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Bitcoin Government

The FBI's Giant Bitcoin Wallet 177

Posted by samzenpus
from the all-your-coins-in-one-basket dept.
SonicSpike writes with a story about the huge amount of bitcoins owned by the FBI. "In September, the FBI shut down the Silk Road online drug marketplace, and it started seizing bitcoins belonging to the Dread Pirate Roberts — the operator of the illicit online marketplace, who they say is an American man named Ross Ulbricht. The seizure sparked an ongoing public discussion about the future of Bitcoin, the world's most popular digital currency, but it had an unforeseen side-effect: It made the FBI the holder of the world's biggest Bitcoin wallet. The FBI now controls more than 144,000 bitcoins that reside at a bitcoin address that consolidates much of the seized Silk Road bitcoins. Those 144,000 bitcoins are worth close to $100 million at Tuesday's exchange rates. Another address, containing Silk Road funds seized earlier by the FBI, contains nearly 30,000 bitcoins ($20 million)."
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The FBI's Giant Bitcoin Wallet

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  • If the majority of miners wanted to, they could invalidate the FBI wallet, correct?

    • by gatkinso (15975)

      If so that would make all bitcoins worthless I would think.

      • by ackthpt (218170)

        If so that would make all bitcoins worthless I would think.

        Yep, the value of the Bitcoin, like the value of the Dollar, is in its security - if it were easy to make Dollars with your laserjet printer the market would flood with them and the Dollar value would plummet - this is beside the point of counterfeiting being illegal, if nearly everyone was doing it it would be a very difficult law to enforce.

        • by camperdave (969942) on Wednesday December 18, 2013 @11:36PM (#45733009) Journal
          Counterfeiting is a different animal than invalidating Bitcoins. With counterfeiting, you are flooding the market with worthless duplicates or fakes, thus throwing the authenticity of what you hold into question. With Bitcoin invalidation, a third party simply declares your bitcoins worthless. It's like when the money changed from Pounds to Euros. The currency may be authentic, but it is unable to be exchanged. The scary bit is that if someone can invalidate the FBI's wallet, they can invalidate yours just as easily.
      • In fact, that's exactly how I think the government will, in the future, invalidate bitcoins (and keep control of currency).

        They will put up a website where you can "validate" your bitcoins. The ones which the government doesn't like will get banned (because who wants to have "dirty" money?) and devalued.

        • by xelah (176252)
          Notice that this would work just as well with dollar notes. This isn't done, even though governments have far more control over them than bitcoins.
          • This isn't done, because governments have far more control over them than bitcoins.

            Fixed that for you :)

    • by Anonymous Coward

      Why would you want such a system? So the big mining pools can invalidate all the bitcoins of rivals?

    • by ASDFnz (472824) on Wednesday December 18, 2013 @08:25PM (#45731971)

      Sort of...

      If 51% of miners got together they could in theory stop the FBI from using that wallet (it is actually an address, not a wallet but that is another story).

      They would have to continue to do so though, and once they stop the FBI could then use the funds. One of the tennents of bitcoin is that it is very hard (if not near imposable) to confiscate/block/invalidate etc someone else's funds.

      • by Bing Tsher E (943915) on Wednesday December 18, 2013 @11:12PM (#45732901) Journal

        How did the FBI confiscate someone else's funds, then?

        • by paxprobellum (2521464) on Wednesday December 18, 2013 @11:37PM (#45733011)
          They took physical possession of the wallet.
        • by camperdave (969942) on Wednesday December 18, 2013 @11:38PM (#45733015) Journal

          How did the FBI confiscate someone else's funds, then?

          They confiscated the computers with the crypto keys, probably.

          • Doesn't it mean that if the original owners still have a backup of the crypto keys laying around somewhere, they could still move the money away?

            • by DrXym (126579)
              Assuming the feds had the unencrypted wallet, I expect the first thing they would do is transfer all the funds out of the original wallet to their own to prevent that happening. Even if the person maintained a backup, the first thing that would happen when they synced is that all the coins would disappear out of it.
        • by Sez Zero (586611)

          How did the FBI confiscate someone else's funds, then?

          They didn't take the money, they just took the data (and presumably the devices that data was on).

          I wonder if you could pull a Walter White-style magnet attack... what happens if BTC wallet and keys is lost? Do the bitcoins just die?

        • by mpeskett (1221084)

          Ownership is established by knowing the private key for the wallet/address. The FBI gained that key --whether by keylogger, wiretap, plea bargain or $5 wrench is unclear-- and transferred all the funds to an address under their exclusive control.

          So from the point of view of the bitcoin protocol, the FBI were the proper owners (they knew the key) and therefore weren't obstructed from making that transfer. Likewise they wouldn't be obstructed from further use of the address they control unless a majority of

      • by JWSmythe (446288) <<moc.ehtymswj> <ta> <ehtymswj>> on Wednesday December 18, 2013 @11:29PM (#45732977) Homepage Journal

        So, invalidate and reissue on the behalf of Ulbricht, and any other bitcoins that were confiscated. That would actually be nice. The ultimate in theft prevention.

        Imagine, if someone steals your (real world) wallet. You invalidate all the cash in it, and issue new cash.

        Unfortunately, I can see the *huge* number of reasons why it's a bad idea. The first being, I do a high dollar transaction. I get the physical product. I complain that it never arrived, and 51% agree that I'm a good guy. Now the seller is out the funds, and the product.

        So does this plan go for only funds seized in high profile cases? If the feds didn't say they seized the funds publicly, would they get to keep the them, and screw the accused? Who do you believe for deciding, the holder of the bitcoins, or the media?

    • by mysidia (191772)

      If the majority of miners wanted to, they could invalidate the FBI wallet, correct?

      Yes. A code update to treat as invalid, any spend transaction with that wallet as a source.

    • by TheCarp (96830)

      Sure, it would only undermine the entire concept of bitcoin, and defeat the very reason that btc was made distributed like it is in the first place. However, if enough thought it was a good idea, they could all start running some new code that treats some addresses as special.

      This is highly unlikely and would be highly undesirable. The FBI has some bitcoins, good for them, they are just as protected by the system; and no more so; than anyone else. The way it was always intended to be.

      I mean nearly the entir

    • by LWATCDR (28044)

      Sure. Just set the value of all bitcoins to 0. Just imagine the fun that would be.
      "Sorry but a lot of us decided to take your money away from you because we do not like you."

  • blocking.
  • Well, with the value of Bitcoin already rapidly declining, they may not have to worry about it for much longer.
    • by drooling-dog (189103) on Wednesday December 18, 2013 @08:50PM (#45732165)

      This whole thing smells like a bubble right now. The value increases for mostly speculative reasons. Bitcoins could never be a viable mainstream currency, because the volume can't readily be increased to match rising demand from transactions involving them. That's the whole point of Bitcoin, isn't it? Money in essentially fixed supply that can't be "printed" at the whim of a central bank? That makes it a deflationary currency, and no one will exchange it for stuff today if the price of that stuff is likely to be dramatically lower next week. And if it's not a viable currency, what is the value based on? Scarcity by itself isn't enough.

      • by King_TJ (85913) on Wednesday December 18, 2013 @09:14PM (#45732331) Journal

        Not saying you're wrong... but simply saying it's complicated enough that I sure wouldn't write it off yet.

        Bitcoin may have a fixed limit, but there are literally dozens of other cryptocoins out there vying for attention and viability. Some appear to be little more than bad ripoffs of existing code used for an earlier coin, and likely pre-mined by the author in the hopes of making a quick buck off of them. Others (like litecoin) seem to be following in lock-step with the rises and falls of bitcoin in the marketplace, although at a much lower value per coin.

        I think it's very short-sighted to believe bitcoin would ever be used by itself as a form of digital currency. It's worth a high enough value already (and continues to trend upwards) that it's very inconvenient to use to pay for smaller items or more inexpensive services. (Nobody likes to work with numbers multiple digits to the right of the decimal place.) The litecoin proponents often use the analogy of it being "silver to bitcoin's gold". Who knows ... but it's certain that when using U.S. currency, simply having $100 bills to pay for smaller items is impractical. (Many shops caution you with signs in the window that they don't make change for bills larger than $20.)

        I'm not sure if bitcoin would run into the perceived "volume required exceeds coins in existence" issues, causing deflation, if it wound up only used for very large transactions, alongside multiple other altcoin options? As long as coin exchanges exist and other cryptocoins are in active use, there would be ways to convert bitcoin into other coins anyway -- further eliminating the concerns of it becoming a deflationary currency.

        Heck, there's really nothing saying bitcoin will be around in the long haul either! It's essentially a version 1.0 attempt at all of this stuff.... I could easily see bitcoin deprecated in the marketplace, with people instructed to convert it to some newer, better cryptocoin alternative before a certain "drop dead" date when it would become worthless.

        • by um... Lucas (13147) on Wednesday December 18, 2013 @09:52PM (#45732543) Homepage Journal

          Youre right, it is a 1.0 attempt at a peer to peer currency. But it'll be next to inpossible to go back to the drawing board on it. Too much vested interest. Think all those people who have spent tens of millions (most likely) on mining equipment will endorse even a slight change to the algorithm that renders their equipment useless? Not likely. And that's just at the simest level. Then there's more fundamental things like block generation rate ( which is the time for a transaction to get into the block chain), even if 90% of people thought it should be changed, it's not a democratic process - so long as the important people thought otherwise, nothing would happen.

          Point out enough of this on the bitcoin boards and you're told "if you don't like it make your own" but then if you make your own, at best it's called a cheap knockoff with a couple parameters changed, at worst it get attacked by bitcoin miners in the name of "defending bitcoin"

          • by u38cg (607297)
            Bitcoin is just a piece of digital property, no different from an MP3 you've bought. The only difference is it is unique, fungible, and transferable. With no intrinsic value, it is only worth what others in the marketplace will trade it for at the margin.
        • by pantaril (1624521)

          I think it's very short-sighted to believe bitcoin would ever be used by itself as a form of digital currency. It's worth a high enough value already (and continues to trend upwards) that it's very inconvenient to use to pay for smaller items or more inexpensive services. (Nobody likes to work with numbers multiple digits to the right of the decimal place.)

          That issue is already being solved by lots of merchants/wallets and other services switching to milibitcoins denomination by default.

      • by pantaril (1624521)

        That's the whole point of Bitcoin, isn't it?

        Another "whole point" of bitcoin? I wonder how many whole points bitcoin has. I regulary read on slashdot that the whole point of bitcoin is that it cannot be regulated, that it is currency, that it is annonymous/untracable, that it can be used to avoid taxes... all of this is of course false (it is not unregulated, it is not annonymous and untracable) . Bitcoin has no single purpose, it could be currency (but the volatility prevent this at the moment), or long term store of value (like gold), or payment ne

      • by tompaulco (629533)
        I can't see how an inflationary currency is any better. Basically the best thing you can do is, as soon as you receive a dollar, spend it. Otherwise, as soon as you've held your dollar for more than zero time, it is no longer worth what it was when you earned it.
        So the problem with bitcoin is no one would spend one today knowing they could get it for cheaper tomorrow. And the opposite is true with gov't backed currency. Nobody would hold onto a currency knowing it will not have a s much buying power tomorr
        • by j-beda (85386)

          One of the strengths of a (slightly) inflationary currency is that there is an incentive to invest it in productive activities - ie starting a business. This also creates opportunities for lending the money out for others to use at interest and pooling monies in banks to use for lending, and things like that. Putting your money under the mattress for later use is not so good for the economy. Spending it or getting it into a bank so others can spend it and provide liquidity to the whole system is what is nec

          • by tompaulco (629533)
            That would be true if the ROI was better than the inflation rate, which it isn't for just about anything you can find offered by a bank ( especially after you figure in taxes on your interest). Still better than hiding it in your mattress. For most people, the only way to keep their dollar worth a dollar is to invest in the stock market or a business. However, for no risk at all, they could go and buy something tangible right now, and be better off than waiting until tomorrow to buy it (on average).
            • by j-beda (85386)

              That would be true if the ROI was better than the inflation rate, which it isn't for just about anything you can find offered by a bank ( especially after you figure in taxes on your interest). Still better than hiding it in your mattress. For most people, the only way to keep their dollar worth a dollar is to invest in the stock market or a business. However, for no risk at all, they could go and buy something tangible right now, and be better off than waiting until tomorrow to buy it (on average).

              "That" is still true even with a lower ROI, since the "that" that my post was about was the idea that slight inflation provides an incentive to invest, and in fact buying something right now is a form of investing. My point is still that currency is a device designed to ease trade and production, thus currencies that have built-in incentives to use them (or at least make them available for others to use) are "better" than ones without such incentives. The system works better if the money moves around.

    • by Dahamma (304068)

      The tulips are dying, the tulips are dying!!

  • by Anonymous Coward

    "but it had an *unforeseen side-effect*: It made the FBI the holder of the world's biggest Bitcoin wallet."

    I'm sure that was an accident..

  • Because so many countries are declaring that bitcoin isn't a currency and should be viewed as an asset (thus falling under capital gains) does a police seizure of bitcoin mean that they will end up at a police auction?
  • by savuporo (658486) on Wednesday December 18, 2013 @08:45PM (#45732131)

    Let me try a random headline generator with the word Bitcoin substituted in, see how many land on Slashdot

    Could binge bitoin mining burgle the middle class?
    Will the bitcoin steal the identity of the conservative party?
    Is the nanny state destroying the bitcoin?
    Could dumbing-down bitcoin tax england?
    Is cancer stealing the bitcoins of your children?

    • by mpeskett (1221084)

      Or to borrow some actual slashdot headlines...

      Formhault C has a huge bitcoin debris ring
      Scientists print bitcoin
      Police pull over more drivers for bitcoin tests
      Apple pushes developers to bitcoin
      NASA schedules space walks to fix bitcoin pumps
      Bitcoin exchange value halves after... wait, I did this one wrong
      Unreleased 1963 bitcoin on sale
      Want to fight allergies? Get bitcoin

      Dammit, it still works, I would read every single one of these.

  • Please, please, please, somebody steal those wallets. What are the chances they haven't been secured correctly? All it takes is some bureaucratic error resulting in bad opsec and some thieves with big balls of steel and we'll have the bitcoin story of the year.

    • Right, because we need the government to find news ways to lose another $100M.

    • by Shoten (260439)

      Please, please, please, somebody steal those wallets. What are the chances they haven't been secured correctly? All it takes is some bureaucratic error resulting in bad opsec and some thieves with big balls of steel and we'll have the bitcoin story of the year.

      Actually, I bet something like this is happening as we speak:

      John Travolta (made up to look slightly different, as a blonde with a bit of a goatee): "Hey, Stan. How've you been?"
      Hugh Jackman: "Oh, SHIT! Not this crap again..."

  • 144,000 bitcoins is only $82M, since they're only $574.17 at the moment.
    They should have run this story on the 1st of dec, when they were going for $1203

  • Ugh... (Score:2, Flamebait)

    by bennomatic (691188)
    Cue the paranoid right wing "Obama wants to take your Bitcoins" brigade.
    • Re:Ugh... (Score:4, Funny)

      by PolygamousRanchKid (1290638) on Wednesday December 18, 2013 @09:12PM (#45732315)

      Cue the paranoid right wing "Obama wants to take your Bitcoins" brigade.

      Nonsense! Obama said quite clearly: "If you like your Bitcoin, you can keep it."

      I suspect that the FBI will use these Bitcoins in undercover operations, to lure out criminals who will only accept Bitcoins.

  • Federal Bitcoin Industries.

  • They are "worth" nothing. The bitcoins however are currently valued at X amount.
    Mind you, I'm not implying cash is "worth" anything either.

    On topic, the Winklevoss Bros are predicting up to $40,000 per coin
    http://www.theregister.co.uk/2013/12/17/winklevoss_predicts_400bn_bull_market_for_bitcoin/ [theregister.co.uk]
    Who knows what will happen? I just wish I'd made some money from it myself :/

    • Indeed, a pedant would be right, you are just inventing a distinction where there is none.
    • by QilessQi (2044624)

      On topic, the Winklevoss Bros are predicting up to $40,000 per coin

      Doctor: You know the leech comes to us on the highest authority?
      Edmund: Yes. I know that. Dr. Hoffmann of Stuttgart, isn't it?
      Doctor: That's right, the great Hoffmann.
      Edmund: Owner of the largest leech farm of Europe.

  • by alphonse23 (3461977) on Wednesday December 18, 2013 @09:11PM (#45732307)
    http://www.forbes.com/sites/kashmirhill/2013/10/04/fbi-silk-road-bitcoin-seizure/ [forbes.com] The feds plan to eventually sell them back into circulation -- if that's what they mean by liquidate. Though I think they should just throw/burn the private key away, and let those coins join the mass of other coins that were lost by early adopters.
  • by PPH (736903) on Wednesday December 18, 2013 @10:13PM (#45732639)

    I'd expect the FBI to use its collection of Bitcoin to engage in a number of sting operations. Buy contraband using their Btc and break up the next Silk Road. I'm sure they are getting set up with their own mining operation which would give them an up to date view of the block chain.

  • The FBI can buy the first round.

  • Let's just say this silk road profit was made before the recent spike in bitcoin price, and divide it by ten, that's still $10 million. This is after he probably spent a whole lot on operations and lifestyle, and whatever he had stashed elsewhere.

    I have no idea how profitable the drug dealing business is, nor the pricing of drugs, but that sounds like a shitload of product sold.

    You must need a warehouse with employees to ship all that stuff. And how much jailtime do you get when they catch you with that
    • by wvmarle (1070040)

      From the stories I read about it, I get the impression that Silk Road acted more like eBay, a platform allowing independent vendors sell their product. So the operator of the Silk Road only took a certain percentage of the deals, they didn't handle the drugs and other products directly. That doesn't mean it was a small operation overall, of course.

      For most of 2013, the bitcoin traded at around USD 120 each. So 144k BTC would be worth over 17 mln USD. And that's after cost. Not likely he had many staff or so

  • by Anonymous Coward

    There is not enough liquidity in the entire world-wide bitcoin market for the FBI to be able to exchange even a small fraction of those. The $100M value is absurd. If they tried to convert them to a more usable currency the exchange rate would plummet and they would become nearly worthless.

    • Says the idiot AC with no research skills.

      From Bitcoin Charts [bitcoincharts.com]
      Bitcoins sent last 24h 1,303,510.08 BTC
      Bitcoins sent avg. per hour 54,312.92 BTC

      So the FBI's 174,000 coins would equate to less than 13% of the current daily volume, or in other words wold satisfy the full current demand for, oh, about 3 whole hours.
      • by LWATCDR (28044)

        If they dumped them the market would crash. An increase of available bitcoins for sale of 13% would cause a massive crash.

  • Posting to undo moderation.
  • There are multiple exchanges that have more bitcoins overall and larger individual wallets.

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