5 ms·

> It's meant to be anonymous Unfortunately, Bitcoin (BTC) is not anonymous, as you pointed out. It never was; and with tax laws requiring copious transaction

by ColanR 7y ago

> It's meant to be anonymous Unfortunately, Bitcoin (BTC) is not anonymous, as you pointed out. It never was; and with tax laws requiring copious transaction information, it is particularly easily traceable. That's the idea behind Monero & Co., which tries to mix things up a bit (literally). The anonymity is still not perfect, especially against state-level actors.

Ambele 7y ago
Bitcoin can be anonymous though in certain use-cases. You can create a new bitcoin public/private key pair on a computer that has never (and will never) touched the internet. Once you send the coins from an address to this new address, the network will now know the IP address of the sender, but it won't know anything about the unknown recipient.
- hobofan 7y ago
  It knows that in some way/shape/form the old address is associated with the new address, so most likely it is the same entity, or a transaction partner. Bitcoin is not supposed to be anonymous, and very unsuitable for use-cases where you want any kind of anonymity guarantee.
  - Ambele 7y ago
    >Bitcoin is not supposed to be anonymous But it can be used anonymously and probably in some industries is still used anonymously. A counterparty that is willing to swap anonymously acquired and sent altcoins for Bitcoin can provide a privacy conscious individual with anonymous Bitcoins. If using proxy-chains, Tor, or a real person in another country to broadcast your trade isn't your cup-of-tea because you don't trust them, there is still another less practical way. If you secretly give someone your Bitcoin private key (for example: written on a small piece of paper), you can give or trade those Bitcoins to someone without the network knowing about the transaction. >so most likely it is the same entity, or a transaction partner. Conceivably, the transaction could be broadcasted from an important individual's hacked phone or computer without a trace. This is where being innocent until proven guilty becomes important.
    - ColanR 7y ago
      > A counterparty that is willing to swap anonymously acquired and sent altcoins for Bitcoin can provide a privacy conscious individual with anonymous Bitcoins. Not if amounts are tracked, rather than addresses. "oh look, this gal X just lost 5.3876BTC and gained 3.76549ALTCOIN, and this other dude Y just gained 5.3876BTC and lost 3.76549ALTCOIN. Geeze, I wonder if they traded." And with the proper graph theory tools, much more complex interactions could be tracked.
      - nybble41 7y ago
        The first problem here is that there is no link between the identities across the two currencies. You don't know that X lost some BTC and gained some altcoin. You just know that some BTC was transferred from X to Y and some altcoins were transferred from Z to W—completely different addresses. You also don't know precisely what exchange rate was used, and a privacy-minded service would round to a small number of significant digits (5.4BTC for 3.8ALT) rather than using exact, traceable figures. A proper mixer would probably also use fixed denominations and send each piece to a different address over a randomized timespan. It's still not immune to tracing, obviously, but it's a much harder problem than just looking for symmetric transactions. The simplest system, though, is probably just to spend some BTC renting time on a mining rig. It doesn't have to be profitable, just break even. Newly mined bitcoins have no official history to show who paid for the mining.
        ColanR 7y ago
        > It's still not immune to tracing, obviously, but it's a much harder problem than just looking for symmetric transactions. "And with the proper graph theory tools, much more complex interactions could be tracked." > The simplest system, though, is probably just to spend some BTC renting time on a mining rig. It doesn't have to be profitable, just break even. Newly mined bitcoins have no official history to show who paid for the mining. That is a good idea.
        nybble41 7y ago
Lordarminius 7y ago
>The anonymity is still not perfect, especially against state-level actors. With PirateChain it is, but true anonymity brings with it other technical challenges.
- vkou 7y ago
  It also brings legislative challenges, such as 'prove that your money did not come from running an international assassination ring'.
- ColanR 7y ago
  I haven't heard of PirateChain. However, the state-level threat model includes things like taxes, where (e.g.) people in the US have to report every transaction they make. If most people report their PirateChain transactions, amount in, amount out, then the problem is that unreported transactions would stick out and would probably be associable with wallets. Am I getting this wrong?
  - AlexCoventry 7y ago
    What are the laws requiring reporting of every transaction? I know it's necessary to report transactions which establish the cost basis for capital gains, but doesn't mandate report of all transactions.
    - ineedasername 7y ago
      In the US, all transactions to/from a financial institution of $10,000 or higher (including cash) must be reported. Same applies if multiple transactions on the same day reach that limit. So all attempts to cash out will be hard to avoid tracking. Also, attempts to structure transactions to avoid this, like $9999 per day, is illegal with jail and fines applied.
    - sobani 7y ago
      The IRS considers Bitcoin an asset. Every time you buy/sell goods with Bitcoin or just plain buy/sell Bitcoin, you have to report that as if you were buying/selling any other asset, like stocks. So most Bitcoin transactions will be subject to capital gains tax. https://www.investopedia.com/articles/investing/040515/are-there-taxes-bitcoins.asp https://www.investopedia.com/articles/investing/040515/are-t...

by ColanR 7y ago

Ambele 7y ago

Bitcoin can be anonymous though in certain use-cases. You can create a new bitcoin public/private key pair on a computer that has never (and will never) touched the internet. Once you send the coins from an address to this new address, the network will now know the IP address of the sender, but it won't know anything about the unknown recipient.

hobofan 7y ago
It knows that in some way/shape/form the old address is associated with the new address, so most likely it is the same entity, or a transaction partner. Bitcoin is not supposed to be anonymous, and very unsuitable for use-cases where you want any kind of anonymity guarantee.
- Ambele 7y ago
  >Bitcoin is not supposed to be anonymous But it can be used anonymously and probably in some industries is still used anonymously. A counterparty that is willing to swap anonymously acquired and sent altcoins for Bitcoin can provide a privacy conscious individual with anonymous Bitcoins. If using proxy-chains, Tor, or a real person in another country to broadcast your trade isn't your cup-of-tea because you don't trust them, there is still another less practical way. If you secretly give someone your Bitcoin private key (for example: written on a small piece of paper), you can give or trade those Bitcoins to someone without the network knowing about the transaction. >so most likely it is the same entity, or a transaction partner. Conceivably, the transaction could be broadcasted from an important individual's hacked phone or computer without a trace. This is where being innocent until proven guilty becomes important.
  - ColanR 7y ago
    > A counterparty that is willing to swap anonymously acquired and sent altcoins for Bitcoin can provide a privacy conscious individual with anonymous Bitcoins. Not if amounts are tracked, rather than addresses. "oh look, this gal X just lost 5.3876BTC and gained 3.76549ALTCOIN, and this other dude Y just gained 5.3876BTC and lost 3.76549ALTCOIN. Geeze, I wonder if they traded." And with the proper graph theory tools, much more complex interactions could be tracked.
    - nybble41 7y ago
      The first problem here is that there is no link between the identities across the two currencies. You don't know that X lost some BTC and gained some altcoin. You just know that some BTC was transferred from X to Y and some altcoins were transferred from Z to W—completely different addresses. You also don't know precisely what exchange rate was used, and a privacy-minded service would round to a small number of significant digits (5.4BTC for 3.8ALT) rather than using exact, traceable figures. A proper mixer would probably also use fixed denominations and send each piece to a different address over a randomized timespan. It's still not immune to tracing, obviously, but it's a much harder problem than just looking for symmetric transactions. The simplest system, though, is probably just to spend some BTC renting time on a mining rig. It doesn't have to be profitable, just break even. Newly mined bitcoins have no official history to show who paid for the mining.
      - ColanR 7y ago
        > It's still not immune to tracing, obviously, but it's a much harder problem than just looking for symmetric transactions. "And with the proper graph theory tools, much more complex interactions could be tracked." > The simplest system, though, is probably just to spend some BTC renting time on a mining rig. It doesn't have to be profitable, just break even. Newly mined bitcoins have no official history to show who paid for the mining. That is a good idea.
        nybble41 7y ago

Lordarminius 7y ago

>The anonymity is still not perfect, especially against state-level actors. With PirateChain it is, but true anonymity brings with it other technical challenges.

vkou 7y ago
It also brings legislative challenges, such as 'prove that your money did not come from running an international assassination ring'.
ColanR 7y ago
I haven't heard of PirateChain. However, the state-level threat model includes things like taxes, where (e.g.) people in the US have to report every transaction they make. If most people report their PirateChain transactions, amount in, amount out, then the problem is that unreported transactions would stick out and would probably be associable with wallets. Am I getting this wrong?
- AlexCoventry 7y ago
  What are the laws requiring reporting of every transaction? I know it's necessary to report transactions which establish the cost basis for capital gains, but doesn't mandate report of all transactions.
  - ineedasername 7y ago
    In the US, all transactions to/from a financial institution of $10,000 or higher (including cash) must be reported. Same applies if multiple transactions on the same day reach that limit. So all attempts to cash out will be hard to avoid tracking. Also, attempts to structure transactions to avoid this, like $9999 per day, is illegal with jail and fines applied.
  - sobani 7y ago
    The IRS considers Bitcoin an asset. Every time you buy/sell goods with Bitcoin or just plain buy/sell Bitcoin, you have to report that as if you were buying/selling any other asset, like stocks. So most Bitcoin transactions will be subject to capital gains tax. https://www.investopedia.com/articles/investing/040515/are-there-taxes-bitcoins.asp https://www.investopedia.com/articles/investing/040515/are-t...