I guess I don’t quite understand how step 3 and 4/5 work - is it possible to find out that the wallet receiving the 18.85 BTC in step 3 is the same one sending some amount of money out of step 4/5, or is it the case that by using different addresses for the receiving/sending that it is impossible to determine that they are related? I am aware that wallets can have multiple addresses but I wasn’t sure if it is possible to determine whether different addresses are related to the same wallet or not.
Do exchanges usually re-use addresses? How can people currently trace a particular bitcoin transaction on the ledger to a source, if new addresses are used for every transaction?
A bitcoin transaction can be perfectly anonymous; this is true. It is also true that bitcoin can’t be used perfectly anonymously. The catch is that, to actually use a currency, you need at least four transactions:
1: You provide someone with a product or service of value to them.
2: They provide you with some amount of currency in exchange.
3: You provide that currency to someone else, in exchange for
4: They provide you with a product or service of value to you.
Let’s say that you’re a criminal, engaged in the sorts of products and services that society frowns upon, and look at some concrete examples.
1: You provide a dealer below you in the supply chain with some illegal drugs.
2: The dealer pays you for the drugs.
3: You take the money from the drugs to a hitman.
4: The hitman offs one of your rivals for you.
Now let’s suppose that both the dealer and the hitman have been compromised: The cops are onto both, and are tracking them. And now suppose that the money used here was US banknotes. In this case, the cops have no way to connect the drug dealer with the hitman, unless they’ve been tracking the serial numbers on the bills (difficult even if they’re doing it in advance, impossible if they only catch the criminals after the transactions).
Alternately, suppose that the monetary transactions were in bitcoins. Now, the cops know that, whoever it was that the dealer gave the money to, that person then gave the money to the hitman. They know there’s a connection there. And they can now start looking at the intersection of people who have interacted with the dealer, and the people who have interacted with the hitman, an intersection that includes you. Your anonymity has been compromised.
And now you’ve made things even worse. If you take the funds and split them up, and send some to ShadyShit.com and some to DarkCrap.com, now the cops are looking at the intersection of three sets of interactions.
This sounds kind of like how DNA databases can zero in on a criminal even if the criminal isn’t in the database. The authorities use the criminal’s DNA to find close relatives who happen to be in the database and then try to find the criminal based on those people’s relatives.
The address on both ends of a transaction are public information forever. But, as I said, bitcoin stores no identifying information whatsoever about the owner. A US-based exchange like Coinbase is required by law to keep a (private) registry of who owns what address. I must use that to convert from USD to BTC. But once my funds are in BTC, now I can create my own local address on my PC. Nobody ever knows it’s mine, I’ll only use it once, and I’ll destroy it when I’m done. Naturally, the public record will forever record that I sent money to that address, but nobody will ever know what that address was.
No, there’s no way to relate an address to a wallet.
If you mean the same address for the same customer, yes. It’s like your account number, it’s used for every transaction you do on that exchange.
As mentioned above, exchanges don’t (normally) use new addresses for every transaction. So anything you transfer through the exchange is very public, forever, and can be traced to your identity. But if you don’t want to be traced, then you transfer from your exchange to your temp address (in my example). If nobody gets your computer, nobody can prove you sent the money to yourself as opposed to some vendor.
It is not true that bitcoin can’t be used perfectly anonymously. You haven’t shown this, only stated it repeatedly, and repeating something doesn’t make it true.
Whoa, whoa, whoa. You’ve injected an ENORMOUS amount of side-channel intel into the cops’ arsenal without showing your work. You concocted a three-person conspiracy, wherein all parties have all knowledge of that conspiracy, and all parties have some real-life connection to each other. This racket doesn’t need USD or Bitcoin to be busted. It was fatally compromised by external information before currency even entered the mix. Your scenario is invalid.
Let’s limp along with your flawed scenario anyhow. The drug dealer sent money to an anonymous address, that address sent money to another anonymous address, which sent money to the hitman. The anonymous addresses have never conducted a single transaction except this one. They bear no identifying info whatsoever. Tell me specifically what piece of information links my identity to that address, and tell me who has it. Nobody does, so you can’t get it!
The intersections don’t do any good, again, because they bear no identifying information. They know someone sent money to those places. They have no idea who or why. You can torture the parties involved if you want. I never shared my name, they only interacted with an anonymous address.
It’s easy to wave your hands and say “cops are omniscient, they have everything”, but it doesn’t seem like you understand that they have no evidence to link my identity to my temporary bitcoin addresses. You can wave your hands and say “there are intersections”, but if we drill down into them, you won’t be able to link me to any of those intersections.
So, in summary, you’re entirely mistaken and it looks like you have some errors in your understanding of how the tech works.
I would guess in the real world of average criminals, you could not expect this level of competency universally. Even if you are 100% perfect, not everyone else may be that careful. Some criminal in the process is going to do something like have a .txt file where they list people, their wallet IDs, amounts, and what the transfer is for. And a court case does not require 100% proof. If they find a few criminals who have .txt files with your name and a wallet id, the court is going to find you guilty even if they can’t find that USB stick with the wallet on it in your possession.
This is like the 10th post to create a scenario which creates an enormous amount of fatally incriminating side-channel correlating information before Bitcoin ever enters the mix. What do you think this proves about Bitcoin’s anonymity?
No, that’s false. A .txt with my name and a bitcoin address isn’t proof that I own it. Maybe it means I said to use that address, maybe I said not to use that address, maybe this person plucked my name off an internet white-pages to use as a codename. Investigators may use it as a hint to investigate me further, but it isn’t proof of anything.
I’m trying to explain that I’m safe if I’m in an anonymous conspiracy where I never shared my name or identifying information. Contriving scenarios where I leak my identity from the get-go is really fighting the hypothetical.
But the point is, with any currency other than bitcoin, it’s not fatally-incriminating information. The transactions being in bitcoin makes the whole thing more identifiable, not less. You say that bitcoins don’t have your name on them? Sure, but neither do dollars. Bitcoin doesn’t add any anonymity at all, here, and it takes away some by the transactions being traceable to the same wallet (even if that wallet is later destroyed).
If we are discussing whether Bitcoin is good or bad, we must compare it to other systems. I don’t know why DigiCash went bankrupt (it is called Taler now), but it pre-dates bitcoin by at least a decade and hardly incorporates today’s techniques (like replacing servers with a P2P cloud, etc.) And, yet, even under the simple original scheme, if you give me $1000000 and I give you however many Taler, then I presumably know your name, but those coins cannot be linked to coins later cashed in by the Republican Party or the Sinaloa Cartel. It is even more anonymous than $100 bills since there are no serial numbers that can be traced.
ETA and any criminal attempting to turn such a received electronic payment into cash has the problem of figuring out how to do that; they do not even have anything in hand like a duffel bag full of banknotes, gold coins, or (gods forbid) Bitcoins, merely a bunch of tokens.
Unless you’re making a withdrawal/deposit over $10,000, at which point IRS Form 8300 kicks in, and you can’t break up the amount without running afoul of restrictions against structuring.
I’m going to go out on a limb and say that if you’re dealing with any meaningful cash transactions, you have to either accept the loss of anonymity, or own a business(es) that you can launder the cash through.
The standard of criminal conviction is not absolute proof, but proof beyond reasonable doubt.
Evidence usually consists of a number of items that must be looked at as a whole, not each item individually. Showing uncertainty in each item individually may not undermine the case as a whole in criminal law.
A .txt with your name and a bitcoin address might be a damning piece of evidence, when taken in conjunction with other probable, but not certain, indicators of guilt, and might lead to conviction.
Everyone else is trying to explain that it’s your scenario that’s hypothetical.
A perfect anonymous conspiracy doesn’t exist in the real world. It’s like an abstract concept in geometry, a one-dimensional line, a perfect circle, etc. In the real world there will always be imperfections.
At some point you will need to interface with the conventional monetary system. At some point one of the people involved will make a mistake. At some point there will be identifying information.
Correction: not any currency. You’re talking about physical cash, which is a bit of a strawman. Obviously, unmarked physical assets are the most untraceable means of exchange. But if you want to move seven figures of funds, now you’re dragging around several large suitcases of cash through roads, trains, airports, international borders, etc. That’s a dramatic change in your security posture.
Compare apples to apples. Bitcoin to traditional bank accounts. Bitcoin removes the entire requirement to have a third-party handle your account, or to require an identity. That’s how it’s more anonymous than traditional banks.
Yeah. And Bob saying "I think this is Alice’s Bitcoin account* is not a reasonable doubt. It’s a piece of circumstantial evidence. You’ll need an enormous amount of circumstantial evidence outside of the bitcoin network to build that case. And that’s the point. If your crime is mediated by a traditional bank, you can go to Wells-Fargo with a warrant or subpoena and say “Provide me the owner of this account” and they are required by law to do so. With Bitcoin, there’s nobody to subpoena, no place to issue a warrant. (Except the exchange, but we already established exchanges aren’t safe and can be entirely bypassed).
Nobody can subpoena your private bitcoin wallet. It adds an enormous burden on authorities to build an exhaustive circumstantial case outside of bitcoin. That information may exist, it may not, but it’s not in bitcoin.
Nobody is explaining that. They are repeating that, from ignorance. I’m investing a lot of effort to dispel that ignorance, and the ignorance is fighting back hard. Sometimes it be like that.
Here’s how all these arguments look from my end:
ME: Your identity never needs to intersect with any other entity on Bitcoin if you stay off exchanges and create your own addresses.
YOU ALL: BUT WHAT IF YOU DIDN’T DO THAT
ME: I’m saying that’s the condition of anonymity. You have to do it. If you do, you’re anonymous.
YOU ALL: A CHAIN IS ONLY AS STRONG AS ITS WEAKEST LINK
ME: Yes, but I’ve demonstrated that Bitcoin is the strong link in your scenario. You keep hypothetically placing it in a chain of weak links, and acting like Bitcoin created the weakness, but that’s demonstrably not the case.
YOU ALL: WHAT IF A GIANT BIRD FLEW IN YOUR WINDOW, STOLE YOUR USB DRIVE, AND DROPPED YOUR USB DRIVE ON THE FBI’S DESK? WHAT THEN SMARTYPANTS?
ME: Uh… seems unlikely, but again, no matter what financial network you use, you’re going to have critical secrets, and you have to guard them from… uh… animals of every species.
YOU ALL: WHAT IF YOUR ENTIRE HIGH SCHOOL CLASS NAMED YOU AS THE OWNER OF AN ACCOUNT
ME: If I involved that many idiots in my conspiracy, that’s just my bad judgment as a criminal. Bitcoin didn’t cause that. All of that happened before I ever decided to use Bitcoin.
YOU ALL: BUT BITCOIN IS ABSOLUTELY TRACEABLE AND INSECURE. ALSO DRUGLORDS USE IT
ME: Oh, I guess that’s why all the druglords are now in jail. They all just entered their real names and addresses into the cop database and the cops have now caught them all. You’ve cracked the case, well done.
YOU ALL: WHAT IF A GIANT GIRAFFE RAN AWAY WITH YOUR WALLET WHAT THEN
ME: sigh. Again, every consumer is responsible for guarding their financial secrets. You’re only anonymous if you exercise that choice.
You’re into “God of the Gaps” territory here. Again, you can describe a chain with as many weak links as you like. Bitcoin isn’t going to be the weak link, ever. The conspiracy will always be rolled up by some information outside of Bitcoin to get one’s secret token. If you expose your token, game over, and that’s the case of any financial network that will ever be designed.
If you can’t trust anyone but yourself, then you need to set up your hypotheticals on that basis: What can your enemy do if everyone else is compromised? And that makes the vulnerabilities most clear.
But you don’t even need everyone to be compromised. All you need is for a few agents to be compromised, and a few others to be doing foolish things like re-using a wallet for more than two transactions (one in, one out). In the real world, the cops could get quite a lot of information just by getting the cooperation of one major exchange (a company that is just swapping bitcoins for dollars, without storing either). And the sort of information the cops can get is entirely based on the nature of bitcoin, and wouldn’t work for anything else.
I did exactly this in post 76. I created an airtight, realistic transaction chain that doesn’t require me to create a nexus between my identity and any nefarious activity. You responded to it by adding a bunch of weak links on either end of the chain and insisting that they’re necessary. They aren’t necessary, and you can’t prove that they are.
This is more of the same. You can’t add a bunch of weak links to the chain and claim Bitcoin made it weak. I don’t think you apprehend the meaning of “anonymous address”. Bob can tell the feds that Alice provided this bitcoin address for nefarious activity. They cannot use Bitcoin data to prove that ownership. They’ll have to hope there were other leaks outside of Bitcoin.
No. In the very real world, the cops can’t much information from an exchange. Specifically, they can get my legitimate name, and my legitimate Bitcoin address, and addresses where I sent funds. If I send money to an anonymous address, the trail goes dead right there. The exchange can’t provide private info on addresses they don’t control. Nobody can provide information on an address not controlled by an exchange, if the owner chooses to keep it private.
It really feels like you’re missing some big technical details here. Do you understand that if I create a private address on my machine and destroy it, there’s no proof anywhere in the Bitcoin network of the owner’s identity, or the counterparty’s identity? And that your only hope of compromising me is building a large circumstantial case that depends entirely on me or someone else making errors?
You can say I’m fallible and may err. Okay, fine, I’ve made one or two mistakes in my day. What you’ve proven here is that human error is a vulnerability. You’ve proven that Bitcoin can’t eliminate risk of human error. Fine! Nobody ever claimed that Bitcoin protects people from their own stupidity, just that anonymity is achievable with diligence in a way that no bank ever can.
Must I drag up a list of criminal busts where folks got caught transiting international borders with diamonds, or gold, or art, or other valuables so as to avoid the suspicion of suitcases of cash? Or can you just admit that physical assets of any kind become risky when you cross a physical border?
“This is yet another example of how investigators with the right tools can leverage the transparency of cryptocurrency to follow the flow of illicit funds,” says Jonathan Levin, cofounder of blockchain analysis company Chainalysis.
The case shows yet another example of how Bitcoin, once widely believed to be a powerful tool for making anonymous, untraceable transactions, has turned out to be in many cases the very opposite. The blockchain’s ledger of all Bitcoin transactions since the cryptocurrency’s creation has often instead served as a means for law enforcement to trace even years-old transactions.
The arrest of Bitcoin Fog’s administrator based on blockchain analysis represents just how far back in time investigators can reach with those “follow the money” techniques, says Sarah Meiklejohn, a computer scientist at University College of London whose work pioneered Bitcoin-tracing techniques in 2013. “With blockchain analytics the thing we say over and over is that all this activity is on this ledger forever, and if you did something bad 10 years ago you can be caught and arrested for it today,” says Meiklejohn. “The fact that they’re pulling up those transactions is really significant.”
This is the inherent weakness of Bitcoin. All the transactions are on record, so if investigators get hold of one part of the thread they can follow it all the way, far more easily than they could with conventional transactions.
You know, you might want to consider reading the article for comprehension and adding a little analysis, rather than dumping that burden on me. I’ve added quite a bit of new information in this thread, you appear to be Googling for stuff that sounds pretty close and saying WHAT ABOUT THIS. Do a little homework here. But I will generously zoom in (AGAIN) on a recurring theme. This will be the final time I do this, as I’m exhausted repeating the performance.
You don’t need a fancy computer scientist to tell you this. You don’t need Wired magazine to tell you this. It’s built into the spec, it’s published information, and I will tell it to you (again) quite plainly: Every Bitcoin transaction is not only public information, it remains public information forever. It is not only public, it is published. In fact, here’s a free websitewhere you can leisurely browse every single Bitcoin transaction from the very beginning of time. It’s all there, it has to be there by design. Find something nefarious. Hell, find me, find my publicly identifiable Coinbase account. Every needle is there in that haystack. Sift through each and every one, but I’ll only give you ten million years to do it. After you’ve inspected them all, tell me, did you find me? How?
I stipulate that all of this is true, and I assert that it. Does. Not. Matter. When I can create a cold account on my PC, use it once, and destroy it, yes, that transaction and address WILL live forever. But the information linking it to me Does. Not. Exist. I keep explaining this, and people keep missing it. How are you all missing this? Am I failing to explain a technical detail? Do you struggle to reject a prior assumption that such a thing isn’t intuitively possible? Leave the intuition behind, look at the facts and reason through them.
No, it’s not a weakness, it’s an intentional design aspect that does not matter because the anonymity doesn’t rest on that feature.
Not only no, but HELL no. That’s absurd. In a conventional financial network, *every single node and account is associated with identifiable information. The bank keeps it, they’re authorized to share or transmit it in certain cases, law enforcement can easily get it with a warrant or subpoena.
No such information exists in the Bitcoin network. An exchange may require it by law, but again, nobody ever needs to use an exchange. You are empowered to bypass it completely and operate entirely anonymously. This is emphatically not true of conventional banks, and that’s why Bitcoin offers the ability achieve complete anonymity.
You’re right that it doesn’t exist on the blockchain, but the information that there was a transaction is there forever. If the criminal gets busted and investigators find wallets on his computers, the investigators now have new leads to follow. Maybe other transactions on the blockchain indicate who transferred to the old wallets. Maybe the investigators cut a deal with the criminal if he spills who contributed to the wallets. That’s not the case if the criminal has stacks of $100 bills under his mattress. Investigators can’t just look at the stacks and figure out what transactions created all the money. But if the criminal has a old computer from years ago with a wallet on it, it gives investigators new leads into who was giving the criminal money.
We’ve already been through several iterations of “you’re only secure if you secure your stuff.” The tools and directions are provided. If you don’t use them, then you don’t get the benefit. No technology can fully guard against improper use, and Bitcoin doesn’t claim to.
We’ve already done this. Yes, physical assets have zero identity, because they aren’t identifiable or addressable. True, and uncontested. To compare apples to apples, compare Bitcoin to a conventional bank and the advantage is obvious. But if you insist on comparing the anonymity of Bitcoin to bank notes, consider that $100 million in bank notes becomes quite conspicuous due to size, and consider the added risk (and penalties) involved in lugging large duffel bags of cash through the airport. The untraceability of cash doesn’t scale up to large amounts, nor across political borders. But Bitcoin’s does.
I don’t claim to be an expert on this area by any means, but I’m leaning towards the view that you can preserve anonymity only by conducting transactions purely in Bitcoin, making sure never to interface with the conventional monetary system (except for perhaps the first step where you convert a traditional currency to Bitcoin), and using a new address for each transaction.
Of course, this means that you’ll be at the mercy of the volatility of Bitcoin’s price if your transactions take place over a long time period, and secondly, you have no legal recourse if your drug/arms dealer decides to straight up gyp you and refuse to deliver your goods after you send them the Bitcoin.