re: So what happens to Bitcoin now?

quote:

---

SR had an automatic built in mixing service.

---

Then how can actual ownership of the Bitcoins be verified? Authentication requires tracing back to the block chain. Any mixing would have to be recorded for accurate record keeping. You can't mix the Bitcoins and erase all traces of ownership without compromising the entire system.

quote:

---

And I'm sure most vendors used independent mixing services as well. The taint on any coins used in SR transactions is probably long gone.

---

I think it is absurd to assume that most vendors were more sophisticated than the creator of the Silk Road. Isn't the block chain a permanent ledger of ownership of
Bitcoins? Taint does not attach to the specific Bitcoins, it attaches to any Bitcoins owned by persons who participated in illegal transactions. If John Doe was alleged to have participated in illegal activities in 2010 that earned him 50 distinguishable Bitcoins, then the feds could sieze any 50 Bitcoins John Doe owns at the time of arrest in 2013 as the proceeds of illegal activities. Once law enforcement knows who John Doe is, they can trace all his uses of Bitcoins with the knowledge of which specific Bitcoins he received from his illegal activities. They can analyze those transactions looking for other illegal activities that will spread the taint.

The feds don't need convictions to seize Bitcoins. They need credible allegations, and once the property has been seized it is not easy for the owner to recover.

I doubt the feds are going to waste time chasing five and dime criminals (recreational drug users) on Silk Road, but they will go after people who's crimes spread beyond recreational drug use.