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That's because when most people use "blockchain" or "DeFi" they're using AML/KYC entities that post their transaction logs to public servers. Law enforcement ea

That's because when most people use "blockchain" or "DeFi" they're using AML/KYC entities that post their transaction logs to public servers. Law enforcement eats this up because it saves them the trouble of getting warrants for investigations. Bad for customers to be sure. Most have no idea what they're doing and have fallen for a scam hook, line, and sinker. They (loudly, incessantly) proclaim to their friends the benefits of a new money paradigm while deriving all sustenance through the umbilical cord of OldFi. ChromaFlair on a Model T. The article itself is a hot mess of muddled thinking. It starts by talking about the Bitcoin white paper (not a "manifesto"), then asking the absurd question: "Why can't DeFi make good on the promise?" The reason is that "DeFi" is about as far from Bitcoin as "car" is from "carpet." The Bitcoin white paper describes the application of proof of work to the problem of electronic cash. The vast majority of DeFi projects are just centralized ledgers operating through trusted institutions. They are the very definition of "mint" in the white paper - a single, corruptible player that sets the rules - arbitrarily if need be.

arberx 4y ago
Sounds like you've never used a DeFi application...Yes, the bridging between on-chain/off-chain still happens through centralized entities, but things like uniswap are entirely run on-chain and don't require any central authority or centralized ledger.
- cowtools 4y ago
  privacy through voluntary swaps is not sybil-proof
louwrentius 4y ago
What is the point you are trying to convey?
- counttheforks 4y ago
  Don't use AML/KYC entities?
  - zaphar 4y ago
    I can't use crypto for anything useful without it. This advice means crypto is useless.
    - counttheforks 4y ago
      Is localbitcoin not still a thing?
    - DarkWiiPlayer 4y ago
      not entirely correct; if you both earn and spend all of your crypto directly as cryptocurrency, then you can fairly easily just remain entirely anonymous. This just doesn't apply to most people, at least most who do legal business.
      - zaphar 4y ago
        For me and the vast majority of people that is a complete non-starter. And the primary value of a currenyc is that it gives you liquidity to participate in the economy. Until crypto can claim the same thing it only barely qualifies as a currency in my mind.
      - ericd 4y ago
        What about when it comes to paying taxes on those earnings?
        notch656a 4y ago
        Gains can be reported to the IRS without revealing their source.
        ericd 4y ago
        Sounds like a recipe for an audit, at least once they can clear their backlog. At which point, I'm pretty certain they're going to want to know more than "generic cap gains sale"/"revenue paid to me in cryptocurrency". They pretty clearly do not want anonymity in the flow of money.
- bulldog13 4y ago
- BaseballPhysics 4y ago
  Something about No True Scotsman if I'm understanding correctly.
- sph 4y ago
  That many things these days are called Blockchain, as if to appear secure, but they're no more sophisticated than centralised databases, while actual blockchains, like Bitcoin as exemplified in its whitepaper, is designed to be a secure and decentralised chain of transactions. "Blockchain" has stopped meaning anything when people decided to use it for anything remotely related to internet money. It's just become a fancy word executives put on investor decks to woo venture capitalists. But it doesn't mean that the actual cryptographic technology called blockchain, i.e. a chain of digitally signed transactions with a distributed consensus mechanism, is itself insecure.
  - seanw444 4y ago
    Bitcoin is traceable due to its very implementation. Unless you know how to use it properly, it's very easy to deanonymize yourself on accident. And once that happens, all the transactions thereafter are easy to follow. Monero, on the other hand, is designed to intentionally be hard to trace history of transactions on.
    - sph 4y ago
      Yes, I edited it out from my comment because I knew someone would point that out and I didn't really want to go on a tangent about it. I meant it's untraceable by some very narrow definitions of tracing. You'd know that hex address X sent money to Y, but you wouldn't necessarily know that X is John Doe that lives at 1234 Main St., nor you'd be able to tell that, knowing address X, John Doe also owns address Z. With KYC laws you have a lot more metadata to be able to do correlations like that, but I'm specifically talking about the protocol and the technology itself.
      - simiones 4y ago
        It's important though to mention that you don't need KYC to attach a real identity to a bitcoin wallet. It's harder to do at scale, but if you're interested in finding the bitcoin wallet(s) of a specific person, or the person behind a specific wallet, this can be done with analysis of the blockchain itself and information from other parties to their transactions (which include their ISP, the ISP of some Bitcoin nodes where they advertised their transactions, and the seller sending them physical goods if they are using BTC for that). Also, if a BTC wallet is linked to a physical identity at any time, all past transactions of that physical identity can generally be discovered, often even if they are using separate wallets.
ehnto 4y ago
> Bad for customers to be sure. Most have no idea what they're doing and have fallen for a scam hook, line, and sinker. I wouldn't call it a scam, it's written into laws we should all be pretty mad about. It's only a matter of time before KYC companies are the only way to engage legally with cryptocurrencies. While I don't think having all your transactions in a public ledger was ever a smart move for your average joe, just one de-anonymizing event and you're out to dry. I think the bigger issue is the ever eroding privacy policy in many countries.
- deleted 4y ago
  [deleted]
BaseballPhysics 4y ago
> That's because when most people use "blockchain" or "DeFi" they're using AML/KYC entities that post their transaction logs to public servers. Law enforcement eats this up because it saves them the trouble of getting warrants for investigations. Well, except for the important detail that KYC requirements don't preclude the need for warrants... > They (loudly, incessantly) proclaim to their friends the benefits of a new money paradigm while deriving all sustenance through the umbilical cord of OldFi. Yeah, it's almost like crypto can't possibly be a fully self-contained ecosystem, and thus it must by necessity have integration points with the rest of the world. Who could have ever predicted that...
- throwup 4y ago
  > Well, except for the important detail that KYC requirements don't preclude the need for warrants... Banks and law enforcement frequently share data without caring about warrants. One example: if you send a $10K wire (in the US), your bank may voluntarily submit a Suspicious Activity Report. And since they may be liable if they choose not to report, but are not liable if they do report, guess which option they typically choose?
  - niom 4y ago
    Warrants are not a high a hurdle in practice when they are needed. The US has the third-party doctrine, so all information you've communicated to someone does not need a warrant unless otherwise protected. In the US you need to establish real probable cause (otherwise the fruit may be poisoned), but PC is a low legal standard. Non-US jurisdictions don't use the fruit of the poisoned tree doctrine and so the actual legal standard is more like "arguing probable cause for the warrant shouldn't look like an outright perversion of justice". The world's best limbo performer can't dance under that bar.
    - notch656a 4y ago
      Hell with KYC a government imposed search of your papers is dictated by law without even a warrant/PC/RAS. Where I live, you can legally carry a concealed gun in a bank without ID but you can't open a damn account and put $20 even with a US passport (without some proof of address).
nimbius 4y ago
The whole article is a plug for Chainalysis, a company that sells its ability to trace crypto transactions to the US government who ironically gave them KYC, the most fundamental and lazy ability to start a business that traces stuff like this. What I'd like to see Grigg admit to with a straight face is his companies ability to trace monero. his company got the US Government bid for a $625,000 bounty to trace it, and its been two years...so i suspect Grigg's releasing this presser to take some of the heat off the inevitable "no, we cant" he's going to need to admit sooner or later. https://en.wikipedia.org/wiki/Monero#Efforts_to_trace_transactions https://en.wikipedia.org/wiki/Monero#Efforts_to_trace_transa... Updated to reflect the thousands, not mil. bounty.
- woodruffw 4y ago
  $625,000, not million.
- cowtools 4y ago
  I suspect chainalysis is describing some "poisoned output attack" with respect to monero. See: https://m.youtube.com/watch?v=iABIcsDJKyM https://m.youtube.com/watch?v=iABIcsDJKyM The problem is a well-understood but innate limitation to all sender-obfuscating cryptocurrencies.
  - tromp 4y ago
    > limitation to all sender-obfuscating cryptocurrencies Only those that allow sending coins to recipients without their explicit approval. On pure Mimblewimble blockchains, the recipient must sign for receipt and is much less likely to accept poisoned funds.
    - cowtools 4y ago
      It's irrelevant
  - sneed-oil 4y ago
    Sorry, I didn't watch the video, but couldn't that be avoided by churning a few times?
TigeriusKirk 4y ago
- throw10920 4y ago
  This comment is one of the laziest ones that you can make. "No it isn't" is literally the top (least useful) strata of the argument pyramid, provides precisely zero extra information, and doesn't belong on Hacker News.
  - TigeriusKirk 4y ago
    It's not worth going point by point when there's so many fundamental misconceptions. Best to reject the entire comment. What HN needs is less engagement with useless, time consuming misinformation, and more outright rejection of it.
    - throw10920 4y ago
      The fact that you made a second comment, yet provided absolutely no refutations of any of the points in the original comment under discussion, suggests that you cannot refute their points. Although, the phrase "What HN needs is less engagement with useless, time consuming misinformation, and more outright rejection of it." instead suggests that you are of the totalitarian nature that prefers to suppress dissenting thought entirely, so I'm not sure what to think.
      - deleted 4y ago
        [deleted]
    - cowtools 4y ago
      No, This is incorrect
    - mitchdoogle 4y ago
      That may work if you're a known entity who is known to be an expert on the subject, but for an anonymous forum, just saying "you're wrong" without any explanation is stupid and useless.
decentralised 4y ago
The traceability of very much part of design of most blockchains, starting with Bitcoin. The whitepaper makes this clear in section "10) Privacy" and the article quotes half of the relevant text. The remaining half states: "As an additional firewall, a new key pair should be used for each transaction to keep them from being linked to a common owner. Some linking is still unavoidable with multi-input transactions, which necessarily reveal that their inputs were owned by the same owner. The risk is that if the owner of a key is revealed, linking could reveal other transactions that belonged to the same owner" Unlike Bitcoin, account based blockchains make this extra measure of privacy harder as the receiving and sending address is one and the same, however there's no limit to how many accounts one can have, so anonymity is still possible as long as acquiring the coins doesn't reveal your identity. Those who sign up for cryptocurrency service providers (who are required by law to perform AML/KYC checks - and do so with the consent of their customers) trade away the privacy (of some of their) transactions for the benefits (most commonly, yield and ease of use) said services offer. This is not different from use cases of cash money, where getting cash money from an ATM or most money transmitters will reveal your identity, and while one is free to make in person transactions and remain "anonymous", if one wants to have a bank account or invest legally, then some level of KYC will be in place. The article indeed asks the wrong question. DeFi can't operate legally without KYC/AML and customers know it. Your comment on the other hand seems to me to be making an error in believing DeFi users don't know this.

arberx 4y ago

Sounds like you've never used a DeFi application...Yes, the bridging between on-chain/off-chain still happens through centralized entities, but things like uniswap are entirely run on-chain and don't require any central authority or centralized ledger.

cowtools 4y ago
privacy through voluntary swaps is not sybil-proof

louwrentius 4y ago

What is the point you are trying to convey?

counttheforks 4y ago
Don't use AML/KYC entities?
- zaphar 4y ago
  I can't use crypto for anything useful without it. This advice means crypto is useless.
  - counttheforks 4y ago
    Is localbitcoin not still a thing?
  - DarkWiiPlayer 4y ago
    not entirely correct; if you both earn and spend all of your crypto directly as cryptocurrency, then you can fairly easily just remain entirely anonymous. This just doesn't apply to most people, at least most who do legal business.
    - zaphar 4y ago
      For me and the vast majority of people that is a complete non-starter. And the primary value of a currenyc is that it gives you liquidity to participate in the economy. Until crypto can claim the same thing it only barely qualifies as a currency in my mind.
    - ericd 4y ago
      What about when it comes to paying taxes on those earnings?
      - notch656a 4y ago
        Gains can be reported to the IRS without revealing their source.
        ericd 4y ago
        Sounds like a recipe for an audit, at least once they can clear their backlog. At which point, I'm pretty certain they're going to want to know more than "generic cap gains sale"/"revenue paid to me in cryptocurrency". They pretty clearly do not want anonymity in the flow of money.
bulldog13 4y ago
BaseballPhysics 4y ago
Something about No True Scotsman if I'm understanding correctly.
sph 4y ago
That many things these days are called Blockchain, as if to appear secure, but they're no more sophisticated than centralised databases, while actual blockchains, like Bitcoin as exemplified in its whitepaper, is designed to be a secure and decentralised chain of transactions. "Blockchain" has stopped meaning anything when people decided to use it for anything remotely related to internet money. It's just become a fancy word executives put on investor decks to woo venture capitalists. But it doesn't mean that the actual cryptographic technology called blockchain, i.e. a chain of digitally signed transactions with a distributed consensus mechanism, is itself insecure.
- seanw444 4y ago
  Bitcoin is traceable due to its very implementation. Unless you know how to use it properly, it's very easy to deanonymize yourself on accident. And once that happens, all the transactions thereafter are easy to follow. Monero, on the other hand, is designed to intentionally be hard to trace history of transactions on.
  - sph 4y ago
    Yes, I edited it out from my comment because I knew someone would point that out and I didn't really want to go on a tangent about it. I meant it's untraceable by some very narrow definitions of tracing. You'd know that hex address X sent money to Y, but you wouldn't necessarily know that X is John Doe that lives at 1234 Main St., nor you'd be able to tell that, knowing address X, John Doe also owns address Z. With KYC laws you have a lot more metadata to be able to do correlations like that, but I'm specifically talking about the protocol and the technology itself.
    - simiones 4y ago
      It's important though to mention that you don't need KYC to attach a real identity to a bitcoin wallet. It's harder to do at scale, but if you're interested in finding the bitcoin wallet(s) of a specific person, or the person behind a specific wallet, this can be done with analysis of the blockchain itself and information from other parties to their transactions (which include their ISP, the ISP of some Bitcoin nodes where they advertised their transactions, and the seller sending them physical goods if they are using BTC for that). Also, if a BTC wallet is linked to a physical identity at any time, all past transactions of that physical identity can generally be discovered, often even if they are using separate wallets.

ehnto 4y ago

> Bad for customers to be sure. Most have no idea what they're doing and have fallen for a scam hook, line, and sinker. I wouldn't call it a scam, it's written into laws we should all be pretty mad about. It's only a matter of time before KYC companies are the only way to engage legally with cryptocurrencies. While I don't think having all your transactions in a public ledger was ever a smart move for your average joe, just one de-anonymizing event and you're out to dry. I think the bigger issue is the ever eroding privacy policy in many countries.

deleted 4y ago
[deleted]

BaseballPhysics 4y ago

> That's because when most people use "blockchain" or "DeFi" they're using AML/KYC entities that post their transaction logs to public servers. Law enforcement eats this up because it saves them the trouble of getting warrants for investigations. Well, except for the important detail that KYC requirements don't preclude the need for warrants... > They (loudly, incessantly) proclaim to their friends the benefits of a new money paradigm while deriving all sustenance through the umbilical cord of OldFi. Yeah, it's almost like crypto can't possibly be a fully self-contained ecosystem, and thus it must by necessity have integration points with the rest of the world. Who could have ever predicted that...

throwup 4y ago
> Well, except for the important detail that KYC requirements don't preclude the need for warrants... Banks and law enforcement frequently share data without caring about warrants. One example: if you send a $10K wire (in the US), your bank may voluntarily submit a Suspicious Activity Report. And since they may be liable if they choose not to report, but are not liable if they do report, guess which option they typically choose?
- niom 4y ago
  Warrants are not a high a hurdle in practice when they are needed. The US has the third-party doctrine, so all information you've communicated to someone does not need a warrant unless otherwise protected. In the US you need to establish real probable cause (otherwise the fruit may be poisoned), but PC is a low legal standard. Non-US jurisdictions don't use the fruit of the poisoned tree doctrine and so the actual legal standard is more like "arguing probable cause for the warrant shouldn't look like an outright perversion of justice". The world's best limbo performer can't dance under that bar.
  - notch656a 4y ago
    Hell with KYC a government imposed search of your papers is dictated by law without even a warrant/PC/RAS. Where I live, you can legally carry a concealed gun in a bank without ID but you can't open a damn account and put $20 even with a US passport (without some proof of address).

nimbius 4y ago

The whole article is a plug for Chainalysis, a company that sells its ability to trace crypto transactions to the US government who ironically gave them KYC, the most fundamental and lazy ability to start a business that traces stuff like this. What I'd like to see Grigg admit to with a straight face is his companies ability to trace monero. his company got the US Government bid for a $625,000 bounty to trace it, and its been two years...so i suspect Grigg's releasing this presser to take some of the heat off the inevitable "no, we cant" he's going to need to admit sooner or later. https://en.wikipedia.org/wiki/Monero#Efforts_to_trace_transactions https://en.wikipedia.org/wiki/Monero#Efforts_to_trace_transa... Updated to reflect the thousands, not mil. bounty.

woodruffw 4y ago
$625,000, not million.
cowtools 4y ago
I suspect chainalysis is describing some "poisoned output attack" with respect to monero. See: https://m.youtube.com/watch?v=iABIcsDJKyM https://m.youtube.com/watch?v=iABIcsDJKyM The problem is a well-understood but innate limitation to all sender-obfuscating cryptocurrencies.
- tromp 4y ago
  > limitation to all sender-obfuscating cryptocurrencies Only those that allow sending coins to recipients without their explicit approval. On pure Mimblewimble blockchains, the recipient must sign for receipt and is much less likely to accept poisoned funds.
  - cowtools 4y ago
    It's irrelevant
- sneed-oil 4y ago
  Sorry, I didn't watch the video, but couldn't that be avoided by churning a few times?

TigeriusKirk 4y ago

throw10920 4y ago
This comment is one of the laziest ones that you can make. "No it isn't" is literally the top (least useful) strata of the argument pyramid, provides precisely zero extra information, and doesn't belong on Hacker News.
- TigeriusKirk 4y ago
  It's not worth going point by point when there's so many fundamental misconceptions. Best to reject the entire comment. What HN needs is less engagement with useless, time consuming misinformation, and more outright rejection of it.
  - throw10920 4y ago
    The fact that you made a second comment, yet provided absolutely no refutations of any of the points in the original comment under discussion, suggests that you cannot refute their points. Although, the phrase "What HN needs is less engagement with useless, time consuming misinformation, and more outright rejection of it." instead suggests that you are of the totalitarian nature that prefers to suppress dissenting thought entirely, so I'm not sure what to think.
    - deleted 4y ago
      [deleted]
  - cowtools 4y ago
    No, This is incorrect
  - mitchdoogle 4y ago
    That may work if you're a known entity who is known to be an expert on the subject, but for an anonymous forum, just saying "you're wrong" without any explanation is stupid and useless.

decentralised 4y ago

The traceability of very much part of design of most blockchains, starting with Bitcoin. The whitepaper makes this clear in section "10) Privacy" and the article quotes half of the relevant text. The remaining half states: "As an additional firewall, a new key pair should be used for each transaction to keep them from being linked to a common owner. Some linking is still unavoidable with multi-input transactions, which necessarily reveal that their inputs were owned by the same owner. The risk is that if the owner of a key is revealed, linking could reveal other transactions that belonged to the same owner" Unlike Bitcoin, account based blockchains make this extra measure of privacy harder as the receiving and sending address is one and the same, however there's no limit to how many accounts one can have, so anonymity is still possible as long as acquiring the coins doesn't reveal your identity. Those who sign up for cryptocurrency service providers (who are required by law to perform AML/KYC checks - and do so with the consent of their customers) trade away the privacy (of some of their) transactions for the benefits (most commonly, yield and ease of use) said services offer. This is not different from use cases of cash money, where getting cash money from an ATM or most money transmitters will reveal your identity, and while one is free to make in person transactions and remain "anonymous", if one wants to have a bank account or invest legally, then some level of KYC will be in place. The article indeed asks the wrong question. DeFi can't operate legally without KYC/AML and customers know it. Your comment on the other hand seems to me to be making an error in believing DeFi users don't know this.