re: So what happens to Bitcoin now?

If DPR was identified from steps to set up Silk Road, then it stands to reason that the feds were on to him for some time since they had access to this information since the inception of Silk Road. As such the feds identified him solely due to his incompetence, but they still had to assemble their case and show how he profited from the illegal activity. How did they track his, or anyone else's, transactions on the Silk Road? The feds had to find out where he entered and exited the Tor network. Once they had that it was game over. And now the feds can use all of his interactions with other Silk Road users to trace them to their entry and exit points. Traffic analysis of those will enable them to narrow down and identify more users of Silk Road.

My point has been that even if you were 100% perfect in the steps you took to try and hide your identity one other person made a mistake and it put everyone in jeopardy of losing their anonymity. Face it anonymity for Bitcoin users and owners has been compromised, and there is no unringing this bell. Confidence in the idea of being able to hide your transactions from the government by using Bitcoins is gone forever.

Anyone want to speculate how many Americans will be tracked down and arrested for buying hard drugs on SR before this is over?

If another SR user claimed to have the addresses of 500,000 SR users, you can bet the FBI has those addresses, too. Once the FBI starts arresting the largest purchasers and confiscating their bitcoins, it's game over.

I know this would kill other businesses, but with the way bitcoins are used, with a large seizing like this taking a significant % off the market shrinking supply, would this increase the cost over time? Bitcoiners seem to be a "better him than me" type group who wouldn't fold to something like this. I guess that only holds for the very faithful.

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They aren't going to go after the recreational user in my opinion

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I'm not referring to the recreational user. I'm referring to the repeated large quantity purchasers. I'm assuming there have been those types of buyers on SR.

Or, how about those persons who have offered or bought stolen credit card and ATM numbers for sale/purchase on SR? I didn't even know there was such a thing on that website until yesterday when the news broke about all the things available on it.

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Since I've never been there I didn't know they did that. Yeah that's a big deal. I thought you were talking about the dude who buys an occasional small bag of weed or a few Xanax

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The issue is whether or not they are able to obtain the information.

The standard for communication on the site between buyers and sellers is to use an encryption method that only the individual vendor can read. Not even the SR admins have the ability to read the messages.

So really, what they will have to rely on is that there is a rogue seller out there who is willing to give up his client list. I'm not saying that can't or won't happen, but it's not a given that the governments will be able to obtain any usable buyer info. And the sellers are even more protected than the buyers since they never actually have to provide any personal information (like shipping address). So unless they made stupid mistakes like DPR did, then they are pretty safe as well.

It's likely that most of them will move to BMR or another similar site that comes up to fill the vacuum.

What is BMR?

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what they will have to rely on is that there is a rogue seller out there who is willing to give up his client list.

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Is that what happened with the SR user who had the murder contract on him by the SR guy who was arrested?

If the Feds have SR's servers, they will have access to IP addresses of everyone who bought or sold on SR.

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SR never had a record of the sellers (names, addresses). a few may get popped if they have incriminating evidence in their SR inbox, but most will be able to move their biz to BMR and continue with just a small hiccup in their life.

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He was taking commissions in the form of Bitcoins. The feds can backtrack from there to the nexus where the Bitcoins entered and exited the Tor network. From there they can use traffic analysis to trace the human identities of the people who engaged in the transactions.

Humans being creatures of habit will use habitual routines for conducting transactions, and law enforcement has sophisticated tools and methods for identifying patterns that will narrow their searches. I expect there will be numerous arrests of Silk Road vendors and Bitcoin owners in the coming months.

Wiki, you know the Silk Road bust was front page on the FT?

The article itself went a little into concerns of its survival, talked about illegal activities, etc., etc., same cookie-cutter story as every major news source has been about bitcoin.

How much does it make you smile that this made front page news?

There is a clause in there that should make you worry about any chance of broad based acceptance. The CFTC is debating whether or not to put bitcoin under their supervisory remit, which in essence will place all exchanges under the scrutiny and regulation of the CFTC. Won't affect P to P usage obviously, but it will essentially deflate any chance of this getting wide acceptance in the form that you wish for it. This is what I was referring to when I previously made the point that regulators will not ever let something like this just freely go, and you said "if it happens then frick them for it". Hasn't happened yet but being debated.