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As far as I can tell, hundreds of millions in drugs and contraband are regularly transacted using Bitcoin. Billions in global capital controls and taxes are eva

As far as I can tell, hundreds of millions in drugs and contraband are regularly transacted using Bitcoin. Billions in global capital controls and taxes are evaded every day with Bitcoin. The fraction of black market participants who are revealed on the basis of "chain analysis" is still a rounding error. It all depends what your threat model is. Bitcoin can be traced by sophisticated nation state actors at the cost of tens of millions per intercepted target. If I was Osama bin Laden or El Chapo or a guy who personally pissed off Putin, I probably wouldn't rely on it. But if I was a local drug kingpin in Baltimore, or a corrupt mid-level CCP official, or a Cypriot corporate money launderer, then Bitcoin deanonymization is probably a small risk in the scheme of things. Certainly orders of magnitude less risk than using the traditional banking system.

dumbfoundded 6y ago
It can be pretty anonymous too. You can use fiat to buy mining hardware and then it's pretty hard to connect an identity to a wallet if you're careful. Don't you eventually need fiat? Yes, so you have someone sell NFTs to those untraceable wallets and now you have a legit income stream as an artist. Pay the tax in the place you want your money to end up and you really only need like one person in your destination country to clean as much as you'd like.
- dragonelite 6y ago
  You pretty much need to go through a Know your customer(KYC) process to really trade in crypto. At least here in western Europe i had to upload a Id doc, I don't mind it because saving money costs me money, buying satoshis earns me money. Given cryptos nature of being a public ledger and there more then enough compute power available everything can probably be traced and backtracked in real-time.
  - atat7024 6y ago
    > You pretty much need to go through a Know your customer(KYC) process to really trade in crypto KuCoin? Binance?
    - arcticbull 6y ago
      Binance is a great example because you can just keep creating new accounts to circumvent their KYC limits heh. I'm sure they have no idea. You just have to take it up with the government in whatever country they're domiciled in. Like any legitimate company, they simply won't tell anyone which country that is, of course.
    - dragonelite 6y ago
      A more local crypto exchange, when I started buying bitcoin it was harder to get euros in and out of Binance. Seeing how I'm not really a dissident or a rebel and I'm lazy so I'm not going to jump through multiple hoops. So I don't mind the KYC process so I don't have to jump through hoops, but I do see how nations can use lawfare to attack/monitor crypto currencies, its not that hard to see. You have a open ledger, you have wallet addresses connected to personal identities. They can probably use social media connection graphs to fill in the gaps of unknown wallet addresses. Its a real time financial monitoring tool like the current system, just packaged up as some libertarian/tech bro nirvana escape hatch. Brilliant marketing if you ask me, but I'm just using it as an inflation hedge.
      - randomopining 6y ago
        Yeah literally, is it not just a connected graph of transactions? Sounds like smart people can split and roll and all this stuff to their main transaction to try to obfuscate it. But with the proper tool, couldn't the FBI use powerful computers to fill the graph in with human links and deduce a lot from it? XMR I don't know though.
        dragonelite 6y ago
        I don't know enough, but the moment I saw I needed to go through a Know your customer process I knew block chain privacy is compromised. Wouldn't be surprised if there are ways to obfuscate your bitcoins. Something like wrapped bitcoins or something. For the time being you already have block chain analytics companies that can trace and back trace transactions. Hell maybe they can even do it cross chain. I wouldn't be surprised if a NSA or other nat sec organization can hack something together in a weekend.
  - dumbfoundded 6y ago
    Only in the destination country. Let's say someone in China wanted to move $$$$ out of China for whatever reason. They could use yuan to purchase mining hardware and use that to generate clean wallets with no identity attached. A good friend of this person is an artist in the UK. The artist cashes in the ETH, properly reports taxes from income, and now has a completely clean and clear source of cash. Now if the Chinese person wants to get out of China in a hurry, they can visit their close friend in the UK.
    - powerapple 6y ago
      I believe this is how it works at the beginning, and I consider it as the main use of crypto in China. It was actually easier when exchange was legal in China, you can just buy bitcoin. Even now, you can use AliPay, WeChat and bank transfer to do P2P crypto transaction.
    - ninjinxo 6y ago
      Being generous you can mine ~$10 of crypto per day with a 3080 based on its hashrate, zero electricity cost. So to transfer $1 million out over 3 years, you'd need to run mine ~$900 of crypto per day, ie. run 90 RTX3080s 24/7/365. Also note that this would draw around 20kW. [1] https://www.nicehash.com/profitability-calculator/nvidia-rtx-3080 https://www.nicehash.com/profitability-calculator/nvidia-rtx...
      - ALittleLight 6y ago
        Googling I see the price of a 3080 is 700 dollars, so this would cost 700 * 90 = 63,000. Plus electricity, which, maybe you can get cheap somehow in China if you have the right friends. Seems like an amount this size is pretty small compared to what you're moving. If you think bitcoin will go up long term then the cost might work out to be negative.
        africanboy 6y ago
        > Googling I see the price of a 3080 is 700 dollars assuming you're able to buy them and have the money upfront and are able to hide the purchase. "What this person could be doing with 90 3080, I wonder" asks the Chinese government employee that checks your bank transactions. https://www.techradar.com/news/nvidia-rtx-3080-shortage-could-continue-until-q3 https://www.techradar.com/news/nvidia-rtx-3080-shortage-coul...
AYBABTME 6y ago
What are the features of the problem that make you think deanonymization is computationally impractical for non-nation states?
- vntok 6y ago
  Here is a link to a very high level layman explanation: https://en.wikipedia.org/wiki/Cryptocurrency_tumbler https://en.wikipedia.org/wiki/Cryptocurrency_tumbler
- colinmhayes 6y ago
  non-nations states don't have access to the exchange logs
exdsq 6y ago
If I was a local drug kingpin I could reduce risk with cash. At some point I’d need to sell my Bitcoin and that’d appear in my bank.
- atat7024 6y ago
  Why not someone else's bank...? That thinking is quite shallow.
  - exdsq 6y ago
    Sure so now you’ve paid it to their account what happens? They will be investigated for unknown wealth. At some point they’ll need to move that money to the drug dealer - either by cash or another bank transfer.
    - colinmhayes 6y ago
      You show up at their house and escort them to the bank where they withdraw the money and give it to you?
- jmnicolas 6y ago
  But with cash you'd have an inflation tax on everything you earn. And depending on where you live you wouldn't be able to make big purchases in cash (in France I think the maximum cash transaction allowed is about 3000€). BTC or cash you would have to launder your money to make it look like legit and be able to buy a house etc Of course the other problem of BTC is that transactions are stored forever (as long as the BTC network operates) so it might bite you decades later.
  - arcticbull 6y ago
    > But with cash you'd have an inflation tax on everything you earn. This has to be the worst reason a drug dealer would avoid dealing in cash ever. Inflation is literally 2% per annum. Drug dealers pay 20%-50% to launder their money. C'mon now.
  - 6y ago
justAnIdea 6y ago
yea, yea, orange coin bad, we get it... meanwhile 63.5k ATH, but keep poo pooing
arcticbull 6y ago
> But if I was a local drug kingpin in Baltimore, or a corrupt mid-level CCP official, or a Cypriot corporate money launderer, then Bitcoin deanonymization is probably a small risk in the scheme of things. Certainly orders of magnitude less risk than using the traditional banking system. ... for now. The thing is, 2-3 tx/sec is basically snail mail. That's such a small number of transactions that there's not even a forest to hide within. As the analytics tools improve the de-anonymization will be faster and more automatic, and that "tens of millions" figure will dwindle down to pennies. State actors can easily combine that data with actual fiat, and you'll be in court before you know it. The problem is you're committing a ledger of your criminal activity to the cloud forever, and CCing your attorney general, smirking that they'll never figure it out. Of course they will. Either they'll figure it out or ban it. Or both.
- spurdoman77 6y ago
  Even in the ancient Silk Road you could sell contraband effectively using internal, offchain transactions only. The customers pay using offchain transactions using the market, and the vendor can cash out via some trader in the same market.
  - Mandatum 6y ago
    Like Hawala?
    - spurdoman77 6y ago
      No, not at all. Basically, if you dont want to deal with the onchain transactions, you could sell the risk of that to someone else and only deal in internal offchain transactions. Dont know if this actually happens though.
- VMG 6y ago
  Bitcoin transactions don't have to be on-chain https://en.wikipedia.org/wiki/Lightning_Network https://en.wikipedia.org/wiki/Lightning_Network
mrb 6y ago
«As far as I can tell, hundreds of millions in drugs and contraband are regularly transacted using Bitcoin. Billions in global capital controls and taxes are evaded every day with Bitcoin» That is completely unsubstantiated. You have no evidence for that.
- posixplz 6y ago
  It’s a fair inference given the size and rate of known Bitcoin black market busts. In one search, I found a paper that estimates $76B worth of Bitcoin is used in illegal trade per year. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3102645 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3102645
  - mrb 6y ago
    I remember this paper. A major flaw that was pointed out to the authors (and never corrected) is that Bitcoin tumbling services—popular among illicit users—artificially increase the transaction volumes. So if tumbling services puts the BTC on average through 10 transactions, then this will multiply by 10-fold the volume. In other words there wouldn't be $76B transacted annually, but only $7.6B. Tumbling also makes some of their other figures unbelievable. For example in table 2 they report "181.82%" of all users transactions attempt to use tumbling services... I have little confidence in this paper being accurate.
- goldsteinq 6y ago
  Russian darknet market Hydra, which is probably the biggest darknet market in the world, uses only Bitcoin for everything.
- rafaelvasco 6y ago
  OP doesn't or you doesn't ? OP appears to have plenty.
muzani 6y ago
Imagine if you were a drug dealer smuggling in a million dollars of cocaine into Chicago from Mexico. Great, you got the drugs in, now how do you get the money back out? You'll still have to find a way to move a million dollars all the way, through air, land, and sea. It's so much easier to hide a pen drive or a laptop.
- lottin 6y ago
  Except it's not hidden in a laptop. Your balance and your entire transaction history is on the blockchain for everyone to see.
  - Supermancho 6y ago
    Imagine a tumbler, where fractions of bitcoins are taken in (say 100 bitcoin split into 1000 pieces each) then from 1000 people (including you and you're "illicit" 100 bitcoin) and then you get back 100000 pieces, passed on to another tumbler until eventually you get back 100000 randomized pieces = 100 bitcoin. Where did all those pieces come from and why? How do you connect that in the blockchain ledger to prove the income is illicit?
    - markwkw 6y ago
      Is bitcoin tumbling feasible anymore? First problem: transaction fees are currently over $10 per transaction. Second problem: max transactions per block (2k?). Wouldn’t a single tumbling instance of 100k pieces completely fill 50 bitcoin blocks, effectively browning out the system?
    - lottin 6y ago
      What happens if the tumbler "loses" your bitcoins?
      - Supermancho 6y ago
        Same thing that happens when a bookie "loses" your bet. Probably nothing. There are illicit activities which use systems of trust based on past behavior just like in the "legal" world and there are usually consequences. Coinbase, shockingly, violated trust on both sides and is still being hyped. Doesn't take much to understand what a terrible investment that is.
AnonsLadder 6y ago
>As far as I can tell, hundreds of millions in drugs and contraband are regularly transacted using Bitcoin What a hilarious claim. Everything else you've said just confirms you've fallen for the "BTC bad" narrative. I wonder how you feel about you-know-who printing unlimited toilet paper money for their own benefits.
zelly 6y ago
It's not. All of the DNMs have switched to Monero already. Ransomware is also changing to Monero. Anyone using Bitcoin for illegal stuff at this point will be caught.
- deleted 6y ago
  [deleted]
- birdyrooster 6y ago
  Correction: Anyone running a large business using bitcoin for illegal stuff is likely to be caught at this point.
  - m00dy 6y ago
    +1 nice correction.
  - tim333 6y ago
    Correction: Anyone running a large business using bitcoin for illegal stuff that isn't based some place like Russia is likely to be caught at this point.
- jcampbell1 6y ago
  Even the 1Feex wallet that has the stolen Mt. Gox funds (now worth $5B) hasn't been touched. Bitcoin has been radioactive for illegal stuff for a while.
  - spottybanana 6y ago
    Or the owner might just have died or might be in prison. I'm pretty sure that the reason for not moving those coins is because BTC is radioactive. It might be partly a reason, but surely not the only reason. If you really needed the money you could try several methods to launder them.
    - smeej 6y ago
      You could try, but miners aren't going to include a transaction from that address in a block, especially not to some sort of mixing service. It takes something pretty extreme to get the consensus of enough miners to matter, but the hack of Mt. Gox was that extreme.
cm2187 6y ago
Why does it cost anything to de-anonymise anyone? Aren’t all transactions observable in the public ledger? Then all you need to do is to observe one transaction and follow the money, or catch the identity of the person when going through a regulated exchange. Am I missing something?
- reidjs 6y ago
  There are ways to get Bitcoin that avoid centralized exchanges.
  - randomopining 6y ago
    Anonymously buying in cash/something else via p2p. Mining. Are there any others?
argvargc 6y ago
> As far as I can tell, Sources?
vinay427 6y ago
Darknet markets almost universally advise against using BTC that hasn't been explicitly anonymized, a process that costs money and effort and requires knowhow to do properly. Mixers, tunneling through a private cryptocurrency, or other methods almost all involve transaction fees. Few people are seriously engaging in trading contraband without this overhead.
gher-shyu3i 6y ago
> hundreds of millions in drugs and contraband are regularly transacted using Bitcoin. Billions in global capital controls and taxes are evaded every day with Bitcoin The same applies with fiat. This is a tired argument against cryptocurrencies. It seems that HN has been upvoting anti-bitcoin content for the past few days now.
- vanviegen 6y ago
  > The same applies with fiat. This is a tired argument against cryptocurrencies. Yes, but the difference is that for fiat this amounts to a small percentage.
  - dnh44 6y ago
    Possibly not if you're talking about €500 notes.
WinstonSmith84 6y ago
> Bitcoin can be traced by sophisticated nation state actors at the cost of tens of millions per intercepted target. Please... Bitcoin transactions can be traced by whoever has a laptop and internet. If you want to stay anonymous, there is nothing worse than Bitcoin. Do yourself a favour and switch to Monero and similar which offer some level of privacy. But there is nothing better than the good old bank notes. Anyway, please educate yourself https://en.wikipedia.org/wiki/Bitcoin https://en.wikipedia.org/wiki/Bitcoin
- Tenoke 6y ago
  How is a guy with a laptop and internet know that the start/end address at e.g. an exchange is connected to me specifically? Sure, they can trace all the transactions of an address but you need more than that to connect the address to a specific person. Of course, Monero is a better option but even with BTC it's not as trivial as you claim.
  - monokh 6y ago
    It doesn't by itself, but it's a much better start. You can simply match up addresses with activity from other digital systems. That link is present in a global, transparent, up to the minute, cheap to ingest data source (the blockchain). Comparing that to any other payment system (or combination of) where there is due process in collecting this information (hopefully accurate and valid) you're going to have a much easier time developing tools to detect and alert with Bitcoin.
    - jjk166 6y ago
      So you need is a financial institution to give you unrestricted access to their records. And it can't be just any financial institution, it has to be the one used by the person you are targeting. And you don't know what financial institution that is because you are still trying to identify who the address belongs to. So really all you need is unrestricted access to many financial institutions' records.
  - tgv 6y ago
trident5000 6y ago
Lol classic Bitcoin price goes up and HN goes on attack. Whats with it with this site?
- Lordarminius 6y ago
  They hate bitcoin here
ajkdhcb2 6y ago
The information is there but law enforcement hasn't widely used it for mass arrests -- just not yet. There is also wide evidence of crime on Facebook messages that goes unnoticed but that doesn't mean it is private.
kumarvvr 6y ago
History shows that reducing costs of computing, and the availability of on-demand large scale computing, will make is exponentially cheaper to do such tracing as time goes. I would not be surprised if there will be agencies that will bid on tracing services.
KaiserPro 6y ago
> Bitcoin deanonymization is probably a small risk in the scheme of things its really not. unlike cash or bearer bonds, _all_ transactions are recorded in perpetuity. That's literally the entire selling point of bitcoin, the ledger is opensource and universal. Given that virtually all money going into and coming out of bitcoin is through establishments that have financial licenses, its perfectly trivial to trace the flow of money from its first exchange of real cash for bitcoin, to when its used for illicit purposes. You're currently labouring under the impression that tracing cash flows in the real world is hard. its not, especially for a government. what is hard is proving that its illicit. cash is fungible, as in each unit of currency has no ID. so its much harder to prove that this $1 came from a drug sale. with bitcoin, you have a public wallet, and a clear lineage of transactions from start to end.
- snypher 6y ago
  I often see this argument as though in the future some advance technology can go back through the ledger and de-anon people. Outside of some exchange link keeping a name = address record, the public wallet doesn't really expose you as there's no link between an address and a person. Also, that $1 can be charged with crime and sized directly. Good luck siezing a brainwallet etc.
  - Retric 6y ago
    Plenty of Bitcoins have been sized. People don’t memorize their private keys, they store them somewhere. It’s quite hard to minimize the attack surface of your crypto currency without also risking the coins being lost.
    - selfhoster11 6y ago
      Then that is entirely on them.
  - nend 6y ago
    It sounds like to me that the argument isn't that an advanced technology will go back through the ledger and identify people. It's that once people have been identified/linked to a public wallet, it's really easy to determine how they spent bitcoin because the record is public and permanent.
lumost 6y ago
The only difficult to trace transactions in Bitcoin is from transactions which occur purely in btc and don’t touch anyone with a financial license. Think drug dealers/gangs recirculating bitcoins mined years ago. Now the tricky part of this is that it would only take knowledge of a few transactions in the networks identity, complete with purpose to start identifying everyone. I’m sure an AG is looking forward to the largest RICO case in history at that point. I’m sure that folks looking to anonymize are aware of this and take further precautions, I’m also sure that there is someone in the network who is dumb. If I was in law enforcement I’d make btc address collection a top priority.
antonios 6y ago
> As far as I can tell, hundreds of millions in drugs and contraband are regularly transacted using Bitcoin. Billions in global capital controls and taxes are evaded every day with Bitcoin. The fraction of black market participants who are revealed on the basis of "chain analysis" is still a rounding error. Some bold statements there. Do you have any evidence to provide?
2ion 6y ago
Looking at how my nation state is moving to tax even more despite having world highest tax rates, I'd say evading taxes and capital controls is going to be a feature for me as well in the not so distant future. Citizens evading getting taxed to financial death is a pretty legit - surely not legal - use of technology.
bogwog 6y ago
> Bitcoin can be traced by sophisticated nation state actors at the cost of tens of millions per intercepted target Do you have a source for that number, or did you just pull it out of thin air?
nickik 6y ago
I have a friend who works at local police in Europe, and they already regularly use commercial tools to analyze the blockchain and find what service people used to get the names and so on. This is a mid sized town in Europe, not some major department. Funny how in the hack space some people explained how to buy drugs with bitcoin, others showed how they can track you anyways.

dumbfoundded 6y ago

It can be pretty anonymous too. You can use fiat to buy mining hardware and then it's pretty hard to connect an identity to a wallet if you're careful. Don't you eventually need fiat? Yes, so you have someone sell NFTs to those untraceable wallets and now you have a legit income stream as an artist. Pay the tax in the place you want your money to end up and you really only need like one person in your destination country to clean as much as you'd like.

dragonelite 6y ago
You pretty much need to go through a Know your customer(KYC) process to really trade in crypto. At least here in western Europe i had to upload a Id doc, I don't mind it because saving money costs me money, buying satoshis earns me money. Given cryptos nature of being a public ledger and there more then enough compute power available everything can probably be traced and backtracked in real-time.
- atat7024 6y ago
  > You pretty much need to go through a Know your customer(KYC) process to really trade in crypto KuCoin? Binance?
  - arcticbull 6y ago
    Binance is a great example because you can just keep creating new accounts to circumvent their KYC limits heh. I'm sure they have no idea. You just have to take it up with the government in whatever country they're domiciled in. Like any legitimate company, they simply won't tell anyone which country that is, of course.
  - dragonelite 6y ago
    A more local crypto exchange, when I started buying bitcoin it was harder to get euros in and out of Binance. Seeing how I'm not really a dissident or a rebel and I'm lazy so I'm not going to jump through multiple hoops. So I don't mind the KYC process so I don't have to jump through hoops, but I do see how nations can use lawfare to attack/monitor crypto currencies, its not that hard to see. You have a open ledger, you have wallet addresses connected to personal identities. They can probably use social media connection graphs to fill in the gaps of unknown wallet addresses. Its a real time financial monitoring tool like the current system, just packaged up as some libertarian/tech bro nirvana escape hatch. Brilliant marketing if you ask me, but I'm just using it as an inflation hedge.
    - randomopining 6y ago
      Yeah literally, is it not just a connected graph of transactions? Sounds like smart people can split and roll and all this stuff to their main transaction to try to obfuscate it. But with the proper tool, couldn't the FBI use powerful computers to fill the graph in with human links and deduce a lot from it? XMR I don't know though.
      - dragonelite 6y ago
        I don't know enough, but the moment I saw I needed to go through a Know your customer process I knew block chain privacy is compromised. Wouldn't be surprised if there are ways to obfuscate your bitcoins. Something like wrapped bitcoins or something. For the time being you already have block chain analytics companies that can trace and back trace transactions. Hell maybe they can even do it cross chain. I wouldn't be surprised if a NSA or other nat sec organization can hack something together in a weekend.
- dumbfoundded 6y ago
  Only in the destination country. Let's say someone in China wanted to move $$$$ out of China for whatever reason. They could use yuan to purchase mining hardware and use that to generate clean wallets with no identity attached. A good friend of this person is an artist in the UK. The artist cashes in the ETH, properly reports taxes from income, and now has a completely clean and clear source of cash. Now if the Chinese person wants to get out of China in a hurry, they can visit their close friend in the UK.
  - powerapple 6y ago
    I believe this is how it works at the beginning, and I consider it as the main use of crypto in China. It was actually easier when exchange was legal in China, you can just buy bitcoin. Even now, you can use AliPay, WeChat and bank transfer to do P2P crypto transaction.
  - ninjinxo 6y ago
    Being generous you can mine ~$10 of crypto per day with a 3080 based on its hashrate, zero electricity cost. So to transfer $1 million out over 3 years, you'd need to run mine ~$900 of crypto per day, ie. run 90 RTX3080s 24/7/365. Also note that this would draw around 20kW. [1] https://www.nicehash.com/profitability-calculator/nvidia-rtx-3080 https://www.nicehash.com/profitability-calculator/nvidia-rtx...
    - ALittleLight 6y ago
      Googling I see the price of a 3080 is 700 dollars, so this would cost 700 * 90 = 63,000. Plus electricity, which, maybe you can get cheap somehow in China if you have the right friends. Seems like an amount this size is pretty small compared to what you're moving. If you think bitcoin will go up long term then the cost might work out to be negative.
      - africanboy 6y ago
        > Googling I see the price of a 3080 is 700 dollars assuming you're able to buy them and have the money upfront and are able to hide the purchase. "What this person could be doing with 90 3080, I wonder" asks the Chinese government employee that checks your bank transactions. https://www.techradar.com/news/nvidia-rtx-3080-shortage-could-continue-until-q3 https://www.techradar.com/news/nvidia-rtx-3080-shortage-coul...

AYBABTME 6y ago

What are the features of the problem that make you think deanonymization is computationally impractical for non-nation states?

vntok 6y ago
Here is a link to a very high level layman explanation: https://en.wikipedia.org/wiki/Cryptocurrency_tumbler https://en.wikipedia.org/wiki/Cryptocurrency_tumbler
colinmhayes 6y ago
non-nations states don't have access to the exchange logs

exdsq 6y ago

If I was a local drug kingpin I could reduce risk with cash. At some point I’d need to sell my Bitcoin and that’d appear in my bank.

atat7024 6y ago
Why not someone else's bank...? That thinking is quite shallow.
- exdsq 6y ago
  Sure so now you’ve paid it to their account what happens? They will be investigated for unknown wealth. At some point they’ll need to move that money to the drug dealer - either by cash or another bank transfer.
  - colinmhayes 6y ago
    You show up at their house and escort them to the bank where they withdraw the money and give it to you?
jmnicolas 6y ago
But with cash you'd have an inflation tax on everything you earn. And depending on where you live you wouldn't be able to make big purchases in cash (in France I think the maximum cash transaction allowed is about 3000€). BTC or cash you would have to launder your money to make it look like legit and be able to buy a house etc Of course the other problem of BTC is that transactions are stored forever (as long as the BTC network operates) so it might bite you decades later.
- arcticbull 6y ago
  > But with cash you'd have an inflation tax on everything you earn. This has to be the worst reason a drug dealer would avoid dealing in cash ever. Inflation is literally 2% per annum. Drug dealers pay 20%-50% to launder their money. C'mon now.
- 6y ago

justAnIdea 6y ago

yea, yea, orange coin bad, we get it... meanwhile 63.5k ATH, but keep poo pooing

arcticbull 6y ago

> But if I was a local drug kingpin in Baltimore, or a corrupt mid-level CCP official, or a Cypriot corporate money launderer, then Bitcoin deanonymization is probably a small risk in the scheme of things. Certainly orders of magnitude less risk than using the traditional banking system. ... for now. The thing is, 2-3 tx/sec is basically snail mail. That's such a small number of transactions that there's not even a forest to hide within. As the analytics tools improve the de-anonymization will be faster and more automatic, and that "tens of millions" figure will dwindle down to pennies. State actors can easily combine that data with actual fiat, and you'll be in court before you know it. The problem is you're committing a ledger of your criminal activity to the cloud forever, and CCing your attorney general, smirking that they'll never figure it out. Of course they will. Either they'll figure it out or ban it. Or both.

spurdoman77 6y ago
Even in the ancient Silk Road you could sell contraband effectively using internal, offchain transactions only. The customers pay using offchain transactions using the market, and the vendor can cash out via some trader in the same market.
- Mandatum 6y ago
  Like Hawala?
  - spurdoman77 6y ago
    No, not at all. Basically, if you dont want to deal with the onchain transactions, you could sell the risk of that to someone else and only deal in internal offchain transactions. Dont know if this actually happens though.
VMG 6y ago
Bitcoin transactions don't have to be on-chain https://en.wikipedia.org/wiki/Lightning_Network https://en.wikipedia.org/wiki/Lightning_Network

mrb 6y ago

«As far as I can tell, hundreds of millions in drugs and contraband are regularly transacted using Bitcoin. Billions in global capital controls and taxes are evaded every day with Bitcoin» That is completely unsubstantiated. You have no evidence for that.

posixplz 6y ago
It’s a fair inference given the size and rate of known Bitcoin black market busts. In one search, I found a paper that estimates $76B worth of Bitcoin is used in illegal trade per year. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3102645 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3102645
- mrb 6y ago
  I remember this paper. A major flaw that was pointed out to the authors (and never corrected) is that Bitcoin tumbling services—popular among illicit users—artificially increase the transaction volumes. So if tumbling services puts the BTC on average through 10 transactions, then this will multiply by 10-fold the volume. In other words there wouldn't be $76B transacted annually, but only $7.6B. Tumbling also makes some of their other figures unbelievable. For example in table 2 they report "181.82%" of all users transactions attempt to use tumbling services... I have little confidence in this paper being accurate.
goldsteinq 6y ago
Russian darknet market Hydra, which is probably the biggest darknet market in the world, uses only Bitcoin for everything.
rafaelvasco 6y ago
OP doesn't or you doesn't ? OP appears to have plenty.

muzani 6y ago

Imagine if you were a drug dealer smuggling in a million dollars of cocaine into Chicago from Mexico. Great, you got the drugs in, now how do you get the money back out? You'll still have to find a way to move a million dollars all the way, through air, land, and sea. It's so much easier to hide a pen drive or a laptop.

lottin 6y ago
Except it's not hidden in a laptop. Your balance and your entire transaction history is on the blockchain for everyone to see.
- Supermancho 6y ago
  Imagine a tumbler, where fractions of bitcoins are taken in (say 100 bitcoin split into 1000 pieces each) then from 1000 people (including you and you're "illicit" 100 bitcoin) and then you get back 100000 pieces, passed on to another tumbler until eventually you get back 100000 randomized pieces = 100 bitcoin. Where did all those pieces come from and why? How do you connect that in the blockchain ledger to prove the income is illicit?
  - markwkw 6y ago
    Is bitcoin tumbling feasible anymore? First problem: transaction fees are currently over $10 per transaction. Second problem: max transactions per block (2k?). Wouldn’t a single tumbling instance of 100k pieces completely fill 50 bitcoin blocks, effectively browning out the system?
  - lottin 6y ago
    What happens if the tumbler "loses" your bitcoins?
    - Supermancho 6y ago
      Same thing that happens when a bookie "loses" your bet. Probably nothing. There are illicit activities which use systems of trust based on past behavior just like in the "legal" world and there are usually consequences. Coinbase, shockingly, violated trust on both sides and is still being hyped. Doesn't take much to understand what a terrible investment that is.

AnonsLadder 6y ago

>As far as I can tell, hundreds of millions in drugs and contraband are regularly transacted using Bitcoin What a hilarious claim. Everything else you've said just confirms you've fallen for the "BTC bad" narrative. I wonder how you feel about you-know-who printing unlimited toilet paper money for their own benefits.

zelly 6y ago

It's not. All of the DNMs have switched to Monero already. Ransomware is also changing to Monero. Anyone using Bitcoin for illegal stuff at this point will be caught.

deleted 6y ago
[deleted]
birdyrooster 6y ago
Correction: Anyone running a large business using bitcoin for illegal stuff is likely to be caught at this point.
- m00dy 6y ago
  +1 nice correction.
- tim333 6y ago
  Correction: Anyone running a large business using bitcoin for illegal stuff that isn't based some place like Russia is likely to be caught at this point.
jcampbell1 6y ago
Even the 1Feex wallet that has the stolen Mt. Gox funds (now worth $5B) hasn't been touched. Bitcoin has been radioactive for illegal stuff for a while.
- spottybanana 6y ago
  Or the owner might just have died or might be in prison. I'm pretty sure that the reason for not moving those coins is because BTC is radioactive. It might be partly a reason, but surely not the only reason. If you really needed the money you could try several methods to launder them.
  - smeej 6y ago
    You could try, but miners aren't going to include a transaction from that address in a block, especially not to some sort of mixing service. It takes something pretty extreme to get the consensus of enough miners to matter, but the hack of Mt. Gox was that extreme.

cm2187 6y ago

Why does it cost anything to de-anonymise anyone? Aren’t all transactions observable in the public ledger? Then all you need to do is to observe one transaction and follow the money, or catch the identity of the person when going through a regulated exchange. Am I missing something?

reidjs 6y ago
There are ways to get Bitcoin that avoid centralized exchanges.
- randomopining 6y ago
  Anonymously buying in cash/something else via p2p. Mining. Are there any others?

argvargc 6y ago

> As far as I can tell, Sources?

vinay427 6y ago

Darknet markets almost universally advise against using BTC that hasn't been explicitly anonymized, a process that costs money and effort and requires knowhow to do properly. Mixers, tunneling through a private cryptocurrency, or other methods almost all involve transaction fees. Few people are seriously engaging in trading contraband without this overhead.

gher-shyu3i 6y ago

> hundreds of millions in drugs and contraband are regularly transacted using Bitcoin. Billions in global capital controls and taxes are evaded every day with Bitcoin The same applies with fiat. This is a tired argument against cryptocurrencies. It seems that HN has been upvoting anti-bitcoin content for the past few days now.

vanviegen 6y ago
> The same applies with fiat. This is a tired argument against cryptocurrencies. Yes, but the difference is that for fiat this amounts to a small percentage.
- dnh44 6y ago
  Possibly not if you're talking about €500 notes.

WinstonSmith84 6y ago

> Bitcoin can be traced by sophisticated nation state actors at the cost of tens of millions per intercepted target. Please... Bitcoin transactions can be traced by whoever has a laptop and internet. If you want to stay anonymous, there is nothing worse than Bitcoin. Do yourself a favour and switch to Monero and similar which offer some level of privacy. But there is nothing better than the good old bank notes. Anyway, please educate yourself https://en.wikipedia.org/wiki/Bitcoin https://en.wikipedia.org/wiki/Bitcoin

Tenoke 6y ago
How is a guy with a laptop and internet know that the start/end address at e.g. an exchange is connected to me specifically? Sure, they can trace all the transactions of an address but you need more than that to connect the address to a specific person. Of course, Monero is a better option but even with BTC it's not as trivial as you claim.
- monokh 6y ago
  It doesn't by itself, but it's a much better start. You can simply match up addresses with activity from other digital systems. That link is present in a global, transparent, up to the minute, cheap to ingest data source (the blockchain). Comparing that to any other payment system (or combination of) where there is due process in collecting this information (hopefully accurate and valid) you're going to have a much easier time developing tools to detect and alert with Bitcoin.
  - jjk166 6y ago
    So you need is a financial institution to give you unrestricted access to their records. And it can't be just any financial institution, it has to be the one used by the person you are targeting. And you don't know what financial institution that is because you are still trying to identify who the address belongs to. So really all you need is unrestricted access to many financial institutions' records.
- tgv 6y ago

trident5000 6y ago

Lol classic Bitcoin price goes up and HN goes on attack. Whats with it with this site?

Lordarminius 6y ago
They hate bitcoin here

ajkdhcb2 6y ago

The information is there but law enforcement hasn't widely used it for mass arrests -- just not yet. There is also wide evidence of crime on Facebook messages that goes unnoticed but that doesn't mean it is private.

kumarvvr 6y ago

History shows that reducing costs of computing, and the availability of on-demand large scale computing, will make is exponentially cheaper to do such tracing as time goes. I would not be surprised if there will be agencies that will bid on tracing services.

KaiserPro 6y ago

> Bitcoin deanonymization is probably a small risk in the scheme of things its really not. unlike cash or bearer bonds, _all_ transactions are recorded in perpetuity. That's literally the entire selling point of bitcoin, the ledger is opensource and universal. Given that virtually all money going into and coming out of bitcoin is through establishments that have financial licenses, its perfectly trivial to trace the flow of money from its first exchange of real cash for bitcoin, to when its used for illicit purposes. You're currently labouring under the impression that tracing cash flows in the real world is hard. its not, especially for a government. what is hard is proving that its illicit. cash is fungible, as in each unit of currency has no ID. so its much harder to prove that this $1 came from a drug sale. with bitcoin, you have a public wallet, and a clear lineage of transactions from start to end.

snypher 6y ago
I often see this argument as though in the future some advance technology can go back through the ledger and de-anon people. Outside of some exchange link keeping a name = address record, the public wallet doesn't really expose you as there's no link between an address and a person. Also, that $1 can be charged with crime and sized directly. Good luck siezing a brainwallet etc.
- Retric 6y ago
  Plenty of Bitcoins have been sized. People don’t memorize their private keys, they store them somewhere. It’s quite hard to minimize the attack surface of your crypto currency without also risking the coins being lost.
  - selfhoster11 6y ago
    Then that is entirely on them.
- nend 6y ago
  It sounds like to me that the argument isn't that an advanced technology will go back through the ledger and identify people. It's that once people have been identified/linked to a public wallet, it's really easy to determine how they spent bitcoin because the record is public and permanent.

lumost 6y ago

The only difficult to trace transactions in Bitcoin is from transactions which occur purely in btc and don’t touch anyone with a financial license. Think drug dealers/gangs recirculating bitcoins mined years ago. Now the tricky part of this is that it would only take knowledge of a few transactions in the networks identity, complete with purpose to start identifying everyone. I’m sure an AG is looking forward to the largest RICO case in history at that point. I’m sure that folks looking to anonymize are aware of this and take further precautions, I’m also sure that there is someone in the network who is dumb. If I was in law enforcement I’d make btc address collection a top priority.

antonios 6y ago

> As far as I can tell, hundreds of millions in drugs and contraband are regularly transacted using Bitcoin. Billions in global capital controls and taxes are evaded every day with Bitcoin. The fraction of black market participants who are revealed on the basis of "chain analysis" is still a rounding error. Some bold statements there. Do you have any evidence to provide?

2ion 6y ago

Looking at how my nation state is moving to tax even more despite having world highest tax rates, I'd say evading taxes and capital controls is going to be a feature for me as well in the not so distant future. Citizens evading getting taxed to financial death is a pretty legit - surely not legal - use of technology.

bogwog 6y ago

> Bitcoin can be traced by sophisticated nation state actors at the cost of tens of millions per intercepted target Do you have a source for that number, or did you just pull it out of thin air?

nickik 6y ago

I have a friend who works at local police in Europe, and they already regularly use commercial tools to analyze the blockchain and find what service people used to get the names and so on. This is a mid sized town in Europe, not some major department. Funny how in the hack space some people explained how to buy drugs with bitcoin, others showed how they can track you anyways.