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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 mi

by 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!
- joshuak 10y ago
  I do know how mining pools work. One could indeed do what you are saying. What I am saying, however, is that one wouldn't. It does not make any sense economically or in terms of risk of arrest. Either you have pissed off miners ("Hey! What happen to all the money from that fee?"), or they are all collaborating which means "grand conspiracy". Without the miners participation you have an easy to trace transaction chain that goes like this: bad guys, suspicions fee transaction, pool operator, new address. Trivial to trace. In point of fact the fees in this case went to every participating miner. All conceivable cases that lead to any definition of tumbling requires that the actual funds are sent to all the miners. The event horizon argument which is the basis of the article is simply wrong. You seem to agree since you don't make a case for that. Simply put: the fee is just as traceable as any transaction. The best that could be done to balance the economic motivations and risk in your scenario is to generate pre-signed multi party transactions in advance of the initial fee payment for every minor, perhaps they only become valid once the fee is paid (one of the inputs to the transaction), and only at some point in the future (to obscure the direct relationship). In this case you'd have at least one new transaction from every participating miner creating a large number of outputs that become difficult to trace. Though it is still only one round of tumbling, and so compromising even a single participant would be enough to trace at least the value of that one participants laundering contribution directly to the source. Even that solution requires a set of completely traceable colluding participants namely the entire set of miners who should have been paid the fees but aren't. And each of them would have to express there intent to collude via the pre-signed transaction in advance of receiving any benefit. So at absolute best you have a poor quality, high risk, error prone, tumbling / mining service.

by joshuak 10y ago

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!

joshuak 10y ago
I do know how mining pools work. One could indeed do what you are saying. What I am saying, however, is that one wouldn't. It does not make any sense economically or in terms of risk of arrest. Either you have pissed off miners ("Hey! What happen to all the money from that fee?"), or they are all collaborating which means "grand conspiracy". Without the miners participation you have an easy to trace transaction chain that goes like this: bad guys, suspicions fee transaction, pool operator, new address. Trivial to trace. In point of fact the fees in this case went to every participating miner. All conceivable cases that lead to any definition of tumbling requires that the actual funds are sent to all the miners. The event horizon argument which is the basis of the article is simply wrong. You seem to agree since you don't make a case for that. Simply put: the fee is just as traceable as any transaction. The best that could be done to balance the economic motivations and risk in your scenario is to generate pre-signed multi party transactions in advance of the initial fee payment for every minor, perhaps they only become valid once the fee is paid (one of the inputs to the transaction), and only at some point in the future (to obscure the direct relationship). In this case you'd have at least one new transaction from every participating miner creating a large number of outputs that become difficult to trace. Though it is still only one round of tumbling, and so compromising even a single participant would be enough to trace at least the value of that one participants laundering contribution directly to the source. Even that solution requires a set of completely traceable colluding participants namely the entire set of miners who should have been paid the fees but aren't. And each of them would have to express there intent to collude via the pre-signed transaction in advance of receiving any benefit. So at absolute best you have a poor quality, high risk, error prone, tumbling / mining service.