In Code We Trust vs In Law We Trust

I will start this post with the following – I believe Craig Wright is a bit of a dick, harsh, abrasive, highly disagreeable, definitely on the autistic spectrum and at times prone to exaggeration. I also happen to believe that he is either Satoshi or at least 80% of the gestalt entity known as Satoshi, and was certainly the driving force behind its creation.

Craig caused a bit of a stir earlier this week when he posted the following comments in a slack forum he leads:

This caused quite a bit of excitement among those who follow him, especially in regards to his boasting about his plans to ‘poison’ the BTC blockchain through double spend attacks, like the one carried out on the on the 21st hours of the 21st of January on the 21st year of the 21st century, on a blockchain with 21 million coins. Without going into the specific he said it was possible to cripple the BTC network, by flooding the network when it was already congested, with multiple trades and using RBF fee payments create multiple double spend attacks that would consequently slow the network down even further through multiple chain reorgs while he placed his “iceberg” trades on various exchanges to dispose of his holdings:

Being aware of the all of the above I was watching rather intently last night and have to put my hand up as one of the people who became rather excited, especially when I saw a number of Satoshi era coins start moving about the place with weird scripted fee payments attached to them.

This morning I woke up and one of the first comments I saw in relation to his ‘big revelation’ and contrasting greatly with what he was saying 3 years ago was this:

Talk about an about face! You will certainly never get any disagreement from me when people say Craig’s inconsistency and idle boasting have done a large amount of harm to the crypto space, and especially to his vision of what BitCoin was meant to be. Craig and all the investors who’ve followed his vision would have been far better off if he’d just had an Agent Smith come along and permanently seal his mouth like was done to Neo in the Matrix.

Eventually when I dug in a little further as to what his original over hyped “tomorrow lightening and sidecars are permanently broken” was all about, I have to admit that it at first appeared to be just another big fat nothing burger:

Basically Craig is suing the developers of various forks of the BitCoin protocol, in order to get coins that he claims were rightfully his and were stolen, back into his possession.

There are a number of theories that range from Craig being a giant fraudster and the keys and coins were never his, to more reasonable explanations that they were stolen or lost. Personally, while I have long been convinced that Craig is Satoshi, I have never been more than 50/50 in terms of assurance that he had the keys or could still access his coins. Indeed, in recent months as BTC climbed to new peaks I became more convinced that he did not (the story that I heard was that when he entrusted David Klienman in setting up the Tulip Trust and the encrypted file that they were secured in, they were actually lost, as in the final months of his life David had descended into a very disheveled and disorganized state, both physically and mentally, amplified by a very large cocaine habit).

Regardless of that particular history and whatever the truth in regards to it may be, on further consideration I realised that Craig’s initial comments in regards to lightening and BTC, while typically over embellished, did actually pose a long term existential problem for BTC and many other crypto currencies and side chains, should he ultimately be successful in his latest legal case.

The terms ‘own’, ‘owner’ and ‘ownership’ are defined and noted throughout the White Paper. It is important to note that the white paper defines these separately to possession of the keys. As I’ve said previously, BitCoin is a Gordian knot of economic and legal principals, and has been very carefully constructed to operate WITHIN THE LAW. Consequently for systems that are designed to operate within the law, then they can be expected to benefit from protection by the law.

In section 2 of the White Paper, BitCoin is defined as a chain of ownership. You do not gain ownership through theft, likewise you do not lose ownership through loss either. If you receive stolen goods, either wittingly or unwittingly, they do not become yours – something cannot be legally given away when it is not yours to give away. If you find a suitcase full of money lying in the street, it does not become yours – it remains the property of the person who lost it, and you are obliged to make a reasonable effort to locate the owner – even if that is simply turning the suitcase into the police.

The Blockchain is no different to any other ledger, it is just that it is decentralised and digital. It is no different to a share registry. If you have a BHP Share and the share certificates are stolen, you can take action and have BHP change the ledger to issue new share certificates. Likewise if your house burns down and you lose the paper share certificates, you can take action and have them reissued. That is how ledgers work and is a legal principal of Tracing and Following that extends right back to the days of Rome.

The principal and distinction of ownership as opposed to possession over BitCoin has already been established many times in various courts around the world. Perhaps the most famous was Ross Ulbricht aka ‘Dread Pirate Roberts’. One of the defenses that he put forward was that he was not in possession of the keys to the Silk Road account, and thus could not be considered to be the owner of the coins. The US law court look through this argument and established he was the actual owner of those coins through a significant amount of ancillary evidence.

The same will apply to Craig in regards to his claims of being the owner of the coins in question of this particular action – he will have to prove to the courts that he is the rightful owner and have them find in his favour for his actions against the developers to be enforced. Note that he is not suing the developers for money or compensation, he is suing for enforced action.

If Craig is successful in this action it will have far reaching actions. Firstly in regards to people who have lost the keys to their accounts, like the famous case of the UK man who sent his hard drive to the dump and has spent a fortune trying to recover it from the land fill, they will be able to simply prove ownership and apply to have their keys to the their account returned to them.

It would also disrupt the cyberpunk’s narrative that code is law – it is a misconception that BTC held in a wallet cannot be moved without the consent of the owner. The blockchain is digital code and that code can be changed via hardfork or some other coding means, and the developers and miners can be legally compelled to do make it happen. If Craig is successful in this case, then all the BitCoin forks will be compelled to take similar action on their blockchains and return those coins or keys he claims were stolen to his possession.

But if successful the action by Craig would have other far reaching implications, especially in regards to side chains and second layer solutions. Again in the White Paper it states that BitCoin needs a way for the previous owner to check the transaction.

For a small amount of money of only a couple thousand dollars, this would be relatively simple. As long as nothing has been broadcast using an ‘Alert Key’ (functionality which has now been removed from BTC) then the recipient would be able to trust the transaction based on a pseudonymous exchange. However, if the amount is significantly larger, as stated in section 2 of the White Paper, “the payee would need to know that the previous owners did not sign earlier transactions”. Owners, not key holders.

As some crypto holders have already experienced when moving large amounts of coins onto exchanges, they have been asked to provide proof as to their legal ownership of those coins. This is something that I’ve personally experienced, while I had transactions from previous exchanges showing buys/sells, I was fortunate that in all those years ago back in 2012 I retained a single invoice receipt showing my purchase of my X number of BTC for $5 each.

Where this starts to become an existential problem for BTC and lightening under existing laws, is that the continuous chain of ownership is broken by the ‘Lightening Network’. When you send coins via lightening channels, the person receiving them doesn’t receive the coins you sent, but an equivalent number paid out of the Lightening channel. Under existing laws this is a BIG problem for BTC (added to the fact that there is no functional alert key remaining in that system).

Basically it means that every lightening tower that forms part of the lightening network will be required to perform AML/KYC over each transaction that is sent – they become money transmitters. Furthermore they will be required to keep mountains of data, enabling the tracing of every coin broadcast to their network, where it was sent to and where it ended up.

If you are familiar with the history of development on the BTC chain then it is obvious that these changes have been made deliberately in order to move BTC outside the law, and it all started with the worst, most impractical “improvement” that was adopted in BTC – Segwit or Segregated Witness.

Things such as P2SH (Pay to Script Hash) and RBY (replace by Fee) and the Bech 32 addresses ALL drop signatures for bundled witness statements, allowing for the lightening channels to operate, whilst bypassing the sat/byte fee for weighted transactions. The sat/byte fee was the process adopted by BitCoin in the original white paper and actually facilitates the system scaling that UTXO systems enable. Introducing ‘channels’ effectively transforms that part of the BTC network into a ‘state’ based system more akin to a spoke and wires network, destroying its ability to scale in the process.

This was the key motivation in capturing BitCoin and transforming it into BTC – capturing the fee flow for economic activity that takes place over the network. Coming back to my earlier Gordian knot statement, the only problem is that by doing so it transformed the network that operated easily and efficiently inside the law, to one that operates outside the law, unless accompanied by a huge amount of data collection and recording that effectively negates the benefits of using it in the first place.

The vested interests that now control BTC are lobbying very hard for the laws to change – they want BTC to be accepted as it is now, with its multitude of second layer solutions. They may be successful, but it would require a radical rewrite of payment and transmission laws, that would really only benefit BTC and leave existing payment services at a distinct disadvantage to BTC in terms of existing laws re Traceability, KYC and other boring but necessary rules and regulations that make for honest systems. I don’t like their chances.

Of course Craig could be simply lying – but he would have to be insane to do so, and while I think he is many things I don’t believe he is insane. He is actually initiating these lawsuits, he is bringing them to court, with the exception of the Klienman case he is not trying to evade or defend himself against accusations. By initiating these other cases he knows his claims will be intensely scrutinised, and it he is found to be lying or maliciously suing under false pretenses, as well as costing him a mountain in legal fees and opening himself up to be counter sued, he will be going to jail for a very, very long time.

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Peachy

That’s a mighty long post, Stewie!

There are many threads there, but I’ll just respond on the surface to the legal aspect of this. One would be absolutely delusional to expect that the legal action stands any chance of compelling the developers/miners to do anything. It is vain to talk about the law of ownership or “tracing and following” because there is no such thing as global law.

There is a law in each country, and the laws are all different between countries but also within countries for different purposes.

What might pass for “ownership” in the US in the context of a criminal prosecution might not for the purposes of a civil suit in Taiwan. Or family law in the UK or superannuation law in EZFKA.

If by some miracle dude succeeds in obtaining a judgement in the UK, good luck to him trying to enforce it in all the jurisdictions where each of developers and miners are.

Not sure what the point of the legal action is. Likely just to be seen to be doing something.

Peachy

Enforcing foreign judgements might work nicely in theory, but not in practice.

Here’s how it works in China (https://www.kwm.com/en/uk/knowledge/downloads/enforcing-your-judgement-in-china-20160915?downloadCode=541952749) apparently…
😂😂😂🤣🤣

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Last edited 7 months ago by Peachy
Peachy

PS a judgement that requires someone to perform a particular action would be particularly problematic. It’s one thing to order a contract be modified or property be transferred, between a couple of parties. quite another to order to order a whole bunch of disparate developers to modify code somehow.

I mean, can you even begin to imagine how that might happen? Who will review the code to determine if it satisfies the terms of the judgement???? 🤯🤯

Snowflakes in Hades, etc…

Peachy

I maintain that it is a huge huge HUGE chasm – light years – between obtaining a judgment in some (possibly low level) UK court and global exchanges delisting the asset.

I think that the best he might hope for is some empty Pyrrhic victory, where he “scores” a win but gets nothing because nobody complies. Maybe the denizens of Leicester or Liverpool (or something, wherever the court is located) will be disallowed from trading BTC.

Like the NYAG thingy that supposedly banished tether from NY, but of course anyone in NY who wants to transact in tether will still do so.

Peachy

Don’t be so credulous, Stewie.

If he somehow miraculously wins, there will be a bunch of appeals in the UK that will run for years. Then appeals against enforcement in every jurisdiction where the miners/developers are – more years.

In the meantime, you’ll see the btc protocol develop and evolve in such a way that bloke’s claim can never be practically satisfied. And the parties to the litigation will restructure themselves such that there is nothing left to be grabbed.

There is just no way that anything will come of this.

That’s the problem with trying to sue for fifty billion…. nobody has fifty billion, so you won’t get no satisfaction.

Peachy

Well, I’ll take the under on that 🙂

bjw678

 But I’m not doubtful that should he actually win he will ultimately get access to those coins.

I really don’t see how we possibly get to that point having thought about it some more.
If he has legal documents proving he owns the coins, congratulations he can now sell them to anyone willing to buy them with no changes required to btc at all. Keys Not equal to ownership as you say.

But they are almost worthless without the keys to move them, you say.

Sorry, you are SOL. It’s a damn shame the legal precedent that ownership and ability to transfer are distinctly separate has been set…

Last edited 7 months ago by bjw678
bjw678

Craig claims he owns that address and has legal ownership documents to prove it. 

Unless he has the private keys to access that address, how does he have anything that isn’t public knowledge?
There are no “legal ownership” documents for btc.

Last edited 7 months ago by bjw678
Peachy

Yep. Legal documents my butt.

“Not your keys, not your coins” is something that someone technical like Craigo should understand.

Seems to me like he’s lost a bunch of BTC but instead of just having a cry about it, he wants to try to upend the whole universe and rewrite the BTC protocol to allow “his” coins to be restored to him, even though he’s got no keys.

Peachy

1) I’m not saying that whoever has managed to obtain possession of the keys should be the owner.

2) “Not your keys not your coins” is how the protocol operates. The protocol has arbitrary rules. The court isn’t going to rewrite them. It just isn’t happening.

1 and 2 are very different things. But no 2 constrains what can be done in respect of no 1.

Some things are just liable to theft/loss and it’s a risk. If we’re doing analogies – consider music pirated (stolen) over the internet. The music owner has a legitimate complaint, but they will FAIL if they ask a court to force the internet to be shut down so that music can’t be stolen.

Last edited 7 months ago by Peachy
bjw678

But how do you PROVE ownership?
If you dont have the private keys you only have stuff freely available on the blockchain.
I could create “legal” documents stating a right to every possible bitcoin address. Does that mean I own all the bitcoin ever?
Or to continue the car analogy, if you lose your keys, are the manufacturers responsible for providing you with access to your car or is it your problem to solve?

Last edited 7 months ago by bjw678
Peachy

Even if we assume that someone can prove that some coins were stolen, it’s quite another matter to then change the protocol such that they can be restored to the person they were stolen from.

If this were to happen, might as well scrap the whole project. What’s the point of a blockchain if any court in any country can go and order that it be rewritten? Maybe that’s the outcome Craigo is getting at – being a wrecker if he can’t be the boss.

bjw678

Blockchain is absolutely terrible for microtransactions.
It requires those transaction remain on the ledger FOREVER, taking up space.
A system that discards all transactions once they are no longer relevant is a much more practical system for that.

bjw678

they will be essentially free transactions based on the chain of hash signatures, verified by the receiving wallet checking hash signatures.

They don’t even need to go to a miner until they leave the local network,

So how does this solve the double spend problem?
I can add my hash to multiple chains until they reach the miners and are placed into the mined chain, at which point all but one will be invalidated. Whatever the other half of those transactions are is a different matter though.

Last edited 7 months ago by bjw678
bjw678

Yeah, you wait for a few blocks of confirmation.
A bit hard to do if not sending it to the miners though…

bjw678

So why use blockchain? It’s one strength is providing trust in a trustless environment.
We are going to go around in circles on this.
See the crypto exhanges. None of them are using blockchain internally because it is a trusted* environment, you head back out into trustless when you get back on the blockchain.

*Whether they all should be or not is another discussion.

bjw678

You could easily put all the processing activity from a normal exchange onto BSV, 

as long as you are happy with the blockchain being restricted to central authorities, 460Gb per day as discussed earlier.

bjw678

Then I become aware it is in the bank vault, I can go to court and prove ownership – it doesn’t stay in the bank vault because I wasn’t the person who placed it in there.

True, but the entire operation of the banking system also doesn’t need to be changed.
The true analogy is the owner of a single address being ordered to transfer the coins back, which is a realistic option. No order will ever force unrelated third parties into action.

bjw678

If I lose a suitcase filled with gold that I’ve bought, that I have copies of the receipts and the serial numbers of the bars and someone finds the suitcase and locks it in a bank vault.

True, but if you bury it in your backyard and then forget where you put it, good luck getting a court action against anyone to recover it.

Peachy

Apparently Swiss banks to this day hold a lot of gold and funds that had belonged to people that the nazis murdered in the 1940s…

And the heirs of the victims have not been able to compel them to disburse it…

Expect Craigo to fare no better.

Last edited 7 months ago by Peachy
bjw678

The only problem is to succeed in getting this court order made, you need to prove that it isn’t actually required, see my comment above.

Either Keys ARE ownership OR they aren’t so why do we need to rewrite the whole system to give you new keys again?

bjw678

Somebody needs to be AT FAULT to have a judgment made against them, or to have done something criminal.
The only person at fault is the person who lost the keys.

bjw678

If you had a safe, locked a pile of money in and forgot the combination, could you sue the manufacturer for destruction of the contents resulting from forced opening of the safe?
Simply demand they provide a new one because you lost the combination?
Or would the individual have to BEAR SOME RESPONSIBILITY rather than it being everyone else’s problem?

Peachy

This is an interesting take.

I like it, although I don’t 100% agree. Probably it comes down to how we use the word “ownership”.

If I
1)physically possess something,
2)am legally entitled to it and
3)am in a position to deal with/dispose of it
– that’s clearly “ownership”.

But there are some situations where these 3 factors don’t go together, and so it gets trickier.

Examples: borrowed car from friend: 1&2, not 3; picked up $10 off street: 1&3 not, not 2; gold in bank vault: 2&3, not 1.

Crypto keys go to items 1 and 3 (together, hence colloquially – not your keys, not your coins)… but perhaps they don’t go to to #2. I can accept that.

Craigo wants a UK court to order something to be done that adversely affects the property of 100 million people around the world, to remedy someone running off with his keys…. I say this is not likely. Unbloodylikely.

Because we like crazy analogies – If my car is stolen and parted out, I’m going to have no luck asking a court to order that all the parts be found, recovered and reassembled into my car. No freaking way.

Last edited 7 months ago by Peachy
bjw678

Craigo wants a UK court to order something to be done that adversely affects the property of 100 million people around the world, to remedy someone running off with his keys…. I say this is not likely. Unbloodylikely.

Because we like crazy analogies – If my car is stolen and parted out, I’m going to have no luck asking a court to order that all the parts be found, reacquainted and reassembled into my car. No freaking way.

To rectify him LOSING his keys. No one stole them, no one took the coins, they are all still right where he left them and he still “owns” them.

This is like ordering the car factory to give him a new car because he lost his keys and can no longer drive it.

Peachy

Hang on, he lost them, nobody swiped them?

I hadn’t realised that they are jsut where he left them.

New analogy – I’ve lost a $100 note and I turn up at the central bank quoting the serial number, asking for them to print up a replacement one for me!

🙀😂😂😂🤣🤣😂😅

bjw678

I’m not fully across the details but it seems someone he trusted “Lost” the keys so same,same.
You win the analogy war by the way 🙂

the story that I heard was that when he entrusted David Klienman in setting up the Tulip Trust and the encrypted file that they were secured in, they were actually lost, as in the final months of his life David had descended into a very disheveled and disorganized state, both physically and mentally, amplified by a very large cocaine habit

Peachy

But nobody deprived him of the access? At least nobody that he is suing deprived him?

bjw678

Given from the brief info I’ve received he sounds like someone talking down btc to buy back in I’ll take option B thanks…

bjw678

who set up ‘Crypto News’ sites to push their own agenda,

You might want to consider how that applies to the stuff you are reading and repeating…

It didn’t take a lot of thought to get to the point that this legal action is completely self defeating.

Frankly if he couldn’t think that far through this legal case there is no way he made the decisions about the implementation of bitcoin. Or he is lying. Or both.

Last edited 7 months ago by bjw678