In response to the settlement between Bitcoin Association for BSV (“Bitcoin Association”) and Tulip Trading Ltd. (“TTL”) this week, Bitcoin Association has prepared a statement and answers to the most frequently asked questions that we and our representatives are receiving.

TL:DR;

• Bitcoin Association settled with TTL because we were already planning to release the software being expected.
• The software was developed with the aim to allow miners to freeze coins which are determined by valid legal process to be lost or stolen, such that they may be returned to their rightful owner.
• The enforcement of valid court orders concerning digital assets on the BSV network is the responsibility of miners. They alone will run the required software and comply with received orders applicable to BSV as required by law.

How did all this start?

On February 24, 2021, Bitcoin Association received notice that TTL. (a company associated with Dr. Craig S. Wright) is suing Bitcoin Association, asserting that Bitcoin Association have duties under English law, as guardians of the BSV Node software, to provide access and control to bitcoins which were stolen from a computer of Dr Wright in February 2020 (For reference : https://bitcoinassociation.net/bitcoin-association-statement-concerning-legal-action-by-dr-craig-s-wright-tulip-trading-ltd/)

Settlement of legal action

In June 2022, Bitcoin Association decided to settle with TTL by agreeing, among other things, to release software which will make it possible for a Notary Service Provider to verify court orders asserting the rightful ownership of coins misappropriated in hacking incidents, and broadcast them to mining networks in machine readable language to allow miners to freeze these coins.

Although the Association has already released the first part of the software package in October 2021 (BSV Node software v. 1.0.9.) enabling the freezing of transaction outputs, we have agreed to do whatever is in our power to solicit a Notary Service Provider that is willing to execute the notary aspects of the process as an independent entity within a 30-day period.

Why has Bitcoin Association been developing this software?

In light of the hacks the cryptocurrency industry has been experiencing over recent years, for instance:

• https://www.reuters.com/article/us-japan-cryptocurrency-regulation-idUSKBN1FW04F;
• https://www.ft.com/content/43ab875b-2e96-48b7-926d-be17e925f1c3; 
• https://www.bloomberg.com/news/articles/2022-03-29/hackers-steal-590-million-from-ronin-in-latest-bridge-attack;
• https://www.theverge.com/2022/2/20/22943228/opensea-phishing-hack-smart-contract-bug-stolen-nft);

as well as of the double-spend attacks BSV network experienced in July and August 2021, Bitcoin Association in collaboration with a software development company nChain has been developing a software solution to enable miners to enforce the legal rights of victims of crime.

The module that allows miners to freeze coins as a countermeasure to double spend attacks was already released in October 2021 (see: https://www.bitcoinsv.io/releases/bitcoin-sv-node-software-upgrade-to-v1-0-9-release).

The fact that Dr Wright approached the courts to seek the early release of additional tools and solicit a Notary Service Provider within such short period puts us under pressure, but is not contrary to our goal:

To equip the digital currency and blockchain industry with the technical mechanisms and industry best practices to provide remedies, upon valid proof of ownership and with judicial due process, to restore control of lost or stolen coins to their rightful owner – just as there are remedies available for any asset or property (physical, digital, intangible or otherwise).

We believe that the introduction of such solutions would help to engender more confidence in Bitcoin among everyday users, businesses and government agencies, and lead to wider adoption of Bitcoin’s innovative technology. This aligns with our Association’s goal to build a lawful digital currency ecosystem that leverages the capabilities of the Bitcoin public ledger to advance more honesty, transparency and accountability in the world.

How exactly would the software referred to in the court document assign coins to new scripts?

The software suite shall enable Bitcoin miners to freeze coins once they have established that a valid court order (or document of equivalent value) has been issued to this effect. 

An independent Notary Service Provider would have to be appointed to validate court orders, translate them into machine readable language and broadcast it to miners. The Notary Service Provider would act analogically to a bailiff with respect to conventional assets.

Miners shall install the necessary software modules, decide if they trust the information received from the Notary Service Provider,, and take action to respect the order to freeze coins. Should they decide not to do the above, they will be in breach of the network rules, their blocks may be orphaned and they may risk being held in contempt of court for not complying with a court order.

Will Bitcoin Association be enforcing the Software Suite?

Apart from releasing the software, the Bitcoin Association will have no role in installing or implementing it ourselves. It will be the miners who install the version of the BSV Node software containing features allowing them to freeze transaction outputs as well as to act on court orders.

Which parties will participate in the process of freezing and reassigning coins?

The role of ruling on the legal ownership of coins remains the task of the competent jurisdiction and of the legal system. 

The plaintiff would then pass on the court order to an independent reputable Notary Service Provider who would verify the validity thereof, and broadcast it to the mining network using a so-called ‘Notary tool’.

It would then be incumbent upon miners to make use of the software to freeze the coins in accordance with the court order broadcasted to the network by the duly appointed Notary Service provider.

Which courts will judge in matters of dispute over coin ownership and who will interpret whether a court order is valid for all of Bitcoin?

Miners will need to decide if a court order is applicable to them, in much the same way as a bank would do.

At no point in time would Bitcoin Association be involved in the execution of the valid court orders concerning digital assets on the BSV network.

What is the involvement of Dr. Craig S. Wright with Bitcoin Association?

Dr Wright is neither a member nor on the Executive Committee of the Association and therefore holds no authority to give directives or file motions of any kind pertaining to the Association’s activity.

Furthermore, despite the well known friendship between Dr Wright and Calvin Ayre (member of the Association’s Executive Committee as well as long time advocate and avid supporter of BSV), at no point has the Association ever received any funding from Dr Wright.

Will this affect the security and functional model of BSV?

No, the software described by the settlement would simply enable miners to receive court decisions securely, and act upon them as needed. The miners will continue to use Nakamoto Consensus to extend the blockchain, as it always has, and always will.

This software is a similar implementation of the Alert System introduced by Satoshi Nakamoto in 2010. The alert system was used by trusted parties to communicate messages to nodes in the network. These messages could be acted upon or ignored by nodes in the network as needed.

Does this mean that the Bitcoin Protocol is changing?

No, this is in line with Satoshi Nakamoto’s Bitcoin whitepaper in which there are 19 references to “owner”, a legal term of art distinct from the possession of keys, and where the final line states: “Any needed rules and incentives can be enforced with this consensus mechanism.”

Should you have any further inquiries, please contact us at: info@bitcoinassociation.net