[Cryptography] On the 'regulation proof' aspect of Bitcoin

[Phillip Hallam-Baker]

On Tue, Mar 29, 2016 at 4:11 PM, John Levine <johnl at iecc.com> wrote:
>>So why doesn't the Fed do this?
>
> It's still nowhere near worth the effort because bitcoin remains an
> utterly trivial financial instrument.  Yesterday, the total volume of
> bitcoin transactions was 5674 btc worth about $2.3 million.  By
> comparison, the foreign exchange market in real currencties trades
> that much every 37 milliseconds.
>
>>My guess is that until ransomware, BTC just wasn't a big enough
>>irritation and there is always the knowledge that as fast as one
>>scheme is shut down, another pops up to take its place.
>
> I've heard a lot about ransomware at recent security conferences and I
> don't recall anyone, ever, suggesting the choking the bitcoin market
> would be a useful countermeasure.  Before they demanded bitcoins, they
> demanded Western Union transfers to offshore money mules, and they
> could switch back to that in a minute.  Keep in mind that the victims
> have a perverse incentive not to rat out the mules since if the mules
> don't collect the payment, they don't get an unlock key.

Collecting cash via BitCoin requires no infrastructure. Using mules is
much more complex and a lot riskier.

Not all victims are actually victims. If I have a backup I will rat
out the mule in a heartbeat. In fact I will infect machines on
purpose.

Mules take time to recruit. If it takes them eight hours to recruit
and train a mule and they are caught after ten drops, that limits them
to ten drops a day.If they are burning 20 mules a month, they are
going to get caught.

The offshore mules have to deliver the cash to the criminal remember.
And they take a cut. And they might just run off with the cash. So
they need someone to keep them in line.


> Besides, bitcoin will implode from the sheer social incompetence of
> the bitcoin community.  Who'd have expected they'd be so wedged they
> couldn't agree how to make a mechanical change to increase the
> transaction rate?

I did. It was an obvious consequence of the decentralization. That
comes at a severe cost.