Dark Wallet Will Make Bitcoin Accessible For All — Except the Feds

Daniel_Stuckey writes "The group, called UnSystem, are self-proclaimed crypto-anarchists led by Cody Wilson—who you may remember as the creator of the controversial 3D-printed gun. After getting himself in hot water with the government for making the digital files to print an unregulated weapon freely available on the internet, Wilson's now endeavoring to bring Bitcoin back to its anarchist roots. Like other Bitcoin wallets, you'll be able to store, send, and receive coins, and interact with block chain, the Bitcoin public ledger. But Dark Wallet will include extra protections to make sure transactions are secure, anonymous, and hard to trace—including a protocol called "trustless mixing" that combines users' coins together before encoding it into the ledger."

Comments

Deceased owners

[Anonymous Coward]

Would someone please explain what happens to BitCoins whose owners die without passing on their wallets to successors? Without the necessary passwords, what happens to the BitCoins? Are they removed from the system?

Re:Deceased owners

[Wonko the Sane]

Are they removed from the system?

No, the just remain in the blockchain as unspent outputs.

Re:Deceased owners

[kajsocc]

They are not removed, but they become inaccessible. It's quite like an encrypted message that you've lost the passphrase to. Everyone can see the coins in the ledger but nobody has the keys to access them.

(Note that it won't be obvious to everyone else that nobody has the key. It could just as easily be the case that the owner just hasn't made any transactions. They will just sit in the blockchain forever.)

Re:Deceased owners

[gringer]

Would someone please explain what happens to BitCoins whose owners die without passing on their wallets to successors?

Until someone can work out what the password / key is, the bitcoins will be unable to be used by anyone else -- the value of the remaining bitcoins will probably increase. If someone *is* able to work out what that password / key is, then the value of all bitcoins will drop.

Re:Deceased owners

[pla]

Would someone please explain what happens to BitCoins whose owners die without passing on their wallets to successors? Without the necessary passwords, what happens to the BitCoins? Are they removed from the system?

At present, every 5-10 years, the Bitcoin protocol will necessarily upgrade its encryption an d hashing routines to keep pace with processor (whether CPU or GPU or "other") speeds.

Dead people will, of course, not ever transfer their balances to the newest version, and as a result, after 10-20 years, their BTC will become trivially crackable.

You can, therefore, expect an entire community of BTC "grave" robbers to develop, who will, instead of wasting CPU time on mining new blocks, waste it on reclaiming old blocks

Note as an aside, when you see block-0 spent, you can presume the NSA can easily read your old encrypted email.

Re:Deceased owners

[Austrian Anarchy]

Isn't it inevitable that the total pool of BitCoins would be reduced to nothing as owners die off without passing on their wallets? That was the intent of my original question.

No more inevitable than people having stashed away money that gets destroyed in fires (or other) will result in all money being reduced to nothing.

Personal example (I was not there, my dad was) an old relative died at home after extended illness. He kept saying something about the mattress, but could not speak well. Dad and his brothers took the mattress to the side of the railroad tracks and burned it. That is when they discovered it was stuffed full of cash and they had no way to put it out before it was all gone. Similar stuff happens all the time, but it is the amount of money remaining in circulation that has the impact on prices, etc. Also, since BitCoin can be made into such small change, losses of sizable chunks should not be devastating.

Re:Deceased owners

[Your.Master]

That would be deflation, since it's the money supply being reduced.

Re:Deceased owners

[girlintraining]

You can, therefore, expect an entire community of BTC "grave" robbers to develop, who will, instead of wasting CPU time on mining new blocks, waste it on reclaiming old blocks

Actually, that ordinarily would be a problem. However, you're not understanding that bitcoin isn't encrypting anything. It's hashing it. The bitcoin system doesn't protect against seizure and use of bitcoins; it protects against ledger fraud.

Think of it this way: It will always be hard (hopefully too hard) to undo, invalidate, or duplicate a transaction; The older it is, the more secure it becomes. But let's remove the idea of a bitcoin for the moment and instead say that everyone has a user account in this 'BT' system, and after supplying their login and password, can trade any coins they have with anyone else. Any transaction made is secure; until and unless you lose your password or someone else gets it. Then whatever bitcoins you have are now theirs, the end. But they cannot unspend your coins; they cannot change the transactions. They can only spend what's in your wallet now.

So these "grave" robbers can't reclaim old blocks... they can only decrypt the wallets the coins are stored in. Assuming they were ever encrypted to begin with.

The bit coin system is not secured against theft of coins. That's your job (either to steal or to protect)... all it guarantees is that transactions are permanent (and public).

Re:Deceased owners

[Your.Master]

It's absolutely more inevitable than that. Non-bitcoin money gets created and destroyed constantly. Part of the point of bitcoin was a limited supply -- just under 21 million can ever be in the supply at most. If you burn the mattress full of USB keys with bitcoin wallets, they will never be replaced (once the last coin is mined, anyway).

Apparently the current limitation on divisibility of bitcoins can technically be worked around, but nobody cares to because it's already divisible to fractions of pennies. That will become worthwhile as the currency deflates from ever-decreasing supply.

Though I'm skeptical of bitcoin lasting nearly long enough to have that kind of problem.

Re:Deceased owners

[hibiki_r]

Not increasing the monetary base, and just using appreciation leaves open a huge hole for a deflationary spiral that stops any exchanges from happening.

Imagine keeping money in your pocket was a good investment, because we had an 8% yearly deflation. You'd need very strong reasons to spend the money. Imagine the problems of loans when not loaning the money at all provides such a great rate of return.

The only way to get a working economy using the system Bitcoin has would be to have said economy grow extremely slowly. In essence, Bitcoin only has a chance of working if it's unpopular.

Re:Deceased owners

[philip.paradis]

Factor in eight decimal places worth of divisibility to that 20 million limit. I hope you understand why that's significant.

Re:Deceased owners

[pla]

I've never heard of this. Source?

No real "source" required - If you can spoof an arbitrary SHA256 hash, you can "own" any Bitcoin block you want.

Over time, the need to future-proof the protocol against that possibility makes for an obvious upgrade path. But until someone moves "their"coins to a new wallet, the security of the original hash they used provides an upper limit to the CPU time needed to steal their coins.

With current CPUs and algorithms, that amounts to centuries or even millennia. Much like with MD5, however, if you don't think that will drop exponentially... Let me hold on to your BTC wallet for a decade or so. :)

Re:Deceased owners

[whistlingtony]

Or maybe he's saying that just because there's a finite number of bitcoins, that doesn't mean you can't split them a bajillion ways.

Everyone seems to think that bitcoins can't have inflation.... Every value is based on perception and trust. If I can buy a candy bar for .5 bitcoins today (I made that up), the market may shift and tomorrow it will be 1 bitcoin. Who knows?

Same thing with gold. I listen to all my conservative friends ramble on about gold as if there'd be no inflation if we used it... but it's STILL just perception and trust. The value of gold can shift. It went up when Obama became president, and not because the supply magically went down..... Heh.

Anyway, perception of value can change. And just because you can't make more bitcoins, doesn't mean you can't split them forever. It's kind of the same thing really. People don't seem to get that. Or, perhaps I completely misunderstood what he was trying to say.

Re:Deceased owners

[Zemran]

"an old relative died at home after extended illness."

This does not tell us about bitcoins but about preparing for the inevitable. We should all prepare for our death as we will all die. My oldest son knows how to access my money and how to deal with my demise. You need someone you trust in life and your old relative obviously lacked that. I give a copy of all my keys etc. to my son and I know that the trust is 2 way in that I have access to his. If I had a stock of bitcoins he would have a copy of the keys. When he asks for money I tell him to get it from the account himself... My online banking is set up with a direct link to his account. I know that not everyone can trust someone else and that in that way I am lucky. I think that it is sad that many people do not have someone.

Re:Deceased owners

[wvmarle]

This dividing in ever smaller units is not a solution, it doesn't increase the number of bitcoins in existence. It just means that the bitcoins that are still there increase in value - possibly rapidly - making it more interesting for people to hold them instead of spending them, amplifying the problem.

This until so many bitcoins are lost and being hoarded that there is not enough liquidity left to make it a viable currency.

Re:Deceased owners

[Joce640k]

Dad and his brothers took the mattress to the side of the railroad tracks and burned it.

And that seems like normal behavior...?

Re:Deceased owners

[peragrin]

I would like to point out Gold goes up whenever the stock market goes down hard. in every recession there is a spike in gold. Smart investors buy gold when the economy is booming and gold is cheap and sell towards the end of a recession when stocks are cheap and gold is high.

But your correct. Cash currency is always being created and destroyed. a destroyed(lost) bit coin is gone forever. In the short term lost bit coins increase the value of the remaining ones, but at one point the amount of bit coins lost will be greater than the remaining ones and the value will plummet.

Re:Deceased owners

[pla]

I am a Bitcoin developer and have been for years. Your entire theory is garbage.

Okay, fellow Bitcoin dev - Explain to me what happens when (not "if") someone can generate a given SHA256 hash, and why that doesn't let an attacker write arbitrary transactions into the block chain?

Not talking about actually cracking the ECDSA pair here (though that would certainly satisfy my claim, and it too will eventually become possible) - I just mean the ability to spoof the hash on the PaytoPubkeyHash transaction to match the provided PK. Bam, transaction validates, done.

Or do you base your assertion on merely trusting an NSA-designed hash to remain uncrackable forever? If so, I can't help but notice that not all in the BTC dev community share your optimism, judging by how often the topic "should we switch to SHA3 yet" comes up.

Re:Deceased owners

[Xylantiel]

As hoarding grows, the value of the currency grows, and so incentive to spend increases.

No, as hoarding grows, value grows and the incentive to spend DECREASES. It is startling how clueless about macroeconomics most bitcoin proponents are.

Hoarding currency is bad because currency itself has no value, it is only valuable as a means of exchange. Monetary policy exists to prevent individuals from hoarding so much in aggregate that it hurts the overall economy (including them). Excessive hoarding causes currency instability. If nobody can buy/sell goods, including food, because the value of the currency fluctuates wildly from month to month or year to year, everyone starves, including the "rich" (i.e. the hoarders).

Re:Deceased owners

[mozkill]

The interesting thing about the divisibility of bitcoins is that the need for divisibility arises from scarcity, or in other words, arises from deflation. So, the currency is not designed to inflate like fractional currency, but rather to DEFLATE . This is a huge difference between Bitcoins and other archaic currency systems. Also, Bitcoin already has built-in protocols to transfer money if you die and don't respond to deadman switch emails. Also, if you keep a copy of your bitcoin wallet in a safe, then beneficiaries can access your coins. There are probably other ways as well. So, I don't see it as a problem. Whatever future Bitcoin banking service that you use would obviously set up these precautionary measures for you.

Re:Deceased owners

[ultranova]

It just means that the bitcoins that are still there increase in value - possibly rapidly - making it more interesting for people to hold them instead of spending them, amplifying the problem.

Actually, I think Bitcoin has conclusively disproven this myth about deflation: even when Bitcoins were gaining hundreds of percents the economy get going as usual.

The concept of a deflationary spiral is based on a false assumption: specifically, that people prefer long-term gain over short-term one. That's simply not true. And it's pretty obviously untrue, since otherwise no one would buy a computer, pad or smartphone today since you can get a better one tomorrow - technology has a constant deflation, yet that doesn't seem to result in a halt to sales.

Mind you, this has a lot of implications outside of Bitcoin economy, too.

Re:Deceased owners

[Kijori]

The divisibility only comes into play because there are fewer bitcoins, or a greater need/demand for them. As the value of the bitcoin grows, certain commodities/services will cost a whole lot less in terms of bitcoins. As far as I know, the divisibility only means I send you 0.0001 for something that used to cost 0.01 bitcoins. Perhaps at some stage, people will even come up with different "names" for the divisions. Kind of like a cent is 0.01 of a dollar.

But I can't really answer your question without knowing why you think this sudden jump in money supply is bad. These things happen, have happened, and could happen to a lot of the commodities and currencies out there. The question is, why must there be some sort of mechanism in place to dampen the effects of a sudden increase in money supply. That's why I asked, and eventually went off on a tangent.

I suppose it depends on what role you are imagining for Bitcoins. If they are a way to move money from one currency to another - broadly the role they have now - then maybe it doesn't matter. If your transactions are instantaneous then the value of your "exchange medium" isn't important.

If you are trying to design a currency, however, it's very important.

The direct problems are to things like futures, options and really any investments. Currency volatility makes all these unattractive. I'm sure it's possible to design around the problems, but you're still going to have increased complexity and uncertainty; both of those translate into higher charges. As an example, if I want to issue bonds in Bitcoins against a backdrop of possible swings in the value of Bitcoins, then I'm going to have to pay a higher rate on them as a result. That's a big problem.

The indirect problem is that uncertainty, in general, is bad for business. If you want to pay me in bitcoins, I'm going to charge you more, because the more bitcoins I have the more exposed I am to the risk of a sudden increase in the monetary base. For something very big the uncertainty might be completely fatal: if there are eventually 5 million "shadow" Bitcoins that aren't circulating, every transaction is made against the risk that someone controls a large number of them and can manipulate the price of the currency. Not a big problem for buying groceries, perhaps, but a very big problem if you're buying a chain of grocery stores.

On a side note. The "expansion" approach you suggested as an alternative has the major downside that only a specific subset of people get the influx of currency. They get the most 'benefit' out of it as the prices have not taken into account the extra currency in the market, and as the currency diffuses into the system, each subsequent entity gets less of that benefit until the prices stabilize. In the "division" approach as you call it, the benefits are first given to the hoarder. But remember, that hoarder lost the utility of that currency for all that time he hoarded it in order to somehow drive up the value, when he could have spent it in exchange for tangible goods/services.

You make it sound like they will just give money out - that's obviously not what happens. I accept though that it's not perfect; again I'm not claiming that Bitcoins are necessarily worse, just asking about what seems a disadvantage of their design.

Do note, though, that if someone has a pile of "shadow" Bitcoins then they can add to the money supply in exactly the same way. I may not like every decision made by central Governments, but a world where an investment bank controlled the money supply would be worse.

Re:Nice scam

[kajsocc]

I haven't RTFA--this is Slashdot, after all--but I'm pretty sure that "trustless mixing" is the very same method as described here. This method requires no changes to the bitcoin protocol and I'm fairly certain is in at least limited use today, given that there's been software released to facilitate it.

Or the C.I.A. method.

[MRe_nl]

Cash In Advance.

Secure, anonymous, and hard to trace - including a protocol called "trustless mixing" that combines users' coins together.

Re:Ignorant and Stupid

[sI4shd0rk]

Frankly, such a disposition on the part of the NSA is reasonable

I don't think government thugs harassing people is at all "reasonable."

Re:So....

[Anonymous Coward]

The whole project is secretly run by the feds?

Shush! We aren't supposed to talk about that!

Bad news.

[girlintraining]

including a protocol called "trustless mixing" that combines users' coins together before encoding it into the ledger."

I got some bad news; The Silk Road tried the same thing. It failed. But I mean, whadda expect... the government likes getting paid. Kindof a lot. And so they have entire divisions of the government setup to make sure they can track down people who try to hide money from them and, well, make them pay.

But for the moment, let's ignore all that. Some crypto-anarchist hacked something together over the course of a few weekends and that's all solved. Great!

Next question: The NSA is evil and watching everything, except of course this, which is totally impregnable and would be pretty much the terrorist currency of choice... what compelling moral, ethical, or technical arguments can you provide that dropping my "money" into a e-blender and setting it to frappe will result in delicious privacy juices coming out in the same quantity as I put in, and is totally resistant to attack? I've learned in security that you can get either tamper-evident, or tamper-resistant... but trying to get both is enormously difficult. So I really, well and truly, want to know how you plan on having the necessary robust auditing and controls necessary to ensure that transactions are fair and correctly executed, while at the same time dropping the ledgers into your e-blender... while trusting the now-anonymized agents utilizing such a thing not to find some way to exploit the system... using the system itself to cover their tracks?

Re:Bad news.

[kajsocc]

So I really, well and truly, want to know how you plan on...

Supposedly, like this. It has its limitations, of course, but it's pretty neat.

The Silk Road tried the same thing. It failed.

Silk Road allegedly mixed some coins but, also allegedly, did so poorly. Not surprising given the amounts it was trying to mix. It did not, afaik, use the coinjoin method linked above. Also, the founder wasn't tracked down due to coin mixing or lack thereof anyway.

Re:Bad news.

[girlintraining]

Silk Road allegedly mixed some coins but, also allegedly, did so poorly. Not surprising given the amounts it was trying to mix. It did not, afaik, use the coinjoin method linked above. Also, the founder wasn't tracked down due to coin mixing or lack thereof anyway.

More to the point.. coin mixing did not prevent the Feds from identifying thousands of people who used the service and were able to match realworld transactions to their bitcoin equivalents. In fact, from what I can tell... it wasn't much more than a slight irritation to their forensic accountants.

The fact is that crypto-anarchists may be very good at code, but they're very bad at high level analysis. You (and the crypto people too) need to understand that if you take a hundred people, walk them into a room, and they all empty their pockets and record the cash they throw into a giant bin on a ledger, and when everyone has gone through, they line up again and take money back out... which is effectively what the 'perfect' mixer would do... you aren't improving the anonymity of your cash expenditures by that much.

Your anonymity is not dependent on where you got the money from but rather who you're giving it to. It's the spending of money that destroys your anonymity, not the acquisition of it.

Re:Bad news.

[gman003]

Silk Road failed through secondary methods. The actual mechanism was solid, it's just that DPR was sloppy while setting it up, enabling regular investigative work to find him. I will note that we haven't heard of Silk Road clients being arrested en masse, which means they probably haven't been able to track down many of them. They caught the operator, shut down the site, and seized a large amount of money, but the fact that they haven't been arresting left and right the drug dealers who used it means they aren't getting much information from it.

Basically, all someone needs to do is do the exact same thing Silk Road did, except avoiding leaking information on other bands. Use a secure email, don't even think about the site on unencrypted channels, establish a completely new identity for running the site, etc.

Unless you use your real e-mail address

[F34nor]

Or use your real name in the Word file metadata that you attach... I love it when smart people do dumb things.

Re:So....

[F34nor]

No it is run my the illumina arrrrgh.... askldfjgieh

Re:Ignorant and Stupid

[sI4shd0rk]

You're the guy who was arguing in the other thread today that government workers are literally subhuman and deserving of death.

Are you positive that that's what I was actually arguing?

And the joke wasn't about government workers in general, but those who violate our rights.

But I am very, very glad to have them monitoring you.

Looks like we have a principled lover of freedom here!

You might find, if you're sufficiently honest with yourself

"Honest" meaning "Anything that artor3 agrees with."

that you're the one who is being "unreasonable".

I'm not even entirely sure what you're talking about. What I think is unreasonable is when government thugs are harassing people; surely you don't object to that? Your reply seems offtopic to me.

So after trying to fuck up 3D printing ...

[dbIII]

So after trying to fuck up 3D printing by attracting the attention of law enforcement to the possibility of making guns from something with inferior mechanical properties for that purpose than most types of wood, he's trying to get their attention with bitcoin?

How much attention should we really be expending on this guy? Is he just an attention seeker? He obviously knew fuckall about guns or 3D printing, how much does he know about the bitcoin pyramid scam? Does he even spot it as a scam or does he really think it's the fictional currency from Cryptonomicon come to life?

Re:Money Laundering

[Agent ME]

You have everyone put the same amount of money in, and they all take it out into brand new addresses. Anyone trying to trace the money will see X bitcoins go into the pool along with N-1 other people's X bitcoins, and then N new addresses each take X bitcoins out. Now you have to investigate N addresses instead of 1 address to figure out which owner used to own the original X bitcoins you were tracing.

Bitcoin's transaction history across addresses is very public, so this isn't just about privacy from law enforcement. It's about basic privacy from regular people too.

The US is now irrelevant to Bitcoin

[Animats]

There's been a huge change in the Bitcoin world recently. There are now exchanges in China where you can buy Bitcoins for yuan very easily. This is a big deal, because exchanging yuan for other currencies is tightly restricted by the Peoples Bank of China via the State Administration of Exchange Control. Bitcoin provides a way around those restrictions.

This has caused a huge run-up in the price of Bitcoins. That could change at any moment if the People's Bank of China issues "guidance" on Bitcoin. There are comments from Bitcoin users in China that the acceptance of Bitcoins by a small subunit of Baidu was incorrectly interpreted as a signal from the government of China that buying Bitcoins was now OK.

"The mountains are high and the Emperor is far away."

Re:Nice scam

[Beavertank]

It's more "Cody Wilson" than "Bitcoin". The guy is a shameless attention whore who claims odd political beliefs but is actually doing the things he's doing for the payday.