BTC: cutting the trace

[Mbidox]

There are people that use Bitcoin mixer to cover the origin of there Bitcoins with a veil.

I will never make this, because this would make my BTC suspect. And there is a risk to make my BTC's dirty.

But here is my technical question:
When we change our BTC into another crypto and after change them back into BTC, I guess in this case it would no more be possible to trace back the origin of the  origin BTC.
Am I right? Or do I miss anything?
Of course if we make the change on a CEX, it would be possible to trace back the origin, because the CEX will have a history-protocol. But I guess not, when we make this via DEX.


If I am right: Why do people use BTC mixer? Isn't changing BTC into another crypto and change them back, not the much better solution to cut off the trace?

Would appreciate a competent answer. Thank you.

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[mindrust]

There are people that use Bitcoin mixer to cover the origin of there Bitcoins with a veil.

I will never make this, because this would make my BTC suspect. And there is a risk to make my BTC's dirty.

But here is my technical question:
When we change our BTC into another crypto and after change them back into BTC, I guess in this case it would no more be possible to trace back the origin of the  origin BTC.
Am I right? Or do I miss anything?
Of course if we make the change on a CEX, it would be possible to trace back the origin, because the CEX will have a history-protocol. But I guess not, when we make this via DEX.


If I am right: Why do people use BTC mixer? Isn't changing BTC into another crypto and change them back, not the much better solution to cut off the trace?

Would appreciate a competent answer. Thank you.

Then it would depend on the DeX you're using. DEX's are not always anonymous as well. If the DeX operates on a .com domain, your ISP still can track your activity and then you won't really be anonymous. Also the DeX you are using might collect/log your data without letting you know.

When you are on the internet it is pretty damn hard to stay anonymous. If you do some shady shit and the government decides to learn who you are, they will succeed it I can guarantee that.

[ABCbits]

When we change our BTC into another crypto and after change them back into BTC, I guess in this case it would no more be possible to trace back the origin of the  origin BTC.
Am I right? Or do I miss anything?
Of course if we make the change on a CEX, it would be possible to trace back the origin, because the CEX will have a history-protocol. But I guess not, when we make this via DEX.

Aside from the fact some DEX is centralized, privacy/anonymity when using DEX also depends on how you use it. For example, interacting with DEX smart contract on ETH with lightweight wallet (such as Metamask) letting ETH node operator what you're doing.

If I am right: Why do people use BTC mixer? Isn't changing BTC into another crypto and change them back, not the much better solution to cut off the trace?

If the process use DEX, there are several limitation such as small trading volume, waiting other participant to initiate the trade or bad exchange rate.

[Charles-Tim]

I will never make this, because this would make my BTC suspect. And there is a risk to make my BTC's dirty.

Bitcoin do not have to depend on any other coin before you can have privacy while using it, you will need to use a mixer sometimes to maximize privacy.

According to Chainanalysis:

crypto mixers are not explicitly illegal in most jurisdictions.

[LoyceV]

And there is a risk to make my BTC's dirty.

All Bitcoins are equal be design, there is no such thing as "dirty" Bitcoins.

If I am right: Why do people use BTC mixer?

Privacy and convenience. Going through an altcoin, especially on a decentralized exchange, is much more work.

Isn't changing BTC into another crypto and change them back, not the much better solution to cut off the trace?

It depends who you're trying to hide your transactions from. Or your balances. You don't want your local coffee shop to know you own a fortune in Bitcoin, and may not want them to know you gamble. If that's the reason, any exchange will suffice, even though chain analysis companies may still find the connection.

[jackg]

Some dexes might also be built on chains that are similar to bitcoin so you could trace where the fund have come and gone from (perhaps explicitly or otherwise). It probably looks obvious on places you spend coins if the underlying protocol takes a % of a fee and batches it with your trade transaction as a smart contract, this would mean external sources might be able to track where your "change" is and denonymise you that way.

That's excluding the other issue of sending fixed amounts to mixers or exchanges (are you going to analyse this)? A non custodial dex might be a "safer" alternative than a mixer (fewer devices to hack - although a mixer acts well fairly autonomously and has their own funds to prove they're secure) but comes with the risk of making you easier to denonymise (most dexes aren't marketed for privacy mixing - they might be a good step to include but aren't great on their own) if you send a specific amount that looks odd or the dex doesn't have high enough volume to mask your trades.

[Lucius]

I will never make this, because this would make my BTC suspect. And there is a risk to make my BTC's dirty.

When you talk about tainted BTC, then you should know that you also very likely have BTC that originates from some problematic/suspicious transaction - so if someone really wants to analyze the history of your BTC, a link to some dirty coins would not be strange. All those who would be strictly guided by accepting only virgin BTC would very quickly find themselves in a big problem.

Of course if we make the change on a CEX, it would be possible to trace back the origin, because the CEX will have a history-protocol. But I guess not, when we make this via DEX.

I know that Bisq works in such a way that each user has the software on his computer, and the connection between users is via the TOR network, so that the user's privacy is ensured. I cited it as an example of DEX, which is often mentioned in a positive sense when it comes to secure and no KYC trading.

If I am right: Why do people use BTC mixer? Isn't changing BTC into another crypto and change them back, not the much better solution to cut off the trace?

Not all mixers are the same, and even the best ones cannot ensure user privacy if they use them in the wrong way. The goal is not only to break the link between your deposit and what you will get as a result of the mix, but also to be smart and use mixed coins with a time delay to make it difficult for someone to connect deposit A with withdrawal B.

[o_e_l_e_o]

Why do people use BTC mixer

With ChipMixer - cheap, fast, convenient, low risk, and secure. I can send coins to be mixed and leave them on ChipMixer for as long as I want, and access them at any time I choose. I can have a handy supply of mixed coins I can access at a moment's notice at any time. Additionally, thanks to ChipMixer's chip structure, I can only withdraw what I need, meaning I can usually avoid creating change which gives me even more privacy.

Isn't changing BTC into another crypto and change them back, not the much better solution to cut off the trace?

The only truly private altcoin is Monero, and the only truly private DEX to trade it on is Bisq. Swapping Bitcoin to Monero is a viable mixing technique, but you should then move the Monero around, wait as long as possible before swapping it back, swap it back in a different amount than you traded in the first place, and with a different third party. While this is entirely possible, it is slower, has higher fees, is far more cumbersome to do, and potentially less private if you mess up.

Also, if you are using a centralized service which is discriminating against some bitcoin because they claim they are "dirty", then that service is actively attacking and undermining bitcoin's fungibility as well as monitoring and censoring you, and you would do well to find a different service to use.

[Mbidox]

Thank you all very much. I appreciate it.

I see the advantage of a good mixer now.

But back to the other method:
I do not understand, why privacy (cutting the trace) is better when I make A) instead of B).

A) I use Bisq to switch my BTC into Monero and switch back to BTC (with a different amount).
B) I use Bisq to switch my BTC into ETH and switch back to BTC (with a different amount).

I know, that Monero does not provide a history of the past transactions, but ETH does.
But why is this relevant in the case of switching BTC into another coin and switch back to cut the trace?
The trace on the ETH, if I would use ETH, is not from me. So the past transactions of this ETHs would be useless, if somebody would try to follow my past transactions. What am I missing?

Would be thankful for an answer. Thank you.

[o_e_l_e_o]

But why is this relevant in the case of switching BTC into another coin and switch back to cut the trace?

If you trade BTC for ETH, and then later trade that ETH back to BTC, then an adversary who was watching you might be able to link up your trades across the two public blockchains and therefore track what you did. They can look for an ETH transaction of an identical value to the BTC transaction you made occurring around about the same time, and then be able to make a reasonable guess as to which ETH are now in your possession. They can repeat this again in reverse to link your new bitcoin to your old bitcoin. This is impossible with Monero.

You also have to consider how you interact with the Ethereum blockchain. The most popular Ethereum wallets, such as MetaMask or multi-coin wallets, are in no way private, and harvest lots of data including your IP address, crypto addresses, and balances and transactions. Monero, on the other hand, can either be run via your own node or connecting to another node via Tor to mitigate these risks.

[BlackHatCoiner]

With ChipMixer - cheap, fast, convenient, low risk, and secure.

One thing I'd add, is that you send and receive coins of the same value, and therefore have better control. If you were to do a BTC <-> XMR swap, and a few days later, a XMR <-> BTC swap, you'd likely receive a different amount, because the market value of XMR/BTC would likely have changed.

The trace on the ETH, if I would use ETH, is not from me.

It doesn't matter if it was from you. What it matters is to not have your bitcoin activity linked to your ethereum balance.

[Mbidox]

... then an adversary who was watching you might be able ...

Thank you.
Must this adversary (or any data collector) be watching me live, exactly to the time point, if I would make the swap with ETH?

And if at that time point there was no data collecting and I have moved the ETH around, waited as long as possible before swapping back,
then in retrospect it would be the same swapping with ETH like Monero?

(I don't want to do this, I just want to better understand.)

[o_e_l_e_o]

Must this adversary (or any data collector) be watching me live, exactly to the time point, if I would make the swap with ETH?

No, not at all. Given that both Bitcoin's and Ethereum's blockchains are completely public, anyone can look back at any point in the future and try to link your transactions together. Hence why you would want to use Monero.

And if at that time point there was no data collecting and I have moved the ETH around, waited as long as possible before swapping back,
then in retrospect it would be the same with ETH like Monero?

Again, no. Since Ethereum is public, then simply moving coins around a bit is easily tracked, which again is another reason to use Monero, since such movements cannot be tracked.

But as I mentioned above, given how complicated this is, and the many potential pitfalls, most people just opt to use a mixer instead.

[Mbidox]

To stick with any other coin than Monero for the swap (for example ETH; it's only for interest):

Must this adversary (or any data collector) be watching me live, exactly to the time point, if I would make the swap with ETH?

No, not at all. Given that both Bitcoin's and Ethereum's blockchains are completely public, anyone can look back at any point in the future and try to link your transactions together.

They can look for an ETH transaction of an identical value to the BTC transaction you made occurring around about the same time, and then be able to make a reasonable guess as to which ETH are now in your possession.

Given, there was no data collecting at the time I made the switch from BTC into ETH and back, then the only possibility to reconstruct the trace between the two blockchains would be ...
-the point of time and
-the amount of the coin (together with the coin market price)?

Right?


But because of the missing collected data, nobody knows at which point in the BTC blockchain-chain the owner has changed. So if someone knows, that a particular BTC address is mine, and then I make some transfers to another BTC address of mine and only then make the switch to ETH, this person does not know, until which BTC address the BTC's are still under mine possession. So he also not knows, from which address the owner has changed. But this would be the point, where I would have switched my BTC into ETH and this person would have to search a suitable corresponding transaction on the ETH blockchain.

Or do I miss anything?

Further more:
There are so much Altcoins. I could have used any other coin than ETH for the switch. So each blockchain must be investigated to find the trace. (?)

[n0nce]

There are people that use Bitcoin mixer to cover the origin of there Bitcoins with a veil.

I will never make this, because this would make my BTC suspect. And there is a risk to make my BTC's dirty.

But here is my technical question:
When we change our BTC into another crypto and after change them back into BTC, I guess in this case it would no more be possible to trace back the origin of the  origin BTC.
Am I right? Or do I miss anything?

What do you think is the on-chain visible difference between someone selling their Bitcoin and buying it again and someone mixing? How do you tell that one of the 2 happened?
The whole idea of mixing is making it impossible / very hard to tell. A better mixer will do a better job of this than a worse mixer, of course.

If I am right: Why do people use BTC mixer? Isn't changing BTC into another crypto and change them back, not the much better solution to cut off the trace?

This definitely has the risk that the amounts match up and you can enhance this heuristic by looking at both chains and checking what happened with the altcoin right after it was acquired.
A mixing service like ChipMixer, or the scheme I came up with here, break these heuristics by allowing you to basically withdraw more or less than what you deposited. ChipMixer does this through their voucher system.


On the topic of taint: me and most others here strongly disagree with such notion of taint and we just avoid any service continuing to proclaim this garbage.
A simple to understand rationale is: there's no way to tell when coins left a criminal's wallet and entered a non-criminal's wallet. Since in Bitcoin no identities are tied to wallets and anyone can have as many different wallets as they want, there's no way to tell whether a thief is bouncing coins between their own wallet or whether the coins are used / traded.
Now, imagine someone pays you in BTC and the next day it is discovered that whoever gave them to you, had stolen them. Do you want those coins to become worthless? Now, that you already gave them the valuable product you sell? Because I wouldn't want that.

So, here we collect the exchanges and services that we do know for a fact, are pushing this idea forward, as a reference to avoid using them:
https://bitcointalk.org/index.php?topic=5401468.0

For a more convenient solution long-term, we also have a thread for any thoughts or ideas one may have that could improve layer 1 privacy, hopefully making it much simpler to use Bitcoin privately. There would be no need to attempt 'cutting the trace' when there is no trace anymore.
https://bitcointalk.org/index.php?topic=5410526.0

[Little Mouse]

I will never make this, because this would make my BTC suspect. And there is a risk to make my BTC's dirty.

Bitcoin do not have to depend on any other coin before you can have privacy while using it, you will need to use a mixer sometimes to maximize privacy.

According to Chainanalysis:

crypto mixers are not explicitly illegal in most jurisdictions.

Not necessarily.

First, using mixer has a chance of getting dirty bitcoin in return regardless of mixer is legal or illegal in a place. You don't know the origin of the bitcoin. I can't remember any mixing site which ensure giving clean bitcoin, newly mined bitcoin. Of course, there's a chance. However, people using mixer mostly use to cut the trace.

Second, you said BTC do not have to depend on altcoin. There's no need if you don't want to cut the trace but if you want, you may get interested to what OP said. Converting them to XMR as said above, and then once again converting them to BTC. That's what theymos suggested too besides using a mixer, for a decent mixing.

So if someone knows, that a particular BTC address is mine, and then I make some transfers to another BTC address of mine and only then make the switch to ETH, this person does not know, until which BTC address the BTC's are still under mine possession. So he also not knows, from which address the owner has changed. But this would be the point, where I would have switched my BTC into ETH and this person would have to search a suitable corresponding transaction on the ETH blockchain.

Or do I miss anything?

So, for example, you decided to create another address and transfer some BTC and use that to convert to ETH. If someone wants to trace your address, they will be able to trace the address you will use to move some of your BTC. Instead, if you use mixer, the link will be totally broken. You will not anymore be using that input. If someone tracea that input, they will trace someone else, not you anymore. After mixing,  you can convert to altcoin maybe.
There are a lot of small issue which can help investigator to link up regardless of whatever you do unless you follow all them exactly.

[LoyceV]

First, using mixer has a chance of getting dirty bitcoin in return regardless of mixer is legal or illegal in a place.

Please stop promoting the idea that taint exists. I consider making people believe it exists an attack on Bitcoin, and it may very well be the only way for governments to stop Bitcoin from succeeding. Don't fall for it.

You don't know the origin of the bitcoin.

You don't know where your change in a supermarket came from either. Even better: you can be pretty sure there's cocaine on it. But it doesn't matter, as money is fungible. Without fungibility, money is useless, and that's why this "taint" BS is nothing more than an attack on Bitcoin. Don't believe it, and it doesn't exist.

I can't remember any mixing site which ensure giving clean bitcoin, newly mined bitcoin.

See:

There are multiple types of services:
~
Second - newly minted coins. You deposit some funds and you receive "clean, newly minted coins fresh from miners genesis block". Good part is newly minted coins out of coinbase (not this one) should have no history and should be accepted by anyone accepting Bitcoins. Bad part is that none of services that advertises by that does that.

[NeuroticFish]

First, using mixer has a chance of getting dirty bitcoin in return regardless of mixer is legal or illegal in a place. You don't know the origin of the bitcoin. I can't remember any mixing site which ensure giving clean bitcoin, newly mined bitcoin. Of course, there's a chance. However, people using mixer mostly use to cut the trace.

Second, you said BTC do not have to depend on altcoin. There's no need if you don't want to cut the trace but if you want, you may get interested to what OP said. Converting them to XMR as said above, and then once again converting them to BTC. That's what theymos suggested too besides using a mixer, for a decent mixing.

First of all, I agree with LoyceV: the idea of dirty coins is very dangerous and on a wrong premises. I agree that some centralized services may be keeping an eye on this (i.e. the origin of the coins), but not all of them and the rules differ.
For example you may easily get "dirty" bitcoins also from exchanging XMR back to BTC. What would stop anybody from doing that to you?

The result is that you better avoid the businesses that try to introduce the idea of tainted coins instead of being overly confident (and get burned) and also help them grow (hence give them more chances to enforce such an wrong and dangerous idea).

[o_e_l_e_o]

Given, there was no data collecting at the time I made the switch from BTC into ETH and back, then the only possibility to reconstruct the trace between the two blockchains would be ...
-the point of time and
-the amount of the coin (together with the coin market price)?

Right?

Maybe. Or maybe the wallets you were using leaked your IP address. Or maybe you later check those addresses through a blockchain explorer or SPV wallet and leak your IP address that way. Or maybe those addresses are used again in the future and leak information that way. There are a lot of other sources of information that blockchain analysis companies can draw on.

So if someone knows, that a particular BTC address is mine, and then I make some transfers to another BTC address of mine and only then make the switch to ETH, this person does not know, until which BTC address the BTC's are still under mine possession.

Maybe. Or maybe your addresses can all be linked together because they are all part of the same SPV wallet. Or you look them all up from the same browser fingerprint or the same IP address. Or even the software you are using includes unique identifiers within the transaction data itself.

If you are going to go through all this hassle just to avoid using a mixer (although I'm still not clear why), then why would you use anything other than Monero?

[Mbidox]

Thank you. It's very educational.