[vectorpush]

Hmm, I'm not so sure. If anything, it seems to me that bitcoin has actually been quite a boon for the viability of darknet markets; certainly the silk road would have never risen to such heights were it not for bitcoin, and as far as I'm aware, bitcoin itself has never actually played a direct role in helping to identify darknet kingpins (who end up tipping their hand in some other fashion). Honestly, I'd say darknet markets are the only place where bitcoin is genuinely useful.

[gwern]

More importantly: if Bitcoin was invented and released for that reason, then it will turn out to be one of the more epic backfires in security agency history, for the simple reason that everyone involved knows that inventing the first successful distributed pseudonymous e-cash is much, much harder than inventing the first successful distributed anonymous e-cash.

As soon as Bitcoin became clearly successful, it also became inevitable that things like Monero or Zerocoin or Coinjoin would be invented. Once the genie of distributed e-cash has been let out of the bottle, it not merely can evolve but will evolve.

So in exchange for a brief period of visibility through Bitcoin, they would have permanently and irrevocably damaged their ability to spy via banks, Western Union, PayPal etc (entities which they pwn lock stock and barrel) as usage diverts to anonymous currencies (Bitcoin with extensions or mixes, or anonymous coins).

[johnsoft]

>everyone involved knows that inventing the first successful distributed pseudonymous e-cash is much, much harder than inventing the first successful distributed anonymous e-cash

Assuming "much, much harder" isn't hyperbole, could you elaborate on this please? I'm interested in the tech aspect. The existing anonymous solutions I've looked at are all more complex and difficult to grasp than the simplicity of bitcoin's global ledger.

[gwern]

What I'm saying is that before Bitcoin no one had a good idea for a distributed e-cash which met the basic criteria of no trusted third parties. Given such a system, then you can fairly easily imagine building an anonymity layer on top of it: if nothing else, to name only the very most obvious solution, people can use a mixer service hosted on a Tor hidden service. The jump from ???->Bitcoin is much bigger than Bitcoin->Bitcoin+Tor, and with a working system, one can go back and look at all the fancy anonymity-related math and ideas which had been published or speculated about in the past and see which can be added in, and dollars to donuts, at least one will work and that's all you need. Any group smart enough to invent Bitcoin would be able to foresee that at some point, anonymous currency would follow as a consequence and I believe Satoshi said as much somewhere (although I don't have a quote on hand).

[imglorp]

But it will. The journal contains connections, just like facebook, between every miner, buyer, and seller ever. If you make a new wallet and transfer your coins there, it's recorded. If you buy some on the street for cash from some guy, it's recorded. You don't always know the details, but you always know the connection.

Cash, laundering, shell corps; they have none of these properties.

[drjesusphd]

> bitcoin itself has never actually played a direct role in helping to identify darknet kingpins (who end up tipping their hand in some other fashion)

See: parallel construction.

Bitcoin or not, if the technology existed to identify "darknet kingpins", the technique wouldn't show up on the open press.

[vectorpush]

I don't see why parallel construction would be necessary in the case of bitcoin. Investigators can legally subpoena the records of bitcoin payment gateways/exchanges (that's the entire point of KYC procedures) and then easily link bank records to wallet addresses on the public ledger without violating any laws. It's also a well known fact that this is already possible (hence the creation of tumblers etc), so it's not as if the government would hesitate to do this for fear that the technique would be compromised.

[ColourCharge]

It's not about violating laws. It's about not letting the enemy know when you've cracked their system. If bitcoin was setup (or is just being conveniently used) by a three letter, they will use parallel construction to avoid letting the public know their true capabilities. Popularity of bitcoin would plummet if that capabilty was known.

[vectorpush]

> they will use parallel construction to avoid letting the public know their true capabilities.

As I already stated, parallel construction is completely unnecessary since everyone is already aware that the blockchain is a comprehensive public record of all bitcoin transactions. What secret technique could the government have that could give them more information than is already available for everyone to see? There isn't any more information beyond what's inside the ledger except for the link between wallet and bank account which everyone knows the government is capable of establishing.

[ColourCharge]

It's not about a secret technique. It's about whether or not they are in fact using the blockchain for this purpose. That little detail is presently unknown by the public, regardless if "everyone knows" they should be capable. If they do not wish to confirm this in public then parallel construction will be necessary to maintain that unknowing.

[seanwessmith]

Which in turns feeds the security agency. A la private prisons

[jahewson]

Which in turn feeds the orange jumpsuit industry.