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Given how extremely traceable bitcoin payments are, I'm pretty surprised that they're not trying to get Bad People to use Bitcoin, whether publicly or behind-th

Given how extremely traceable bitcoin payments are, I'm pretty surprised that they're not trying to get Bad People to use Bitcoin, whether publicly or behind-the-scenes. I mean, in a way, maybe this is what this story is all about: a great big advertisement saying "Come use this completely anonymous payment system," with a sly nudge and a wink because bitcoin's nothing of the sort. Just imagine: a plot is discovered, payment details made via bitcoin stumbled upon - and now you have a long list of every transaction those people have ever made using Bitcoin! (for the inevitable bitcoin cult members wanting to chime in about "tumbling" or "fog" services, aka bitcoin money launderers, 1. they're still traceable and 2. there's not enough money going through them to successfully launder a four-digit amount, let alone anything greater.)

bduerst 11y ago
It's impossible to track bitcoins when people transfer in and out of other currencies between bitcoin addresses. The process is called tumbling, and it's primarily how bitcoin tax evaders use it now to get around the "public ledger".
- mootothemax 11y ago
  >It's impossible to track bitcoin laundering when people transfer in and out of other currencies, between bitcoin addresses. >The process is called tumbling, and it's primarily how bitcoin tax evaders use it now to get around the "public" ledger. I very briefly addressed this at the bottom of my comment. In short order: - Tumbling is traceable: throw a beefy server at the list of transactions, and since you know how much money arrived in someone's possession on a given date, you can now trace it backwards by crunching the numbers. Analysing long lists of transactions like this is something computers are really good at. - But that doesn't matter, because tumbling sites can't work: they don't have enough capital in them to successfully launder more than a few play dollars at a time.
  - bduerst 11y ago
    I think you're under the assumption that currency conversions are traceable. Once you convert bitcoins to dollars or yuan, your beefy server can't see the remaining transactions. For example: 20 BTC -> $4000 -> 25000 yuan -> 4 new addresses @ 5, 10, 2, & 8 BTC The only way to trace these is to compromise the exchange servers, get account information, and subpoena transactions from the banks. Very difficult to do given the international nature of these exchanges and banks.
    - mootothemax 11y ago
      >I think you're under the assumption that currency conversions are traceable. I was specifically addressing tumbling services. I'm guessing that you accept those services are easy to compromise (heck, for all we know, various governments might operate the current ones) which is why you bring up currency conversion. >For example: 20 BTC -> $4000 -> 25000 yuan -> 4 new addresses @ 5, 10, 2, & 8 BTC Let's turn this around: you have a list of transactions, you know when they took place, you know where the money ended up, and now you're tracing the line backwards, knowing that at some point, there will be a connection (or connections) to other transactions at least as big as this one; why do you think this is so hard to analyse? >The only way to trace these is to compromise the exchange servers, get bank account information, and get transactions from the banks. Very difficult to do given the international nature of these exchanges. Not really, given how little is known about some exchanges' operators.
      - ramblerman 11y ago
        > why do you think this is so hard to analyse? Why do you insist it isn't. 1) bitcoin to cash or cash to bitcoin is pretty hard to trace unless you catch the actual handover. 2) As for the 'connections'. Anyone who knows what they are doing would spin up a wallet per transaction making connections non existant. Of course mistakes can and will be made, at which point using bitcoin can become a bigger liability than cash/banks because everything is public. But given perfect usage, it is extremely difficult to ascertain any information.
      - celticninja 11y ago
        huge list of assumptions there, but having read your responses you dont really understand bitcoin, transactions or tumblers. Tumblers can delay sending transactions by anywhere from hours to days, so matching 1 input with 1 output would be dificult at the very least. If 1 input is split into 6 outputs of varying sizes, sent at various times how would a beefy server help you. Say I send in 10BTC to a tumbler and my output is split into 6 outputs of between 1 and 2 btc each, these are issued to different addresses over a 5 day period. How do you trace that in amongst all of the other several thousand transactions that occurred in that 5 day period? I would genuinely be interested in how you think this would work, as would many in law enforcement and the bitcoin ecosystem.
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  - dsmithatx 11y ago
    You can not trace it backwards, that's not how tumbling works. If I take a 1000 inputs and combine them. Then I split it into 100,000 outputs you can not trace that. You could trace it if the person getting the outputs was dumb enough to recombine them or spend them in all the same way. I suspect most people who tumble store the coins in those addresses and only spend small amounts later. Tumbling has been used by people being tracked and has been effective at them not being caught. Read the bitcoin forums.
  - hippich 11y ago
    Back in 2012 someone stole worth of $1M bitcoins in today's prices from project I had. Do you think you can help me find who did it? Since if we could - there is certainly a case and enough to pay lawyers and for beefy server and whatever else.
  - celticninja 11y ago
    It is not traceable if done correctly, regardless of how many beefy servers you throw at the problem. As long as you don't collate all BTC in one address at the end of your tumbling then there is no way to absolutley link it to the original sending address.
  - wyager 11y ago
    > throw a beefy server at the list of transactions, and since you know how much money arrived in someone's possession on a given date, you can now trace it backwards by crunching the numbers. I hope you realize that you haven't actually described a process for tracing Bitcoin transactions. You can't just take an arbitrary problem, say "throw a computer at it", and consider it solved. I don't mean to be abrasive, but you are clearly ignorant of the state of affairs of Bitcoin anonymity systems. Look up coinjoin, for starters. When you have highly-connected (in the graph sense), properly conducted mixing systems, you can't just "trace the transactions".
  - sneak 11y ago
    It doesn't matter how beefy your server is when I trade that Bitcoin for a different cryptocurrency using an exchange via Tor, and back again. Factor in a few exchanges and unless you're running all of them, good luck. Bitcoin is indeed untraceable, with care.
probablyfiction 11y ago
I think you're giving politicians too much credit. As a group, they tend to be reactionary to whatever the threat du jour is.
throwaway7767 11y ago
> 2. there's not enough money going through them to successfully launder a four-digit amount, let alone anything greater.) Are you sure about that? I believe most of the onion drug markets have their own tumblers running in the background, so sending money to them and then withdrawing it should get you mixed funds. I'd expect the scale of business of those sites to result in quite a large mixing pot.
tobias3 11y ago
Can't one launder money by buying and running bitcoin mining? There is the question of getting it into a usefull currency again but it makes who sent money to whom untraceable.
Karunamon 11y ago
Pre-insulting everyone who disagrees with you as a "cult member" is pretty nonconstructive as far as comments go, and for that matter so is the idea that tumbling is equivalent to money laundering, the latter of which always implies ill-gotten gains. Someone has yet to successfully explain how you differentiate coins once they enter a single wallet. Say you know with certainty who owns a given address. That person makes a transaction sending the coins to another wallet, and the owner of that wallet makes another transaction. You do not know who controls the second and third wallets. It could be the original owner splitting their money up. It could be a legitimate business accepting payment for services. There's no way just looking at the blockchain to tell the difference between 'tumbling' and other perfectly normal transactions, save for very easily defeated statistical analysis
wyager 11y ago
There are methods of tumbling Bitcoin (a la coinjoin) where every tumbling round effectively divides the confidence in a sender/receiver relationship by the number of people participating in the tumble. So no, such mechanisms are not traceable by any reasonable metric. You're right about the volume of plausibly tumble-able money being low, but it's at least in the five or six digits per day.
imaginenore 11y ago
Nothing is traceable about bitcoin payments. All you see is coins moving from address A to address B. And then B can split into C, D, E, and each of those can too. It becomes an unmanageable mess very quickly. You can generate 1000 addresses a minute absolutely free and randomly move your coins between them for a few pennies. Even if an outside observer knows your originating address, they don't know absolutely anything about who owns the addresses the money went to. All they see is money moving, and no way to trace them to a person. If you're paranoid, you can sell/buy coins on LocalBitcoins, and there's no trail leading back to you.

bduerst 11y ago

It's impossible to track bitcoins when people transfer in and out of other currencies between bitcoin addresses. The process is called tumbling, and it's primarily how bitcoin tax evaders use it now to get around the "public ledger".

mootothemax 11y ago
>It's impossible to track bitcoin laundering when people transfer in and out of other currencies, between bitcoin addresses. >The process is called tumbling, and it's primarily how bitcoin tax evaders use it now to get around the "public" ledger. I very briefly addressed this at the bottom of my comment. In short order: - Tumbling is traceable: throw a beefy server at the list of transactions, and since you know how much money arrived in someone's possession on a given date, you can now trace it backwards by crunching the numbers. Analysing long lists of transactions like this is something computers are really good at. - But that doesn't matter, because tumbling sites can't work: they don't have enough capital in them to successfully launder more than a few play dollars at a time.
- bduerst 11y ago
  I think you're under the assumption that currency conversions are traceable. Once you convert bitcoins to dollars or yuan, your beefy server can't see the remaining transactions. For example: 20 BTC -> $4000 -> 25000 yuan -> 4 new addresses @ 5, 10, 2, & 8 BTC The only way to trace these is to compromise the exchange servers, get account information, and subpoena transactions from the banks. Very difficult to do given the international nature of these exchanges and banks.
  - mootothemax 11y ago
    >I think you're under the assumption that currency conversions are traceable. I was specifically addressing tumbling services. I'm guessing that you accept those services are easy to compromise (heck, for all we know, various governments might operate the current ones) which is why you bring up currency conversion. >For example: 20 BTC -> $4000 -> 25000 yuan -> 4 new addresses @ 5, 10, 2, & 8 BTC Let's turn this around: you have a list of transactions, you know when they took place, you know where the money ended up, and now you're tracing the line backwards, knowing that at some point, there will be a connection (or connections) to other transactions at least as big as this one; why do you think this is so hard to analyse? >The only way to trace these is to compromise the exchange servers, get bank account information, and get transactions from the banks. Very difficult to do given the international nature of these exchanges. Not really, given how little is known about some exchanges' operators.
    - ramblerman 11y ago
      > why do you think this is so hard to analyse? Why do you insist it isn't. 1) bitcoin to cash or cash to bitcoin is pretty hard to trace unless you catch the actual handover. 2) As for the 'connections'. Anyone who knows what they are doing would spin up a wallet per transaction making connections non existant. Of course mistakes can and will be made, at which point using bitcoin can become a bigger liability than cash/banks because everything is public. But given perfect usage, it is extremely difficult to ascertain any information.
    - celticninja 11y ago
      huge list of assumptions there, but having read your responses you dont really understand bitcoin, transactions or tumblers. Tumblers can delay sending transactions by anywhere from hours to days, so matching 1 input with 1 output would be dificult at the very least. If 1 input is split into 6 outputs of varying sizes, sent at various times how would a beefy server help you. Say I send in 10BTC to a tumbler and my output is split into 6 outputs of between 1 and 2 btc each, these are issued to different addresses over a 5 day period. How do you trace that in amongst all of the other several thousand transactions that occurred in that 5 day period? I would genuinely be interested in how you think this would work, as would many in law enforcement and the bitcoin ecosystem.
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- deleted 11y ago
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- dsmithatx 11y ago
  You can not trace it backwards, that's not how tumbling works. If I take a 1000 inputs and combine them. Then I split it into 100,000 outputs you can not trace that. You could trace it if the person getting the outputs was dumb enough to recombine them or spend them in all the same way. I suspect most people who tumble store the coins in those addresses and only spend small amounts later. Tumbling has been used by people being tracked and has been effective at them not being caught. Read the bitcoin forums.
- hippich 11y ago
  Back in 2012 someone stole worth of $1M bitcoins in today's prices from project I had. Do you think you can help me find who did it? Since if we could - there is certainly a case and enough to pay lawyers and for beefy server and whatever else.
- celticninja 11y ago
  It is not traceable if done correctly, regardless of how many beefy servers you throw at the problem. As long as you don't collate all BTC in one address at the end of your tumbling then there is no way to absolutley link it to the original sending address.
- wyager 11y ago
  > throw a beefy server at the list of transactions, and since you know how much money arrived in someone's possession on a given date, you can now trace it backwards by crunching the numbers. I hope you realize that you haven't actually described a process for tracing Bitcoin transactions. You can't just take an arbitrary problem, say "throw a computer at it", and consider it solved. I don't mean to be abrasive, but you are clearly ignorant of the state of affairs of Bitcoin anonymity systems. Look up coinjoin, for starters. When you have highly-connected (in the graph sense), properly conducted mixing systems, you can't just "trace the transactions".
- sneak 11y ago
  It doesn't matter how beefy your server is when I trade that Bitcoin for a different cryptocurrency using an exchange via Tor, and back again. Factor in a few exchanges and unless you're running all of them, good luck. Bitcoin is indeed untraceable, with care.

probablyfiction 11y ago

I think you're giving politicians too much credit. As a group, they tend to be reactionary to whatever the threat du jour is.

throwaway7767 11y ago

> 2. there's not enough money going through them to successfully launder a four-digit amount, let alone anything greater.) Are you sure about that? I believe most of the onion drug markets have their own tumblers running in the background, so sending money to them and then withdrawing it should get you mixed funds. I'd expect the scale of business of those sites to result in quite a large mixing pot.

tobias3 11y ago

Can't one launder money by buying and running bitcoin mining? There is the question of getting it into a usefull currency again but it makes who sent money to whom untraceable.

Karunamon 11y ago

Pre-insulting everyone who disagrees with you as a "cult member" is pretty nonconstructive as far as comments go, and for that matter so is the idea that tumbling is equivalent to money laundering, the latter of which always implies ill-gotten gains. Someone has yet to successfully explain how you differentiate coins once they enter a single wallet. Say you know with certainty who owns a given address. That person makes a transaction sending the coins to another wallet, and the owner of that wallet makes another transaction. You do not know who controls the second and third wallets. It could be the original owner splitting their money up. It could be a legitimate business accepting payment for services. There's no way just looking at the blockchain to tell the difference between 'tumbling' and other perfectly normal transactions, save for very easily defeated statistical analysis

wyager 11y ago

There are methods of tumbling Bitcoin (a la coinjoin) where every tumbling round effectively divides the confidence in a sender/receiver relationship by the number of people participating in the tumble. So no, such mechanisms are not traceable by any reasonable metric. You're right about the volume of plausibly tumble-able money being low, but it's at least in the five or six digits per day.

imaginenore 11y ago

Nothing is traceable about bitcoin payments. All you see is coins moving from address A to address B. And then B can split into C, D, E, and each of those can too. It becomes an unmanageable mess very quickly. You can generate 1000 addresses a minute absolutely free and randomly move your coins between them for a few pennies. Even if an outside observer knows your originating address, they don't know absolutely anything about who owns the addresses the money went to. All they see is money moving, and no way to trace them to a person. If you're paranoid, you can sell/buy coins on LocalBitcoins, and there's no trail leading back to you.