Silk Road forums
Discussion => Security => Topic started by: vlad1m1r on June 22, 2012, 12:26 pm
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Had an interesting question from one of my clients earlier today about whether my Bitcoins were "clean" (as they are either bought with cash or through legal services like the Bitcoin Stock Exchange). He suggested I make this a selling point of my Bitcoin trading service but I am very reluctant do so as I think it would be misleading!
If you think about it, the coins you buy from an exchange could have come from anywhere - in the same way I suppose as money you withdraw from a cash machine might have been used to pay a hit man at some point!
Also even if you only offer legal products/services on SR, every user who orders from you has their coins run through a mixer so I assume that the money of the great and the good is mingled in equal measures with money earned from less savoury activities? I certainly tumble any coins my clients order before sending them on!
As such, I would say the only guarantee of obtaining "clean" Bitcoins would be to mine them yourself? I'm more than happy to be contradicted on this point but I just don't think it's helpful to think of BTC as being "tainted" or "untainted" in this way.
Looking forward to your comments,
V.
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I completely agree with you, unless you mine them yourself there is no way of knowing where your bitcoins have come from. Mining is the equivalent of minting, anything else you get is going to have passed through unknown other hands before.
On a different, but related note, if I pay bitcoins into my SR account they are tumbled, yes? I am thinking along the lines of an adversary sends me some amount of bitcoins for a MP or something, I assume that when I withdraw the bitcoins they are then tumbled so it would be impossible to trace them back to my home IP if I was not running my bitcoin client through Tor.
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Isn't this taking things too literally, as if they were "real" coins made of metal? After all, aren't bitcoins just a string of numbers? In what way can they be associated with past transactions?
More to the point, what does a bitcoin actually look like? Can someone post a string of numbers that can be said to be a bitcoin (no risk of someone "appropriating" it, I hope)? Do different parts of the string have different functions, or whatever?
MockFrog
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Well, aren't coins and dollars just collections of molecules? How can the molecules be tied back to a cash transaction?
Bitcoins are currency, and have value, and they are much more transparent than cash. When I send you a bitcoin, that transaction gets logged by the bitcoin network. It happened, and it was recorded for all time. see blockchain.info.
the "security" comes from the fact that there are many many transactions happening, and the majority of them are "dummy" transactions from tumblers, so they don't actually represent a real "transaction" in the sense of two parties exchanging currency for goods or services. So to actually trace a bitcoin to a past transaction takes a *lot* of computing power (or a lot of luck, or stupidity by the traders).
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Depends entirely on what one would like to achieve by purchasing "clean" coins.
Even if you purchase your Bitcoins on Mt. Gox with 100% legitimate money, you could expect persecutory behaviour from some financial regulation authorities. It has not started in earnest as of yet, but there are some small signs of it beginning (cash deposits to some exchanges through certain banks have become more difficult as I understand)
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I completely agree with you, unless you mine them yourself there is no way of knowing where your bitcoins have come from. Mining is the equivalent of minting, anything else you get is going to have passed through unknown other hands before.
On a different, but related note, if I pay bitcoins into my SR account they are tumbled, yes? I am thinking along the lines of an adversary sends me some amount of bitcoins for a MP or something, I assume that when I withdraw the bitcoins they are then tumbled so it would be impossible to trace them back to my home IP if I was not running my bitcoin client through Tor.
My understanding is that if Bitcoins are deposited into your Silk Road account then they are not tumbled automatically however if you withdraw them they are - I did some quite extensive tests on this point around a month ago as I wanted to be sure there was indeed a built in mixer and from my (admittedly amateur) analysis of Blockchain.info I could see that withdrawal addresses did not marry up with deposit addresses so the mixer would seem to be working.
V.
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Depends entirely on what one would like to achieve by purchasing "clean" coins.
Even if you purchase your Bitcoins on Mt. Gox with 100% legitimate money, you could expect persecutory behaviour from some financial regulation authorities. It has not started in earnest as of yet, but there are some small signs of it beginning (cash deposits to some exchanges through certain banks have become more difficult as I understand)
An excellent point AbraCadaver, many thanks - what difference does it make even if Bitcoins can be said to be "clean" - all this would mean is that there's no definitive proof they've been used for a specific crime, this wouldn't necessarily stop Financial Regulatory Authorities in your home country from trying to clamp down on them!
V.
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My understanding is that if Bitcoins are deposited into your Silk Road account then they are not tumbled automatically however if you withdraw them they are - I did some quite extensive tests on this point around a month ago as I wanted to be sure there was indeed a built in mixer and from my (admittedly amateur) analysis of Blockchain.info I could see that withdrawal addresses did not marry up with deposit addresses so the mixer would seem to be working.
V.
We can second your results V. Several times we've done a decidedly unscientific test of deposits and withdrawals here at SR and the coins are different.
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there is no such thing as "clean" or "dirty" coins. the guy at http://dkn255hz262ypmii.onion/index.php?topic=25674.msg302986#msg302986 knows what he's talking about so i won't repeat him here.
Thanks Shannon, did you see my post under his? I read his message just after creating this thread; d'oh!
V.
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I don't see how it matters, as far as I'm aware Bitcoins are perfectly legal and you don't commit a criminal act until you actually take ownership of the drugs in your house, the whole Bitcoin part is just circumstantial evidence which could be used to point to you purchasing drugs, but Bitcoins have many other uses too, albeit most illegal.
There's some huge legitimate companies dealing in Bitcoins now, and they haven't got any "heat", so we can assume that the law enforcement don't see Bitcoins in themselves as illegal entity's.
Infact I think it would be hilarious to go infront of some old codger Judge and see the prosecution try to explain to him that you purchased the drugs and had them posted you your home using some magical unheard of currency called Bitcoins that are mined using graphics cards and that they can't access to show him as they don't know how to use Tor or it's running slow that day in the court house. I can see such a case being thrown out.
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I'm looking forward to that (assuming the televise trails by then)!! I enjoy the idea of a judge being shown a random string of digits and a diagram of the block chain and being told that this is definitive evidence of wrongdoing.
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I don't know, I wouldn't count on people's ignorance for my own protection, it could easily backfire and that ole judge might have the last laugh at that. Much better to be proactive and not get caught in the first place by being obsessively preoccupied with privacy and anonymity.
MockFrog
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I posted this in another thread earlier;
I've always wondered, if someone were to follow your Bitcoin trail (?blockchain?), would they see the coins go from MtGox (for example), get split up into smaller packets, go to all these different wallets in multiple combinations and then come together in a single wallet (SilkRoad)? In other words, would the tumbling process be obvious? Could there be a real life, realistic situation were someone would make multiple small payments to several different people, over a short period of time, and those small payments continue in this manner (like the tumbling process). Especially if all these people then paid their small amount of coins to one person, with the final total almost exactly equaling the original number of Bitcoins at the start of the process (like when tumbled and then paid into SilkRoad wallet)!
I may have misunderstood exactly how Bitcoins can be followed. I have a very basic understanding of them, at best! I was just wondering if you did have to defend yourself in a court of law and justify your actions, would the way your coins are appearing to be tumbled suspicious in itself? This does all hinge on whether the coins can be directly traced to you, as in the OP case were he's buying them in his own name through MtGox.
Please enlighten me.
Love you all, fellow Roaders! :)
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Just saw this thread on the BitcoinTalk Forums:
https://bitcointalk.org/index.php?topic=73385.0
It would seem that MtGox took it upon themselves to try to confiscate some Bitcoins from an innocent user after some of the "stolen" coins from the great Bitcoinica Heist ended up in his wallet. Of course as he points out, there are any number of ways the coins could have reached him via other users and this interpretation of "good" and "bad" coins isn't helpful. I'm pleased to say Bitcoinica concurred on this point and MtGox backed down.
V.