Craig Wright’s Blacklist Looks Like Bitcoin ‘Kill Switch’ Satoshi Was Never Followed Up On

Bitcoiners are reeling from the fact that users of the rival Bitcoin SV (BSV) blockchain can now freeze and confiscate other users’ coins, thanks to Australian computer scientist Craig Wright’s “blacklist manager” – a software tool for recovering lost or stolen coins. But did Satoshi Nakamoto, the inventor of Bitcoin, propose a similar “kill switch” feature 13 years ago?

In a 2010 Bitcoin Talk post, Satoshi described a system that would allow a buyer to unlock bitcoin in an escrow account. The money will be unlocked when the buyer has confirmed receipt of goods or services. The buyer could never withdraw the funds (although the seller could always refund the bitcoin). But here’s the catch – the buyer can keep the coins locked up indefinitely (something like a kill switch aimed at fraudulent sellers).

BSV unveiled its blacklist manager in October. The tool allows users to freeze and confiscate BSV coins as long as they provide legal documents proving rightful ownership. Many see this as a violation of the ethos of decentralization and censorship resistance. But BSV supporters claim that the blacklist boss is consistent with Satoshi’s old escrow idea.

“It’s not as far away from Satoshi as some might think,” wrote Twitter user Wolfgang Lohmann, a BSV lawyer.

“Imagine that someone stole something from you. You can’t get it back, but if you could, if it had a kill switch that could be external[ly] triggered, would you do that?” Satoshi wrote in the Bitcoin Talk post. “Would it be a good thing for thieves to know that everything you own has a kill switch and if they steal it, it will be useless to them, even if you still lose it too? If they give it back, you can reactivate it.”

Wright, who is posing as Satoshi, has claimed that he was in the situation Satoshi described. In February 2020, Wright alleged hackers used a Wi-Fi pineapple to steal private keys from him for two bitcoin (BTC) wallets. A Wi-Fi pineapple is a special device used by malicious actors to intercept messages between a computer and a Wi-Fi network.

One of the wallets Wright claims to own – the 1Feex wallet – is well-known and has nearly 80,000 BTC. The wallet was funded under the Mt. Gox debacle – a series of hacks between 2011 and 2014 that forced the Tokyo-based bitcoin exchange, Mt. Gox, to go bankrupt. The other wallet has about 31,000 BTC.

Wright filed a claim against 16 developers of Bitcoin and its various forks in 2021, insisting they owe Tulip Trading, a Seychelles company owned by Wright and the official claimant in the case, “fiduciary and tortious duties” to “rewrite or change” protocol code to give Tulip Trading access to 111,000 BTC controlled by the two wallets.

This bizarre requirement to change the protocol code seemed to contradict basic cryptography and left many scratching their heads. How could developers give Wright access to coins whose private keys are unknown?

Enter BSV’s blacklisted boss, who, according to court documents, Wright’s other company, nChain, had been working with all along.

“The first step in the process of freezing digital assets is to obtain a court order or a document with equivalent legal force,” says a video explanation on the official BSV website. “The plaintiff appoints a “notary” who can operate a “notary tool.” The notary converts the court order into a machine-readable format and transmits it to the mining network.”

This type of transaction is called a “confiscation transaction,” and according to the video, the end result is that miners “will receive legal documents ordering the reallocation of misplaced or lost assets and execute a transaction that transfers ownership of coins to their legally determined owner.”

According to BSV’s press release, the network wants digital assets to receive the same legal treatment as traditional assets.

For blockchain technology to be adopted globally, it needs digital assets to be treated legally in the same way as stocks, bonds and other property,” the release said, citing Marcin Zarakowski, general counsel and chief of staff of the Bitcoin Association for BSV.

“In the past two years, we have seen over $3 billion in digital assets stolen; this is unacceptable. With this new tool, we are looking to put ourselves on the right track to solving this problem, the statement said.

Although such a tool may seem reasonable at first, it does not take much to puncture the concept of a judicially mediated network. For example, how will disputes between users in different jurisdictions be handled?

On the other hand, many members of society may prefer a system bound by law to one that relies on computer code and a strict decentralization ethos.

For what it’s worth, Satoshi doesn’t appear to have ever implemented an escrow or kill switch feature. He may have merely brainstormed before realizing the inevitable trade-off between decentralization and financial assurance.

“This is not implemented and I probably won’t have time to implement it soon, but just to let you know what is possible,” Satoshi wrote.

However, he created a “notification system” where “power users” (like Satoshi) could send network-wide alerts and even disable transactions, Satoshi discontinued it in December 2010 and it was completely removed between 2016 and 2017.

“I see nothing to indicate that the notification system was intended for anything other than broadcasting a message to all node operators,” Bob Summerwill told CoinDesk. Summerwill is a long-time member of the Ethereum developer community and CEO of the ETC Cooperative. “[There was] never any indication that it was intended for asset freezing or recovery.”

Summerwill also pointed out that Ethereum had a similar system involving canary contracts – code that allowed core developers to stop certain operations or transactions. Canary contracts were removed from Ethereum (due to centralization concerns) after the Homestead upgrade in 2016.

Bitcoin SV’s decision to allow these “confiscation transactions” highlights the trade-offs that certain blockchains have made when balancing the goals of decentralization, censorship resistance, and enforcement of legal property rights.

So is Wright really following Satoshi’s vision, or is he simply trying to cash in on a fortune of 111,000 BTC?

“It cannot be a coincidence that CSW [Craig Steven Wright] claims that billions were stolen from him in the rogue pineapple hack and that he is the only person in the world trying to get a court to ‘return’ these assets while BSV [is] the only chain in the world that implements confiscation transactions, Summerwill said. “It’s so against the spirit of Bitcoin.”