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Comment by sdan | Hacker News Reader

Afaik, bitcoin addresses are easily interchangeable, so you can make a unique one every-time someone transfers it to the poker site.

So how can CB find out if you're using it on poker?

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> So how can CB find out if you're using it on poker?

The poker site can generate independent addresses A1, A2, A3, ... to receive deposits. But then they also need to handle withdrawals. A withdrawal transaction might for example consume the amount in A1 plus part of the amount on A2, sending the leftover change to another new address. Now A1 and A2 have been observed to be under the control of the same entity.

All addresses of the poker site can be linked together like this, by tracing the "taint" from a single known address. The poker site can try to split their addresses into subsets that are isolated from each other (selerate "wallets"), but then a blockchain analyst can simply keep doing deposits/withdrawals to find them all.

They have a list of suspicious addreses. If you attempt to transfer to one of those addresses they immediately close your account.

This might be true for a service with a basic setup of providing the same address for deposits. If they did it the right way, they would provide a unique address each time. Such a list of addresses is only known to the key holder unless they were to share it. https://github.com/bitcoin/bips/blob/master/bip-0032.mediawi...

Do they e.g. stop you from transferring it to a new wallet, and then to a forbidden address? or rather, how many edges does the money have to traverse before it's no longer under their monitoring?

It looks like some exchanges and fiat-to-crypto on ramps are using chain analysis to track which addresses you are sending to (1).

(1) https://twitter.com/RonaldMcHodled/status/122217208461002752...

Trivial to evade: Just transfer to your own wallet (e.g. Electrum) then back to yourself (from Electrum to Electrum again), and then to the poker site. They won't be able to prove that the intermediary (second Electrum address) was you.

The example you give to try and evade coinbase checks is trivial to track, and the big US exchanges use chain analytics tech. to do this.

Just try it, and you'll see what happens to your account.

To do what you suggest is of course possible, but requires far more "exertion" than what you suggest and certainly more than the average user is technically capable of.

The amount of hops is irrelevant for blockchain analysis.

Can you explain how a Bitcoin blockchain analysis company can track this?

For example, I transfer to an Electrum address from Coinbase. Then I make a transaction that has a single input spending that address, and two outputs, both with newly derived addresses that belong to me (unknown at that point to the chainalysis). Then I make a third transaction with one one input, spending one of those two new addresses that belong to me, and one output with the address of the poker site. How does Chainalysis know that the new address that was spent by the input of that last (third) transaction to the poker site was mine (at least till I spend the second output from the second transaction)? What am I missing?

From what I know, chain analytics uses various heuristics and it's inherently probabilistic: the more hops, the less certainty

But they can't assume it's under your control indefinitely. If I buy some Bitcoin, and use it to pay for something online, the seller could sell it to someone else who uses it on a poker site. Am I responsible for their use?

Are blockchain analysis companies able to detect what you are describing? Yes. Is it possible that exchanges say we ignore everything after n amount of hops? Also yes. It depends on what exchanges specify.

Can't someone just transfer their money to monero and then back to a bitcoin address?

Maybe things have changed, but I recall Coinbase catching poker site transfers.

Most people usually pull it out of Coinbase to another wallet and transfer from there to avoid any issues.

But you sure as hell aren’t going to be able to transfer poker money into Coinbase and then dump it into your Chase account. At least I don’t think you can.

doesn't this sort of financial restrictions kinda destroy the purpose of using bitcoins? Are they doing this to comply with regulations? Or is it a malicious chilling effect banks implement but still be seen as allowing for bitcoins?

It’s probably as simple as online poker being in a legal gray area in America, unfortunately.

I guess it follows that if you directly deposit from Chase to those sites, Chase would close you down too.

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