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Chainalysis: A startup that helps governments trace crypto

bloomberg.com

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Re: Chainalysis: A startup that helps governments trace crypto

#21

Post by pclmulqdq »

jejeyyy77 wrote: post #19
pclmulqdq wrote: post #17

Earlier quoted context omitted.

Lightning is a lot less untraceable than people think. Settlement payments on a lightning channel are still traceable, and can be matched up. Also, lightning nodes get a lot of information about transactions that they don't publish to the blockchain, and you can bet that most lightning nodes that are around today keep logs. Most of them are run by big crypto companies, several of which are US-based.

It's not meant to be "untraceable". But it's fast, and as mentioned not a public ledger. If you want untraceable, you can go out of your way to achieve that using something akin to tornado.cash I think the point is that the technology is already here and available - it's just not evenly distributed yet.

More people have tried to sell me on the lightning network on the basis that it offers privacy and reduces net transaction fees than on the basis that it offers speed.

Re: Chainalysis: A startup that helps governments trace crypto

#22

Post by jejeyyy77 »

cowtools wrote: post #15
jcbrand wrote: post #14

Earlier quoted context omitted.

Transactions are moving to layer 2 solutions like the lightning network. Individual lightning transactions are not recorded on the blockchain and are not subject to chain analysis.

They are not subject to chain analysis, but they are still subject to analysis.

by that logic, so is every fiat payment processor, bank, what have you.

Re: Chainalysis: A startup that helps governments trace crypto

#23

Post by manholio »

This is mostly snake oil, perhaps efficient against the dumbest of criminals. The newer generation coin laundry service, for example Chipmixer, will have pre-funded addresses already waiting in the blockchain before the "client" even makes an account. In exchange for a deposit in a wallet controlled by Chipmixer, the client will receive a set of corresponding private keys that add up to the total value being laundered.

You might trace that the coins went into a laundry, but you will never associate with the previously laundered coins that the client got.

Re: Chainalysis: A startup that helps governments trace crypto

#24

Post by jejeyyy77 »

pclmulqdq wrote: post #21
jejeyyy77 wrote: post #19

Earlier quoted context omitted.

It's not meant to be "untraceable". But it's fast, and as mentioned not a public ledger. If you want untraceable, you can go out of your way to achieve that using something akin to tornado.cash I think the point is that the technology is already here and available - it's just not evenly distributed yet.

More people have tried to sell me on the lightning network on the basis that it offers privacy and reduces net transaction fees than on the basis that it offers speed.

It does all those things to different degrees?

Re: Chainalysis: A startup that helps governments trace crypto

#25

Post by zeroclip »

pclmulqdq wrote: post #18

As far as I know, the state of crypto privacy is that everything is directly traceable except: * Bitcoin lightning transactions when the lightning nodes involved are trusted to not keep logs * Transactions through mixers with a lot of users * Monero transactions * Zcash private transactions And everything is de-facto traceable except: * Tornado cash users who use standard-size amounts (or users of another equivalentl…

Seems about right. More users would use Tornado Cash if regulation was clear and allowed it. Zcash and Monero lack smart contracts which limits their use cases.

ZK based privacy was possible and working fine for many users through TC before the sanctions. Now it is risky as you may end up with locked funds or in jail for seeking privacy.

Edit: Should also mention Aztec and Aleo. These are working currently but in the same position that TC was before its sanctions. Hard to know what regulators will do as these tools allow for absolute privacy which is antithetical to the US government’s goals.

Re: Chainalysis: A startup that helps governments trace crypto

#26

Post by mccorrinall »

pclmulqdq wrote: post #18

As far as I know, the state of crypto privacy is that everything is directly traceable except: * Bitcoin lightning transactions when the lightning nodes involved are trusted to not keep logs * Transactions through mixers with a lot of users * Monero transactions * Zcash private transactions And everything is de-facto traceable except: * Tornado cash users who use standard-size amounts (or users of another equivalentl…

Can you explain the entry/exit thing of monero? I always thought i’m fine when using monero, but never looked into what ring signatures imply.

Re: Chainalysis: A startup that helps governments trace crypto

#28

Post by hamiltonians »

zeroclip wrote: post #25
pclmulqdq wrote: post #18

As far as I know, the state of crypto privacy is that everything is directly traceable except: * Bitcoin lightning transactions when the lightning nodes involved are trusted to not keep logs * Transactions through mixers with a lot of users * Monero transactions * Zcash private transactions And everything is de-facto traceable except: * Tornado cash users who use standard-size amounts (or users of another equivalentl…

Seems about right. More users would use Tornado Cash if regulation was clear and allowed it. Zcash and Monero lack smart contracts which limits their use cases. ZK based privacy was possible and working fine for many users through TC before the sanctions. Now it is risky as you may end up with locked funds or in jail for seeking privacy. Edit: Should also mention Aztec and Aleo. These are working currently but in the…

how would funds be locked

Re: Chainalysis: A startup that helps governments trace crypto

#29

Post by cowtools »

pclmulqdq wrote: post #17
jcbrand wrote: post #14

Earlier quoted context omitted.

Transactions are moving to layer 2 solutions like the lightning network. Individual lightning transactions are not recorded on the blockchain and are not subject to chain analysis.

Lightning is a lot less untraceable than people think. Settlement payments on a lightning channel are still traceable, and can be matched up. Also, lightning nodes get a lot of information about transactions that they don't publish to the blockchain, and you can bet that most lightning nodes that are around today keep logs. Most of them are run by big crypto companies, several of which are US-based.

It is quite difficult to compare the obfuscation features of lightning network with that of "conventional" systems like cryptonote-style ring signatures. Consider two different situations:

A) A user picks the economically best peer to open channels with, or chooses peers randomly. Neither of these are sybil proof, which basically means you are transmitting your requests publicly.

B) A user only opens channels privately within a cohort of peers that privately agree not to keep logs, have special means of transmitting requests privately, etc.

I would assume that most users follow some of A's heuristic and some of B's. To the extent that situation B offers privacy, it prevents you from transacting with other users globally in a more general sense.

In other words, it is useful as a privacy mechanism only if you trust your peers not to keep logs, but don't trust them not to double-spend, and also you are not worried about guilt-by-association of owning a channel with these peers. If you were running some sort of dark net market or something, it would be easier to implement some sort of (cryptocurrency-backed?) chaumian cash, as you already implicitly trust the marketplace's sysadmin to some extent (as they can simply MITM your relationships unless you establish them by keypairs out-of-band (this is another sybil problem), which is probably more dangerous than double-spending).

Re: Chainalysis: A startup that helps governments trace crypto

#30

Post by zeroclip »

hamiltonians wrote: post #28
zeroclip wrote: post #25

Earlier quoted context omitted.

Seems about right. More users would use Tornado Cash if regulation was clear and allowed it. Zcash and Monero lack smart contracts which limits their use cases. ZK based privacy was possible and working fine for many users through TC before the sanctions. Now it is risky as you may end up with locked funds or in jail for seeking privacy. Edit: Should also mention Aztec and Aleo. These are working currently but in the…

how would funds be locked

Many who had USDC on TC pools have had their assets frozen. Others might have a hard time sending or receiving these assets to typical US-based services because they will be hesitant to touch anything that has been through TC.
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