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Their example is a wallet with 10 bitcoin, 3 were stolen. * poison: all BTC is the wallet is considered stolen, and all BTC in every wallet the BTC moves throu

Their example is a wallet with 10 bitcoin, 3 were stolen. * poison: all BTC is the wallet is considered stolen, and all BTC in every wallet the BTC moves through from there is considered stolen * haircut: BTC in the wallet is considered 30% stolen, and it's diluted as the money moves through other wallets * FIFO (their solution): the first 3 BTC transferred from the wallet is considered stolen But, the principle given in the paper is "nobody can give what isn’t theirs". Why isn't it the last 3 BTC transferred from the wallet that's considered stolen? The wallet had 7 legitimately acquired BTC to spend, so why isn't spending beyond that 7 what's tracked? Someone could have a wallet or bank account (from the 1816 example) and not know stolen amounts were given to them. The first amount they spend should be considered legitimate.

maxerickson 9y ago
The FIFO method doesn't track the first 3 BTC, it depends on what the first transfer into the wallet was. If the first transfer in was 3 tainted BTC, it taints the first 3 out. If the first transfer in was 2 clean BTC and the second transfer in was 3 tainted BTC, it taints the 3rd, 4th and 5th BTC transferred out. They don't seem to really have a way of measuring where the illicit value actually goes, so the comparison is just hand waving (in terms of forensics that's what tainting is for anyway, enumerating the accounts to consider; enumerating less accounts isn't necessarily an advantage).