Operational Distributed Regulation for Bitcoin
This work addresses the problem of theft and regulatory gaps in Bitcoin for users and stakeholders, though it appears incremental as it builds on existing proposals without claiming new breakthroughs.
The paper investigates the technical feasibility and implications of implementing a regulatory framework using redlisting Bitcoin accounts to address theft and lack of recourse in the Bitcoin system, aiming to provide a scientific basis for discussions on crypto-justice.
On February 2014, $650.000.000 worth of Bitcoins disappeared. Currently it is unclear whether hackers or MtGox, the largest Bitcoin exchange, are to be blamed. In either case, the anonymous and unregulated nature of the Bitcoin system makes it practically impossible for innocent victims to get their money back. We have investigated the technical possibilities, solutions and implications of introducing a regulatory framework based on redlisting Bitcoin accounts. Despite numerous proposals, the Bitcoin community has voiced a strong opinion against any form of regulation. However, most of the discussions were based on speculations rather than facts. We strive to contribute a scientific foundation to these discussions and illuminate the path to crypto-justice.