Tracking the Bitfinex hacked coins

1

How can someone like an exchange track the Bitfinex hacked coins to make sure the hacker cannot exchange them?

Does a service exist to make it easy for the exchange to call an API with the deposit txid and get back an answer if the input coins are tracked to the hack?

Update

I understand that people don't like the idea of tracking bitcoins, but as an exchange if bitcoins associated with the hack are deposited on your platform and allowed to be converted into USD you are potentially liable for facilitating a crime. An exchange needs an easy way to keep track of these coins so at the very least they can put a hold on the user's account while investigating the source of the deposited coins. This happens with USD all the time, so I'm not sure why people would expect bitcoins to be any different. No exchange wants to be a party of criminal actions.

Hopefully now the question is more clear. So does such a service exist or must the exchange write their own code to handle this?

Brandon

Posted 2016-08-14T05:35:42.930

Reputation: 286

2

Any exchange that tried to do so would end up turning down lots of legitimate customers who received the coins indirectly from the thieves. So I don't think there would really be a market for such a service. See also http://bitcoin.stackexchange.com/questions/34307/can-miners-reject-transactions-from-an-address/34308#34308 http://bitcoin.stackexchange.com/questions/9666/catching-thieves-network-jury-account-blacklist-additional-tx-script-commands/9671#9671 http://bitcoin.stackexchange.com/questions/13595/is-it-technically-feasible-to-shun-particular-bitcoin-wallets/13596#13596

– Nate Eldredge – 2016-08-14T17:26:47.640

Does that imply that the hacker will likely be able to cash out his 119,000 bitcoins? – Brandon – 2016-08-15T20:40:28.220

1Trying to sell all of them at once would disrupt the market pretty severely. But if the thief knows what they are doing, they probably won't have any trouble selling moderate amounts over time. – Nate Eldredge – 2016-08-15T23:18:47.030

There's another misconception here, which is that bitcoins (or even satoshis) are individual objects that can be individually identified, like banknotes with serial numbers. That's not a good analogy. See http://bitcoin.stackexchange.com/questions/2496/are-bitcoins-inherently-fungible

– Nate Eldredge – 2016-08-25T01:12:04.143

Answers

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This is possible. It also may sound good on paper, but the implications are horrible.

Think of it. 100 thousand bitcoin. 0.5% of all coins will be rejected. This is out of 21 million. Out of the current 15 million, maybe 0.65%. That's hugel

If a hacker also wanted, he could move the coins into multiple mixers and deposit them in and out of Exchanges, as they're off-chain. Hacker could even sell a couple.

Whyte the Weeabear

Posted 2016-08-14T05:35:42.930

Reputation: 530

I know about mixers, but I didn't think any existed that could mix that many coins? The amount of coins are somewhat arbitrary as we have 8 decimal places and can extend that if necessary. I would think the important thing would be to prevent the hacker from actually cashing out. This would be facilitating a crime if an exchange were to allow this. Isn't that important? – Brandon – 2016-08-24T19:57:22.210

Decimal places are arbitrary. Yes, we can increase them. But they're integers. It's gonna be hard to try and change thr coin limit from 21 million. – Whyte the Weeabear – 2016-08-24T20:14:38.380

The thing is, due to bitcoin's nature, there will always be someone willing to buy dirty coin. – Whyte the Weeabear – 2016-08-24T20:15:45.573

What I meant was if obtaining a whole coin becomes too expensive, people will just use fractions of a bitcoin (in response to your comment about "0.5% of all coins will be rejected"). – Brandon – 2016-08-24T20:56:08.167

Again it just seems obvious to me that an exchange that allows these coins to be sold could be held liable for facilitating a crime. So how would an exchange track these coins to make sure they are not helping the hacker? – Brandon – 2016-08-24T20:58:06.750

Im not sure you understand. If you create denominations of a bitcoin there will still be 21 million bitcoin, just that you can divide a Satoshi into smaller parts. – Whyte the Weeabear – 2016-08-24T20:59:36.700

How do we know that the hacker hasnt sold the bitcoin already? – Whyte the Weeabear – 2016-08-24T21:00:00.800

Asked: 2016-08-14T05:35:42.930

Viewed: 390 times

Active: 2016-08-24T22:02:52.350