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What happens when bitcoins are stolen? Can they be use again without being traced?

by yowza 13y ago

steveklabnik 13y ago
It depends on what you mean by 'traced.' All bitcoin transactions are 'traced,' but you can just set up a few thousand wallets, transfer some money to all of them, send them between each other, trade some away to other people for things... it's not clear simply from the transaction log who actually took them, and who is just receiving BTC from an anonymous buyer for some sort of service.
- kevin_nisbet 13y ago
  From my understanding of bitcoin, doing this would be trivially easy to track also. However, I haven't studied this in great detail, so what is said here may be incorrect. *simplified view Wallet 1 stores 50 bitcoin for(i = 1; i < 100000; i++) { Transfer 1 bitcoin from Wallet i to Wallet i+1 } At this point, wallet 100000 contains exactly 1 bitcoin, that every transaction can be traced back to wallet 0. I understand that you would include more wallets, varying values, etc. But the point is every one of those bitcoins can be traced back to the original wallet which has the stolen funds. The only way to make this behavior viable that I can see, is to have intermediate services that mix up funds. So you have 50BTC Stolen funds in Wallet A. I run Wallet B, that takes transactions from many people. You give me the 50BTC that is stolen. I send you 50 bitcoins in small increments randomly over a set period of time, but from the other transactions I have. I do the same for other people, using the 50BTC that you sent me. As such, my service mixed the coins through a common point, which now makes tracking the chain very difficult. If I didn't mix this with other people's transactions, and gave you back you're own coin numbers, the coins would just track through me back to the original stolen wallet. This would need a party to offer this type of service, with enough volume to obscure the source, and for that service to not keep records (or not be inspected through other means). Again, I want to re-iterate, my knowledge of bitcoin is somewhat superficial, so don't take this as an authoritative post on the subject.
  - steveklabnik 13y ago
    > The only way to make this behavior viable that I can see, is to have intermediate services that mix up funds. They're called 'mixers.' > Again, I want to re-iterate, my knowledge of bitcoin is somewhat superficial, so don't take this as an authoritative post on the subject. You've got your head on straight. Here's one small aspect you're missing: there's no connection between a person and a wallet, and there's no transaction costs, so just make a million wallets and send random amounts to each one, and then send them through a mixer, and then to each other some more, and then to a mixer....
ge0rg 13y ago
Yes and no. You can trace every transaction back to day 0, so it is possible to know which other bitcoin wallet(s) the money was transferred to. If the thief however only uses the stolen BTC to pay for non-identifying services (i.e. internet hosting), it will be very hard to find them.
onedev 13y ago
From what I've been told, yes....they can be used when stolen; it's kinda the whole untraceable, distributed nature of it all.
- steveklabnik 13y ago
  > untraceable This is wrong. Every single transaction is saved, by everyone. It's the core of how the protocol works. That doesn't mean there aren't ways to obscure who controls the wallets, but it's not untraceable, and 'distributed' has nothing to do with privacy.
  - grey-area 13y ago
    I find this point a very interesting one. Everyone insists that transactions are saved and traceable (which of course they are), but I've never heard of anyone finding out who stole their coins and getting them back. People just seem to accept after a break-in that the money is gone and there's nothing they can do about it. That's not acceptable to me in a currency, particularly not one that people use as a store of value long-term. So it is effectively untraceable even if technically you can trace the anonymous transactions. The important part of that statement, which was not wrong, is they can be used when stolen. This is my biggest reservation about bitcoin - they have taken the worst attributes of paper cash (pretty anonymous, not tied to a verifiable identity), and replicated them in a digital currency. If I'm transacting with someone I want to know who they are, in case of fraud or theft. People even openly run money laundering operations (mixing), and the community put up with it! In contrast, most people never store large values of money in actual paper cash anymore, they store it in a bank, which has identification and laundering checks, proper tracing of accounts to identities, immediate yet reversible transactions, and compensation if money is stolen. Bitcoin doesn't come out well in that comparison. The other reservation I have about it is the lack of regulation - these exchanges which hold the money of lots of people are not regulated as banks are. No-one knows exactly what security they actually have (as opposed to say they have), sometimes people don't know who's behind them (I remember that 17 year old from Singapore talking here about starting one[1]), and there's no protection against market manipulation, speculation and cornering, or it seems against online theft. Given they have become so valuable so quickly, you can be quite sure the market is heavily manipulated, perhaps even in advance of thefts like this in order to gain the maximum benefit. What is the cause of the huge recent spike in prices for example? If bitcoin is to work as a currency and a store of value (the traditional roles of money), it does need regulation and verification, but I find it hard to see how that would come about, given the lack of a central authority and the lack of will to deal with incidents like this. I'd love to see a digital currency that tried to emulate the advantages of digital cash, while doing away with the ability of a central government to print the currency ad infinitum - that's the big downside of our current state-backed currencies - it seems Bitcoin is not that currency. [1] https://news.ycombinator.com/item?id=2973301 https://news.ycombinator.com/item?id=2973301

What happens when bitcoins are stolen? Can they be use again without being traced?

by yowza 13y ago

What happens when bitcoins are stolen? Can they be use again without being traced?

It depends on what you mean by 'traced.' All bitcoin transactions are 'traced,' but you can just set up a few thousand wallets, transfer some money to all of them, send them between each other, trade some away to other people for things... it's not clear simply from the transaction log who actually took them, and who is just receiving BTC from an anonymous buyer for some sort of service.

kevin_nisbet 13y ago
From my understanding of bitcoin, doing this would be trivially easy to track also. However, I haven't studied this in great detail, so what is said here may be incorrect. *simplified view Wallet 1 stores 50 bitcoin for(i = 1; i < 100000; i++) { Transfer 1 bitcoin from Wallet i to Wallet i+1 } At this point, wallet 100000 contains exactly 1 bitcoin, that every transaction can be traced back to wallet 0. I understand that you would include more wallets, varying values, etc. But the point is every one of those bitcoins can be traced back to the original wallet which has the stolen funds. The only way to make this behavior viable that I can see, is to have intermediate services that mix up funds. So you have 50BTC Stolen funds in Wallet A. I run Wallet B, that takes transactions from many people. You give me the 50BTC that is stolen. I send you 50 bitcoins in small increments randomly over a set period of time, but from the other transactions I have. I do the same for other people, using the 50BTC that you sent me. As such, my service mixed the coins through a common point, which now makes tracking the chain very difficult. If I didn't mix this with other people's transactions, and gave you back you're own coin numbers, the coins would just track through me back to the original stolen wallet. This would need a party to offer this type of service, with enough volume to obscure the source, and for that service to not keep records (or not be inspected through other means). Again, I want to re-iterate, my knowledge of bitcoin is somewhat superficial, so don't take this as an authoritative post on the subject.
- steveklabnik 13y ago
  > The only way to make this behavior viable that I can see, is to have intermediate services that mix up funds. They're called 'mixers.' > Again, I want to re-iterate, my knowledge of bitcoin is somewhat superficial, so don't take this as an authoritative post on the subject. You've got your head on straight. Here's one small aspect you're missing: there's no connection between a person and a wallet, and there's no transaction costs, so just make a million wallets and send random amounts to each one, and then send them through a mixer, and then to each other some more, and then to a mixer....

ge0rg 13y ago

Yes and no. You can trace every transaction back to day 0, so it is possible to know which other bitcoin wallet(s) the money was transferred to. If the thief however only uses the stolen BTC to pay for non-identifying services (i.e. internet hosting), it will be very hard to find them.

onedev 13y ago

From what I've been told, yes....they can be used when stolen; it's kinda the whole untraceable, distributed nature of it all.

steveklabnik 13y ago
> untraceable This is wrong. Every single transaction is saved, by everyone. It's the core of how the protocol works. That doesn't mean there aren't ways to obscure who controls the wallets, but it's not untraceable, and 'distributed' has nothing to do with privacy.
- grey-area 13y ago
  I find this point a very interesting one. Everyone insists that transactions are saved and traceable (which of course they are), but I've never heard of anyone finding out who stole their coins and getting them back. People just seem to accept after a break-in that the money is gone and there's nothing they can do about it. That's not acceptable to me in a currency, particularly not one that people use as a store of value long-term. So it is effectively untraceable even if technically you can trace the anonymous transactions. The important part of that statement, which was not wrong, is they can be used when stolen. This is my biggest reservation about bitcoin - they have taken the worst attributes of paper cash (pretty anonymous, not tied to a verifiable identity), and replicated them in a digital currency. If I'm transacting with someone I want to know who they are, in case of fraud or theft. People even openly run money laundering operations (mixing), and the community put up with it! In contrast, most people never store large values of money in actual paper cash anymore, they store it in a bank, which has identification and laundering checks, proper tracing of accounts to identities, immediate yet reversible transactions, and compensation if money is stolen. Bitcoin doesn't come out well in that comparison. The other reservation I have about it is the lack of regulation - these exchanges which hold the money of lots of people are not regulated as banks are. No-one knows exactly what security they actually have (as opposed to say they have), sometimes people don't know who's behind them (I remember that 17 year old from Singapore talking here about starting one[1]), and there's no protection against market manipulation, speculation and cornering, or it seems against online theft. Given they have become so valuable so quickly, you can be quite sure the market is heavily manipulated, perhaps even in advance of thefts like this in order to gain the maximum benefit. What is the cause of the huge recent spike in prices for example? If bitcoin is to work as a currency and a store of value (the traditional roles of money), it does need regulation and verification, but I find it hard to see how that would come about, given the lack of a central authority and the lack of will to deal with incidents like this. I'd love to see a digital currency that tried to emulate the advantages of digital cash, while doing away with the ability of a central government to print the currency ad infinitum - that's the big downside of our current state-backed currencies - it seems Bitcoin is not that currency. [1] https://news.ycombinator.com/item?id=2973301 https://news.ycombinator.com/item?id=2973301