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Comment by NelsonMinar | Hacker News Reader

"mixers—large digital pools where crypto owners can deposit funds to obscure their origins."

I have a quibble with articles about cryptocurrency fraud. They always get around to mixers and then they define it as if it were some relatively legitimate thing, like an odd bank. "large digital pools", "deposit funds". You have to get to the last phrase ("obscure their origins") to understand what mixers really are.

A proposed alternate definition: "mixers - international money laundering services where illegally obtained cryptocurrency can be mixed with other fraud proceeds making it harder for the legal system to trace".

(The definition I really would like: "mixers - services that look to hide your funds but are actually operated by intelligence agencies to track illegal activity". I imagine at least one mixer is a honeypot of sorts.)

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Ideally we would have a world where privacy is the default and everyone has it.

Because we don’t, and there is considerable friction required to have financial privacy, most people don’t bother unless they really need it or are unusually privacy conscious. Really needing it may often mean they are doing something nefarious.

That doesn’t mean the technology to enable privacy is “bad”, it means it’s too hard to use and that as a society we have done poorly at guaranteeing people’s right to privacy.

Not so long ago you might have ben able to say the same thing about people communicating with end-to-end encryption, but thanks to a concerted effort to improve the UX of this tech. and it’s adoption by some very widely used services, it’s now commonplace. End to end encryption could no longer be argued to be mostly used by criminals.

Hopefully we will get there with financial privacy too.

NB: in neither case am I suggesting that the government should be unable to require you to provide information in some situations (or face the consequences of withholding it against, say, a court order), only that dragnet surveillance of everyone by default is never acceptable.

I'm overall not for financial privacy.

Unfortunately I'm a normal person with my primary/only income being my salary.

I benefit from this 100 times more than not.

I can't and won't do tax evasion. The rich and bad do.

I don't understand why technology that provides a modicum of privacy must be demonized. It must be for money laundering and criminals. It can't have a legitimate use case. Is it used for nefarious activities? Of course, but not exclusively so.

Can I use an RPG-7 to kill animals like bears that threaten my life on my property?

Yes.

It’s definitely usable for non nefarious activities.

Should I be demonized for having one in my house?

Probably

And when it's less obvious? Should I be demonized for using TOR? Monero? Signal? GPG?

If 99% of BTC mixers' volume is helping laundering international drug trade money, arms or human trafficking, it's not exactly hard to demonize mixing itself. I have no data to base this on, but I assume that privacy absolutists are a tiny, tiny drop in the pool of blood and crime.

Would privacy absolutists even use BTC? I was under the impression that every transaction was out in the open and permanent.

The answe is no but they can make a trade off using something like monero. BTC's only read advantage is the network effects. As far as the tech is concerned it is mediocre compared with other ledgers.

Privacy absolutists are free to deal in cash. Whatever amounts they send and receive, criminals and dictators do orders of magnitude more and people suffer as a result.

If it wasn't so sad it would be funny that the countries with highest levels of freedom and least corruption tend to be the ones with most vocal privacy absolutists...

>the countries with highest levels of freedom and least corruption tend to be the ones with most vocal privacy absolutists...

Correlation or causation?

Only irony. No one is taking cash away from those guys.

The most powerful states don't need to launder any money, since they can just pass a law legitimizing any action they do, with no need to hide the funds generated from any one else.

This is irrelevant. Anything putin gang does is legal in Russia obviously but being able to clean blood money is vital for them. That's the point of sanctions and why any way around it like crypto is a godsend to dictators.

You're missing my point. Your example doesn't contradict it.

My point is that the most powerful countries don't need to clean their dirty money to spend their money abroad, because they are the center of the world economy, and everything is available to them to buy. Russia is economically on the periphery and thus does need to clean it.

Making it looks like "powerful country can do shady stuff and poor country needs to clean money" is not how reality works. Try being a violent dictator and do crime at a scale acceptable in Russia but in the US and then tell me how it goes.

do you feel the same way about Tor?

If 99% of Tor's volume is helping laundering international drug trade money, distributing CSAM, etc, should it be demonized as well?

I think most people do feel that way about Tor, both in terms of assuming that 99% of its users are criminals and that it should be demonized. It's interesting to me because I think most of those people don't feel the same way about encryption in general, which of course enables Tor and all sorts of criminal activity in other contexts. Everyone has something to hide from someone and wants to see the green lock symbol in their browser's address bar along with other assurances of some degree of privacy. I don't know how most people decide where to draw a line.

There are some things that are perfectly legal for me to Google search, that I don’t want my ISP or Google to know about. So Tor works well for that. Tor would also be useful if governments were to crack down on free speech.

You can apply basically the same argument to money. If I have $20m in Bitcoin I don’t want my name to be tied to my wallet address (because a KYC exchange saw where the money went to) because it makes me a target, for example. And in the case of censorship or something I want to be able to do with the money what I please.

Privacy is a fundamental human right, in my opinion. We have to use cumbersome technology to get any modicum of true digital privacy. Just because people use it for illegal things doesn’t mean that the desire for privacy or the technology itself is bad. One day things we find morally just may be illegal too

Intentional consealment of illegal internet traffic isn't a crime (the crime is just the crime).

Intentional consealment of illegal financial transactions is a crime in-and-of itself (the crime is money laundering, which is a seperate offence to the original criminal activity that the money came from).

The point was whether using a mixer is a crime in itself.

Well it is a crime to use it for obscuring illegal money, while it is not illegal to use Tor for obscuring illegal internet traffic

conspiracy to commit a crime is often an additional charge (IANAL)

That’s just when two or more people get together to plan a crime - obfuscation isn’t the offence, the offence is the joint planning and intention to commit a crime.

> If 99% of Tor's volume is helping laundering international drug trade money, distributing CSAM, etc, should it be demonized as well?

Easy answer: Yes! Although I think it would be hard to call it demonizing when something is already 99% demons.

Should any tech that conceals IP addresses be demonized? Or just Tor?

Depends if it is being overwhelmingly used for criminal activity.

Obviously you know that "demonized" is a loaded word here. What's your point in using it?

All I'm saying is that if there's something where "99% of [...] volume is helping laundering international drug trade money, distributing CSAM" that that is obviously terrible for the world and we should be asking some strong questions about who's supporting it and why. Is somebody gaining something that's more important than the lives forever ruined?

Mostly, yes. I sympathize with the goals in theory since I grew up on 90s internet dreams too but as a practical matter if you run a large website you’ll see mostly attacks from Tor, it shows up a lot in news about crime, and it’s noticeably helping people in actual repressive regimes because it’s still too easy to identify the network traffic when the stakes are high.

There's a difference between sending around uncensored information, and sending around uncensored money.

Funny thing is, you can barely launder any tangible amount of money with Bitcoin let alone crypto.

> Funny thing is, you can barely launder any tangible amount of money with Bitcoin let alone crypto.

https://www.cnbc.com/2022/08/10/crypto-criminals-laundered-5...

Is $540M considered a tangible amount? I'll let you quibble over that but I'd think most criminals would be more than happy to be able to launder $540M.

That's mixing or "anonymizing" your crpyto proceeds. To make use of this crypto, you need to convert it to the relevant currency of the country you are in. If you are based in the USA, your only option is the few regulated exchanges which will ask "lots" of questions for this amount of money. It doesn't stop there, you'll have to answer lots of questions for the banks too as you'll withdraw this money eventually.

If you made it this far, then you start the laundering process.

You can't launder money with Bitcoin because Bitcoin is not well integrated with any country financial devices in any meaningful manner.

just buy homes from individuals. or rent luxury homes and and sub rent them. there are many individuals who will turn a blind eye on their real estate for a 30% premium.

Please give an example

Signal: https://www.nytimes.com/2022/12/28/opinion/jack-dorseys-twit...

Signal is not a crypto mixer. The argument here is about the frequency a certain service is used for crime.

For example, library records generally have a fair amount of privacy. Criminals sometimes consult libraries. Crime is not the dominant use of libraries.

Mixers have a fair amount of privacy. Mixers are used by criminal, and crime is overwhelmingly the dominant use of mixers.

To rebut this you’d need to show large and innocent use cases which use mixers. Not an unrelated app.

I'm only arguing the definition shouldn't be changed to something that is explicitly negative, even if the vast majority of the time it's used for nefarious reasons.

If you don't want to link your 'public' wallet with your cold wallets. General privacy on a chain where everyone can see everything.

Can you provide a legitimate use case for mixers? (I'm not trolling, I'm genuinely curious)

Scenario one. Individual (while working in a startup) is receiving some tokens as a compensation. Time passes. Their remuneration being on-chain and visible is a problem when negotiating salary in the next job.

Scenario two. I want to have on-chain identity (e.g. exo762.eth domain name). To register it I need to have some ETH (gas, registration fee). If I sent this ETH directly from my "money" account, I will forever link my public identity to my money, which is like walking around with "my net worth is at least XYZ USD" banner.

How are these scenarios "use cases" for a mixer and not critical flaws in the underlying system?

We're in a thread about a rogue state using the tech to steal money to fund their operations (Chemical attacks in airports, nuclear warheads, intercontinental ballistic missiles, etc.) How many nuclear detonations would you consider acceptable in exchange for the cryptobros to have their toys?

You’d rather they sell meth? They’re gonna find the money one way or another.

How "Operation Choke Point" is not a critical flow of the underlying system? I care about civil rights way more than I care about NK.

Side note, I find it interesting that "bros" is now a pejorative - cryptobros, techbros. Are there other instances?

We've come a long way from Mario Bros!

I think it originates from "frat bros" which has been a negative phrase since before the internet.

How many would you consider acceptable to have an international banking system? North Korea hackers stole $81 million from the Bangladesh central bank, and it was only a fluke that they didn't get away with over a billion from that one hack.

https://www.bbc.com/news/stories-57520169

More prosaic wire fraud is common in real estate and B2B transactions, and if not noticed immediately the funds are often lost after being transferred internationally and cashed out. It wouldn't be surprising if NK is behind some of that, given what they managed against Bangladesh.

sending money to ukraine when you are russian (like vitalik buterin did)

If you are transacting in a business environment, I think it is an added benefit if the counterparty in the transaction can't deduce information out of your transaction. Such as how much assets you have, to what other services have you been sending funds and so on. As Bitcoin does have public ledger, and if you just use single address and don't do any privacy enchancing practices, lots of information could be deductible using blockchain analysis.

I would also suspect that using data collected by governments is used for business advantage. Of course it is hard to prove quite often. Personally I think that in principle it just doesn't make sense to spread your data around, as the benefits are tiny and the potential downsides can be big.

The Bitcoin Lightning Network uses indirection for privacy and liquidity in a way that could be described as mixing. https://en.wikipedia.org/wiki/Lightning_Network

Using Tornado was pretty common among well known/higher profile people in the space to avoid causing inadvertent market effects or leak info about upcoming projects.

Basically if you were high profile enough, people would watch your wallets to see what you were investing in/transacting with, and use that as market intelligence.

As far back as 2016 or so I recall someone specifically offering their blockchain analysis platform as a way to do this.

So you would use tornado to make the money you planned to invest/use appear "somewhere else" disconnected, to maintain privacy/security of a project.

Tornado and mixers and such become necessary specifically because all transactions are public - unlike in tradfi where transactions are opaque except to parties and intermediaries.

Similarly to how investors in tradfi tend to keep their investment strategies secret where possible.

Also, if you want to be able to create legitimate projects that are not tied to your real-world identity, you need a break between bank -> exchange -> address -> ??? -> contract deployment address.

Providing some basic financial privacy, not from the government but from the general public. Everything on chain is public. When you buy something or transfer money to a friend, you don't necessarily want the recipient to know how much money is in your account, or what other addresses you've sent money to.

Lots of good examples already mostly geared around minimizing bits leaked for the sake of alpha, but there are also instances where it is desirable to be "locally clandestine" even if you're a full throated supporter of the powers that be on the whole. Persecution does not just come by way of financial penalties or the legal system, these tools are useful for avoiding social consequences as well. A hypothetical I'd expect to play well here: paying for an abortion in a large state where it is legal, but in a small town where the local church wields an immense amount of influence.

I agree in principal, however if the vast majority of a given service's users are using it for criminal activity then maybe there's room for some added scrutiny.

Ok, so all you have to do is prove that the vast majority of a given service's users are using it for criminal activity, right?

GNU Taler[0] provides a "modicum of privacy" and isn't demonized.

[0] https://taler.net

It may get demonized if it ever gets some users. Quite a Hurd(le)!

GNU Taler lets the government surveil people's transactions.

Basically almost all custodial crypto exchanges and services function as mixers, as they don't separate customer funds. Using Blockchain analysis you can see that certain transaction likely belongs to certain service, but to get the details you have to file a data request, and hope that the service has done the KYC properly.

Smart contract based mixers like Tornado Cash are just code for encrypting transactions. The only reason that a large proportion of Tornado Cash transactions were criminal in origin is that the legitimate parties were largely scared off from using it, because of the legal uncertainty around it, with people fearing what exactly ended up happening - with OFAC sanctioning the actual code - happening.

This left only the bravest parties, and criminals to use it, leading to a high proportion of users being criminals.

If it weren't for that uncertainty about the legal treatment TC would receive from government (say if Congress passed legislation explicitly providing a right to use financial privacy technology), a huge proportion of the whole crypto economy would have been using Tornado Cash, as they should be, because privacy is an absolute bare minimum for a functioning financial system.

The conceptual treatment you're giving transaction encryption is to treat privacy as criminal. This is an ideological outlook that promotes putting total trust and faith in a small elite in government and finance to engage in warrantless dragnet surveillance of every one's financial transactions.

I thought the ultimate goal was using legitimate exchanges as your mixer, since if a mixer only handles illegal crypto, chances are the funds can be traced to every destination address and the exchanges are tasked with reporting anything that comes from those addresses to federal law enforcement. The only real anonymity is in tornado cash.

"Mixers" of various kinds (even before cryptocurrency) used to seem a legitimate, if nerdy, idea for privacy.

One of the more recent difficulties with a lot of privacy technology is that the main user might not be the abused and those wanting to avoid being abused, but instead... really awful criminals.

And with anything cryptocurrency or blockchain in the last decade, it's not only the users who are criminals, but much of the technology itself is built by scamming atop scamming.

I'd quibble with any article today that mentions cryptocurrency/blockchain at all without acknowledging how sketchy the entire space is.

Pre-Web cynical cyberpunk writers were better at predicting much of the modern world, than were the optimistic techies who mostly saw tremendous opportunity for goodness.

Why don’t you post your credit card statement below if you have nothing to hide since you’re not a criminal?

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