Topic: [2019-12-26] Binance Blockade of Wasabi Wallet Could Point to a Crypto Crack-Up (Read 343 times)

it's easy to underestimate what the first version of Lightning channels has already done to improve BTC fungibility; using a Coinswap-like process, one can easily get most of the benefits of coinjoins/ring signatures without any of the drawbacks, and this can be done today, without any upgrades to the Bitcoin protocol. And taproot will (as you say) improve the privacy of lightning use even further (though at the on-chain level), resulting in increased fungibility of taproot based Lightning channels

you and me both, but good luck actually finding discounts like that. the OTC markets (especially in china, russia, etc) can swallow up so much "tainted" supply and wash them back into the exchange economy, that you'll never find people who are that desperate to offload coins. as the OTC markets grow larger---and as actual p2p/b2b usage grows (removing the need for centralized exchanges at all)---fungibility will only further improve.

between this and protocol-level privacy improvements like taproot (and someday, cross-input aggregation), i see bright days ahead for bitcoin's fungibility.

The former, but the end will be that people will stop needing to exchange out of crypto and more and more people will just stay in it and not need the exchanges.

I'll be happy to buy these tainted coins at a few cents on the dollar.

@gentlemand. Agreed. I might also have triggered some holders when I mentioned that bitcoin was more used as a speculative investment. When I posted about an article about its most important application, I reckon that it might have triggered them further hehehehe.

Most people are using the crypto space to increase their position in the fiat system. That's a very different proposition and coming across all of these regulations is an inevitable outcome of that.

Only small numbers are looking to truly bypass it but it will be faction that slowly grows. Could take a good while but it will happen until it's a significant size.

Someday. How long will this be? We speculated that the cryptospace would disrupt and tame the fiat system, however, it is the system that is taming bitcoin through strict regulations, KYC.

That's the long and short of it. Exchange wallets themselves are full of once tainted coins.

I think it has to do with this new model of KYCC -- "Know Your Customer's Customer" -- especially in this atmosphere where cryptocurrency exchanges are increasingly viewed as financial institutions. Exchanges (particularly fiat exchanges like Binance SG) are trying to appease their banking partners in addition to regulators.

If I were running an exchange I would do my very best to hang back on this unless unequivocally forced to. In the meantime I would observe what happened to the exchanges that embraced and ran towards it.

I can't see a workable outcome if they go much beyond immediate level, though no doubt they'll try, and if their terms are clear enough immediate level stuff is acceptable. I remember a bloke getting booted from Coinmama for a gambling transaction several txs down the line.

https://www.reddit.com/r/Bitcoin/comments/bdr9nw/coinmama_is_a_nosey_bitch_tracking_your_coin/?sort=confidence

I would've thought not too far off everything has something questionable somewhere once you look hard enough.

At these days where regulators are pressing down hard on us I would say that thinking as a regulator is the most realistic approach when it comes to determining what the future will hold when it comes to rules and regulations. Yeah there might be some clear win-win solutions out there but really would you expect regulators to be that forward-thinking where they would favor this solution instead of making a AML-compliance for these types of services?

tbh i haven't seen any. however, there are lots of cases of account closures where the customer isn't told why their account is being closed. gemini in particular doesn't usually tell people what triggers it.


here's the thing about that: exchanges need bitcoin to be fungible. they may act on obvious and sloppy activity---direct deposits to/from gambling sites, darknet marketplaces, identifiable mixers/coinjoins, etc---but what about more effectively mixed outputs several hops away?

i'd love to know how exchanges are dealing with this. the vast majority of mixer activity is to/from exchanges.

Are there any cases similar to central mixers? Chipmixer specifically,
What is the fate of currencies if a blacklist for specific addresses is agreed upon?

It varies according to how people understand it. If concepts on the nature of cryptocurrencies do not change, we will return to the old financial system.
There are a lot of people who still trust central platforms and then put all their money in them, the motivation for these people is for profits more than decentralization.

Nah. Some day there'll be a significant proportion of people earning and paying in crypto and it'll be the thing they'll want above anything else in return for selling their shit.

There'll always be the need for fiat but it won't be the absolute be all and end all as it is now. This is a transitional period.

The quicker the loop closes the less power the old system has. Just as their anality reaches fever pitch they may find a whole section of the world's population has drifted away with little requirement to dip into their anus in future.

Right this very moment I am earning BTC writing this bilge. I've paid a few people with it for repairs and a few bits of tat and they've paid others with it. Next year I'm renting a place in the US with BTC. I directed the bloke to Bitpay but he said wasn't interested and intended to see where it went. Times that by a few countries and off you go.

Is bitcoin losing in its fight versus the fiat system? I reckon there is nothing users could do versus exchanges, which might be the real power overseeing everything behind the cryptospace.

you're thinking like a regulator. that's how FINCEN expects mixers to act. fat chance!

mixers will do what they've always done---swap your coin's taint for another. that's why they exist. nobody will use a mixer that employs an AML process. thus, exchanges are increasingly avoiding doing business with customers who transact with mixers, due to the potential money laundering implications.

so what we need are mixing algorithms sophisticated enough to slip by exchange blockchain analysis unnoticed---the best of both worlds. that's where wasabi wallet is failing.

Well the problem I see here is how mixing services will deal this tainted coins from their services. Will they block entry for it, or how will they even know they are tainted in the first place? Or will they just notify the authorities that they have received tainted coins and freeze those crypto so that the recovery for them would be easier? Nevertheless these types of action and process cannot be solely done by the mixer itself, I would expect representatives from the authorities carefully monitoring all their movements.

P2EP/BIP79/BustaPay/PayJoin/etc... are not a replacement for proper coinjoins.  

While they indeed look like a subset of normal transactions, if you are the blockchain analysis company and you know that payjoins are going on the network then you are going to incorporate that into your heuristics.

For example a tx: 1,2 -> 2.5, 0.5 would traditionally be interpreted as "A sent 2.5BTC to B and A got back 0.5BTC as the change." With payjoin in mind, which means the receiver participates in the transaction, it can also be interpreted as "A sent  (1-0.5=)0.5BTC to B, while B provided the 2BTC input and A got back 0.5BTC as the change" or "A sent  (2-0.5=)1.5BTC to B, while B provided the 1BTC input and A got back 0.5BTC as the change."

So, the tx instead of 1 has 3 different interpretations. Consider an equal amount coinjoin tx, let's say JoinMarket tx, where you get back a coin, let's say 1BTC in a transaction where there are 3 1BTC outputs total. That means the transaction has 3 different interpretation right out of the bag. However you can scale up the equal amount coinjoins to at least 100 participants, thus the interpretations can grow, but you cannot scale up payjoins as straightforwardly.

Let me reiterate my point. These tools are different, they can be used, but they aren't replacement of one another. When we came up with Pay-2-EndPoint we did not have individual privacy in mind, as it does little to protect that, but it can disrupt the mass surveillance, which indirectly ends up protecting individual privacy. P2EP does not help a given individual's privacy to the extent that equal value coinjoins do.

in this case, we're talking about binance singapore (binance.sg). they don't support monero or any privacy coins, so that might be your answer right there. they don't want either activity (bitcoin mixing or privacy coins) on their platform.

CZ is implying that this wouldn't have happened on binance.com.

What would be the difference on using bitcoin coinjoin after withdrawal and withdrawing by using Monero coins from Binance? Monero can be more dangerous, I reckon.

the issue isn't about taint itself. it's about using mixing services, whether centralized or decentralized. from an exchange's point of view, customers who use mixers are risky from an AML/regulatory point of view.

wasabi wallet is super blatant with its coinjoins due to the high anonymity set. we need mixing solutions that not only deal with taint but also obfuscate the mixing activity itself.

BIP79, and variations thereof.

Exactly. After Monero getting delisted by exchanges here and there, this move against mixed Bitcoin is somehow a step we should have been expecting. And yep, more like this will certainly come.

Could you elaborate on this?

Will 2020 be a year for more regulations especially in the area of cryptocurrency exchange business? I think this is already a foregone conclusion. As the industry is growing by leaps and bounds, there will be stricter rules covering all transactions and of course there will be the classic clash between those who are rooting for more deregulation and those that are actually accepting more regulations in lieu of more recognition from the government and other similar financial institutions. Though labeling is as a crypto crack-up may seems to me like a exaggeration to some degree.

For sure we will see more companies following the path but it's a waste of time and resources. (it's not only about Wasabi/Coinjoin btw, but it's also the whole problem with tainted coin)
Samourai's wallet has a feature to help in creating decoy transactions. If an exchange monitors the last x transactions then make x+1 decoy transactions to yourself. Anyway, with the Bitcoin development, all this won't be relevant anymore, like people looking to buy "clean bitcoins" at a premium price

It's interesting in the sense that Wasabi Wallet coinjoins may be providing "cover" for more discreet mixing efforts. They're an easy mark for the risk-based AML policies that exchanges employ. Less obvious methods will slip by unflagged.

the former

it's possible to do perfectly effective coinjoins that are indistinguishable from regular transactions, I've become bored of having to tell people this spectacularly obvious fact

https://www.coindesk.com/binance-blockade-of-wasabi-wallet-could-point-to-a-crypto-crack-up

I've often wondered whether clearly mixed coins would be considered 'hot' and in this case at least it seems they do.

Do you think they'll be heading towards an unworkable dead end with this or it's the start of something others will try to emulate?