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Author Topic: Privacy enhancing strategy on centralized exchanges possible?  (Read 297 times)
Charles-Tim
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June 10, 2021, 09:15:45 PM
Merited by LoyceV (4), Welsh (3), DdmrDdmr (3), o_e_l_e_o (2), Coolcryptovator (2), Upgrade00 (2), ETFbitcoin (1), hosseinimr93 (1), bitmover (1), BlackHatCoiner (1)
 #1

Although, centralized exchanges are privacy invaders, just want to know what experienced members will comment about this.
Centralized exchanges are not for holding Bitcoin.

Normally, the best to do is to buy Bitcoin on decentralized exchanges, or directly from someone on platforms like Bitcointalk while all means to protect oneself against scam is necessary for not to be scammed. I have seen this method as the most perfect way to buy Bitcoin. But, one thing comes to my mind which I do not totally know if privacy depriving or not.

Most people even the whales like to make use of centralized exchanges to buy and sell Bitcoin, I think it is as a result of centralized exchanges having high trading volume and liquidity if compared to decentralized exchanges that support buy and sell of Bitcoin. So, I will be making use of centralized exchanges and noncustododial wallet (Binance, Electrum and Trezor specifically) for this.

I have been using Binance for a while now, I know a lot about the exchange, I do not know if other exchanges can be like binance in what I want to explain. On binance, I can decide to open and account, use it to buy Bitcoin after verification, after I buy the Bitcoin, I can send it to a wallet like electrum, I can decide to delete my Binance account (in which all my data would be deleted along, although, it is what Binance indicated, but I do not know how true it is).

While my Bitcoin is on Electrum, I can make use of mixer/tumbler to mix the Bitcoin and have it finally sent to Trezor wallet. Assuming I am using Tor or VPN to access my noncustodial wallets which makes the connection throught it to be more private. There are ways I can decide to send back to the exchange if I want to sell back in a way my Bitcoin would not be freezed after opening an account again with the same data I used in the past (it will work).

With this, even if the exchange is hacked, my Bitcoin are not there
Also, if the data were hacked, if truly Binance deleted my data, hackers will not get hold to my data after I deleted it
If I decided to make use of p2p on Binance (no direct Bitcoin transactions into bank account), I think I am still safe if my transactions not involved in illegal deal, and yet deleted my account while my data got deleted along until I opened another Binance account anytime I want.

Or, is binance lying, no data deleted, it is centralized platform and nothing open to customers to believe.
Is the privacy increased this way after using centralized exchange to buy Bitcoin using p2p which is later moved to Trezor after mixing.

Although, decentralized exchanges like Bisq will give total privacy while buying Bitcoin.





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June 10, 2021, 09:39:44 PM
Merited by LoyceV (4), DdmrDdmr (2), ETFbitcoin (1), Charles-Tim (1), SquirrelJulietGarden (1)
 #2

Although, centralized exchanges are privacy invaders, just want to know what experienced members will comment about this.
Centralized exchanges are not for holding Bitcoin.

Normally, the best to do is to buy Bitcoin on decentralized exchanges, or directly from someone on platforms like Bitcointalk while all means to protect oneself against scam is necessary for not to be scammed. I have seen this method as the most perfect way to buy Bitcoin. But, one thing comes to my mind which I do not totally know if privacy depriving or not.

Most people even the whales like to make use of centralized exchanges to buy and sell Bitcoin, I think it is as a result of centralized exchanges having high trading volume and liquidity if compared to decentralized exchanges that support buy and sell of Bitcoin. So, I will be making use of centralized exchanges and noncustododial wallet (Binance, Electrum and Trezor specifically) for this.


Even though you can you can  from people in bitcointalk or some other  p2p , I think it is safer  for large values  to buy directly from an exchange. It is also better for swing trading, and certainly the only way to day trade.

I know that anyone can safely send 200,000 usd to binance and buy many bitcoins there. But would you trust any forum member such a high amount? Many trusted members may just get Val and exit scam. Binance won't,  because that isn't much for them.

I think there is space for both centralized and decentralized exchanges to exist.

Privacy is really the worse part when working in a centralized exchange. But at any time you can send your coins to a mixer and you can mitigate that problem.

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June 10, 2021, 09:39:57 PM
 #3

Well, being paranoid of our privacy will always have a way how to solve it.
That is a good idea that you have stated above, it should be buying from P2P exchange and then send to your hot wallet, and then to the bitcoin mixer service and next out to your hardware wallet which is the cold storage that you will use if you wanted to sell back to the centralized exchange that a clean bitcoin. However, if your country banned bitcoin, this is the best advice to them, and then you are giving them an idea of how to sell or convert their bitcoin to fiat.

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Charles-Tim
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June 10, 2021, 10:03:13 PM
Last edit: June 10, 2021, 11:02:50 PM by Charles-Tim
 #4

That is a good idea that you have stated above, it should be buying from P2P exchange and then send to your hot wallet, and then to the bitcoin mixer service and next out to your hardware wallet which is the cold storage that you will use if you wanted to sell back to the centralized exchange that a clean bitcoin.
Clean bitcoin are newly mined bitcoins, almost all circulating bitcoins are tainted already, but I get your point, it is Bitcoin that can not be rejected by other platforms. You can check this topic out to know more about tainted Bitcoin.





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June 10, 2021, 10:40:07 PM
Merited by LoyceV (4), Welsh (2), o_e_l_e_o (2), DdmrDdmr (2), Charles-Tim (1)
 #5

I know that anyone can safely send 200,000 usd to binance and buy many bitcoins there. But would you trust any forum member such a high amount? Many trusted members may just get Val and exit scam. Binance won't,  because that isn't much for them.
Trusting a third party to mediate between Bitcoin transactions goes against the idea of a trust less system which Bitcoin was created to be. Binance has a good reputation like some other centralized exchanges, but functions almost like a bank;
• Requires user data,
• Answers to the government and can submit your details to them,
• Can restrict users from transacting at any point in time, etc.

Platforms like bisq which are decentralized does not need any form of trust, you simply need to understand how Bitcoin works and what a multi sig wallet is.





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June 10, 2021, 10:51:14 PM
Merited by bitmover (1)
 #6

I know that anyone can safely send 200,000 usd to binance and buy many bitcoins there. But would you trust any forum member such a high amount? Many trusted members may just get Val and exit scam. Binance won't,  because that isn't much for them.
Trusting a third party to mediate between Bitcoin transactions goes against the idea of a trust less system which Bitcoin was created to be. Binance has a good reputation like some other centralized exchanges, but functions almost like a bank;
• Requires user data,
• Answers to the government and can submit your details to them,
• Can restrict users from transacting at any point in time, etc.

Platforms like bisq which are decentralized does not need any form of trust, you simply need to understand how Bitcoin works and what a multi sig wallet is.
You are right, but bitmover is also right. You are right if exchanging low amount of Bitcoin, but bitmover mentioned buying $200000 worth of bitcoin, this is what can be bought easily on binance with high trading volume and liquidity, but it might be difficult on Bisq. Currently, Bisq has a trading volume of $249,471.28 daily, and yet support not only Bitcoin. Getting $200000 worth of bitcoin on Bsiq can be difficult, although it is a means to achieve privacy while buying Bitcoin. What if someone want to buy $500000 worth if bitcoin. But, it will be good if people are supporting decentralized exchanges to also increase their trading volumes (I am not talking about those swap exchanges like ethereum or BNB based exchanges, but the ones that support Bitcoin like Bsiq and hodlhodl).





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June 10, 2021, 11:01:55 PM
 #7

You are right if exchanging low amount of Bitcoin, but bitmover mentioned buying $200000 worth of bitcoin, this is what can be bought easily on binance with high trading volume, but it might be difficult on Bisq.
This is not a problem with bisq or any other P2P network. It's rather a result of people's choice to more frequently use centralized platforms with growing user reach, limiting decentralized exchanges. If more people used such platforms, it would increase market acceptance.


What if someone want to buy $500000 worth if bitcoin.
It would be unfavourable and difficult to sell such amounts on low volume platforms.
There are also OTC options on centralized exchanges.





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June 11, 2021, 02:07:58 AM
 #8

This is not a problem with bisq or any other P2P network. It's rather a result of people's choice to more frequently use centralized platforms with growing user reach, limiting decentralized exchanges. If more people used such platforms, it would increase market acceptance.
Thats the advantage of Binance I guess. Its very convenient, Im not used this bisq yet but I wonder how it be compared to purchasing btc on a cex like binance. Probably it works like a non custodial wallet for btc then directly swap your money (fiat) to btc like uniswap.

It would be unfavourable and difficult to sell such amounts on low volume platforms.
There are also OTC options on centralized exchanges.
Cause it will be difficult to find a peer to peer method for this kind of amount. Depends if you talk to a whale guy or institution with a lot of btc. So binance can accomodate that so easy. Its just really a matter of choice, if you want to give up the privacy for using theit platform.





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June 11, 2021, 03:18:23 AM
Merited by LoyceV (4), DdmrDdmr (2), Charles-Tim (1), SquirrelJulietGarden (1)
 #9

In this scenario you increased your privacy when you withdrew your bitcoins and then mixed them before moving them to your storage device not by deleting your account since when you delete your account it is only removed from the public database you access for loging in, for all we know Binance (and any other centralized exchange with a KYC) is obligated by the government to keep a complete report of all their customers and transactions and be ready to hand it over. Which means your "footprint" is stored somewhere by Binance and in case of a hack it will leak.

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June 11, 2021, 03:44:26 AM
Merited by LoyceV (4), DdmrDdmr (2), pooya87 (1), Charles-Tim (1)
 #10

In this scenario you increased your privacy when you withdrew your bitcoins and then mixed them before moving them to your storage device not by deleting your account since when you delete your account it is only removed from the public database you access for loging in, for all we know Binance (and any other centralized exchange with a KYC) is obligated by the government to keep a complete report of all their customers and transactions and be ready to hand it over. Which means your "footprint" is stored somewhere by Binance and in case of a hack it will leak.
Binance has rules about data of closed accounts. Other exchanges have similar rules. Terms (see c. User Identity Verification)

Five years are long time and many things, leaks can happen. You will never know how your Identity documents are leaked.
Quote
In addition to providing such information, you agree to allow us to keep a record of that information during the period for which your account is active and within five (5) years after your account is closed, in compliance with global industry standards on data storage.

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June 11, 2021, 07:01:40 AM
Last edit: June 11, 2021, 12:03:23 PM by Charles-Tim
 #11

In addition to providing such information, you agree to allow us to keep a record of that information during the period for which your account is active and within five (5) years after your account is closed, in compliance with global industry standards on data storage.
This is now very clear that even if someone delete his account, that does not mean it is not still stored on the exchanges database, and what is stored on the data base can easily be leaked to the public after successful data hack. Which means deleting the account does not mean any privacy, the data customers thought has been deleted will still be leaked.





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June 11, 2021, 11:06:58 AM
 #12

Which means deleting the account does not mean any privacy if data was stolen by hackers, the one customers thought has been deleted will still be leaked.
I don't think there is any guarantee of security when all that data is still stored for 5 years in the binance database. This mean 5 years is not a short amount of time for a hacker to get hold of user data on the exchange if they manage to hack it. Indeed privacy issues are difficult issues to solve on centralized exchange, but at least we can trust them as much as we can trust bank system.

On Binance we can still withdraw 2 btc without KYC in 24 hours. This mean we can still withdraw 60 bitcoin in 1 month without KYC and this is a way to keep our privacy from being leaked in my opinion. Do you think this is a good enough way to maintain privacy when trading on a centralized exchange?

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June 11, 2021, 11:43:33 AM
 #13

But at any time you can send your coins to a mixer and you can mitigate that problem.

Be very careful if you use exchange which activate monitor your Bitcoin after you withdraw it.

On Binance we can still withdraw 2 btc without KYC in 24 hours. This mean we can still withdraw 60 bitcoin in 1 month without KYC and this is a way to keep our privacy from being leaked in my opinion. Do you think this is a good enough way to maintain privacy when trading on a centralized exchange?

Don't rely too much on withdraw without KYC. They could ask your for KYC anytime if their system think you did something suspicious.

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June 11, 2021, 11:53:29 AM
Merited by LoyceV (4)
 #14

This is now very clear that even if someone delete his account, that does not mean it is not still stored on the exchanges database, and what is stored on the data base can easily be leaked to the public after successful data hack.
Note as well that that is simply how long Binance keep your data in ordinary circumstances. If a government or other agency tells them to keep it longer, they will. Also note that Binance share your data with a huge number of third parties, and you have no idea what their data retention policies are. They may keep your data much longer, or indeed, indefinitely.

Don't rely too much on withdraw without KYC.
It is also impossible to buy bitcoin for fiat on a centralized exchange without first completing KYC.

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June 11, 2021, 12:54:01 PM
Merited by LoyceV (4), o_e_l_e_o (2), ETFbitcoin (1)
 #15

Be very careful if you use exchange which activate monitor your Bitcoin after you withdraw it.
The thing is with this point, there's no way of really knowing whether they do monitor your transactions after you have used their service. In all likelihood they don't, but most exchanges to be regulated, licensed, and GDPR friendly will have to keep some sort of record of purchase, and sales. Therefore, they could potentially just look at the history of an address, and figure out your entire transaction history with that address.

Are they likely to do that, probably not. However, if the exchange was breached then malicious attackers might find that information useful depending on their goals. In all likelihood, there are records of who/what bought x amount of Bitcoin, and what address that came from or went too. However, they aren't likely actively monitoring this.

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June 12, 2021, 02:39:32 AM
 #16

Currently, Bisq has a trading volume of $249,471.28 daily, and yet support not only Bitcoin. Getting $200000 worth of bitcoin on Bsiq can be difficult, although it is a means to achieve privacy while buying Bitcoin. What if someone want to buy $500000 worth if bitcoin.

Do you know if Bisq provides an API with their marketdata? I was able to find the page below, but it only shows the last 100 trades, and no API.
https://bisq.network/markets/

I was impressed that there is no good API from bisq with marketdata. I took a look at their API, but there is no market data like other exchanges do.
https://bisq.markets/api

I was looking for data such as 24h volume, last price, trading pairs, and so on. Like binance and other exchanges do. Do you knwo where I can find it? I was able to see it in coinmarketcap, but I wish I could get from bisq, the source.

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June 12, 2021, 07:26:48 AM
Merited by o_e_l_e_o (2)
 #17

In this scenario you increased your privacy when you withdrew your bitcoins and then mixed them before moving them to your storage device not by deleting your account since when you delete your account it is only removed from the public database you access for loging in, for all we know Binance (and any other centralized exchange with a KYC) is obligated by the government to keep a complete report of all their customers and transactions and be ready to hand it over. Which means your "footprint" is stored somewhere by Binance and in case of a hack it will leak.
That would be my assumption too. Once you give your personal data, it's safe to assume they'll never remove it.

On binance, I can decide to open and account, use it to buy Bitcoin after verification, after I buy the Bitcoin, I can send it to a wallet like electrum, I can decide to delete my Binance account (in which all my data would be deleted along, although, it is what Binance indicated, but I do not know how true it is).
The only way to be sure they don't keep your data, is by not sending it in the first place.

Quote
While my Bitcoin is on Electrum, I can make use of mixer/tumbler to mix the Bitcoin and have it finally sent to Trezor wallet. Assuming I am using Tor or VPN to access my noncustodial wallets which makes the connection throught it to be more private.
Who are you trying to hide from? Say Binance gets hacked, a local crook sees you bought Bitcoin, and decides to pay you a visit. How does mixing your coins help you in this scenario? The crook will see your Bitcoin was moved to a new address, and even though you mixed it, he'll just use his $5 wrench until you give up your coins.

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June 12, 2021, 07:54:13 AM
 #18

Be very careful if you use exchange which activate monitor your Bitcoin after you withdraw it.
The thing is with this point, there's no way of really knowing whether they do monitor your transactions after you have used their service. In all likelihood they don't, but most exchanges to be regulated, licensed, and GDPR friendly will have to keep some sort of record of purchase, and sales. Therefore, they could potentially just look at the history of an address, and figure out your entire transaction history with that address.

Are they likely to do that, probably not. However, if the exchange was breached then malicious attackers might find that information useful depending on their goals. In all likelihood, there are records of who/what bought x amount of Bitcoin, and what address that came from or went too. However, they aren't likely actively monitoring this.

I agree, however there are few exchange known for monitoring withdrawn Bitcoin. One example is Binance which threaten to close user account if they keep use Wasabi Wallet.

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June 12, 2021, 08:10:08 AM
 #19

One example is Binance which threaten to close user account if they keep use Wasabi Wallet.
Another example is Coinbase banning users who withdraw crypto from their Coinbase account to a casino or sportsbook, even if there is a hop or two inbetween. And even if the exchange you are using doesn't actively monitor your coins after withdrawal, they will obviously still keep records of all your withdrawals linked to your account and KYC data. At any point they could decide to start analyzing this information or hand it over to a third party of government who will.

Who are you trying to hide from? Say Binance gets hacked, a local crook sees you bought Bitcoin, and decides to pay you a visit. How does mixing your coins help you in this scenario?
It does help you keep the coins your purchased from Binance separate from each other and from any other crypto you have. It provides some plausible deniability in the case of a $5 wrench attack, as you can add coins you bought from Binance to your main cold storage without it being traceable from looking at the blockchain. You might be able to only hand over a portion of your coins and convince the thief that you spent or sold the rest if they have all been mixed and sent to different wallets, whereas if you have just withdrawn everything in to the same wallet then as soon as you hand over the password/seed phrase you've lost everything.

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June 12, 2021, 12:48:24 PM
 #20

I agree, however there are few exchange known for monitoring withdrawn Bitcoin. One example is Binance which threaten to close user account if they keep use Wasabi Wallet.

Strangely they don't do the same for gambling addresses?

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