asyncmind on Nostr: For Bitcoin nodes to effectively block or enforce restrictions on stolen funds from ...
For Bitcoin nodes to effectively block or enforce restrictions on stolen funds from the Bybit hack (or any illicit transactions), a few key points need to be understood:
1. Bitcoin’s Decentralization & Censorship Resistance
Bitcoin nodes do not have a built-in mechanism for blocking transactions based on their source or destination.
Anyone can broadcast a valid Bitcoin transaction as long as it follows the consensus rules.
Bitcoin miners confirm transactions based on incentives (fees), not identity checks.
2. What Would Need to Happen for Nodes to Block These Transactions?
For effective blocking, a significant portion of the Bitcoin network would have to:
Refuse to relay transactions from blacklisted addresses (custom rules applied by node operators).
Miners would have to refuse to include blacklisted transactions in blocks.
Exchanges and payment processors would need to refuse withdrawals and deposits from flagged addresses.
This would require coordination across full nodes, mining pools, and exchanges, which is difficult because:
Many nodes are operated privately, and most follow Bitcoin Core’s standard rules.
Miners prioritize transaction fees and are unlikely to enforce blacklist rules unless legally required.
A large portion of mining power (hashrate) would need to comply to make blacklisting effective.
3. What Has Been Done in the Past?
In past cases (e.g., Bitfinex and Ronin Bridge hacks), enforcement relied on:
Exchanges freezing assets associated with flagged addresses.
Law enforcement pressuring centralized services like Chainalysis, blockchain analytics firms, and custodial wallets.
Users and businesses voluntarily avoiding tainted coins to prevent legal risks.
The Bitcoin network itself does not have a mechanism to enforce blacklist rules at the protocol level.
4. Can Bitcoin Enforce Blacklists at Scale?
No consensus layer enforcement: The network is designed to be censorship-resistant.
Market-driven enforcement: Exchanges and service providers can refuse to accept flagged coins.
Mining pools: If enough major mining pools agreed to reject blacklisted transactions, it could slow down laundering but not fully prevent it (attackers can use private mining or small pools).
Coin mixing & Privacy tools: Bitcoin mixers, CoinJoin, and Lightning Network make enforcement even harder.
5. Practical Enforcement: Who Needs to Act?
Exchanges (like Binance, Kraken, Coinbase) refusing deposits from blacklisted addresses.
Regulators & Governments pressuring businesses to comply with forensic data.
Mining pools potentially implementing filtering (though this is unlikely without regulation).
Analytics firms tracking and flagging transactions.
Conclusion: Blacklist Enforcement is Mostly Off-Chain
Bitcoin’s design makes direct enforcement at the node level highly impractical. Instead, exchanges, payment processors, and custodial services act as chokepoints where stolen Bitcoin can be frozen or rejected. Enforcement happens at these levels rather than within the decentralized network itself.
Would you like an analysis of how DamageBDD could verify transaction risks in such cases?
1. Bitcoin’s Decentralization & Censorship Resistance
Bitcoin nodes do not have a built-in mechanism for blocking transactions based on their source or destination.
Anyone can broadcast a valid Bitcoin transaction as long as it follows the consensus rules.
Bitcoin miners confirm transactions based on incentives (fees), not identity checks.
2. What Would Need to Happen for Nodes to Block These Transactions?
For effective blocking, a significant portion of the Bitcoin network would have to:
Refuse to relay transactions from blacklisted addresses (custom rules applied by node operators).
Miners would have to refuse to include blacklisted transactions in blocks.
Exchanges and payment processors would need to refuse withdrawals and deposits from flagged addresses.
This would require coordination across full nodes, mining pools, and exchanges, which is difficult because:
Many nodes are operated privately, and most follow Bitcoin Core’s standard rules.
Miners prioritize transaction fees and are unlikely to enforce blacklist rules unless legally required.
A large portion of mining power (hashrate) would need to comply to make blacklisting effective.
3. What Has Been Done in the Past?
In past cases (e.g., Bitfinex and Ronin Bridge hacks), enforcement relied on:
Exchanges freezing assets associated with flagged addresses.
Law enforcement pressuring centralized services like Chainalysis, blockchain analytics firms, and custodial wallets.
Users and businesses voluntarily avoiding tainted coins to prevent legal risks.
The Bitcoin network itself does not have a mechanism to enforce blacklist rules at the protocol level.
4. Can Bitcoin Enforce Blacklists at Scale?
No consensus layer enforcement: The network is designed to be censorship-resistant.
Market-driven enforcement: Exchanges and service providers can refuse to accept flagged coins.
Mining pools: If enough major mining pools agreed to reject blacklisted transactions, it could slow down laundering but not fully prevent it (attackers can use private mining or small pools).
Coin mixing & Privacy tools: Bitcoin mixers, CoinJoin, and Lightning Network make enforcement even harder.
5. Practical Enforcement: Who Needs to Act?
Exchanges (like Binance, Kraken, Coinbase) refusing deposits from blacklisted addresses.
Regulators & Governments pressuring businesses to comply with forensic data.
Mining pools potentially implementing filtering (though this is unlikely without regulation).
Analytics firms tracking and flagging transactions.
Conclusion: Blacklist Enforcement is Mostly Off-Chain
Bitcoin’s design makes direct enforcement at the node level highly impractical. Instead, exchanges, payment processors, and custodial services act as chokepoints where stolen Bitcoin can be frozen or rejected. Enforcement happens at these levels rather than within the decentralized network itself.
Would you like an analysis of how DamageBDD could verify transaction risks in such cases?
quoting nevent1q…z5z9NEW: FBI issues PSA seeking help as North Korea’s Lazarus Group launders $1.5B in ETH stolen from Bybit.
@tayvano_ reports that 209,384 ETH (~$500M) has already moved from Ethereum to Bitcoin, with THORchain playing a key role in the conversion.