The FBI's Giant Bitcoin Wallet

SonicSpike writes with a story about the huge amount of bitcoins owned by the FBI. "In September, the FBI shut down the Silk Road online drug marketplace, and it started seizing bitcoins belonging to the Dread Pirate Roberts — the operator of the illicit online marketplace, who they say is an American man named Ross Ulbricht. The seizure sparked an ongoing public discussion about the future of Bitcoin, the world's most popular digital currency, but it had an unforeseen side-effect: It made the FBI the holder of the world's biggest Bitcoin wallet. The FBI now controls more than 144,000 bitcoins that reside at a bitcoin address that consolidates much of the seized Silk Road bitcoins. Those 144,000 bitcoins are worth close to $100 million at Tuesday's exchange rates. Another address, containing Silk Road funds seized earlier by the FBI, contains nearly 30,000 bitcoins ($20 million)."

Comments

Bubble? Not necessarily ....

[King_TJ]

Not saying you're wrong... but simply saying it's complicated enough that I sure wouldn't write it off yet.

Bitcoin may have a fixed limit, but there are literally dozens of other cryptocoins out there vying for attention and viability. Some appear to be little more than bad ripoffs of existing code used for an earlier coin, and likely pre-mined by the author in the hopes of making a quick buck off of them. Others (like litecoin) seem to be following in lock-step with the rises and falls of bitcoin in the marketplace, although at a much lower value per coin.

I think it's very short-sighted to believe bitcoin would ever be used by itself as a form of digital currency. It's worth a high enough value already (and continues to trend upwards) that it's very inconvenient to use to pay for smaller items or more inexpensive services. (Nobody likes to work with numbers multiple digits to the right of the decimal place.) The litecoin proponents often use the analogy of it being "silver to bitcoin's gold". Who knows ... but it's certain that when using U.S. currency, simply having $100 bills to pay for smaller items is impractical. (Many shops caution you with signs in the window that they don't make change for bills larger than $20.)

I'm not sure if bitcoin would run into the perceived "volume required exceeds coins in existence" issues, causing deflation, if it wound up only used for very large transactions, alongside multiple other altcoin options? As long as coin exchanges exist and other cryptocoins are in active use, there would be ways to convert bitcoin into other coins anyway -- further eliminating the concerns of it becoming a deflationary currency.

Heck, there's really nothing saying bitcoin will be around in the long haul either! It's essentially a version 1.0 attempt at all of this stuff.... I could easily see bitcoin deprecated in the marketplace, with people instructed to convert it to some newer, better cryptocoin alternative before a certain "drop dead" date when it would become worthless.

Re: Bubble? Not necessarily ....

[um... Lucas]

Youre right, it is a 1.0 attempt at a peer to peer currency. But it'll be next to inpossible to go back to the drawing board on it. Too much vested interest. Think all those people who have spent tens of millions (most likely) on mining equipment will endorse even a slight change to the algorithm that renders their equipment useless? Not likely. And that's just at the simest level. Then there's more fundamental things like block generation rate ( which is the time for a transaction to get into the block chain), even if 90% of people thought it should be changed, it's not a democratic process - so long as the important people thought otherwise, nothing would happen.

Point out enough of this on the bitcoin boards and you're told "if you don't like it make your own" but then if you make your own, at best it's called a cheap knockoff with a couple parameters changed, at worst it get attacked by bitcoin miners in the name of "defending bitcoin"

Re:Bubble? Not necessarily ....

[Anonymous Coward]

BitCoin has one attribute that none of the other alt-coins has .... a multi peta-hash network of computers used ensure the integrity of all transactions. A network that exceeds the power of the top 500 super computers combined.
That is a real world, physical attribute for BTC that people forget when they say it is 'backed by nothing'. Wrong ... it is backed by the most powerful, distributed, purpose built network ever built. None of the competing alt-coins comes close. LiteCoin is the nearest, and on that basis alone, the only other virtual currency likely to survive in any long term.
The odds of another virtual coin gaining the mind share need to get a hardware investment to match BitCoin is probably Zero.

That network is what prevents the corruption of the BitCoin rules - unlike the Federal Reserve Notes used by the USA (commonly and wrongly called US Dollars) which are corruptible by design.

Re:Bubble? Not necessarily ....

[NoImNotNineVolt]

It's sad that these all these computers are burning electricity for such a useless purpose. If cryptocurrency comes with such onerous computational requirements, is it really an efficient use of our limited resources to promote it? Aren't we squandering an amazing amount of computing power by having these calculations wasted on transaction handling instead of simulated protein folding or some other genuinely productive endeavor? If you think about it, a computational network that exceeds the power of the top 500 super computers combined should not be required to run a distributed version of paypal. In that sense, this really is like tulips. Whether it's wasting prime agricultural land on growing flowers or wasting electricity on computing arbitrary hashes, it just seems that if people stepped back and saw the big picture, they'd see the folly of such activities.

Re:Can it be invalidated?

[Bing Tsher E]

How did the FBI confiscate someone else's funds, then?

Re:Can it be invalidated?

[JWSmythe]

So, invalidate and reissue on the behalf of Ulbricht, and any other bitcoins that were confiscated. That would actually be nice. The ultimate in theft prevention.

Imagine, if someone steals your (real world) wallet. You invalidate all the cash in it, and issue new cash.

Unfortunately, I can see the *huge* number of reasons why it's a bad idea. The first being, I do a high dollar transaction. I get the physical product. I complain that it never arrived, and 51% agree that I'm a good guy. Now the seller is out the funds, and the product.

So does this plan go for only funds seized in high profile cases? If the feds didn't say they seized the funds publicly, would they get to keep the them, and screw the accused? Who do you believe for deciding, the holder of the bitcoins, or the media?