It seems inevitable to me that if cryptocurrencies don’t fail or eat themselves with scams and bubbles, they will be banned by most nations. Outlawing unhosted wallets is basically a ban, since hosted wallets are essentially the same thing as a regular bank account. At that point there is little reason to bother with the cryptocurrency P2P layer.
There’s two reasons countries would do this. One is obvious: control and law enforcement. The other is to prevent the emergence of any threat to sovereign fiat currencies which are effectively weapons of economic warfare.
“The fed is a weapon,” as one finance person once said, and he called it a kind of economic Death Star. Countries with major sovereign currencies used internationally can in effect levy an imperial tax on users of the currency by exporting inflation. Seeking to “end the fed” is basically akin to trespassing on a military base and sabotaging ordinance. The US isn’t the only country they does this, but it’s probably the largest. Countries like China might want to displace the dollar, but they don’t want Bitcoin. They want to displace the dollar for the Yuan so they can pull the same trick.
In any case, I think this is a good thing. If crypto-currencies are regulated against, the remaining crypto-currencies must succeed on their technical merits as a currency (privacy, security, byzantine fault tolerance, speed, etc.) in order to evade regulation. So this would shift the focus towards systems like Monero, Zcash, and maybe even systems like GNU Taler that work alongside existing taxation/banking institutions.
It’s true that there’s some lens to view it from where this causes positive things. Bitcoin itself is a fairly direct response to novel government action following 2008.
But it’ll set back adoption so heavily. There are a lot of applications in the space that only become feasible once adoption is so high, so development of everything above the base layer is liable to slow down significantly.
Under the hood, I think that bitcoins, etc., are just blobs of text that can be saved in regular files. Probably ascii-armored, like a PGP key, correct ?
So I think that an "unhosted wallet" just refers to a blob of text in a regular file ... which is exactly how I would store bitcoins if I had any.
In the United States, this is a clear-cut free speech / First Amendment issue. In the United States I can write, or say, any number I choose to.
There's a lot of hand waving reference to magic technology when discussing things like key escrow or "encryption" or "unhosted wallets". In the end, they are protected speech and cannot be limited under any interpretation of the First Amendment.
Edit: About an unhosted wallet being a clear case of freedom of speech because it can be encoded as text; even if it was, what are you expressing? The intent to evade cryptotaxes?
That one was everywhere at the time, it's still a trade secret, but utterly unenforceable. As you say, it's one number, Wikipedia is not publishing all of them for a reason.
I think you are making a pretty big assumption that it would fail in the supreme court. It's not like the supreme court has abolished asset forfeiture either.
'intellectual property' is mostly post-modern nonsense. Yet, here we are. If these numbers are property, then, the government will duely regulate it as such.
Society reifies and adjudicates the specific rules surrounding "property rights", but they also derive from our cultural norms and biological instincts: everything from "Finders Keepers" to "Your Home Is Your Castle". And predictably, these root nodes of moral claims to property frequently conflict.
I strongly recommend Heller & Salzman's "Mine!" [0] as a non-ideological and layperson-accessible exploration of the history and nature of property.
regulating intellectual "property" will only become increasingly difficult to protect and regulate as the technology for recording, copying, and disseminating information improves. In order to regulate intellectual "property", you need to gimp information technology with DRM.
I don't deem the existence of intellectual "property" necessary, in fact I predict its existance will become infeasable to uphold.
That's about how I feel. I think it's worth noting that humans seem to go through cycles of securitization, that makes 'all the sense in the world' in their time. But, which becomes abhorrent, or nonsensical as the fashions change over time.
Not text, but stored in a binary format in a Berkeley DB (Generally only version 4.8.30). There is documentation on the formats here: https://en.bitcoin.it/wiki/Wallet
Where it gets interesting is the so called Seed Phrase, https://en.bitcoin.it/wiki/Seed_phrase in which an unlimited number of private keys can be derived. A seed phrase can 'recreate' every key in a wallet, it could be considered a form of wallet backup. In the BIP39 standard, 12 words are used from a dictionary of 2048.
At its core, a wallet is just a collection of private keys. So yes, these are easy to extract and, in the original client, there is a simple command to do just that. Or, as mentioned, you can access the BerkleyDB wallet.dat file directly. The "bitcoin" itself is never really stored anywhere in terms of state-- the chain simply stores the series of transactions between public keys up to right now and you calculate the btc state from that. The wallet.dat also typically stores cached transaction data, but it's only a local cache and not authoritative.
A bitcoin private key is an elliptic curve private key on the secp256k1 curve. OpenSSL will let you encode a valid bitcoin private key as a PEM if you wish for easy copy paste -- you would have to convert them into another format for direct usage however.
eg:
Bitcoins are entries on a ledger, which you can transfer by signing a message with a key. The keys are typically a master key encoded as a 12 or 24 word seed phrase, from which the actual keys are then derived.
What this regulation is targeting isn't the holding or sharing of the keys itself, but the use of exchanges to convert between cryptocurrency and fiat (regular) money. They want to restrict/regulate (mostly monitor for now, but more regulation is likely to follow)
a) the ability to send Bitcoin that you bought on an exchange to your own wallet, i.e. your ability to get Bitcoin that you actually control yourself with said text file
b) the ability to send Bitcoin from such a wallet to an exchange to turn them into "regular money".
They aren't gonna crack down on them in the sense of speech, they are gonna tell exchanges not to give people dollars in exchange for bitcoin associated with them.
By your argument, piracy of digital media and software should be 100% legal because it's just exercising first amendment rights to share text in a file (which is ultimately what any software boils down to)?
I don’t think that’s analogous, with cryptocurrency you generate the text file from a random number generator or rolling dice, there is no issue with copyright for private keys. The courts have already ruled that copying DVD decryption keys is allowed under free speech.
This is a deeply philosophical issue. Ideas can be encoded in text there are laws that protect ideas, but then there is rights such as free speech which are meant to protect what we say and how we express ourselves. From a socialism perspective ideas should belong to everyone, capitalism would say an individual has the right to own an idea from the set of all ideas if they discovered it, or own some text (code) from the set of all possible text.
> capitalism would say an individual has the right to own an idea
"Capitalism" says no such thing. Property under capitalism is a consequence of scarcity; property rights exist specifically because a particular good cannot be expended for two different purposes at the same time. As such, someone must decide how the property will be used, and the entity with the right to make that decision is designated the owner. Ideas lack scarcity—the same idea can be used for any number of purposes simultaneously without being used up—and consequently are outside the capitalist definition of property.
Assigning fake "ownership" privileges to ideas infringes on the exercise of actual property rights, effectively seizing private property (including capital) for public use to to implement a policy of subsidizing the creation of new copyrightable works or patentable inventions, which is an inherently socialist exercise of government power.
>By your argument, piracy of digital media and software should be 100% legal because it's just exercising first amendment rights to share text in a file (which is ultimately what any software boils down to)
Why, thank you, I didn't even have to spell it out for you. That's reasonable even if the extension to CSAM isn't.
Binary streams should not come with impllicit legal chains. It's all math.
Don't want it copied? Don't make it digital. The rest of the world shouldn't be held at gunpoint over your inability to cope with trivial reproduction of information.
>Come on.
You can have this back. Use it for a post that needs it.
> First Amendment issue. In the United States I can write, or say, any number I choose to.
That is complete and utter nonsense. A child pornography video is just a blob of text, essentially a big number. And you certainly can be prosecuted both for distribution and for storing child pornography. just because you have the imagination to boil everything down through bits to a number does not mean the First amendment becomes a shield for anything. A tweet stating you want to assassinate the president is equally "just a number" and also not protected by the first Amendment.
Porn is covered under an exception. A tweet saying you merely want to assassinate the president is fine, what's illegal is inciting others to commit crimes.
At this point I've really got the view of just go get fucked.
If its in a cold / unhosted wallet then the brokers can't make any money from it. If you buy bitcoin as an investment and stick it in a cold wallet then companies like coinbase can't make money from it.
You can tell the big players have been lobbying government.
It's worse than that: cash is at least nominally provided and supported by governments themselves; whatever stupid or unjust constraints are on paper dollars [0], they are at least currently "legal tender for all debts public and private".
Criminalizing "unauthorized" wallets amounts to outlawing all "off-books" exchange relationships, from time-banks to babysitting clubs [1] to "I'll trade you three apples for two oranges". At the end of the day, a blockchain is merely a fancy way to implement a spreadsheet, and any sufficiently advanced (and encrypted) spreadsheet can be used to establish economic relationships that escape tax liability.
I'm far from a "taxation is theft" libertarian (if anything, I skew democratic socialist [2]). But this is a root problem with our system of taxation and public goods funding as it exists today: it can only be fully enforced in the context of a surveillance state. We currently tolerate some small amounts of non-compliance (no one taxes teenagers mowing lawns in exchange for cash), but as these "off-books" transactions scale into the billions, a clash between free speech and tax obligation is inevitable.
> a blockchain is merely a fancy way to implement a spreadsheet, and any sufficiently advanced (and encrypted) spreadsheet can be used to establish economic relationships that escape tax liability.
Sorry, 'blockchain' is a corporate buzzword or shitcoin scam. People who spend time to understand the significance of proof of work get it - I mean this with sincerity and hope that you will take the time to understand the implications of pow.
I may not have been clear: I am very much opposed to the existence of a surveillance state; and while I am not opposed to taxation or public goods a priori, I consider our current mechanisms of taxation to be both inefficient and problematic (contrast with Henry George's LVT, Pigovian taxes on externalities, luxury taxes, etc).
Carrying around, withdrawing and/or depositing large amounts of cash is already an excellent way of inviting additional questions from law enforcement. Even then, it is only a problem if you have no good explanation.
In any case, can you expand on why you think the Chinese miner-dominated bitcoin is so much better than one by your own country?
My view is that the most promising direction for making government and large companies less horrible are things like blockchains, smart contracts, digital autonomous organizations, and more generally shared protocols.
What I envision is that somehow the de facto rules of society could operate a bit like using a decentralized software package registry. Or perhaps even explicitly that.
The biggest challenge in my mind is that humans are, in fact, animals, with strong instincts that push towards hierarchies. This creates conflict with the ideals of protocol-based free society.
But whatever form of hierarchy or authority we are stuck with, deploying these distributed protocols and tools will aid both those in power and the common man. Because ultimately most of the activity of regulation or market-making (and monopolization) is about solving logistical problems. And the leading edge for scaling logistics are decentralized technologies.
One more fantasy. Maybe the problems we have with government are due to monopoly. If we had a way to vote with our feet for better rules, such as using protocols that are more effective or fair.. but ultimately authority is enforced by killing.
What if somehow we could just collectively get together and ban killing (execution of dissidents or mass killing i.e. warfare) as a way of resolving conflicts over control? Lol. Of course, that might only make it easier for those without morals to take over. But just to keep hope alive for the human species, we should consider how our developing technologies might inform questions like that.
The reason why distributed trust is never going to work is because authority doesn’t exist without the threat of violence.
We’ve done a lot of interesting things in terms of POCs in the public sector over the last decade, and we’ve yet to find a way for blockchain to have a real world impact. In countries with high amount of trust in the public sector and low levels of corruption, it’s a burdensome, inefficient and expensive way to handle trust. In countries with high corruption and no trust, the smart contract doesn’t change the fact that a bunch of people with guns can still just take your land and nobody is going to come after them.
It’s sort of similar with money. The only real appliance or Bitcoin and crypto currencies is for criminal enterprises to move and exchange money. The thing about that is that these organisations have as much of an authority or violence as some nation states.
Considering Bitcoin can’t control where you use it, or how you turn it into real money, it’s really got not authority.
It's important to understand that heavy unhosted wallet regulation in conjunction with PoS transition pretty much ruins cryptocurrency in the US. People will be forced to keep their coins on exchanges and they will not have enough coins to stake but the exchanges will stake from their wallets and claim the rewards for themselves. Then they can use the coins gained to manipulate the markets how they wish collecting fees and more coins from their clients further centralizing control.
This is why people like me have been saying, it's just best to stay away from it, or escrow everything until minds have been made up on taxation.
It will be regulated. It will look like everything else in the financial system, and tooling will be made to retroactively pin down crypto transactions at the injection point into the financial system.
The Biden administration seems to havebeen cracking down on cryptocurrency fairly aggressively, I don't think I've seen so many stories concerning regulation and enforcement in the domain in such a short period.
They have no choice but to gain more control over it. Crypto could very well be a make or break factor in whatever strategies they have planned to stop inflation.
Yes and I'm certain they have extensively planned for the consequences before they went all overboard with it. It looks now that crypto wasn't taken into account to the extend that perhaps it should have been.
Nothing in the government moves this fast. These regulations have been in the works for years and it took so long. However they might be prioritizing it more than the previous admin because Trump gave huge tax breaks to companies and had lax enforcement.
If this is really enforced, it should lead to a huge devaluation of crypto currencies. After all, the reason why Bitcoin was invented in the first place was to decentralize currencies. Moreover, most crypto wallets should still be offline so a lot of value will be lost of no loopholes can be found.
A crypto currency forced to be managed by centralized authorities is pretty much useless, the equivalent of having a savings bank account in some extremely volatile foreign currency.
I suppose there will be enough loopholes in foreign countries to prevent these negative effects in the short term.
Most of the supposed features of crypto, and Bitcoin in particular, become impractical once the government starts to become motivated to stop it. It’s largely all one big utopian wishful thought.
it is regretable that the bitcoin network and related networks are so dependent on modern computer infrastructure which is controlled by a handfull of institutions. But perhaps it does not need to be this way
Unhosted wallets is the only way crypto should be used. That was the whole idea behind Bitcoin. No middle men, users transact directly with eachother. This protects them from the criminal government mafia such as the IRS.
I agree that unhosted wallets are how crypto was meant to be used, and the only way it makes sense—you don't need a decentralized BFT protocol with proof-of-work if all transactions involve a limited set of centralized exchanges, and proof-of-stake is meaningless if only exchanges hold coins. However, it's wrong to say that this offers any protection against the IRS. Legally speaking the tax obligations are exactly the same for hosted and unhosted wallets, and in practical terms merely keeping your coins in unhosted wallets is not an effective means of hiding income from the tax man.
"In the Netherlands, the Dutch National Bank (DNB) now requires that crypto service providers looking to officially register with the central bank must demonstrate their compliance with verification requirements under the 1977 Sanctions Act. It involves establishing the identity and place of residence of the counterparty, screening it against the sanctions lists and establishing that this person or legal entity is actually the recipient or the sender."
I believe that is no longer true : "DNB has now revoked the registration requirement and said it will remove the wallet-verification measures as soon as possible."
63 comments
[ 2.9 ms ] story [ 117 ms ] threadThere’s two reasons countries would do this. One is obvious: control and law enforcement. The other is to prevent the emergence of any threat to sovereign fiat currencies which are effectively weapons of economic warfare.
“The fed is a weapon,” as one finance person once said, and he called it a kind of economic Death Star. Countries with major sovereign currencies used internationally can in effect levy an imperial tax on users of the currency by exporting inflation. Seeking to “end the fed” is basically akin to trespassing on a military base and sabotaging ordinance. The US isn’t the only country they does this, but it’s probably the largest. Countries like China might want to displace the dollar, but they don’t want Bitcoin. They want to displace the dollar for the Yuan so they can pull the same trick.
But it’ll set back adoption so heavily. There are a lot of applications in the space that only become feasible once adoption is so high, so development of everything above the base layer is liable to slow down significantly.
So I think that an "unhosted wallet" just refers to a blob of text in a regular file ... which is exactly how I would store bitcoins if I had any.
In the United States, this is a clear-cut free speech / First Amendment issue. In the United States I can write, or say, any number I choose to.
There's a lot of hand waving reference to magic technology when discussing things like key escrow or "encryption" or "unhosted wallets". In the end, they are protected speech and cannot be limited under any interpretation of the First Amendment.
Nope, you can't: https://en.wikipedia.org/wiki/Illegal_number
Edit: About an unhosted wallet being a clear case of freedom of speech because it can be encoded as text; even if it was, what are you expressing? The intent to evade cryptotaxes?
You'll note that one of the numbers in question[1] is published, in full, on the wikipedia page that you link to.
[1] 09 F9 11 02 9D 74 E3 5B D8 41 56 C5 63 56 88 C0
intellectual property is a subset of property rights.
they both exist only because society deems their existence necessary.
I strongly recommend Heller & Salzman's "Mine!" [0] as a non-ideological and layperson-accessible exploration of the history and nature of property.
[0] https://www.minethebook.com/
I don't deem the existence of intellectual "property" necessary, in fact I predict its existance will become infeasable to uphold.
Quite the opposite. You're either confused on the meaning of 'intellectual property' or 'post-modernism'.
Where it gets interesting is the so called Seed Phrase, https://en.bitcoin.it/wiki/Seed_phrase in which an unlimited number of private keys can be derived. A seed phrase can 'recreate' every key in a wallet, it could be considered a form of wallet backup. In the BIP39 standard, 12 words are used from a dictionary of 2048.
I have never interacted with a bitcoin or other crypto-currency ...
The words come from a standardised wordlist, providing a rudimentary way of error checking and checksumming.
openssl genpkey -algorithm EC -outform PEM -pkeyopt ec_paramgen_curve:secp256k1 -pkeyopt ec_param_enc:named_curve
There is a native format known as WIF (wallet import format) that uses ascii encoding for private keys, allowing easy migration/copy paste: https://en.bitcoin.it/wiki/Wallet_import_format
What this regulation is targeting isn't the holding or sharing of the keys itself, but the use of exchanges to convert between cryptocurrency and fiat (regular) money. They want to restrict/regulate (mostly monitor for now, but more regulation is likely to follow)
a) the ability to send Bitcoin that you bought on an exchange to your own wallet, i.e. your ability to get Bitcoin that you actually control yourself with said text file
b) the ability to send Bitcoin from such a wallet to an exchange to turn them into "regular money".
Come. On.
"Capitalism" says no such thing. Property under capitalism is a consequence of scarcity; property rights exist specifically because a particular good cannot be expended for two different purposes at the same time. As such, someone must decide how the property will be used, and the entity with the right to make that decision is designated the owner. Ideas lack scarcity—the same idea can be used for any number of purposes simultaneously without being used up—and consequently are outside the capitalist definition of property.
Assigning fake "ownership" privileges to ideas infringes on the exercise of actual property rights, effectively seizing private property (including capital) for public use to to implement a policy of subsidizing the creation of new copyrightable works or patentable inventions, which is an inherently socialist exercise of government power.
Why, thank you, I didn't even have to spell it out for you. That's reasonable even if the extension to CSAM isn't.
Binary streams should not come with impllicit legal chains. It's all math.
Don't want it copied? Don't make it digital. The rest of the world shouldn't be held at gunpoint over your inability to cope with trivial reproduction of information.
>Come on. You can have this back. Use it for a post that needs it.
That is complete and utter nonsense. A child pornography video is just a blob of text, essentially a big number. And you certainly can be prosecuted both for distribution and for storing child pornography. just because you have the imagination to boil everything down through bits to a number does not mean the First amendment becomes a shield for anything. A tweet stating you want to assassinate the president is equally "just a number" and also not protected by the first Amendment.
Images of sexually exploited toddlers are "just numbers" too, but it doesn't seem like the DOJ buys the free speech argument.
If its in a cold / unhosted wallet then the brokers can't make any money from it. If you buy bitcoin as an investment and stick it in a cold wallet then companies like coinbase can't make money from it.
You can tell the big players have been lobbying government.
Central bank digital commie coin or bitcoin.
Not choosing is choosing.
Choose wisely.
Criminalizing "unauthorized" wallets amounts to outlawing all "off-books" exchange relationships, from time-banks to babysitting clubs [1] to "I'll trade you three apples for two oranges". At the end of the day, a blockchain is merely a fancy way to implement a spreadsheet, and any sufficiently advanced (and encrypted) spreadsheet can be used to establish economic relationships that escape tax liability.
I'm far from a "taxation is theft" libertarian (if anything, I skew democratic socialist [2]). But this is a root problem with our system of taxation and public goods funding as it exists today: it can only be fully enforced in the context of a surveillance state. We currently tolerate some small amounts of non-compliance (no one taxes teenagers mowing lawns in exchange for cash), but as these "off-books" transactions scale into the billions, a clash between free speech and tax obligation is inevitable.
[0] https://en.wikipedia.org/wiki/Civil_forfeiture_in_the_United...
[1] http://www.pkarchive.org/theory/baby.html
[2] https://theblockchainsocialist.com/
I take exception the premise that a fully commie surveillance state is required for society to function.
City states. Government at local scale. Living with the decisions made. Today's take: https://www.freeprivatecities.com.
> a blockchain is merely a fancy way to implement a spreadsheet, and any sufficiently advanced (and encrypted) spreadsheet can be used to establish economic relationships that escape tax liability.
Sorry, 'blockchain' is a corporate buzzword or shitcoin scam. People who spend time to understand the significance of proof of work get it - I mean this with sincerity and hope that you will take the time to understand the implications of pow.
In any case, can you expand on why you think the Chinese miner-dominated bitcoin is so much better than one by your own country?
By starting off writing off your rights to privacy you already lost.
If this is how you feel you should feel right at home in China, North Korea, or one of any other authoritarian jurisdictions.
I don't need to explain to you or to anyone why I carry around cash or otherwise.
No privacy. No freedom.
>In any case, can you expand on why you think the Chinese miner-dominated bitcoin is so much better than one by your own country?
DYOR or have fun in gulag.
"I have nothing to hide, why should I care?"
What I envision is that somehow the de facto rules of society could operate a bit like using a decentralized software package registry. Or perhaps even explicitly that.
The biggest challenge in my mind is that humans are, in fact, animals, with strong instincts that push towards hierarchies. This creates conflict with the ideals of protocol-based free society.
But whatever form of hierarchy or authority we are stuck with, deploying these distributed protocols and tools will aid both those in power and the common man. Because ultimately most of the activity of regulation or market-making (and monopolization) is about solving logistical problems. And the leading edge for scaling logistics are decentralized technologies.
One more fantasy. Maybe the problems we have with government are due to monopoly. If we had a way to vote with our feet for better rules, such as using protocols that are more effective or fair.. but ultimately authority is enforced by killing.
What if somehow we could just collectively get together and ban killing (execution of dissidents or mass killing i.e. warfare) as a way of resolving conflicts over control? Lol. Of course, that might only make it easier for those without morals to take over. But just to keep hope alive for the human species, we should consider how our developing technologies might inform questions like that.
We’ve done a lot of interesting things in terms of POCs in the public sector over the last decade, and we’ve yet to find a way for blockchain to have a real world impact. In countries with high amount of trust in the public sector and low levels of corruption, it’s a burdensome, inefficient and expensive way to handle trust. In countries with high corruption and no trust, the smart contract doesn’t change the fact that a bunch of people with guns can still just take your land and nobody is going to come after them.
It’s sort of similar with money. The only real appliance or Bitcoin and crypto currencies is for criminal enterprises to move and exchange money. The thing about that is that these organisations have as much of an authority or violence as some nation states.
Considering Bitcoin can’t control where you use it, or how you turn it into real money, it’s really got not authority.
This is why people like me have been saying, it's just best to stay away from it, or escrow everything until minds have been made up on taxation.
It will be regulated. It will look like everything else in the financial system, and tooling will be made to retroactively pin down crypto transactions at the injection point into the financial system.
That’s a cop out. They have a choice.
A crypto currency forced to be managed by centralized authorities is pretty much useless, the equivalent of having a savings bank account in some extremely volatile foreign currency.
I suppose there will be enough loopholes in foreign countries to prevent these negative effects in the short term.
No untraceable transactions.
I believe that is no longer true : "DNB has now revoked the registration requirement and said it will remove the wallet-verification measures as soon as possible."
https://www.coindesk.com/dutch-court-rules-bitonic-no-longer...