Off Grid Crypto Transactions

One of the benefits of decentralization is that you can build “censorship-resistant” applications.

The best example of that is Bitcoin, a store and transfer of value system that governments can’t interfere with.

Censorship resistant money, as it were.

But if these transactions are going across a wire that is controlled by the government or some other censor (Apple, Google, Facebook, etc), then you haven’t really accomplished your goal.

Enter mesh networks.

Yesterday, our portfolio company GoTenna, which makes a popular and inexpensive mesh networking device, announced something pretty interesting, a mobile app called TxTenna that will allow off grid Bitcoin transactions.

From that blog post:

Today we are pleased to announce that the Samourai team took our suggestion, and went well beyond our expectations! The result is the TxTenna app.

A transaction using the TxTenna app works as follows: Using the Samourai Wallet app the user creates a standard bitcoin transaction and signs it. This is possible while offline and without wifi or mobile access.The Samourai Wallet app then passes the offline transaction to the TxTenna App and TxTenna broadcasts it to nearby mesh nodes via a paired goTenna mesh device. Other goTenna devices in the area relay the transaction until an internet connected goTenna node also running TxTenna receives it and forwards it to the Bitcoin network.

I am excited to see the TxTenna app come to market in the coming months, but more than that, I am excited by the idea of the possibility of off-grid crypto transactions. I think they are necessary in theory and possibly in reality.


Comments (Archived):

  1. awaldstein

    “necessary in theory and possibly in reality”A perfect mantra for why I work today.Have an idea in this vein to float by you after the hysteria of Blockchain week is over.

  2. Amar

    Doesn’t the last hop statement here imply it still needs the grid? Other goTenna devices in the area relay the transaction until an internet connected goTenna node also running TxTenna receives it and forwards it to the Bitcoin network Ah, is this off-grid because by the time the edge device gets it, there is no way to trace that bitcoin transaction to a specific wallet?

    1. Richard Myers

      The last hop can also be an off-grid satellite up-link or cross a national border. Unlinking the sender from the subscriber ID is part of it, but also physically broadcasting allows you to tap in to a wider variety of routes to the internet and bitcoin blockchain.

  3. William Mougayar

    An outcome of off grid or decentralized transactions is that search becomes difficult to impossible. Centralized search will not be the same as what we were used to, and that’s good in some ways, but we’re not sure yet.

  4. LIAD

    Remember Andreas giving speeches years ago saying how bitcoin transactions could essentially be sent by Morse code, paper and pencil, smoke signal. They never actually have to hit any grid . Ever .This is one step removed. From what i understand, you sign a transaction and just use the mesh network as a conduit to the grid, much the same as encoding one by hand and giving it to a courier to drop off for you somewhere else.Effectively space-shifts bitcoin access .

  5. David C. Baker

    Somewhere, some day, some court will redefine “interstate commerce” to include the carrying of a device across state lines…or the electronic transmission of data across state lines, albeit on a private peer-to-peer network. We may always be one step ahead of the law, but not much more than one step. 🙂

      1. PhilipSugar

        You realize part of the story line of the show was that they were under a federal indictment and parole agreement for moon shining right??

        1. falicon

          Heck yeah (it was my favorite show when I was a kid)!I posted it because I thought it fit on a number of levels as a response to “one step ahead of the law” …

          1. PhilipSugar

            I think people might have missed that. I know some good old boys down in the “holler”. They have mind over matter, they don’t mind because you don’t matter.I will never tolerate racism or sexism, but you do not want to come play, unless they know you.

    1. JLM

      .In fact the US Congress (Article 1, Section 8, Clause 3 US Constitution) has the right to “to regulate commerce with foreign nations, and among the several states, and with the Indian tribes.”In this “enumeration of powers” there is no necessity to actually have a sale transaction, but rather to simply have the desire — upon the whim of the Congress — “to regulate commerce.”The fact that this enumerated power is given directly to the US Congress is an important distinction as it, essentially, means it will remain forever at their whim.JLMwww.themusingsofthebigredca…

      1. LE

        essentially, means it will remain forever at their whimAnd it should. Because decisions made by even a dysfunctional body of elected representatives is much better all around and almost always than one made by crowds of people who don’t even understand why a business [1] would not want to open up public restrooms to people other than paying customers. Or why someone asked to leave by the police (for even the wrong reason) needs to comply with that order and right the wrong in a different forum.As you would say this country is great. Just look at the shithole countries and even countries that had money and are now dead (like Venezuela).[1] I have to get this in here one more time and may again from time to time.

      2. Dan T

        A fellow Texan was opining on this topic in 1995. Is this what happens when people are too smart?

        1. JLM

          .Wow, that is a great link. Well played. How prescient.JLMwww.themusingsofthebigredca…

        2. Vendita Auto

          Ultimately it will be continents that compete financially (coin) not individual nation states (belt & road) working for the Yankee dollar was never sustainable.I have a foot in both these camps “One of life’s challenges — knowing enough to think you are right, but not enough to know that you are wrong” [Neil Tyson]

    2. Richard

      It’s almost like the bitcoin community is reaching out to the illegal drug and arms industries ?

  6. Rob Underwood

    The idea of a decentralized network at the top of the OSI model that still relies on a network that is centrally controlled at the lower levels of the OSI model has always been a huge head scratcher for me re the full decentralized vision. This starts to fill that gap — and happily for us in Brooklyn we have a healthy mesh network infrastructure growing.

  7. OurielOhayon

    The problem is that transactions won’t show in the ledger. At least not immediately

    1. JamesHRH

      That’s alaways the case, on or off

      1. OurielOhayon

        not correct. when you do an “online” tx it s get on the ledger the second it gets mined. here how can it get mined if the tx is off the grid?

        1. JamesHRH

          You are missing my point / jab / joke that mining is not happening instantaneously.

    2. falicon

      The opportunity to double spend is what came to mind for me too…the ‘receiver’ of these transactions will either have to hold until confirmation or have some level of a trust factor.Sure it can be worked around, and in many cases, the time before this offline transaction gets synched via a mesh network to the online world will prob. be very short (and mostly unknown to anyone *really* trying to double spend).But it will be something that has to be considered for sure…

      1. jason wright

        does this open up the possibility of significant arbitrage?

  8. JamesHRH

    These ideas give me Mad Max end of days willies.

  9. jason wright

    ….until an internet connected goTenna node also running TxTenna receives it and forwards it to the Bitcoin network.”Is this digital Darwinism? In a future paradigm where mesh networks become ubiquitous why do we continue to need the internet? Protocols and applications running exclusively over mesh networks, can that work?

  10. Girish Mehta

    “The best example of that is Bitcoin, a store and transfer of value system that governments can’t interfere with”.Even if we assume or stipulate for a minute that bitcoin security cannot be broken for eternity (including by quantum computing), this statement is simply not true.Governments don’t need to break Bitcoin’s security to enforce their will. They have the ability to re-set laws and enforce penalties.Last week you said – “It is much more likely that these crypto assets will trade and be valued like currencies that underpin economies”. Please think through how the nation-state relates to currencies that underpin economies.I keep saying crypto might survive as an alternative asset class (non-mainstream) owned by some people. And yes, even today it is only some people..ownership is highly concentrated. But if you are talking about it being mainstream (i.e. “currencies that underpin economies”), the idea the governments cannot interfere is fanciful.Have heard the arguments that “Bitcoin is code and code is free speech and free speech is protected by the First Amendment”. That ignores the reality of how closely the monetary system is integrated with the nation-state. Even more so today, than in the past.

    1. Pointsandfigures

      what will be interesting is if corporations use an internal crypto currency to make themselves and their decision making more efficient. a corporation is a sort of economy.

      1. JLM

        .Whatever behaviors Boards of Directors reward their management for, will be duplicated.JLMwww.themusingsofthebigredca…

    2. falicon

      Governments might be able to tax or control the people involved at the end of a transaction (assuming they know about it and have the interest/resources to go after individual transactions — see “online piracy” for the most likely path on this front), but they don’t really have a way to directly interfere with the transaction itself.Technically, in today’s world they could monitor the online grid/network within their borders and probably interfere…but that’s kind of the whole point of why this post is interesting.So I think, at best, they can be reactionary (and really only at spots where value is transferred out of one decentralized network and into another centralized/controlled one).That being said – still mostly speculation on my part…so take with a grain of salt.

      1. Girish Mehta

        I do understand that Kevin.Attached is a copy of US Executive Order 6102 issued by Roosevelt in 1933 requiring US citizens to submit all gold in their possession exceeding 5 ounces immediately at the rate of $20/oz. Immediately afterward in 1934 the govt raised the price of gold to $35/oz where it remained until 1971. But the citizens received only $20.67/oz and were forced to hand over their gold. Why did people comply ? See the section at the bottom of the executive order about criminal penalties. Violation of this order was punishable by the Trading with Enemies Act of 1917. And individuals and businesses that did not comply were prosecuted.I am bothered that Fred says governments cannot interfere with this.Governments have the power to regulate. I have been saying for a long time that expect governments to step up significantly their regulation of this space.https://uploads.disquscdn.c

        1. JLM

          .This is one of the most interesting governmental actions in the history of the US. What made it work was that the Depression destroyed the market for gold and those who mined and actually produced gold were willing to go along. It was a huge political hit job.What is equally incredible is that the price of gold stayed where it did for so long.The history of the Depression and WWII obscured this action.JLMwww.themusingsofthebigredca…

          1. xcsler

            One man’s “interesting” is another man’s ‘theft’.

        2. falicon

          Interesting. I wonder how many people just “hodl” though…really only the lower volume people, that needed to transact or convert, were in danger b/c of this (so yet another tax on the middle and/or poor).

          1. Girish Mehta

            The people who just “hodl” was what I was thinking of where I said it can survive as an alternative/non-mainstream asset class.Like art that is held for several decades, and even passed onto the next generation but not liquidated. But that is a alternative/non-mainstream asset class, it is not currency that underpins economies.

          2. falicon

            Agree on that point for sure.

          3. falicon

            It should also be noted that China’s regulation attempts have moved the (BitCoin) market a couple of times already…but in all cases, it’s actually come back very quickly and much stronger.So I think you could argue that government regulation would actually be a step towards legitimizing AND mainstreaming crypto more than anything….in which case, you’ve got both sides of the risk coin covered (it grows if unregulated/unchecked/un-touched by government because it’s out of their reach; it goes mainstream and becomes ubiquitous if government is involved).I also think there’s an interesting global situation developing here…governments are slow to understand and act…and each will have their own interests/needs and interpretations…but the technology is global and universal already…so until there is global government consensus (good luck on that), there is likely going to be lots of loopholes and opportunity…

        3. LE

          I am bothered that Fred says governments cannot interfere with this.With all due respect of course to Fred note that he makes his money by flying in the face of conventional logic and wisdom and actually ignoring it on purpose. He is also liberal thinker (idealistic) and as a VC investor doesn’t worry about the nitty gitty details and in fact if he did and he knew what some other people know or thought like them he would never make any of the decisions and investments that he does. And he wears that as a badge of honor also. How can you not after betting correctly as he does?Sure the twitter investment was rooted in his feeling (from what he has said) that it was easier than blogging (which he did at the time) and therefore the investment seemed to have potential. However look at the coinbase investment and other crypto investments and his interest in them (which is going gangbusters). That is a total hail mary bet the ranch fuck conventional wisdom bet. You have something that the establishment calls literally moronic and not people who write for the New York Times (those who can’t teach) but people like Blankfein [1] and Buffet that are accomplished.What does that tell you?Let’s look at one small example. I and others have raised the point here that the government could simply outlaw things and the mesh wouldn’t matter. That is the conventional (and restrictive thinking). Fred must know that but he doesn’t care about that risk. In fact it’s as if that makes it a better investment idea.It’s like trying to convince someone they are stupid for free climbing up a mountain but not understanding that the fact they might die makes it more appealing not less.[1] (edit: I meant Jamie Dimon)

          1. Girish Mehta

            I don’t know. On crypto, I just wonder if Fred may be a little too close/ too deeply engaged in the space. I don’t know if it is possible for somebody so deeply engaged to see the “outside-in” view to crypto anymore.But like I said here once, if it is 2013 and you are Fred Wilson, how do you not invest atleast somewhere in the crypto space ? Also he was coming off 2012 when he did not make a single investment the entire year…

          2. LE

            Yeah Fred appears to be a bit aspergers on this entire crypto thing I have to say. The same thing is happening with others on self driving cars, electric cars, flying cars, and AI (sorry Twain).He could be right and he could be wrong. I was going to say the other day that it’s not like shifting your investment focus back in the 90’s from investments in many areas to focus all in on the internet. That was nowhere near as risky or viewed the same . While people were not aware of what the final potential was they certainly didn’t think the same way people do about crypto. They could see the value in some way and it was quite possible (I remember discussions on ‘always on broadband’ on tv shows) to see the future potential.

        4. xcsler

          Curious…What do you think of the morality of the EO and the subsequent reval from 20 to 35$?You OK with that?

      2. PhilipSugar

        Here is the thing. Let’s say you can transfer money out of the U.S. and not have it traceable at all. Sounds good right??No borders right??? We are all citizens of the world.Ok. Now I am a group of people that come and take you, your wife, and kids until you transfer money outside of the U.S. untraceable to my account. Not hard to find you. Not hard to get you. I can go to the Kitchen Store for knives and other stuff and Home Depot to buy full strength: bleach for cleaning, hyrdocloric acid for the pool, lye for cleaning drains, and some gasoline.There are some medieval things that are going to go down as you watch until you comply.

        1. LE

          Well as long as we are doing movie scripts if I was writing that it would be much less risky to do it as follows.Break into N number of offices or houses when you know the occupant is away on vacation. Login to their computer (but do nothing else in the house). This should be easy to do at most houses and if you try enough you will find one that is not protected well. Actually just clone the hard drive. Forget doing the access in real time. Assume a fair amount of them don’t have two factor authentication enabled. Off site access the account (while eating chinese food right out of the carton like they do in the movies) and authorize wire transfers to a third party account (potentially stolen) which you can then access or daisy chain to another place.I think this is way less risky than kidnapping, torture, and waiting in line at Home Depot.My point is why involve humans when there are so many good vectors for financial crimes?For that matter wouldn’t it be easier to just do a gofundme or kickstarter and make off with the cash?

          1. PhilipSugar

            Agree, but saying how low tech. I buy the acid for my pool because it is plaster, the bleach to keep algae out of the pool. My daughter has hair down past her waste so the lye too. The gasoline? People that have trimmers buy it there because no ethanol.They literally stock all by the pallet. And more than one pallet. I had to get them to bring one down from up above. Look up the stocks of each at the Christiana store. Hundreds of each in stock. They don’t even give me a second look, they literally sell hundreds a month at one store. I could pay cash but I don’t.You are using subtle tactics. There are those that will not.

          2. LE

            They don’t even give me a second look, they literally sell hundreds a month at one store. I could pay cash but I don’t.Cameras in the store? You would have to buy it well in advance past the point of making it practical to review old security nvr.By the way this is exactly the reason that people can’t get away with the perfect crime or murder. There are always things that you are not going to think about when committing the crime. Not saying you wouldn’t have thought of this either just that there are a host of things that are possible that you aren’t going to consider.Take my example of the house. In this day and age there are probably security cameras not only on the same street but on streets leading up to the street in question. And at the rental agency if you decide to rent a car. I have security cameras at the office. Most people in the complex don’t know they are there.I also get people driving on the main road. No way they know the camera is there as they pass by impossible. Have some in plain site and some hidden. People who placed notes on my cars because the way I parked? Have them recorded. Something they never thought about.Your buddy the seal team six member? He has both the experience and also extensive training based on past failures decades of knowledge from the best of the best on what to do. Mind blowing.

          3. PhilipSugar

            Oh, I get it. I have lots of camera’s. But here is the thing. I don’t because I care, I have things to lose, I am moral, I realize that. There are many that don’t.Think about the idiocy of robbing a Wawa. Sheer idiocy. Happens a ton.Last week my daughter wanted to get a smoothie there after her college art class. Some guy came out of the bathroom and he had obviously just taken something. I normally don’t notice, this guy was stoned on something beyond belief.She like many others is naive. I got up between her in this guy and she was pissed I was in her “personal space”.We got home and she told my wife who worked at the maximum security unit of Smyrna Prison and the Federal one in Branson, MO. I literally had to break that one up my wife was so pissed at my daughter. Did I get his picture? Yup. Wawa??? Multiple angles. Think he cared?

          4. LE

            You know why Wawa’s and liquor stores get robbed? Because the mentality of people that rob places is such that they don’t think about easier targets. [1] Out of sight out of mind (important retail concept). I mean why not just walk into any doctor’s waiting room with no cameras and get money from them? Some people pay in cash (and the doctor has cash) and there are no cameras and no controls because places like that are never robbed. And no it’s not because they figure there is more money at Wawa’s or liquor stores. They drop the cash in a safe place.No creativity on the part of armed robbers except in movies.What did your daughter want to do and why was she mad? What happened?[1] This goes along with my other premise on why people will stand in line to get a job at a Walmart but not go to an office park and try to get a job there which is much easier because no competition.

          5. PhilipSugar

            Nothing happened. She was angry that I was so up close to her I was touching her.Some of it is that people just want to get “three hots and a cot”But some is because people are f’ing crazy.This is as I have said is the difference sometimes.Many people think: “everyone is good they just need a chance, it’s not their fault” Sorry… is not urban. It’s country. I got the license plate of his car as well.You look at how many crimes don’t get solved. You try and do business in Russia. You think somebody that doesn’t care will take out your family? It must be nice to live in that world……until it’s not.

        2. Lawrence Brass

          A crypto transaction is completely traceable and the trace theoretically lives forever in the ledger. And it is public.The problem to solve is anonymity. You have to match the IP associated with the transaction with the IP of the target or suspect at the time of the transaction. Agencies can log all the traffic. These type of work is done routinely using pattern matching against network traffic in financial networks to detect and prevent fraud and money laundering and to do fraud forensic analysis.What happens is that because there is not clear legislation governing crypto transactions these procedures are not formally in place, but there is any reason for thinking that they won’t be in the future. ML and AI will solve this problem for us.All things you surely know.I think that particulary relating crypto with crime is a myth. A bank note is more guilty in reality, and more difficult to trace.

      3. jason wright

        i wonder if it will usher in the ending of offshore tax havens? Bitcoin is a global currency.

    3. JLM

      .The utterance of free speech is “protected” by the First Amendment.The consequences of the exercise of that free speech are not.JLMwww.themusingsofthebigredca…

      1. Girish Mehta

        Naval R made that statement.You know what might be a stronger argument for crypto ? Significant Legal End-user Demand.

    4. PhilipSugar

      I agree and I am going to throw gas on this fire.It is easy to cut down a rifle barrel. It is easy to mill the firing pin mechanism to go full auto.One could argue easier than crypto.Penalty for doing or possessing?? Minimum of ten years in a Federal Penitentiary. No parole. Think many people want to take that risk?So yes you can do with about $300 of tools from Harbor Freight.Nobody can track you. Who knows why you bought those tools? But I will tell you, if we want to say no nations, no states…….then you better be ready to defend your stuff, because I guarantee there is somebody that is going to take it, and the way they are going to take it is not going to be with subtle tactics.That is what scares people so much. I’ll give you a quote, debatable to Thomas Jefferson: “Those that hammer their guns into plows will plow for those that don’t”

      1. Girish Mehta

        On the gold example (US executive order 6102) below, a response I have received in the past with people I have discussed it with is that – Oh but gold was traceable, but bitcoin is not.Wrong answer. You think the US government was actually going to search millions of households to find out if they kept more than 5 ounces of gold ? People could easily “wait it out” hoping for the regulation to change.Its simple, most people do not want to break the law. Most people are law abiding. That is a great thing, its a wonderful thing. The Threat of Criminal Prosecution is the deterrent. That is how society works.And in crypto’s case, it can be used for many illegal activities that people will actually support a government clampdown on crypto if some serious, nefarious activities come to light that were funded by crypto.The idea that government cannot interfere because of Bitcoin’s security is a complete red herring.

        1. PhilipSugar

          We could not agree more.

        2. jason wright

          i think it is a complete red herring to single out Bitcoin as the unit of value that facilitates nefarious activities. cash (fiat) is the principle unit, and has been for quite some time.

          1. Girish Mehta

            Cash does that and therefore law-enforcement monitors large cash movements. It is the reason why anybody traveling on a international flight has to declare their cash holding to customs above a limit, and explain why they are carrying large amounts of cash. It was one of the reasons why the Indian government made 84% of all cash in circulation non-legal tender with only 3 hours of notice in November 2016.Net: All large Cash transfers on the network are tracked; and in-person movements of cash are difficult for large amounts.The difference is the anonymity that bitcoin brings to network transfers. Because of the experience with cash is exactly why it is naive to expect law-enforcement to not step in heavily on bitcoin.

          2. jason wright

            is Bitcoin anonymous?

          3. Girish Mehta

            Fair question. Does it invalidate the point ? – Because of their experience with cash is exactly why it is naive to expect law-enforcement to not step in heavily on bitcoin.

          4. jason wright

            It may begin to question it if it is built around whether or not Bitcoin is or is not anonymous, and i’ve always acted on the assumption that it isn’t.Law enforcement may step in heavily on Bitcoin, but the legal regulation and enforcement of the traditional banking system requires banks to report suspicious activities. It doesn’t always work well, but no one goes to prison;…Mexican drug money laundering[edit]In April 2008, the Wall Street Journal reported that federal prosecutors had initiated a probe into Wachovia and other U.S. banks for aiding drug money laundering by Mexican and Colombian money-transfer companies, also known as casas de cambio. These companies help Mexican immigrants in the United States send remittances back to family in Mexico, but it is widely known that they also present a significant money-laundering risk. However, not only is it a “lucrative industry” that is able to charge high fees, but Wachovia also viewed it as a way to gain a foothold in the Hispanic banking market.[68]In March 2010, Wachovia admitted “serious and systemic” violations of the Bank Secrecy Act that allowed Mexican and Colombian drug cartels[69] to launder $378 billion between 2004 and 2007, the “largest violation of the Bank Secrecy Act”.[70] It negotiated a deferred prosecution agreement with the Justice Department to resolve criminal charges for willfully failing to set up an effective anti-money-laundering program. It agreed to forfeit $110 million and pay a $50 million fine to the U.S. Treasury.Reports in Bloomberg Businessweek in June 2010[71] and The Observer in April 2011 shed light on the extent to which Wachovia went to turn a blind eye, including by ignoring the warnings and suspicious activity reports (SARs) of its London-based director of anti-money-laundering.[72]…While CEO of Wachovia in 2007, G. Kennedy Thompson received a total compensation of $15,653,559, which included a base salary of $1,090,000, a cash bonus of $0, stocks granted of $12,351,369, and options granted of $1,925,933.[6]I don’t think gov will come down heavily on Bitcoin. It will set standard regulation rules of the game similar to the fiat banking system. What gov could do is run its own node on the network (and on all blockchain networks of any real value) to have a copy of all transactions (something it does not have with the banking system where it relies almost exclusively on self reporting to highlight ‘anomalies’ – a trust system wide open to abuse). That’s a powerful ‘check’ on any participant thinking about bending the rules of the game. The Federal Bureau of Node Analysis. It’s coming 🙂

        3. xcsler

          Most people are law abiding until there is a crisis and their well being is threatened. You think anyone in Venezuela cares about Venezuelan commerce laws right now? It’s chaos, which is a direct result of enormous debt and centrally planned social and monetary policies that aren’t that different than the ones in the US.

          1. JLM

            .The US has quasi-governmental entities — Federal Reserve, FDIC, Fannie, Freddie, NASD, NYSE –which have a thumb on the markets. These entities do not exist in countries like V’la.Monetary policy in the US is set by the Fed. No President exerts much control over the Fed once they name their members.JLMwww.themusingsofthebigredca…

          2. xcsler

            Where was their thumb during the financial crisis?Monetary policy is set by the Fed but they must also take into account and react to the fiscal situation of the country and policies of Congress. The Fed had been a great enabler of overspending with their ultra low interest rate/ QE policies and now that the US has so much debt it makes it difficult to raise rates without causing yet another crisis.

      2. xcsler

        “then you better be ready to defend your stuff, because I guarantee there is somebody that is going to take it, and the way they are going to take it is not going to be with subtle tactics.”That “somebody” IS that ‘noble protective State’ who is currently taking 40% of my stuff. Pretty subtle of them, huh?

  11. kenberger

    Saw the preso here at Consensus yesterday and it had a cool factor with a use case that few would ever have expected.

  12. Richard Myers

    There are interesting analogies between what bitcoin does to dis-intermediate banks, and what mesh can do to traditional centralized carriers and ISPs. Neither is going to decentralize themselves, but they can’t fight the technology that makes it possible either.

  13. JLM

    .This is simply not correct. The US Constitution specifically empowers the US Congress to “regulate commerce” and thereby, as an enumerated power, they have the last word on everything.This bit of power is brought to life in Article 1, Section 8, Clause 3 of the US Constitution. It is the basis of all laws which are passed by the Congress pertaining to commerce, finance, and record keeping. It is often the enabling legislation for IRC rules.Those of you who sat in a law school class and learned this are having a sharp headache right now as you recognize that the ability to “regulate commerce” is one of the broadest powers given to the Congress in the entire Constitution.As an obvious application of that power, they could require that every bit of interstate commerce identify the buyer, seller of any good or service. Ahh, actually, they do right now.An example of how they used their regulatory power was in the US Bank Secrecy Act (BSA) and its attendant IRC Sec 60501 rule pertaining to the requirement to file Form 8300 which is the reporting requirement for moving money above a certain limit.[For the bankers amongst us that is CTRs (cash transaction reports) and SARs (suspicious activity reports) and the limit is $10K.]The FBI maintains a database which tracks every such transaction in the US (and the international wire system) which breaks that threshold. I have had more than a few chats with regard to periodic payments and bank deposits in my business career. Anybody with multi-state, multi-operating units and any foreign ownership is going to confront this.Smart guys thought they would get around this by doing something called “structuring” or “smurfing” which means taking a larger transaction which would trigger the reporting requirement and breaking it down into smaller otherwise unreportable transactions.What did the US Congress do? They made it illegal with a single swipe of the pen. You can have a perfectly legal transaction but if you break it down into smaller bites, guess what? You may be going to prison. [Up to five years, a fine or both.]Here is what Congress did in 1986:”No person shall, for the purpose of evading the reporting requirements of section 5313 (a) or 5325 or any regulation prescribed under any such section, the reporting or record keeping requirements imposed by any order issued under section 5326, or the record keeping requirements imposed by any regulation prescribed under section 21 of the Federal Deposit Insurance Act or section 123 of Public Law 91–508—[…] (3) structure or assist in structuring, or attempt to structure or assist in structuring, any transaction with one or more domestic financial institutions.”Again, five years for coloring outside the lines even if the underlying transaction is perfectly legal. It pertains to both reporting and record keeping.Another point — the US laws on wire fraud are very tough. The definition of “wire” movement is broad, purposely so. PayPal is “wire.”Wire fraud is almost always used to tack on more illegality on a transaction which is illegal — but perhaps not particularly serious — to manufacture a larger, multiple crime. Ask Paul Manafort about this one.One of the core foci of this is money laundering.It is very naive to suggest that the US gov’t is going to allow anonymity to defeat its laws against money laundering. Laws against money laundering require the identity of the who, what, why, where, how much of every financial transaction in the US.There is a file retention requirement to financial transactions which is a kissing cousin.Bitcoin and crypto have wiggled into bed with securities regulation, but they are still virgins as it relates to the criminal justice environment. Silk Road was a criminal enterprise at its core, so nothing much was learned from it other than the founder is in prison for life.Bitcoin, blockchain, crypto are off to the races, but the races are going to, eventually, be run within the same guardrails as the entire financial world. Congress is going to regulate the commerce driven by BBC. Count on it.JLMwww.themusingsofthebigredca…

    1. Richard

      Yes, the “commerce clause” is by far the broadest reaching power in the US Constitution.

    2. sigmaalgebra

      But, but, …, but, but, but, …, what about fantasy, excitement, swing for the fences, rock the boat, no guts no blue chips, drama, the leading edge, … ????You are vulnerable to being accused of being a killjoy, downer, naysayer, someone with a long, sharp needle puncturing gaily decorated, hot air balloons!!!!!You might get accused of writing a “wall of text” or some “long, complicated post”!!!!!IMHO you did a great service here: You explained some very strong, rock solid, facts of life with rock solid explanations, examples, details, and references.Or, as we know from an old butter ad, “It’s not nice to try to fool Mother Nature”. And similarly it’s not nice to try to fool the US Department of the Treasury, the SEC, the IRS, etc.E.g., IIRC, the long arm of the power of the US in world finance actually got the Swiss bankers to come clean and expose themselves, drop their pants or raise their skirts as the case may be, and open the doors of their big washers and dryers of international money laundering — how about that for mixed metaphors!!!!Fantasy can be fun in summer popcorn movies but is too often a big, major league, world-class bummer otherwise, something to grind teeth, upset stomach, ruin sleep, chew fingernails, intrude on everything else, and then end with something much worse.Let’s stick with reality, understand that, and THEN do something new, correct, powerful, valuable, …, all within the boundaries of reality.You just posted the leading candidate for Post of the Year for 2018. Well done.

      1. sigmaalgebra

        In revision, all that said, it remains that for really hot topics, if they are really hot, f’get about the distant future, solid reality, fear of fantasy, real utility, legality, etc. and concentrate on the fact that with all the heat and hype there may be some bigger fools — really need only one with a lot of money. Then SELL!

    3. Lawrence Brass

      I could bet my digital wallet that the agencies already have full unpruned nodes forming part of every crypto network and probably full related traffic captures, for anything they need and want to do.That means full traceability and de-anonymization capability.Had to look that one up to check.

      1. maria noor

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    4. jason wright…”In March 2010, Wachovia admitted “serious and systemic” violations of the Bank Secrecy Act that allowed Mexican and Colombian drug cartels[69] to launder $378 billion between 2004 and 2007, the “largest violation of the Bank Secrecy Act”.[70] It negotiated a deferred prosecution agreement with the Justice Department to resolve criminal charges for willfully failing to set up an effective anti-money-laundering program. It agreed to forfeit $110 million and pay a $50 million fine to the U.S. Treasury.Reports in Bloomberg Businessweek in June 2010[71] and The Observer in April 2011 shed light on the extent to which Wachovia went to turn a blind eye, including by ignoring the warnings and suspicious activity reports (SARs) of its London-based director of anti-money-laundering.[72]

    5. xcsler

      If the laws are too onerous and interfere with people’s ability to freely trade then commerce will move elsewhere. Having reserve currency status has allowed the US to be a worldwide financial bully by cutting off entire nations from global commerce via SWIFT blockade. That exorbitant privilege is ending as other nations and investors realize that the US government have no intentions of honest non-inflationary repayment of their debt.Times change, perceptions change, and new technologies enable interactions never before possible. Bitcoin is a borderless payment network and global money. The US will be forced to choose between softening their commerce laws or enacting even more oppressive capital control laws like the ones you mentioned; the alternative is to be left out of the new global economy.The US needs Bitcoin far more than Bitcoin needs the US.Deal with it.

      1. JLM

        .What countries, specifically, has the US cut off from global commerce by blockading SWIFT?The reason I ask this question is because SWIFT is actually a co-op owned by its 10,000 member banks and the US gov’t has next to nothing to do with it other than having approved its anti-money laundering functions as meeting the requirements of US law.Today, we have had or have sanctions against Iran, North Korea, Syria, Sudan, Cuba, and Venezuela. None of them is truly impacted by SWIFT.I doubt I could possibly disagree more with the utterance that “The US needs Bitcoin far more than Bitcoin needs the US.”The US regulatory regime rolls over in bed and Bitcoin is a thing of the past.Can you cite a real “interaction never before possible”? Just as a conversation starter?I get the zealotry and I love it, but the facts seem a little ghosty.JLMwww.themusingsofthebigredca…

        1. xcsler

          Iran and North Korea are cut off…also recent threats to sanction Russia via SWIFT. Even if these countries can use other means to move money the mere threats of being cutoff can be construed as an act of hostility punishing citizens for the acts of their governments.If the US regulatory regime were able to stop BTC they would have done it long ago. They can’t, as it is a global distributed network. Sure they could discourage its use but what kind of optics would that present to the rest of the world? How can the US be viewed by others as a relative bastion of free markets if severe capital controls were enacted? What kind of questions would arise from such a regulatory move? Would there be any risk of countries not wanting to purchase as many US bonds if these investors started to worry about capital controls? Not a good situation to have interest rates rising when you’ve got 21 trillion in debt.St Louis Fed president James Bullard was asked on CNBC if Bitcoin posed any threat to the US dollar. He answered that he “didn’t think so, at this point…we don’t know how the future will unfold”. The fact that that question is even being asked by a mainstream news outlet should tell you something about the potential of BTC.Interactions or use cases never before possible would include having a store of value with no counter party risk or risk of debasement, and which can store and transport millions of dollars worth of wealth effortlessly across borders. Other use cases include protecting wealth from confiscatory governments, being able to invest in, donate to, or do business with whomever one pleases, disintermediation of costly services (cross border remittances, property title management), being able to purchase inexpensive medications on-line, social media micropayments etc.I think you give States and their laws too much credit for what they can and can’t do.

  14. Frank W. Miller

    I’d much rather have my democratic govt have the ability to look at my comms with a warrant than give drug dealers, arms dealers, and child pornographers another way to move illicit cash around.

  15. Richard

    “Censorship Resistant” , who comes up with these BS names?

    1. xcsler

      People who care about privacy and individual sovereignty.

  16. LE

    From:…If a country outlawed bitcoin and forbade its citizens from using it, local ISPs could block network nodes locally (even if the global system continues to function).If a country outlawed bitcoin (say our country even) then it would be illegal. As such the method by which you do the transaction (the layer) wouldn’t matter it would still be illegal and there would be a tremendous disincentive to use a mesh network and penalties for doing so. Or am I missing something here?A similar example applies to taxes that you pay. There are certain transactions that the government has visibility into and is provided information by banks and other parties. However at the base there is a legal obligation to pay taxes. So someone being able to pay you cash for services or even trade services for services (with no visibility by the government) does not remove the obligation to follow the law and pay taxes.

  17. falicon

    Some bookies will still have a business (partially because they often “float” their clients and that will not be something legal spots will be willing/able to do).

  18. Michael J Lambie

    I love this. I am ordering one. Bitcoin or not, this looks like it could be an important step for privacy.

  19. Jason Mack

    I’ve always been impressed by the system for off-grid credit card transactions https://uploads.disquscdn.c

    1. Richard

      ha, along with this were the book of banned credit card numbers. The numbers were printed into a booklet that was distributed weekly.

  20. creative group

    CONTRIBUTORS:Review Melissa Lee interviewing Arthur Hayes CEO of BitMEX. (Its retail clients is heavy Asian) Her disjointed questions reveal she doesn’t have a clue. If a person that covers the financial world can’t develop intelligent questions how can the average person watching understand it.Crypto-Currency isn’t going anywhere. The money that is chasing smart money for them to become more super rich is coming it very heavy from Asia.…Captain Obvious!#UNEQUIVOCALLYUNAPOLOGETICALLYINDEPENDENT

  21. jason wright

    it seems to be only a matter of time before the network we presently call ‘off grid’ becomes the de facto on grid. What protocols will run on it? This is the big prize. Wither the internet.

  22. jason wright

    yeah, the ‘globus’ doctrine. its extraterritoriality takes my breath away. how does the US get away with it?

  23. BillMcNeely

    So could you run a legal online betting business licensed by an Indian tribe using cryptocurrency paid over GoTenna to run a legal online betting business here in the states?

  24. jer979

    I wouldn’t be surprised if someone already pointed this out, but this seems like a good crypto-token use case (maybe I missed it?). Adoption is the key and incentivization is critical to get to critical mass. Why not reward those folks who are part of the mesh in order to drive the WOM and growth?

  25. OurielOhayon

    very interesting thanks for bringing this to my attention

  26. falicon

    Awesome. Thanks!

  27. jason wright

    i like this vision of the future. thanks.

  28. xcsler

    How are the TxTenna data forwarded to the Bitcoin network? Is that currently over the internet? If so would miners have to run all full node with a mesh connection? Is that feasible?