Bitcoin's Success With Investors Alienates Earliest Adopters

holy_calamity writes "Digital currency Bitcoin is gaining acceptance with mainstream venture capitalists, reports Technology Review, but at the price of its famed anonymity and ability to operate without central authority. Technology investors have now ploughed millions of dollars into a handful of Bitcoin-based payments and financial companies that are careful to follow financial regulations and don't offer anonymity. That's causing tensions in the community of Bitcoin enthusiasts, some of whom feel their currency's success has involved abandoning its most important features."

Comments

If you...

[neo8750]

did not see this coming then you must be new here...

Re:If you...

[Anonymous Coward]

I never read articles pertaining to bitcoin; I just read the /. comments with a bucket of popcorn.

The hysteria from both sides is going to get a lot better as the bitcoinpocalypse approaches.

How do they remove anonimity?

[Anonymous Coward]

I don't understand, how are they removing the anonimity of Bitcoin? They aren't changing how the algorithms work I assume?

Re:How do they remove anonimity?

[ShanghaiBill]

I don't understand, how are they removing the anonimity of Bitcoin?

They aren't. Bitcoins can now be used in new venues, but that does not stop private transactions. The article is just stupid. If I deposit cash in a bank, I will be recorded by a security camera. But that doesn't mean I can no longer buy stuff anonymously with cash at the local flea market.

Re:How do they remove anonimity?

[petermgreen]

Bitcoin is and always has been psudononymous. It's trivial to track the flow of coins between bitcoin addresses (which are essentially psudonyms). So how much anonymity there is depends on how difficult it is to associate those bitcoin addresses with real people.

How difficult it is to associate those addresses with real people depends hugely on both what records are kept and how many significant players there are in the bitcoin market (it's much easier to force a small number of large entities to hand over records to the cops than it is to force a large number of small entities to do it)

Re:How do they remove anonimity?

[viperidaenz]

But you can wipe your fingerprints off that cash. Coins don't even have serial numbers and the numbers on notes are not tracked in every transaction.

You can't wipe your bitcoin address off the block chain.
If you associate that data with a person, they're forever tied to that transaction and you can follow it.

Re:How do they remove anonimity?

[Immerman]

So? That's been the case with bitcoins since day one, the anonymity claims were always pure hyperbole. If you wanted anything more than security-through-obscurity grade anonymity you needed to pass your coins through an (illegal in most jurisdictions) money-laundering service and hope they didn't keep any records themselves. All that's changing is that now there's institutions joining the game who are doing their legal record-keeping duty to tie the accounts they deal with to particular people. Unless they refuse to honor any bitcoins that have passed through a money-laundering service recently nothing has really changed except the currncy is . And if they do so refuse, well then... nothing has really changed because they didn't honor *any* bitcoins previously, so your laundered coins are still just as good.

Re:How do they remove anonimity?

[ShanghaiBill]

You can't wipe your bitcoin address off the block chain.
If you associate that data with a person, they're forever tied to that transaction and you can follow it.

But you can create as many bitcoin addresses as you want. You can use a different address from every transaction. The only way it can be tracked to you is if "they" already know who you are by other means.

Re:How do they remove anonimity?

[viperidaenz]

Unless you use a different address for every transaction you will ever make, "They" find out your entire transaction history as soon as they match you to a single transaction, through one of these new services popping up that keeps and shares records with "Them"

Re:How do they remove anonimity?

[pla]

If you associate that data with a person, they're forever tied to that transaction and you can follow it.

Yes and no. Once you associate "me" with a transaction, you can always prove I owned part of block B at time T. You can't, however, prove that when I "spent" those bitcoins, I did or did not simply send them to myself, making anonymity (at least, at the "plausible deniability" level) always just one easy transaction away.

And for the really paranoid, you can use any of a dozen "mixing" services, that take your bitcoins along with those of thousands of other people and stir them all together to make tracing the ones you put in to the ones you take out as close to impossible as matters.

Re:How do they remove anonimity?

[smellotron]

"mixing" services

The term "mixing" sounds less pejorative than "laundering", but the principle is the same: disguise the transfer of wealth. I expect that some extreme pressure will be put on these mixing services as Bitcoins gain traction with nations.

Re:How do they remove anonimity?

[pla]

The term "mixing" sounds less pejorative than "laundering", but the principle is the same: disguise the transfer of wealth. I expect that some extreme pressure will be put on these mixing services as Bitcoins gain traction with nations.

As I pointed out, though, you don't really need to use a mixer - You can accomplish almost the same thing just by sending your bitcoins to other accounts you control in more or less random chunks. You could even, if really motivated, create your own mixer with thousands of your own accounts. A handful of illegal sources go in, along with a large volume of legit transactions, stir stir stir, and who knows that you-#1701 equals you-#42 unless you tell on yourself?

Granted, we already have laws against "structuring", but even as blatant of a cash-grab as those laws appear, they still require "you" to deliberately make a series of related sub-$10k deposits specifically to avoid filing a CTR/8300. Key point there, they need to prove both intent (the standard defense), and the "you" part (which Bitcoin's entire structure makes all but impossible, though ironically, if they could prove all the accounts as you, that would pretty much put a nail in the "intent" coffin).

Re:How do they remove anonimity?

[viperidaenz]

Or a search warrant is issued and your wallet file is taken from you, containing all your addresses.

Re:How do they remove anonimity?

[g4sy]

You don't need to put your coins into a laundry if you use zerocoins instead. End of problem. Whoever wrote this article (and everyone commenting) doesn't know how to do a little research. Total anonymity and pseudymity are possible.

Re:How do they remove anonimity?

[Rich0]

I thought using a new address for every transaction was the advised method of using bitcoin.
I don't use it myself, but I remember reading something along the lines of "never reuse your addresses" in the documentation.

How do you get bitcoins into the new address? You either have to mine it, buy it, or transfer it from another address. Most likely you transfer it, and what account you transferred it from is public record. So, all your accounts are effectively linked, even if you use a new one for every transaction.

Sure, you can have multiple completely-independent accounts, but you can't move money between them unless you pass it out through cash, or you mine it. The ability to pass it out through cash is limited due to the developments in TFA - banks are asking for ID. So, unless you mine ALL the cash you use in discrete unrelated bundles, you're traceable. Mining is pretty expensive and a hassle, though it can be done (though over time it will become less and less practical).

Hipsters

[Anonymous Coward]

"I liked Bitcoin before it was cool. It's too mainstream now"

Re:Hipsters

[seepho]

I encode my wallet file using touch tones and pressed a recording of it onto vinyl. The smoothness on the waveform of the 3/6/9 keys adds a certain warmth to my financial transactions.

If you think Bitcoin was ever Anonymous...

[trims]

...I've got a bridge somewhere that needs to be sold that you might be interested in.

Bitcoin does irrefutability (i.e. the ability to prove that a transaction occurred, and occurred only once). I can thus prove that I do, in fact, own all Bitcoin I possess.

It never has been anonymous. There are characteristics that make it more difficult to trace the payer, but the protocol and implementation have never been configured (or designed) to be a strongly anonymous technology.

Re:If you think Bitcoin was ever Anonymous...

[hguorbray]

here's a pretty good technical overview of Bitcoin from El Reg today:

http://www.theregister.co.uk/2013/05/23/bitcoin_spam_byzantine_generals/

-I'm just sayin'

The ultimate laissez faire capitalist technology

[Ukab the Great]

Is selling out to the highest bidder. How dare they.

The only anonymity lost it the ability to convert

[rahvin112]

Bitcoin is and always will be just as anonymous as it was promised. No one EVER said exchanging Bitcoin for other currencies would be an identity protected venture. In fact it's always been assumed by anyone with any brains at all that Bitcoin is only anonymous as long as you keep it Bitcoin and don't trade it for any hard goods or currency.

There have always been regulatory requirements that make transaction tracking easy for government when you convert to currency or goods. And this has ALWAYS been BitCoins greatest weakness because at the end of the day the currency is only as valuable as it's ability to exchange it for goods. That exchange will never be anonymous.

Bitcoin versus Real Money

[CuteSteveJobs]

The whole idea that you could create money by having your computer crack at a cryptographic algorithm is ridiculous, but so too is the fact that some professions earn so much more than others, that those professions form unions (oops! I mean 'professional associations') that limit supply of their professionals, or that during the GFC the Fed could pull billions of dollars from out of their ass and give it to banks who could then earn themselves interest off that. Bitcoin may be a bubble, but so is the entire stockmarket where you have computers buying and dumping stock microseconds later without any idea what is being traded. Hey did you know the big investment banks pay a premium so they connect their computers closer to the exchange's computers? As soon as they detect buys on a certain stock, they start grabbing massive amounts of it on the assumption others will follow and they can dump it microseconds later? http://en.wikipedia.org/wiki/High-frequency_trading Please tell me how this is good for the economy and sensible investment?

Bitcoin may have its problems and speculators are really bad for anything, but so called 'real money' is just as bad and maybe worse.

Re:Bitcoin versus Real Money

[Anonymous Coward]

I paid cash for a Fiat. Worst car I ever owned.

Re:Pyramid scheme

[Lehk228]

it's a little bit of both.

there are tons of unaccounted for bitcoins harvested in the early days they will not reenter the market until

a) the market is large enough to not crash when whoever is sitting on them cashes out

or

b) whoever is sitting on them needs the money badly enough not to care.