Ritchie and Bitcoin

Now there’s a surprise. A tax haven is promoting the use of cryptocurrencies whose use is untraceable

The entire point of the blockchain is that every transaction, ever, is traceable.

It might be anonymous, at least until it meets the rest of the financial system, but it really is traceable. Because that’s what the blockchain is, a listing of all and every transactions ever.

9 comments on “Ritchie and Bitcoin

  1. The use of bitcoin is traceable, but ownership of the bitcoin is not. You have to work from a user’s private key to find out how much they own. You can’t identify the owner simply by looking at all the ledger entries relevant to a common owner.

  2. “that’s what the blockchain is, a listing of all and every transactions ever.”

    Sure, and it will never run out of storage, the wide boys will never look at it hard, nor will the government find it convenient to have access to this mass of data, and nobody will ever, ever find a way to hack into its inevitable security holes, because, you know, this time, the software is perfect, no security holes whatever, none, not even a teeny weeny one.

    Me, I’m sticking with mostly anonymous bits of colored paper.

    I did like this bit in Alex’s comment: “The use of bitcoin is traceable, but ownership of the bitcoin is not”. So if I look at all this data and find that there are exactly ten 20,000 pound transfers how long will it take me to winkle out the ones between the parties I am targeting? Perhaps I’ll have to do it for different suspicious amounts over a longer period of time, but I, being the government, will get there.

    The government doesn’t necessarily care who owns a bitcoin now but certainly cares very much that it passed through Alex’s hands and he failed to pay tax on it.

    I doubt that any large financial dataset is impregnable to statistics and logical analyses.

  3. @Tim Worstall

    The entire point of the blockchain is that every transaction, ever, is traceable.

    Correct. University of Edinburgh Management School had a paper on that in their Aluminate alumni magazine a couple of years ago.

  4. Bitcoin may be to some extent traceable, but other cryptocurrencies have been designed that are not. There’s no difficulty imposed by the cryptocurrency concept itself.

    The problems with truly anonymous trading are all to do with the interface with the real world. If you’re trading data, no problem. But if you want hard goods, they’ve got to be mailed somewhere, or you’ve got to appear on the street in person to pick them up. And if somebody fails to pay for the goods you’ve just given them, how do you find them to enforce the contract?

  5. Actually, this is a feature of BitCoin, and similar applications. Not All Blockchains.

    This is a real problem with BitCoin, as big players in ‘easy buying of BitCoin online’ like Coinbase have been banning people’s accounts for making transfers to the wallets of dissident political actors, because they can see the public address of the source (the account registered with them, or an account that the account registered with them transferred money to) and the destination (Weev, other freedom fighters, etc).

    Monero, as an example, avoids this with everything being private.

    Others are working on systems that allow one to choose public visibility or not globally or on a case by case basis, and systems of optional limited disclosure (to the taxman, etc).

  6. Coinbase Likely to Lose Fight to Block IRS Customer Probe

    “U.S. Magistrate Judge Jacqueline Scott Corley indicated she will allow the IRS to investigate Coinbase customers who made money on the currency….. The judge also said she’ll probably give Coinbase time to appeal her decision before it turns over any customer information.”

  7. Ivor,

    My bet is it’s going to end up with SCOTUS, so it will be a couple of years before finally settled.

  8. Expecting Murphy to understand the blockchain is like expecting a gerbil to have a firm grasp of algebraic geometry.

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