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OK, so you (the criminal) have addresses with known-good reputations which you're able to fence the stolen coins through. Once accepted into their wallet, they

by chiph 14y ago

OK, so you (the criminal) have addresses with known-good reputations which you're able to fence the stolen coins through. Once accepted into their wallet, they are indistinguishable from any other coin already present or added later. It seems that the problem now becomes one of reputation management. The diamond markets in New York work entirely by trust (a handshake can seal a $10 million deal), but that's not possible when the community is the world. A pretty challenge. :)

Groxx 14y ago
If you send the 'bad' coins into the 'known good' wallet, everyone can see it. So while the coins themselves are potentially indistinguishable for reasons similar to melting together all the gold you receive and chipping off a bit to spend, the entire account is now known to accept coins from a bad source. You can send any part of any coins in an account to somewhere else, so it's not really 'melting', but it's a useful mental picture for laundering bitcoins. In real-world cases like this, you generally launder the money through untraceable sources, where they can re-enter the system from anywhere and be 'clean'. You can do something similar in bitcoin, where I think they're called "mixers". I don't know if any automated ones exist, but basically: mix (i.e., melt) a bunch of people's money from addresses A-M in one account, and send the same amount out to (brand-new, anonymous) addresses N-Z. N-Z are owned by unknown entities, so as long as e.g. X doesn't receive exactly as much money as only D put in, you can't infer ownership. All coins are 'tainted' because the sources can be tracked perfectly (i.e., a marker chemical in gold), but who owns what coin is now lost. Obviously there's more to it, and distributing without losing perfect anonymity is difficult, but it shows the basic problem. Again similar to melting, you can even send # coins to addresses 1-9 over a large period of time, while melting more and more coins into the shared pool, so there's less of a chance of guessing who owns what based on timing.

by chiph 14y ago

Groxx 14y ago

If you send the 'bad' coins into the 'known good' wallet, everyone can see it. So while the coins themselves are potentially indistinguishable for reasons similar to melting together all the gold you receive and chipping off a bit to spend, the entire account is now known to accept coins from a bad source. You can send any part of any coins in an account to somewhere else, so it's not really 'melting', but it's a useful mental picture for laundering bitcoins. In real-world cases like this, you generally launder the money through untraceable sources, where they can re-enter the system from anywhere and be 'clean'. You can do something similar in bitcoin, where I think they're called "mixers". I don't know if any automated ones exist, but basically: mix (i.e., melt) a bunch of people's money from addresses A-M in one account, and send the same amount out to (brand-new, anonymous) addresses N-Z. N-Z are owned by unknown entities, so as long as e.g. X doesn't receive exactly as much money as only D put in, you can't infer ownership. All coins are 'tainted' because the sources can be tracked perfectly (i.e., a marker chemical in gold), but who owns what coin is now lost. Obviously there's more to it, and distributing without losing perfect anonymity is difficult, but it shows the basic problem. Again similar to melting, you can even send # coins to addresses 1-9 over a large period of time, while melting more and more coins into the shared pool, so there's less of a chance of guessing who owns what based on timing.