How a 27-Year-Old Codebreaker Busted the Myth of Bitcoin’s Anonymity ( www.wired.com )

"This is the story of the revelation in late 2013 that Bitcoin was, in fact, the opposite of untraceable—that its blockchain would actually allow researchers, tech companies, and law enforcement to trace and identify users with even more transparency than the existing financial system."

bl_r ,

The main way criminals are caught is when they transfer their crypto to an exchange so they can convert it to cash. Law enforcement will subpoena the exange and ask “Hey, who exchanged 0.7886 bitcoin for cash on this date?” and they will get their identity. Using the public ledger, they will be able to trace the transactions done and show that this person sent money to an address advertised as belonging to a trafficking site, an illegal market, or recieved money from the bad wallet address.

The address owner is anonymous until there is a source of data that ties information the wallet, and often transactions can be used to do that, just as any way to advertise a wallet belongs to you can, or any way to exchange crypto to cash can.

eager_eagle , (edited )
@eager_eagle@lemmy.world avatar

This has to be the most convoluted way of saying someone clustered wallet addresses of a public blockchain. I'm sure there's much more to her work, but this beats so much around the bush.... I'm not going to speculate on the author's motivations for this article, I'll just say I wouldn't waste (more) time on it.

Grandwolf319 ,

The article seemed to focus on the person more than the actual issues with blockchain.

dylanmorgan ,

The article’s point appears to be an ad for the book written by the same dude whose byline is on the article.

eager_eagle ,
@eager_eagle@lemmy.world avatar

that makes more sense, considering I felt like reading a darn book that never gets to the point

daniskarma ,

Transactions are public. But wallet ownership is not.

That's why it's widely used in cybercrime. You can make a wallet and authorities may know which wallet receibe the money, but it may be imposible to link that wallet with an actual person.

kent_eh ,

but it may be imposible to link that wallet with an actual person.

Impossible using the blockchain itself, but not as impossible when you add more traditional investigative techniques to the mix.

7heo ,

Provided that the exchanges are cooperating (voluntarily or by law).

Why do you think NK and other "impenetrable" countries are so fond of it? It provides them with the means to monetize something otherwise pretty useless: their relative independence and the resulting potential for secrecy.

They are turning into new-age Swiss banks, keeping anyone's private ledgers private. For a hefty sum.

And one does not need a strong currency to achieve that: other cryptocurrencies are also perfectly usable.

webghost0101 , (edited )

People don't need an exchange either. Someone can create a physical paper wallet with no copy of its keys and who ever holds it owns it.

Organized crime has existed for a while, the boss rarely gets their hands dirty and the grunt isn’t involved and in the know enough about the bigger crime to be charged too harshly if their part in it was discovered.

7heo ,

The point of the exchange in that context is to have a separate ledger. That is, to hide parts of the information, so that it is then impossible to relate information otherwise public.

You cannot do that with a paper wallet. A wallet (cryptographic material) and a ledger (a collection of transfers - the blockchain being an example of one) are totally unrelated.

prole ,
@prole@sh.itjust.works avatar

Yeah, but retrieving actual useful currency from that wallet becomes nearly impossible. At that point, the only way, really, is peer-to-peer transaction. And even then, it seems fraught.

maness300 ,

Yeah, but retrieving actual useful currency from that wallet becomes nearly impossible.

Then how do people set up drug empires built around it?

Use your brains.

circuscritic ,

The same way they do everywhere else.... Complex webs of money laundering, but that's not cheap, or easy.

maness300 ,

Or nearly impossible, as evidenced by the litany of small-time vendors who have been operating for years.

On a side note, where are you getting this information from?

circuscritic ,

You said drug empires, not guy selling 8 balls and 10 packs on a darknet market.

I'm not going to provide sourcing for my throw away comment. Take it, or leave it, doesn't really matter to me.

maness300 ,

You said drug empires, not guy selling 8 balls and 10 packs on a darknet market.

Yeah, because those are the ones LE focuses on. So we can agree that players both big and small are able to cash out on cryptocurrency and your initial point is wrong.

I’m not going to provide sourcing

Lol, okay. You can just admit you don't have one.

circuscritic ,

You got me, I'm just making this shit up. I have never even heard of any of the publicly available blockchain forensics databases, or reviewed any of the ample examples of reporting and analysis on the subject.

If this was some obtuse or obscure subject, I'd take the time to cite sources, but it's not, it's extremely well covered, so stop being a lazy twat and look for yourself.

maness300 ,

I have never even heard of any of the publicly available blockchain forensics databases, or reviewed any of the ample examples of reporting and analysis on the subject.

That's not what I asked about and you know it.

I asked how you know about vendor money laundering techniques, which you failed to provide a source for.

it’s extremely well covered

If that's the case, then you should be able to easily provide a source instead of flailing around like you're doing now.

so stop being a lazy twat and look for yourself.

You made the claim. You provide the source or you admit you're making stuff up.

pandapoo ,

Are you actually asking someone to prove that large darknet market drug dealers use money laundering to safely access their profits?

It sounds like what you really want is someone to explain to you how it's done successfully...if you're that desperate to learn, take it to Dread and off Lemmy.

maness300 ,

I'm asking for a source for their information.

pandapoo ,

I just gave you a primary source for that...and a lot more...

Dread

maness300 ,

Are you going to link to a specific post, or just the whole forum and pretend that satisfies the criteria of 'source'?

Hey guys! I found a source for everything! It's called Google. Just cite it at the end of all your papers.

Why is it so difficult for you people to admit you make stuff up without a source? Lol.

pandapoo ,

You're something special.

Okay kid, if this was all about you wanting to feel like you won an argument because people are declining to act as your personal Spotify Crime Explained playlist generator, then you win.

maness300 ,

Why is it so difficult for you people to admit you make stuff up without a source? Lol.

Passerby6497 ,

And it becomes much, much easier to track down and remove anonymity the moment real currency transactions are made. Because of KYC requirements, the only way to stay anonymous with crypto is to keep your crypto transactions entirely outside of the real world. Once your digital anonymous currency interacts with real money you've not anchored your wallet to your identity.

FaceDeer ,

There are places you can exchange crypto that exist outside of KYC requirements.

n3m37h ,

I knew this in 2007 when I heard about shitcoin. A ledger is a collection of transactions which is widely share, yep sure confedental...

Seriously how stupid can ya be?

ililiililiililiilili ,

That's crazy that you heard about crypto before it was created in 2008. Are you Satoshi? Did Hal Finney get Internet installed in his casket?

7heo ,

That's confedental.

BearOfaTime ,

So they were off by one year. This was years ago. Hell, I thought I remember reading about it in 2000,apparently not. I'm probably mentally conflating it with the white papers I was reading in the late 90's, some of my more technical coworkers at that company (which I left in 2000) were hot on what we now call crypto currency.

n3m37h ,

Crypto bros be idiots...

n3m37h ,

Sorry I missed a year ya pedantic donkey

I heard about it around that time and it was as stupid then as it is now

sir_reginald ,
@sir_reginald@lemmy.world avatar

as stupid as they are, if you had installed it and mined
it for a few minutes, you'd be millionaire now.

I assume that's why they enrage you.

n3m37h ,

Ass U Me more. Money is not a motivational factor for all. There is virtually no benefit of crypto currencies that arent out weighed by all the negative factors.

If im gonna needlessly waste money it will be for research (folding@home)
This is at least benefits others

zarkanian ,
@zarkanian@sh.itjust.works avatar

And if you're at the top of a pyramid scheme, you can become a millionaire, too.

Varyk ,

I don't think this story is correct, just to chime in with everybody else. It was explicitly stated that bitcoin was a public ledger in the whitepaper.

massive_bereavement ,
@massive_bereavement@kbin.social avatar

What part do you not consider correct?

Varyk ,

That someone busted the myth of Bitcoin four years after it was made public knowledge that bitcoin was not anonymous.

There was no myth to bust. Bitcoin was explicitly public from its inception.

massive_bereavement ,
@massive_bereavement@kbin.social avatar

I guess you hadn't read the article. The point wasn't that the ledger is public, but that the accounts allegedly were deemed anonymous.

My point is read the article then criticize it.

Varyk , (edited )

I read it, the point is that people who hadn't even read the basic information about Bitcoin presented by its creator assumed Bitcoin was anonymous.

This is not as groundbreaking as you seem to think it is.

Some people didn't take the time to read closely or think critically and then made poor assumptions.

Like you, for instance, with your comment.

FaceDeer ,

It's paywalled.

eager_eagle ,
@eager_eagle@lemmy.world avatar

But it wasn't deemed anonymous by anyone who read the bitcoin white paper from 2008. That's the point... that was never a myth to bust because anonymity was never a promoted feature of this chain.

merc ,

There's a difference between "bitcoin is a public ledger" and "we can determine that Alice paid Bob 1 bitcoin".

The bitcoin devs thought they could achieve the "public ledger" part while avoiding the second part. It turns out they couldn't.

thecookingsenpai ,
@thecookingsenpai@lemmy.world avatar

There should be more education on the difference between "privacy being available if you look for it" VS "privacy being ensured since the beginning and forever no matter what"

Spoiler: the last one does not exists

shortwavesurfer ,

Monero comes the closest, but there is a possibility that ring signatures could be broken in the future for sure.

FaceDeer ,

Ethereum supports anonymized tokens and rollups too, if you choose to use them.

shortwavesurfer ,

That's the difference though. On Ethereum you have to choose to use them. On Monero it's private by default. And that's the way it ought to be.

FaceDeer ,

If you're using the anonymized tokens then your transactions are private by default.

Anonymization requires a bunch of computational overhead which means that anonymized transactions cost more to execute, all else being equal. So a blockchain where you can choose whether you're using anonymization or not depending on your particular needs is better than one where it's forced on every transaction.

Bear in mind, Ethereum is a platform. It has many different tokens with different properties running on that platform, some of which are as anonymous as Monero. Use the ones with the properties you need.

shortwavesurfer ,

Oh, I see what you mean now. I have heard of privacy projects that are anonymous sometimes and not anonymous at other times like Zcash and was under the impression that is kind of what you meant.

FaceDeer ,

Those sorts of things exist on Ethereum too. There are also "mixers", like Tornado Cash, that can anonymize a particular transaction using a normally non-anonymized token. The Ethereum philosophy is to provide a broad range of tools that can interoperate with each other, allowing people to use whichever ones suit their specific need.

prole ,
@prole@sh.itjust.works avatar

Spoiler: the last one does not exists

Maybe technically... But we've come up with some pretty ridiculous cryptography schemes that would take billions of years to crack.

thecookingsenpai ,
@thecookingsenpai@lemmy.world avatar

You would be surprised in finding out that the majority of blockchains out there aren't Quantum resistant, tho (elliptic curves being the reason mainly but I am not an expert)

NightLily ,
@NightLily@lemmy.basedcount.com avatar

I remember when Bitcoin first came out and one of the selling points of bitcoin was that literally anyone could trace the transfers using the wallet codes and what not no? I don't ever remember there being claims that it was untraceable at least as the selling point to the average consumer. There was even tools in like 2012 for tracking whether stuff internally in bitcoin was stolen or whatever...

"While the taint analysis tool aims at measuring the “correlation” between two addresses, there is another notion of taint in the Bitcoin community which refers to the percentage of bitcoins, that come from a known theft or scam and have been blacklisted by popular exchange markets. For example, in 2012 the bitcoin exchange Mt.Gox froze accounts of customers, who owned bitcoins that could be directly related to such an incident [20]." https://maltemoeser.de/paper/money-laundering.pdf

r00ty ,
@r00ty@kbin.life avatar

I think people confuse anonymity (similar to the made up names we use here, or character names in online games, and your wallet ID in a crypto coin) to privacy. Technically, if you receive all your funds in crypto, and you spend all the crypto directly (on goods and services that do not require you to give any PII) without it ever turning to fiat. Then yes, it is anonymous but not private. People can see that wallet hash x received funds from wallet hash y and send some of that to wallet hash z and will be able to confirm that for as long as a copy of the ledger exists somewhere.

Really not sure a codebreaker needed to work this out. Anyone that spent a bit of time understanding how it worked would realise this right away. I have no doubt though, that many people had a total pikachu face when their barely concealed illegal activities were easily discovered.

eleitl ,

Which part of public ledger they don't understand?

akilou ,

The anonymity part

kalkulat OP ,
@kalkulat@lemmy.world avatar

The how part.

ExLisper ,

Clearly the public part.

CaptainSpaceman ,

Anyone in the crypto space has known this for years.

Thats why privacy coins like Monero exist

my_hat_stinks ,

You're not wrong, but the first words are literally "Just over a decade ago". It's not a news article, it's the story of the research in 2013 which revealed bitcoin isn't anonymous.

520 ,

It wasn't a revelation in 2013 either. The ledger data has always been public information.

massive_bereavement ,
@massive_bereavement@kbin.social avatar

But neither the addresses nor the people who had them where. It would be like saying that you can identify someone from an arp table because you can see the mac addresses.

Unless you know specifically who own said address (even to the point that those can be spoofed) you just have a big pile of wet paper.

520 ,

Plenty of ways to identify people from their spending habits.

There are also plenty of ways to connect the address to the person. You can subpoena a legit vendor they've paid with that address, for example.

prole ,
@prole@sh.itjust.works avatar

Unless I'm mistaken, you still can't unless you are using an on/off-ramp with AML/KYC. You can track it back to a wallet, but until the person interacts with an entity that requires identification in order to buy/sell the crypto for actual useful currency, they're unidentifiable. I guess you'd prob want to use a VPN as well.

At this point, the only real way to avoid that would be peer-to-peer transactions. Basically meeting someone in person and trading your crypto for physical cash.

merc ,

Bitcoin was designed with the theory that the ledger would be public, but that various techniques would make it very hard to get anything useful out of that ledger other than the fact that a payment went through. These included change addresses so a single payment resulted in 2 transactions to 2 random-seeming addresses. This is described as a "key privacy feature of bitcoin". But, if you can identify which addresses are change addresses and which aren't, that privacy is compromised. That's one of the techniques she developed.

Bitcoin transactions having multiple inputs and multiple outputs was also supposed to be a privacy feature, but it had the drawback of making it easier to cluster addresses as being related.

Basically, the bitcoin devs / early bitcoin enthusiasts thought that despite having a public ledger, they could use security by obscurity as a privacy measure, but Sarah Meiklejohn figured out ways of unraveling that process so it was much easier to trace transactions and the owners of wallets.

otter ,
@otter@lemmy.ca avatar

How does Monero work compared to the other big ones?

bjorney ,

Every time there is a transaction the sender's funds are mixed together with a bunch of other senders, and the recipients receive their money from this random pool, so there is no direct association between sender/receiver

stown ,
@stown@sedd.it avatar

Automated money laundering.

fluxion ,

Yes I laundered some of my salary from work. don't report me please.

stown ,
@stown@sedd.it avatar

Well people like you aren't the issue so much as you are the enablers.

prole ,
@prole@sh.itjust.works avatar

I mean, pretty much yeah. I think it's super clever and elegant, but I'm not going to lie to myself about what the main purpose for something like that would be.

CaptainSpaceman ,

The main purpose is to give privacy to digital transactions. Money laundering exists at a much larger scale within institutional banks like Deutsche and Credit Suisse (RIP)

BearOfaTime ,

Meh, anymore I'm not making a distinction between supposed criminals and country level government (and really, state level either).

Government is the single greatest source of crime IMO, because it offers deniability and the shield of legal violence against people.

And I'm not just talking about things like Ruby Ridge- those are small scale, individuals. Iran-Contra, Fast and Furious, etc, etc.

Look into the beginnings of OPEC and that cocksucker Nader.

So yea, wanting to get the grubby gubmint fingers and eyes out of my shit makes sense.

Imgonnatrythis ,

Because protecting privacy is always a bad thing people wearing hoodies do while. Selling babies on the black market?
God every corporation and your government wants you to think that so hard. Write your senator a letter about the dangers of this technology, they'll probably email you a picture of the boner you gave them.

shortwavesurfer ,

This is not quite correct. You do not have to involve anybody else in your transaction. What happens is the protocol takes a random selection of 15 other people who have spent money and adds them to a ring so that your transaction could be any one of 16 different outputs. But there is no mixing of funds involved.

skillissuer ,
@skillissuer@discuss.tchncs.de avatar

your fake internet points are routed via north korean money laundering scheme

prole ,
@prole@sh.itjust.works avatar

Monero is fucking genius actually, I recommend reading about the cryptography and mathematics behind it, it's actually incredible.

Basically, they've created a way to make the entire thing opaque. Even the people sending the coin are unable to identify the person they're sending to.

I don't hold any Monero, because I don't see it as a good investment (no way governemnts allow something that powerfully opaque to thrive), but I respect the technology.

tourist ,
@tourist@lemmy.world avatar

I recommend reading about the cryptography and mathematics behind it

Could most people understand it if they took the time or did the white paper require several niche latex packages to compile

los_chill ,

Or pay cash... ultimate "privacy coin"

sir_reginald ,
@sir_reginald@lemmy.world avatar

true, but paying in cash is sort of difficult over the internet.

You can send it via mail, but mail is slow and it could potentially be traced back to you.

andrew_bidlaw ,
@andrew_bidlaw@sh.itjust.works avatar

https://en.wikipedia.org/wiki/Hawala

I think that such stuff can be a great layer of privacy and can be set up in a diaspora, in a church, in a community, by a rich guy alone.

wikibot Bot ,

Here's the summary for the wikipedia article you mentioned in your comment:

Hawala or hewala (Arabic: حِوالة ḥawāla, meaning transfer or sometimes trust), originating in India as havala (Hindi: हवाला), also known as havaleh in Persian, and xawala or xawilaad in Somali, is a popular and informal value transfer system based on the performance and honour of a huge network of money brokers (known as hawaladars). They operate outside of, or parallel to, traditional banking, financial channels and remittance systems. The system requires a minimum of two hawaladars that take care of the "transaction" without the movement of cash or telegraphic transfer. While hawaladars are spread throughout the world, they are primarily located in the Middle East, North Africa, the Horn of Africa and the Indian subcontinent. Hawala follows Islamic traditions but its use is not limited to Muslims.

^to^ ^opt^ ^out^^,^ ^pm^ ^me^ ^'optout'.^
^article^ ^|^ ^about^

Lucidlethargy ,
@Lucidlethargy@sh.itjust.works avatar

And yet, crypto bros love pushing the false narrative that bitcoin is an untraceable currency of the future.

In reality, anyone that's looked into crypto in all its popular forms knows it's just a ponzi scheme.

lone_faerie ,

It's so braindead. The entire point of Bitcoin is that it's 100% traceable

Snapz ,

An article in Wired doesn't speak to the "crypto space", they speak to your aunt and uncle in Missouri who don't know about this.

CaptainSpaceman ,

This is the Technology sub on Lemmy, I cant imagine you believe im talking to people in Missouri

Crack0n7uesday ,

St. Louis has a decent tech scene, AT&T used to have their headquarters there. There's still a large tech presence there, low cost of living drives tech companies to hire there since they can pay lower wages and no one in the area really cares since you can still get a two bedroom apartment for less than $1,000 a month.

CaptainSpaceman ,

I was being tongue in cheek, I dont disparage any particular state.... except Arkansas

dasgoat ,

I mean I'm an absolute troglodyte when it comes to technology and I'm here too. Hi!

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