Wallet audit

[Smartprofit]

Bitcoin coins do not have ~ fungibility.

Oh really? So if I borrow 1 Bitcoin from you, you want the exact same Bitcoin back?

This is where I see the problem...
Let's say you lend me 0.01 BTC, and after a month I return you 0.01 BTC.  
And then you tell me: “Smartprofit!  I lent you 0.01 BTC that I mined myself, and these satoshi are readily accepted by all centralized exchanges!  And you sent me 0.01 BTC, which has a history, and this history is not very good.  This is not a fair exchange because I will now have to spend some effort in order for these satoshi to officially become “white”.  And from this point of view, 0.01 BTC is not equal to 0.01 BTC!”  
Yes, this is not what Satoshi Nakamoto intended, but, unfortunately, this is the modern reality.(((  
And regulators are trying to make that dialogue more and more common....
I have different satoshis, and if in relation to some satoshis I have no doubt that I can easily turn them into fiat money, then in relation to my other satoshis I have doubts that it will be easy...
At the same time, I do not  a criminal and is categorically against breaking laws.  But even if you follow all the rules and laws, you can still get officially “dirty” satoshi.

[1715206495]

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[1715206495]

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[1715206495]

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[BlackHatCoiner]

Yes, this is not what Satoshi Nakamoto intended, but, unfortunately, this is the modern reality.(((  

This is only the reality if you depend on centralized exchanges which discriminate you based on arbitrary and inaccurate criteria.

But even if you follow all the rules and laws, you can still get officially “dirty” satoshi.

There is no "officially dirty" satoshi. There is only "subjectively interpreted as dirty". Chain analysis is inaccurate BS. Different chain analysis companies can produce different outputs. Here's an example of the default Wasabi coordinator treating a supposedly "clean" coinbase output as tainted.

[LoyceV]

Let's say you lend me 0.01 BTC, and after a month I return you 0.01 BTC.  
And then you tell me: “Smartprofit!  I lent you 0.01 BTC that I mined myself, and these satoshi are readily accepted by all centralized exchanges!  And you sent me 0.01 BTC, which has a history, and this history is not very good.  This is not a fair exchange because I will now have to spend some effort in order for these satoshi to officially become “white”.  And from this point of view, 0.01 BTC is not equal to 0.01 BTC!”

At this point you should tell me I'm an idiot, and I should learn how fungibility works. If you have a $100 bill, and you lend it out, you don't expect the same bill back. If you lend out your car, you expect the same car back. That's the difference.

Bitcoin is fungible until you think otherwise. That's entirely in your mind.

Read this (and I'm quoting the entire post because it's that important):

I've seen several posts lately from people willing to treat Bitcoin as non-fungible because they believe some coins are "tainted".
I'd say this is a severe threat to Bitcoin, and I wouldn't be surprised if governments use this because they can't stop Bitcoin in any other way. If people believe Bitcoin is "tainted", they won't accept it anymore. "We" should really inform people not to fall for this.
Nobody would reject a dollar bill because it has previously been used in a crime, despite the fact that 85 to 90% contains traces of cocaine. Claiming Bitcoin isn't fungible is just plain stupid.

Here's a few examples:

Today netex24 exchanger sent me tainted btc.

What's that? Are you saying Bitcoin isn't fungible?

service which i wanted to top up blocked my account.

The solution is simple: don't use services that tell you your Bitcoin is different than another Bitcoin.

I don’t tell that i will return btc. We can trace it. We can mark it.

Bitcoin is fungible. Stop trying to convince people it's not, and stop using services that treat Bitcoin as if it's not fungible.

Lmao you have no glue what are you talking about. Please stop spam in my tread if you don’t know anything about chainanalys, thx

BestChange.com should be added to this list. Even though they're not an exchange, and even though I've used them, they seem to think not all Bitcoins are equal:

Don’t you think exchangers that do not follow AML should be excluded from your site? Or at least marked as untrustworthy.
Today netex24 exchanger sent me tainted btc. And obviously service which i wanted to top up blocked my account.
I checked transaction via AML bot:
 
Risk Score: 50% Medium risk transaction
Medium risk
Exchange ML Risk Veryhigh - 100%

@rokuen
Thank you for the signal, we will certainly investigate the matter to find out all the details and if necessary, will take measures to prevent this in the future. The exchanger you named is one of the largest on over-the-counter and such appeals are the matter of exception.

In any case, your situation requires our involvement. We will certainly get in touch with the service representatives to find out the technical details of your transaction and offer them to change the counterparty, if necessary, if they use some compromised custodial service to store bitcoin.

In line with this, I am interested to know if the BestChange company subscribes to the idea that there are clean and dirty Bitcoins. I mean, yes, there are probably a lot of crimes in which Bitcoins are involved as there are countless others which involve fiat, but do you think that Bitcoins involved in these crimes are tainted and are therefore dirty and shouldn't be accepted by different Bitcoin platforms?

This is not so much our moral position, but the forced adherence to generally accepted norms. Regardless of our or anyone else's opinion, AML purity for cryptocurrency transactions has become as important a property as it is for fiat currencies. Most crypto transactions end up in centralized custodial services that adhere to standard rules for the entire global market, in particular, the fifth AML directive of the European Union (5AMLD). Therefore, in a sense, the widespread introduction of AML made BTC an analogue of NFT of the ERC-1155 standard

This site explains very well what it's all about:

Coin validation proposed to offer as a service to trace coins and try to give you a rating about how the history of the coin from your point of view and to offer that as a service to businesses. I think this could be quite dangerous because it goes back to that 17th century court case where now you could receive a coin that is perfectly valid at the time that you receive it, but a few weeks later a crime is uncovered and now your coin is tainted. So if this coin validation service is advicing many of the merchants where you would want to spend your coin at, it's tainted and now the merchant would refuse to accept your coin. That's a strange experience for you; you're holding a coin that you might have to sell at a discount to get rid of it. The aggregate effect of this might create a run on the bitcoin price. So it reopens this long-set legal principle that currency or currency units are all equal.

I can't stress enough how important this is!

[Smartprofit]

Yes, I agree with you that challenging fungibility is a very big problem for Bitcoin.  Money must be fungible (otherwise it is no longer full-fledged money). 
At the same time, the principle of fungibility of money is attacked from all sides, just remember the CBDC project (central bank digital currencies) or the censorship of non-cash transactions, which is very often carried out by commercial banks (under the influence of regulatory authorities).  At the same time, there are ideas to replace the circulation of cash with a new financial instrument - CBDC. 
One way or another, the problem arises when trying to exchange Bitcoin for fiat currencies (and this is a fairly common option).  I agree with you that it is impossible to follow the lead of centralized services in this matter.  This could really ruin Bitcoin!

[cryptosize]

Initially, Bitcoin coins do not have the property of identity and fungibility. 

Not true. Bitcoin is fungible just like cash is.
If I give you $100 in cash and you give me $100 in cash, then the only thing we both need to do is to make sure the dollar bills aren't fake. If they are both legit, then we are exactly where we started from.
If I give you $100 in BTC and you give me $100 in BTC, then the only thing we both need to do it to make sure the BTC is legit. Luckily, bitcoin does that on its own after some block confirmations. So we just need to wait a little.

Banknotes have serial numbers... ever wondered what happens if you get a banknote that comes from a robbery/VIP abduction?

As soon as that "tainted" banknote enters the banking system, you're fucked. They will freeze the money and the police will interrogate you where you got it from.

It's the same thing with satoshis (each one has a serial number based on the order in which it was mined, that's how Ordinal NFTs are created). BTC is electronic cash (which has pros and cons).

If you don't plan on using banks/ATMs (centralized exchanges are also semi-regulated banks), then sure, peer2peer/hand2hand transactions are not affected at all.

But you already know how hard it is to avoid using banks these days...

Tainted banknotes are like a hot potato. The last person who gets them and decides to deposit them in a bank is royally fucked.

[LoyceV]

Banknotes have serial numbers... ever wondered what happens if you get a banknote that comes from a robbery/VIP abduction?

I can't read the site, but this isn't something I worry about. Almost every banknote has cocaine traces on it, and given enough rotation most banknotes must have been in the hands of criminals. That's not a problem: money is fungible.
It's a problem if you're personally dealing with criminals. So don't do that

As soon as that "tainted" banknote enters the banking system, you're fucked. They will freeze the money and the police will interrogate you where you got it from.

What's wrong with catching murderers? The police won't come after you, but you may have information that can help them find the real bad guys. If you tell them you received the money when you sold cocaine, you have a problem. But if you got it for selling your car, I don't expect them to blame you.

[cryptosize]

Banknotes have serial numbers... ever wondered what happens if you get a banknote that comes from a robbery/VIP abduction?

I can't read the site, but this isn't something I worry about. Almost every banknote has cocaine traces on it, and given enough rotation most banknotes must have been in the hands of criminals. That's not a problem: money is fungible.
It's a problem if you're personally dealing with criminals. So don't do that

As soon as that "tainted" banknote enters the banking system, you're fucked. They will freeze the money and the police will interrogate you where you got it from.

What's wrong with catching murderers? The police won't come after you, but you may have information that can help them find the real bad guys. If you tell them you received the money when you sold cocaine, you have a problem. But if you got it for selling your car, I don't expect them to blame you.

Use Google Translate. It has nothing to do with cocaine...

When an robbery/abduction is performed, the police keeps a record of the serial numbers of the stolen banknotes.

Just like AML/chain analysis keeps track of certain addresses/satoshis.

As soon as you try to deposit stolen banknotes in a bank, they will confiscate them and interrogate you.

You may be innocent (just like someone who received "tainted" BTC and then deposited it to a CEX), but they won't care.

So yes, you may argue that banknotes are fungible, but that only applies to hand2hand transactions.

If you want true fungibility, you better use metallic coins (they don't have serial numbers), but you won't be able to hoard large amounts of money with 1-2 eurocoins.

[LoyceV]

You may be innocent ~, but they won't care.

It sounds like you have a police-problem, not a money-problem. I'm glad I live in a country where I'm innocent until proven guilty.

[BlackHatCoiner]

As soon as that "tainted" banknote enters the banking system, you're fucked. They will freeze the money and the police will interrogate you where you got it from.

I have never heard of this happening before. Cashing into the bank is much rarer than cashing out, maybe that's why. Usually, you have more money in the bank than in cash.

Even if it happens, what do the police expect from me? Cash is untraceable. I have no damn clue where I sent or received a particular banknote. Any response I give to the source of the money cannot be verified.

[cryptosize]

You may be innocent ~, but they won't care.

It sounds like you have a police-problem, not a money-problem. I'm glad I live in a country where I'm innocent until proven guilty.

All countries/central banks issue banknotes with serial numbers for a reason... there is no exception.

This is a long-time international practice, so I'm surprised you've never heard it before:

https://www.reddit.com/r/explainlikeimfive/comments/3ou4h4/eli5_how_are_the_serial_numbers_on_banknotes/
https://en.wikipedia.org/wiki/Bait_money

Bait money or bait bills are bills with known serial numbers, used by banks to aid the tracing of bank robbers.

The serial numbers are recorded by the bank either by making a copy or by listing in a log book. During a bank robbery, if a robber has taken the bait money, details of this can be passed on to the police. If the money is found in the possession of someone, or used to purchase goods, this can make it easier to find the suspect of the bank robbery.[1] Bait bills were used by investigators of the 1932 Lindbergh kidnapping in the United States.[2]

In the future it might get even worse:

https://www.eetimes.com/euro-bank-notes-to-embed-rfid-chips-by-2005/
https://www.fleur-de-coin.com/eurocoins/banknote-rfid

As soon as that "tainted" banknote enters the banking system, you're fucked. They will freeze the money and the police will interrogate you where you got it from.

I have never heard of this happening before. Cashing into the bank is much rarer than cashing out, maybe that's why. Usually, you have more money in the bank than in cash.

Even if it happens, what do the police expect from me? Cash is untraceable. I have no damn clue where I sent or received a particular banknote. Any response I give to the source of the money cannot be verified.

I wouldn't say it's rare... many people (especially shops) who get paid in cash make ATM deposits on a daily basis. That's why they have more money in the bank (the money has to come from somewhere).

[LoyceV]

All countries/central banks issue banknotes with serial numbers for a reason... there is no exception.

This is a long-time international practice, so I'm surprised you've never heard it before

Don't make up things about me. Of course I know what serial numbers are.

During a bank robbery, if a robber has taken the bait money, details of this can be passed on to the police. If the money is found in the possession of someone, or used to purchase goods, this can make it easier to find the suspect of the bank robbery.

That's not the same as blaming innocent people. I'll end this discussion here, it's far too off-topic.

To get back on-topic: If you earn your Bitcoin from selling drugs, the police will hold it against you once they catch you. But if your Bitcoin came from a drug dealer who bought a coffee from you, they can't hold that against you. If you believe otherwise, don't use money. Not that barter is going to help you: the cow you got may have been used for a crime in the past

[cryptosize]

All countries/central banks issue banknotes with serial numbers for a reason... there is no exception.

This is a long-time international practice, so I'm surprised you've never heard it before

Don't make up things about me. Of course I know what serial numbers are.

During a bank robbery, if a robber has taken the bait money, details of this can be passed on to the police. If the money is found in the possession of someone, or used to purchase goods, this can make it easier to find the suspect of the bank robbery.

That's not the same as blaming innocent people. I'll end this discussion here, it's far too off-topic.

I didn't make up anything, you insinuated that this isn't a common practice in many countries.

This isn't a "police problem" as you claimed, it happens everywhere:

https://www.fbi.gov/history/famous-cases/charles-ross-kidnapping

And don't make up things I never said. I said they will interrogate you, not blame/jail you:

As soon as that "tainted" banknote enters the banking system, you're fucked. They will freeze the money and the police will interrogate you where you got it from.

[apogio]

As soon as that "tainted" banknote enters the banking system, you're fucked. They will freeze the money and the police will interrogate you where you got it from.

It's the same thing with satoshis (each one has a serial number based on the order in which it was mined, that's how Ordinal NFTs are created). BTC is electronic cash (which has pros and cons).

Tainted banknotes are like a hot potato. The last person who gets them and decides to deposit them in a bank is royally fucked.

This argument actually strengthens my opinion that cash and bitcoin are both fungible.
If you are afraid, the solution is super simple:
(1) Don't deposit the cash in a bank, just use it to buy something.
(2) Don't send your BTC to a CEX, just use it to buy something.

Well in fact:
(a) Self-custody your bitcoin.
(b) Use it as it's supposed to be used, as a cash system.


Just to make some fun, I hereby volunteer to accept any coins anybody thinks are "tainted". If anyone is desperate to get rid of them, I am here. _{That's a joke obviously, in case anyone is super sensitive and gets mad about it}  

[cryptosize]

As soon as that "tainted" banknote enters the banking system, you're fucked. They will freeze the money and the police will interrogate you where you got it from.

It's the same thing with satoshis (each one has a serial number based on the order in which it was mined, that's how Ordinal NFTs are created). BTC is electronic cash (which has pros and cons).

Tainted banknotes are like a hot potato. The last person who gets them and decides to deposit them in a bank is royally fucked.

This argument actually strengthens my opinion that cash and bitcoin are both fungible.
If you are afraid, the solution is super simple:
(1) Don't deposit the cash in a bank, just use it to buy something.
(2) Don't send your BTC to a CEX, just use it to buy something.

Well in fact:
(a) Self-custody your bitcoin.
(b) Use it as it's supposed to be used, as a cash system.


Just to make some fun, I hereby volunteer to accept any coins anybody thinks are "tainted". If anyone is desperate to get rid of them, I am here. _{That's a joke obviously, in case anyone is super sensitive and gets mad about it}  

Sure, but you cannot control what someone does with their newly acquired money...

So if someone gets "tainted" money from you and deposits it in a CEX/bank (some people want to liquidate BTC for fiat, or buy instantly BTC with fiat), then you should expect a call.

[apogio]

Sure, but you cannot control what someone does with their newly acquired money...

So if someone gets "tainted" money from you and deposits it in a CEX/bank (some people want to liquidate BTC for fiat, or buy instantly BTC with fiat), then you should expect a call.

But, how will anyone know who I am. Perhaps you mean if I buy something online. Well in that case, I will just lead the "interrogators" to the address that sent them to me.

In general, if we buy the whole "tainted bitcoin" idea, then we deserve the strict banking system that we currently have!

[cryptosize]

Sure, but you cannot control what someone does with their newly acquired money...

So if someone gets "tainted" money from you and deposits it in a CEX/bank (some people want to liquidate BTC for fiat, or buy instantly BTC with fiat), then you should expect a call.

But, how will anyone know who I am. Perhaps you mean if I buy something online. Well in that case, I will just lead the "interrogators" to the address that sent them to me.

Not necessarily online.

Do you live in the real world? If so, you've probably made physical transactions, arranged appointments and this usually involves phone communication (so they will have your number).

When a police officer asks where you got that money from (that's what I mean by interrogation, not beating you up), you will have to reveal his phone number, even if you don't know his name/surname/address.

Phone numbers/SIM cards aren't anonymous since 2009 last time I checked.

In general, if we buy the whole "tainted bitcoin" idea, then we deserve the strict banking system that we currently have!

I don't like the banking system. It is what it is.

But how are you going to fund your debit card? How do you pay taxes? Do you use banks in general?

Regarding "tainted" BTC, I prefer to let the free market decide.

From what I've heard, there are people who are willing to exchange "tainted" BTC with clean coinbase outputs for less money than it's actually worth.

If people are willing to get rid of it for a cheaper price, then who am I to argue with them?

[takuma sato]

Im not sure about your situation, but banks need a source of funds, an audit gives a sense of confidence to the bank. The bigger the amount the more you are going to need it. The thing is, the weed example was literal. It's not that im buying weed with the wallet and sent it to Silk Road or something. Let's say that you have a receiving address (like for a sig campaign to put an example) and the guy that sends you the money, bought weed, or the guy before the guy that paid this guy, and so on. These Chainalysis type softwares go back several hops.

Banks will not care about the hops those coins have passed to you before if you can produce at one point solid evidence that you got them in a legal way.
The whole tainted thing is just some idiocracy created by ironically crypto companies in order to steal your funds, they will ask for that and that and then seize your coins and demand more and more proofs for god knows what evidence just with the hope of you giving up on those funds.

But more important banks don't deal with BTC, they deal with fiat, and there is little to no importance for them what coins you have, they care about your worth in fiat and that's all!
Those audits are for private deals, it's for companies trying to get loans on their assets, pass financial inspections, issue reports or try to get a listing, lock their funds in custodial wallets as collateral, and so on and on, your average bank will not give a rats' ass about your coins and neither will they be interested ever in dealing with your Bitcoin transactions history they will ask you for your strictly $ values, how much you earn how much you spend what's your company profit and assets!

To convert your coins into fiat you have to first deposit them into an exchange, and this exchange will already ruin a Chainalysis type audit on your funds. If it triggers past a certain treshhold your funds may be frozen until you deliver source of funds. If you could get them audited, you could present this audit to them, you would have something ready in case this happens, vs going in without nothing. You may for instance have got payments for sig campaigns, and when you deposit them they show up that a number of addresses trigger the Chainalysis type tool they use. You explain that the funds are legal from a marketing campaign (sig campaign that's what it is basically) which may or not be enough. A third party that has audited your coins before going into an exchange would let you prepare with more time.

As soon as that "tainted" banknote enters the banking system, you're fucked. They will freeze the money and the police will interrogate you where you got it from.

It's the same thing with satoshis (each one has a serial number based on the order in which it was mined, that's how Ordinal NFTs are created). BTC is electronic cash (which has pros and cons).

Tainted banknotes are like a hot potato. The last person who gets them and decides to deposit them in a bank is royally fucked.

This argument actually strengthens my opinion that cash and bitcoin are both fungible.
If you are afraid, the solution is super simple:
(1) Don't deposit the cash in a bank, just use it to buy something.
(2) Don't send your BTC to a CEX, just use it to buy something.

Well in fact:
(a) Self-custody your bitcoin.
(b) Use it as it's supposed to be used, as a cash system.


Just to make some fun, I hereby volunteer to accept any coins anybody thinks are "tainted". If anyone is desperate to get rid of them, I am here. _{That's a joke obviously, in case anyone is super sensitive and gets mad about it}  

"Buying something" with BTC may be cool if you are dealing with small amounts. The moment BTC goes to 100k, 200k, 300k.. and your wallet is now 7 figures, and you continue to use it limited ot Bitrefill coupons and whatnot, it is a bit of a joke. You have all that money but you cannot really upgrade your life quality.
If you want to move and live on a better area, diversify in other assets, buy a better car, increase monthly expenses.. you can't do anything relevant with the money. A solution is needed and part of it is being able to interact with the fiat system in one way or another, thus the audit being part of it. There has to be a jurisdiction that isn't some dodgy non CRS country that would be ok to do banking with the funds.

[m2017]

However, I can think of many ways how that would go wrong. Namely, you send them your transaction history in the form of a text file (not them directly, but through your accountant/lawyer) but then you happen to hold some coins that were used to buy weed or whatever else, as you cannot know who paid you and where the coins came from if you just accept BTC payments in general.

And you can certainly be sure that the owner of the dubious address (or transaction) “forgot” to go through the KYC procedure. The shadow of this act can easily fall on you.

It just seems risky to me considering you have no control over previous transactions and you'll be adding your dox next to your addresses, not great for privacy but otherwise you cannot do anything relevant with BTC besides smaller payments.

This is not just risky, but reckless and impossible to bear responsibility for previous (and subsequent) transactions, because anyone could be a link in the chain.

From a privacy point of view, you should generally not associate a wallet address (or transaction) with a specific person (your documents). It seems to me that this has already become an irreplaceable trend and soon almost every address (transaction) will be identified.

[apogio]

"Buying something" with BTC may be cool if you are dealing with small amounts. The moment BTC goes to 100k, 200k, 300k.. and your wallet is now 7 figures, and you continue to use it limited ot Bitrefill coupons and whatnot, it is a bit of a joke. You have all that money but you cannot really upgrade your life quality.
If you want to move and live on a better area, diversify in other assets, buy a better car, increase monthly expenses.. you can't do anything relevant with the money. A solution is needed and part of it is being able to interact with the fiat system in one way or another, thus the audit being part of it. There has to be a jurisdiction that isn't some dodgy non CRS country that would be ok to do banking with the funds.

I disagree. You can do anything you want, as long as you don't mess with other people's freedom and of course as long as you don't hurt someone.
Why can't you buy a car with BTC? I think the reason is because the car company doesn't accept BTC as a payment. That's also true if you try to buy a car in the USA, using Norwegian Krone. If you are using cash, they will ask you to exchange it to USD first, before you can proceed with the payment. If you pay using a card, then the payment processor (Visa / Mastercard etc.) will do the exchange silently behind the scene and they will charge you for that.

Finally, just a quick question. According to the quoted text above, is there any usage of Bitcoin that you like? Or is there a reason why you own it in the first place? My question isn't ironic, but it looks like you have plenty of "flaws" to accuse bitcoin for, but you have no positives to indicate. Am I wrong?

[Z-tight]

To convert your coins into fiat you have to first deposit them into an exchange, and this exchange will already ruin a Chainalysis type audit on your funds. If it triggers past a certain treshhold your funds may be frozen until you deliver source of funds.

That is how centralized exchanges operate, they can confiscate your funds at anytime and take note that chain analysis companies depend on guesswork and so they cannot be considered accurate. So you do not need any 'wallet audit', what you need to do is deposit funds into p2p exchanges and not into custodial services that would confiscate it whenever they want to.