pm UTC](https://boards.straightdope.com/t/feds-seize-bitcoins-how-what-then/670260/27 "2013-10-07T14:34:06Z")
> [@Duckster](#): > > Then the feds go after Bitcoin for destruction of evidence and obstruction of justice. In other words, Bitcoin goes down as well. Go after who? Bitcoin isn’t a company, or a physical thing. It’s a distributed currency. There’s nobody to go after. ETA: as I understand it the bitcoins seized in the raid were being held in escrow by SilkRoad. They’re essentially money that has been spent by people trying to buy drugs being kept in a dedicated account until those drugs arrive. ---
**Author:** ![Nancarrow](https://avatars.discourse-cdn.com/v4/letter/n/c37758/32.png) [@Nancarrow](https://boards.straightdope.com/u/Nancarrow)\ **Post date:** [October 8, 2013, 6:15am UTC](https://boards.straightdope.com/t/feds-seize-bitcoins-how-what-then/670260/28 "2013-10-08T06:15:39Z")
> [@BigT](#): > > Now I understand why some are asking for the Fed, if they choose to destroy the data, to report which keys they are destroying. Those could then be mined again, right? Sigh. No. Bitcoins can’t be remined, as I said _repeatedly_. > [@brickbacon](#): > > Can’t anyone with the key or an fairly up to date image of the server Silk Road was hosted on, just steal all the money now? Or do you think the US Gov transferred all the money to its own accounts? With the key, yes. With the server image, no. Unless the key was stored on the server image, which would be a supremely stupid (and completely pointless) thing to do. As for the gov transferring the money, I believe they have already done this, haven’t checked the blockchain myself but everyone in the resurrected bitcointalk forums says so. > [@DrDeth](#): > > Actually if the feds want to hurt Bitcoins they need to re-release the coins back into circulation, thus driving down the value. It wouldn’t do very much, it’s some 20k bitcoins out of over 10 million. ---
**Author:** ![Learjeff](https://avatars.discourse-cdn.com/v4/letter/l/94ad74/32.png) [@Learjeff](https://boards.straightdope.com/u/Learjeff)\ **Post date:** [October 10, 2013, 3:41am UTC](https://boards.straightdope.com/t/feds-seize-bitcoins-how-what-then/670260/29 "2013-10-10T03:41:28Z")
> [@Lemur866](#): > > If they have the key to those coins, they can simply destroy all copies of the key and those bitcoins will be permanently inaccessible. You’re right that this isn’t technically destroying them, it’s more like dumping gold coins overboard on the high seas. The coins are still there at the bottom of the ocean, but no one will ever be able to use them. Right. > [@Nancarrow](#): > > Since it is essential to have the private key to a bitcoin address in order to spend the bitcoins at that address, I think it is fair to say that a bitcoin ‘exists’ in the location where its private key exists, be that a hard drive on a laptop, a server from a web service, or someone’s head. If the private key is destroyed, those bitcoins can never\* be spent again, so again I think it is perfectly cromulent to say that those bitcoins have been ‘destroyed’. So the feds could very simply destroy those bitcoins by deleting the wallet. What they cannot delete (and in fact this would work very much in their favour) is the transaction record in the blockchain - THAT is distributed all over the intertubes. So bitcoin is an interesting kind of money, in that you can destroy the money but you can’t destroy the evidence that it was used, how much it was, and who was involved in the transaction. Right – although there’s dispute about the “who” part. That is, if “who” is a number, yes. Attributing that number to an individual is possible if the person wasn’t very very careful. However, a careful (and capable) enough person might be able to avoid any traces. > [@brickbacon](#): > > Can’t anyone with the key or an fairly up to date image of the server Silk Road was hosted on, just steal all the money now? Or do you think the US Gov transferred all the money to its own accounts? The wallet would be password-protected, unless those holding the wallet are foolish. If someone has the data and is really good at crypto and has the processing resources and the password wasn’t terribly strong, it might be recoverable. > [@Measure\_for\_Measure](#): > > Deflation is bad only insofar as it exists against the common currency you are operating with. Deflation as a general rule is a terrible thing for a national or world economy, because it encourages hoarding rather than investment. However, bitcoins aren’t a dominant currency, they’re at most a hedge, and a deflationary hedge might just be ideal to drive the value up: it encourages hoarding the bitcoins, and the more people hoard them (and want to hoard them) the more valuable they become. So, bad for sawbucks, good for bitcoins. > [@BigT](#): > > Now I understand why some are asking for the Fed, if they choose to destroy the data, to report which keys they are destroying. If they report the keys, whover was quickest at spending them would win. I don’t believe there’s a way to destroy them. The most they could do is transfer them to the same account, and state that all bitcoins on that account would never be transferred again (the new keys go to the bit bucket). I doubt the transaction records for those keys would get deleted, so it’d really be no different than simply deleting the original keys, except maybe people would know exactly which ones went to limbo. ---
**Author:** ![sisu](https://avatars.discourse-cdn.com/v4/letter/s/df705f/32.png) [@sisu](https://boards.straightdope.com/u/sisu)\ **Post date:** [October 10, 2013, 4:22am UTC](https://boards.straightdope.com/t/feds-seize-bitcoins-how-what-then/670260/30 "2013-10-10T04:22:54Z")
> [@Diceman](#): > > Given the reputation bitcoins have (as a currency for drug smugglers and child pornography distributers), I’d imagine the instinctive reaction of the Feds will be to try to “destroy” the bitcoins. That doesn’t solve anything, it just raises the value of the ones already in circulation. The only thing that can ruin bitcoins is lack of confidence, which is what they may be trying to do here ---
**Author:** ![puddleglum](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/puddleglum/32/137_2.png) [@puddleglum](https://boards.straightdope.com/u/puddleglum)\ **Post date:** [October 10, 2013, 1:24pm UTC](https://boards.straightdope.com/t/feds-seize-bitcoins-how-what-then/670260/31 "2013-10-10T13:24:03Z")
Money has two purposes which are related, store of value and medium of exchange. The store of value of bitcoins is that inflation is supposedly impossible because only 21 million will ever be created. Not spending the seized bitcoins will make the others slightly more valuable. However, the primary function of money is medium of exchange. The fewer bitcoins that are being circulated the fewer people will be willing to take them and the fewer people that will be willing to spend them. This downward spiral would destroy bitcoins value as a medium of exchange. If they are no longer useful as a medium of exchange then they lose their use as a store of value. It is impossible to inflate confederate money as well but it is still worthless. What the Silk Road bust proves is that anonymity in online transactions is harder than people thought and if these types of websites are the primary marketplace where bitcoins are used, then bitcoins may be in trouble. [Previous page](https://boards.straightdope.com/t/feds-seize-bitcoins-how-what-then/670260.md?page=1)