> Starting around 2014, law enforcement discovered something remarkable: Bitcoin's blockchain was a permanent, traceable record.
It took them until 2014 to read the satoshi white paper?
snthpy 2 hours ago [-]
They're still a decade ahead of most people. It seems only now that people are becoming aware of privacy coins. I go to a lot of crypto meetups and every time I bring up that bitcoins aren't fungible (because they carry full provenance and you might not be able to cash out tainted coins) I just get blank stares. FATF Travel Rule is turning up the heat on this.
I haven't kept up with developments though. What are best privacy coins these days. ZCash seems to be the institutional favourite while Monero hasn't moved much.
ta12653421 1 hours ago [-]
This is not what "fungibility" means in terms of accounting & balancing:
In fact, Bitcoin are fungible from a regulatory perspective: As every one USD is worth as another USD, every Bitcoin has same value as another Bitcoin and they are fully intechangeable without any change of value on both sides of the transaction.
Thats the reason why there are NFT - these are not fungible in that sense, as they are not interchangeable one by one, since one 1 NFT may have another value than the next NFT.
beeflet 29 minutes ago [-]
Bitcoin associated with criminal transactions are worth less than "clean" bitcoin. so they are not fungible. All bitcoin outputs are naturally NFTs, for example see Colored Coins or Ordinals.
vasco 57 minutes ago [-]
They go to crypto meetups, they know all of this. Their point being that when provenance comes into play they are not fungible anymore because you may be able to spend a bitcoin but not another. So they are not all worth the same. You just repeated wikipedia, they were making a new point.
ta12653421 34 minutes ago [-]
I work in the field on the side of an institution, I know very well what people on "Crypto Meetups" are telling :-D
akimbostrawman 24 minutes ago [-]
Monero is vastly superior and desirable compared to zcash with its weak optional privacy, centralization and corporate/government ties.
Ferret7446 1 hours ago [-]
That's not fungibility, that's just an association issue. If someone denies doing business with you because you bought (or sold) a Trump hat, that doesn't make cash non-fungible.
(Incidentally, banknotes all have unique serial numbers and can be traced to criminal transactions by either the serial or by more mundane taints/markings)
walletdrainer 56 minutes ago [-]
Fungibility is the term that has been used in this space for more than a decade, it’s a bit late for you to try to change that.
bawolff 37 minutes ago [-]
Fungability as a term goes back hundreds of years.
I get that specialized communities use specialized jargon, but it seems like it would be less confusing to use the word "tracable" here.
walletdrainer 33 minutes ago [-]
Fungibility accurately describes the main problem here, right now some bitcoins are worth significantly less than others because they’re tied to hacks and you can’t send them to any normal exchange without immediately getting your account frozen.
You will have to spend more than 1 “dirty” bitcoin to get 1 “clean” bitcoin. Almost nobody will accept the dirty bitcoin, whereas basically everyone will accept a bank note no matter the history of said bank note (cops might show up at your door later, yeah).
But sure, eliminating traceability inherently solves this issue too.
NoMoreNicksLeft 33 minutes ago [-]
If you want to buy something and the guy says "I'd love to sell that to you, but your $100 was stolen in a bank robbery two years ago and it's on a list with its serial number"... well, that $100 isn't fungible, is it? Has little to do with the association, it's not you, it's the money itself. That said, my example is one that proves this happens for cash too. Extreme corner cases are funny like that.
charcircuit 2 hours ago [-]
>tainted coins
All you have to do is make a single transaction using all of them. You will receive a freshly minted UTXO. Each bitcoin block involves burning a set of UTXO and then minting a new set of clean UTXO.
wmf 2 hours ago [-]
Nope, taint flows through transactions. If the input(s) are tainted so will be the outputs.
charcircuit 2 hours ago [-]
By that definition everyone in the same block is tainted. Maybe the bitcoins from your output came from someone else's input. And you tainted input may have entirely gone to the miner as their reward UTXO. You can't really trace an individual bitcoin / satoshi because in reality it's just a bunch UTXOs constantly being created and destroyed. Maybe you can distribute a percentage of the taint among all the outputs, but at that points its like most US dollars have traces of cocaine on them.
wmf 2 hours ago [-]
That isn't how Bitcoin works at all. All the transactions in a block are not CoinJoined together.
charcircuit 2 hours ago [-]
Maybe this example will help. Let's say a user has 1 bitcoin UTXO that is tainted and then 1 bitcoin UTXO that is not tainted. They create a transaction that takes both UTXO as an input and as an output creates 2 UTXO of 0.5 bitcoin.
In this scenario, is the first output UTXO of the transaction tainted? The second? The miner's reward UTXO? Someone else's output UTXO?
walletdrainer 1 hours ago [-]
Both, not the block reward.
OutOfHere 2 hours ago [-]
Zcash is not a privacy coin in the same way that Litecoin isn't. In both cases, their privacy is optional, which is to say that when you need to swap it, your recipient will likely not accept the private version. Monero is a privacy coin with default privacy.
Institutional pumps and dumps are exactly the thing to steer clear of, and Monero is fortunate to not have become a huge victim of them. Monero has seen more organic growth.
godelski 51 minutes ago [-]
Monero also isn't tradable on coinbase and is much harder to obtain or spend. Zcash has been pushing Zashi which will reconvert coins to shielded ones. They seem to be trying to take the issue seriously and help make this trivial for those who actually want to use coins as cash. Not sure it really matters for those who are just holding on coinbase or daytrading, as traders don't care about privacy and if you have a custodial wallet the custodian already has access to the sending and receiving addresses, significantly reducing privacy.
I'm with you, but it also seems like they have a better roadmap than Monero. If Silicon Valley can get monopoly status by selling things cheap and then jacking up the price after they have their network effect, why not get the coin embedded into the financial system first and then hard fork into private transactions only? Maybe it's not the right play, but at least we have people trying different things.
beeflet 23 minutes ago [-]
The development of zcash is entirely controlled by Electric coin company, and they use this to control the zcash supply by taking a fraction of the coinbase outputs.
Even if zcash is technologicially superior, why not just fork it exactly and start over from genesis? Zcash is not the next bitcoin, but the next bytecoin.
Cryptocurrency needs to be a community-led project like bitcoin or monero.
pertsix 2 hours ago [-]
Why would Bitcoin purists care about off ramping onto fiat?
This seems awkwardly unnecessary for a technology that has only prioritized deflationary economics and economic sovereignty through private key encryption.
cperciva 2 hours ago [-]
Serious answer: Because they have to eat. Being a purist doesn't mean they can afford to ignore the world they live in; even if they believe that USD is fundamentally worthless and keep all their wealth in Bitcoin, they still need to occasionally pay bills to people who don't take Bitcoin.
wmf 2 hours ago [-]
There are virtually no actual purists. And criminals are generally more opportunistic than ideological.
dyauspitr 2 hours ago [-]
You used to be able to convert to monero and then back into bitcoin to make it completely untraceable. Suspiciously all exchanges stopped offering monero in a coordinated way at the same time.
vintermann 1 hours ago [-]
Very suspiciously, almost like someone working with preventing money laundering noticed and sent them a letter reminding them about 18 U.S. Code §1956, which makes it a crime to assist in obfuscating the origin of proceeds from crime.
If you know about anyone using Monero for that purpose, you can't use Monero, since obfuscating the origin of transactions is something you do as a condition of participating in Monero (either as a miner or through paying transaction fees).
ifwinterco 31 minutes ago [-]
This is all US (and Western Europe) centric perspective. Last time I was in HK you could cash out basically any kind of crypto to cash easily, no questions asked. There will always be somewhere like that in the world
AndrewKemendo 3 hours ago [-]
Three years is pretty good for police to get through a paper.
First they had to learn how to read…
akimbostrawman 16 minutes ago [-]
Monero works how most people think bitcoin does and what Satoshi wanted it to be.
How is this a secret? It's literally a feature: transparent ledgers.
kragen 3 hours ago [-]
Because in clickbait "journalism" everything is a "secret".
LexiMax 3 hours ago [-]
Anecdotally, I don't think that this is widely understood by people who use crypto for illicit purposes, which isn't exactly uncommon.
kragen 7 minutes ago [-]
I have often been astounded at the level of ignorance of people who use cryptocurrency —not knowing the difference between Binance and Bitcoin, for example, or between Tether and Bitcoin, or not knowing that an on-chain Bitcoin transaction will take several minutes to post.
somenameforme 2 hours ago [-]
It's a mixture of private and public. For instance anybody can create an infinite number of wallets and cycle transactions through those wallets infinitely, subject to time and/or transfer fees. And wallets are the only stored identifier - it doesn't lead to e.g. an IP or whatever, and even if it did - those could also be endlessly proxied. On top of this there are 'tumblers' that do this as a service.
So while it's completely traceable in theory, in practice it's vaguely akin to trying to track money by the serial numbers in that you can probably figure out a few points in a dollar's lifetime, but tracing it point by point to a specific entity is generally not realistic. Of course most criminals are stupid and doing something like using CoinBase hosted crypto to try to do something illicit is as good as leaving your license and phone number at the scene of a crime.
vintermann 1 hours ago [-]
> On top of this there are 'tumblers' that do this as a service.
and using these makes no sense, since it's readily noticeable that you've used one, and using them is basically always illegal. The crypto currency ecosystem keeps reminding me of https://xkcd.com/1494/ .
somenameforme 8 minutes ago [-]
This is incorrect. Things are legal unless criminalized, and tumblers are not inherently illegal, and have plentiful legitimate uses. However, money laundering or offering a money laundering service is illegal and so using one in an effort to money launder, or facilitate such, would be illegal. It's akin to something like a jimmy bar. Owning or manufacturing/selling them is 100% legal, but they're going to be used pretty regularly for illegal purposes which is, rather tautologically, illegal. Similarly, intentionally selling them for illegal purposes would be illegal.
evolighting 3 hours ago [-]
Because people who hype Bitcoin claim that its value comes from it: Bitcoin is anonymous, secure, and private, and therefore can be used for illegal transactions without fear of being traced.
senectus1 3 hours ago [-]
also the uninformed mix up "crypto" with encryption with privacy.
I STILL encounter people that get this confused.
mrunix 2 hours ago [-]
Because crypto bros market Bitcoin as "anonymous" and "untraceable"
hoppp 28 minutes ago [-]
It was never a secret, it was a design choice from the start.
People don't actually pay attention to what powers the pyramid scheme they participate in?
beeflet 21 minutes ago [-]
It was a design flaw from the start, that satoshi agreed was an issue but did not have the tools to fix
sph 57 minutes ago [-]
What I’m most interested in is: are there proof-of-concepts or any work done on making Bitcoin actually more private and untraceable? Does Lightning suffer from the same traceability issues?
There is a constant flux of papers and prototypes that are not mentioned anywhere (least of all this website) unless you delve deep into technical forums (such as delvingbitcoin) - which I never find the time to stay abreast of.
Ms-J 4 hours ago [-]
Use privacy preserving coins such as Monero instead of Bitcoin as it is much more safe. Not bulletproof, but much better.
Monero also complicates any type of investigation much more than Bitcoin. It is very hard for investigators. They also don't want to burn techniques unless the case is absolutely massive.
Also make sure to never use an exchange that forces KYC.
rajamaka 4 hours ago [-]
Seems to be the case that the conversion to fiat is the part that is difficult to do while staying anonymous
Ms-J 3 hours ago [-]
As long as one takes moderate measures to stay anonymous on the network level, an exchange that is P2P or doesn't force KYC can be used to convert. There are many of them out there.
Fees may be higher is a note.
chistev 2 hours ago [-]
But without p2p there is greater risk of scam?
cheschire 3 hours ago [-]
I also noticed on a darkweb site that keeping monero in an escrow account is used to further muddy the trail. Not sure how effective that actually is though.
idiotsecant 3 hours ago [-]
Monero is great so long as you don't care about conversion to cash. That part is ... tricky.
SchemaLoad 3 hours ago [-]
Of course it's difficult. Even if you could convert it to cash you wouldn't be able to deposit in any bank or meaningfully use it. The moment you do anything with it you'll trigger anti money laundering laws and have to explain where the money came from.
Ms-J 3 hours ago [-]
It isn't very difficult, see my earlier post. Once successfully converted the cash can be used in a multitude of different ways.
With an imagination and taking proper anonymity safeguards, the possibilities are endless.
solumunus 3 hours ago [-]
Well yeah, you also have to launder the money if you’re a criminal enterprise…
wmf 2 hours ago [-]
From a criminal perspective you may not have to launder it. Just deposit your XMR/ZEC into an exchange and sell it. If they ask, say you bought it years ago at $10.
metadat 3 hours ago [-]
Hot-dog sales outside NY stadium.
Seriously though, the days of easy tax avoidance are long gone at this point. Welcome to The Matrix of America.. and China.
arctanJimmy 3 hours ago [-]
> Monero is great so long as you don't care about conversion to cash. That part is ... tricky.
Make no mistake, this is not coincidence. It's hard because non auditable financial transactions would undermine the fiat issuers authority.
patchtopic 4 hours ago [-]
this kind of blockchain analysis for the non-privacy oriented coins has been well known at least for a decade.. I don't see how it's a secret weapon except against the naive or uninformed
ozim 3 hours ago [-]
Duh, most criminals are naive and uninformed.
Ms-J 57 minutes ago [-]
There seems to be a coordinated effort to down vote technical insight in this thread.
Some entity does not want this type of info out there.
Fascinating how blockchain’s transparency has flipped the script on crypto anonymity. Law enforcement now uses forensic tracing to dismantle criminal networks, from dark web markets to ransomware rings. The real challenge remains jurisdictional reach, not technical capability.
It took them until 2014 to read the satoshi white paper?
I haven't kept up with developments though. What are best privacy coins these days. ZCash seems to be the institutional favourite while Monero hasn't moved much.
In fact, Bitcoin are fungible from a regulatory perspective: As every one USD is worth as another USD, every Bitcoin has same value as another Bitcoin and they are fully intechangeable without any change of value on both sides of the transaction.
Thats the reason why there are NFT - these are not fungible in that sense, as they are not interchangeable one by one, since one 1 NFT may have another value than the next NFT.
(Incidentally, banknotes all have unique serial numbers and can be traced to criminal transactions by either the serial or by more mundane taints/markings)
I get that specialized communities use specialized jargon, but it seems like it would be less confusing to use the word "tracable" here.
You will have to spend more than 1 “dirty” bitcoin to get 1 “clean” bitcoin. Almost nobody will accept the dirty bitcoin, whereas basically everyone will accept a bank note no matter the history of said bank note (cops might show up at your door later, yeah).
But sure, eliminating traceability inherently solves this issue too.
All you have to do is make a single transaction using all of them. You will receive a freshly minted UTXO. Each bitcoin block involves burning a set of UTXO and then minting a new set of clean UTXO.
In this scenario, is the first output UTXO of the transaction tainted? The second? The miner's reward UTXO? Someone else's output UTXO?
Institutional pumps and dumps are exactly the thing to steer clear of, and Monero is fortunate to not have become a huge victim of them. Monero has seen more organic growth.
I'm with you, but it also seems like they have a better roadmap than Monero. If Silicon Valley can get monopoly status by selling things cheap and then jacking up the price after they have their network effect, why not get the coin embedded into the financial system first and then hard fork into private transactions only? Maybe it's not the right play, but at least we have people trying different things.
Even if zcash is technologicially superior, why not just fork it exactly and start over from genesis? Zcash is not the next bitcoin, but the next bytecoin.
Cryptocurrency needs to be a community-led project like bitcoin or monero.
This seems awkwardly unnecessary for a technology that has only prioritized deflationary economics and economic sovereignty through private key encryption.
If you know about anyone using Monero for that purpose, you can't use Monero, since obfuscating the origin of transactions is something you do as a condition of participating in Monero (either as a miner or through paying transaction fees).
First they had to learn how to read…
https://miro.medium.com/v2/resize:fit:1100/format:webp/0*_My...
So while it's completely traceable in theory, in practice it's vaguely akin to trying to track money by the serial numbers in that you can probably figure out a few points in a dollar's lifetime, but tracing it point by point to a specific entity is generally not realistic. Of course most criminals are stupid and doing something like using CoinBase hosted crypto to try to do something illicit is as good as leaving your license and phone number at the scene of a crime.
and using these makes no sense, since it's readily noticeable that you've used one, and using them is basically always illegal. The crypto currency ecosystem keeps reminding me of https://xkcd.com/1494/ .
I STILL encounter people that get this confused.
There is a constant flux of papers and prototypes that are not mentioned anywhere (least of all this website) unless you delve deep into technical forums (such as delvingbitcoin) - which I never find the time to stay abreast of.
Monero also complicates any type of investigation much more than Bitcoin. It is very hard for investigators. They also don't want to burn techniques unless the case is absolutely massive.
Also make sure to never use an exchange that forces KYC.
Fees may be higher is a note.
With an imagination and taking proper anonymity safeguards, the possibilities are endless.
Seriously though, the days of easy tax avoidance are long gone at this point. Welcome to The Matrix of America.. and China.
Make no mistake, this is not coincidence. It's hard because non auditable financial transactions would undermine the fiat issuers authority.
Some entity does not want this type of info out there.
Ethereum has entered the chat