[2019-12-26] Binance Blockade of Wasabi Wallet Could Point to a Crypto Crack-Up

[gentlemand]

https://www.coindesk.com/binance-blockade-of-wasabi-wallet-could-point-to-a-crypto-crack-up

I've often wondered whether clearly mixed coins would be considered 'hot' and in this case at least it seems they do.

Do you think they'll be heading towards an unworkable dead end with this or it's the start of something others will try to emulate?

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[Carlton Banks]

Do you think they'll be heading towards an unworkable dead end with this or it's the start of something others will try to emulate?

the former

it's possible to do perfectly effective coinjoins that are indistinguishable from regular transactions, I've become bored of having to tell people this spectacularly obvious fact

[squatter]

Do you think they'll be heading towards an unworkable dead end with this or it's the start of something others will try to emulate?

the former

it's possible to do perfectly effective coinjoins that are indistinguishable from regular transactions, I've become bored of having to tell people this spectacularly obvious fact

It's interesting in the sense that Wasabi Wallet coinjoins may be providing "cover" for more discreet mixing efforts. They're an easy mark for the risk-based AML policies that exchanges employ. Less obvious methods will slip by unflagged.

[LeGaulois]

For sure we will see more companies following the path but it's a waste of time and resources. (it's not only about Wasabi/Coinjoin btw, but it's also the whole problem with tainted coin)
Samourai's wallet has a feature to help in creating decoy transactions. If an exchange monitors the last x transactions then make x+1 decoy transactions to yourself. Anyway, with the Bitcoin development, all this won't be relevant anymore, like people looking to buy "clean bitcoins" at a premium price

[CryptoBry]

Will 2020 be a year for more regulations especially in the area of cryptocurrency exchange business? I think this is already a foregone conclusion. As the industry is growing by leaps and bounds, there will be stricter rules covering all transactions and of course there will be the classic clash between those who are rooting for more deregulation and those that are actually accepting more regulations in lieu of more recognition from the government and other similar financial institutions. Though labeling is as a crypto crack-up may seems to me like a exaggeration to some degree.

[nopara73]

it's possible to do perfectly effective coinjoins that are indistinguishable from regular transactions, I've become bored of having to tell people this spectacularly obvious fact

Could you elaborate on this?

[NeuroticFish]

the former

Exactly. After Monero getting delisted by exchanges here and there, this move against mixed Bitcoin is somehow a step we should have been expecting. And yep, more like this will certainly come.

[Carlton Banks]

it's possible to do perfectly effective coinjoins that are indistinguishable from regular transactions, I've become bored of having to tell people this spectacularly obvious fact

Could you elaborate on this?

BIP79, and variations thereof.

[figmentofmyass]

For sure we will see more companies following the path but it's a waste of time and resources. (it's not only about Wasabi/Coinjoin btw, but it's also the whole problem with tainted coin)

the issue isn't about taint itself. it's about using mixing services, whether centralized or decentralized. from an exchange's point of view, customers who use mixers are risky from an AML/regulatory point of view.

wasabi wallet is super blatant with its coinjoins due to the high anonymity set. we need mixing solutions that not only deal with taint but also obfuscate the mixing activity itself.

[bbc.reporter]

What would be the difference on using bitcoin coinjoin after withdrawal and withdrawing by using Monero coins from Binance? Monero can be more dangerous, I reckon.

[figmentofmyass]

What would be the difference on using bitcoin coinjoin after withdrawal and withdrawing by using Monero coins from Binance? Monero can be more dangerous, I reckon.

in this case, we're talking about binance singapore (binance.sg). they don't support monero or any privacy coins, so that might be your answer right there. they don't want either activity (bitcoin mixing or privacy coins) on their platform.

CZ is implying that this wouldn't have happened on binance.com.

[nopara73]

P2EP/BIP79/BustaPay/PayJoin/etc... are not a replacement for proper coinjoins.  

While they indeed look like a subset of normal transactions, if you are the blockchain analysis company and you know that payjoins are going on the network then you are going to incorporate that into your heuristics.

For example a tx: 1,2 -> 2.5, 0.5 would traditionally be interpreted as "A sent 2.5BTC to B and A got back 0.5BTC as the change." With payjoin in mind, which means the receiver participates in the transaction, it can also be interpreted as "A sent  (1-0.5=)0.5BTC to B, while B provided the 2BTC input and A got back 0.5BTC as the change" or "A sent  (2-0.5=)1.5BTC to B, while B provided the 1BTC input and A got back 0.5BTC as the change."

So, the tx instead of 1 has 3 different interpretations. Consider an equal amount coinjoin tx, let's say JoinMarket tx, where you get back a coin, let's say 1BTC in a transaction where there are 3 1BTC outputs total. That means the transaction has 3 different interpretation right out of the bag. However you can scale up the equal amount coinjoins to at least 100 participants, thus the interpretations can grow, but you cannot scale up payjoins as straightforwardly.

Let me reiterate my point. These tools are different, they can be used, but they aren't replacement of one another. When we came up with Pay-2-EndPoint we did not have individual privacy in mind, as it does little to protect that, but it can disrupt the mass surveillance, which indirectly ends up protecting individual privacy. P2EP does not help a given individual's privacy to the extent that equal value coinjoins do.

[Theb]

For sure we will see more companies following the path but it's a waste of time and resources. (it's not only about Wasabi/Coinjoin btw, but it's also the whole problem with tainted coin)

the issue isn't about taint itself. it's about using mixing services, whether centralized or decentralized. from an exchange's point of view, customers who use mixers are risky from an AML/regulatory point of view.

wasabi wallet is super blatant with its coinjoins due to the high anonymity set. we need mixing solutions that not only deal with taint but also obfuscate the mixing activity itself.

Well the problem I see here is how mixing services will deal this tainted coins from their services. Will they block entry for it, or how will they even know they are tainted in the first place? Or will they just notify the authorities that they have received tainted coins and freeze those crypto so that the recovery for them would be easier? Nevertheless these types of action and process cannot be solely done by the mixer itself, I would expect representatives from the authorities carefully monitoring all their movements.

[figmentofmyass]

the issue isn't about taint itself. it's about using mixing services, whether centralized or decentralized. from an exchange's point of view, customers who use mixers are risky from an AML/regulatory point of view.

wasabi wallet is super blatant with its coinjoins due to the high anonymity set. we need mixing solutions that not only deal with taint but also obfuscate the mixing activity itself.

Well the problem I see here is how mixing services will deal this tainted coins from their services. Will they block entry for it, or how will they even know they are tainted in the first place? Or will they just notify the authorities that they have received tainted coins and freeze those crypto so that the recovery for them would be easier?

you're thinking like a regulator. that's how FINCEN expects mixers to act. fat chance!

mixers will do what they've always done---swap your coin's taint for another. that's why they exist. nobody will use a mixer that employs an AML process. thus, exchanges are increasingly avoiding doing business with customers who transact with mixers, due to the potential money laundering implications.

so what we need are mixing algorithms sophisticated enough to slip by exchange blockchain analysis unnoticed---the best of both worlds. that's where wasabi wallet is failing.

[bbc.reporter]

Is bitcoin losing in its fight versus the fiat system? I reckon there is nothing users could do versus exchanges, which might be the real power overseeing everything behind the cryptospace.

[gentlemand]

Is bitcoin losing in its fight versus the fiat system? I reckon there is nothing users could do versus exchanges, which might be the real power overseeing everything behind the cryptospace.

Nah. Some day there'll be a significant proportion of people earning and paying in crypto and it'll be the thing they'll want above anything else in return for selling their shit.

There'll always be the need for fiat but it won't be the absolute be all and end all as it is now. This is a transitional period.

The quicker the loop closes the less power the old system has. Just as their anality reaches fever pitch they may find a whole section of the world's population has drifted away with little requirement to dip into their anus in future.

Right this very moment I am earning BTC writing this bilge. I've paid a few people with it for repairs and a few bits of tat and they've paid others with it. Next year I'm renting a place in the US with BTC. I directed the bloke to Bitpay but he said wasn't interested and intended to see where it went. Times that by a few countries and off you go.

[hugeblack]

Are there any cases similar to central mixers? Chipmixer specifically,
What is the fate of currencies if a blacklist for specific addresses is agreed upon?

Is bitcoin losing in its fight versus the fiat system? I reckon there is nothing users could do versus exchanges, which might be the real power overseeing everything behind the cryptospace.

It varies according to how people understand it. If concepts on the nature of cryptocurrencies do not change, we will return to the old financial system.
There are a lot of people who still trust central platforms and then put all their money in them, the motivation for these people is for profits more than decentralization.

[figmentofmyass]

Are there any cases similar to central mixers?

tbh i haven't seen any. however, there are lots of cases of account closures where the customer isn't told why their account is being closed. gemini in particular doesn't usually tell people what triggers it.

What is the fate of currencies if a blacklist for specific addresses is agreed upon?

here's the thing about that: exchanges need bitcoin to be fungible. they may act on obvious and sloppy activity---direct deposits to/from gambling sites, darknet marketplaces, identifiable mixers/coinjoins, etc---but what about more effectively mixed outputs several hops away?

i'd love to know how exchanges are dealing with this. the vast majority of mixer activity is to/from exchanges.

[Theb]

Well the problem I see here is how mixing services will deal this tainted coins from their services. Will they block entry for it, or how will they even know they are tainted in the first place? Or will they just notify the authorities that they have received tainted coins and freeze those crypto so that the recovery for them would be easier?

you're thinking like a regulator. that's how FINCEN expects mixers to act. fat chance!

mixers will do what they've always done---swap your coin's taint for another. that's why they exist. nobody will use a mixer that employs an AML process. thus, exchanges are increasingly avoiding doing business with customers who transact with mixers, due to the potential money laundering implications.

so what we need are mixing algorithms sophisticated enough to slip by exchange blockchain analysis unnoticed---the best of both worlds. that's where wasabi wallet is failing.

At these days where regulators are pressing down hard on us I would say that thinking as a regulator is the most realistic approach when it comes to determining what the future will hold when it comes to rules and regulations. Yeah there might be some clear win-win solutions out there but really would you expect regulators to be that forward-thinking where they would favor this solution instead of making a AML-compliance for these types of services?

[gentlemand]

here's the thing about that: exchanges need bitcoin to be fungible. they may act on obvious and sloppy activity---direct deposits to/from gambling sites, darknet marketplaces, identifiable mixers/coinjoins, etc---but what about more effectively mixed outputs several hops away?

If I were running an exchange I would do my very best to hang back on this unless unequivocally forced to. In the meantime I would observe what happened to the exchanges that embraced and ran towards it.

I can't see a workable outcome if they go much beyond immediate level, though no doubt they'll try, and if their terms are clear enough immediate level stuff is acceptable. I remember a bloke getting booted from Coinmama for a gambling transaction several txs down the line.

https://www.reddit.com/r/Bitcoin/comments/bdr9nw/coinmama_is_a_nosey_bitch_tracking_your_coin/?sort=confidence

I would've thought not too far off everything has something questionable somewhere once you look hard enough.