Topic: Where do bitcoins on exchanges come from ? - page 2. (Read 237 times)

Two out of the three options available are valid means of building the balance sheet of an exchange in bitcoin and other cryptocurrencies. There are exchanges who are also into bitcoin mining and they get profits from transaction fees and service fees.

There are no dirty bitcoins, just those that are reported to have been used for illegal activities. It is difficult to determine what transaction a UTXO has been involved in since it was mined, you can only try to use blockchain data and run that over different searches to know if it turns up for any illegal activity.
It could be important further years down the line. Today there are only restrictions by exchanges for mixed coins.

- Jay -

You have asked a very nice question. The bitcoins on those exchanges mostly come from miners and some of those coins come from traders. Many of the miners sell their bitcoin in bulk, and for them the best place is an exchange. Their mined bitcoin get sold very soon on those exchanges, drug dealers or criminals will never use those exchanges to deposit their coins.

They won't use the exchanges mainly because most of those exchanges, and almost every centralized exchange cooperate with governmental bodies. They will stop the withdrawals of those bitcoins and share the details with the governmental authorities. Those drug dealers will most likely use tor and they might use other services to exchange their bitcoin into something else.

I assure you that any bitcoin you buy through a reputed exchange like Binance is completely legit and no one will ever take legal action against you. The coins that you buy from those exchanges come from legit and legal sources so chance of them being dirty is 0.00001%, that's why you can buy without any worries.

Ideally, the Bitcoins on Exchanges are first and fore most REAL, in a state of EXISTENCE.  I really do however wonder how many of them truly do have enough Bitcoin in their Wallets to cover every single Satoshi of their users.

If this is the case.  Then the Bitcoins can come from multiple sources.  But they most likely come from a combination of Bitcoins invested in by the Exchange and Bitcoins deposited by the users.  Most Exchanges have to start with a set capital of Coins whenever they open a new Coin listing.  If they want to list Ethereum, they have to first invest a couple hundred thousand in it and create orders or they just rely on demand and offer.

There is NO such thing as dirty or clean Bitcoin.  The Bitcoin you get is as dirty as the bank notes in your physical Fiat Wallet, or as dirty as the Fiat you have in the Bank Account.  How do you know the owner before you of the bank notes you own was not a drug dealer?  You do not, and this is why you do not care.  Bitcoin offers Transparency, something Fiat does not offer, and this is not a reason to classify Bitcoins as dirty or clean.  There is no taint in Bitcoin.  In fact, considering the amount of transactions bank notes are used in, it is very likely you own EXTREMELY 'dirty' Fiat bank notes that have gone through drug deals, tax evasions, robberies and worse.

It's mostly sell orders coming from miners and traders. There were some analytics done on this by companies like Coin Metrics and all that you've listed is correct.
Some of the coins will come from crime, just like when you get cash from an ATM, some of it will have traces of drugs on it. Bitcoin is like digital cash, a small percentage of it will come from illegal proceedings.


I borrowed the picture from here.


The largest suppliers of fresh bitcoins are of course miners, but some come from old addresses. There are auctions where you can pay premium for clean bitcoin that has never been transacted before.
It really doesn't matter if you buy bitcoin on exchange or straight from a miner. Governments sell bitcoin that is seized from drug marketplaces, so it would be ridiculous for them to go after the people they sold to.

It's not your duty to think about whether Bitcoin is legit, clean, or not; it's the duty of the exchange, if there is even a need for that. When Bitcoin is deposited into a centralized system, I guess the system checks if the address has been flagged for scams before or not. If they pass those processes and it's successfully deposited into the exchange account and an order is being created, then those coins have been mixed with other coins.

That's to say you can't buy an illegal coin from an exchange, even if they are illegal. If something were to come up in the future, the exchange and its authority would be held responsible for it.

OP, the bitcoins you see on exchanges come from various sources such as retail traders and others send in BTC to exchanges, and it is the responsibility of exchanges to detect which bitcoin is dirty or not. On your own, you can't figure it out, and you have not committed any crime by buying such bitcoins; that's because you are not aware. I believe you are advised not to store your bitcoin in CEXs? After purchasing your bitcoin, move it to a self-custodial wallet to which you have sole access. One of the consequences you will face if an exchange discovers a dirty or fraudulent Bitcoin transaction, or any other coin transaction, is that they will have to freeze withdrawals from their exchange, and if you were so unlucky as to keep your coins in that exchange, you might not be able to withdraw them until their investigation is complete.

 After moving your bitcoin to your private wallet, if you want to attain more privacy, you can use any of the Bitcoin mixers to mix your bitcoin.

Firstly, it doesn't matter because any Bitcoin you acquire should be ok. It is the exchanges' duty to block or freeze funds from illicit transactions before you can actually acquire and withdraw them.

Secondly, a lot of the coins come from fractional reserve, meaning they only exist in the books of the exchanges. Since not everybody at once is going to withdraw, you'll get some of the "real" ones when you withdraw from an exchange into your wallet.

Thirdly, if you are concerned that your Bitcoin has ever been used for illegal things, are you also concerned that your fiat money has ever been used for illegal things? It most likely has. Now what?

Hey !

Just out of curiosity I know there are a lot of bitcoins on exchanges (Binance, Coinbase, Bitfinex and so on).
Where do they come from ?

Is it:
- Miners selling bitcoins on exchanges
- Retail people exchanging bitcoins
- Drug dealers swapping bitcoins versus cash
- Other ?

How can I know if the bitcoin I buy on the exchange is "legit" or "dirty" ? Is it important ?