<p>It s well known mining pools as well as hashing power is centralized in countries where electricity is cheap and using mining farms rather belonging to at least medium sized companies than single hand individuals.</p>
<p>In the same time, it s worth noting most countries have their <a href="https://en.wikipedia.org/wiki/Financial_Crimes_Enforcement_Network" rel="nofollow noreferrer">fincen</a> equivalent linked with other agencies preventing payment processors like banks or visa or paypal from accepting some transactions coming from to or from specific individuals or countries under sanctions like North Korea.</p>
<p>So imagine after a round of negociations, an agreement modifying current Bitcoin s consensus rules for preventing a common set of Bitcoin address (changing dynamically) from spending their money is found. Then the following framework can be set (the number of countries reaching the agreement have to represent more than 50% of the global hash power). This means after regulating fiat exchanges, this is mining which becomes regulated. It might even be done through Interpol.</p>
<ul>
<li>Mining pools as well as miners using them are recognized as playing the role of banks (processing transactions) in the traditional system and therefore are not only required to not mine transactions from specific addresses but also to reject blocks directly containing or reffering past blocks containing such transactions. <strong>This would be implemented through soft forks</strong>. <em>With the existing laws, in many countries this can be done using a decree</em>.</li>
<li>In order to enforce compliance, a lightweight process is implemented where instead of registering with the related agencies, records of addresses are updated on a website and miners and mining pools need to declare as well as be able to prove which blocks they mined or helped to mine (through mining pools) when filling their tax returns related to mining income.</li>
</ul>
<p>Of course, that s not to say there s would be a fierce backslash attempt as a result, and that many mining pools would choose to move to safe countries. But ultimately, the rule of markets would apply, and miners having the cheapest cost of mining would choose mining pools complying with the regulations from their countries in order for themselves to comply with their requirements if they don t produce blocks directly.<br />
In order for such scenario to work, the will to stay on a blockchain which was never hard forked would prevail over the will to resist the resulting soft forks much like what happenned with Bitcoin Cash.</p>
<p>Unlike a plain ban where miners don t have any incentive to accept any rules when mining, this would act as a variant of a 51% attack by a state actor which is not only easier to implement but also easier to accept and attract other states at it.<br />
And the longest chain would be the run by complying companies with better access to cash especially for cryptocurrencies using delegated proof of stake. Additionally, if those governments regulated sort forks works (don t accept a transaction after past blocks), any attempts to include such transactions would result in miners stripped from their rewards.</p>
<p>One of the big benefits is this would also apply to things like Dash or Monero on some cases. leaving only cryptocurrencies using ZsNarks (where even the mining pools have no knwolwedge about the address they include in the block they mine but also the potential utxo).</p>
<p><strong>Under those conditions, would such plan work technically</strong>?</p>

CC BY-SA 4.0
2021-02-02T17:29:33.777Z
It seems that this question may be too specific and technical to fit the Worldbuilding SE. Here, we generally do better with questions that are phrased more openly, focused on "How?" and "Why?". I would suggest that you could rephrase your question in such a manner or split it up into multiple questions. Personally, I find the description of a hypothetical scenario in a wall of text and asking "am I right" to be rather uninviting to potential answerers.
Murch
CC BY-SA 4.0
2021-02-03T17:52:15.970Z
Maybe it would be enough to turn the question around: "How can the Bitcoin project prevent governments from turning Bitcoin into a permissioned system by forcing Bitcoin users to register addresses and only allow payments to these whitelisted addresses?"
Murch
CC BY-SA 4.0
2021-02-03T17:57:16.980Z
@Murch you didn t understand. the main banking system used blacklksts, and the same would apply here. Miners don t have to registers addresses but only register the blocks they received money from.
user2284570
CC BY-SA 4.0
2021-02-03T18:12:34.163Z
Since you can use new addresses for every payment, I don't see how blacklists could ever precede blocks including the new addresses.
Murch
CC BY-SA 4.0
2021-02-03T18:16:15.213Z
@Murch that s right. It doesn t prevent one from receiving dark money. It only works at preventing from spending addresses known as tainted. And unlike in the main public banking system for frozen bank accounts, the warrent can t be private as the ever changing blacklist needs to be public. The mempool remains uncensored.
user2284570
CC BY-SA 4.0
2021-02-03T18:24:36.657Z
So, you're assuming that the reaction time of a multinational body to agree on adding addresses to a blacklist is faster than that money moves, and that the multinational body would agree on which addresses should be forbidden?
Murch
CC BY-SA 4.0
2021-02-03T18:52:23.397Z
@Murch no. But many times the criminal wait several weeks before laundering the money, and as a result, some address are on a blacklist preventing exchanges of some countries from letting use funds received from them. This is the matter of extending such blacklists or sanction lists to the protocol level. A second limitation is the soft fork/blacklist would have to be common to all countries implementing the policy (unlike current sanction lists which are per country) because of the nature of the Bitcoin protocol, but the Interpol wanted/notice list show it s possible.
user2284570
CC BY-SA 4.0
2021-02-03T19:00:29.883Z
In order for the rules to be common (and as explained in my question), the list would have to be dynamically fetched so that it doesn t depends on changing  the Bitcoin core version. This would also allows to remove address (making the money spendable again) in the case the person or the network is arrested (so the police can require to recover the money).
user2284570
<consensus><soft-fork><regulation><money-laundering><taint-analysis>
Can cryptocurrencies like Bitcoin be turned into a censored payment system under that would be financial regulation framework creating soft forks?
user2284570
# Can cryptocurrencies like Bitcoin be turned into a censored payment system under that would be financial regulation framework creating soft forks?

(Asked by: username_0 on 2021-01-24)

It s well known mining pools as well as hashing power is centralized in countries where electricity is cheap and using mining farms rather belonging to at least medium sized companies than single hand individuals.

In the same time, it s worth noting most countries have their [fincen](https://en.wikipedia.org/wiki/Financial_Crimes_Enforcement_Network) equivalent linked with other agencies preventing payment processors like banks or visa or paypal from accepting some transactions coming from to or from specific individuals or countries under sanctions like North Korea.

So imagine after a round of negociations, an agreement modifying current Bitcoin s consensus rules for preventing a common set of Bitcoin address (changing dynamically) from spending their money is found. Then the following framework can be set (the number of countries reaching the agreement have to represent more than 50% of the global hash power). This means after regulating fiat exchanges, this is mining which becomes regulated. It might even be done through Interpol.

* Mining pools as well as miners using them are recognized as playing the role of banks (processing transactions) in the traditional system and therefore are not only required to not mine transactions from specific addresses but also to reject blocks directly containing or reffering past blocks containing such transactions. **This would be implemented through soft forks**. *With the existing laws, in many countries this can be done using a decree*.
* In order to enforce compliance, a lightweight process is implemented where instead of registering with the related agencies, records of addresses are updated on a website and miners and mining pools need to declare as well as be able to prove which blocks they mined or helped to mine (through mining pools) when filling their tax returns related to mining income.

Of course, that s not to say there s would be a fierce backslash attempt as a result, and that many mining pools would choose to move to safe countries. But ultimately, the rule of markets would apply, and miners having the cheapest cost of mining would choose mining pools complying with the regulations from their countries in order for themselves to comply with their requirements if they don t produce blocks directly.  
In order for such scenario to work, the will to stay on a blockchain which was never hard forked would prevail over the will to resist the resulting soft forks much like what happenned with Bitcoin Cash.

Unlike a plain ban where miners don t have any incentive to accept any rules when mining, this would act as a variant of a 51% attack by a state actor which is not only easier to implement but also easier to accept and attract other states at it.  
And the longest chain would be the run by complying companies with better access to cash especially for cryptocurrencies using delegated proof of stake. Additionally, if those governments regulated sort forks works (don t accept a transaction after past blocks), any attempts to include such transactions would result in miners stripped from their rewards.

One of the big benefits is this would also apply to things like Dash or Monero on some cases. leaving only cryptocurrencies using ZsNarks (where even the mining pools have no knwolwedge about the address they include in the block they mine but also the potential utxo).

**Under those conditions, would such plan work technically**?

**Tags:** consensus, soft-fork, regulation, money-laundering, taint-analysis

> **Comments:**
> **username_1**: It seems that this question may be too specific and technical to fit the Worldbuilding SE. Here, we generally do better with questions that are phrased more openly, focused on "How?" and "Why?". I would suggest that you could rephrase your question in such a manner or split it up into multiple questions. Personally, I find the description of a hypothetical scenario in a wall of text and asking "am I right" to be rather uninviting to potential answerers.  
> **username_1**: Maybe it would be enough to turn the question around: "How can the Bitcoin project prevent governments from turning Bitcoin into a permissioned system by forcing Bitcoin users to register addresses and only allow payments to these whitelisted addresses?"  
> **username_0**: @username_1 you didn t understand. the main banking system used blacklksts, and the same would apply here. Miners don t have to registers addresses but only register the blocks they received money from.  
> **username_1**: Since you can use new addresses for every payment, I don't see how blacklists could ever precede blocks including the new addresses.  
> **username_0**: @username_1 that s right. It doesn t prevent one from receiving dark money. It only works at preventing from spending addresses known as tainted. And unlike in the main public banking system for frozen bank accounts, the warrent can t be private as the ever changing blacklist needs to be public. The mempool remains uncensored.  
> **username_1**: So, you're assuming that the reaction time of a multinational body to agree on adding addresses to a blacklist is faster than that money moves, and that the multinational body would agree on which addresses should be forbidden?  
> **username_0**: @username_1 no. But many times the criminal wait several weeks before laundering the money, and as a result, some address are on a blacklist preventing exchanges of some countries from letting use funds received from them. This is the matter of extending such blacklists or sanction lists to the protocol level. A second limitation is the soft fork/blacklist would have to be common to all countries implementing the policy (unlike current sanction lists which are per country) because of the nature of the Bitcoin protocol, but the Interpol wanted/notice list show it s possible.  
> **username_0**: In order for the rules to be common (and as explained in my question), the list would have to be dynamically fetched so that it doesn t depends on changing  the Bitcoin core version. This would also allows to remove address (making the money spendable again) in the case the person or the network is arrested (so the police can require to recover the money).  

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## 0 answers

