Thanks for the video, i never considered this. I think bitcoin is a good first use case for p2p cash, even though it failed to be "digital cash" and has been rebranded as digital gold. Something I have considered which gets ignored and made fun of on youtube/reddit is when the last bitcoin is created, miners who have spent tons of money on their hardware will only rely on transaction fees. Because they need to pay for all that electricity and maintaining the hardware, what stops them from charging enormous transaction fees? People tell be that the lightning network will solve everything, but after reading the Master Bitcoin book and their chapter on LN, it still doesn't solve the problem of high fees in the future.
How can Bitcoin ever serve as a currency when its price lacks stability? If it was adopted as a currency world wide, and since its limited in digital coins, that would mean its value would have to continually go up indefinitely. That would result in people having to learn to accept being paid in lesser Bitcoins each day as its value would have to increase without end. Its scarcity would be its downfall long term. How in the world can people learn to be paid in less money since their currency would continue to go up in value, and how can anyone know how to price anything on a daily basis when price stability would never be reached??? How can it be a store of value long term if people cannot use it as a currency and would be less inclined to transact with it due to lack of price stability and expectations of future price increases that would outstrip the price of goods/services. This would be a big incentive to hoard it rather than to allow it to circulate due to its scarcity. It can never function as a currency as its design is flawed. Its currently a speculative asset for as long as enough new buyers are willing to pay more for it than the previous buyer paid for it.
Subscribed. I am actually learning something here. I can only cringe when I see this new generation of bitcoin fan boys who think they are some kind of avantgarde revolutionaries by buying bitcoin in 2021. On the other hand I feel a bit sorry for them, as they are lead by some ecelebs on youtube.
If you are try to find a problem with fungability so hard as this, you will also find it on dollars, gold, oil deposits, and whatever. Bitcoin is the most perfect fungible asset than we have today
Wow Coding Jesus... Came to your channel from Jake Tran, and quite honestly, I'm staying ;) Very well-structured videos that are easy to understand about difficult topics. And you seem like a very intelligent man, so thank you very much for the effort! Like, Sub!
Interesting video, but not sure where you get the central point that tainted vs virgin btc trades at different prices. What exchange or locations charge a premium for virgin btc?? Never once seen that or heard of that and I’ve been in the space a long time.
Over a long enough timeline.... Sort of. Bitcoin fees will probably be considered "virgin" after the initial emission. And alot of chain analysis companies like to take "number of hops" or number of tx into account but I'm not an expert here
As far as the price history, the same criticism can be made of a bar of gold, it has changed hands and sold at different prices, but both have the ability to exchange 1:1 for what it is. For the different grades of BTC, yeah that is a good point.
I take your point about knowing the provenance of your BTC. Can't this be said about any other coin/token whose ledger is public? Yes, agree seizure could be concern down the road when governments/agencies wake up to fact that BTC's ledger can be monitored by any third party.
Although I agree up to some point with your take on this, the result is that Monero is being frowned upon by default. So yes, Monero is more private than Bitcoin, but governments and exchanges will handle *all* Monero coins as if they are tainted. This will hinder wide adoption. Monero could prove to be more fungeable, but its growth will be slow, due to legal issues. And what about Lightning? The lightning channels obfuscate coin origin for smaller transactions.
Great video thanks for posting! Do you think fungibility stay a problem? It seems to me as individual bitcoins are traded more and less fresh bitcoins are mined, we will come to a point where most bitcoins will have some form of taint. That said, I don't know if this will make all bitcoins more even, increasing fungibility, or make untainted bitcoins more worthwhile further decreasing fungibility. Would love to hear your thoughts.
Good question. As long as there is at least one individual who uses Bitcoin for illicit means, and continues to do so, eventually all bitcoin will be tainted. I don't know how exchanges will deal with this. Maybe they'll limit their fund confiscation to taint within a given amount of hops. For example, if a bitcoin was tainted 50 unique transactions ago, then they'll ignore the taint. If it was tainted 1 unique transaction ago, then they'll confiscate. I say 'unique' transactions because some people may try to create extra hops by sending funds to themselves of using a mixer (which doesn't obfuscate anything).
I'm no maximalist but I fail to see an issue here. Chain analysis has yielded less than 2% being linked to illicit activity due to the public nature of the blockchain making it easier to track, and this in a severe down trend. At best governments siezing illicit bitcoin further contributes to the deflationary aspect of the asset. At worst if means the government indefinitely holds these coins or auctions them off back into the supply much how they do with civil forfeiture. The reality is if the latter path is taken it will homogenize the supply and only lead to activity that can be traced to illicit behavior being punished. And even then it's not the bitcoin that's shafted, it's just the medium of exchange, it's the address that's blacklisted. As for the supply, it's not like most fiat bills have coke on them or have been used by a bank to fund or launder for illicit activity. It's not like countries are uncomfortable stealing gold from one another just because it was linked to war crimes or other unethical behavior. So I think your take, although informative to some, is naive and misleading.
Why are you bragging using Bitcoin is beneficial because it is best positioned to allow states to seize other people’s assets for things that someone finds detestable like selling weed? Damn, we’ve come far since 2009...
Omg sooo many things wrong here, I wish I had the TIME, but "tainted bitcoin"? Lol, that's the main argument in this video? Lol and ppl are actually pondering this garbage? Is it just me or: BTC confiscated = money frozen in bank accounts Fiat circulates regardless of what someone used it for= so does btc and unless there's proof you're the acting criminal then...? Bottom line, privacy coins will never survive bc the government wants to monitor all money. Money is going digital so that it can be traceable and accounted for. Period. And is that even the definition of non fungible? Btc isn't an NFT, it is an asset that is unique and can't be replaced, which gives it value, not take away from it. And what does fungibility have to do with not being able to hold a store of value? Are you kidding me? 😳 unbelievable..... it's scary, a bunch of idiots, no wonder the takeover in this world will be so easy this is sad.
@Coding Jesus Way to strawman my points....I dont support bitcoin or civil assest forfeiture. What I'm pointing out is that a medium of exchange cant be vilified, only the individuals, and the means in which they're using it. This dichotomy you're emphasizing with various Satoshis doesn't and wont matter unless traced to illicit behavior deemed reprehensible ie theft, laundering, etc. Even then it can find a means of being introduced back into the supply and homogenized rendering this dichotomy mute. I agree privacy is important, but its also near untenable in our modern age, and I see no world were special intrests don't track monetary activity.
Hi Coding Jesus I am a freshmen in computer science and trying to learn about HFT. I have read "All About High Frequency Trading" by Michael Durbin and "Dark Pools" by Scott Patterson. Do you have any more technical books to prepare myself for interviews or learn more about it? Hope to use your resume review services next year when I apply for internships!
HEX blockchain certificate of deposit. What are your thoughts on something like this? How often do you get asked about XRP? Also Hedera Hashgraph seems to be a chosen project.
What's your thoughts on GRIN or LTC adding mumblewimble? I would love a video on this. Granted I know you're not a crypto channel but you might have an interesting perspective on this.
The only thing I don’t get is everyone everywhere will have possibly trillions of satoshis spread all over the globe. Would all of those be essentially deemed virgin or tainted? I have heard Kevin O’Leary talking about this. Only wanting virgin coins that have no bad history.
Coding Jesus what do you think ppl like Elon and Saylor are up to with all hoarded bitcoin? They do not seem like they are selling at least any time soon, what do you think?
Isn't that the whole point of blockchain? The transaction needs to be transparent so that nodes in the chain can verify new transactions in a decentralized fashion? I may be missing your point here
Just to be clear, are you saying mixing doesn't help because it doesn't stop them from determining who the owner of the mixed output is? Or are you saying they know the owner might own that output but they can't be certain?
Hi Jesus, new sub here, I am tasked as an execution trader for a hedge fund to improve their trade execution through coding, can you share some insights or where I should start?
while this video explains the concept of fungibility rather well I feel it fails to explain why is it a flaw. i.e why do exchanges about tainted bitcoins? the crumpled/scribbled note analogy doesn't really hold when talking about a virtual concept imho. besides that it was a nice introduction to a problem I was not aware of :)
This is very good. I never know that there is a possibility of confiscation. Question: Why do centralize authority want to confiscate a tainted bitcoin? Suppose that I am a drug trafficker, and I accept bitcoin as a form of payment. Then I use my bitcoin to buy a Lamborgini (assume the Lamborgini dealer accepts bitcoin). And one day my operation got busted by the FBI. Why would the FBI want to confuscate the coin from the Lambo dealership? Would it make more sense to confiscate my Lambo instead?
Centralized authority like exchanges need to implement certain AML (anti-money laundering) and KYC (know-your-customer) standards to operate in a certain jurisdiction. That involves knowing where the money that was sent to them came from. And if you're caught buying a Lamborghini with tainted funds, that will most likely also be confiscated as it's just another ill-gotten item sourced from criminal endeavors.
although i sorta agree with this...you have to remember that we should be talking in satoshis...and with 1 bitcoin being 100000000 satoshis, and each one being worth less than a cent, it's hard to imagine thinking a person's bitcoin is tainted when it has 1 or 2 tainted satoshis...therefore you can just scramble bitcoin to dilute your stack, and with time all the tainted bitcoin is spread throughout the ecosystem somewhat uniformly...on top of that, there is no central entity that can enforce people being able to trade/not trade their 'tainted' bitcoin...so doesn't really matter anyways.
That whole taintability is a bit stupid. So we need to have a background check when spending a 100$ bill? Or even a drug test on the bill just in case someone snorted cocaine with it? Nop. Taintability is not going to work on the long run. If one of my coin is getting seized by an exchange, I'll certainly sue them. The burden of proof is not on the consumer.
yeah, its certainly an interesting point and something to keep in mind, but i personally dont see it as much of a flaw as is presented in this video, especially not to the point of old old bitcoins being confiscated.
Its nice to see the fungability-issues of bitcoin being addressed. Lacking Fungability has not been tackled and most likely will not be tackled by the bitcoin devs in the future. $Grin does well in this regard.
Well, regulators attack all markets, not only bitcoin, furthermore, there is more illicit activities in the dollar than what it is entire crypto market capitalization.
Thats the second biggest problem the first biggest problem is the ilusion of controll "you are your own bank " quantum decription cough oh sorry your money is gone....
There's something I dont understand. Lets say i have a 1 tainted btc and i send it to a wallet with 10 virgin btc. Then from that wallet i sent 1 btc to an exchange. How is chain analysis able to know if the bitcoin i sent is tainted or not. They just know theres a 1/11 chancd that the btc is tainted. And if you send the btc many times the odds get really low. Feel free to correct me trying to wrap my head around how all of this works
Alternative view: "Tainted" bitcoin are storied bitcoin that are worth a premium because they hold a piece of bitcoin's anti-establishment history. But that indeed makes them unusable when transacting with the establishment. And non-fungible.
Agree with most of your points, the thing is the black market is pretty much the only thing that gives crypto it's legs, without us buying drugs etc you'd just be hodling a really obscure, niche crypto with no volume & no volatility which means anything that affects that relationship is super important, I've never heard of any actual confiscations though I'm assuming that's KYC only?
Never knew this. Very interesting to hear since Bitcoin seems to be the one cryptocurrency a lot of miners and crypto enthusiasts see as the most stable of the cryptos. Seems like govt would eventually hop on this analysis tool for themselves for use in order to discredit bitcoin and bring its evaluation down once the dollar drops further in evaluation. I think we all do see that the US govt/dollar is becoming less and less powerful but I can't imagine politicians allowing some "decentralized" currency i.e. bitcoin to take their vast power over the US economy, its citizens, and many other foreign countries away from them. Is there any other cryptocurrency you are intrigued about other than Monero?
It's mostly B.S. for the time being. At least in regards to tainted Bitcoin...particularly because drug Lords on the dark market use Monero nowadays and tracking transaction history of a coin via tracing the ledger is sort of obsolete and overpriced relative to the utility it drives for the government if the currency is dead for black market folks
1. The receiver does not know your coins history before receiving it. So no one will ever reject a payment from you. 2. The coins are limited and will all be affected to coinjoins, therefore all coins will be "tainted" which means that all coins will be "virgin". All bitcoins will have some criminal transactions in their history, so it's not a problem. 3. The problem of confiscated funds has nothing to do with bitcoin nor fungibility, it has to do with the fact that your coins were under the control of a third party. Not your keys not your coins. For many weeks you could not withdraw your ZIL from binance. Why? Because the Exchange decided so. They can do the same with monero. If you have the keys, no one can confiscate your coins.
Other so called fungible coins... How do you stop the same thing from happeningg on a private block chain once a targeted individuals wallet address is known? Those examples you gave specifically ulbrecht we only know it's his address because the address was doxxed. What's stopping an agency from doxxing another persona non grata's address upon arrest, search and seizure for these fungible block chains?
Thank you for great explanation. You pointed out the main issue in bitcoin but monero comes with fungibility at the cost of scalability and higher blockchain size. I recommend you to check out Grin and mimblewimble which gives privacy at the level of monero with lower blockchain size than bitcoin!
Monero has Bullet Proofs and CSLAGS, which have radically reduced transaction sizes. More work is actively being done. Thanks for sharing your recommendation though.
Do you have insight into how often BTC is confiscated due to the BTC being tainted? And aren't exchanges already aware, and take into account that all BTC will "eventually" make its way to illicit activity, and thus protect their customers? Your narrative sounds like it ends with exchanges like Coinbase eventually steal a nontrivial portion of everyone's money. That exchanges are scheming to do this.
fungiblity in this case didnt happen by design, it's just the free market. the same is to gold, if a gold bar is associated with a criminal i doubt people will pay as much money for it. Your argument is plain stupid, and this is coming from someone who isnt a fan of bitcoin
Please, ohm please don't address to your self . Please please please. You are great, you're smart, I like your videos, but when I hear that, it kills me from inside :))
I dont think so. It is so new tech and i think they will draw a set line in time and the exchanges will say “if its tainted after this (x) date, then we will not accept it” because now crypto is getting wowed into society and users are more aware about what it is. Dumb idea to taint a scarce asset so early in its development into society
