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Author Topic: Possibly stupid question about anonymity  (Read 670 times)
satyagrahi
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September 05, 2011, 12:35:15 AM
 #1

Hi,

I've been reading up on and trying to get my head around the public nature of bitcoin transactions...

So my question is this:

Say I wanted to make one particularly anonymous transaction. And I have 5 BTC on my account, which I obtained from an exchange.

What if I created three new addresses, and then sent the coins to myself (assuming I don't mind paying a 0.01 fee for each). I'd have 4.97 BTC left, on three separate addresses.

If I then proceed to make that particularly anonymous transaction, say 4.5 BTC, how traceable are the coins? Could someone figure out that they came from an exchange, then to my address(es)?

And furthermore, would that not make the exchange (by far the most common way people acquire bitcoins), and consequently the bank transaction you made to the exchange, the most vulnerable points of the whole system (given a determined and resourceful enough adversary)?

Thanks in advance!

Satya
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offshoregenius77
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September 05, 2011, 12:37:52 AM
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I dont think there is any true anonymity on the net these days.
satyagrahi
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September 05, 2011, 01:19:49 AM
 #3

Depends on who/what your threat is, but sure there is!

You buy a cheap laptop, boot it with TAILS live CD (which surfs through Tor by default), change the MAC address, find an open Wi-Fi network, sit somewhere not covered by CCTV of any description (easy in Sweden, a bit harder in the UK) and voila! Smiley

Anonymous or pseudonymous transactions, on the other hand, are a bit more tricky, but far from impossible!
nmat
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September 05, 2011, 02:12:06 AM
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Yes, in your example they would trace the coins and find out who you are. All transactions can be tracked because everything is publicly logged. Check blockexplorer.

To make "anonymous" transactions you must launder bitcoins. There are services that already do that, but I don't know if they are very used or not. For this to work, you must have a lot of people involved.
If a service like this works, the idea is simple. I'm going to quote David Schwartz from a similar question at Bitcoin Stack Exchange (this will go public on tuesday):

Quote
Say I received 10 bitcoins on a Bitcoin address I publicly advertise for donations. Anyone looking at the block chain can put that address in a search engine and fine me. Now say I want to use those 10 bitcoins to buy drugs. If the drug dealer's Bitcoins are traced, they'll point right back to me.

Now I can create a lot of accounts if I want. And I can pass the 10 Bitcoins I received through those accounts and then to the drug dealer. But likely because those accounts aren't used anywhere else, the trail would still lead right from the drug dealer to me.

Now suppose I put my 10 Bitcoins in an account created just for me by a Bitcoin laundering service. And you and Fred do the same thing. Then the service sends my coins to Fred and your coins to me. Then I spend the coins I got on drugs. Now the trail looks exactly the same as in the non-laundering example, except the trail leads straight to you instead of me -- a pretty good deal for me, not so much for you.

What happens in reality is that those 10 Bitcoins are split among lots of people lots of times, which creates a big mess. It wouldn't be possible for someone from the outside to find out where the money really came from.
satyagrahi
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September 05, 2011, 03:00:58 AM
 #5

Thanks for the reply nmat, I had a suspicion that it might be like that!

I like the idea of laundering bitcoins, and I guess a 5% commission is cheaper than what you'd pay in real life for similar services! Cheesy

Will any of this change as time passes - i.e. as the logs of bitcoin transactions increase? I mean the same way that real money gets dirty after getting passed from hand to hand for years...
methodsaint
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September 05, 2011, 05:08:38 AM
 #6

Why do you have to launder the money?  What's the reason?
satyagrahi
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September 05, 2011, 05:44:02 AM
 #7

Hahaha I don't have to launder money, but I'm inquiring out of general curiousity and before I advise a friend in India.

India has restrictions on sending any currency out of the country, something which bitcoin can obviously circumvent. That same friend is also interested in buying a domain anonymously and starting a blog for the purposes of whistleblowing.

If you step on enough toes and annoy enough people, the traceablity of everything, including your Internet connection and financial transactions, becomes a serious enough issue...  Wink
methodsaint
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September 05, 2011, 06:44:39 AM
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Ah, okay.  That makes more sense.
max in montreal
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September 05, 2011, 07:07:58 AM
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there is a site to find people who are near you who are willing to sell bitcoins face to face. buy off them...
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