Perpetually KYC'd Coins Using Evil Covenants

Perpetually KYC'd Coins Using Evil Covenants

Original Postby recent798

Posted on: February 13, 2024 17:47 UTC

The discussion revolves around the comparison between using a whitelist approach and multisignature (multisig) mechanisms for government-related cryptocurrency transactions.

It highlights that both systems allow for updates to the whitelist or the conditions of the multisig without needing to alter the contracts tied to existing Unspent Transaction Outputs (UTXOs). This similarity suggests that from a flexibility standpoint, there is no clear advantage of one system over the other.

Furthermore, the conversation addresses concerns regarding Know Your Customer (KYC) processes for transactions exceeding $50,000. It questions how KYC verification can be effectively implemented on the receiving end of a transaction, considering that holders of non-covenant bitcoin can transfer funds as they wish, including to addresses that comply with KYC requirements. This indicates a potential challenge in enforcing strict KYC procedures in the decentralized and permissionless nature of cryptocurrencies.

The discussion also touches upon operational aspects of managing secure transactions by the government. It notes that the government does not necessarily need to utilize a hot wallet, which is connected to the internet and poses security risks. Instead, it could opt for signing transactions offline using air-gapped devices, enhancing security. Whether it's registering a new address or confirming transactions, the process seemingly requires manual transfer of data to and from these air-gapped systems. This method, according to the discussion, appears equally applicable and cumbersome whether the government opts for a multisig or a whitelist-based system.

Lastly, the debate contrasts the infrastructure needed for both approaches. It suggests that instead of maintaining a cosigning server for multisig operations, the government would need to manage a whitelist server if it chose the whitelist route. Both options imply the use of air-gapped (isolated from unsecured networks) systems to enhance security. This comparison underscores the necessity of additional infrastructure, regardless of the choice between using a whitelist or a multisig setup, without highlighting a definitive preference for either from a logistical or security perspective.