I'm Charlie Shrem, Bitcoin Pioneer currently in Federal Prison. AMA!

[CharlieShrem]

UPDATE: Unfortunately it is no longer safe for Charlie to continue this AMA. -Oct 7th 2015
----------------------------------------------------------------------------------------------------------------------------------

Hi Everyone,

I'm Charlie Shrem, Bitcoin pioneer, founder of Bitinstant, and currently serving time in federal prison for "operating an unlicensed money transmitting business, money laundering conspiracy and willfully failing to file suspicious activity reports with banking authorities."
Formal Complaint

I'll be conducting this AMA using the federal prison email system.
The system automatically delays incoming and outgoing messages by 90 minutes, so the absolute earliest I can reply to each question would be three hours.
I will be at my computer answering these questions every weekday from 1:30 - 3:30pm EST, and nearly all day on the weekends.

Obviously I'm not writing all of this directly myself, but direct quotes of my own words will be in italics.

The government will be monitoring all of my communications, so it is possible that I won't be allowed to answer some of your questions, but I will do my best!

Please post your questions below and we will keep going as long as it takes.

Thank you all!

https://twitter.com/CharlieShrem/status ... 8852306944

[TheCryptoShow]

Hello Charlie
Danny here at The Crypto Show. What limitation if any will you have as far as the use of computers or the Internet upon your release? Or is that even an issue? You often hear that so called cyber crime have this stipulation attached to a person upon release.

[BitcoinXio]

Hi Charlie,

When you are released, will you be able to work for a bitcoin company (exchanges, wallets, etc), or start your own bitcoin company again? Or do you know if as part of your release, you will not be allowed to engage in "bitcoin activities?"

Best wishes,

David

[rogerver]

What is the most important lesson you have learned from your prison experience?

[rkn]

Hi Charlie.

For the lay person right now, what happened that sent you to prison? Did you do something bad, was it bad decisions, low experience, messed up system, too much new ground to break, a few of these or something entirely different?

Cheers

[ThothThought]

Hey Charlie,

Just wondering what you thought about articles posted to The Daily Hash Rate about you:

http://dailyhashrate.com/2014/10/19/int ... f-bitcoin/

http://dailyhashrate.com/2014/12/21/cha ... in-prison/

[elux]

Charlie! This too shall pass!

Thanks for making Bitinstant happen!

You were the foolish genius Bitcoin needed in 2011-2012.

Do you have the ring? Did they take everything?

Any idea what you'll be doing when you get out?

Oh, and... What should be done about the blocksize limit?

Cheers!



PS: Just kidding, Bitcoin is dead.
We all use Dogecoin now. Sorry.

[LiteCoinGuy]

Hi Charlie,

When you are released, will you be able to work for a bitcoin company (exchanges, wallets, etc), or start your own bitcoin company again? Or do you know if as part of your release, you will not be allowed to engage in "bitcoin activities?"

Best wishes,

David

and what kind of company would you start?

[helloworld]

Is it stressful to be in prison?

Do you have actual criminals harassing you?

[BitcoinXio]

Hi Charlie,

When you are released, will you be able to work for a bitcoin company (exchanges, wallets, etc), or start your own bitcoin company again? Or do you know if as part of your release, you will not be allowed to engage in "bitcoin activities?"

Best wishes,

David

and what kind of company would you start?

It would depend on what year Charlie would be released from prison. Maybe in a few years, there won't be a need for a bitcoin exchange. I'll just leave this here.

[Lightrider]

Are the pigs treating you decent?

[btc]

Since Bitcoin is free speech, doesn't this mean you are in Prison for no good reason?

[ibrightly]

What books have you read?
How are you spending your time?
Have you talked to fellow inmates about Bitcoin?
Were they curious?

[aneves]

how many hours per day do you spend standing up in the cafeteria shouting out the day’s mackerelcoin transactions?

[DougScrib]

Charlie!

I wonder what the state of Bitcoin would be now if you were out?

My question is: After you get out, will you be LEAVING New York?

[CharlieShrem]

Hello Charlie
Danny here at The Crypto Show. What limitation if any will you have as far as the use of computers or the Internet upon your release? Or is that even an issue? You often hear that so called cyber crime have this stipulation attached to a person upon release.

Hey!

Whem I'm released, the only restriction I have is travelling for the first few months. Other than that, Im allowed to use the internet. Im debating wether to buy the blackphone when I get out or just root an android

Charlie

[CharlieShrem]

Hi Charlie,

When you are released, will you be able to work for a bitcoin company (exchanges, wallets, etc), or start your own bitcoin company again? Or do you know if as part of your release, you will not be allowed to engage in "bitcoin activities?"

Best wishes,

David

Hey David,

Great question! I've had alot of time to think in here and some ideas and projects I want to work on when I get out. I'd love to work for a Bitcoin company and eventually move abroad. I think Bitcoin has much more potential to be integrated in places where infrustructure is lacking and I want to be on the ground doing just that. I've been teaching myself Spanish in here and becoming fluent. I'm also fluent in Hebrew and Arabic already. I have no limitations as to what I can do, and I plan on jumping right back into it. Im going to take some time to be with family and friends when I get out and make my decisions the right way, but I look forward to seeing everyone!

Charlie

[CharlieShrem]

What is the most important lesson you have learned from your prison experience?

So far I've learnt a few important things. I've learnt that I don't know everything. I was a very arrogant person and let my ego get the best of me. I've learnt how to have patience and slow down my thinking. It's very important to work through problems slowly and not jump at the first emotion. If there is a situation or event that causes you to have a negative reaction, taking a moment to challenge it and think, can be the difference between a good and bad decision. Responsibility, honesty, caring, objectivity, humility and gratitude are great attitudes to grow.

[CharlieShrem]

Hi Charlie.

For the lay person right now, what happened that sent you to prison? Did you do something bad, was it bad decisions, low experience, messed up system, too much new ground to break, a few of these or something entirely different?

Cheers

In 2011 when I was 21 years old, I allowed a customer to buy Bitcoins via my company Bitinstant when I knew this customer was reselling these Bitcoins on Silk Road. I was irresponsible and I should have done more to block him from using our services. I dont blame anyone but myself and every day I think about all the people I let down.

[rogerver]

In 2011 when I was 21 years old, I allowed a customer to buy Bitcoins via my company Bitinstant when I knew this customer was reselling these Bitcoins on Silk Road. I was irresponsible and I should have done more to block him from using our services. I dont blame anyone but myself and every day I think about all the people I let down.

Are you saying you should have done more to block the user from buying bitcoins to resell on the Silk Road because it was morally wrong, or because it was illegal?
What are your thoughts on the drug war?
Are the police who prosecute drug users, or the drug users the bad guys?
What percentage of the people with you in prison are there for victimless crimes?
Do you think the Silk Road was a good or bad thing for the world?

If you can't, or don't want to answer these questions at the moment, I completely understand.

[BTCLuke]

Hey Charlie! Thanks a million for all you have done for Bitcoin.

My only question for now is about access to currency in the klink... I've heard that they discourage use of cigarettes and other naturally-occurring currencies, but of course that's a per-prison rule, I'd think.

Are you allowed to use one, what is it, and is Bitcoin accessible at all for prisoners?

[dnaleor]

Hi Charlie!

It's really sad to see you in prison...
I hope that the thought that people still care about you on the outside keeps you going!

What I wanted to ask...
Do you think that fungibility issues are the origin of all the problems we see now with BTC regulation?
I did lose my trust in BTC because of this and wrote a reddit post about this issue a few months ago. i'll quote it below this message.

If you can't see where money comes from or money goes to, you can't be held accountable for what your customers are doing with the money. AML/KYC is still possible, but there isn't a "guilt by association". With BTC, you can get in troubles if you send coins to a guy who is using it on f.e. SR, or when you accept coins who were used in a crime.

Do you remember cornering Jeffrey Tucker and explaining him all about BTC? Well, this is basically the same thing I'm doing now with you. You NEED to know about what I'll post next:

I am not here to pump altcoins or anything like that, but I think you should know more about the ring signatures that are implemented in the cryptocurrency 'Monero' ('coin' in Esperanto). It provides passive mixing across the whole network, no centralization required. You can even mix offline without consent of the others in the network. You can't even know a certain UTXO is spent or not. There is plausible deniability about whether you've send the coins or not.
This currency also uses "stealth addresses" by default. You only need one address. Nobody can track the money they receive from you, so there is no need for "HD wallets" or something similar. Just plain and simple, one address.
Also, there is a "viewkey" that, when made public, could prove certain transactions or make your balance transparent. It has privacy by default and is optionally transparent. So it's possible to still prove you made a certain payment (think about arbitration/escrow services, charities, etc)
This cryptocurrency is completely fungible and can't be 'regulated' in the way that BTC is.

Monero was fairly launched in april 2014, had no premine and has an active community of people who are aware of the fungibility issues with BTC. It is completely new code, not a fork of bitcoin. The development is done completely by volunteers and are funded by community donations. I'll link some more information below and would really like to keep you in the loop if you want. I hope that you look into this and don't just dismiss it as being a scam. I was an ideologically driven bitcoiner in the past, now I've become an ideologically driven monerano ('member of the monero community in Esperanto'). Although I love the bitcoin community, I don't believe BTC will be the revolution we all hope for.
Tokens need to be fungible to be able to be used as money. Money needs to be neutral.

My reddit post about fungibility issues:

My thesis is that the transparent nature of the Bitcoin Blockchain leads us to the path of (nasty) government regulation.
This won't be some long theoretical opinion about technical Bitcoin flaws, I will provide you with some clear practical examples. People who love to have extensive government regulation, please move on and ignore this post.

What is exactly problematic about a transparent blockchain? Well, every UTXO has a history. This means mainly 2 things:
1) people who receive a transaction can see this history
2) miners who put transactions into blocks can see this history
Let me be clear. The issue we are talking about here isn't anonymity, it's fungibility.

You can try to hide your coins as much as you want, if you tried to mix your coins using a mixer, coinjoin or another type of "anonymity enhancing feature", we will at least be able to detect that you did. We maybe won't know who you are, but those coins can be flagged as "possible suspicious activity on the blockchain".

So what's the big deal about that? Well, this gives governments the possibility to regulate BTC transactions. Let me explain: Basically it comes down to these 2 possible scenario's: blacklisting and whitelisting

Government could on one hand through “whitelisting” obligate bitcoin users to identify themselves when they purchase bitcoins (this is already happening: KYC and AML) and ask them to whom they are transferring these bitcoins (Coinbase is already asking this for some transactions).
In the future this could lead to a situation in which only “identified” bitcoins would be spendable at regulated payment processors. Every business that accepts bitcoin in a certain jurisdiction would need to use a certified payment processors that only accepts "whitelisted" coins.
As a result, your anonymous bitcoins would only be spendable if you match them to your identity through a regulated authority (exchange, wallet service or directly through government). If you try to spend other coins, the payment processor could send them back you you (best case) or send them to a government wallet (worst case) and maybe you can claim the coins after you identify yourself (at least you have your coins back...)

A more aggressive approach is “blacklisting”. This is a system whereby the government makes it illegal to process certain blacklisted UTXO's.
Of course you would say that no miner would comply... But think about it. Would a large mining farm operator risk going to jail for "money laundering" or will he comply? After all, he has electricity bills to pay. The profit will be more important than the ideology.
This kind of regulation leads to a loss of fungibility. Bitcoin isn't fungible anymore if one bitcoin is accepted for payment or isn't mined anymore and another isn't.
If you are thinking that i'm exaggerating because there are a lot of jurisdictions and there will always be places where there will not be this strict regulation, you are right.
But it gets worse...

Not only governments but even companies will start to apply regulation by themselves as a form of self-censorship, because they fear government crackdown on their business:

We already saw the "whitelisting version" with the deposit of the Evolution coins to BTC-e. Those coins weren't allowed by an exchange that is pretty anonymous themselves! The reason is that they don't want the CIA and Europol on their doorstep, so they decided not to accepts possible money laundering activity.

And what about the blacklisting by the miners? I'm sure there will be ideologically motivated miners that will keep processing blacklisted UTXO's.
But there are far less pools than there are individual miners. The regulation will slowly affect this. I see a 5 stage system:

1) there will be some pools that voluntarily adopt the regulations, because they fear government crackdown (same situation as BTC-e with the Evolution coins)
2) some miners fear the government, so they ask their pool operators if they will comply with the regulations. If not, they move to a "regulated pool". It will slowly become a disadvantage for pool operators to not comply. If one uses mixed bitcoins, the transactions will start to suffer from delays because of less miners processing them.
3) the regulation will become more harsh. Building on a block that contains blacklisted transactions will become illegal. This will lead to more pools censoring themselves because they fear they will loose the block reward if they don't comply
4) the "illegal block depth" will become larger (f.e. not building on a chain which 3 blocks "deep" had a blacklisted transaction; more pools start to comply
5) almost everybody now complies and blacklisted UTXO's won't be spendable unless they pass through a regulation authority.

In essence this could lead to three kinds of bitcoins:
White bitcoins: bitcoins that satisfy the identification regulation.
Grey bitcoins: bitcoins that are not yet identified, but which are not actively anonymized. transactions are allowed, but not spending them at a certified payment processor.
Black bitcoins: bitcoins that are banned by miners. Processing them is illegal. Maybe even owning them...

The consequence?
Bitcoin will not be fungible anymore: you can’t just use a grey or black bitcoin to buy something from a webshop. If the government is able to discover that you possess black bitcoins or process blacklisted type transactions, you could even be seen as a someone committing a crime.

Eventually Bitcoin will become a fast payment system without counterparty risk but with full government control.
Is that what we really want?

And if you think these are all unlikely scenario's then well... we will talk again in 5 year's time.

Links about Monero (XMR):
The whitepaper describing the technology: https://cryptonote.org/whitepaper.pdf
Our bitcointalk thread (first post has a lot of info): https://bitcointalk.org/index.php?topic=583449.0
our website: http://www.getmonero.org
if you want specific info, I suggest you just mail the development team: dev@getmonero.org

friendly greetings from Belgium,
take care!

dnaleor

[LiteCoinGuy]

Hi Charlie,

did you convince some prisoners to become bitcoiners too ?



ThX
-LCG-

[CharlieShrem]

how many hours per day do you spend standing up in the cafeteria shouting out the day’s mackerelcoin transactions?

I eat all my Mackerel lol, it tastes pretty good with some rice and hot sauce. People even put it in their oatmeal! Good source of protein

[CharlieShrem]

What books have you read?
How are you spending your time?
Have you talked to fellow inmates about Bitcoin?
Were they curious?

Hey,

I've read over 70 books so far, I keep a list of course! It includes Crytponomicon, economic related books by Mises and Bastiat and spy thrillers as well. Nothing like a good novel! I just read a great history trilogy by Ken Follett called The Century Trilogy and a fantastic Russian classic called A Day In the Life of Ivan Denisovich

I keep myself very busy with a rigorous schedule. I'm a GED teacher, so I teach students to get their high school diploma. One of my students is 71 and he's doing very well! I take classes about life, lifestyle balance, rational thinking, living with others, Yoga, and others. I cook alot, workout every day, walk or run on the track and play sports. I read at least 200-300 pages a day of whatever book I'm reading. I sleep at midnight and wake up 5am every day so I push myself. Every day I do pull-ups, chin ups, dips, and pushups. I've lost over 20 pounds and in the best shape of my life.

All the inmates know about Bitcoin! I'm even teaching them about Sidechains, Ripple and others so they understand what the industry look like. Many people here even owned Bitcoin before they came in. We have alot of programmers here, finance guys, doctors, and economists. Just the other day, someone asked me to schedule an hour with him so he can pick my brain. Everyone is very respectful and clean. This is our home for now and we treat it that way.

Charlie

[CharlieShrem]

Hey Charlie! Thanks a million for all you have done for Bitcoin.

My only question for now is about access to currency in the klink... I've heard that they discourage use of cigarettes and other naturally-occurring currencies, but of course that's a per-prison rule, I'd think.

Are you allowed to use one, what is it, and is Bitcoin accessible at all for prisoners?

I cant answer this one while Im in here.

Charlie

[CharlieShrem]

Charlie! This too shall pass!

Thanks for making Bitinstant happen!

You were the foolish genius Bitcoin needed in 2011-2012.

Do you have the ring? Did they take everything?

Any idea what you'll be doing when you get out?

Oh, and... What should be done about the blocksize limit?

Cheers!



PS: Just kidding, Bitcoin is dead.
We all use Dogecoin now. Sorry.

Thank you!

Of course I have the ring, its beautiful and I plan on keeping it as long as I can.

In an earlier question I answered what my plans are.

Something should be done, we should not leave things as is. One of the most important strengths Bitcoin has is its ability to adapt and now is the time to do it.

[CharlieShrem]

Hey Charlie,

Just wondering what you thought about articles posted to The Daily Hash Rate about you:

http://dailyhashrate.com/2014/10/19/int ... f-bitcoin/

http://dailyhashrate.com/2014/12/21/cha ... in-prison/

I just printed them out and now sharing them around

[CharlieShrem]

Is it stressful to be in prison?

Do you have actual criminals harassing you?

We are all criminals in here to various degrees of course.

At first adjusting was hard. Stressful and full of anxiety. It took a few weeks to get into a routine. I got very sick with Mono and had to go to the hospital. Now, 6 months in, time flies and its pretty stress free. Working out, reading, teaching and going through my routine is the best way to keep moving

[CharlieShrem]

Charlie!

I wonder what the state of Bitcoin would be now if you were out?

My question is: After you get out, will you be LEAVING New York?

Yes! I dont plan on going back to NY at all. We're looking on moving to Austin, TX and eventually out of the country when its possible. If anyone is in Austin and wants to get in touch, write me a lettter!

Charlie