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https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3942181 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3942181 > For example, illegal transactions, sc

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3942181 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3942181 > For example, illegal transactions, scams and gambling together make up less than 3% of volume. Note that: 1. This quote is talking specifically about bitcoin, not crypto overall 2. This paper is written by a notable crypto skeptic, so he's not using bro logic. He found the main usage by volume is speculation, with very little illegal activity. In fact, the US underground economy is 11-12% of US GDP[1], which is a much worse proportion than bitcoin. [1]: https://www.investopedia.com/terms/u/underground-economy.asp https://www.investopedia.com/terms/u/underground-economy.asp

luma 4y ago
The overwhelming volume is in wash trading, which is just a different kind of fraud. It's all fraud.
- readthenotes1 4y ago
  is using bitcoin to transfer some of l your wealth out of country to avoid currency controls fraud? I don't think so but IANAL I read that crypto is also being used for rapid cross country remittances, which may be totally legal. -- Don't think I'm a crypto fan. The value is all based purely on shared beliefs. At least government fiat is backed by the taxing authority (while undermined by the printing authority)
  - luma 4y ago
    If it's being used instead of some other wire transfer in order to dodge government rules on capital controls etc, then yes it's used to evade the legal system and thus also fraud. The fees are not incredibly low nor is the service particularly user friendly or reliable compared to something like Western Union. Bitcoin et al is not providing a useful alternative to existing, legal services. They do of course provide an alternative for other services.
bryanlarsen 4y ago
"main usage by volume being speculation" doesn't help the case. A little bit of speculation helps price discovery. A lot leads to tulips etc, and is very dangerous.
thecupisblue 4y ago
A few problems here: 1. >flows to addresses which have been identified as illegal These are only identified as illegal. First off, only a small number of adressess has been marked as illegal, since it doesn't make much sense to have everyone know the dirty deals you're making, most of the real illegal traffic is not there. Also a large number of DN markets uses 1-time wallets, so it's impossible to identify those. 2. Most of the traffic analysis is based on private to/from exchange and exchange to/from exchange data. As exchanges require a KYC, it can be assumed that most of the exchange routed transactions aren't illegal, or first go into a mixer if they are coming from an exchange, decreasing the odds that it can be classified as illegal. 3. Analysis was done in a crypto bubble market, where everybody and their moms were trading it on a daily basis to earn money. In conclusion - the paper is bull. Yes, a large amount of usage is speculation, but illegal activity is way larger than assumed in the paper. But also, when you remove trading/gambling for speculative profits, what usages remain? Mostly illegal ones, small amount of legal ones and a few believers.
- rom-antics 4y ago
  The paper is not so simplistic as you make it sound. 1. They analyzed clusters of addresses, not individual addresses, so one-time addresses are accounted for (unless the vendor never collected their payment from the DN, in which case they gave away the drugs for free) And anyway since 5 years ago all the DNMs use monero, not bitcoin, so talking about DNMs in the context of bitcoin is an anachronism. If you use a traceable currency with a public ledger for drugs, you're not very bright. 2. Volume associated with a mixer is classified as illegal in the paper, so it's part of the 3%. Bitcoin mixers are not plausibly deniable the way Tornado Cash is (because of UTXOs) - mixers still leave an obvious trail. 3. The analysis covers data from 2015-2021, so it covers two halving cycles. > flows to addresses which have been identified as illegal transactions, scams, and gambling together make up about 4% of the volume at the beginning of our sample in 2015. By the end of of our sample in the middle of 2021, this fraction has fallen to less than 0.4% Illegal activity is 0.4% in a bull market and 4% in a bear market. Overall it averages to the headline 3%. You can infer speculation volume goes up 10x in a bull market.
ohgodplsno 4y ago
As the other comment said, "illegal transactions" makes no sense. Al Capone's bank account did not receive directly millions from racket and drug selling. Everything in there was clean. Where did it come from ? Accounts that are also thought to be clean. Otherwise, if there were direct proof of illegal transactions, he'd have been arrested earlier. The whole point of it is _not_ to get caught. In a space like cryptocurrencies where creating a new wallet to launder your money through and no longer have anything associated with evil_wallet_of_bad_illegal_man (which had all its funds sent to a tumbler and came back to the new account anyways). The whole point of underground transactions is to not be tracked.

luma 4y ago

The overwhelming volume is in wash trading, which is just a different kind of fraud. It's all fraud.

readthenotes1 4y ago
is using bitcoin to transfer some of l your wealth out of country to avoid currency controls fraud? I don't think so but IANAL I read that crypto is also being used for rapid cross country remittances, which may be totally legal. -- Don't think I'm a crypto fan. The value is all based purely on shared beliefs. At least government fiat is backed by the taxing authority (while undermined by the printing authority)
- luma 4y ago
  If it's being used instead of some other wire transfer in order to dodge government rules on capital controls etc, then yes it's used to evade the legal system and thus also fraud. The fees are not incredibly low nor is the service particularly user friendly or reliable compared to something like Western Union. Bitcoin et al is not providing a useful alternative to existing, legal services. They do of course provide an alternative for other services.

bryanlarsen 4y ago

"main usage by volume being speculation" doesn't help the case. A little bit of speculation helps price discovery. A lot leads to tulips etc, and is very dangerous.

thecupisblue 4y ago

A few problems here: 1. >flows to addresses which have been identified as illegal These are only identified as illegal. First off, only a small number of adressess has been marked as illegal, since it doesn't make much sense to have everyone know the dirty deals you're making, most of the real illegal traffic is not there. Also a large number of DN markets uses 1-time wallets, so it's impossible to identify those. 2. Most of the traffic analysis is based on private to/from exchange and exchange to/from exchange data. As exchanges require a KYC, it can be assumed that most of the exchange routed transactions aren't illegal, or first go into a mixer if they are coming from an exchange, decreasing the odds that it can be classified as illegal. 3. Analysis was done in a crypto bubble market, where everybody and their moms were trading it on a daily basis to earn money. In conclusion - the paper is bull. Yes, a large amount of usage is speculation, but illegal activity is way larger than assumed in the paper. But also, when you remove trading/gambling for speculative profits, what usages remain? Mostly illegal ones, small amount of legal ones and a few believers.

rom-antics 4y ago
The paper is not so simplistic as you make it sound. 1. They analyzed clusters of addresses, not individual addresses, so one-time addresses are accounted for (unless the vendor never collected their payment from the DN, in which case they gave away the drugs for free) And anyway since 5 years ago all the DNMs use monero, not bitcoin, so talking about DNMs in the context of bitcoin is an anachronism. If you use a traceable currency with a public ledger for drugs, you're not very bright. 2. Volume associated with a mixer is classified as illegal in the paper, so it's part of the 3%. Bitcoin mixers are not plausibly deniable the way Tornado Cash is (because of UTXOs) - mixers still leave an obvious trail. 3. The analysis covers data from 2015-2021, so it covers two halving cycles. > flows to addresses which have been identified as illegal transactions, scams, and gambling together make up about 4% of the volume at the beginning of our sample in 2015. By the end of of our sample in the middle of 2021, this fraction has fallen to less than 0.4% Illegal activity is 0.4% in a bull market and 4% in a bear market. Overall it averages to the headline 3%. You can infer speculation volume goes up 10x in a bull market.

ohgodplsno 4y ago

As the other comment said, "illegal transactions" makes no sense. Al Capone's bank account did not receive directly millions from racket and drug selling. Everything in there was clean. Where did it come from ? Accounts that are also thought to be clean. Otherwise, if there were direct proof of illegal transactions, he'd have been arrested earlier. The whole point of it is _not_ to get caught. In a space like cryptocurrencies where creating a new wallet to launder your money through and no longer have anything associated with evil_wallet_of_bad_illegal_man (which had all its funds sent to a tumbler and came back to the new account anyways). The whole point of underground transactions is to not be tracked.