[eghri]

The problem with digital data is that it can be replicated at no cost and with no trace, so there wouldn't be any way for Ashley Madison to ever be sure the leak was contained. They could pay $10MM for a copy of the data... and two months later it can anonymously show up on Tor. Not to mention the hackers would need to come forward to collect the $10MM, which might land them in a jail cell before they can collect.

[gwern]

There is no need for it to be a lump sum. A (much smaller) regular monthly payment to a Bitcoin address is perfectly adequate a mechanism.

[bduerst]

>"Perfectly Adequate"

All bitcoin transactions are public record, and even if you tumble you are setting yourself for getting caught by repeatedly doing the same actions. Besides, the value of the information decreases over time, meaning you're going to be making the large payments up front.

[gwern]

> even if you tumble you are setting yourself for getting caught by repeatedly doing the same actions.

By doing what? Making payments to an address?

> Besides, the value of the information decreases over time, meaning you're going to be making the large payments up front.

Any lumpsum can be structured as an equivalent series of regular payments. Whatever the present value of not having the data released is, it can be turned into a set of finite or indefinite payments, which last 1 year or 5 years or 10 years or however long the company feels the harm will be non-neglible. And by doing this, you still get the anti-defecting incentive of a stream rather than one-off payment.

[bduerst]

You know how the blockchain works, right?

Those transactions become permanently public, and can be used against you in court if at any time in the infinite future you are tied to that address, or tied to any addresses pulling bitcoins out of that account (which are also publicly recorded actions). Compared to cash, which is not a matter of public record, bitcoin is not a "Perfectly Adequate" solution.

Without contracts or signals, you can't make monthly payments on a depreciating asset/service because it becomes an auction. The hackers are rationally incentivized to maximize their returns, and that includes selling the data to the highest bidder before the price depreciates. That means that Ashley Madison would need to beat the highest bidder each month, without knowing if the other bidders are even real.

[gwern]

> You know how the blockchain works, right?

You apparently don't. Payments do not in themselves offer any risk whatsoever when the payments are made to a brand-new address (which is so obvious and basic a point of secure Bitcoin use I didn't need to mention it); these payments to the blackmailer can then be mixed in numerous ways at varying costs and levels of efficacy - Coinjoin, a large DNM, a web wallet, an exchange (either to just gradually withdraw, or sell outright into another cryptocoin & then sell that cryptocoin at a different exchange, particularly one of the cryptocoins with built-in anonymity features), sent to stealth addresses, etc etc. The pseudonymity of this does not affect the mechanism of turning a lump sum into a stream of payments: the payments can be safely made with reasonable levels of transaction costs, and thus the blackmailed and blackmailers can transact safely and keep the data private or not, with neither side being ripped off for more than one payment.

> The hackers are rationally incentivized to maximize their returns, and that includes selling the data to the highest bidder before the price depreciates. That means that Ashley Madison would need to beat the highest bidder each month, without knowing if the other bidders are even real.

If the hackers are bluffing, then AM can always call their bluff. If AM is not confident they are bluffing, then they will simply pay up to the value of keeping the data secret. Where's the problem here? Again, why does a stream of payments fail where lump sums would succeed?