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Anonymity in ethereum is rapidly accelerating. Currently the best option is an on-chain mixer [1] for set amounts, but fully anonymous transaction systems are g

Anonymity in ethereum is rapidly accelerating. Currently the best option is an on-chain mixer [1] for set amounts, but fully anonymous transaction systems are going to launch relatively soon [2]. In two years, ether is virtually certain to be the most anonymous cryptocurrency and dai (dollar stablecoin) to be the most anonymous digital dollar in existence. Anonymous digital dollar has the potential to cause quite a stir. Coins that aim to be fully anonymous (like monero) are, counterintuitively, much worse, because they lack plausible deniability. Optional (but large enough!) anonymity on a smart-contract platform allows it: you can manufacture fake profits on a dex using anonymous funds, and then claim you never anonymized your funds - you made a speculative profit (from a much smaller fully transparent seed fund). Many, many possibilities exist in this area. [1] https://tornado.cash/ https://tornado.cash/ [2] https://www.aztecprotocol.com/ https://www.aztecprotocol.com/

mindslight 6y ago
IMO, if Bitcoin had had untraceability, it would be in the exact same regulatory situation it is in today. That would be serious plausible deniability. The mechanisms you're describing also happen to already be crimes. As soon as a system has any legible structure, regulators want to mount up. They don't care about perfect enforcement or even aiming for perfection, but rather just exerting control over most uses. I do hope untracability can be sustainably implemented at scale by the techniques you're describing, but we'll see. There are many more people thinking that tracing cryptocurrency transactions is a desirable thing.
- nootropicat 6y ago
  Without complex smart contracts plausible deniability is much harder, because you have to use a centralized entity (like an exchange) to manufacture profits somehow, and that's much easier to regulate away. Not to mention more risky - exchanges like to lock coins pending kyc. Note that no purely cryptographic method exists that prevents you from provably deanonymizing your transaction. I'm nearly certain the legal situation is eventually going to deteriorate to a point where if you can't prove the origin of your crypto funds, you can't sell them for external property (ie. not fully decentralized tokens) at all.

mindslight 6y ago

IMO, if Bitcoin had had untraceability, it would be in the exact same regulatory situation it is in today. That would be serious plausible deniability. The mechanisms you're describing also happen to already be crimes. As soon as a system has any legible structure, regulators want to mount up. They don't care about perfect enforcement or even aiming for perfection, but rather just exerting control over most uses. I do hope untracability can be sustainably implemented at scale by the techniques you're describing, but we'll see. There are many more people thinking that tracing cryptocurrency transactions is a desirable thing.

nootropicat 6y ago
Without complex smart contracts plausible deniability is much harder, because you have to use a centralized entity (like an exchange) to manufacture profits somehow, and that's much easier to regulate away. Not to mention more risky - exchanges like to lock coins pending kyc. Note that no purely cryptographic method exists that prevents you from provably deanonymizing your transaction. I'm nearly certain the legal situation is eventually going to deteriorate to a point where if you can't prove the origin of your crypto funds, you can't sell them for external property (ie. not fully decentralized tokens) at all.