Craig Wright’s Blacklist Resembles Bitcoin ‘Kill Switch’ Satoshi Never Followed Through On

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

Feel free to read the whole manual. It’s not long.

The takeaway is: if you are in a trusted relationship with a miner, there is now tooling in BSV that will let you freeze and spend other people’s coins.

If you have BSV, there are people who can freeze and spend your coins.

— Rijndael (@rot13maxi) January 13, 2023

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

Last October, BSV unveiled its blacklist manager. The tool allows users to freeze and confiscate BSV coins as long as they provide legal documents proving rightful ownership. Many see this as an affront to the ethos of decentralization and censorship resistance. But BSV proponents claim the blacklist manager aligns with Satoshi’s old escrow idea.

(https://t.co/24uht01vd7 escrow discussion)
Later, Satoshi introduced the Alert key, which has been removed by developers 2014, if I am not wrong.
It is not so far away from Satoshi as some may think. pic.twitter.com/JoQPuDL9fH

— Wolfgang Lohmann (@WolfgangLohmann) January 13, 2023

“It is not so far away from Satoshi as some may think,” wrote Twitter user Wolfgang Lohmann, a BSV advocate.

Read more: Craig Wright Signals He's Given Up Convincing Courts He Invented Bitcoin

What Lohmann is referring to is the comparison between BSV’s digital asset recovery process and the concept Satoshi floated in that old escrow discussion.

“Imagine someone stole something from you. You can't get it back, but if you could, if it had a kill switch that could be remote[ly] triggered, would you do it?” 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'll be useless to them, although you still lose it too? If they give it back, you can reactivate it.”

Wright, who purports to be Satoshi, has claimed he found himself in the situation Satoshi described. In February 2020, Wright alleged hackers used a WiFi pineapple to steal private keys from him for two bitcoin (BTC) wallets. A WiFi pineapple is a special device used by malicious actors to intercept messages between a computer and a WiFi network.

One of the wallets Wright claims to own – the 1Feex wallet – is well-known and holds nearly 80,000 BTC. The wallet was funded during the Mt. Gox debacle – a series of hacks between 2011 and 2014 that forced Tokyo-based bitcoin exchange, Mt. Gox, into bankruptcy. The other wallet has roughly 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 “re-write or amend” protocol code in order to give Tulip Trading access to the 111,000 BTC controlled by the two wallets.

Read more: Craig Wright Demands Bitcoin Developers Give Him Access to Stolen Mt. Gox Coins

This bizarre demand to amend 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 blacklist manager, which according to court documents, Wright's other company, nChain, had been working on all along.

“The first step of the digital asset freezing process is obtaining a court order or a document of equivalent legal force,” states a video explainer on the official BSV website. “The plaintiff commissions 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 reassignment of misappropriated 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 similarly to stocks, bonds and any other property,” the release states, quoting Marcin Zarakowski, general counsel and chief of staff of the Bitcoin Association for BSV.

“In the past two years, we have seen $3 billion-plus in digital assets stolen; this is unacceptable. With this new tool, we look to set ourselves on the right track for solving this issue,” the statement reads.

While such a tool may seem reasonable at first, it doesn’t take much to poke holes into the concept of a court-mediated network. For example, how would 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 beholden to computer code and a strict decentralization ethos.

For what it’s worth, it doesn’t seem Satoshi ever implemented an escrow or kill switch feature. He may have been just brainstorming before realizing the inevitable tradeoff between decentralization and financial insurance.

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

He did however, create an “alert system” where “power users” (like Satoshi) could send network-wide alerts and even disable transactions, Satoshi deprecated it in December 2010 and it was completely removed between 2016 and 2017.

“I see nothing to indicate that the alert system was intended for anything other than to broadcast a message to all node operators,” Bob Summerwill told CoinDesk. Summerwill is a long-time member of the Ethereum developer community and executive director for 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 tradeoffs that certain blockchains have made when balancing the goals of decentralization, censorship resistance and the enforceability of legal property rights.

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

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