There is not yet any exchange that does not keep meticulous track of transfers, also due to AML laws. A meta-blockchain unfuzzer might still work, as the other coin would also use one. Or there'd be central tracking. Or it would be zerocoin! As long as zerocoin exists somewhere you can chain-switch (exchange) and anonymize. On Mar 7, 2014 11:05 PM, "Cathal Garvey" <cathalgarvey@cathalgarvey.me> wrote:

Hey all, As it came up in the Mt Gox asides in one of the variously titled threads on Nakomoto etc.: Bitcoin's pretty pseudonymous, rather than anonymous. Coin transactions are public, and some can be pinned to real identities, vendors or products, while others can be well inferred, leaving a smaller, hard to quantify set of "really anonymous" addresses, coins and transactions. Added to that, you have coin "taint" and badly patched wallets that mix coins from other addresses when sending payments, correlating various receiving addresses in one single transaction.

There are laundries, but my understanding is that they're not highly regarded; their methods may be questionable, potentially they can be untangled. Without a large enough set of users, you have little guarantee of laundering; if only Alice and Bob pay in, and Alice and Bob receive out, then the recipient set is clearly too bad to protect them!

OK, big problem. Zerocoin was designed to help fix that problem, by minting a zero-knowledge-proof based 'coin, but it hasn't yet been implemented.

What about simply exchanging different blockchain based coins, though? Would that not help to "launder" with reasonable efficacy, provided both participants use crypto to hide the transaction? From the outside, transactions occur on both blockchains, but there's no "data trail" correlating the transactions with one another as there is within each blockchain.

So, Alice buys .4 btc from a friend, but knows the friend's opsec might be poor, or that the transaction may have occurred over a bad channel, or that the coins were purchased from an exchange that demands valid phone numbers, etc.: she wants to launder.

She contacts Bob, a Dogecoin seller, to set up a private exchange. She asks him to sell her 0.4btc worth of Dogecoin in two transactions of unequal value (to prevent analysis by exchange rate to ID their transaction). They conduct the exchange over an encrypted channel.

From the outside, someone knows she's laundering, and just bought Dogecoin, but because they don't know her Dogecoin receiving addresses, they've lost the scent; she now has 0.4btc worth of Dogecoin, and can convert that back to btc again in the same way.

In a round trip, she's broken the chain; she keeps her value, minus fees, of 0.4btc, but now it's in different btc, with no blockchain-recorded transaction logs to link the original, tainted btc to the new, clean btc.

As a way for an individual to "launder", does this look plausible? Is it any better or worse than laundries as they currently exist?

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On Fri, Mar 7, 2014 at 4:43 PM, Cathal Garvey <cathalgarvey@cathalgarvey.me> wrote:

As a way for an individual to "launder", does this look plausible? Is it any better or worse than laundries as they currently exist?

Cross coin exchanges are guaranteed free of crypto taint, so that's better. Cross coin may not require KYC due to not touching fiat, so that's better. But you still have two of the same risks as with same chain exchanges... - logs held by the exchanger - watching the amounts in/out. Cross coin is a bit better here for swaps of casual consumer amounts due to the addition of the variable exchange rate (whereas typical same coin swaps have merely their [in]variable fees). Don't expect to securely swap $1m in one easy overnight shot.