8 ms·

Bitcoin's big secret: How cryptocurrency became law enforcement's secret weapon

172 points by LopRabbit 11mo ago

Ms-J 11mo ago
Use privacy preserving coins such as Monero instead of Bitcoin as it is much more safe. Not bulletproof, but much better. Monero also complicates any type of investigation much more than Bitcoin. It is very hard for investigators. They also don't want to burn techniques unless the case is absolutely massive. Also make sure to never use an exchange that forces KYC.
- rajamaka 11mo ago
  Seems to be the case that the conversion to fiat is the part that is difficult to do while staying anonymous
  - Ms-J 11mo ago
    As long as one takes moderate measures to stay anonymous on the network level, an exchange that is P2P or doesn't force KYC can be used to convert. There are many of them out there. Fees may be higher is a note.
    - chistev 11mo ago
      But without p2p there is greater risk of scam?
  - arevno 11mo ago
    You can do it on Kraken just fine. As long as you're ok paying taxes on it (since Kraken is KYC), you're still shielding the source of the funds, which is the primary utility of Monero. Or to put it another way, it's good for "money laundering", but not "tax evasion".
    - stef25 11mo ago
      Why would Kraken just accept 100K worth of Monero coming in and sent out as fiat to a bank account ?
      - deleted 11mo ago
        [deleted]
      - red-iron-pine 11mo ago
        cuz they get their cut and there is nothing anyone can do to unmask that transfer or prove that it's, fundamentally, fraudulent. IRS or CRA is getting their cut, so it's the regulator or the FBI's problem
- cheschire 11mo ago
  I also noticed on a darkweb site that keeping monero in an escrow account is used to further muddy the trail. Not sure how effective that actually is though.
- idiotsecant 11mo ago
  Monero is great so long as you don't care about conversion to cash. That part is ... tricky.
  - SchemaLoad 11mo ago
    Of course it's difficult. Even if you could convert it to cash you wouldn't be able to deposit in any bank or meaningfully use it. The moment you do anything with it you'll trigger anti money laundering laws and have to explain where the money came from.
    - metadat 11mo ago
      Hot-dog sales outside NY stadium. Seriously though, the days of easy tax avoidance are long gone at this point. Welcome to The Matrix of America.. and China.
      - epolanski 11mo ago
        Your post is a spot pro matrix, not against it.
    - Ms-J 11mo ago
      It isn't very difficult, see my earlier post. Once successfully converted the cash can be used in a multitude of different ways. With an imagination and taking proper anonymity safeguards, the possibilities are endless.
    - solumunus 11mo ago
      Well yeah, you also have to launder the money if you’re a criminal enterprise…
      - wmf 11mo ago
        From a criminal perspective you may not have to launder it. Just deposit your XMR/ZEC into an exchange and sell it. If they ask, say you bought it years ago at $10.
patchtopic 11mo ago
this kind of blockchain analysis for the non-privacy oriented coins has been well known at least for a decade.. I don't see how it's a secret weapon except against the naive or uninformed
- ozim 11mo ago
  Duh, most criminals are naive and uninformed.
  - stef25 11mo ago
    They tend to learn pretty quickly though
hereme888 11mo ago
How is this a secret? It's literally a feature: transparent ledgers.
- kragen 11mo ago
  Because in clickbait "journalism" everything is a "secret".
  - LexiMax 11mo ago
    Anecdotally, I don't think that this is widely understood by people who use crypto for illicit purposes, which isn't exactly uncommon.
    - evolighting 11mo ago
      Because people who hype Bitcoin claim that its value comes from it: Bitcoin is anonymous, secure, and private, and therefore can be used for illegal transactions without fear of being traced.
    - somenameforme 11mo ago
      It's a mixture of private and public. For instance anybody can create an infinite number of wallets and cycle transactions through those wallets infinitely, subject to time and/or transfer fees. And wallets are the only stored identifier - it doesn't lead to e.g. an IP or whatever, and even if it did - those could also be endlessly proxied. On top of this there are 'tumblers' that do this as a service. So while it's completely traceable in theory, in practice it's vaguely akin to trying to track money by the serial numbers in that you can probably figure out a few points in a dollar's lifetime, but tracing it point by point to a specific entity is generally not realistic. Of course most criminals are stupid and doing something like using CoinBase hosted crypto to try to do something illicit is as good as leaving your license and phone number at the scene of a crime.
      - vintermann 11mo ago
        > On top of this there are 'tumblers' that do this as a service. and using these makes no sense, since it's readily noticeable that you've used one, and using them is basically always illegal. The crypto currency ecosystem keeps reminding me of https://xkcd.com/1494/ https://xkcd.com/1494/ .
greesil 11mo ago
https://en.wikipedia.org/wiki/Tornado_Cash https://en.wikipedia.org/wiki/Tornado_Cash Ethereum has entered the chat
Ethan312 11mo ago
Fascinating how blockchain’s transparency has flipped the script on crypto anonymity. Law enforcement now uses forensic tracing to dismantle criminal networks, from dark web markets to ransomware rings. The real challenge remains jurisdictional reach, not technical capability.
- ikmckenz 11mo ago
  Is this comment AI written?
  - mabedan 11mo ago
    You’re absolutely right, that’s a great catch /s
bawolff 11mo ago
> Starting around 2014, law enforcement discovered something remarkable: Bitcoin's blockchain was a permanent, traceable record. It took them until 2014 to read the satoshi white paper?
- AndrewKemendo 11mo ago
  Three years is pretty good for police to get through a paper. First they had to learn how to read…
- snthpy 11mo ago
  They're still a decade ahead of most people. It seems only now that people are becoming aware of privacy coins. I go to a lot of crypto meetups and every time I bring up that bitcoins aren't fungible (because they carry full provenance and you might not be able to cash out tainted coins) I just get blank stares. FATF Travel Rule is turning up the heat on this. I haven't kept up with developments though. What are best privacy coins these days. ZCash seems to be the institutional favourite while Monero hasn't moved much.
  - charcircuit 11mo ago
    >tainted coins All you have to do is make a single transaction using all of them. You will receive a freshly minted UTXO. Each bitcoin block involves burning a set of UTXO and then minting a new set of clean UTXO.
    - wmf 11mo ago
      Nope, taint flows through transactions. If the input(s) are tainted so will be the outputs.
      - charcircuit 11mo ago
        By that definition everyone in the same block is tainted. Maybe the bitcoins from your output came from someone else's input. And you tainted input may have entirely gone to the miner as their reward UTXO. You can't really trace an individual bitcoin / satoshi because in reality it's just a bunch UTXOs constantly being created and destroyed. Maybe you can distribute a percentage of the taint among all the outputs, but at that points its like most US dollars have traces of cocaine on them.
1317 11mo ago
password management?
sph 11mo ago
What I’m most interested in is: are there proof-of-concepts or any work done on making Bitcoin actually more private and untraceable? Does Lightning suffer from the same traceability issues? There is a constant flux of papers and prototypes that are not mentioned anywhere (least of all this website) unless you delve deep into technical forums (such as delvingbitcoin) - which I never find the time to stay abreast of.
- wmf 11mo ago
  Everyone's probably keeping their heads down after Samourai.
- sph 11mo ago
  Still no answer 7 hours later. It is amazing to see that there is no overlap of communities between such a large tech forum, and open-source tech work being done on cryptocurrencies, so strong is the anti-crypto bias in here. I wonder what other tech blind spots does HN have.
  - Karrot_Kream 11mo ago
    HN is pretty strongly focused along a particular dev culture that has at best a deep distrust of and at worst disdain for finance. I appreciate that, as a long time poster, you're posting this but I personally have given up that HN will ever become anything more than r/hackerculture.
  - red-iron-pine 11mo ago
    1) they either have ways, which would be incredibly valuable and worth keeping secret or 2) there isn't a way or its not worthwhile; just use Monero instead, dawg. "why hasn't anyone made, like, a secure Telnet?" because they created SSH and VPNs, same idea.
Ms-J 11mo ago
There seems to be a coordinated effort to down vote technical insight in this thread. Some entity does not want this type of info out there.
hoppp 11mo ago
It was never a secret, it was a design choice from the start. People don't actually pay attention to what powers the pyramid scheme they participate in?
- beeflet 11mo ago
  It was a design flaw from the start, that satoshi agreed was an issue but did not have the tools to fix
  - hoppp 11mo ago
    So far only monero solved it, its not an easy problem and xmr is pretty much delisted everywhere now because it works well. Quite funny
  - deleted 11mo ago
    [deleted]
akimbostrawman 11mo ago
Monero works how most people think bitcoin does and what Satoshi wanted it to be. https://miro.medium.com/v2/resize:fit:1100/format:webp/0*_Myd0D42HPG7T-wz https://miro.medium.com/v2/resize:fit:1100/format:webp/0*_My...
- conorcleary 11mo ago
  borched link
  - akimbostrawman 11mo ago
    Works fine for me https://www.reddit.com/media?url=https%3A%2F%2Fpreview.redd.it%2F40zi1zi22ks61.png https://www.reddit.com/media?url=https%3A%2F%2Fpreview.redd....
ionwake 11mo ago
Bitcoin , the greatest decentralised centralised payment record.
_12345678UP 11mo ago
All Hail Mastercard?
notepad0x90 11mo ago
I think most opsec sensitive people, if they do use BTC it is one wallet per transaction. That said, BTC is still cash-like because your wallet isn't associated with your identity, cops still have to work out that detail. The NSA was using this sort of tricks long before all this when people tried to use PGP encrypted email. Either way, if governments allowed payment cards that don't do KYC, it would be more convenient for everyone involved. I don't know how governments suddenly took it upon themselves that in addition to controlling commerce, they get to monitor lawful commerce between law abiding citizens with no suspicious of criminal conspiracy. Privacy wasn't taken from us, they asked nicely and we shrugged.
Kate5477 11mo ago
[dead]
damion6 11mo ago
Um obvious. Good article though, good to tell people.
econ 11mo ago
Someone one time wrote a great filesharing application. Then one day I asked him about caching what other clients downloaded and offered. A few exchanges later he concluded that one could reconstruct what someone downloaded. The problem was clients that didn't run very often. They needed some time to catch up with deleting things no longer available. They tended to wait for a good while for the other client to come back online so that they could get a new list. In the mean time you could ask them what a user had to offer and they would provide the outdated channel info. The next day he released an update that erased the application and all data.

172 points by LopRabbit 11mo ago

Ms-J 11mo ago

Use privacy preserving coins such as Monero instead of Bitcoin as it is much more safe. Not bulletproof, but much better. Monero also complicates any type of investigation much more than Bitcoin. It is very hard for investigators. They also don't want to burn techniques unless the case is absolutely massive. Also make sure to never use an exchange that forces KYC.

rajamaka 11mo ago
Seems to be the case that the conversion to fiat is the part that is difficult to do while staying anonymous
- Ms-J 11mo ago
  As long as one takes moderate measures to stay anonymous on the network level, an exchange that is P2P or doesn't force KYC can be used to convert. There are many of them out there. Fees may be higher is a note.
  - chistev 11mo ago
    But without p2p there is greater risk of scam?
- arevno 11mo ago
  You can do it on Kraken just fine. As long as you're ok paying taxes on it (since Kraken is KYC), you're still shielding the source of the funds, which is the primary utility of Monero. Or to put it another way, it's good for "money laundering", but not "tax evasion".
  - stef25 11mo ago
    Why would Kraken just accept 100K worth of Monero coming in and sent out as fiat to a bank account ?
    - deleted 11mo ago
      [deleted]
    - red-iron-pine 11mo ago
      cuz they get their cut and there is nothing anyone can do to unmask that transfer or prove that it's, fundamentally, fraudulent. IRS or CRA is getting their cut, so it's the regulator or the FBI's problem
cheschire 11mo ago
I also noticed on a darkweb site that keeping monero in an escrow account is used to further muddy the trail. Not sure how effective that actually is though.
idiotsecant 11mo ago
Monero is great so long as you don't care about conversion to cash. That part is ... tricky.
- SchemaLoad 11mo ago
  Of course it's difficult. Even if you could convert it to cash you wouldn't be able to deposit in any bank or meaningfully use it. The moment you do anything with it you'll trigger anti money laundering laws and have to explain where the money came from.
  - metadat 11mo ago
    Hot-dog sales outside NY stadium. Seriously though, the days of easy tax avoidance are long gone at this point. Welcome to The Matrix of America.. and China.
    - epolanski 11mo ago
      Your post is a spot pro matrix, not against it.
  - Ms-J 11mo ago
    It isn't very difficult, see my earlier post. Once successfully converted the cash can be used in a multitude of different ways. With an imagination and taking proper anonymity safeguards, the possibilities are endless.
  - solumunus 11mo ago
    Well yeah, you also have to launder the money if you’re a criminal enterprise…
    - wmf 11mo ago
      From a criminal perspective you may not have to launder it. Just deposit your XMR/ZEC into an exchange and sell it. If they ask, say you bought it years ago at $10.

patchtopic 11mo ago

this kind of blockchain analysis for the non-privacy oriented coins has been well known at least for a decade.. I don't see how it's a secret weapon except against the naive or uninformed

ozim 11mo ago
Duh, most criminals are naive and uninformed.
- stef25 11mo ago
  They tend to learn pretty quickly though

hereme888 11mo ago

How is this a secret? It's literally a feature: transparent ledgers.

kragen 11mo ago
Because in clickbait "journalism" everything is a "secret".
- LexiMax 11mo ago
  Anecdotally, I don't think that this is widely understood by people who use crypto for illicit purposes, which isn't exactly uncommon.
  - evolighting 11mo ago
    Because people who hype Bitcoin claim that its value comes from it: Bitcoin is anonymous, secure, and private, and therefore can be used for illegal transactions without fear of being traced.
  - somenameforme 11mo ago
    It's a mixture of private and public. For instance anybody can create an infinite number of wallets and cycle transactions through those wallets infinitely, subject to time and/or transfer fees. And wallets are the only stored identifier - it doesn't lead to e.g. an IP or whatever, and even if it did - those could also be endlessly proxied. On top of this there are 'tumblers' that do this as a service. So while it's completely traceable in theory, in practice it's vaguely akin to trying to track money by the serial numbers in that you can probably figure out a few points in a dollar's lifetime, but tracing it point by point to a specific entity is generally not realistic. Of course most criminals are stupid and doing something like using CoinBase hosted crypto to try to do something illicit is as good as leaving your license and phone number at the scene of a crime.
    - vintermann 11mo ago
      > On top of this there are 'tumblers' that do this as a service. and using these makes no sense, since it's readily noticeable that you've used one, and using them is basically always illegal. The crypto currency ecosystem keeps reminding me of https://xkcd.com/1494/ https://xkcd.com/1494/ .

greesil 11mo ago

https://en.wikipedia.org/wiki/Tornado_Cash https://en.wikipedia.org/wiki/Tornado_Cash Ethereum has entered the chat

Ethan312 11mo ago

Fascinating how blockchain’s transparency has flipped the script on crypto anonymity. Law enforcement now uses forensic tracing to dismantle criminal networks, from dark web markets to ransomware rings. The real challenge remains jurisdictional reach, not technical capability.

ikmckenz 11mo ago
Is this comment AI written?
- mabedan 11mo ago
  You’re absolutely right, that’s a great catch /s

bawolff 11mo ago

> Starting around 2014, law enforcement discovered something remarkable: Bitcoin's blockchain was a permanent, traceable record. It took them until 2014 to read the satoshi white paper?

AndrewKemendo 11mo ago
Three years is pretty good for police to get through a paper. First they had to learn how to read…
snthpy 11mo ago
They're still a decade ahead of most people. It seems only now that people are becoming aware of privacy coins. I go to a lot of crypto meetups and every time I bring up that bitcoins aren't fungible (because they carry full provenance and you might not be able to cash out tainted coins) I just get blank stares. FATF Travel Rule is turning up the heat on this. I haven't kept up with developments though. What are best privacy coins these days. ZCash seems to be the institutional favourite while Monero hasn't moved much.
- charcircuit 11mo ago
  >tainted coins All you have to do is make a single transaction using all of them. You will receive a freshly minted UTXO. Each bitcoin block involves burning a set of UTXO and then minting a new set of clean UTXO.
  - wmf 11mo ago
    Nope, taint flows through transactions. If the input(s) are tainted so will be the outputs.
    - charcircuit 11mo ago
      By that definition everyone in the same block is tainted. Maybe the bitcoins from your output came from someone else's input. And you tainted input may have entirely gone to the miner as their reward UTXO. You can't really trace an individual bitcoin / satoshi because in reality it's just a bunch UTXOs constantly being created and destroyed. Maybe you can distribute a percentage of the taint among all the outputs, but at that points its like most US dollars have traces of cocaine on them.

1317 11mo ago

password management?

sph 11mo ago

What I’m most interested in is: are there proof-of-concepts or any work done on making Bitcoin actually more private and untraceable? Does Lightning suffer from the same traceability issues? There is a constant flux of papers and prototypes that are not mentioned anywhere (least of all this website) unless you delve deep into technical forums (such as delvingbitcoin) - which I never find the time to stay abreast of.

wmf 11mo ago
Everyone's probably keeping their heads down after Samourai.
sph 11mo ago
Still no answer 7 hours later. It is amazing to see that there is no overlap of communities between such a large tech forum, and open-source tech work being done on cryptocurrencies, so strong is the anti-crypto bias in here. I wonder what other tech blind spots does HN have.
- Karrot_Kream 11mo ago
  HN is pretty strongly focused along a particular dev culture that has at best a deep distrust of and at worst disdain for finance. I appreciate that, as a long time poster, you're posting this but I personally have given up that HN will ever become anything more than r/hackerculture.
- red-iron-pine 11mo ago
  1) they either have ways, which would be incredibly valuable and worth keeping secret or 2) there isn't a way or its not worthwhile; just use Monero instead, dawg. "why hasn't anyone made, like, a secure Telnet?" because they created SSH and VPNs, same idea.

Ms-J 11mo ago

There seems to be a coordinated effort to down vote technical insight in this thread. Some entity does not want this type of info out there.

hoppp 11mo ago

It was never a secret, it was a design choice from the start. People don't actually pay attention to what powers the pyramid scheme they participate in?

beeflet 11mo ago
It was a design flaw from the start, that satoshi agreed was an issue but did not have the tools to fix
- hoppp 11mo ago
  So far only monero solved it, its not an easy problem and xmr is pretty much delisted everywhere now because it works well. Quite funny
- deleted 11mo ago
  [deleted]

akimbostrawman 11mo ago

Monero works how most people think bitcoin does and what Satoshi wanted it to be. https://miro.medium.com/v2/resize:fit:1100/format:webp/0*_Myd0D42HPG7T-wz https://miro.medium.com/v2/resize:fit:1100/format:webp/0*_My...

conorcleary 11mo ago
borched link
- akimbostrawman 11mo ago
  Works fine for me https://www.reddit.com/media?url=https%3A%2F%2Fpreview.redd.it%2F40zi1zi22ks61.png https://www.reddit.com/media?url=https%3A%2F%2Fpreview.redd....

ionwake 11mo ago

Bitcoin , the greatest decentralised centralised payment record.

_12345678UP 11mo ago

All Hail Mastercard?

notepad0x90 11mo ago

I think most opsec sensitive people, if they do use BTC it is one wallet per transaction. That said, BTC is still cash-like because your wallet isn't associated with your identity, cops still have to work out that detail. The NSA was using this sort of tricks long before all this when people tried to use PGP encrypted email. Either way, if governments allowed payment cards that don't do KYC, it would be more convenient for everyone involved. I don't know how governments suddenly took it upon themselves that in addition to controlling commerce, they get to monitor lawful commerce between law abiding citizens with no suspicious of criminal conspiracy. Privacy wasn't taken from us, they asked nicely and we shrugged.

Kate5477 11mo ago

[dead]

damion6 11mo ago

Um obvious. Good article though, good to tell people.

econ 11mo ago

Someone one time wrote a great filesharing application. Then one day I asked him about caching what other clients downloaded and offered. A few exchanges later he concluded that one could reconstruct what someone downloaded. The problem was clients that didn't run very often. They needed some time to catch up with deleting things no longer available. They tended to wait for a good while for the other client to come back online so that they could get a new list. In the mean time you could ask them what a user had to offer and they would provide the outdated channel info. The next day he released an update that erased the application and all data.