6 ms·

But used as intended (not via a KYC exchange) it is pseudonymous, right?

by SahAssar 4y ago

Lerc 4y ago
Until you buy something you can touch.
- Red_Leaves_Flyy 4y ago
  And then all transactions up steam can get unraveled.
noduerme 4y ago
If you trade in and out for cash, in person with a counterparty, from a self-hosted wallet that you never use to send or receive from any other wallet that's connected to an exchange... then yes. The use case for this is mainly moving money over borders.
- funstuff007 4y ago
  except that person(s) you gave and received the cash from know who you are.
  - marksmith2996 4y ago
    only if they're still alive
    - 8note 4y ago
      Or if they brought their phone with them
      - alex_young 4y ago
        In this scenario the person transacting the bitcoin murdered their counterparty but the cellphone is still intact?
        hedora 4y ago
        Either that, or they didn't ask the counterparty to uninstall google maps before the meeting.
        alex_young 4y ago
        It’s a pretty amusing crime plot in any case. If your goal is to find people to off who have money on them there are surely less complicated options.
  - noduerme 4y ago
    in reality, no, they don't know who I am. Back when LocalBitcoins.com facilitated face to face trades for cash around the world, you just had to have a high rating from previous transactions. Now... how safe do you feel showing up to meet an anonymous guy in a bar with thousands of dollars in Benjamins? That's the downside of being anonymous. /edit: The downside of operating completely outside the system. /edit 2: I should also clarify that I never cashed out my casino's BTC in this manner. That obviously wouldn't make sense because anything that touched a casino wallet would be traceable to that nexus. I only used it to bring extra spending cash and rent money to countries where it was hard or expensive to transfer USD through banks.
    - nibbleshifter 4y ago
      I bought and sold bitcoin in exactly that way (in person, in public) back in the day. Never has anything even remotely untoward happen. Just sit, have a beer, wait for confirmations to happen, and be on your way.
  - squeaky-clean 4y ago
    Are Bitcoin ATM's still a thing? There used to be one in a coffee shop near where I lived. If I deposited cash and wore a facemask and sunglasses, how would anyone ever know who did the transaction?
    - gertlex 4y ago
      A couple months ago, I was incredulous when I noticed about a half dozen of them on google maps within a mile radius of where I am in San Jose. I haven't gone looking for them physically, though.
    - MivLives 4y ago
      They require a phone number and an ID in some cases. Their exchange rates are normally not great either.
      - vertis 4y ago
        Bad exchange rates are the cost of money laundering, along with the eventual jail sentence.
- kjellsbells 4y ago
  This makes bitcoin sounds like a complicated technical reimplementation of hawala https://en.wikipedia.org/wiki/Hawala?wprov=sfla1 https://en.wikipedia.org/wiki/Hawala?wprov=sfla1
  - noduerme 4y ago
    It actually is exactly like Hawala, and I've traded BTC in and out with networks that had roughly the same human topography. That was the original killer app or crypto. FWIW, we Jews (speaking for my family) mostly think the Rothschilds were pretty smart for working out the same type of system by placing a brother in each European capital and banking to kings, keeping a ledger instead of moving physical gold whenever possible. It seems obvious now, but it was "moving fast and breaking things" in the 18th Century.
    - deleted 4y ago
      [deleted]
  - nayuki 4y ago
    No, Bitcoin is like sending cash directly to the recipient. Lightning is exactly like cryptographic Hawala, with many hops along the way.
- TrapLord_Rhodo 4y ago
  ... lol. Going to a site to exchange bitcoin for cold cash seems like the worst idea ever if you want to stay anonomyous. Did everyone just forget about snowden?
- vertis 4y ago
  Let's game this out. Bob and Alice are the first parties. You trade in cash, in person, probably in a public place. Say that Alice then gets in trouble for the drug dealing they also do (or maybe the government just pings her for not doing KYC and being licensed to do financial transactions), it could be years later. The authorities seize Alice's computers and subpoena "localbitcoins", or the whatsapp/telegram/signal chat that you had to organise the meetup. They might even have a list of addresses that Alice used for transactions at this point. Alice may or may not have had good OpSec, Bob doesn't know. From that there a myrriad options to identify Bob and Bob's addresses. In your example you don't use an exchange, but that's not the only method of identifying Bob. Mass survelliance and metadata gathering noticed 100 phones within the location and timeframe Bob and Alice were supposed to meet. Bob had to take a phone to do the actual transfer of bitcoin (or any altcoin), so just leaving it at home wouldn't work. They also know the amount Alice transferred to Bob and the rough timeframe that it was completed and put into the ledger. Bob was also seen drawing out roughly the right amount from the ATM an hour before the meeting. Of the 100 phones, most haven't drawn out that much money recently. So they can correlate a set of phones with a set of addresses. Even if Bob is not completely unmasked at this point. He has the money in but has to get the money out as well. Bob wanted as you say, to move money across the border. In order to do that Bob must cross the border[0] and meet with Charlie to do the reverse of the transfer. Only a handful of those 100 phones crossed borders shortly after meeting with Alice. As soon as the money in that address moves again the cross reference with the locations of the tagged phones and discover that they know Charlie because he's done a KYC with an exchange and installed their app (even if he doesn't use that address for the transaction). They ask Charlie some pointed questions about whether he is following KYC procedures in his financial dealing and he caves and gives up the chat logs confirming your meeting, or maybe they just install NSO spyware on his phone and watch to find all the other people Charlie is dealing with. So... In a perfectly isolated one off instance maybe that's pseudonymous. In any real world transaction it's extremely unlikely that a state can't use it's resources to unmask the participants. In a one shot, the rules might be one way, but in multi-shot there are always factors that will serve to unmask the participants, and in reality you have to do those transactions over and over until you slip up and just combine them with a KYC exchange account and it doesn't even require that level of effort on the part of the state. OpSec is hard, as they say. [0]: there is an alternative where only the bitcoin transaction crosses the border in return for something of value, either physical or digital, both have alternative paths that can be tracked in similar ways.
Red_Leaves_Flyy 4y ago
How is that helpful? Get Bitcoin from crime Wash into monero? Pray the tumbler is legit? Wash back into Bitcoin Now what? Bitcoins from tumblers are suspect everywhere with kyc requirements. Sell off books to a Russian oligarch or North Korea I guess?
- antibasilisk 4y ago
  You can still trade it for goods and services
- from 4y ago
  Going back to Bitcoin is unnecessary but possible. You go from Monero to cash, wire transfer, or gift cards through a variety of unlicensed conversion services that advertise themselves all over the Internet.
  - RcouF1uZ4gsC 4y ago
    > but possible. You go from Monero to cash, wire transfer, or gift cards through a variety of unlicensed conversion services that advertise themselves all over the Internet. Those are probably run by the FBI. It seems like a no brained for the government to try to run such services given the wealth of information they would provide.
    - from 4y ago
      Having unexplained assets is not a crime and won't be at least in the US because of the constitution, worst case they could be subject to civil forfeiture. Assuming you did everything else right (full disk encryption, Tor on public wifi/LTE router that you alternate routinely, not using Google, etc) the anonymity of Monero means the government would have a very difficult time tying whatever you bought with the Monero to your actual criminal activity. Of course if you are involved in meatspace crime like drugs then maybe if you use these services they put you under surveillance and eventually find you with drugs in the trunk of your car.
      - deleted 4y ago
acdha 4y ago
Only if you and everyone you ever deal with have perfect security. As soon as one person’s identity is leaked, that opens the possibility of a real-world ID being linked to a wallet. This story from about a year ago also showed how that worked with investigators tracing it link by link: https://www.wired.com/story/tracers-in-the-dark-welcome-to-video-crypto-anonymity-myth/ https://www.wired.com/story/tracers-in-the-dark-welcome-to-v...
- mjevans 4y ago
  "Leaked" also includes cashing in or out of Bitcoin.
  - acdha 4y ago
    Or using a business which is required to report transactions, using a site which gets hacked, etc. I don’t think people sufficiently weight the risk of having a ledger which can’t be redacted – for example, I’d imagine there were a lot of people in Weimar Germany who did not think twice about donating to a synagogue or other organization which you would not want have wanted linked to your bank account a decade later.
    - pineaux 4y ago
      This can be true for basically anything: Maybe you own a car. In 10 years time a green authoritarian communist group starts to suspect anybody who owned a car, you are sent to a re-education facility. Maybe you are environmentally conscious and bought solar panels. In ten years time an anti environmental fascist group comes to power. You are disappeared. You make some negative comments about AI at a dinner party. The host has an Alexa home automation system. In ten years time when government is run by AI. You are assigned to sewer cleaning duty, a tragic accident happens. Summarizing: It's not a really strong argument. However, if you are doing things that can get you arrested today; That's another story, then you should be paranoid and not use bitcoin. Maybe Monero instead? Although, that's not watertight either.
      - 4y ago
baryphonic 4y ago
Since the ledger is public, it can be analyzed for patterns from the individual transactions. The more transactions there are involving a certain party, the more likely an outside observer will be able to piece together identities for that party's overall network. KYC exchanges accelerate that process. Crypto projects like Monero (XMR) do not have this flaw, as deducing the identities of parties from the public ledger is computationally prohibitive.
- sizzle 4y ago
  What if they use a mixer before major transactions and create disposable wallets to transact the funds that risk exposing their wallet?
yieldcrv 4y ago
It took 8 years for this high profile guy to be caught because he comingled funds in 2020 This article is not the investigative epiphany that it thinks it is

But used as intended (not via a KYC exchange) it is pseudonymous, right?

Lerc 4y ago

Until you buy something you can touch.

Red_Leaves_Flyy 4y ago
And then all transactions up steam can get unraveled.

noduerme 4y ago

If you trade in and out for cash, in person with a counterparty, from a self-hosted wallet that you never use to send or receive from any other wallet that's connected to an exchange... then yes. The use case for this is mainly moving money over borders.

funstuff007 4y ago
except that person(s) you gave and received the cash from know who you are.
- marksmith2996 4y ago
  only if they're still alive
  - 8note 4y ago
    Or if they brought their phone with them
    - alex_young 4y ago
      In this scenario the person transacting the bitcoin murdered their counterparty but the cellphone is still intact?
      - hedora 4y ago
        Either that, or they didn't ask the counterparty to uninstall google maps before the meeting.
        alex_young 4y ago
        It’s a pretty amusing crime plot in any case. If your goal is to find people to off who have money on them there are surely less complicated options.
- noduerme 4y ago
  in reality, no, they don't know who I am. Back when LocalBitcoins.com facilitated face to face trades for cash around the world, you just had to have a high rating from previous transactions. Now... how safe do you feel showing up to meet an anonymous guy in a bar with thousands of dollars in Benjamins? That's the downside of being anonymous. /edit: The downside of operating completely outside the system. /edit 2: I should also clarify that I never cashed out my casino's BTC in this manner. That obviously wouldn't make sense because anything that touched a casino wallet would be traceable to that nexus. I only used it to bring extra spending cash and rent money to countries where it was hard or expensive to transfer USD through banks.
  - nibbleshifter 4y ago
    I bought and sold bitcoin in exactly that way (in person, in public) back in the day. Never has anything even remotely untoward happen. Just sit, have a beer, wait for confirmations to happen, and be on your way.
- squeaky-clean 4y ago
  Are Bitcoin ATM's still a thing? There used to be one in a coffee shop near where I lived. If I deposited cash and wore a facemask and sunglasses, how would anyone ever know who did the transaction?
  - gertlex 4y ago
    A couple months ago, I was incredulous when I noticed about a half dozen of them on google maps within a mile radius of where I am in San Jose. I haven't gone looking for them physically, though.
  - MivLives 4y ago
    They require a phone number and an ID in some cases. Their exchange rates are normally not great either.
    - vertis 4y ago
      Bad exchange rates are the cost of money laundering, along with the eventual jail sentence.
kjellsbells 4y ago
This makes bitcoin sounds like a complicated technical reimplementation of hawala https://en.wikipedia.org/wiki/Hawala?wprov=sfla1 https://en.wikipedia.org/wiki/Hawala?wprov=sfla1
- noduerme 4y ago
  It actually is exactly like Hawala, and I've traded BTC in and out with networks that had roughly the same human topography. That was the original killer app or crypto. FWIW, we Jews (speaking for my family) mostly think the Rothschilds were pretty smart for working out the same type of system by placing a brother in each European capital and banking to kings, keeping a ledger instead of moving physical gold whenever possible. It seems obvious now, but it was "moving fast and breaking things" in the 18th Century.
  - deleted 4y ago
    [deleted]
- nayuki 4y ago
  No, Bitcoin is like sending cash directly to the recipient. Lightning is exactly like cryptographic Hawala, with many hops along the way.
TrapLord_Rhodo 4y ago
... lol. Going to a site to exchange bitcoin for cold cash seems like the worst idea ever if you want to stay anonomyous. Did everyone just forget about snowden?
vertis 4y ago
Let's game this out. Bob and Alice are the first parties. You trade in cash, in person, probably in a public place. Say that Alice then gets in trouble for the drug dealing they also do (or maybe the government just pings her for not doing KYC and being licensed to do financial transactions), it could be years later. The authorities seize Alice's computers and subpoena "localbitcoins", or the whatsapp/telegram/signal chat that you had to organise the meetup. They might even have a list of addresses that Alice used for transactions at this point. Alice may or may not have had good OpSec, Bob doesn't know. From that there a myrriad options to identify Bob and Bob's addresses. In your example you don't use an exchange, but that's not the only method of identifying Bob. Mass survelliance and metadata gathering noticed 100 phones within the location and timeframe Bob and Alice were supposed to meet. Bob had to take a phone to do the actual transfer of bitcoin (or any altcoin), so just leaving it at home wouldn't work. They also know the amount Alice transferred to Bob and the rough timeframe that it was completed and put into the ledger. Bob was also seen drawing out roughly the right amount from the ATM an hour before the meeting. Of the 100 phones, most haven't drawn out that much money recently. So they can correlate a set of phones with a set of addresses. Even if Bob is not completely unmasked at this point. He has the money in but has to get the money out as well. Bob wanted as you say, to move money across the border. In order to do that Bob must cross the border[0] and meet with Charlie to do the reverse of the transfer. Only a handful of those 100 phones crossed borders shortly after meeting with Alice. As soon as the money in that address moves again the cross reference with the locations of the tagged phones and discover that they know Charlie because he's done a KYC with an exchange and installed their app (even if he doesn't use that address for the transaction). They ask Charlie some pointed questions about whether he is following KYC procedures in his financial dealing and he caves and gives up the chat logs confirming your meeting, or maybe they just install NSO spyware on his phone and watch to find all the other people Charlie is dealing with. So... In a perfectly isolated one off instance maybe that's pseudonymous. In any real world transaction it's extremely unlikely that a state can't use it's resources to unmask the participants. In a one shot, the rules might be one way, but in multi-shot there are always factors that will serve to unmask the participants, and in reality you have to do those transactions over and over until you slip up and just combine them with a KYC exchange account and it doesn't even require that level of effort on the part of the state. OpSec is hard, as they say. [0]: there is an alternative where only the bitcoin transaction crosses the border in return for something of value, either physical or digital, both have alternative paths that can be tracked in similar ways.

Red_Leaves_Flyy 4y ago

How is that helpful? Get Bitcoin from crime Wash into monero? Pray the tumbler is legit? Wash back into Bitcoin Now what? Bitcoins from tumblers are suspect everywhere with kyc requirements. Sell off books to a Russian oligarch or North Korea I guess?

antibasilisk 4y ago
You can still trade it for goods and services
from 4y ago
Going back to Bitcoin is unnecessary but possible. You go from Monero to cash, wire transfer, or gift cards through a variety of unlicensed conversion services that advertise themselves all over the Internet.
- RcouF1uZ4gsC 4y ago
  > but possible. You go from Monero to cash, wire transfer, or gift cards through a variety of unlicensed conversion services that advertise themselves all over the Internet. Those are probably run by the FBI. It seems like a no brained for the government to try to run such services given the wealth of information they would provide.
  - from 4y ago
    Having unexplained assets is not a crime and won't be at least in the US because of the constitution, worst case they could be subject to civil forfeiture. Assuming you did everything else right (full disk encryption, Tor on public wifi/LTE router that you alternate routinely, not using Google, etc) the anonymity of Monero means the government would have a very difficult time tying whatever you bought with the Monero to your actual criminal activity. Of course if you are involved in meatspace crime like drugs then maybe if you use these services they put you under surveillance and eventually find you with drugs in the trunk of your car.
    - deleted 4y ago

acdha 4y ago

Only if you and everyone you ever deal with have perfect security. As soon as one person’s identity is leaked, that opens the possibility of a real-world ID being linked to a wallet. This story from about a year ago also showed how that worked with investigators tracing it link by link: https://www.wired.com/story/tracers-in-the-dark-welcome-to-video-crypto-anonymity-myth/ https://www.wired.com/story/tracers-in-the-dark-welcome-to-v...

mjevans 4y ago
"Leaked" also includes cashing in or out of Bitcoin.
- acdha 4y ago
  Or using a business which is required to report transactions, using a site which gets hacked, etc. I don’t think people sufficiently weight the risk of having a ledger which can’t be redacted – for example, I’d imagine there were a lot of people in Weimar Germany who did not think twice about donating to a synagogue or other organization which you would not want have wanted linked to your bank account a decade later.
  - pineaux 4y ago
    This can be true for basically anything: Maybe you own a car. In 10 years time a green authoritarian communist group starts to suspect anybody who owned a car, you are sent to a re-education facility. Maybe you are environmentally conscious and bought solar panels. In ten years time an anti environmental fascist group comes to power. You are disappeared. You make some negative comments about AI at a dinner party. The host has an Alexa home automation system. In ten years time when government is run by AI. You are assigned to sewer cleaning duty, a tragic accident happens. Summarizing: It's not a really strong argument. However, if you are doing things that can get you arrested today; That's another story, then you should be paranoid and not use bitcoin. Maybe Monero instead? Although, that's not watertight either.
    - 4y ago

baryphonic 4y ago

Since the ledger is public, it can be analyzed for patterns from the individual transactions. The more transactions there are involving a certain party, the more likely an outside observer will be able to piece together identities for that party's overall network. KYC exchanges accelerate that process. Crypto projects like Monero (XMR) do not have this flaw, as deducing the identities of parties from the public ledger is computationally prohibitive.

sizzle 4y ago
What if they use a mixer before major transactions and create disposable wallets to transact the funds that risk exposing their wallet?

yieldcrv 4y ago

It took 8 years for this high profile guy to be caught because he comingled funds in 2020 This article is not the investigative epiphany that it thinks it is