6 ms·

There are many ways Bitcoin is easier to track than cash.

by gojomo 14y ago

sliverstorm 14y ago
Although, I'm sure the government wouldn't mind if people went on believing that Bitcoin can't be tracked... :)
glomph 14y ago
Everyone says this, and I have repeated the mantra, but I am curious how one would go about following a trail of bitcoin transactions. Lets say you intercept a drug deal, know the final bitcoin address that money goes into. So you have that info. You can also follow the trail back arbitrarily far getting address after address. How does this net you anyone more information? How would you 'convert back' into a human name or address?
- stfu 14y ago
  Would be interested in that too. What if I just hold me bitcoin wallet locally and and create ids for "critical" transactions that I use only through public internet access points.
- maxerickson 14y ago
  There are lots of systems with address-information associations. Collecting that information is going to yield lots of human names. Something like the Coinbase merchant pages contained a surprising amount of information, and they were intentionally published.
  - glomph 14y ago
    Presumably Law Enforcement couldn't compel Coinbase to disclose all the names they had though? They would need some kind of probable cause?
- gojomo 14y ago
  How? See my response to eridius in sibling comment.
tocomment 14y ago
I've been wondering. Isn't bitcoin truly anonymous if people simply exchange private keys (wallets)? It would basically be just like cash then.
- oafitupa 14y ago
  I never thought of that, brilliant.
  - tocomment 14y ago
    sarcasm or no?
- DennisP 14y ago
  It would be, since it's not on the blockchain. But the purpose of the blockchain is to prevent people from giving you some coins, then giving else the same coins. If they just hand over their wallet, they could hand over the same wallet to someone else later. The recipient could send the wallet's bitcoins to another address right away, but then the sender might as well have done that in the first place. Still, in the rare case where you need an anonymous transfer from someone you completely trust, this might be the way to go.
eridius 14y ago
Different meaning to the word "track". Yes, it's far easier to trace a given bitcoin backwards through the various transactions, but tying any particular transaction to a particular person can be difficult or impossible, depending on how much care the person takes. As a trivial example, if I create a brand new bitcoin wallet, accept a transaction of 100btc into the wallet, and then send that 100btc on to someone else, there's nothing that ties the wallet to me. I just received and then spent $10k (at approximate current valuation last I checked), but the IRS has no way to a) count this as $10k income for me, and b) track the $10k I then spent.
- gojomo 14y ago
  If authorities obtain the cooperation of either the sender-to-you, or the receiver-from-you, they can find out who they thought they were dealing with, and why. You should probably assume that all businesses/exchanges with fixed addresses and traditional bank accounts will cooperate with authorities. And, some fair proportion of others, as well, including even those involved in explicitly illegal activities (who may be informants/plants, from the beginning or once discovered). So if 'your' Bitcoin is received several hops from any of the known nodes/addresses, and after your spend goes several hops before arriving at a known node/address... you may be safe. That is, if you're small-scale, use Bitcoin only with others who avoid reporting requirements, and no big priority investigation peels back the links one by one using all the tools and pressure available to the state. And, if other security compromises and traffic analyses don't prematurely reveal your correspondent nodes. But ultimately, a financial-enforcement agency might be running their own operation much like blockchain.info... with 1000X the resources, and various extra private sources of information. Every error by any participant -- mixing different outputs, client bugs revealing identity correlations, announcing pubkey-to-identity associations, matching time-online with time-of-spends, providing historic data after being targeted by an audit or prosecution, etc. -- would constantly improve the map of balances-to-real-world-entities. And like playing a game of 'minesweeper', a few lucky hits by enforcement, even years down the road, might suddenly illuminate large portions of the network. The blockchain never forgets! And, a few policy changes could supercharge this map. Legislate that if you're an above-ground operation, you must register your public keys. Any balances received from unregistered/tainted addresses are subject to forfeiture (or a punitive excise tax), but balances received from registered addresses are OK. Bitcoin's public blockchain makes this possible, and it's not possible with cash. All the above-ground businesses and users then register their addresses, and stop accepting -- or quickly report under penalty of law -- received funds from unregistered addresses. The gaps in the enforcement map then shrink pretty fast. You might also then have, within one blockchain, both 'dark' and 'light' balances that usually don't mix and aren't 1-to-1 interchangeable. To spend your 'non-taxable' coin on things like food or rent, you'd have to swap it for registered coin, through some legitimate-looking (and thus likely tax-paying) transaction. That's just money laundering, and it's no easier and probably much harder than with real cash businesses. (Are you sure the person willing to give you 'light' balances in return for your 'dark' balances is not and will never be an informer?)

There are many ways Bitcoin is easier to track than cash.

by gojomo 14y ago

There are many ways Bitcoin is easier to track than cash.

sliverstorm 14y ago

Although, I'm sure the government wouldn't mind if people went on believing that Bitcoin can't be tracked... :)

glomph 14y ago

Everyone says this, and I have repeated the mantra, but I am curious how one would go about following a trail of bitcoin transactions. Lets say you intercept a drug deal, know the final bitcoin address that money goes into. So you have that info. You can also follow the trail back arbitrarily far getting address after address. How does this net you anyone more information? How would you 'convert back' into a human name or address?

stfu 14y ago
Would be interested in that too. What if I just hold me bitcoin wallet locally and and create ids for "critical" transactions that I use only through public internet access points.
maxerickson 14y ago
There are lots of systems with address-information associations. Collecting that information is going to yield lots of human names. Something like the Coinbase merchant pages contained a surprising amount of information, and they were intentionally published.
- glomph 14y ago
  Presumably Law Enforcement couldn't compel Coinbase to disclose all the names they had though? They would need some kind of probable cause?
gojomo 14y ago
How? See my response to eridius in sibling comment.

tocomment 14y ago

I've been wondering. Isn't bitcoin truly anonymous if people simply exchange private keys (wallets)? It would basically be just like cash then.

oafitupa 14y ago
I never thought of that, brilliant.
- tocomment 14y ago
  sarcasm or no?
DennisP 14y ago
It would be, since it's not on the blockchain. But the purpose of the blockchain is to prevent people from giving you some coins, then giving else the same coins. If they just hand over their wallet, they could hand over the same wallet to someone else later. The recipient could send the wallet's bitcoins to another address right away, but then the sender might as well have done that in the first place. Still, in the rare case where you need an anonymous transfer from someone you completely trust, this might be the way to go.

eridius 14y ago

Different meaning to the word "track". Yes, it's far easier to trace a given bitcoin backwards through the various transactions, but tying any particular transaction to a particular person can be difficult or impossible, depending on how much care the person takes. As a trivial example, if I create a brand new bitcoin wallet, accept a transaction of 100btc into the wallet, and then send that 100btc on to someone else, there's nothing that ties the wallet to me. I just received and then spent $10k (at approximate current valuation last I checked), but the IRS has no way to a) count this as $10k income for me, and b) track the $10k I then spent.

gojomo 14y ago
If authorities obtain the cooperation of either the sender-to-you, or the receiver-from-you, they can find out who they thought they were dealing with, and why. You should probably assume that all businesses/exchanges with fixed addresses and traditional bank accounts will cooperate with authorities. And, some fair proportion of others, as well, including even those involved in explicitly illegal activities (who may be informants/plants, from the beginning or once discovered). So if 'your' Bitcoin is received several hops from any of the known nodes/addresses, and after your spend goes several hops before arriving at a known node/address... you may be safe. That is, if you're small-scale, use Bitcoin only with others who avoid reporting requirements, and no big priority investigation peels back the links one by one using all the tools and pressure available to the state. And, if other security compromises and traffic analyses don't prematurely reveal your correspondent nodes. But ultimately, a financial-enforcement agency might be running their own operation much like blockchain.info... with 1000X the resources, and various extra private sources of information. Every error by any participant -- mixing different outputs, client bugs revealing identity correlations, announcing pubkey-to-identity associations, matching time-online with time-of-spends, providing historic data after being targeted by an audit or prosecution, etc. -- would constantly improve the map of balances-to-real-world-entities. And like playing a game of 'minesweeper', a few lucky hits by enforcement, even years down the road, might suddenly illuminate large portions of the network. The blockchain never forgets! And, a few policy changes could supercharge this map. Legislate that if you're an above-ground operation, you must register your public keys. Any balances received from unregistered/tainted addresses are subject to forfeiture (or a punitive excise tax), but balances received from registered addresses are OK. Bitcoin's public blockchain makes this possible, and it's not possible with cash. All the above-ground businesses and users then register their addresses, and stop accepting -- or quickly report under penalty of law -- received funds from unregistered addresses. The gaps in the enforcement map then shrink pretty fast. You might also then have, within one blockchain, both 'dark' and 'light' balances that usually don't mix and aren't 1-to-1 interchangeable. To spend your 'non-taxable' coin on things like food or rent, you'd have to swap it for registered coin, through some legitimate-looking (and thus likely tax-paying) transaction. That's just money laundering, and it's no easier and probably much harder than with real cash businesses. (Are you sure the person willing to give you 'light' balances in return for your 'dark' balances is not and will never be an informer?)