[Cryptography] playing lawyer, Incentive Politics

[Phillip Hallam-Baker]

On Thu, Oct 12, 2023 at 11:33 PM Sebastian Stache via cryptography <
cryptography at metzdowd.com> wrote:

> On 2023-10-11 23:06, John Levine wrote:
> > It appears that Sebastian Stache via cryptography <zeb at qtt.se> said:
> >> Be it for "the pure pleasure of destruction", or to "end the CO2
> >> emissions" or, most likely, simple sour grapes; Yes, to "wipe out $BTC"
> >> is both illegal and prosecutable, as is hacking mining pools and
> >> currency exchanges.
> >
> > You know how we feel when lawyers start making assertions about the way
> > cryptography works?
> >
> > I am not aware of any laws directly regulating Bitcoin. I know a lot
> > of laws related to fraud, but they depend on the intent to defraud people
> > who expect you to do something but you do something else. If you set up
> > your own private mining pool to unwind the blockchain, and have no
> > connection to the people who find their wallets depopulated* via the
> > longest chain algorithm, where's the fraud?
> >
> > If you think it's illegal it would be a help if you could say under
> > what laws and in what countries.
> >
> > R's,
> > John
>
> I know what you mean, beware of lawyers (and politicians) making
> technological assertions.
>
> But I do think there is explicit Bitcoin legislation in the EU, the
> United States, China, Canada, Japan, Australia, Singapore, South Korea,
> India and Brazil. The UK regards crypto currency as property. El
> Salvador and CAR both have adopted Bitcoin as a national currency. An
> uncomprehensive list and possibly partly erroneous.
>

Explicit BitCoin legislation eh? Care to cite the relevant acts of
Congress? Imagine for a moment that I helped to build a global information
web 30 years ago and you can recall almost any public data with a few mouse
clicks. Oh wait a minute, we did!

I don't check every factual claim I make every time but I typically make
3-4 checks every time I write an email like this countering someone who
thinks having a keyboard and an opinion trumps actual facts.

Pseudo-currency supporters attempt to impose a binary standard on the
status of their tokens. The law is rather more subtle. And no, I am not a
lawyer, I have just spent an inordinate amount of time with lawyers
discussing these exact points for three decades.

BitCoin is a security for certain purposes but that does not mean it can be
registered as a security. The genius of common law is that it is very
flexible and allows legal principles that in some cases (e.g. parts of
contract law) are over 2000 years old to be applied to modern inventions.

It is pretty clear that there is a property interest in BitCoin. But any
prosecution would have to come under the heading of fraud. And it is far
from clear to me that unwinding the chain is fraud. Where is the false
statement being made? The rules of the game Hal set out say unwinding the
chain is completely legit, the longest chain wins.

Razzlekhan and her hubby couldn't be prosecuted for theft in the Bitfinex
heist, they ended up copping a plea for money laundering.

Vandalism is currently limited to physical property. Defacing Web
sites comes under digital trespass laws.


However: Suppose that you managed to fulfill your malicious Bitcoin
> destruction by (magically or perhaps quantum wishfully) mining a new,
> technically valid, longest chain from block 1 (disregarding protocol
> changes and forks). Since your intention is to "wipe out" Bitcoin and
> since you like to refer to this act as "unwinding" the chain, I presume
> that you would falsify each and every one of your new blocks (they
> wouldn't contain all and only the real transactions in the real order;
> if they did, your new chain would be equivalent to the real one, and
> Bitcoin wouldn't be destroyed).
>

My principal field is information engagement. We didn't defeat the Soviet
Union with tanks and guns, it was blue jeans, rock music and Starsky &
Hutch brought them down. And some of the details of that operation like
situating West German TV stations to give best reception in the East are
fascinating.

Unwinding the chain would destroy confidence in the foundation BitCoin is
built on just as bringing down the Berlin Wall collapsed first the East
German regime and later the entire Warsaw pact.

Because of this, I would argue that, even without any Bitcoin specific
> legislation, you could be prosecuted with 811,866+ counts of anything
> from fraud to terrorism.
>

But cannot be bothered to actually make any attempt to verify that claim.

As SEC Chairman Gary Gensler put it: "Nothing about the crypto markets
> is incompatible with the securities law; investor protection is just as
> relevant, regardless of underlying technologies".
>

Gensler is pointing out that pseudo-currencies don't need to be
registerable as securities to fall under the SEC's mandate.

According to US law, cowrie shells and peppercorns become securities when
used as a store of value. The definition of security is that broad. All
commodities are securities. The only difference being that if a security
meets the criteria for being a commodity, regulation comes under a
different agency.


Also remember that unwinding the chain is only one of the attacks on
BitCoin I have proposed. The one I think will eventually be used (likely by
a state actor) is to stall the chain.
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