Do Bitcoin Markets Have a Conversion Tort Problem?
mechanicalmarkets.wordpress.com
mechanicalmarkets.wordpress.com
> Property that had been granted currency had a different legal status from property that didn't. Let's assume that a good has been stolen and sold by the thief to a third party, a shopkeeper, who innocently accepts it not knowing that it has been stolen. For most forms of property the original owner could sue the third party and get the stolen article back. But not if that good is one of the few to be considered by society to have currency, wrote Macleod. When an article is said to have currency, or to be current, the original owner cannot chase the third party to recover stolen property. So in our example, our shopkeeper gets to keep the stolen good, even if its stolen nature has been proven in court.
US regulators have classified it not as a currency, but as a commodity. https://www.bloomberg.com/news/articles/2015-09-17/bitcoin-i...
Side note, the talks of micropayments and currency use has shifted due to high fees and a paradoxical aversion to updating the network to reduce clogging.
It's so strange to me... commutes would be much shorter if cars were allowed to drive 150, and your roads would be able to move more people per day, too.
Increasing bandwidth and reducing fees is trivial and would be user friendly. Dynamic blocksize and fees as implemented on Monereo [1] would be a good example of a dev community that can implement forward thinking designs without ideological constraints to exploit the user experience for the financial benefit of a minority.
[1] https://monero.stackexchange.com/questions/4562/how-does-the...
That's almost $6 billion dollars worth of bitcoins that have tenuous ownership.
All you have to do is come across a private key of an old account with no bitcoin in it and then announce to the world that it was your account and it was stolen and the money should be returned to you regardless of who has it now.
Also, any transaction can have multiple inputs and outputs. If your btc is stolen and combined with 10 other accounts and then funneled into 37 completely different accounts, you now have some percentage rightful claim on 37 different accounts. If each of those 37 create transactions get combined with other bitcoin inputs and have more outputs you could end up with some dilute percentage of all bitcoin accounts holding some claimed stolen coins.
It is true that in other legal contexts courts and governments have decided to treat Bitcoin as a commodity, but they have no problem calling it "money" when requiring exchanges to register as money service businesses. This is not inconsistent because the definitions of "money" and "commodity" are local to each law; tax law has a narrower definition of money than the laws regulating money service businesses.
So it would be perfectly reasonable and consistent to say that, for the purposes of title, cryptocurrencies are treated as money regardless of the way they are treated elsewhere in the law.
Even if Bitcoins are treated as a commodity for property law purposes, title is unlikely to follow them in practice. If I take some BTC from source A and put it in an address, and then some BTC from source B and put it in the same address, the two lots of BTC are now mixed up in a single address. In cases where this occurs as a physical process (e.g. putting petrol in a car) the law (at least in the UK, I don't know about anywhere else) treats the mixing as a one-way step. So if you put petrol in your car and then find you can't pay, the garage is not allowed to siphon the petrol back out because they will inevitably take some of your petrol as well as their own. Once the mixing has happened the petrol is your property, although of course you still have to identify yourself and accept the debt, or be guilty of "making off without paying". Similar arguments apply to food at a restaurant.
By a similar argument, it can be argued that once stolen Bitcoins have been mixed with others in a common address it is not possible to distinguish the stolen bitcoins. Hence they become the property of the person who has acquired them.
Whether these arguments will actually persuade a court remains to be seen, but the legal situation is more complex than the original article lets on.
Is that because they treat Bitcoin as "money", or because they treat Bitcoin as a "money transfer" mechanism, that is, a way to send money to someone else?
> If I take some BTC from source A and put it in an address, and then some BTC from source B and put it in the same address, the two lots of BTC are now mixed up in a single address.
That simplified view is not how Bitcoin actually works. In your example, the single address now has two separate and distinct "unspent transaction outputs", one for the transaction from source A, the other for the transaction from source B. The mixing will happen only once they are spent, since the wallet software can use either of them, or both, as the input(s) for the outgoing transaction; but before that happens, they could easily be separated.
In fact, there is no real or virtual object which could be called a "Bitcoin". The Bitcoin blockchain is a distributed ledger which records statements like "of the combination of the previously unspent outputs A, B, and C, an amount of X will go to a new output D with key K, an amount of Y will go to a new output E with key L, and the rest will go to whoever generates a valid block which includes this transaction"; the unit of measurement for these amounts is what is "Bitcoin". Saying an address "has X Bitcoin" is a simplification for "the address has the keys corresponding to a set of unspent transaction outputs, which together sum to an amount of X Bitcoin".
So the "stolen Bitcoins" are "spent" the moment they are transferred to a new address, and can't ever be given back (a transaction output can only be spent once). What can be given back is a new set of transaction outputs, with the equivalent amount of Bitcoin. Whether that makes a material difference for the courts, I can't say, but it at least muddles the waters a bit more.
With Bitcoin, it's as if you had thousands of tiny checking accounts, every time you received money created a new one, and you could withdraw each account only once, and always for the full value (if you wanted to use only part of an account, you had to send the rest to a new account).
Compared to checking accounts; I can't just generate a thousand checking accounts that don't belong to any identity and generate a transaction history that appears to show many transactions occurred between hundreds of parties.
It's still not as good as mixing with other Bitcoin of alternate origin (if I only have the tainted coins at the beginning, I will still have 1000 accounts with only all of the same tainted coins when I am done, and a careful analysis will show that these 1000 addresses were funded entirely by the original tainted coins). But each seller cannot be expected to perform this careful analysis, and as you are able to exchange known tainted coins for clean coins and mix them, you can increase the uncertainty that a legitimate transaction is taking place that is separate from the one that originally generated your ownership of the tainted coins.
Imagine the average number of times that an unspent output gets spent a year is 50.
So, this means that after one year, it will be necessary to hunt down name, address, and whereabouts of up to 3⁵⁰ unspent output owners, many of which will turn out to be the same persons, but you cannot know that upfront. The more time passes by, the worse the problem gets.
So, that means that you could easily end up suing something like 100,000 individuals in 190+ jurisdictions.
That is even more unrealistic than the failed attempts of the MPAA trying to sue bittorrent users.
You see, someone sitting on stolen bitcoins will keep exchanging them back and forth for other cryptocurrencies until he has nothing left from his original stash. Therefore, you will most likely not even be able to sue the original thief.
I am familiar with how tracing cash and securities transactions on behalf of wronged parties was done in a couple of frauds and that's how it worked there (although those cases didn't involve bitcoin it must be said).
//edited to explain more clearly that I had read the article so understand the point the parent was making in that context
It only makes the problem worse. Most of these identities cannot be recovered. It is not realistic to believe that the first 3 identities in the chain will be recovered. It may very well end up being identities further down the chain.
Furthermore, you will still need to try until you can find an identity in a jurisdiction in which you can sue.
Imagine that you find someone at step 12 with some fraction of the coins, who lives in Japan, and who bought the coin fractions at an exchange. Are you sure that the Japanese courts will cooperate with your recovery efforts?
By the way, the MPAA mostly stopped suing bittorrent users in Europe and elsewhere, because "Pirate parties" started springing up and gaining increasingly more elected seats. At that point, we are no longer talking about what the law would be, but what it should be, and things started looking bad for the MPAA. So, they backed off.
Suing lots of random people on rather flimsy grounds would very soon get political too.
Furthermore, as Von Clausewitz nicely argues in "Vom Kriege", war is just the continuation of the political negotiations but then by other means. So, that would be the next step, if even the political confrontation would fail. It was not that the MPAA was ever going to win.
Sorry to be pedantic, but this contains 3 [sic] errors.
1) it's missing a ... denoting n-4 terms between 3³ and 3^n
2) the exponent on the right should be n+1 instead of n-1
3) the denominator on the right should be 3-1 instead of n-1
> "Indeed, given the high volume of fraud and default in the bitcoin network, chances are most bitcoins have competing claims over them by now. Put another way, there are probably more people with legitimate claims over bitcoins than there are bitcoins. And if they can prove the trail, they can make a legal case for reclamation."
https://ftalphaville.ft.com/2015/03/24/2122678/bitcoins-lien...
That's one of the strengths of cryptocurrencies: they can adapt. And, in my opinion, which version is most valuable is decided by the community -- not the miners, but the people who are buying and selling.
It wouldn't be fair to anyone if we did that with cash, and it's not fair to try to enforce that with bitcoin.
https://reddit.com/r/Bitcoin/comments/1le87j/bitcoin_core_de...
Also, you don't need to resort to property torts, when there are crimes of stealing and fraud and statutory remedies like restitution available.
When the protesters started marching in 2011 in Syria, Bashir thought that he could solve the problem by putting a lot of them in jail. Well, outside the small area that he still controls today, the entire Syrian police force has been exterminated. They are all dead now.
The political situation in many countries is already explosive without provocation. The state-sanctioned banking system is generally hated. Too many people already are looking to overthrow the ruling elite. All that they still need, is a flimsy excuse.
What's funny about bitcoin is that there are all kinds of ways it could have failed, but it didn't. The government could have kicked down the door at any moment with all kinds of trumped up legal stuff, but they didn't. What happened?
The truth is that a currency gains more utility when people value it more which in turn makes it more valuable. Until you see that you will continue to be blindslided by it's growth.
Controlling a private key != Ownership