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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 adre

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.

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.