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I think there's a problem with his argument about the dealer and Joe. Joe will have taken steps to make sure that his identity is disconnected from the BTC with

by rlpb 14y ago

I think there's a problem with his argument about the dealer and Joe. Joe will have taken steps to make sure that his identity is disconnected from the BTC with which he pays the dealer. This is the same as making sure that the dollar bills he uses can't be traced back to him either (except that with Bitcoin he'd need to take a little more care, like for example using an app that does it for him). The fact that there will be a permanent record that $100 was transacted is neither here nor there. Even if the dealer gets caught later, nobody will be able to link that to Joe. If the dealer confesses and implicates Joe, then that would be the same as the dealer being caught with the $100 in cash and implicating Joe. In both cases, Joe can just deny that he ever held the cash (whether in dollars or BTCs). I do take the author's point that arranging to make your money less traceable is illegal under money laundering laws in most jurisdictions. But using Bitcoin for illegal purposes is no different to using dollars for illegal purposes; it's illegal either way. Interestingly, since there's a record of all Bitcoin transactions, records of your own transactions that you keep yourself can easily be corroborated with the public record by the authorities. This can be done far more readily than with cash. If you want to keep your financial transactions above board, then perhaps Bitcoin is even better than cash for proving that you aren't laundering money.

kevingadd 14y ago
Is it possible to actually disconnect BTC from its source though? There will always be a transaction history. The best it seems you can do is obfuscate its source, by 'pooling' large quantities of BTC and then spreading them back out to new destinations - but if anything, that just seems to me like it would make ALL the resulting BTC suspect. It seems inevitable to me that if a government decided bitcoins were being used for illicit purposes, they would take all necessary steps to ensure that mechanisms for making them untraceable at scale become illegal. The currency doesn't actually seem like the problem here: $100 isn't much even if it's in bitcoins, so how you spend it and where you get it doesn't matter much in practice. The purchase is what matters, because if the purchase is illegal that's what's putting you at risk no matter the amount of money. Of course, once you start dealing in large amounts of currency - USD or BTC - that's when you start increasing risk because governments keep an eye out for large amounts of money being moved around. At that point, I think you'd have reason to be concerned about people simply tracking your large transactions towards their destination and using that to identify you. The upside of more robust record-keeping does seem like a potential upside, though, I agree.
- rlpb 14y ago
  > ...that just seems to me like it would make ALL the resulting BTC suspect. True. All BTC that has come out of a mixer might be considered suspect. But if you buy BTC for cash, should that be suspect? What if it turns out that the BTC that you now consider yours has been through a mixer some time in the past before it reached your hands? Take the analogy to bank notes. Are all my bank notes suspect? We accept this situation with cash. Why should Bitcoin be any different?
  - kevingadd 14y ago
    Any BTC<->cash exchange would either be illicit or have very clear, robust records as required by the country that issues the cash currency. Isn't this already the case with the services that let you exchange BTC for USD? Also, any BTC you possess having been through a mixer in the past - yes! That seems like it could be a real problem. Here's how I see it: If I end up buying a used car, and it turns out the guy who sold it to me stole it, that doesn't somehow protect me from the consequences of the original theft. I certainly won't get to keep that car. Bitcoins aren't cars, but I wouldn't be shocked if governments decided to go overboard and say that trading in any BTC that came out of a mixer is illegal. After all, you can check the history of the BTC yourself and decide whether it's legit.
    - rlpb 14y ago
      You can't realistically look at the history of BTC and determine if it came through a mixer or not. They could have been legitimate transactions. >I certainly won't get to keep that car. No. But what if you sold a car and it turned out to have been paid for with stolen cash? And what if the cash was obtained by the buyer legitimately, but his source had stolen it? How about the same situation but three times removed? You might be interested in this proposal: http://www.loper-os.org/?p=988 http://www.loper-os.org/?p=988 ("Shitcoin is to be a distributed network for attaching “dirt” to particular bitcoins...")
    - jmtame 14y ago
      Any BTC<->cash exchange would either be illicit or have very clear, robust records as required by the country that issues the cash currency. Here's an exercise for you: prove that Joe purchased $100 worth of Bitcoins to obtain drugs illegally. You only know that they were purchased using a cash deposit to a BitInstant account, which was moved to MtGox. Neither of those accounts have IP addresses, e-mails, or any other type of personally identifying information. The bank doesn't have surveillance records anymore.

by rlpb 14y ago

kevingadd 14y ago

Is it possible to actually disconnect BTC from its source though? There will always be a transaction history. The best it seems you can do is obfuscate its source, by 'pooling' large quantities of BTC and then spreading them back out to new destinations - but if anything, that just seems to me like it would make ALL the resulting BTC suspect. It seems inevitable to me that if a government decided bitcoins were being used for illicit purposes, they would take all necessary steps to ensure that mechanisms for making them untraceable at scale become illegal. The currency doesn't actually seem like the problem here: $100 isn't much even if it's in bitcoins, so how you spend it and where you get it doesn't matter much in practice. The purchase is what matters, because if the purchase is illegal that's what's putting you at risk no matter the amount of money. Of course, once you start dealing in large amounts of currency - USD or BTC - that's when you start increasing risk because governments keep an eye out for large amounts of money being moved around. At that point, I think you'd have reason to be concerned about people simply tracking your large transactions towards their destination and using that to identify you. The upside of more robust record-keeping does seem like a potential upside, though, I agree.

rlpb 14y ago
> ...that just seems to me like it would make ALL the resulting BTC suspect. True. All BTC that has come out of a mixer might be considered suspect. But if you buy BTC for cash, should that be suspect? What if it turns out that the BTC that you now consider yours has been through a mixer some time in the past before it reached your hands? Take the analogy to bank notes. Are all my bank notes suspect? We accept this situation with cash. Why should Bitcoin be any different?
- kevingadd 14y ago
  Any BTC<->cash exchange would either be illicit or have very clear, robust records as required by the country that issues the cash currency. Isn't this already the case with the services that let you exchange BTC for USD? Also, any BTC you possess having been through a mixer in the past - yes! That seems like it could be a real problem. Here's how I see it: If I end up buying a used car, and it turns out the guy who sold it to me stole it, that doesn't somehow protect me from the consequences of the original theft. I certainly won't get to keep that car. Bitcoins aren't cars, but I wouldn't be shocked if governments decided to go overboard and say that trading in any BTC that came out of a mixer is illegal. After all, you can check the history of the BTC yourself and decide whether it's legit.
  - rlpb 14y ago
    You can't realistically look at the history of BTC and determine if it came through a mixer or not. They could have been legitimate transactions. >I certainly won't get to keep that car. No. But what if you sold a car and it turned out to have been paid for with stolen cash? And what if the cash was obtained by the buyer legitimately, but his source had stolen it? How about the same situation but three times removed? You might be interested in this proposal: http://www.loper-os.org/?p=988 http://www.loper-os.org/?p=988 ("Shitcoin is to be a distributed network for attaching “dirt” to particular bitcoins...")
  - jmtame 14y ago
    Any BTC<->cash exchange would either be illicit or have very clear, robust records as required by the country that issues the cash currency. Here's an exercise for you: prove that Joe purchased $100 worth of Bitcoins to obtain drugs illegally. You only know that they were purchased using a cash deposit to a BitInstant account, which was moved to MtGox. Neither of those accounts have IP addresses, e-mails, or any other type of personally identifying information. The bank doesn't have surveillance records anymore.