Obscurity via Cross-Coin Exchanges

[Lodewijk andré de la porte]

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 at 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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