Feign Madness but Keep Your Balance

(假痴不癲/假痴不癫, Jiǎ chī bù diān)

Hide behind the mask of a fool, a drunk, or a madman to create confusion about your intentions and motivations. Lure your opponent into underestimating your ability until, overconfident, he drops his guard. Then you may attack.

I posted the strategy publicly in 2017. I left people believing that I was doing one thing based on the Twitter persona, which they addressed as if it was a reality they should take note of. At the same time, I filed multiple papers and have presented at several academic conferences. My two PhDs that I’m currently doing, in law at the University of Leicester and applied mathematics at CNAM, are going well. At the same time, we have filed just under 800 patent applications. There are at least 1280 white papers in the pipeline that will lead to patents. 

Simultaneously, the team has managed to obtain a sustained transaction rate of around 1,000 transactions per second. By the end of the year, we will be able to handle a transaction volume the level of Visa.

In social media, people try to tell you how you should act. They seek to limit and restrict your freedom. It is a common socialist ploy, and fits well with those of a more totalitarian power-hungry bent. But equally, it is a simple strategy to bypass rules outside of social media and fake news. Hactivism and activism may be defanged when you avoid and ignore them. The Twitterati are at best toddlers and three-year-olds in the act of a tantrum. You don’t respond to a tantrum from a child; you teach them that they don’t matter unless they play within the rules. Such is the lesson for the “crypto-sphere.” Unlike e-gold and Liberty Reserve, Bitcoin was built and designed to act within the rules.

What people fail to understand is that anti-money laundering (AML) rules always covered Bitcoin. Liberty Reserve purposely set up systems that allowed to trade with false identities. We see the same with bucket-shop exchanges such as Binance today. Systems that set themselves up to specifically appeal to online criminals through the use of weak anti-money laundering controls have been covered under law since the creation of various funding acts requiring know your customer (KYC) legislation and anti-money laundering (AML) controls. The word ‘funding’ is particularly important. Money laundering doesn’t require you to use money. Any funding applies.

Arthur Budovsky appealed his conviction for money laundering using the premise that cryptocurrencies were not money and hence the concept of money laundering would not apply. The problem, though, is that anti-money laundering rules cover funding. If you read the text of the law, you will find that it incorporates everything that you could possibly imagine, from bank accounts to cash to golden gems to watches. Funding means any means of funding a transaction. So the reality is that cryptocurrency does not give criminals a place to hide.

I designed Bitcoin with the particular goal of creating a system that did not allow criminals and money-laundering facilitators to easily bypass the controls around the system. Bitcoin is pseudonymous, and does not work well as a criminal system. Which was intentional. To be money under the law, the system needs to support tracing.

If you seek to create a more anonymous system, as we have seen recently in BCH with the implementation of illicit mixers and in Core coin (BTC) with the development of the Lightning Network, what you will find is a system that no longer operates within the legal boundaries. Some think that they can get away with it because Bitcoin is decentralised. We are seeing that such is not the case, but then again: such cryptocurrencies are not decentralised.

FIOD haalt crypto-witwasdienst Bestmixer offline
De Financiële Inlichtingen- en Opsporingsdiensten, of FIOD, heeft een witwaswebsite voor cryptovaluta offline gehaald…tweakers.net

What people fail to understand is that I was best served for a while building systems within the law and in instructing and teaching people who could take them and ensure that regulatory bodies understood that Bitcoin could not operate in a way that they could not stop.

To Be Decentralised

To be decentralised, a system requires the decentralisation of power. In any system where the developers can alter the protocol, the system is no longer decentralised. In the Internet protocol or IP, no developer or developer group is capable of altering the protocol. Using the RFC process, additions and extensions can be made that develop and grow the protocol through the addition of new rules. In the case of technological expansion, it sometimes becomes a requirement to move to new protocols. In our instance, we see IPv4 and IPv6 coexisting for the time being. Yet, they are separate protocols.

The analogy applies in a system like Bitcoin.

For a cryptocurrency to be decentralised, it needs to be set in stone.

The same does not apply to just Bitcoin. Any cryptographic asset that can be altered by the protocol developers to change the nature of transactions such that it could alter the format making a transaction signed today become invalid some time within the next 20 years is centralised. Creating something that is decentralised is very simple; you need to launch a cryptocurrency in such a way:

1. Create a set fixed protocol.

2. Allow no pre-mines or special benefits outside of time for the creator and other investors.

3. Start the system with no value that is intrinsic in the system.

4. Allow individuals to earn in securing the network and validating transactions.

The requirements of such a system are that the rules are set on the day that the system is released. I did so with Bitcoin. Our node implementation, the Bitcoin SV Node, will allow you to take a transaction signed in 2009 and know that you will be able to replay the same transaction and have it accepted by nodes on the network — if it is valid — in the year 2100. Such is what decentralised means. It is why systems such as Ethereum and Core coin (BTC) differ radically from Bitcoin.

We have some things to fix. The alterations such as in the form of pay-to-script hash (P2SH) that have been tacked onto Bitcoin will be removed within the year — leaving the original and removing the systems that are designed to help facilitate illicit activity. When talking about alternative coins such as Core coin (BTC), we need to note that they differ greatly from Bitcoin. Their desire to make an anonymous system leaves them in a scenario faced by e-gold and Liberty Reserve. Illegal funding systems can be taken down. Bitcoin clones and poor copies are no different, and can be taken down. Decentralisation of systems alone does not stop it, and in fact is a point that simplifies the process.

Bitcoin is an immutable evidence trail. Every single node maintains records, which allows prosecutors to trace the path of money with an immutable record trail that cannot be deleted. It was always intentional. Bitcoin was not designed to be anonymous. It was designed to destroy anonymous cryptocurrencies by forming something that was far better.

There are no such things as decentralised exchanges. 

To put it simply, exchanges all have owners. They are not funded by computers. The error that some people make is thinking that decentralisation applies to systems. The decentralisation of power is the issue under law. For a system to be decentralised, you need to decentralise control. When we are talking about exchanges, they have to act within the law. If they’re not within the law, if they’re not following anti-money laundering controls and do not have people appointed to respective positions, then they are simple to take down. Being distributed across many systems is not the same thing as having power distributed amongst many people. Distributed exchanges are only distributed as far as the systems are distributed, which does not matter under law. To be distributed under law, you need to be distributed in power. When you have systems such as Binance that misleadingly and fraudulently deceive customers in making them believe that they are using a distributed exchange, they are always centralised. Centralisation comes from ownership and control. Individuals within Binance have control, and hence the system is not decentralised.

If we look at something like BTC, we see that it is incredibly centralised. The developers change the protocol, and have done so since they abandoned Bitcoin in 2017 and started a clone that is passing off and misleading investors. It is centralised because a few Core developers set the policy that allows the system to be controlled. It does not matter that they don’t change all of the rules; the mere fact that they can change some of the rules means that they control the system.

It is simple to take down illegal cryptocurrencies.

The developers who are seeking to mislead investors into believing that something like BTC is decentralised do so in order to fraudulently gain money from investors.

To be legitimate, a system such as BTC cannot split away from Bitcoin. When you split a cryptocurrency, you are defrauding and misleading investors. BTC split with the addition of Segregated Witness and a system that removed the key aspects of Bitcoin in a vain desire to make something that is attractive to criminals. BTC split away, and copied Bitcoin to simply invent a way of making a new, more anonymous version of Bitcoin, which has been the goal of the Core developers since the collapse of Silk Road.

What they’re going to learn is that Bitcoin is only resilient and robust when it acts within the law. It is very simple to take down blockchain-based systems that stray away from the path set by Bitcoin in being a system that works within the law. Once you allow terrorist funding, you can start targeting miners. Once you allow for a system that is designed to become more anonymous and bypass the controls that were developed when I built Bitcoin, you create a system that is open to jurisdictional capture. A court can order a miner to freeze a transaction. If the miner does not listen to the court, its assets can be seized. The seizure of criminal assets is possible across jurisdictions in the case of money laundering. It was seen in the extradition from Spain of the founder of Liberty Reserve and the capture of funds from Costa Rica by the US officials.

The addition of technological features that make Bitcoin clones like BTC more anonymous opens miners up to legal action. Proceeds of crime rules allow miners who knowingly act to validate a transaction from an unknown illicit address to become targets themselves. The changes to the anti-money laundering rules that come into effect in January 2020 throughout Europe and in other countries around the world specifically include cryptocurrencies, and make the scenario simple for law enforcement to apply. Once it occurs, systems that are designed to facilitate illegal activities such as those involving the Lightning Network, confidential transactions, and enhanced anonymity will see miners supporting them having their equipment seized.

What developers fail to see is that being part of a social network or an open-source project does not exempt you from law. All it does is remove the protections of a corporate structure. As a developer, you can be liable for the actions of other developers in the group. The same has occurred before, and actions on distributed developer groups including criminal cases date to the 1990s.

I would like to add a big thank you to Mr Antonopoulos who is helping ensure that all of the illegitimate and useless cryptocurrencies such as Monero and Core coin (BTC) are made illegal. With their blatantly erroneous statements about decentralised exchanges, Lightning, and other systems designed to breach anti-money laundering laws and facilitate crime, such individuals are helping ensure that you will wake up one day and find BTC, Monero, and Zcash to be illegal criminal assets and the mere possession to be a crime. But at least you will be able to destroy your now worthless holdings before the police arrests you.

If it wasn’t for people like him, my job and getting law enforcement to understand such kinds of the blockchain would be much harder. I guess it is necessary for those seeking justice, law, and order to have criminals on the other side to make the case. It’s very helpful that they’re so incredibly incompetent when promoting crime.

In acting as I did for a time, I have allowed those opposing my vision to actively come out saying how their “bullet-proof systems” will enable them to hide and avoid regulation and act outside of the international anti-money laundering frameworks. Binance, for instance, flaunts how it acts as a criminal-friendly money-laundering site. It actively promotes the ability to launder Core coin (BTC) and other cryptocurrencies. Unfortunately for its clients, there is little mentioned about how a seizure of the system would result in a complete capture of all assets. One day, clients of Binance will awaken and find that all of their assets have been seized, stolen, or embezzled. Then, such is the cost of doing business on a criminal exchange that flaunts law.

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