They can make you cough up an equivalent amount in fines, of course. But the original amount is gone.
The point the article was making is that transactions can and will be deemed illegitimate, both in the sense that mistakes are made, and in the sense that the legal framework will decide you have to reverse the payment. If you've buried cash and refuse to tell people where it is, you are in roughly the same place as refusing to reveal keys. You can be held accountable of course, in various ways.
I think the article was more making the point that any payment system that doesn't recognize this reality will have inherently limited uptake, which is probably true.
I was noting that there is nothing fundamentally different between say you accepting a payment in bitcoin and refusing to cough up the key when told to reverse it, or accepting a payment in cash and burying it then refusing to tell police where.
Fundamentally there are mechanisms to reverse this, or punish/constrain you for obstructing the process. Some payment systems have them built in at a very low level (CC chargebacks), some rely on professional standard (hold harmelss), etc. Some rely on court systems. That's a trade off of convenience vs. risk, but doesn't change the fundamental point that a payment system without a standard reversal mechanism is going to have limited use.
Agreed.
> That's a trade off of convenience vs. risk, but doesn't change the fundamentals.
There is. The ones that rely on court mechanisms aren't the payment mechanism being reversible, it's something else (the storage) that gives first.
It's true that if you keep it in your bank account, all transactions are reversible. But that's a statement about property rights, not about finality. If I have a solid means of "storing" my money, such as by burying it in my back yard, then the payment itself is irreversible. That's not true for cards, which are reversible even if your storage is 100% robust.
I'm not sure we agree on this being fundamental. At least you can define it as a categorical difference (sure) but not really a practical difference.
I think the articles points were twofold: 1) Property rights, or more generally the legal & regulatory systems, trump any rules imposed or agreed in your system of payments 2) Most payments systems feature reversal processes for necessary reasons (but if they don't, see (1) as fallback position)
Both of these seem important to understand if you want to understand how a payment system works or could work in the future, and also to understand your exposure/risk in using them.
People mostly understand the trade offs and limitations of cash; mostly probably don't understand them well for lots of payment systems.
1. Storage
2. Payment rail
If your storage is solid (e.g. keys in brain wallet, account in crooked bank, money in shoebox) and the payment rail is solid (e.g. gold, cryptocurrency, cash), you're good. (To clarify, "solid" here means "beyond the legal-regulatory system", which means the rules aren't trumped.) Otherwise, you aren't.
I say that Bitcoin has "finality," because it does the job of payment rail with 100% irreversibility.
Grant that Bitcoin is a mediocre storage (1). But the payment rail (2) truly is irreversible. The combined system of two disjoint parts, built out of bitcoin-as-storage and bitcoin-as-payment-rail, is not.
I think it is a mistake to believe this is a thing. You can be allowed to operate in gray areas for a bunch of reasons, or you can be small enough not to be too bothered about (e.g. shutting you down not deemed worth the effort); but this is a choice of those same systems, not in your control really.
Although to be fair, I guess this stuff really varies by jurisdiction. Otoh, where the gray areas get bigger, your chances of having that go against you are bigger also.
Whether such storage exists is a much better question. I think it depends on what you want to do with it. For example, if the Bitfinex guys were ideologically motivated, they could've spent all the money on, I don't know, political ads or whatever. More generally, I think you can certainly come up with storage that is outside the reach of a given threat actor in pursuit of a given goal.
I'm not saying bitcoin isn't a thing in the world; I was saying that I don't think that makes it "beyond the legal-regulatory system", or that that is really even a helpful/useful concept. I mean we can talk about various shadow economies, but they are just that - and not really in scope for OP article.
It isn't, though. The record is kept, and in fact the government needs to submit to the blockchain's laws to move any coin around.
It is kept in the same sense that you can draft a contract declaring you the owner and supreme ruler of the moon.
> in fact the government needs to submit to the blockchain's laws to move any coin around
No, it's the opposite: Everybody moving around coins has to submit to applicable laws – or face the consequences of violating them.
The government cannot undo a Bitcoin transaction. If the keys are accessible, they can seize the coin and create a new transaction to redistribute according to the law.
If the keys are not accessible, then they are totally powerless to do anything at all.
The government submits to the blockchain's rules the same way everyone else does. That's kind of the point.
The interesting thing in this whole conversation is assuming the person holding the key is the custodian of the funds, when it is more the key itself that is the custodian. The keys hold the funds, the person holding the keys can change but that is entirely outside the system but so is getting robbed on the side of the street of the cash in your pocket.
If you truly believe that, I don't think you understand how law enforcement works.
To my knowledge, this hasn't happened yet, but I strongly suspect that it's only a question of time. Embargoes/sanction lists are one of the most powerful mechanisms of law enforcement for governments – I doubt that they will continue to let cryptocurrencies undermine that for too long.
Definitely, but I don't think that mixers would be considered an acceptable "excuse" for dubious coin origin.
> The key holder has the ultimate power to simply throw away the key. There is no recourse for that.
True, but what is the utility of that?
I suppose the point is to not have something seized from you which you do not want taken.
Anyway, these questions are now outside of/unrelated to common sense understanding of what a "finalized" payment is.
It doesn't really matter what the code says, or what bits are inscribed somewhere. Finance and ownership are ultimately enforced by armies, not computer programs.
This is one reason why some people think that cryptocurrencies are playing with fire. It's also why major exchanges won't make it easy to cash out laundered bitcoins to USD.