The Bitcoin Strikes Back

smitty777 writes "Slashdot readers are no doubt informed of the infamous crash of Bitcoin. In fact, its demise was followed closely here. Wired has a recent article tracking Bitcoin's climb out of chaos. Valued at $17 before the crash, it had lost 90% of its value due to the hacking incident, down to a low of $2. It climbed back up to $3 in December, and is currently valued at $4. From the article: 'Bitcoin boosters have traditionally suggested that Bitcoin is an alternative to [the world's] currencies. But we'll suggest an alternative explanation: that Bitcoin is not so much an alternative currency as a "metacurrency" that allows low-cost and regulation-free transfer of wealth between nations. In other words, Bitcoin's major competitors aren't national currencies, but wire-transfer services like Western Union.' Still, Bitcoin has significant obstacles to overcome, such as covert mining, criminal uses, and other security issues." Amir Taaki of the Bitcoin Consultancy (who did an interview here a while back) disputes the reasoning and the conclusions in the Wired article.

Comments

Criminal uses?

[Anonymous Coward]

Regular money has criminal uses. The security concerns are also a non-issue as regular wallets and bank accounts are routinely stolen and money diverted.

Re:Criminal uses?

[Anonymous Coward]

But they're not completely untraceable.

http://reason.com/blog/2011/06/01/buy-illegal-drugs-anonymously

Yes, you're probably safer than using a credit card, but it's never going to be as safe as paying in cold hard cash.

Re:Criminal uses?

[lkcl]

Regular wallets can not be stolen with a computer program. Stealing money from a bank account is possible for a program, but there are ways to recover it after the fact, unlike with bitcoin.

err, no. the banks are willing to *refund* the "electronic" money that is stolen, by replacing it with another lot of "electronic" money. and neither the police nor the bank of england (or whatever) will print you another bank note with the same serial number, will they?

so all that's required to "emulate" the present situation is for someone to set up an online bitcoin bank, and to offer the same "insurance" against theft as regular banks. of course, that means that they will need to charge for the service, and will need to be happy with the massive fluctuation in the currency. actually what would happen is that that bank would bitch like hell that it was your fault and that you didn't have the right anti-virus updates, and would delay the insurance claim just like any other bank.

Re:Criminal uses?

[Anonymous Coward]

Many child porn sites and contraband trading sites on darknets take payment in bitcoin.

OMG! OMG! Think of the children!

There is no such thing as 'child porn sites' that take any payment. One must be a child molester and deliver 'original content' in order to be accepted in trading rings. This is well documented by the police and explain the difficulty for them to infiltrate the child pornography networks. eg: They will not rape a child to be accepted and gather evidence.

You are full of shit. Thank you for contributing to the set back of, freedom enabling, anonymous money usage by spreading disgusting FUD.

Re:Criminal uses?

[um... Lucas]

False. Why don't you read their reasoning itself rather than make up ideas?

(this from someone - me - thinks the whole bitcoin system is a worthless construct)

https://www.eff.org/deeplinks/2011/06/eff-and-bitcoin

Re:Criminal uses?

[cold fjord]

There is no such thing as 'child porn sites' that take any payment.

Really?

Feds: 100 Arrested in Child Porn Bust

One hundred people have been arrested as part of an undercover sting investigation into the largest known commercial child pornography business ever uncovered, U.S. government officials said today.

The two-year investigation began with Landslide Productions Inc., a Fort Worth, Texas, company owned by Thomas and Janice Reedy. Authorities said the company was at the center of an international child pornography business that distributed lewd pictures of children having sex to subscribers over the Internet. . . . .

Landslide grossed as much as $1.4 million in one month alone, the profits coming from monthly fees viewers paid to access child pornography Web sites, authorities said. Called Operation Avalanche, the undercover operation was based on intelligence developed from the Landslide investigation and encompassed 30 federally funded task forces formed to combat Internet crimes against children.

"During an Operation Avalanche search, we found a collection of videotapes produced by a suspect depicting the sexual abuse of several young girls. One of the girls was only 4 years old," said Chief Postal Inspector Kenneth C. Weaver.

The Reedys were convicted last year on charges that included sexual exploitation of minors and distribution of child pornography. A federal judge on Monday sentenced Thomas Reedy, 37, to life in prison and his 32-year-old wife, Janice, to 14 years in prison. . . . .

OMG! OMG! Think of the children

Maybe it's better if you, specifically, didn't. I'm not sure the outcome would be good for anybody.

Pedophiles should be seeking help instead of seeking children or pictures of children.

Re:Criminal uses?

[makomk]

That's what the police originally - and sensationally - claimed. Of course, it turns out that not only was the vast majority of Landslide Productions' business in legal pornography, but even then a lot of the payments to them were fraudulent and carried out by scammers who were funneling money from stolen credit card details through fake porn sites that used Landslide Productions as their payment provider. The police then went and withheld the evidence of credit card fraud to make their cases stronger...

Re:Criminal uses?

[BenEnglishAtHome]

Intro note for the folks who will ask "How do you know this stuff?" - I did some "e-commerce investigative lead development" for the Internal Revenue Service before I recently retired. As a result, I know a lot more about the way porn is sold online than I need or want to. Most porn companies just want to pay their taxes, minimized as far as their accountants can manage, and be left alone. On this particular sub-topic I can provide some insight.

Landslide was active from, per your link, 1997 to 1999. That was back when pictures of naked kids that were perfectly legal in some countries were considered porn in other countries. From a U.S. legal perspective, Landslide helped those markets equalize and that is, to be sure, facilitating the sale of child porn. The view from the producing countries was that U.S. puritanism was killing a small industry that was providing cash that fed, clothed, sheltered, and educated people who were badly in need of help. They couldn't understand why we criminalize pictures of what they could see just by going to the beach on a warm summer day.

The amount of actual, nobody-could-possibly-argue-to-the-contrary child porn showing adults raping little kids that was sold with the assistance of Landslide was insignificant to nonexistent. Some of their customers possessed bad materials and you'll note that in your link the phrasing of the police spokesman ("During an Operation Avalanche search, we found a collection of videotapes...") makes it clear that the unambiguously bad stuff they found wasn't sold via Landslide but was merely found in the possession of Landslide customers. The Landslide bust, more than anything else, gave the police probable cause to execute search warrants on the customers. Making up the lists of customers, getting the warrants, and executing them was a separate action from the Landslide bust; it was called Operation Avalanche. There's nothing in the linked article to indicate that the real CP uncovered during Avalanche was actually sold by Landslide but it's pretty clear from the way the article is written that either the author or the LEO sources from which the info was obtained would like the reader to confuse these two and not realize that they were separate operations.

There's dubious LEO-spawned "look how we're making the world a better place" PR-spew designed to demonize a couple of folks who ran a credit card processing service. There's also facts. Please stop confusing the two.

tl;dr - GP was basically right. There are always (literally, in the entire world, counting the WWW, .onion sites, and Freenet) one or two "child porn sites" that take payment but they never survive long. They're a statistical blip. It is essentially correct (and, often, perfectly correct) to say that such sites do not exist, deliberately misleading LEO press releases notwithstanding.

Re:Propaganda

[Goaway]

Miners dont make the network;

Actually, it is the miners that literally make the network.

You've no idea what you're talking about

[Weezul]

Bitcoin is the most traceable "currency" in the world. It's just that bitcoin accounts don't have names attached, making them less tracable than bank account transfers, credit cards, etc., but certainly you can trace them, and ask the first legit possessor how they obtained them.

There should probably be an anti-fraud protocol that attempts to trace the paths of fraudulently transferred bitcoins. You could establish "super" civil rights protections around it that complied with the tightest civil liberties rules in various countries, much like wikileaks did for journalism, but ultimately provided a sensible framework for ex-post-facto dispute resolution.

Mod parent UP please!

[Burz]

Bitcoin transactions are very traceable and there is no indirection or anonymization built into the software. The GP doesn't know what he is talking about.

Re:That's how money works - a shared hallucination

[subreality]

For instance, a break through in prime factorization (or however bitcoins are created) that is kept secret could mean that someone generates a ton of money out of thin air, which are impossible to identify apart from normal bitcoins (as they would be legitimate bitcoins).

They're created through brute forcing SHA256 hashes to meet a specific criteria. As the global hashrate rises, a difficulty factor is automatically adjusted to keep generation constant at 300 per hour.

If you invent an inexpensive piece of hardware that can push several orders of magnitude more SHA256 hashes per joule, you will successfully capture a disproportionate percentage of those 300 coins per hour. You do not get to generate unlimited coins - you just asymptotically approach 300/hour.

In fact, this has already happened: hashing used to be done on CPUs at about 10-20 MHash/s per core; then the RadeonHD happened. Suddenly some people had access to hundreds / thousands of "cores" (they're vector processors, practically miniature Crays for $200 a pop for this problem), pushing 500-1000 MH/s per GPU. Hashrate surged by orders of magnitude as people bought 58xx and 59xx cards as fast as they could make them, and difficulty rose in lockstep. End result: CPUs are now irrelevant and Radeons are marginally profitable if you have cheap power. It wasn't a problem.

It's also easy to switch to a new proof-of-work if someone completely breaks SHA256.

There are some significant weaknesses in Bitcoin, but this isn't one of them.