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

Re:Can it be invalidated?

[ASDFnz]

Sort of...

If 51% of miners got together they could in theory stop the FBI from using that wallet (it is actually an address, not a wallet but that is another story).

They would have to continue to do so though, and once they stop the FBI could then use the funds. One of the tennents of bitcoin is that it is very hard (if not near imposable) to confiscate/block/invalidate etc someone else's funds.

Bitcoin post = win

[savuporo]

Let me try a random headline generator with the word Bitcoin substituted in, see how many land on Slashdot

Could binge bitoin mining burgle the middle class?
Will the bitcoin steal the identity of the conservative party?
Is the nanny state destroying the bitcoin?
Could dumbing-down bitcoin tax england?
Is cancer stealing the bitcoins of your children?

Re:easy come, easy go

[drooling-dog]

This whole thing smells like a bubble right now. The value increases for mostly speculative reasons. Bitcoins could never be a viable mainstream currency, because the volume can't readily be increased to match rising demand from transactions involving them. That's the whole point of Bitcoin, isn't it? Money in essentially fixed supply that can't be "printed" at the whim of a central bank? That makes it a deflationary currency, and no one will exchange it for stuff today if the price of that stuff is likely to be dramatically lower next week. And if it's not a viable currency, what is the value based on? Scarcity by itself isn't enough.

What the feds plan to do:

[alphonse23]

http://www.forbes.com/sites/kashmirhill/2013/10/04/fbi-silk-road-bitcoin-seizure/ The feds plan to eventually sell them back into circulation -- if that's what they mean by liquidate. Though I think they should just throw/burn the private key away, and let those coins join the mass of other coins that were lost by early adopters.

Re:Ugh...

[PolygamousRanchKid]

Cue the paranoid right wing "Obama wants to take your Bitcoins" brigade.

Nonsense! Obama said quite clearly: "If you like your Bitcoin, you can keep it."

I suspect that the FBI will use these Bitcoins in undercover operations, to lure out criminals who will only accept Bitcoins.

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 ....

[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:Delete it.

[petermgreen]

An address isn't actually a public key, it's the hash of a public key. So what you actually need to find to spend the bitcoins is an ECDSA keypair where the public key hashes to the address. I presume they did it this way to make addresses shorter (at the cost of making transactions in the blockchain longer).

But the principle remains, it's not "impossible" to go from a bitcoin address to a set of keys that can be used to spend coins from that addresses but it is "computationally infeasible" given current public knowledge of the crypto primitives involved and current or reasonablly forseable computing power.

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?

Re:Can it be invalidated?

[camperdave]

Counterfeiting is a different animal than invalidating Bitcoins. With counterfeiting, you are flooding the market with worthless duplicates or fakes, thus throwing the authenticity of what you hold into question. With Bitcoin invalidation, a third party simply declares your bitcoins worthless. It's like when the money changed from Pounds to Euros. The currency may be authentic, but it is unable to be exchanged. The scary bit is that if someone can invalidate the FBI's wallet, they can invalidate yours just as easily.

Re:Can it be invalidated?

[paxprobellum]

They took physical possession of the wallet.

Re:Can it be invalidated?

[camperdave]

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

They confiscated the computers with the crypto keys, probably.

Re:Can it be invalidated?

[mrchaotica]

LOL, you've never heard of civil forfeiture, have you?

Re:Can it be invalidated?

[thebigmacd]

"Money" never changed from Pounds to Euros.
http://en.wikipedia.org/wiki/Pound_sterling

Re:Can it be invalidated?

[Bazman]

Irish pounds were actually "Punts" [http://en.wikipedia.org/wiki/Irish_pound] - named to rhyme with the irish word for "banker".

Re:Can it be invalidated?

[TheRaven64]

The government does acknowledge the existence of bitcoins. They're just not sure quite how to classify them. They don't have most of the properties of a currency, but they do have some. They have most of the properties of a security, but not all. They have a lot of the properties of a scam, but not all.