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Comment by PragmaticPulp | Hacker News Reader

> What? How's 1 BTC is not fungible [to another BTC] unless you're wanna hide your bitcoin transaction history?

I think you’re deliberately ignoring the entire point that the article is making. The fact is that tainted transactions are becoming a thing as exchanges realize that they need to do something about addressing theft and fraud.

It’s not even about your own transaction history. Assets acquired illegally, including Bitcoin, and and will be seized even after they change hands several times.

Unless you mined the Bitcoin yourself (not through a pool, literally generates the block yourself) then it has a history attached that involves other people.

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> that involves other people

well if we're going this abstract then everything everywhere involves "other people".

Pragmatically mining, even through a pool does not show who you are or who you are associated with as no one can associate you with anyone if they can't associate your coins with you.

This idea that exchanges will stop handling coins from flagged addresses is nonsense - DEXes already solve that problem anyways, so an exchange will be willingly giving up business for legit customers who may have happened upon a coin with a less-than-legit history and they'll do nothing to prevent money with illicit history from making its way onto their platform.

Distributed exchanges by their nature only trade one type of crypto-asset for another. The problem always comes when you try to move value out. Whatever you trade for in your DEX, if you want to buy a house with it you'll need to be able to account for how you got it.

Those who enforce money laundering laws don't mess around: If your money is clean, you're just shooting yourself in the foot by erasing the record of how you got it.

I'm in the process of buying a house, haven't had to prove a single thing after I traded into fiat and if I had really wanted to I could have traded into fiat via direct trades using sites like localbitcoin.com or similar.

Guilty until proven innocent is an untenable practice if you want to run a profitable business. The market will sort out any ridiculous practices that makes you prove you haven't laundered in order to participate in a market and as I've said, the alternatives already exist.

edit: as for DEXes that's my whole point, you trade a crypto with "bad history" for a crypto without bad history and just like that even the strictest exchanges will happily give you an off ramp into fiat

> haven't had to prove a single thing

Even in your jurisdiction, you may soon have to. From the linked article, you can infer that you got lucky - your attempt to cash out might have been stopped by an exchange, if you did it a little later or with a little dirtier coins.

> and if I had really wanted to I could have traded into fiat via direct trades using sites like localbitcoin.com or similar

Good luck meeting random strangers and trading BTC for cash with them safely AND anonymously. You're lucky if you get even one of those two.

> Guilty until proven innocent is an untenable practice

Tell that to financial crimes investigators, whatever they're called where you live. As I said, they don't mess around. They're not reasonable. The price for operating in the legal economy is that you have to be able to account for your assets. The exchanges don't do this because they want to, but because they have money laundering cops breathing down their necks - and you will too, if you're silly enough to try to cash out significant amounts through localbitcoin or similar.

> Even in your jurisdiction, you may soon have to

and as I've stated, using a DEX to trade from dirty coins into clean coins is cheap and simple. I think this whole thing is just paranoia, but in the event it actually does become an issue for law abiding citizens (such as myself) the market has already accounted for the nonsense and given me an avenue to continue to operate effectively and legally.

> Good luck meeting random strangers and trading BTC for cash with them safely AND anonymously. You're lucky if you get even one of those two.

I've done both frequently and with nothing but success - I'm wondering if you've had experiences otherwise as I know plenty of people who use that site and have had nothing but success.

> if you're silly enough to try to cash out significant amounts through localbitcoin or similar

I'm sorry, what are you talking about? Legitimate services with legitimate clean money is not silly.

> using a DEX to trade from dirty coins into clean coins is cheap and simple

Cheap, but not free. You're paying a premium. Which illustrates the article's point.

As exchanges are reined in, and off-the-record bitcoin for cash trades are cracked down on (google "localbitcoin arrests" to get an idea - that should also answer your two other lines), this premium will grow, and it may well grow enough to make the whole thing impractical.

so if trading USD into other currencies isn't free then USD isn't fungible? I'm not following your point

> you trade a crypto with "bad history" for a crypto without bad history and just like that even the strictest exchanges will happily give you an off ramp into fiat

Who is on the other side of that trade? If it's an identifiable DEX then doesn't that only work until cryptocurrencies from that DEX are defined as "bad"?

Ok, but you have the same thing with gold or any other "fungible" asset that will be traced to you if you don't take measures to obfuscate the trace.

Gold has a real world trace that can be found out by simply asking intermediaries and numerous other means, Bitcoin has a digital trace, it's not that different.

It's very difficult to make sure that the history of where that gold you got came from and to whom you sold it to is 100% erased.

It’s completely different. If no exchange will let you withdraw or accept coins from a mixer, how do you “take measures to obfuscate the trace”?

Gold is literally untraceable. Nobody can stop you from smelting and selling it as you like.

In practice, there will always be at least one exchange that lets people trade coins that are tainted by some measure, because that particular exchange's idea of taint does not implicate the history of their coins.

Once a person trades coins at that exchange (perhaps even into a different cryptocurrency for additional obfuscation), then in the eyes of the other exchanges those coins will become disconnected from the activity they are trying to hide.

Other exchanges will simply stop accepting coins that have been through this particular exchange X. It is the case already, as seen in the article.

Once that happens, why would exchange X take your BTC, or any other people exchange other crypto for BTC there, if they can’t circulate it?

I don't believe that it's feasible for all other exchanges globally to agree to coordinate to block coins that have ever touched exchange X in their ownership history. It's too much of a global coordination problem.

There are numerous other ways to sell your bitcoin, p2p exchanges, pay online via bitcoin, OTC and 20 other ways.

Gold is very traceable, because it leaves a trail of people behind. It's very heard to disconnect your identity from your gold sale, because you have to make that sale in person, so there are always witnesses, cameras, paper trails.

If you want to put in a middle man, you also need to know him to trust him not to run away with the gold and he becomes a liability, because he knows your identity.

That's why this is the maximum fungability you get, be it with bitcoin or gold, none of the two have the upper hand here.

Doesn’t matter if there are other ways if all the mainstream exchanges won’t take the coin. That’s exactly what being “tainted” means. Those coins are forever less desirable.

And no, I don’t see how you can compare gold being “traceable” through detective work, to a ledger that literally stores every transaction in history, publicly.

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