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Bitcoin's $137k Jackpot

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Re: Bitcoin's $137k Jackpot

#71

Post by mwilcox »

drostie wrote: post #62

Can someone else confirm to me that I'm not crazy and the central distinction of this article is totally bogus? Reasoning: BitCoin isn't, to my knowledge, a scheme where some private identifier is stored inside each "coin" whose ownership is revealed with a zero-knowledge proof; it's simply one where you have public and private keys and use those private keys to sign transactions saying "Take X1 out of my public key…

Yes tumbling is much more secure if your goal is to anonymise your money. MML is much more easily traceable as you just look at the guy who mined the block and send the authorities to go and speak with him. Especially if the large mining operations are well known.

The usefulness to a launderer seems more the simplicity of exchanging a large amount of coins for fiat currency in a single transaction, rather than going through an exchange or sending lots of complex small transactions through a mixer and figuring out how to exchange all of that back without going through an exchange w/ KYC

Re: Bitcoin's $137k Jackpot

#72

Post by notahacker »

brg1007 wrote: post #50
aianus wrote: post #31

Earlier quoted context omitted.

> So each transaction costs 11000/2000=5.5 USD No, each transaction costs at most $5.50 USD. You haven't established any lower bound in your calculations. A better approach would be to calculate the average number of hashes required to mine a block and the power efficiency of the latest generation ASIC miners. Also, for what it's worth, $5 is much cheaper than a Western Union or SWIFT wire transfer so even this upper…

Meanwhile in Europe I'm paying 30 cents for bank transfers within the EU up to 50K.

and in a country where Western Union is actually the preferred payment option, the transaction fee allows a recipient that may not even own a computer to go to a shop in their village and collect local currency they can actually spend on the things they need

Re: Bitcoin's $137k Jackpot

#73

Post by [deleted] »

drostie wrote: post #62

Can someone else confirm to me that I'm not crazy and the central distinction of this article is totally bogus? Reasoning: BitCoin isn't, to my knowledge, a scheme where some private identifier is stored inside each "coin" whose ownership is revealed with a zero-knowledge proof; it's simply one where you have public and private keys and use those private keys to sign transactions saying "Take X1 out of my public key…

[deleted]

Re: Bitcoin's $137k Jackpot

#74

Post by [deleted] »

drostie wrote: post #62

Can someone else confirm to me that I'm not crazy and the central distinction of this article is totally bogus? Reasoning: BitCoin isn't, to my knowledge, a scheme where some private identifier is stored inside each "coin" whose ownership is revealed with a zero-knowledge proof; it's simply one where you have public and private keys and use those private keys to sign transactions saying "Take X1 out of my public key…

[deleted]

Re: Bitcoin's $137k Jackpot

#75

Post by joshuak »

drostie wrote: post #62

Can someone else confirm to me that I'm not crazy and the central distinction of this article is totally bogus? Reasoning: BitCoin isn't, to my knowledge, a scheme where some private identifier is stored inside each "coin" whose ownership is revealed with a zero-knowledge proof; it's simply one where you have public and private keys and use those private keys to sign transactions saying "Take X1 out of my public key…

You are correct in that tracing a transaction fee is equivalent to tracing any kind of transaction. There is no event horizon for transaction fees as implied by the article. New coins have no history because they are new, the coins for the fee are not new, they are simply added to the reward total for successfully mining them.

---

That being said the bitcoin metaphor is misleading in the details as metaphors always are. There are no bitcoins, in that there are no IDs that are kept in an inventory that represent every individual bitcoin. Instead bitcoins are represented as ledger entries only. The traceability, or lack thereof, comes from the ability to trace the ledger entries. It goes something like this:

Miner: "Everyone agrees I now have 25 bitcoins in account M1. Because I'm a winner!"

Miner: Tx :: Send 25 bitcoins from M1 account, to P2 (Person 2's public key)

Person 2: Tx :: Send 5 bitcoins from P2, to P3.

Balances

M1: 0

P2: 20

P3: 5

P3's bitcoins can be traced to P2, and then M1. Now P2 sends a transaction with a high fee (up to now no fees were paid).

Person 2: Tx :: Send 1 bitcoin from P2, to P4, with a tx fee of 19.

Miner 2: "Everyone agrees I now have 44 bitcoins in my M2 account. Because I'm a winner!"

Balances

M1: 0

P2: 0

P3: 5

P4: 1

M2: 44

M2's bitcoins can be traced to 25 new coins, 19 fee coins given by P2, who go them form m1. P3 is not involved in the transaction history, and every transaction is traceable.

Re: Bitcoin's $137k Jackpot

#76

Post by CydeWeys »

drostie wrote: post #62

Can someone else confirm to me that I'm not crazy and the central distinction of this article is totally bogus? Reasoning: BitCoin isn't, to my knowledge, a scheme where some private identifier is stored inside each "coin" whose ownership is revealed with a zero-knowledge proof; it's simply one where you have public and private keys and use those private keys to sign transactions saying "Take X1 out of my public key…

In traditional tumbling, let's say you have ten people who all want to intermingle their funds. So you have ten inputs and ten outputs, and now there's some plausible deniability added because you don't know which particular one of the ten any given output corresponds to. But you do know it belongs to one of the ten, which is still significant information. And, most importantly, the vast majority of Bitcoiners do not use tumbling services.

With mining, however, you are intermingling with the activities of an entire mining pool. It is WAAAY harder to trace. Let's say I want to launder 1,000 BTC, and I have a sympathetic mining pool that will launder it for me. So I sign a 1,000 BTC transaction that gives it all away as a transaction fee, and they include it in their next mined block, eating the full bonus.

Then, separately, either before or after, and possibly far separated in time chronologically, they issue a series of transactions to a set of separate virgin receiving addresses I have created that total up to, say, 999 BTC (they keep 1 BTC as their mixing fee). As a key point, these transactions do NOT spend the output of the 1,000 BTC reward block, but rather, block generation rewards from previous blocks they've mined. They are indistinguishable from standard mining reward payouts, which any pool goes through a huge number of every day.

Those 999 BTC I now have spread across my addresses are way more anonymized than anything I could get with a traditional mixing pool.

Re: Bitcoin's $137k Jackpot

#77

Post by Melkman »

xigency wrote: post #46
WizzleKake wrote: post #43

Earlier quoted context omitted.

Part of the point of bitcoin is that it is decentralized.

Yes, but that isn't the entire purpose of digital currency. It is just a part of Bitcoin.

Almost all currencies are digital today. Bank notes are just a physical transaction mechanism. You could use Bitcoin notes if you want with the private key under a scratch layer. The big difference is exactly that Bitcoin has no central authority. If that doesn't matter to someone he'd be perfectly happy to use state endorsed currencies.

Re: Bitcoin's $137k Jackpot

#78

Post by CydeWeys »

xigency wrote: post #46
WizzleKake wrote: post #43

Earlier quoted context omitted.

Part of the point of bitcoin is that it is decentralized.

Yes, but that isn't the entire purpose of digital currency. It is just a part of Bitcoin.

I've been using central ledger currency systems (i.e. logging into my bank's website and issuing payments) for longer than Bitcoin has existed. Decentralization is the entire point of Bitcoin. Take that away and you aren't left with anything that wasn't already done long ago. What you're proposing is something that banks have already been doing widely for decades.

Re: Bitcoin's $137k Jackpot

#79

Post by joshuak »

CydeWeys wrote: post #76
drostie wrote: post #62

Can someone else confirm to me that I'm not crazy and the central distinction of this article is totally bogus? Reasoning: BitCoin isn't, to my knowledge, a scheme where some private identifier is stored inside each "coin" whose ownership is revealed with a zero-knowledge proof; it's simply one where you have public and private keys and use those private keys to sign transactions saying "Take X1 out of my public key…

In traditional tumbling, let's say you have ten people who all want to intermingle their funds. So you have ten inputs and ten outputs, and now there's some plausible deniability added because you don't know which particular one of the ten any given output corresponds to. But you do know it belongs to one of the ten, which is still significant information. And, most importantly, the vast majority of Bitcoiners do not…

This does not serve as a tumbling mechanism because the participants aren't peers. The coins went all one direction from source to many destinations. If those many destinations don't, in turn, pay the source back in some way you've just lost the money not laundered it.

Re: Bitcoin's $137k Jackpot

#80

Post by CydeWeys »

mwilcox wrote: post #71
drostie wrote: post #62

Can someone else confirm to me that I'm not crazy and the central distinction of this article is totally bogus? Reasoning: BitCoin isn't, to my knowledge, a scheme where some private identifier is stored inside each "coin" whose ownership is revealed with a zero-knowledge proof; it's simply one where you have public and private keys and use those private keys to sign transactions saying "Take X1 out of my public key…

Yes tumbling is much more secure if your goal is to anonymise your money. MML is much more easily traceable as you just look at the guy who mined the block and send the authorities to go and speak with him. Especially if the large mining operations are well known. The usefulness to a launderer seems more the simplicity of exchanging a large amount of coins for fiat currency in a single transaction, rather than going…

> MML is much more easily traceable as you just look at the guy who mined the block and send the authorities to go and speak with him.

Well that's easier said than done. There are a large number of blocks for which the miner is not known. The only reason the miner is known for as many blocks as it is is because several of the largest mining pools tag every block that they mine as a form of accountability to their miners (and of course bragging rights).

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