I wonder how many people were already exploiting this by stealing $50 a day or something. With bitcoin it'd be nearly impossible to arrest them, right? So an unethical person would have tremendous incentive to abuse it?
It's perfectly possible to arrest them, it just may be harder to track them down... or easier, the blockchain does sometimes reveal a lot and unless the attacker is fairly clever they may easily compromise their identity (ie: depositing to an exchange account tied to their name and verified).
If they're smart and ran the exploit via Tor -> VPN (as to not get caught by automatic Tor filters) and then took the coins through a few mixers and onto a russian exchange, they could then sweep them back into a wallet in near-complete safety.
Laundering bitcoins is challenging and risky due to the nature of the ledger - all transactions since mining must be known for all time - if you were to look at something like Monero or ZCash, things get a lot easier and you get cryptographically unbreakable anonymity rather than socially and legally difficult-to-break complexity.
If you have an offline wallet that has always been offline it is very, very, very easy to get away with criminal activity and take Bitcoin. After I read through the Satoshi paper and understood it completely I realized that Bitcoin was either going to be worth $0 in the future or $100k or more per coin, but it probably won't stay in between for the long term.
The $0 case is the case where hostage taking starts to become mainstream. I'm actually shocked it isn't happening more in places like Brazil. Perhaps cyber criminals aren't smart to begin with and are (rightfully) wary of things like computers, but I expect that this will change over time. Once MPs in Canada start getting kidnapped and ransomed there will be public outrage to do something. The problem is that due to the decentralized nature the best you can hope for is to block it / make it illegal within the country. If every country does this it's value will go to 0 or just above.
The other case is where Bitcoin solves the financial problem of our time: other Governments / financial institutions can't be trusted this provides (among other things) a way of transferring $100m securely for 0 cost. It also allows individuals to avoid exponential inflation. Just an unbelievably useful service that if you make illegal before other countries and it takes off leaves your economy in much worse shape since the appreciation of the coins has gone largely to other individuals.
My pet conspiracy theory that I don't really believe, but I like to entertain, is that Bitcoin was an American intelligence operation to ensure currency dominance in an era of weakening US influence. Satoshi himself has quite a bit of Bitcoin (around 1M BTC / $100m USD) and it would be fairly easy for an NSA staffer to raise his hand in a meeting and say "Hey guys, we should mine this stuff because it will be useful for buying zero days from cyber criminals one day."
But maybe I'm giving the NSA more credit than they deserve.
And what are you going to do once you have that bitcoin in your secure offline wallet? Anywhere you spend it can see it came from your address and you just kidnapped X person, so you'll have a hard time spending it in person especially if authorities are watching. You can try to spend it online, but if you spend it with anyone more easily accessible than you and provide any identifying information to convert funds to a local currency or ship yourself something, you're screwed.
Like I said, the best you can do is mixing and similar, but you know what criminals actually primarily use? Cash. Cash is fungible and untraceable. If you're going to do some hostage taking, you may as well do it for cash rather than bitcoin, the only potential benefit of bitcoin would be verification might be easier than cash.
Ransoms are not paid with clean cash. They are paid with marked bills. If you take a ransom and, after taking some precautions, wait a year then meet up with someone in another country it's pretty likely you'll get away with it. If you have someone you trust in a location that's out of reach for the authorities it's even easier. It isn't like the FBI is busting down the doors of the encrypted HD ransomers.
I fully agree with your thoughts bu but I wanted to add 2 things.
1. Even if all states prohibit BTC (a bigg if) there will still be demand from entities not under state control (black market), especially so in ineffective countries (socialist or wartorn or with just big slums). Consequently price won't go to zero because of this.
2. The biggest threat is BTC competitors because there can be infinitely many.
Let's be honest about something about BTC: It's price is where it is because nerds understand mathematics and realize that the Bitcoin goes to the moon if it becomes the new standard international settlement currency. If all or most states prohibit, then this element goes away and the price collapses in a selling spree. I agree that the black market needs a tool, but it doesn't have to be this.
As for #2, I agree that that was a bigger risk early on, but the problem with taking on a second or third currency is it leads to the question of "what stops a fourth or fifth?" it's sort of a recursive proof that could lead you to conclude that either all crypto-currencies will be worthless or one will win. Since crypto-currencies are so inherently useful they probably aren't going to 0, so now the task is finding the winner. And despite ETH being more useful in some regards, and despite Burstcoin or Peercoin having better fundamentals it seems to be that the market has centralized around Bitcoin so out of the CC that exist today, for now I'd put BTC as a 99% chance to own the market 10 years from now if there is one.
What do you mean by offline wallet? The only times I've heard of offline wallets is in the context of preventing your bitcoins from being stolen, not of avoiding being caught by police.
You can generate a wallet on a computer that isn't connected to the internet and then get someone to send money to it. A wallet is just a bunch of fancy cryptographic tools, none of which need to be online. Once you are ready to spend your Bitcoins, then you'll need to communicate with the blockchain, but not before.
