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This does not serve as a tumbling mechanism because the participants aren't peers. The coins went all one direction from source to many destinations. If those

by joshuak 10y ago

This does not serve as a tumbling mechanism because the participants aren't peers. The coins went all one direction from source to many destinations. If those many destinations don't, in turn, pay the source back in some way you've just lost the money not laundered it.

CydeWeys 10y ago
I don't understand your objection. The mechanism I explained works to launder and obscure the auditable trail of Bitcoin. All I figure is that you're pointing out some there is some risk inherent in the mining pool simply walking away with the money. OK, sure. There's lots of trust involved in the Bitcoin ecosystem. Every time I buy something on the Internet with Bitcoin I'm trusting the retailer to send me what I ordered rather than walking away with my money. Every time I transfer BTC to an exchange in order to sell it I'm similarly trusting that they won't instead simply screw me over.
- mnx 10y ago
  Which... they historically are not that unlikely to do.
  - CydeWeys 10y ago
    Well you are laundering money (which is likely illegal depending on your reason for doing so), so it'd be unreasonable not to expect there to be some risk. You're just trading off risk from government for risk from mining pool. But if you do the laundering over a series of transactions spread out in time, you are limiting your potential losses. Say you do it in fifty blocks over a week -- if the miner betrays you your maximum loss is 2%. If you don't tell the miner how much you're laundering through them (they'll just know when you are finished), and you give them an acceptable cut (say, 3%), it would be in their vested interest not to betray you because the expected value of more laundering from you is greater than what they could make by eating any one given attempt. Also, if they are doing laundering as a service, then trust in them is very important, and screwing over one customer at the cost of potentially losing all future customers is not worth it. For instance, let's say I'm selling $5K of Bitcoin. I'm not worried too much that any given exchange is going to screw me over and eat it, because the big exchanges are doing many millions of dollars in business a day, and stand to lose a lot more from a hit to their reputation from stealing from me than they do to gain from eating my money. The only worry is if an entire exchange goes down (a la MtGox), but you can minimize that risk by not keeping money in an exchange.
- joshuak 10y ago
  No, you're not describing something like A (typical tumbling) is risky, and B (paid back by miners) is better but with somewhat more risk. A is I give you a million dollars, you give me the deed on your house. There is risk, there is trust involved, but we both are peers and bare equivalent risk. B is I give a small portion of a million dollars to hundreds or thousands of people and ask that they pay a new account some large portion of it. B is 100% risk. It is in fact guaranteed not to work in the aggregate. The problem is that none of the individual miners have a stake, as I said they are not peers. In fact it's worse then that, they would incur unnecessary risk of their own to payback the money rather than just keep it because of the danger of being implicated in a money laundering scheme. With tumbling every participant shares risk equally since every participant puts funds into the system. In your scenario weather it's 10 miners or 10000 miners NONE of them are putting up any money at the same time, AND you must trust every single individual. It simply doesn't work. It is not a lauding scheme of any kind.
  - CydeWeys 10y ago
    I think you are misunderstanding how mining pools work. It's only the pool operator that needs to know the valuable fee transaction in order to launder Bitcoin via block rewards. The individual miners that are in the pool are just hashing over a hash of the merkle root of all of the transactions that the pool has selected, along with several other fields. More details here: https://en.bitcoin.it/wiki/Block_hashing_algorithm https://en.bitcoin.it/wiki/Block_hashing_algorithm The individual miners don't know, and have no control over, the transactions in the tree that they are hashing. The only person you need to trust is the person in charge of the pool. So this part is wrong: > In fact it's worse then that, they would incur unnecessary risk of their own to payback the money rather than just keep it because of the danger of being implicated in a money laundering scheme. The miners have no option to pay back or keep the money. They just submit valid hashes of what is essentially nonsense to them (other hashes), and get paid out for doing so. They have no control over the mining pool operator, no control over what they're hashing, and no way of defecting other than by withholding valid hashes, which is disincentivized because it costs them money. To use an example, AntPool is currently sitting at ~30% of the network hash rate. That works out to about 50 blocks per day, more than enough to do lots of laundering if they were so inclined. If I had, say, 1,000 BTC I wanted to launder, all I would have to trust is the main technical person at AntPool. I'd give them fifty different transactions, each with a block fee of 20 BTC, and they could launder it over a day, then give me back most of that 1,000 BTC in transactions to unrelated addresses from unrelated sources at their leisure. I literally only have to trust a single person at AntPool to do this -- I don't understand where you think these thousands of other people come in. It's certainly not doomed to fail. The only real risk I can see is that a lot of mining pools (but not all) include transaction fees in the block reward bonus to be distributed to miners, after the mining pool rake is taken anyway. You'd simply have to calculate the fees differently. Currently miners might be paid out for, say, 95% of the value of a total block transaction fee summing up to around ~0.25-0.5 BTC. You'd continue paying that out for normal transaction fees, but then also add in, say, 1% of non-P2P transaction fees (the money-laundering ones), with another 1% being taken by the pool and the other 98% ultimately going back to the source in untraceable transactions. This would actually create a lot of incentive to use the pool that is doing the money laundering, because they'd be paying out more per found block since they have a second income stream!

by joshuak 10y ago

CydeWeys 10y ago

I don't understand your objection. The mechanism I explained works to launder and obscure the auditable trail of Bitcoin. All I figure is that you're pointing out some there is some risk inherent in the mining pool simply walking away with the money. OK, sure. There's lots of trust involved in the Bitcoin ecosystem. Every time I buy something on the Internet with Bitcoin I'm trusting the retailer to send me what I ordered rather than walking away with my money. Every time I transfer BTC to an exchange in order to sell it I'm similarly trusting that they won't instead simply screw me over.

mnx 10y ago
Which... they historically are not that unlikely to do.
- CydeWeys 10y ago
  Well you are laundering money (which is likely illegal depending on your reason for doing so), so it'd be unreasonable not to expect there to be some risk. You're just trading off risk from government for risk from mining pool. But if you do the laundering over a series of transactions spread out in time, you are limiting your potential losses. Say you do it in fifty blocks over a week -- if the miner betrays you your maximum loss is 2%. If you don't tell the miner how much you're laundering through them (they'll just know when you are finished), and you give them an acceptable cut (say, 3%), it would be in their vested interest not to betray you because the expected value of more laundering from you is greater than what they could make by eating any one given attempt. Also, if they are doing laundering as a service, then trust in them is very important, and screwing over one customer at the cost of potentially losing all future customers is not worth it. For instance, let's say I'm selling $5K of Bitcoin. I'm not worried too much that any given exchange is going to screw me over and eat it, because the big exchanges are doing many millions of dollars in business a day, and stand to lose a lot more from a hit to their reputation from stealing from me than they do to gain from eating my money. The only worry is if an entire exchange goes down (a la MtGox), but you can minimize that risk by not keeping money in an exchange.
joshuak 10y ago
No, you're not describing something like A (typical tumbling) is risky, and B (paid back by miners) is better but with somewhat more risk. A is I give you a million dollars, you give me the deed on your house. There is risk, there is trust involved, but we both are peers and bare equivalent risk. B is I give a small portion of a million dollars to hundreds or thousands of people and ask that they pay a new account some large portion of it. B is 100% risk. It is in fact guaranteed not to work in the aggregate. The problem is that none of the individual miners have a stake, as I said they are not peers. In fact it's worse then that, they would incur unnecessary risk of their own to payback the money rather than just keep it because of the danger of being implicated in a money laundering scheme. With tumbling every participant shares risk equally since every participant puts funds into the system. In your scenario weather it's 10 miners or 10000 miners NONE of them are putting up any money at the same time, AND you must trust every single individual. It simply doesn't work. It is not a lauding scheme of any kind.
- CydeWeys 10y ago
  I think you are misunderstanding how mining pools work. It's only the pool operator that needs to know the valuable fee transaction in order to launder Bitcoin via block rewards. The individual miners that are in the pool are just hashing over a hash of the merkle root of all of the transactions that the pool has selected, along with several other fields. More details here: https://en.bitcoin.it/wiki/Block_hashing_algorithm https://en.bitcoin.it/wiki/Block_hashing_algorithm The individual miners don't know, and have no control over, the transactions in the tree that they are hashing. The only person you need to trust is the person in charge of the pool. So this part is wrong: > In fact it's worse then that, they would incur unnecessary risk of their own to payback the money rather than just keep it because of the danger of being implicated in a money laundering scheme. The miners have no option to pay back or keep the money. They just submit valid hashes of what is essentially nonsense to them (other hashes), and get paid out for doing so. They have no control over the mining pool operator, no control over what they're hashing, and no way of defecting other than by withholding valid hashes, which is disincentivized because it costs them money. To use an example, AntPool is currently sitting at ~30% of the network hash rate. That works out to about 50 blocks per day, more than enough to do lots of laundering if they were so inclined. If I had, say, 1,000 BTC I wanted to launder, all I would have to trust is the main technical person at AntPool. I'd give them fifty different transactions, each with a block fee of 20 BTC, and they could launder it over a day, then give me back most of that 1,000 BTC in transactions to unrelated addresses from unrelated sources at their leisure. I literally only have to trust a single person at AntPool to do this -- I don't understand where you think these thousands of other people come in. It's certainly not doomed to fail. The only real risk I can see is that a lot of mining pools (but not all) include transaction fees in the block reward bonus to be distributed to miners, after the mining pool rake is taken anyway. You'd simply have to calculate the fees differently. Currently miners might be paid out for, say, 95% of the value of a total block transaction fee summing up to around ~0.25-0.5 BTC. You'd continue paying that out for normal transaction fees, but then also add in, say, 1% of non-P2P transaction fees (the money-laundering ones), with another 1% being taken by the pool and the other 98% ultimately going back to the source in untraceable transactions. This would actually create a lot of incentive to use the pool that is doing the money laundering, because they'd be paying out more per found block since they have a second income stream!