Bitcoin Is Traceable, Pipeline Investigation Shows | Hacker News Reader

Bitcoin Is Traceable, Pipeline Investigation Shows

nytimes.com

52 pointsfurcyd31 comments

This has always been part of how Bitcoin works and it’s been the reason I’ve felt like I’ve been taking crazy pills for well over a decade trying to understand its popularity amongst criminals.

Do people realize how HARD it is to trace regular currency!? It’s a nightmare! At law there’s an entire equitable principle devoted to the tracing of money. You can’t just prima facie say $A Dollars are $B Dollars, you have to convince a judge to invoke and principles of natural justice to imply such a connection!

Meanwhile, Bitcoin literally stores _every transaction ever_.

The moment a Federal court declares that Bitcoin addresses aren't fungible is the beginning of the end of Bitcoin as a laundering tool. If the government can seize derivative Bitcoin addresses (and/or other assets purchased in exchange), then as a payee I care very much about the provenance of payments I receive. Almost immediately the value of Bitcoins passing through mixers would plummet.

Monero and others exist. You can’t easily trade them because the government doesn’t like the anonymity, but they exist.

If Bitcoin gets poisoned, you’ll just see it sold for monero, laundered, then passed back into Bitcoin.

Who is going to exchange their Monero for your Bitcoin when the Bitcoin you give them can be seized? At what discount?

I should restate. Mary wants to buy from John, but the dollar exchange won’t convert for her.

She exchanges her Bitcoin for monero. That monero is sent to John. John now converts it back into Bitcoin. When it converts to Bitcoin, the money is perfectly laundered and ready for conversion to dollars.

The problem is that when John converts to Bitcoin he may receive Bitcoin that has a criminal history attached tainting it. That taint may prevent John from using his Bitcoin at certain places or exchanging it elsewhere. It may also mean the US decides at some point that his Bitcoin should be seized due to that criminal history.

How does John know he is getting Bitcoin with only a clean history?

Now that El Salvador has made BTC legal tender, they may take issue with their citizens having their BTC randomly seized by other governments.

The ability to seize BTC is dependent on the jurisdiction of the seizing authority, and their ability to access the wallet. Money launderers will likely concentrate in locations where the local authorities look the other way. Exchanges will charge fees to payout potential seizures in jurisdictions where they can be seized.

Popularity among criminals is almost certainly the ease with which it can be converted back into real money, typically in another country, but the key element is the conversion to cash. The majority of actually anonymous crypto currencies don’t have a fast path back to real money.

and yet we don’t hear of either ransomware gangs being taken down on the regular, or ever; or of cash ransoms. do you know how hard it is to deliver or receive a cash ransom?

Delivering Cash to Pirates as Difficult as Negotiating Ransom

https://abcnews.go.com/International/story?id=6298733&page=1

I really don't understand the persistence of the myth that Bitcoin, which is a public ledger, is not traceable.

It’s a common talking point for Bitcoin salespeople. If you search the archives here you can see a decade of random people making that claim and either going silent or confabulating wildly when asked to support it — and HN has a relatively high average technical skill level. It took years for reporters to start questioning it, and that means there are a LOT of people whose understanding is shaped by what they heard in 2015.

Probably it's the mainstream confusion between anonymity and traceability, as well as between anonymity and pseudonymity. As soon as Joe Sixpack can't see something that resembles a name, they go "ah-ha, I'm anonymous! so nobody can see what I do!"... despite being wrong on both counts (wallets are pseudonyms, and as you say the ledger is public).

Bitcoin: it's the worst because criminals use it to evade authorities.

Bitcoin: it's the worst because it's transactions are traceable.

Both can be true for a period of time: criminals can _believe_ something which is incorrect but that can go a long time before it’s challenged directly enough to break that belief (as we just saw with that secure messaging app).

Someone who bought drugs on the small scale might think it’s true because that was their experience and the local police weren’t spending the time to go after people and the national agencies were going after sales volumes 3+ orders of magnitude larger, or simply that they weren’t spending time on the blockchain because they went after some other part of the system.

That experience would be actively misleading if they got new policy directives — as we just saw with ransomware going from a nuisance for insurance companies to the President of the United States telling federal investigators to do something about it.

Both can be true. One public instance of the government putting in the effort doesn’t mean the enforcement application of this scales to all instances.

>One public instance of the government putting in the effort

They looked at a Blockchain viewer. What was the "effort" they put in?

Actually the hackers tried very hard to hide their tracks by going through a mixer at least once (from what I've read). With enough effort and tracing you can still determine with pretty good accuracy where those bitcoins ended up though. It's not quite like looking up the blockchain.

CNBC reported that the seizure was able due to the sloppy password storage.

https://www.cnbc.com/2021/06/08/fbi-likely-exploited-sloppy-...

It's always been traceable, there's a public ledger and different data analysis techniques you can perform with varying degrees of usefulness, and Bitcoin's real value doesn't lay there.

Anonymity is not the same as pseudonymity, and while you could probably trace a few transactions with a criminal source at a time, it wouldn't take that much to thwart taint analysis by a dedicated enough author.

Besides, they were able to seize those Bitcoins due to badly stored passwords, not because any inherent weakness on Bitcoin itself. Some cybercriminals aren't that great at opsec.

Feels like this thread is a great summary of the real deal: https://twitter.com/matthew_d_green/status/14019792155038883...

Is this supposed to be news!! If you need fungible currencies, try Monero instead.

What if the FBI is Not being truthful and they didn’t actually confiscate the bitcoin? Who would call them out? Would the cybercriminals tell the world, it’s not actually true!?

Maybe this story was made up to weaken bitcoin and try to take it down by making people think it was vulnerable to tracing and manipulation.

Is this possible? Did the wallet addresses ever get published publicly?

But it's already known that bitcoin is traceable and by anyone as it's all public by design. Not sure about the point you're trying to make, maybe the real question is why criminals ask for bitcoin not something that at least on paper gives much better privacy.

This is a double-edged sword. It'd mean that common people should be able to use crypto and the mythic threats of terrorist finance and laundering are not that serious since it can be traced. And normal people won't do that but use it in other simple ways.

I am certain this has been known since about 2016 at least....5 years of common knowledge ....

that's just the mainstream coverage.... obviously this can be traced.....it's not zkp

This has been known since Bitcoins inception because its intentional part of its design. Its so you can see no free bitcoins appeared out of nowhere to cause fraud or inflation.

Its no secret or discovery.

NYT again playing at Captain obvious.

Every promise of Bitcoin was false!

Bitcoin never promised to be untraceable.

It has open ledger where you can simply read source address, destination address and amount for each transaction. Thats how the tech works, anyone can look at the ledger. Intentionally and by design.

It promised anonymity. In 2021, I have no doubt it really was an NSA project - a financial honeypot.

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