24 ms·

Bitcoin's fungibility graveyard

252 points by rzk 5y ago

alienalp 5y ago
If you think like that there is nothing fungible in this world. Even gold probably can be traced by impurities in it although precious metals are definitely fungible enough compared to any other thing. Bitcoin is not creating any value for humanity's sake at this point it is just environmental disaster. Its supporters are retarded so they won't switch to POS. Governments has to interfere however they are also scared. They don't really know what to think nor how to react. However bitcoin may be causing some good in indirect ways. I really find ecosystem that cryptocurrencies created. I like crypto exchanges. In future they may serve to trade wide variety of real assets. (It is already possible though) Smart contracts are also good if i am not getting it wrong zkrollups may make defi scalable enough to be used by masses.
matheusmoreira 5y ago
Yeah, it's a privacy nightmare. The exchanges refuse our money if it has ever passed through a privacy service and they continue to track what we do with it even after it's been withdrawn from our accounts. Nice to have a collection of examples I can point to whenever someone says bitcoin is fungible. It makes no sense to me how bitcoin is still number one cryptocurrency despite it's garbage fundamentals. Failed at everything it was supposed to do.
- alienalp 5y ago
  What are you expecting exchanges to do? If you passed through privacy service you need to prove that your money is not associated with crimes. It is completely your fault. I am actually happy to hear that people who are laundering money will have hard time. On the other hand bitcoin is shitcoin. That is a fact anybody shills bitcoin is possible scammer. Anybody says bitcoin is future is retarded.
- delusional 5y ago
  Because the intersection of the stated goals and the actual goals is essentially empty. The actual goal isn't to be useful, it's to make the early adopters rich.
  - dandare 5y ago
    That's brilliantly said! The argumentation of typical crypto fan is like the motte and bailey fallacy mounted on a helicopter rotor, constantly oscillating between some noble goals (decentralisation, freedom, privacy, anti-inflation, anti-fractional banking) and the "have fun staying poor" snark.
  - TillE 5y ago
    It's such a bizarre industry because I think the technical issues are really interesting and the potential for cryptocurrency is huge, but in practice it's 99% about speculators trying to get rich quick. That's really boring!
    - leppr 5y ago
      It is, but there's probably more actual interesting development and design activity going on than you realize. There's simply a real discovery problem, because of the aforementioned gold rush. Participants have too many incentives to bury accurate information that speaks against their investment, spread misinformation that embellishes it, suppress information about projects they want to invest in but didn't yet, ...
    - astrange 5y ago
      "The technical issues are really interesting" is how you know it's a scam. It's like working for Facebook; they keep everyone interested by having them write unnecessary but interesting projects like new build systems and new PHP runtimes. Except that every contribution makes the price of ETH go up, and FB pays you.
      - edrxty 5y ago
        I...think you just described society
  - _alex_ 5y ago
    that's an ignorant statement. There is a ton of development and deployment happening to make the Lightning Network be a high-throughput, low cost way to move bitcoin around the world. A lot of people are working to make bitcoin more useful to more people.
- magicjosh 5y ago
  It really does seem like the main purpose Bitcoin is succeeding at is sort of a digital gold. It's not good as cash, privacy, or anything else. Lightning seems like a joke compared to the types of efforts happening on Ethereum. Appreciate this thorough analysis of problems with cryptocurrency. Disclosure: crypto owner
  - dmihal 5y ago
    One project I'm following is Aztec Protocol. It's an Ethereum L2 (so faster & cheaper transactions, similar to Lightning) but it supports any Ethereum asset (ETH, USDC, WBTC) and is fully private.
    - itvision 5y ago
      The only thing that goes for Ethereum is the fact that it's used for creating worthless numerous other pump and dump crypto currencies on top of its blockchain where Shiba Inu is the latest glorious example. Solves nothing, serves no purpose but increases the demand for Ethereum transactions which ultimately drives the cost of Ethereum. All those poor sods who have invested in Shiba Inu? Plain idiots to put it mildly. Oh, and NFTs as well. Another worthless crap just to create more Ethereum transactions. Why worthless? Because ... Ethereum is just one of multiple crypto currencies/block chains and tell me again why your particular NFT on top of Ethereum is worth more than the same object on another blockchain? And how many times can the same object be (re)sold on all other blockchains? Do you need to own all of them? Or Ethereum NFT is somehow better?
      - stavros 5y ago
        Aren't NFTs very very useful for money laundering?
      - dlubarov 5y ago
        No affiliation with Aztec, but it's absurd to lump them in the same bucket as Shiba. > pump and dump crypto currencies Aztec has been in development since 2017, and has solved some real problems in cryptography in order to accomplish their goals. Besides, it doesn't have its own token, so there's nothing to pump. > Solves nothing, serves no purpose It allows Ethereum users to transact in private. > but increases the demand for Ethereum transactions which ultimately drives the cost of Ethereum It does the opposite, since it's a rollup - the transactions happen off-chain.
- can16358p 5y ago
  Even though Bitcoin failed at many things, I don't see it as a failure as it literally started it all. All the other cryptos are created after Bitcoin and learned from its shortcomings to build something better.
  - Brian_K_White 5y ago
    It did create and then prove an incredible and utterly novel and important concept. Your downvotes are invalid. I don't own and never have owned any btc, or any other crypto, and at this point wouldn't touch btc in particular with a 10' pole for several different reasons. But the very concept of a distributed ledger that may actually be trusted is both revolutionary and proved. It's collossal despite all the current degenerate uses and wasteful implementations.
  - z3c0 5y ago
    Agreed. When the integrity of the chain is compromised, I'll call it a failure. In the meantime, I'll leave it to the opinionated pissants on both sides to continue acting like they understand anything about what's to come from a system with so little precedence.
- itvision 5y ago
  > It makes no sense to me how bitcoin is still number one cryptocurrency despite it's garbage fundamentals. Failed at everything it was supposed to do. It hasn't failed at not being controlled by people which fiat currencies have failed completely. Do you control the inflation rate? Do you control how much currency is being minted? And tons of other things.
  - JumpCrisscross 5y ago
    > hasn't failed at not being controlled by people which fiat currencies have failed completely. Do you control the inflation rate? Bitcoin has proven to be a worthless dollar inflation hedge. It’s more correlated to the stock market than any real dollar.
    - trhway 5y ago
      Like a marshland for tidal water, stock is best inflation hedge working by sponging the overflowing inflational liquidity, and no wonder that Bitcoin behave similarly.
      - JumpCrisscross 5y ago
        > stock is best inflation hedge working by sponging the overflowing inflational liquidity, and no wonder that Bitcoin behave similarly Agree on the mechanics. Equities are a classic inflation hedge. But the reality is that if three people, in the last year, attempted an inflation hedge, one with TIPs or Series I bonds; one with equities; and one with Bitcoin, the last gained little over the middle. Both likely lost value relative to the first. If your inflation hedge loses value during inflation because the Fed will raise interest rates because of inflation, yes, there were external factors at play, but no, they’re not to blame, you hedged badly.
  - matheusmoreira 5y ago
    > Do you control the inflation rate? Do you control how much currency is being minted? Exchanges are essentially banks. They offer bitcoin loans, essentially creating new coins out of nowhere. Fixed money supply is utterly powerless before the inflationary power of debt.
- analognoise 5y ago
  It's Pokemon cards, but for tech bros.
- Geee 5y ago
  If you compare to Monero, you see that Monero isn't even allowed on these exchanges. So, it seems that you can't really have privacy combined with high exchange liquidity.
  - matheusmoreira 5y ago
    I was under the impression the exchanges chose not to list Monero voluntarily. After all, Binance does have it.
    - sgp_ 5y ago
      Kraken US supports Monero, so clearly it can be done. If another exchange chooses not to, that's a company making their own decision.
  - magicjosh 5y ago
    Can you explain what you mean by "high exchange liquidity"? My understanding is it's a policy issue not tech. Automated exchanges like Uniswap have Monero. edit: Uniswap has Wrapped Monero, not actual Monero.
    - popol12 5y ago
      Not answering to the question, just correcting your last phrase: Uniswap has wrapped monero (WXMR) which is not quite the same as Monero, and with a ridiculous liquidity of ~200k$ currently (https://geckoterminal.com/eth/pools/0x14c10b4bdccd9d3f8940fb79e0ee00121391d6de?utm_source=coingecko&utm_medium=referral&utm_campaign=livechart https://geckoterminal.com/eth/pools/0x14c10b4bdccd9d3f8940fb...)
      - matheusmoreira 5y ago
        How does wrapped monero work? I've seen a lot of wrapped coins but I'm not sure why they exist or why I would want to use them.
        5y ago
- notRobot 5y ago
  > The exchanges refuse our money if it has ever passed through a privacy service I'd love to learn more about this, does anyone have relevant links or info?
  - magicjosh 5y ago
    Here's a relevant episode of the ZK Podcast about cryptocurrency mixers: https://zeroknowledge.fm/111-2/ https://zeroknowledge.fm/111-2/
  - shubhamkrm 5y ago
    It's called "tainted Bitcoin". Basically, you can get a list of all transactions a coin was involved in since it was minted. If any of those transactions contain a blacklisted address, exchanges would refuse the token.
  - ur-whale 5y ago
    > I'd love to learn more about this, It's worse than this. Coinbase, for example, will close your account if you use you Bitcoins for things they don't approve of AFTER you withdraw them.
    - AlexandrB 5y ago
      This is... remarkable. Many cryptocurrency advocates have promoted bitcoin by making exaggerated claims regarding fiat currency's centralized control and lack of privacy. Now bitcoin itself exhibits the very characteristics that were often claimed about fiat currency, except it's not an exaggeration.
      - jakupovic 5y ago
        Easy solution don't use Coinbase. It's not the end of the world.
        ur-whale 5y ago
        > Easy solution don't use Coinbase I most certainly don't. But the hordes of clueless users who continue to flock to the platform are blissfully ignorant of that fact. Worse, the fact that coinbase is behaving in a way that's completely violating the spirit of Bitcoin while profiting from it doesn't solve the problem that what they are doing is possible because of a severe limitation of the platform. I am a big and very long time fan of Bitcoin, but the traceability / fungibility issue has bugged me from day one. I really wish the dev. community would focus on introducing a fork with an technical solution to this problem instead of polishing the turd with minor stuff no one really cares about like taproot.
- mattalex 5y ago
  > It makes no sense to me how bitcoin is still number one cryptocurrency despite it's garbage fundamentals. Failed at everything it was supposed to do. It doesn't matter that bitcoin failed in everything it set out to do (and more) because people don't "hodl" bitcoin for the things bitcoin set out to solve. They do so because the want to go "to the moon". If your only interest in crypto is speculative investment, then you aren't interested in the fact that bitcoin is broken beyond belief: The important thing is the market-recognition since that maximises the chance for high demand, which induces hyper-deflation, which sends you to the moon. Nobody, or very few people, care about crypto for any of its features and the people that tell you they do probably "hodl" substantial amounts of crypto and hope to drag you into the pump. There's not a single problem crypto solves without inducing a new party with equal amounts of leverage (i.e. you don't need VISA, but you do need exchanges) because at the end of the day, crypto is built to change the people that control the money rather than remove control structures entirely because that's impossible: there are always going to be people that facilitate the interaction of the blockchain with the real world and these interpreters/resolvers are the powers in crypto. However, that doesn't matter: nobody buys crypto the currency, they buy crypto the investment and from that POV bitcoin is still the non-plus-ultra in speculative hyper-deflations.
  - creamyhorror 5y ago
    > crypto is built to change the people that control the money Yep, crypto is a revolution being staged to replace the establishment (central banks and traditional finance) with a new one (crypto/defi founders and adopters). The goal is to use the new marketing to draw people to the new system and become the new rich. The earlier and more you buy into it, the more incentive you have to spread the word. This is why it makes sense to rebuild everything in crypto despite it being less efficient. It needs to be done, so that the new system (that replaces all parts of the old) is ready for people to be drawn into it.
    - gingeropolous 5y ago
      its less efficient because decentralized things are less efficient by design. they sacrifice efficiency for the authoritiless nature. That is the goal - to remove authority from money. Money should just exist and have rules and thats it. That's what cryptocurrencies are. to me, its that even if what is happening is that some new ruling class is being established, the difference is that the new ruling class won't be able to fundamentally change the rules anymore. Currently our monetary system is managed by rooms of Very Smart People that can change things at a whim and the cracks are starting to show. but yeah, things are interesting though.... there is a recent upswell of proof of stake, which is just central banking all over again. So the new system might end up looking the same as the old system if these PoS coins become more common. The difference is though is that bitcoin is unstoppable. Like, its price could be 40k, its price could be 400k. The protocol will still work. The old system has no choice but to adapt or whatever.
- leppr 5y ago
  There's one thing that Bitcoin does better than almost any other cryptocurrency right now, and it's being secure against consensus attacks. Ethereum comes close, Chia arguably surpasses it, but otherwise most cryptocurrencies could very easily succomb to collusion and majority attacks.
  - gnramires 5y ago
    Proof of stake chains are virtually immune to collusion and majority attacks. A single actor would need to own huge amount of resources and then essentially burn the coins. To purchase such a dominant stake the price would rise very quickly... making it very unlikely to be feasible. In comparison, attacking the larger Proof of work chains only requires a few $100M in hardware (the harder ones) and a MW-scale power source used sparingly. I don't see why PoW is still used...
    - leppr 5y ago
      They are not immune at all. The security assumptions are different. > A single actor would need to own huge amount of resources and then essentially burn the coins. To purchase such a dominant stake the price would rise very quickly... making it very unlikely to be feasible. You are assuming here a single-sided market where the existing majority holders are not interested in realizing profits on their holdings. For many cryptocurrencies this is not the case, especially the hyped VC-funded ones.
      - gnramires 5y ago
        If you are a large majority holder, selling off to a known exploiter is a very risky move. You might be able to realize great profits of the price increases. But you don't know how much the attacker has gathered from other sources. I think realistically it can happen, but a takeover attempt from buying a large stake should be plainly obvious. The community could even organize price fixing (i.e. "hold", which we've seen on WSB) to fend off the attack. You can even pull off something like forking the chain to invalidate the funds of the attacker -- it would be pretty obvious which stakeholders are responsible for the attack. For a chain where those coins are tainted or deleted from the chain. Those avenues are not really available for PoW chains... if an attacker gets the necessary hardware, there's not much you can do. You can try changing protocol, changing algorithms, etc. but this has obvious consequences of its own (making all mining hardware so far near worthless)... it's a bit scary to be honest.
- hyperhopper 5y ago
  How did it fail at creating a distributed database of a finite digital good made up of non-trustworthy actors? Yeah it's not a good currency but many design goals were reached.
- __MatrixMan__ 5y ago
  I think it was a proof of concept. It did its job, but the speculators can't let go.
- w_TF 5y ago
  It's amazing how they keep shifting the goal posts every couple years. First it was supposed to be digital cash, but then suddenly it's gold and now "digital property". When it became apparent that it's very wasteful they said the only thing hard money can be backed by is pure entropy.
- Quindecillion 5y ago
  > It makes no sense to me how bitcoin is still number one cryptocurrency despite it's garbage fundamentals. Failed at everything it was supposed to do. Peer-to-peer, permissionless, trustless (i.e. not controlled by any one entity), known issuance schedule, fixed maximum supply, and unyielding consensus parameters all still hold up today. Seems to be doing just fine at what it was "supposed to do".
vmception 5y ago
Hop into a lightning channel and then back out in a different address. That should theoretically work to break these heuristic models right? Exchanges are using software that assigns a threshold to each address' inputs or funds. You can easily trick the threshold.
- 28194608 5y ago
  what if the output of lightning came from mixed coins?
  - cliftonk 5y ago
    Output of a lightning channel is almost certainly more likely to contain mixed coins. The UTXO model is hopelessly outdated.
    - toolz 5y ago
      I strongly disagree, UTXO model will be necessary to scale smart contract platforms in the future as the account model will never hold up with the necessarily expensive sync operations it performs. UTXO model, or a derivative will win out when it comes to distributed blockchains that can scale way beyond current distributed blockchains capacity.
  - toolz 5y ago
    What if every coin is mixed, eventually? You think exchanges will just shutdown their bitcoin trades and throw away their likely biggest revenue stream?
    - matheusmoreira 5y ago
      Exchanges are already prejudiced against "unhosted" wallets. I think they'll eventually stop accepting deposits from any source other than other well known exchanges.
      - 5y ago
Ekaros 5y ago
Now I wonder would it be possible to taint all big players and pool productions by some action? How much would this cost in the end?
- zozbot234 5y ago
  It's not just possible, it's arguably the very threat that's driving this unraveling of the market in the first place. Because every large player will then seek to reject "tainted" coin/transactions, lest they be tainted in turn.
magicjosh 5y ago
The article mentions an account frozen after a deposit from a "far-right donor". I wonder how cryptocurrencies will fill the void left by platforms like GoFundMe. GoFundMe apparently just locked a $10M campaign as it violated their terms and conditions: https://www.opindia.com/2022/02/gofundme-removes-campaign-truckers-convoy-canada-withholds-over-9-million-dollars/ https://www.opindia.com/2022/02/gofundme-removes-campaign-tr...
- ferdowsi 5y ago
  GoFundMe is a facilitator for fundraising efforts. If someone wanted to start a far-right crowdfunding site they could without involving digital gold.
  - darawk 5y ago
    Or we could just have a politically neutral monetary system in the first place. Imagine that.
    - wyldfire 5y ago
      The money's pretty neutral but brokers like GoFundMe aren't and IMO shouldn't be compelled to be.
      - darawk 5y ago
        I agree with that, except in cases where the number of brokers is small and monopolistic. That's not strictly true for platforms like gofundme, but it is true for payment processors, who are the real choke points in the ecosystem. My issue with Gofundme isn't that they aren't politically neutral, it's that they took the money first, and then just decided to hold it hostage. Had they not accepted the trucker's money, or just refunded all the donors, or disbursed the funds to the org and then refused to accept anymore, any of those things would have been fine. But what they are doing here is tantamount to theft, and that I do believe brokers should be compelled not to do.
      - password4321 5y ago
lifewallet_dev 5y ago
Well, this argument falls whenever you try to use Bitcoin P2P (user to user shouldn't care where the coins come from) or with P2P exchanges like Bisq or Local Bitcoin. Now that's a different universe than what OPs lives (just by the fact Bitcoin goes up and down in fiat value would be enough to make it "non-fungible" by that logic), but I can assure you many of us exists. And I'm not even mentioning how Lightning Network fixes this as well, making coins very hard to impossible to track.
- magicjosh 5y ago
  Got an article on how Lightning fixes this? This article is alarming to me as a normie user. I'm curious about going off the big exchanges and using my coins. What if I receive crypto through OpenSea that Coinbase deems soiled? Although I don't like it, I could see private verification service popping up for P2P. "We make sure the coins are good before the transaction goes through". Makes me wonder how much of a "walled garden" Bitcoin is. Sure, hold it on exchanges all you want, but don't try to use it or we lock your account.
  - therein 5y ago
    It is no different than depositing to an exchange that doesn't do this and then withdrawing. Or some other service with a centralized wallet. That being said, those outputs will simply become someone else's problem later on, in limbo created by the uncertainty on whether them being held by an exchange clears their past history or not.
- darawk 5y ago
  That would stop being true for P2P if exchanges started blocking tainted coins, though. If that happened at scale, then P2P users would have to start validating themselves before accepting them, which is a real privacy nightmare. Of course, eventually exchanges will start blacklisting anyone with a mixer in their history, too.
- advisedwang 5y ago
  I think it basically still holds - I wouldn't want the bitcoins from someone I suspect got them from crime, knowing they could be traced forward and cause problems for me.
danlugo92 5y ago
Web3 + Lightning fixes this.
itvision 5y ago
> Bitcoin is often touted as a fungible and private asset [skipped] By whom? There's nothing like that here https://github.com/bitcoin/bitcoin https://github.com/bitcoin/bitcoin https://bitcoin.org/bitcoin.pdf https://bitcoin.org/bitcoin.pdf > and digital cash alternative That was the case from the beginning but it hasn't worked out. > Each bitcoin in circulation has a distinct history attached to it ensuring that 1BTC != 1BTC. What? The value is the same. Paper bills also have a distinct history. > While coin histories can be somewhat ofuscated with tools like CoinJoin, the fungibility of Bitcoin remains distinctly lacking. What? How's 1 BTC is not fungible [to another BTC] unless you're wanna hide your bitcoin transaction history? Is this what it's all about? Sorry to break it to the author but he seems to imply that Bitcoin is a privacy oriented electronic currency. It has never been "private". The whole ledger is public. If you don't like it, don't use it. You have Monero, Dash and Zcash and Bitcoin mixers if you wanna deal with ecurrencies without anyone being able to trace you.
- PragmaticPulp 5y ago
  > What? How's 1 BTC is not fungible [to another BTC] unless you're wanna hide your bitcoin transaction history? I think you’re deliberately ignoring the entire point that the article is making. The fact is that tainted transactions are becoming a thing as exchanges realize that they need to do something about addressing theft and fraud. It’s not even about your own transaction history. Assets acquired illegally, including Bitcoin, and and will be seized even after they change hands several times. Unless you mined the Bitcoin yourself (not through a pool, literally generates the block yourself) then it has a history attached that involves other people.
  - toolz 5y ago
    > that involves other people well if we're going this abstract then everything everywhere involves "other people". Pragmatically mining, even through a pool does not show who you are or who you are associated with as no one can associate you with anyone if they can't associate your coins with you. This idea that exchanges will stop handling coins from flagged addresses is nonsense - DEXes already solve that problem anyways, so an exchange will be willingly giving up business for legit customers who may have happened upon a coin with a less-than-legit history and they'll do nothing to prevent money with illicit history from making its way onto their platform.
TekMol 5y ago
Can Bitcoins still be tainted now that the Lightning Network is a thing? Sending them through a Lightning Channel would make them disappear without a trace, right?
- javert 5y ago
  I don't think so. I think you're likely to get tainted coins out of lightning, even if the coins you send in are untainted.
- _alex_ 5y ago
  it's gonna get even more interested when lightning channels look like normal transactions because of taproot
- sgp_ 5y ago
  This largely is not true. While privacy on LN is still being evaluated, it is also extremely complicated. There's no easy "privacy on LN" guide that's industry standard, for example. Monero comparatively is much older and much better understood on the privacy side (eg: see Breaking Monero).
pmontra 5y ago
All of this is new to me. So there are almost two Bitcoins, clean BTC and tainted BTC. If merchants can check if the history of a coin is clean or tainted they could refuse the sale or ask a higher price to hedge the risk of not being able to use the coin. Is there any service like that? Is that double prices dynamic already happening? Mining creates clean BTC, anything else risks tainting them. I expect that the ratio between prices in tainted / clean BTC will grow if the set of tainted coins increases compared to clean ones.
- vmception 5y ago
  > I expect that the ratio between prices in tainted / clean BTC will grow if the set of tainted coins increases compared to clean ones. I don't. I expect the absurdity will become more clear and make the whole attempt to flag them irrelevant. for example, after a national or municipal government seizes bitcoin under some semblance of due process or even an actual criminal charge and reauctions them, we are supposed to pretend those bitcoins are magically clean? do all the exchange softwares update to know that? they still have the transaction history from the event that flagged them to begin with. the answer is easier when it involves a government you respect like when the US Marshalls auction off a drug kingpin's seized bitcoin. but what about a government you don't respect? welp a sovereign nation seized it so they're clean now. If so, some random jurisdiction with some level of sovereignty can just become the bitcoin washer as a service, if not then exchanges are acting too arbitrarily and are going to lose business for no legal reason. Exchanges flag bitcoin to stay within an imagined impending compliance burden of being able to prove they don't accept dirty money. If they flag bitcoin with the clearest outcome of having been seized by the state and reintegrated into the economy, then they have made a hopeless error. People with ambiguously acquired bitcoin already have a dozen ways of getting it into bank accounts and cash, and will have even more in the future. So it's just the merchants and exchanges that have to make sure they are attracting business. For those reasons I don't see a separate exchange rate forming, its an average of fungibility that leads to the same result.
- toss1 5y ago
  Which means that if you really want to clean dirty BTC, you need to simply use it to pay for miners, then mine clean BTC.
vintermann 5y ago
The cryptocurrencies that "fix" this problem vary in the cryptographic tricks they use, but it all boils down to drafting everyone to act as fences as a condition of partaking in the system at all. It's a technical solution to a social problem. It won't work. You can always move value in, but out is another matter. Trading your Monero (or whatever) for legal-economy assets or currency may be criminalized any day.
- zozbot234 5y ago
  Isn't that the definition of fungibility? Every user of currency is implicitly a "fence" for every other user.
  - deleted 5y ago
    [deleted]
  - vintermann 5y ago
    No. Oil is fungible too - any barrel of a given grade is treated the same any other - but that doesn't mean oil buyers and sellers are fences for each other. What you're thinking of is the "current" aspect of currency. That when I take payment for a bagel in my shop, I don't need to worry that the money used to pay me was stolen, I still get to keep it. But this is a social, legal concept, not a technological one. Calling it a currency won't make it current. Fungibility doesn't make anything current either (if I was stupid enough to take payment for a bagel with a barrel of oil, I WOULD have to return it if it turned out it was stolen. I should have known there was something fishy!). No amount of cryptographic cleverness can force society to treat it as current.
    - ghostly_s 5y ago
      You actually can be compelled to forfeit money paid to you if it is found to be stolen (in the US, anyway).
    - ineedasername 5y ago
      I'm pretty sure cash falls into the "stolen goods" category, and you don't get to keep them even if you didn't know they were stolen. You'd have to give the bagel cash back just as much as the barrel of oil. (Well, in my jurisdiction. Source: family member is a lawyer)
garren 5y ago
This is news to me. I’m not super informed regarding cryptocurrencies, but it seems like this would also affect erc-20 “fungible” tokens on Ethereum, wouldn’t it? Do such tokens not also have traceable histories?
- scyclow 5y ago
  I wouldn't think so. BTC uses an unspent transaction output model, which is like breaking up a plot of land into smaller pieces, and treating each square inch as fungible. ERC20 tokens are based on an accounting model, so you're just incrementing and decrementing balances -- nothing to trace there.
  - magicjosh 5y ago
    I never thought of it that way. I wonder what the article's author thinks about Ethereum's privacy.
  - olalonde 5y ago
    The "accounting model" is even easier to trace, I'm not sure what you mean by that. For example, here are all USDT transactions: https://etherscan.io/token/0xdac17f958d2ee523a2206206994597c13d831ec7 https://etherscan.io/token/0xdac17f958d2ee523a2206206994597c...
    - magicjosh 5y ago
      Here's what I took away from the suggestion. Let's say I send you $100 USDT and Osama Bin Laden sends you $100 USDT. Then you send Justin Beiber $100 USDT and keep the remaining $100 USDT. Where are the tainted tokens? For Bitcoin these are UTXOs which are easy to trace, but not so for Ethereum and its tokens which just rely on accounting not UTXOs. Right?
      - lossolo 5y ago
        If Bin Laden sends $100 USDT to you, your address will be tainted because Osama sent you coin and proof of that will be in Transfer Log of ERC20 token. So if you send any amount of that token anywhere, recipient address will be also tainted, doesn't matter if it was Bieber part or Osama part.
hammyhavoc 5y ago
Can't help but feel like this is a puff piece for Monero. It's just how quickly it jumped into beating the drum for Monero.
- matheusmoreira 5y ago
  To be fair, Monero is a fungible privacy coin and a valid answer to all of those concerns.
  - fshbbdssbbgdd 5y ago
    I’m constantly surprised Monero’s market cap isn’t higher. It works better for all the use cases of crypto that genuinely add value, yet has a small fraction of the value of many coins that are used for nothing at all.
    - beaned 5y ago
      Because it actually works, Coinbase never added it. Regulatory pressure.
    - matheusmoreira 5y ago
      Good question. Monero is essentially everything bitcoin was supposed to be. Private, anonymous, more decentralized, you can actually mine it using general purpose computers, it's actually usable as a currency due to low fees and fast transactions. I've actually gotten paid for code in XMR, it's awesome. It's not even a good investment since it doesn't increase in value as fast as bitcoin but gets slaughtered whenever the market goes down. Would be nice if it stabilized in the $200 range.
    - Yizahi 5y ago
      Why should it be? Dollar genuinely adds value for most of human population and yet a single dollar "token" costs 1 dollar. If anything, the flat price of a token I would consider a very small but anyway a sign of maturity and usefulness, as opposed to speculation tokens. (stabletokens excluded of course)
Andrew_nenakhov 5y ago
I'll do you one better. Send a few tainted sats to a non-empty address of a person you don't like, and hurray, his coins are now tainted, giving him endless headache.
- ______-_-______ 5y ago
  Something similar has been done trying to deanonymize wallet owners. It's called a "dusting attack". In theory you can protect yourself by manually choosing which outputs to spend when you're building a transaction.
- sharperguy 5y ago
  Nowadays most wallets will let you choose which UTXOs to spend so you can simply choose not to spend those.
  - Andrew_nenakhov 5y ago
    That is a major pain/inconvenience, and also who knows what setting the antitainting mechanics will look like in the future, can very well make all your money compromised in the future.
- nlitened 5y ago
  Would you please explain in a bit more details? What's the reason for sending tainted satoshis to non-empty address? Bitcoins on that address are already on a public ledger, so if I understand it correctly, you can just watch where the coins go later, no need to "dust" over them.
  - Andrew_nenakhov 5y ago
    Tainted coins (stolen from hacks or whatever) can be tracked forever on a public ledger. If you send some of them to a known address of your adversary, tracking software with start tracking those coins as well, especially if he'll manage to spend coins from your input together with his existing coins. So, he'll have problems down the road.
deleted 5y ago
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skybrian 5y ago
It seems like a matter of degree. To what extent do people treat it as fungible? Will that change? For example, paper money has serial numbers. In theory, it could be tracked. ATM's could record serial numbers with accounts for any cash they give out. Stores could scan all the money they get for serial numbers, looking for counterfeits. Maybe they could share data to discover interesting trends? In practice, it would be hard with banks and stores acting as mixers as part of ordinary business. It's easier to track things with Bitcoin.
- halestock 5y ago
  This is more of an issue of tracibility vs fungibility. The thing that's unique is the bill, not the dollars themselves. Take a stolen $20 bill, deposit it in your bank account with "clean" money. Now withdraw $20. Is it clean, or stolen? How much is stolen? 100%? Less?
jonathan-adly 5y ago
Monero is too good at evading government surveillance. It will never be allowed to reach critical mass of usage to survive as the premier cryptocurrency. It will continue to have a role and prosper next to Bitcoin though. We need both. One to decouple from government control, and the other to evade surveillance. It’s a well-known secret that you can change your Bitcoin to monero, then the Monero back to Bitcoin to “wash” your Bitcoin. Also, with enough time, all the Bitcoins would be dirty. P.S. don’t bother responding if you are coming from the privilege of never having lived under a terrible government.
- tasha0663 5y ago
  > P.S. don’t bother responding if you are coming from the privilege of never having lived under a terrible government. I lived under an even worse government than you, and find this attitude offensive.
- matheusmoreira 5y ago
  > It will never be allowed to reach critical mass of usage to survive as the premier cryptocurrency. Why? How are they going to keep it down? I will keep talking about it and trying to use it. Actually managed to get paid with it once. Ironic that the one coin that's actually usable as currency remains obscure.
  - whimsicalism 5y ago
    Did you manage to convert that pay to fiat?
    - matheusmoreira 5y ago
      Yes. Deposited it on Binance, left some XMR in the savings account, exchanged XMR/USD/BRL and withdrew to my bank.
      - lovich 5y ago
        If crypto currencies ever get large enough to be a bother they can just turn off any networked machine that supports crypto. They control the entire internet at the physical level. Until crypto currencies come with their own physical cables and machines, and the army needed to protect it from sabotage/alteration, then it’s going to need at least implicit permission from various governments. This isn’t shadowrun, the digital realm isn’t one entirely separate from reality
xiphias2 5y ago
Trezor also added KYC: https://cryptonews.com/news/trezor-ditches-controversial-kyc-feature-plans-features-cut-off-regulatory-overreach.htm https://cryptonews.com/news/trezor-ditches-controversial-kyc... It’s a strange thing, because I always thought of Slush as a great guy who understands the importance of fungibility (and he was the main reason I bought Trezor instead of something else), but the company changed over time.
- magicjosh 5y ago
  Wow lots to unpack there. For those reading, the title says "Trezor Ditches a Controversial KYC Feature, Plans Features to 'Cut Off Regulatory Overreach'" Apparently Trezor added a KYC system called AOPP. Then backlash. Then they said they would roll it back (as of the article). Have they rolled it back yet? They said it will be rolled out in February. Edit: Trezor blog post about the rollback here: https://blog.trezor.io/a-decision-on-aopp-789540c2930b?gi=f39ad0a68391 https://blog.trezor.io/a-decision-on-aopp-789540c2930b?gi=f3... I always wondered what Trezor's fundraising plan is. My guess is once they started to see the money come in from taking fees they started to say "we'll be the next Coinbase!!!". Do you have any more analysis of this addition to Trezor? As a Trezor user, this reminds me of Apple's push for on-device scanning. That Trezor even added this feature temporarily has me looking for alternatives. Anyone have suggestions?
  - xiphias2 5y ago
    ColdCard is coming out with a new version, I just listened to an interview with him by Stephan Livera, and he seems like a person with integrity if you are looking for BTC only wallet. The only problem for me in practice was that the red light was blinking instead of the green, which shouldn't have been happening (I reflashed the software on the device in my multisig setup, which I decreased the trust somewhat). If I would have been more patient, I would have sent back the device for a replacement.
    - magicjosh 5y ago
      I will check out ColdCard again, thanks! Last I checked they were Bitcoin-only. edit: still bitcoin-only Seems like Trezor "blinked" here and tried to keep everyone happy. I wonder if Block/Square is going to eat Trezor's lunch by providing a badass wallet for people that don't care about KYC. And then ColdCard will be for users that are strictly anti-KYC. And Trezor gets stuck in the middle and goes out of business.
trixie_ 5y ago
Dollars have serial numbers does that mean they're not fungible? Does the author know what fungible means? Banks block transactions all the time to/from flagged sources.
- mikewarot 5y ago
  If you want to be that pedantic, you're right. However, at present most dollar cash transactions don't record serial numbers or ownership. It is possible to remove all tracking of your cash by getting dollar coins instead of bank notes. In fact... I made an NFT on this basis (the non-fungibility of US Dollar Notes) a while ago, here's the blog post about it http://mikewarot.blogspot.com/2022/01/whats-all-this-nft-stuff-anyway.html http://mikewarot.blogspot.com/2022/01/whats-all-this-nft-stu...
Brian_K_White 5y ago
This aversion to "mixing" is interesting. When my pile of $20 bills with serial numbers on them gets converted into $100 bills with other serial numbers, and my $100 came from some place that collected $20s from other people, is this not exactly the same mixing? I feel like there are people in all governments who are thinking all day every day "Yes, and we are working on this insane hole in our control as hard as we can and the day is coming close when we can finally outlaw cash."
- capitalsigma 5y ago
  I imagine it is very hard to launder, say, $320 M (https://www.cnbc.com/2022/02/02/320-million-stolen-from-wormhole-bridge-linking-solana-and-ethereum.html https://www.cnbc.com/2022/02/02/320-million-stolen-from-worm...) in cash. Google says that a $20 bill weighs about 1 gram, so 320 M / 20 = 16,000 kg or ~3.5k lbs. About the weight of a car.
- acdha 5y ago
  I think it comes down to scale & other means of controlling illegal activity. They don’t need to ban changing $20 bills if they’re fairly comfortable that e.g. banks are going to ask questions if you show up with a suitcase full of them. Scale also matters because it’s hard to ramp up businesses: the mafia can’t claim that their restaurant is doing $100M/year in sales so there are going to be more people involved (i.e. chances for the police to find an in) and they can focus on businesses which do tons of anonymous transactions.
- magicjosh 5y ago
  > I feel like there are people in all governments who are thinking all day every day "Yes, and we are working on this insane hole in our control as hard as we can and the day is coming close when we can finally outlaw cash." From what I can tell, this is what "Central Bank Digital Currencies" are all about.
tromp 5y ago
Monero pays a large price for its fungibility, by making the UTXO set of (potentially) unspent outputs equal to the set of ALL outputs. Whereas synced bitcoin full nodes can forget all about spent outputs, Monero full nodes must keep some info about them, and be able to efficiently index this info. For its initial block download, a node must download and verify rangeproofs for all outputs, not just the unspent ones. Wallets must be able to sample decoys from a large fraction of all historical outputs. This makes Monero much more bloated than Bitcoin. A more detailed comparison between Monero and Bitcoin can be found at https://gist.github.com/phyro/ec37d8bfedd36102b0ea5824580d06e4 https://gist.github.com/phyro/ec37d8bfedd36102b0ea5824580d06...
- Geee 5y ago
  Great comparison. Grin is the only cryptocurrency that fundamentally competes with Bitcoin in the long term.
- sgp_ 5y ago
  I work for Cake Wallet and Monero.com so I'm biased, but you should try one of the wallets that does this relatively burdensome scanning task locally to see that normally it's not the end of the world. It takes me only a few seconds to scan a month of blocks.
  - acdha 5y ago
    > It takes me only a few seconds to scan a month of blocks. How many transactions is that, however?
    - sgp_ 5y ago
      About 25,000 transactions per day right now. So about 750,000 per month. Edit: here's a good comparison chart https://moneroj.net/percentage/ https://moneroj.net/percentage/
- jason0597 5y ago
  > This makes Monero much more bloated than Bitcoin. Would you call bloat something that is essential for privacy?
mullingitover 5y ago
"Bitcoin has these problems because coins that have been through mixers are tainted [lists examples of coins being tanted]. So use Monero, where the entire cryptocurrency system is a huge mixer."
rufusroflpunch 5y ago
This is a vastly overblown issue. It only serves to confirm the bias already present in this site.
- magicjosh 5y ago
  Disagree. This is a solid list of examples of shortcomings of Bitcoin. This is the type of issue worth discussing and solving for. What we need less of are the empty crypto articles that are just idle speculation about "crypto bad". Read the rest of this thread, there's good stuff here!
timoth3y 5y ago
The author of this article minsunnderstinds what fungibility means. ' Fungibility does not mean non-unique or non-traceable. Fungibility means that a given asset is legally identical to all other instances of the same thing. For example, every $20 bill and every share of Apple stock has a serial number that uniquely identifies it, but that uniqueness is legally irrelevant. You broker has no obligation to give you a specific share of stock nor your bank a specific $20 bill. Financial securities are fungible. Bitcoin is fungible. == Edit: Commentators are confusing fungibility and traceability. They are very different concepts. Non Fungible Tokens are just as traceable as Bitcoin, but they are non-fungable. I wrote a detailed article about this [1] a few weeks ago if you want to gory details. [1] https://www.disruptingjapan.com/what-three-card-monte-can-teach-you-about-nfts/ https://www.disruptingjapan.com/what-three-card-monte-can-te...
- mountainboy 5y ago
  umm, no. just no. fungibility means that two units are interchangeable/equivalent. Legality doesn't enter into it. anything that makes unit A perceptibly different from unit B can cause humans to value unit A more less than B. Some units may be perceived as "better" than average and carry a premium. Others may be perceived as "bad" or "tainted" and trade at a discount. Such differences are generally considered undesirable in a money.
- Ar-Curunir 5y ago
  No, it's not. It depends on who's asking. If I see that the satoshis you're trying to give to me were part of (e.g.) a drug transaction in the past, I might not feel comfortable accepting your money. The problem with Bitcoin is that I can do that taint analysis, because the entire transaction graph is public.
- deleted 5y ago
  [deleted]
- mw888 5y ago
  Legally identical is a nonsense metric: if I own bitcoin I cannot sell because it has a tainted history then it is obviously not equivalent and not as valuable as bitcoin which can be. The fact that no broker cares about which instance of the stock or dollar you own but can track it anyways proves that those things are effectively fungible. In Bitcoin it is obviously not true that exchanges don’t care in the same way - plainly obvious from the source material you are responding to. When different bitcoin have different value by virtue of not being exchangeable at the largest liquidity pools, and your definition of fungible fails to capture that fact, you have the wrong definition.
rafaelero 5y ago
By that logic, oil is also not fungible; or any commodity btw. There are also ways to make BTC untraceable, and I believe simply using Lightning Network is a way to do it. Nothing to see here, folks. Just Hacker News noise.
babyshake 5y ago
This does raise some interesting questions. Let's say BlockFi did not want to accept ETH that came from TornadoCash or another coin mixer. For how long does it stay tainted? If you then traded that ETH for another asset on Uniswap, is the ETH still tainted for its new owner? Also is there any way to check for whether funds from a certain address are likely to be "tainted" or if I am going to use a dApp that would taint my own funds?
derangedHorse 5y ago
A small thing to note is that Bitcoin does have fungibility built into the system. There is almost no (non-contrived) way to track the history of a specific amount of Bitcoin over time. When person A receives X Bitcoin, an entry is put into a ledger that says person A received X Bitcoin. If person B sends C amount of coinjoined Bitcoin to person A, then the ledger will now add that person A received C Bitcoin. Now, if person A then wants to send Bitcoin to another address, person A has to reference the ledger transactions where they received the Bitcoin (so the transactions that say person A received C Bitcoin and any other transaction where person A received X Bitcoin) as proof to the Bitcoin system that person A has enough. The used transactions are basically crossed out on the ledger after that and if person A didn't want to use all their coins from the crossed out transaction, person A will make 2 outputs on their outbound transaction -- one amount marked to a recipient's address and another marked back to their own (with the "change" they want to give themselves). Now we can discuss the feature of fungibility within this context. Imagine a scenario where person A only has C coins to their name. If person A were to send Bitcoin to someone else, then you can imagine that any Bitcoin received from Person A directly came from the C coinjoined coins. But what if person A also had another transaction on the ledger giving them X amount of coins? If person A wanted to send less than C amount of coins, let's say C-1, person A could technically reference 2 transactions (the one giving person A 'C' coins and the one giving Person A 'X' coins) and it would be impossible to tell from the ledger which pile the recipient is receiving coins from. Thus there's no surefire way to track an amount of Bitcoin from person to person. What an institution can do is blacklist any transactions received that reference a coinjoined transaction, but it's very easy to make sure one doesn't directly have Bitcoin from a coinjoined transaction. One simply has to send Bitcoin to another address they own and reference 2 transactions, the coinjoined one and another "legitimate" transaction. Using the second address, it now becomes obscure how much of the money they received came from the coinjoined amount and impossible to distinguish any amount they send as being part of that source. Companies can still blacklist accounts that have received coinjoined funds and any direct accounts they've transacted with, but when does the fan-out stop? Conducting business this way would be detrimental to any Bitcoin-based business. From the examples I see in the linked post, exchanges are only rejecting coinjoined transactions as deposits and withdrawal requests to accounts used to create coinjoined transactions. I'm still against this of course, but I wouldn't say this threatens the overall fungibility of Bitcoin).
janandonly 5y ago
There are non-KYC exchanges that allow you to change some ₿ into some Monero, and vice versa. In other words, if an exchange every refused a particular bitcoin UTXO, I could simply swap it to Monero and then back and try again with these fresh new bitcoin UTXO’s.

252 points by rzk 5y ago

If you think like that there is nothing fungible in this world. Even gold probably can be traced by impurities in it although precious metals are definitely fungible enough compared to any other thing. Bitcoin is not creating any value for humanity's sake at this point it is just environmental disaster. Its supporters are retarded so they won't switch to POS. Governments has to interfere however they are also scared. They don't really know what to think nor how to react. However bitcoin may be causing some good in indirect ways. I really find ecosystem that cryptocurrencies created. I like crypto exchanges. In future they may serve to trade wide variety of real assets. (It is already possible though) Smart contracts are also good if i am not getting it wrong zkrollups may make defi scalable enough to be used by masses.

matheusmoreira 5y ago

Yeah, it's a privacy nightmare. The exchanges refuse our money if it has ever passed through a privacy service and they continue to track what we do with it even after it's been withdrawn from our accounts. Nice to have a collection of examples I can point to whenever someone says bitcoin is fungible. It makes no sense to me how bitcoin is still number one cryptocurrency despite it's garbage fundamentals. Failed at everything it was supposed to do.

alienalp 5y ago
What are you expecting exchanges to do? If you passed through privacy service you need to prove that your money is not associated with crimes. It is completely your fault. I am actually happy to hear that people who are laundering money will have hard time. On the other hand bitcoin is shitcoin. That is a fact anybody shills bitcoin is possible scammer. Anybody says bitcoin is future is retarded.
delusional 5y ago
Because the intersection of the stated goals and the actual goals is essentially empty. The actual goal isn't to be useful, it's to make the early adopters rich.
- dandare 5y ago
  That's brilliantly said! The argumentation of typical crypto fan is like the motte and bailey fallacy mounted on a helicopter rotor, constantly oscillating between some noble goals (decentralisation, freedom, privacy, anti-inflation, anti-fractional banking) and the "have fun staying poor" snark.
- TillE 5y ago
  It's such a bizarre industry because I think the technical issues are really interesting and the potential for cryptocurrency is huge, but in practice it's 99% about speculators trying to get rich quick. That's really boring!
  - leppr 5y ago
    It is, but there's probably more actual interesting development and design activity going on than you realize. There's simply a real discovery problem, because of the aforementioned gold rush. Participants have too many incentives to bury accurate information that speaks against their investment, spread misinformation that embellishes it, suppress information about projects they want to invest in but didn't yet, ...
  - astrange 5y ago
    "The technical issues are really interesting" is how you know it's a scam. It's like working for Facebook; they keep everyone interested by having them write unnecessary but interesting projects like new build systems and new PHP runtimes. Except that every contribution makes the price of ETH go up, and FB pays you.
    - edrxty 5y ago
      I...think you just described society
- _alex_ 5y ago
  that's an ignorant statement. There is a ton of development and deployment happening to make the Lightning Network be a high-throughput, low cost way to move bitcoin around the world. A lot of people are working to make bitcoin more useful to more people.
magicjosh 5y ago
It really does seem like the main purpose Bitcoin is succeeding at is sort of a digital gold. It's not good as cash, privacy, or anything else. Lightning seems like a joke compared to the types of efforts happening on Ethereum. Appreciate this thorough analysis of problems with cryptocurrency. Disclosure: crypto owner
- dmihal 5y ago
  One project I'm following is Aztec Protocol. It's an Ethereum L2 (so faster & cheaper transactions, similar to Lightning) but it supports any Ethereum asset (ETH, USDC, WBTC) and is fully private.
  - itvision 5y ago
    The only thing that goes for Ethereum is the fact that it's used for creating worthless numerous other pump and dump crypto currencies on top of its blockchain where Shiba Inu is the latest glorious example. Solves nothing, serves no purpose but increases the demand for Ethereum transactions which ultimately drives the cost of Ethereum. All those poor sods who have invested in Shiba Inu? Plain idiots to put it mildly. Oh, and NFTs as well. Another worthless crap just to create more Ethereum transactions. Why worthless? Because ... Ethereum is just one of multiple crypto currencies/block chains and tell me again why your particular NFT on top of Ethereum is worth more than the same object on another blockchain? And how many times can the same object be (re)sold on all other blockchains? Do you need to own all of them? Or Ethereum NFT is somehow better?
    - stavros 5y ago
      Aren't NFTs very very useful for money laundering?
    - dlubarov 5y ago
      No affiliation with Aztec, but it's absurd to lump them in the same bucket as Shiba. > pump and dump crypto currencies Aztec has been in development since 2017, and has solved some real problems in cryptography in order to accomplish their goals. Besides, it doesn't have its own token, so there's nothing to pump. > Solves nothing, serves no purpose It allows Ethereum users to transact in private. > but increases the demand for Ethereum transactions which ultimately drives the cost of Ethereum It does the opposite, since it's a rollup - the transactions happen off-chain.
can16358p 5y ago
Even though Bitcoin failed at many things, I don't see it as a failure as it literally started it all. All the other cryptos are created after Bitcoin and learned from its shortcomings to build something better.
- Brian_K_White 5y ago
  It did create and then prove an incredible and utterly novel and important concept. Your downvotes are invalid. I don't own and never have owned any btc, or any other crypto, and at this point wouldn't touch btc in particular with a 10' pole for several different reasons. But the very concept of a distributed ledger that may actually be trusted is both revolutionary and proved. It's collossal despite all the current degenerate uses and wasteful implementations.
- z3c0 5y ago
  Agreed. When the integrity of the chain is compromised, I'll call it a failure. In the meantime, I'll leave it to the opinionated pissants on both sides to continue acting like they understand anything about what's to come from a system with so little precedence.
itvision 5y ago
> It makes no sense to me how bitcoin is still number one cryptocurrency despite it's garbage fundamentals. Failed at everything it was supposed to do. It hasn't failed at not being controlled by people which fiat currencies have failed completely. Do you control the inflation rate? Do you control how much currency is being minted? And tons of other things.
- JumpCrisscross 5y ago
  > hasn't failed at not being controlled by people which fiat currencies have failed completely. Do you control the inflation rate? Bitcoin has proven to be a worthless dollar inflation hedge. It’s more correlated to the stock market than any real dollar.
  - trhway 5y ago
    Like a marshland for tidal water, stock is best inflation hedge working by sponging the overflowing inflational liquidity, and no wonder that Bitcoin behave similarly.
    - JumpCrisscross 5y ago
      > stock is best inflation hedge working by sponging the overflowing inflational liquidity, and no wonder that Bitcoin behave similarly Agree on the mechanics. Equities are a classic inflation hedge. But the reality is that if three people, in the last year, attempted an inflation hedge, one with TIPs or Series I bonds; one with equities; and one with Bitcoin, the last gained little over the middle. Both likely lost value relative to the first. If your inflation hedge loses value during inflation because the Fed will raise interest rates because of inflation, yes, there were external factors at play, but no, they’re not to blame, you hedged badly.
- matheusmoreira 5y ago
  > Do you control the inflation rate? Do you control how much currency is being minted? Exchanges are essentially banks. They offer bitcoin loans, essentially creating new coins out of nowhere. Fixed money supply is utterly powerless before the inflationary power of debt.
analognoise 5y ago
It's Pokemon cards, but for tech bros.
Geee 5y ago
If you compare to Monero, you see that Monero isn't even allowed on these exchanges. So, it seems that you can't really have privacy combined with high exchange liquidity.
- matheusmoreira 5y ago
  I was under the impression the exchanges chose not to list Monero voluntarily. After all, Binance does have it.
  - sgp_ 5y ago
    Kraken US supports Monero, so clearly it can be done. If another exchange chooses not to, that's a company making their own decision.
- magicjosh 5y ago
  Can you explain what you mean by "high exchange liquidity"? My understanding is it's a policy issue not tech. Automated exchanges like Uniswap have Monero. edit: Uniswap has Wrapped Monero, not actual Monero.
  - popol12 5y ago
    Not answering to the question, just correcting your last phrase: Uniswap has wrapped monero (WXMR) which is not quite the same as Monero, and with a ridiculous liquidity of ~200k$ currently (https://geckoterminal.com/eth/pools/0x14c10b4bdccd9d3f8940fb79e0ee00121391d6de?utm_source=coingecko&utm_medium=referral&utm_campaign=livechart https://geckoterminal.com/eth/pools/0x14c10b4bdccd9d3f8940fb...)
    - matheusmoreira 5y ago
      How does wrapped monero work? I've seen a lot of wrapped coins but I'm not sure why they exist or why I would want to use them.
      - 5y ago
notRobot 5y ago
> The exchanges refuse our money if it has ever passed through a privacy service I'd love to learn more about this, does anyone have relevant links or info?
- magicjosh 5y ago
  Here's a relevant episode of the ZK Podcast about cryptocurrency mixers: https://zeroknowledge.fm/111-2/ https://zeroknowledge.fm/111-2/
- shubhamkrm 5y ago
  It's called "tainted Bitcoin". Basically, you can get a list of all transactions a coin was involved in since it was minted. If any of those transactions contain a blacklisted address, exchanges would refuse the token.
- ur-whale 5y ago
  > I'd love to learn more about this, It's worse than this. Coinbase, for example, will close your account if you use you Bitcoins for things they don't approve of AFTER you withdraw them.
  - AlexandrB 5y ago
    This is... remarkable. Many cryptocurrency advocates have promoted bitcoin by making exaggerated claims regarding fiat currency's centralized control and lack of privacy. Now bitcoin itself exhibits the very characteristics that were often claimed about fiat currency, except it's not an exaggeration.
    - jakupovic 5y ago
      Easy solution don't use Coinbase. It's not the end of the world.
      - ur-whale 5y ago
        > Easy solution don't use Coinbase I most certainly don't. But the hordes of clueless users who continue to flock to the platform are blissfully ignorant of that fact. Worse, the fact that coinbase is behaving in a way that's completely violating the spirit of Bitcoin while profiting from it doesn't solve the problem that what they are doing is possible because of a severe limitation of the platform. I am a big and very long time fan of Bitcoin, but the traceability / fungibility issue has bugged me from day one. I really wish the dev. community would focus on introducing a fork with an technical solution to this problem instead of polishing the turd with minor stuff no one really cares about like taproot.
mattalex 5y ago
> It makes no sense to me how bitcoin is still number one cryptocurrency despite it's garbage fundamentals. Failed at everything it was supposed to do. It doesn't matter that bitcoin failed in everything it set out to do (and more) because people don't "hodl" bitcoin for the things bitcoin set out to solve. They do so because the want to go "to the moon". If your only interest in crypto is speculative investment, then you aren't interested in the fact that bitcoin is broken beyond belief: The important thing is the market-recognition since that maximises the chance for high demand, which induces hyper-deflation, which sends you to the moon. Nobody, or very few people, care about crypto for any of its features and the people that tell you they do probably "hodl" substantial amounts of crypto and hope to drag you into the pump. There's not a single problem crypto solves without inducing a new party with equal amounts of leverage (i.e. you don't need VISA, but you do need exchanges) because at the end of the day, crypto is built to change the people that control the money rather than remove control structures entirely because that's impossible: there are always going to be people that facilitate the interaction of the blockchain with the real world and these interpreters/resolvers are the powers in crypto. However, that doesn't matter: nobody buys crypto the currency, they buy crypto the investment and from that POV bitcoin is still the non-plus-ultra in speculative hyper-deflations.
- creamyhorror 5y ago
  > crypto is built to change the people that control the money Yep, crypto is a revolution being staged to replace the establishment (central banks and traditional finance) with a new one (crypto/defi founders and adopters). The goal is to use the new marketing to draw people to the new system and become the new rich. The earlier and more you buy into it, the more incentive you have to spread the word. This is why it makes sense to rebuild everything in crypto despite it being less efficient. It needs to be done, so that the new system (that replaces all parts of the old) is ready for people to be drawn into it.
  - gingeropolous 5y ago
    its less efficient because decentralized things are less efficient by design. they sacrifice efficiency for the authoritiless nature. That is the goal - to remove authority from money. Money should just exist and have rules and thats it. That's what cryptocurrencies are. to me, its that even if what is happening is that some new ruling class is being established, the difference is that the new ruling class won't be able to fundamentally change the rules anymore. Currently our monetary system is managed by rooms of Very Smart People that can change things at a whim and the cracks are starting to show. but yeah, things are interesting though.... there is a recent upswell of proof of stake, which is just central banking all over again. So the new system might end up looking the same as the old system if these PoS coins become more common. The difference is though is that bitcoin is unstoppable. Like, its price could be 40k, its price could be 400k. The protocol will still work. The old system has no choice but to adapt or whatever.
leppr 5y ago
There's one thing that Bitcoin does better than almost any other cryptocurrency right now, and it's being secure against consensus attacks. Ethereum comes close, Chia arguably surpasses it, but otherwise most cryptocurrencies could very easily succomb to collusion and majority attacks.
- gnramires 5y ago
  Proof of stake chains are virtually immune to collusion and majority attacks. A single actor would need to own huge amount of resources and then essentially burn the coins. To purchase such a dominant stake the price would rise very quickly... making it very unlikely to be feasible. In comparison, attacking the larger Proof of work chains only requires a few $100M in hardware (the harder ones) and a MW-scale power source used sparingly. I don't see why PoW is still used...
  - leppr 5y ago
    They are not immune at all. The security assumptions are different. > A single actor would need to own huge amount of resources and then essentially burn the coins. To purchase such a dominant stake the price would rise very quickly... making it very unlikely to be feasible. You are assuming here a single-sided market where the existing majority holders are not interested in realizing profits on their holdings. For many cryptocurrencies this is not the case, especially the hyped VC-funded ones.
    - gnramires 5y ago
      If you are a large majority holder, selling off to a known exploiter is a very risky move. You might be able to realize great profits of the price increases. But you don't know how much the attacker has gathered from other sources. I think realistically it can happen, but a takeover attempt from buying a large stake should be plainly obvious. The community could even organize price fixing (i.e. "hold", which we've seen on WSB) to fend off the attack. You can even pull off something like forking the chain to invalidate the funds of the attacker -- it would be pretty obvious which stakeholders are responsible for the attack. For a chain where those coins are tainted or deleted from the chain. Those avenues are not really available for PoW chains... if an attacker gets the necessary hardware, there's not much you can do. You can try changing protocol, changing algorithms, etc. but this has obvious consequences of its own (making all mining hardware so far near worthless)... it's a bit scary to be honest.
hyperhopper 5y ago
How did it fail at creating a distributed database of a finite digital good made up of non-trustworthy actors? Yeah it's not a good currency but many design goals were reached.
__MatrixMan__ 5y ago
I think it was a proof of concept. It did its job, but the speculators can't let go.
w_TF 5y ago
It's amazing how they keep shifting the goal posts every couple years. First it was supposed to be digital cash, but then suddenly it's gold and now "digital property". When it became apparent that it's very wasteful they said the only thing hard money can be backed by is pure entropy.
Quindecillion 5y ago
> It makes no sense to me how bitcoin is still number one cryptocurrency despite it's garbage fundamentals. Failed at everything it was supposed to do. Peer-to-peer, permissionless, trustless (i.e. not controlled by any one entity), known issuance schedule, fixed maximum supply, and unyielding consensus parameters all still hold up today. Seems to be doing just fine at what it was "supposed to do".

vmception 5y ago

Hop into a lightning channel and then back out in a different address. That should theoretically work to break these heuristic models right? Exchanges are using software that assigns a threshold to each address' inputs or funds. You can easily trick the threshold.

28194608 5y ago
what if the output of lightning came from mixed coins?
- cliftonk 5y ago
  Output of a lightning channel is almost certainly more likely to contain mixed coins. The UTXO model is hopelessly outdated.
  - toolz 5y ago
    I strongly disagree, UTXO model will be necessary to scale smart contract platforms in the future as the account model will never hold up with the necessarily expensive sync operations it performs. UTXO model, or a derivative will win out when it comes to distributed blockchains that can scale way beyond current distributed blockchains capacity.
- toolz 5y ago
  What if every coin is mixed, eventually? You think exchanges will just shutdown their bitcoin trades and throw away their likely biggest revenue stream?
  - matheusmoreira 5y ago
    Exchanges are already prejudiced against "unhosted" wallets. I think they'll eventually stop accepting deposits from any source other than other well known exchanges.
    - 5y ago

Ekaros 5y ago

Now I wonder would it be possible to taint all big players and pool productions by some action? How much would this cost in the end?

zozbot234 5y ago
It's not just possible, it's arguably the very threat that's driving this unraveling of the market in the first place. Because every large player will then seek to reject "tainted" coin/transactions, lest they be tainted in turn.

magicjosh 5y ago

The article mentions an account frozen after a deposit from a "far-right donor". I wonder how cryptocurrencies will fill the void left by platforms like GoFundMe. GoFundMe apparently just locked a $10M campaign as it violated their terms and conditions: https://www.opindia.com/2022/02/gofundme-removes-campaign-truckers-convoy-canada-withholds-over-9-million-dollars/ https://www.opindia.com/2022/02/gofundme-removes-campaign-tr...

ferdowsi 5y ago
GoFundMe is a facilitator for fundraising efforts. If someone wanted to start a far-right crowdfunding site they could without involving digital gold.
- darawk 5y ago
  Or we could just have a politically neutral monetary system in the first place. Imagine that.
  - wyldfire 5y ago
    The money's pretty neutral but brokers like GoFundMe aren't and IMO shouldn't be compelled to be.
    - darawk 5y ago
      I agree with that, except in cases where the number of brokers is small and monopolistic. That's not strictly true for platforms like gofundme, but it is true for payment processors, who are the real choke points in the ecosystem. My issue with Gofundme isn't that they aren't politically neutral, it's that they took the money first, and then just decided to hold it hostage. Had they not accepted the trucker's money, or just refunded all the donors, or disbursed the funds to the org and then refused to accept anymore, any of those things would have been fine. But what they are doing here is tantamount to theft, and that I do believe brokers should be compelled not to do.
    - password4321 5y ago

lifewallet_dev 5y ago

Well, this argument falls whenever you try to use Bitcoin P2P (user to user shouldn't care where the coins come from) or with P2P exchanges like Bisq or Local Bitcoin. Now that's a different universe than what OPs lives (just by the fact Bitcoin goes up and down in fiat value would be enough to make it "non-fungible" by that logic), but I can assure you many of us exists. And I'm not even mentioning how Lightning Network fixes this as well, making coins very hard to impossible to track.

magicjosh 5y ago
Got an article on how Lightning fixes this? This article is alarming to me as a normie user. I'm curious about going off the big exchanges and using my coins. What if I receive crypto through OpenSea that Coinbase deems soiled? Although I don't like it, I could see private verification service popping up for P2P. "We make sure the coins are good before the transaction goes through". Makes me wonder how much of a "walled garden" Bitcoin is. Sure, hold it on exchanges all you want, but don't try to use it or we lock your account.
- therein 5y ago
  It is no different than depositing to an exchange that doesn't do this and then withdrawing. Or some other service with a centralized wallet. That being said, those outputs will simply become someone else's problem later on, in limbo created by the uncertainty on whether them being held by an exchange clears their past history or not.
darawk 5y ago
That would stop being true for P2P if exchanges started blocking tainted coins, though. If that happened at scale, then P2P users would have to start validating themselves before accepting them, which is a real privacy nightmare. Of course, eventually exchanges will start blacklisting anyone with a mixer in their history, too.
advisedwang 5y ago
I think it basically still holds - I wouldn't want the bitcoins from someone I suspect got them from crime, knowing they could be traced forward and cause problems for me.

danlugo92 5y ago

Web3 + Lightning fixes this.

itvision 5y ago

> Bitcoin is often touted as a fungible and private asset [skipped] By whom? There's nothing like that here https://github.com/bitcoin/bitcoin https://github.com/bitcoin/bitcoin https://bitcoin.org/bitcoin.pdf https://bitcoin.org/bitcoin.pdf > and digital cash alternative That was the case from the beginning but it hasn't worked out. > Each bitcoin in circulation has a distinct history attached to it ensuring that 1BTC != 1BTC. What? The value is the same. Paper bills also have a distinct history. > While coin histories can be somewhat ofuscated with tools like CoinJoin, the fungibility of Bitcoin remains distinctly lacking. What? How's 1 BTC is not fungible [to another BTC] unless you're wanna hide your bitcoin transaction history? Is this what it's all about? Sorry to break it to the author but he seems to imply that Bitcoin is a privacy oriented electronic currency. It has never been "private". The whole ledger is public. If you don't like it, don't use it. You have Monero, Dash and Zcash and Bitcoin mixers if you wanna deal with ecurrencies without anyone being able to trace you.

PragmaticPulp 5y ago
> What? How's 1 BTC is not fungible [to another BTC] unless you're wanna hide your bitcoin transaction history? I think you’re deliberately ignoring the entire point that the article is making. The fact is that tainted transactions are becoming a thing as exchanges realize that they need to do something about addressing theft and fraud. It’s not even about your own transaction history. Assets acquired illegally, including Bitcoin, and and will be seized even after they change hands several times. Unless you mined the Bitcoin yourself (not through a pool, literally generates the block yourself) then it has a history attached that involves other people.
- toolz 5y ago
  > that involves other people well if we're going this abstract then everything everywhere involves "other people". Pragmatically mining, even through a pool does not show who you are or who you are associated with as no one can associate you with anyone if they can't associate your coins with you. This idea that exchanges will stop handling coins from flagged addresses is nonsense - DEXes already solve that problem anyways, so an exchange will be willingly giving up business for legit customers who may have happened upon a coin with a less-than-legit history and they'll do nothing to prevent money with illicit history from making its way onto their platform.

TekMol 5y ago

Can Bitcoins still be tainted now that the Lightning Network is a thing? Sending them through a Lightning Channel would make them disappear without a trace, right?

javert 5y ago
I don't think so. I think you're likely to get tainted coins out of lightning, even if the coins you send in are untainted.
_alex_ 5y ago
it's gonna get even more interested when lightning channels look like normal transactions because of taproot
sgp_ 5y ago
This largely is not true. While privacy on LN is still being evaluated, it is also extremely complicated. There's no easy "privacy on LN" guide that's industry standard, for example. Monero comparatively is much older and much better understood on the privacy side (eg: see Breaking Monero).

pmontra 5y ago

All of this is new to me. So there are almost two Bitcoins, clean BTC and tainted BTC. If merchants can check if the history of a coin is clean or tainted they could refuse the sale or ask a higher price to hedge the risk of not being able to use the coin. Is there any service like that? Is that double prices dynamic already happening? Mining creates clean BTC, anything else risks tainting them. I expect that the ratio between prices in tainted / clean BTC will grow if the set of tainted coins increases compared to clean ones.

vmception 5y ago
> I expect that the ratio between prices in tainted / clean BTC will grow if the set of tainted coins increases compared to clean ones. I don't. I expect the absurdity will become more clear and make the whole attempt to flag them irrelevant. for example, after a national or municipal government seizes bitcoin under some semblance of due process or even an actual criminal charge and reauctions them, we are supposed to pretend those bitcoins are magically clean? do all the exchange softwares update to know that? they still have the transaction history from the event that flagged them to begin with. the answer is easier when it involves a government you respect like when the US Marshalls auction off a drug kingpin's seized bitcoin. but what about a government you don't respect? welp a sovereign nation seized it so they're clean now. If so, some random jurisdiction with some level of sovereignty can just become the bitcoin washer as a service, if not then exchanges are acting too arbitrarily and are going to lose business for no legal reason. Exchanges flag bitcoin to stay within an imagined impending compliance burden of being able to prove they don't accept dirty money. If they flag bitcoin with the clearest outcome of having been seized by the state and reintegrated into the economy, then they have made a hopeless error. People with ambiguously acquired bitcoin already have a dozen ways of getting it into bank accounts and cash, and will have even more in the future. So it's just the merchants and exchanges that have to make sure they are attracting business. For those reasons I don't see a separate exchange rate forming, its an average of fungibility that leads to the same result.
toss1 5y ago
Which means that if you really want to clean dirty BTC, you need to simply use it to pay for miners, then mine clean BTC.

vintermann 5y ago

The cryptocurrencies that "fix" this problem vary in the cryptographic tricks they use, but it all boils down to drafting everyone to act as fences as a condition of partaking in the system at all. It's a technical solution to a social problem. It won't work. You can always move value in, but out is another matter. Trading your Monero (or whatever) for legal-economy assets or currency may be criminalized any day.

zozbot234 5y ago
Isn't that the definition of fungibility? Every user of currency is implicitly a "fence" for every other user.
- deleted 5y ago
  [deleted]
- vintermann 5y ago
  No. Oil is fungible too - any barrel of a given grade is treated the same any other - but that doesn't mean oil buyers and sellers are fences for each other. What you're thinking of is the "current" aspect of currency. That when I take payment for a bagel in my shop, I don't need to worry that the money used to pay me was stolen, I still get to keep it. But this is a social, legal concept, not a technological one. Calling it a currency won't make it current. Fungibility doesn't make anything current either (if I was stupid enough to take payment for a bagel with a barrel of oil, I WOULD have to return it if it turned out it was stolen. I should have known there was something fishy!). No amount of cryptographic cleverness can force society to treat it as current.
  - ghostly_s 5y ago
    You actually can be compelled to forfeit money paid to you if it is found to be stolen (in the US, anyway).
  - ineedasername 5y ago
    I'm pretty sure cash falls into the "stolen goods" category, and you don't get to keep them even if you didn't know they were stolen. You'd have to give the bagel cash back just as much as the barrel of oil. (Well, in my jurisdiction. Source: family member is a lawyer)

garren 5y ago

This is news to me. I’m not super informed regarding cryptocurrencies, but it seems like this would also affect erc-20 “fungible” tokens on Ethereum, wouldn’t it? Do such tokens not also have traceable histories?

scyclow 5y ago
I wouldn't think so. BTC uses an unspent transaction output model, which is like breaking up a plot of land into smaller pieces, and treating each square inch as fungible. ERC20 tokens are based on an accounting model, so you're just incrementing and decrementing balances -- nothing to trace there.
- magicjosh 5y ago
  I never thought of it that way. I wonder what the article's author thinks about Ethereum's privacy.
- olalonde 5y ago
  The "accounting model" is even easier to trace, I'm not sure what you mean by that. For example, here are all USDT transactions: https://etherscan.io/token/0xdac17f958d2ee523a2206206994597c13d831ec7 https://etherscan.io/token/0xdac17f958d2ee523a2206206994597c...
  - magicjosh 5y ago
    Here's what I took away from the suggestion. Let's say I send you $100 USDT and Osama Bin Laden sends you $100 USDT. Then you send Justin Beiber $100 USDT and keep the remaining $100 USDT. Where are the tainted tokens? For Bitcoin these are UTXOs which are easy to trace, but not so for Ethereum and its tokens which just rely on accounting not UTXOs. Right?
    - lossolo 5y ago
      If Bin Laden sends $100 USDT to you, your address will be tainted because Osama sent you coin and proof of that will be in Transfer Log of ERC20 token. So if you send any amount of that token anywhere, recipient address will be also tainted, doesn't matter if it was Bieber part or Osama part.

hammyhavoc 5y ago

Can't help but feel like this is a puff piece for Monero. It's just how quickly it jumped into beating the drum for Monero.

matheusmoreira 5y ago
To be fair, Monero is a fungible privacy coin and a valid answer to all of those concerns.
- fshbbdssbbgdd 5y ago
  I’m constantly surprised Monero’s market cap isn’t higher. It works better for all the use cases of crypto that genuinely add value, yet has a small fraction of the value of many coins that are used for nothing at all.
  - beaned 5y ago
    Because it actually works, Coinbase never added it. Regulatory pressure.
  - matheusmoreira 5y ago
    Good question. Monero is essentially everything bitcoin was supposed to be. Private, anonymous, more decentralized, you can actually mine it using general purpose computers, it's actually usable as a currency due to low fees and fast transactions. I've actually gotten paid for code in XMR, it's awesome. It's not even a good investment since it doesn't increase in value as fast as bitcoin but gets slaughtered whenever the market goes down. Would be nice if it stabilized in the $200 range.
  - Yizahi 5y ago
    Why should it be? Dollar genuinely adds value for most of human population and yet a single dollar "token" costs 1 dollar. If anything, the flat price of a token I would consider a very small but anyway a sign of maturity and usefulness, as opposed to speculation tokens. (stabletokens excluded of course)

Andrew_nenakhov 5y ago

I'll do you one better. Send a few tainted sats to a non-empty address of a person you don't like, and hurray, his coins are now tainted, giving him endless headache.

______-_-______ 5y ago
Something similar has been done trying to deanonymize wallet owners. It's called a "dusting attack". In theory you can protect yourself by manually choosing which outputs to spend when you're building a transaction.
sharperguy 5y ago
Nowadays most wallets will let you choose which UTXOs to spend so you can simply choose not to spend those.
- Andrew_nenakhov 5y ago
  That is a major pain/inconvenience, and also who knows what setting the antitainting mechanics will look like in the future, can very well make all your money compromised in the future.
nlitened 5y ago
Would you please explain in a bit more details? What's the reason for sending tainted satoshis to non-empty address? Bitcoins on that address are already on a public ledger, so if I understand it correctly, you can just watch where the coins go later, no need to "dust" over them.
- Andrew_nenakhov 5y ago
  Tainted coins (stolen from hacks or whatever) can be tracked forever on a public ledger. If you send some of them to a known address of your adversary, tracking software with start tracking those coins as well, especially if he'll manage to spend coins from your input together with his existing coins. So, he'll have problems down the road.

deleted 5y ago

[deleted]

skybrian 5y ago

It seems like a matter of degree. To what extent do people treat it as fungible? Will that change? For example, paper money has serial numbers. In theory, it could be tracked. ATM's could record serial numbers with accounts for any cash they give out. Stores could scan all the money they get for serial numbers, looking for counterfeits. Maybe they could share data to discover interesting trends? In practice, it would be hard with banks and stores acting as mixers as part of ordinary business. It's easier to track things with Bitcoin.

halestock 5y ago
This is more of an issue of tracibility vs fungibility. The thing that's unique is the bill, not the dollars themselves. Take a stolen $20 bill, deposit it in your bank account with "clean" money. Now withdraw $20. Is it clean, or stolen? How much is stolen? 100%? Less?

jonathan-adly 5y ago

Monero is too good at evading government surveillance. It will never be allowed to reach critical mass of usage to survive as the premier cryptocurrency. It will continue to have a role and prosper next to Bitcoin though. We need both. One to decouple from government control, and the other to evade surveillance. It’s a well-known secret that you can change your Bitcoin to monero, then the Monero back to Bitcoin to “wash” your Bitcoin. Also, with enough time, all the Bitcoins would be dirty. P.S. don’t bother responding if you are coming from the privilege of never having lived under a terrible government.

tasha0663 5y ago
> P.S. don’t bother responding if you are coming from the privilege of never having lived under a terrible government. I lived under an even worse government than you, and find this attitude offensive.
matheusmoreira 5y ago
> It will never be allowed to reach critical mass of usage to survive as the premier cryptocurrency. Why? How are they going to keep it down? I will keep talking about it and trying to use it. Actually managed to get paid with it once. Ironic that the one coin that's actually usable as currency remains obscure.
- whimsicalism 5y ago
  Did you manage to convert that pay to fiat?
  - matheusmoreira 5y ago
    Yes. Deposited it on Binance, left some XMR in the savings account, exchanged XMR/USD/BRL and withdrew to my bank.
    - lovich 5y ago
      If crypto currencies ever get large enough to be a bother they can just turn off any networked machine that supports crypto. They control the entire internet at the physical level. Until crypto currencies come with their own physical cables and machines, and the army needed to protect it from sabotage/alteration, then it’s going to need at least implicit permission from various governments. This isn’t shadowrun, the digital realm isn’t one entirely separate from reality

xiphias2 5y ago

Trezor also added KYC: https://cryptonews.com/news/trezor-ditches-controversial-kyc-feature-plans-features-cut-off-regulatory-overreach.htm https://cryptonews.com/news/trezor-ditches-controversial-kyc... It’s a strange thing, because I always thought of Slush as a great guy who understands the importance of fungibility (and he was the main reason I bought Trezor instead of something else), but the company changed over time.

magicjosh 5y ago
Wow lots to unpack there. For those reading, the title says "Trezor Ditches a Controversial KYC Feature, Plans Features to 'Cut Off Regulatory Overreach'" Apparently Trezor added a KYC system called AOPP. Then backlash. Then they said they would roll it back (as of the article). Have they rolled it back yet? They said it will be rolled out in February. Edit: Trezor blog post about the rollback here: https://blog.trezor.io/a-decision-on-aopp-789540c2930b?gi=f39ad0a68391 https://blog.trezor.io/a-decision-on-aopp-789540c2930b?gi=f3... I always wondered what Trezor's fundraising plan is. My guess is once they started to see the money come in from taking fees they started to say "we'll be the next Coinbase!!!". Do you have any more analysis of this addition to Trezor? As a Trezor user, this reminds me of Apple's push for on-device scanning. That Trezor even added this feature temporarily has me looking for alternatives. Anyone have suggestions?
- xiphias2 5y ago
  ColdCard is coming out with a new version, I just listened to an interview with him by Stephan Livera, and he seems like a person with integrity if you are looking for BTC only wallet. The only problem for me in practice was that the red light was blinking instead of the green, which shouldn't have been happening (I reflashed the software on the device in my multisig setup, which I decreased the trust somewhat). If I would have been more patient, I would have sent back the device for a replacement.
  - magicjosh 5y ago
    I will check out ColdCard again, thanks! Last I checked they were Bitcoin-only. edit: still bitcoin-only Seems like Trezor "blinked" here and tried to keep everyone happy. I wonder if Block/Square is going to eat Trezor's lunch by providing a badass wallet for people that don't care about KYC. And then ColdCard will be for users that are strictly anti-KYC. And Trezor gets stuck in the middle and goes out of business.

trixie_ 5y ago

Dollars have serial numbers does that mean they're not fungible? Does the author know what fungible means? Banks block transactions all the time to/from flagged sources.

mikewarot 5y ago
If you want to be that pedantic, you're right. However, at present most dollar cash transactions don't record serial numbers or ownership. It is possible to remove all tracking of your cash by getting dollar coins instead of bank notes. In fact... I made an NFT on this basis (the non-fungibility of US Dollar Notes) a while ago, here's the blog post about it http://mikewarot.blogspot.com/2022/01/whats-all-this-nft-stuff-anyway.html http://mikewarot.blogspot.com/2022/01/whats-all-this-nft-stu...

Brian_K_White 5y ago

This aversion to "mixing" is interesting. When my pile of $20 bills with serial numbers on them gets converted into $100 bills with other serial numbers, and my $100 came from some place that collected $20s from other people, is this not exactly the same mixing? I feel like there are people in all governments who are thinking all day every day "Yes, and we are working on this insane hole in our control as hard as we can and the day is coming close when we can finally outlaw cash."

capitalsigma 5y ago
I imagine it is very hard to launder, say, $320 M (https://www.cnbc.com/2022/02/02/320-million-stolen-from-wormhole-bridge-linking-solana-and-ethereum.html https://www.cnbc.com/2022/02/02/320-million-stolen-from-worm...) in cash. Google says that a $20 bill weighs about 1 gram, so 320 M / 20 = 16,000 kg or ~3.5k lbs. About the weight of a car.
acdha 5y ago
I think it comes down to scale & other means of controlling illegal activity. They don’t need to ban changing $20 bills if they’re fairly comfortable that e.g. banks are going to ask questions if you show up with a suitcase full of them. Scale also matters because it’s hard to ramp up businesses: the mafia can’t claim that their restaurant is doing $100M/year in sales so there are going to be more people involved (i.e. chances for the police to find an in) and they can focus on businesses which do tons of anonymous transactions.
magicjosh 5y ago
> I feel like there are people in all governments who are thinking all day every day "Yes, and we are working on this insane hole in our control as hard as we can and the day is coming close when we can finally outlaw cash." From what I can tell, this is what "Central Bank Digital Currencies" are all about.

tromp 5y ago

Monero pays a large price for its fungibility, by making the UTXO set of (potentially) unspent outputs equal to the set of ALL outputs. Whereas synced bitcoin full nodes can forget all about spent outputs, Monero full nodes must keep some info about them, and be able to efficiently index this info. For its initial block download, a node must download and verify rangeproofs for all outputs, not just the unspent ones. Wallets must be able to sample decoys from a large fraction of all historical outputs. This makes Monero much more bloated than Bitcoin. A more detailed comparison between Monero and Bitcoin can be found at https://gist.github.com/phyro/ec37d8bfedd36102b0ea5824580d06e4 https://gist.github.com/phyro/ec37d8bfedd36102b0ea5824580d06...

Geee 5y ago
Great comparison. Grin is the only cryptocurrency that fundamentally competes with Bitcoin in the long term.
sgp_ 5y ago
I work for Cake Wallet and Monero.com so I'm biased, but you should try one of the wallets that does this relatively burdensome scanning task locally to see that normally it's not the end of the world. It takes me only a few seconds to scan a month of blocks.
- acdha 5y ago
  > It takes me only a few seconds to scan a month of blocks. How many transactions is that, however?
  - sgp_ 5y ago
    About 25,000 transactions per day right now. So about 750,000 per month. Edit: here's a good comparison chart https://moneroj.net/percentage/ https://moneroj.net/percentage/
jason0597 5y ago
> This makes Monero much more bloated than Bitcoin. Would you call bloat something that is essential for privacy?

mullingitover 5y ago

"Bitcoin has these problems because coins that have been through mixers are tainted [lists examples of coins being tanted]. So use Monero, where the entire cryptocurrency system is a huge mixer."

rufusroflpunch 5y ago

This is a vastly overblown issue. It only serves to confirm the bias already present in this site.

magicjosh 5y ago
Disagree. This is a solid list of examples of shortcomings of Bitcoin. This is the type of issue worth discussing and solving for. What we need less of are the empty crypto articles that are just idle speculation about "crypto bad". Read the rest of this thread, there's good stuff here!

timoth3y 5y ago

The author of this article minsunnderstinds what fungibility means. ' Fungibility does not mean non-unique or non-traceable. Fungibility means that a given asset is legally identical to all other instances of the same thing. For example, every $20 bill and every share of Apple stock has a serial number that uniquely identifies it, but that uniqueness is legally irrelevant. You broker has no obligation to give you a specific share of stock nor your bank a specific $20 bill. Financial securities are fungible. Bitcoin is fungible. == Edit: Commentators are confusing fungibility and traceability. They are very different concepts. Non Fungible Tokens are just as traceable as Bitcoin, but they are non-fungable. I wrote a detailed article about this [1] a few weeks ago if you want to gory details. [1] https://www.disruptingjapan.com/what-three-card-monte-can-teach-you-about-nfts/ https://www.disruptingjapan.com/what-three-card-monte-can-te...

mountainboy 5y ago
umm, no. just no. fungibility means that two units are interchangeable/equivalent. Legality doesn't enter into it. anything that makes unit A perceptibly different from unit B can cause humans to value unit A more less than B. Some units may be perceived as "better" than average and carry a premium. Others may be perceived as "bad" or "tainted" and trade at a discount. Such differences are generally considered undesirable in a money.
Ar-Curunir 5y ago
No, it's not. It depends on who's asking. If I see that the satoshis you're trying to give to me were part of (e.g.) a drug transaction in the past, I might not feel comfortable accepting your money. The problem with Bitcoin is that I can do that taint analysis, because the entire transaction graph is public.
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mw888 5y ago
Legally identical is a nonsense metric: if I own bitcoin I cannot sell because it has a tainted history then it is obviously not equivalent and not as valuable as bitcoin which can be. The fact that no broker cares about which instance of the stock or dollar you own but can track it anyways proves that those things are effectively fungible. In Bitcoin it is obviously not true that exchanges don’t care in the same way - plainly obvious from the source material you are responding to. When different bitcoin have different value by virtue of not being exchangeable at the largest liquidity pools, and your definition of fungible fails to capture that fact, you have the wrong definition.

rafaelero 5y ago

By that logic, oil is also not fungible; or any commodity btw. There are also ways to make BTC untraceable, and I believe simply using Lightning Network is a way to do it. Nothing to see here, folks. Just Hacker News noise.

babyshake 5y ago

This does raise some interesting questions. Let's say BlockFi did not want to accept ETH that came from TornadoCash or another coin mixer. For how long does it stay tainted? If you then traded that ETH for another asset on Uniswap, is the ETH still tainted for its new owner? Also is there any way to check for whether funds from a certain address are likely to be "tainted" or if I am going to use a dApp that would taint my own funds?

derangedHorse 5y ago

A small thing to note is that Bitcoin does have fungibility built into the system. There is almost no (non-contrived) way to track the history of a specific amount of Bitcoin over time. When person A receives X Bitcoin, an entry is put into a ledger that says person A received X Bitcoin. If person B sends C amount of coinjoined Bitcoin to person A, then the ledger will now add that person A received C Bitcoin. Now, if person A then wants to send Bitcoin to another address, person A has to reference the ledger transactions where they received the Bitcoin (so the transactions that say person A received C Bitcoin and any other transaction where person A received X Bitcoin) as proof to the Bitcoin system that person A has enough. The used transactions are basically crossed out on the ledger after that and if person A didn't want to use all their coins from the crossed out transaction, person A will make 2 outputs on their outbound transaction -- one amount marked to a recipient's address and another marked back to their own (with the "change" they want to give themselves). Now we can discuss the feature of fungibility within this context. Imagine a scenario where person A only has C coins to their name. If person A were to send Bitcoin to someone else, then you can imagine that any Bitcoin received from Person A directly came from the C coinjoined coins. But what if person A also had another transaction on the ledger giving them X amount of coins? If person A wanted to send less than C amount of coins, let's say C-1, person A could technically reference 2 transactions (the one giving person A 'C' coins and the one giving Person A 'X' coins) and it would be impossible to tell from the ledger which pile the recipient is receiving coins from. Thus there's no surefire way to track an amount of Bitcoin from person to person. What an institution can do is blacklist any transactions received that reference a coinjoined transaction, but it's very easy to make sure one doesn't directly have Bitcoin from a coinjoined transaction. One simply has to send Bitcoin to another address they own and reference 2 transactions, the coinjoined one and another "legitimate" transaction. Using the second address, it now becomes obscure how much of the money they received came from the coinjoined amount and impossible to distinguish any amount they send as being part of that source. Companies can still blacklist accounts that have received coinjoined funds and any direct accounts they've transacted with, but when does the fan-out stop? Conducting business this way would be detrimental to any Bitcoin-based business. From the examples I see in the linked post, exchanges are only rejecting coinjoined transactions as deposits and withdrawal requests to accounts used to create coinjoined transactions. I'm still against this of course, but I wouldn't say this threatens the overall fungibility of Bitcoin).

janandonly 5y ago

There are non-KYC exchanges that allow you to change some ₿ into some Monero, and vice versa. In other words, if an exchange every refused a particular bitcoin UTXO, I could simply swap it to Monero and then back and try again with these fresh new bitcoin UTXO’s.