Bitcoin Forum

Hey guys

My first post of many :)

I searched high and low but couldn't find an answer so I'm hoping this is the right place and you can help me.

I want to know how an exchange handles the coins someone deposits and if when you decide to withdraw your coins, are they the EXACT same coins as you deposited or, are they different coins, as the exchange pooled them with other coins and simply gives the coins the coins out without respect to the account that deposited them?

Please move this to the correct section if I didn't post in the right place.

Thanks in advance everyone

For most if not all exchanges.

1. You get a personal deposit address
2. Anything sent to this address is then transferred to offline keys for the exchange.

When you want to wirhdraw:

They have an address loaded with a certain amount of coins, can be anywhere from a few btc to a few hundred. This is what you receive so its pooled inputs from everyone else who deposited previously. Exchanges don't expect you to pull out the same as what you put in also and the amount you get out will be below your wallet balance as they'll take up to 0.001 in fees (unleas it's coinbase who I'm told don't take a fee).

Diolch! It's as I suspected then, it works similarly to a tumbling service.

This is a wrong conclusion. You should not consider then as tumbling service nor use them as a substitute for a mixer. The coins do get pooled and the exchange will draw coins from the pool when someone asks for a withdrawal or add coins to the pool when another person deposits. But this does not change or affect the taint in the coins if already present. Some people have tried to use exchanges as modes of money laundering and got KYC-blocked on their accounts, which followed all these AML/KYC regulations on exchanges nowadays.

Still if your objective is to mix the coins then done use exchanges for this purpose.

My coins have always come from localbitcoins, and I've never used the darkweb myself. My concern is that some of the coins I purchase from localbitcoins may have been used by individuals on the darkweb and are now tainted.

So you are concerned about whom? The authorities? If you are not a large-cap trader you wont be under their crosshairs. But it is better to use a mixer in these cases to remove the taint on your coins. However you should note that doing mixing and thinking that your coins are completely off trace is also wrong. With proper blockchain forensics they can be found out about their source.

Now this is a problem with P2P trades done. But a trader with a good score on LBC will probably not be trading in tainted coins. But you never know. There was the incident of escrow.msa and he was jailed for his wrong doings or cloning credit cards.

There are various hot wallets that an exchange has under their ownership.

Your withdrawal is most likely processed from one of them, which could just happen to be someone else's deposit address for all that anyone knows because the exchange wants to save on transaction costs as much as possible. To correct jackg, not all deposits are directly sent to the cold storage in most cases.

Unless you make an extremely large withdrawal, it's unlikely that your coins will be directly sent from their cold storage wallet.

To address the other part of your question, I've never personally had my own deposit sent back to me as a withdrawal before, but theoretically, it could happen.

Local bitcoins gives you the users name. Whether this is their name or not, they've verified it somehow and it's not exactly your problem. (unless you're the one that did the kyc).