I don’t follow your point about infosec. The RAND link summary seems to argue that the case against crypto is that it may not be widespread enough to be a good money laundering source, not that laundering won’t work. Or maybe that’s what you’re saying? So sure, I agree the NSA will continue to target terrorist groups...but they can’t do it through monero or zcash! There just isn’t enough information leakage. But maybe your point is just that there are enough other attack surfaces that intelligence services will continue to target them?
(edit: just saw you are the author, ha! So I took a few more minutes to read, and tbh I’m not sure we disagree. I understand Bitcoin can be somewhat deanonymized, but there are lots of easy ways to make that harder, and monero and zcash seem very private. My point is more that this contributes additional risk overall and we even see examples of this already even w/o e.g. monero being widely accepted.)
I suppose that is somewhat of a rebuff to my thesis as written, perhaps too provocatively. I guess what I mean to say is that *some funding will leak through* and stopping all illegal funding through cryptocurrencies is an impossible task (but perhaps a silly point as maybe you could say similar things about cash). And by proof, I’d present that Hamas already uses cryptocurrencies to route around sanctions and regulations, as does North Korea. My concern is that you only need one crazy terrorist group to make a superflu, and I think cryptocurrencies could make that more likely.
That means they will continue to run to embrace KYC/AMF regulation
Hmm, this doesn’t make sense to me. Bitcoin miners don’t have any KYC requirements, and don’t track that information. That’s why people were annoyed with the Biden Infrastructure Bill, as it appeared to change the rules, effectively making mining illegal in the US (obviously lots of regulatory guidance still to be issued, etc.). Coin Center covered a lot of that, here and here probably good places to start. But yeah I’ve done a quick 5 minute check and I’ve found many Bitcoin mining pools, none of which have KYC. Maybe you could elaborate what you mean here?
Also, this isn’t particularly relevant but I find it interesting (and controversial!) so I’ll dive in a bit: I maintain that nodes (that is, users) determine consensus in Bitcoin, not hashpower. If you take 90% of Bitcoin’s hashpower and start breaking consensus rules, you can mine blocks, but no one will accept them. It would be chaotic and crazy for sure, and of course would result in a hard fork. But the mainchain would continue at 10% of mining hashpower, all the exchanges and users would just ignore the other chain because those blocks break consensus rules. It’d be slow for a bit, but it wouldn’t be a huge problem. The 90% hashpower would lose all the resources they sunk into their forked chain that no one uses. We even saw this play out in 2017 when Bitcoin Cash hard forked with a bunch of hashpower. The main Bitcoin chain kept going, because most nodes stayed with the main chain regardless of where hashpower went.
I guess what I mean to say is that *some funding will leak through* and stopping all illegal funding through cryptocurrencies is an impossible task (but perhaps a silly point as maybe you could say similar things about cash).
Right. So terrorism will likely neither be materially helped nor significantly harmed.
I’ve found many Bitcoin mining pools, none of which have KYC. Maybe you could elaborate what you mean here?
Yeah, I didn’t mean that miners themselves would be subject to KYC, I meant that the key stakeholders in Bitcoin will want to ensure that the government won’t ban it, which would hurt its value. That means that the vast majority will support things that require AML/KYC for most bitcoin usage—and if miners were faced with a choice between regulation and rules which hurt prices or KYC, they would pick KYC in a heartbeat. And we see that it’s happened everwhere else—all the exchanges, all the consumer front ends, and a vast majority of transaction go through places which have KYC requirements—meaning that not only is most of it tracked, but the remaining fraction of the blockchain is far easier to deanonymize.
I don’t follow your point about infosec. The RAND link summary seems to argue that the case against crypto is that it may not be widespread enough to be a good money laundering source, not that laundering won’t work. Or maybe that’s what you’re saying? So sure, I agree the NSA will continue to target terrorist groups...but they can’t do it through monero or zcash! There just isn’t enough information leakage. But maybe your point is just that there are enough other attack surfaces that intelligence services will continue to target them?
(edit: just saw you are the author, ha! So I took a few more minutes to read, and tbh I’m not sure we disagree. I understand Bitcoin can be somewhat deanonymized, but there are lots of easy ways to make that harder, and monero and zcash seem very private. My point is more that this contributes additional risk overall and we even see examples of this already even w/o e.g. monero being widely accepted.)
I suppose that is somewhat of a rebuff to my thesis as written, perhaps too provocatively. I guess what I mean to say is that *some funding will leak through* and stopping all illegal funding through cryptocurrencies is an impossible task (but perhaps a silly point as maybe you could say similar things about cash). And by proof, I’d present that Hamas already uses cryptocurrencies to route around sanctions and regulations, as does North Korea. My concern is that you only need one crazy terrorist group to make a superflu, and I think cryptocurrencies could make that more likely.
Hmm, this doesn’t make sense to me. Bitcoin miners don’t have any KYC requirements, and don’t track that information. That’s why people were annoyed with the Biden Infrastructure Bill, as it appeared to change the rules, effectively making mining illegal in the US (obviously lots of regulatory guidance still to be issued, etc.). Coin Center covered a lot of that, here and here probably good places to start. But yeah I’ve done a quick 5 minute check and I’ve found many Bitcoin mining pools, none of which have KYC. Maybe you could elaborate what you mean here?
Also, this isn’t particularly relevant but I find it interesting (and controversial!) so I’ll dive in a bit: I maintain that nodes (that is, users) determine consensus in Bitcoin, not hashpower. If you take 90% of Bitcoin’s hashpower and start breaking consensus rules, you can mine blocks, but no one will accept them. It would be chaotic and crazy for sure, and of course would result in a hard fork. But the mainchain would continue at 10% of mining hashpower, all the exchanges and users would just ignore the other chain because those blocks break consensus rules. It’d be slow for a bit, but it wouldn’t be a huge problem. The 90% hashpower would lose all the resources they sunk into their forked chain that no one uses. We even saw this play out in 2017 when Bitcoin Cash hard forked with a bunch of hashpower. The main Bitcoin chain kept going, because most nodes stayed with the main chain regardless of where hashpower went.
Right. So terrorism will likely neither be materially helped nor significantly harmed.
Yeah, I didn’t mean that miners themselves would be subject to KYC, I meant that the key stakeholders in Bitcoin will want to ensure that the government won’t ban it, which would hurt its value. That means that the vast majority will support things that require AML/KYC for most bitcoin usage—and if miners were faced with a choice between regulation and rules which hurt prices or KYC, they would pick KYC in a heartbeat. And we see that it’s happened everwhere else—all the exchanges, all the consumer front ends, and a vast majority of transaction go through places which have KYC requirements—meaning that not only is most of it tracked, but the remaining fraction of the blockchain is far easier to deanonymize.