Bitcoin [BTC]: sanctions demonstrates the importance of maintaining decentralization and anonymity in the system

Andreas M Antonopolous, a well-known Bitcoin influencer and the author of Mastering Bitcoin, spoke about the government-sanctioned Bitcoin addresses and censorship resistance, in the latest Q&A session on Youtube. This topic was discussed in the wake of the U.S Treasury’s Office of Foreign Assets Control [OFAC]’s announcement pertaining to the blacklisting of two Bitcoin addresses.

Towards the end of 2018, OFAC released a statement regarding two Bitcoin addresses that belonged to Iranian nationals, Ali Khorashadizaden and Mohammad Ghorbaniyan [149w62rY42aZBox8fGcmqNsXUzSStKeq8C and 1AjZPMsnmpdK2Rv9KQNfMurTXinscVro9V]. Along with this, the statement revealed that these addresses were related to the SamSam ransomware scheme, which has affected over 200 individuals network.

These addresses reportedly have more than 7000 transactions and have received around 6000 BTC. Additionally, these addresses, so far, have interacted with more than 40 exchanges including U.S based cryptocurrency exchange platforms. Due to this, the OFAC has prohibited U.S entities from dealing with the two addresses. 

On this topic, the Bitcoin proponent was asked whether the miners need to drop transactions to these addresses from blocks and if this is a censorship attack vector against Bitcoin. Antonopolous started by stating that:

“They blacklisted not one, but two bitcoin addresses, out of a total bitcoin address space of… 2^160, which means they have blocked two out of 1.461501637 x 10^48 possible addresses. That is 10 with 48 zeroes after it. Considering that your […] computer can probably generate a million address per second, that means 15 million addresses [could have been generated] just since I started that sentence.”

He went on to say that a person can generate new addresses to have new places to receive funds, adding that the entire concept is “ludicrous”. Antonopolous added that this action represents a fundamental misunderstanding, stating that the U.S Treasury is trying to apply its authority on “this novel medium”.

“They will start small, but this will clearly escalate. This game of whack-a-mole cannot be won by technical means, so they will try political means, by applying pressure to any regulated entities that dare to not enforce the blacklist.”

The author further stated that a situation wherein there are a number of centralized entities around a decentralized currency creates a “significant conundrum”. Here, by centralized entities, the author refers to entities such as regulated exchanges. He added that these entities will be required to comply with the government’s regulatory schemes such as blacklisting addresses.

“Now there is two; soon, there may be two-hundred thousand or a million. Maybe [the list of blacklisted] addresses will be updated every ten seconds [through a live feed]… and they [must maintain real-time] compliance. It is a ridiculous scheme because it completely fails to achieve any of the [presumed] goals”

Antonopolous went on to say that, on the contrary, this step by the regulatory body would not be to prevent terrorist financing or stop money laundering but to expand the power and authority of various national governments over its citizens. He further added that this could be to create a surveillance mechanism that would take control of the financial industry, which eventually destroys democratic institutions.

“But it serves the role of extending authoritarian control over citizens. It will be completely ineffective, practically speaking, in Bitcoin. It will mostly affect the “legitimate” regulated entities which operate on the fringes of Bitcoin: [centralized] exchanges, merchant services, etc.”

The author stated that the U.S sanctions do affect miners, who are people who remain anonymous, and that this demonstrates the importance “of maintaining decentralization and anonymity in the system“.