[HN Gopher] Bitcoin's fungibility graveyard
___________________________________________________________________
Bitcoin's fungibility graveyard
Author : yamrzou
Score : 135 points
Date : 2022-02-05 19:08 UTC (3 hours ago)
(HTM) web link (sethforprivacy.com)
(TXT) w3m dump (sethforprivacy.com)
| trixie_ wrote:
| Dollars have serial numbers does that mean they're not fungible?
| Does the author know what fungible means? Banks block
| transactions all the time to/from flagged sources.
| mikewarot wrote:
| If you want to be that pedantic, you're right. However, at
| present most dollar cash transactions don't record serial
| numbers or ownership. It is possible to remove all tracking of
| your cash by getting dollar coins instead of bank notes.
|
| In fact... I made an NFT on this basis (the non-fungibility of
| US Dollar Notes) a while ago, here's the blog post about it
|
| http://mikewarot.blogspot.com/2022/01/whats-all-this-nft-stu...
| hammyhavoc wrote:
| Can't help but feel like this is a puff piece for Monero. It's
| just how quickly it jumped into beating the drum for Monero.
| matheusmoreira wrote:
| To be fair, Monero _is_ a fungible privacy coin and a valid
| answer to all of those concerns.
| fshbbdssbbgdd wrote:
| I'm constantly surprised Monero's market cap isn't higher. It
| works better for all the use cases of crypto that genuinely
| add value, yet has a small fraction of the value of many
| coins that are used for nothing at all.
| matheusmoreira wrote:
| Good question. Monero is essentially everything bitcoin was
| supposed to be. Private, anonymous, more decentralized, you
| can actually mine it using general purpose computers, it's
| actually usable as a currency due to low fees and fast
| transactions. I've actually gotten paid for code in XMR,
| it's awesome.
|
| It's not even a good investment since it doesn't increase
| in value as fast as bitcoin but gets slaughtered whenever
| the market goes down. Would be nice if it stabilized in the
| $200 range.
| Yizahi wrote:
| Why should it be? Dollar genuinely adds value for most of
| human population and yet a single dollar "token" costs 1
| dollar. If anything, the flat price of a token I would
| consider a very small but anyway a sign of maturity and
| usefulness, as opposed to speculation tokens. (stabletokens
| excluded of course)
| wackro wrote:
| I bought into monero hoping it would be the next big thing.
| Fungibility/no public ledger made it seem like it had way
| more utility, but it turned out 1) virtually nobody buys
| crypto in order to spend it, and 2) its only real world use
| was on the dark web.
| headsoup wrote:
| So you bought it as a speculative investment?
| wackro wrote:
| Yes. The same as almost everyone buying crypto. But
| hoping that it would become a usable currency.
| simias wrote:
| I agree, but it just confirms what we already know:
| fundamentals have no importance in the cryptocurrency
| world, it's all about hype and speculation.
|
| Now if they had a cute dog mascot maybe you could get Elon
| Musk to tweet about it...
| beaned wrote:
| Because it actually works, Coinbase never added it.
| Regulatory pressure.
| acdha wrote:
| Cryptocurrency has this nasty conflict of interest built
| in: the early adopters and their investors are rich on
| paper but ALL of that value goes away if people switch to
| something else. You can still find Bitcoin holders lying
| about it being private or uncensorable because they stand
| to lose a fortune if everyone switches to Monero.
|
| I think this combination of looking like tech but being a
| financial instrument makes it hard to talk about on tech
| forums because we don't have anything with close to that
| level of conflict built-in. If you were a PHP developer who
| switched to Python, the value of your past experience
| wouldn't drop to zero (often it goes up); if your Rails app
| was bought by a Node shop it wouldn't be seen as worthless
| and they'd probably keep it running for many years. The
| closest comparison I can think of for weak fiat currency
| like Bitcoin would be Flash after Adobe threw in the towel
| and everyone knew they'd need to migrate, and even there
| the value had a higher floor because you had working code
| and a path to HTML5.
| magicjosh wrote:
| Agreed, a simple disclosure "I own Monero" is needed. The lack
| of this* hurt the credibility. On the about page the author
| says they run two Monero nodes.
|
| That said, the article is pretty much a list of links so not as
| much credibility is needed.
|
| *this: edit - this being a disclosure that they do or don't own
| Monero
|
| Disclosure: I own crypto but not Monero
| Hendrikto wrote:
| > On the about page the author says they run two Monero
| nodes.
|
| Running a node is not the same as mining. You are not
| rewarded financially, and you don't need to hold Monero to
| run a node. Nodes just maintain the ledger and transaction
| pool.
|
| Running a node supports the network through decentralization
| and participation in consensus.
| magicjosh wrote:
| It seems a reasonable enough leap to think that someone who
| runs a Monero node owns Monero. And even if they don't,
| that possibility is enough reason for a disclosure
| statement, either that they do or don't own Monero. Like
| the parent poster said, mentioning Monero in the intro of
| the article stands out.
| matheusmoreira wrote:
| Yeah, it's a privacy nightmare. The exchanges refuse our money if
| it has ever passed through a privacy service and they continue to
| track what we do with it even after it's been withdrawn from our
| accounts. Nice to have a collection of examples I can point to
| whenever someone says bitcoin is fungible.
|
| It makes no sense to me how bitcoin is still number one
| cryptocurrency despite it's garbage fundamentals. Failed at
| everything it was supposed to do.
| itvision wrote:
| > It makes no sense to me how bitcoin is still number one
| cryptocurrency despite it's garbage fundamentals. Failed at
| everything it was supposed to do.
|
| It hasn't failed at not being controlled by people which fiat
| currencies have failed completely. Do you control the inflation
| rate? Do you control how much currency is being minted? And
| tons of other things.
| lottin wrote:
| > Do you control the inflation rate? Do you control how much
| currency is being minted?
|
| You don't control any of that with bitcoin.
| matheusmoreira wrote:
| > Do you control the inflation rate? Do you control how much
| currency is being minted?
|
| Exchanges are essentially banks. They offer bitcoin loans,
| essentially creating new coins out of nowhere. Fixed money
| supply is utterly powerless before the inflationary power of
| debt.
| JumpCrisscross wrote:
| > _hasn 't failed at not being controlled by people which
| fiat currencies have failed completely. Do you control the
| inflation rate?_
|
| Bitcoin has proven to be a worthless dollar inflation hedge.
| It's more correlated to the stock market than any real
| dollar.
| trhway wrote:
| Like a marshland for tidal water, stock is best inflation
| hedge working by sponging the overflowing inflational
| liquidity, and no wonder that Bitcoin behave similarly.
| JumpCrisscross wrote:
| > _stock is best inflation hedge working by sponging the
| overflowing inflational liquidity, and no wonder that
| Bitcoin behave similarly_
|
| Agree on the mechanics. Equities _are_ a classical
| inflation hedge. But the reality is that if three people,
| in the last year, attempted an inflation hedge, one with
| TIPs or Series I bonds; one with equities; and one with
| Bitcoin, the last gained little over the middle. Both
| likely lost value relative to the first.
|
| If your inflation hedge loses value during inflation
| because the Fed will raise interest rates _because of
| inflation_ , yes, there were external factors at play,
| but no, you don't get to blame them, you hedged badly.
| notRobot wrote:
| > The exchanges refuse our money if it has ever passed through
| a privacy service
|
| I'd love to learn more about this, does anyone have relevant
| links or info?
| magicjosh wrote:
| Here's a relevant episode of the ZK Podcast about
| cryptocurrency mixers: https://zeroknowledge.fm/111-2/
| shubhamkrm wrote:
| It's called "tainted Bitcoin". Basically, you can get a list
| of all transactions a coin was involved in since it was
| minted. If any of those transactions contain a blacklisted
| address, exchanges would refuse the token.
| analognoise wrote:
| It's Pokemon cards, but for tech bros.
| can16358p wrote:
| Even though Bitcoin failed at many things, I don't see it as a
| failure as it literally started it all.
|
| All the other cryptos are created after Bitcoin and learned
| from its shortcomings to build something better.
| Brian_K_White wrote:
| It did create and then prove an incredible and utterly novel
| and important concept.
|
| Your downvotes are invalid.
|
| I don't own and never have owned any btc, or any other
| crypto, and at this point wouldn't touch btc in particular
| with a 10' pole for several different reasons.
|
| But the very concept of a distributed ledger that may
| actually be trusted is both revolutionary and proved.
|
| It's collossal despite all the current degenerate uses and
| wasteful implementations.
| z3c0 wrote:
| Agreed. When the integrity of the chain is compromised, I'll
| call it a failure.
|
| In the meantime, I'll leave it to the opinionated pissants on
| both sides to continue acting like they understand anything
| about what's to come from a system with so little precedence.
| delusional wrote:
| Because the intersection of the stated goals and the actual
| goals is essentially empty. The actual goal isn't to be useful,
| it's to make the early adopters rich.
| Geee wrote:
| If you compare to Monero, you see that Monero isn't even
| allowed on these exchanges. So, it seems that you can't really
| have privacy combined with high exchange liquidity.
| matheusmoreira wrote:
| I was under the impression the exchanges chose not to list
| Monero voluntarily. After all, Binance does have it.
| magicjosh wrote:
| Can you explain what you mean by "high exchange liquidity"?
| My understanding is it's a policy issue not tech.
|
| Automated exchanges like Uniswap have Monero.
|
| edit: Uniswap has Wrapped Monero, not actual Monero.
| popol12 wrote:
| Not answering to the question, just correcting your last
| phrase: Uniswap has wrapped monero (WXMR) which is not
| quite the same as Monero, and with a ridiculous liquidity
| of ~200k$ currently (https://geckoterminal.com/eth/pools/0x
| 14c10b4bdccd9d3f8940fb...)
| matheusmoreira wrote:
| How does wrapped monero work? I've seen a lot of wrapped
| coins but I'm not sure why they exist or why I would want
| to use them.
| shubhamkrm wrote:
| From what I've understood, coins are wrapped to enable
| cross-chain movements. Let's say you have X BTC, but you
| want to take advantage of ERC-20 features. You can "move"
| your BTC to Ethereum blockchain by depositing your X BTC
| in Wrapped BTC (WBTC) smart contract. It'll lock your
| BTC, and give you the equivalent amount of WBTC tokens,
| which are ERC20 tokens on the Ethereum chain.
| RileyJames wrote:
| Wrapped tokens enable use across otherwise incompatible
| blockchains.
|
| Wrapped tokens are facilitated through a bridge. The
| bridge contract(s) lock the tokens on one blockchain, and
| re-issue wrapped tokens on a second blockchain. At a 1:1
| peg.
|
| That way the wrapped tokens can be used in Defi or Dapps
| on the second blockchain, and later (if desired) sent
| back through the bridge to be "unwrapped" into their
| original form, on the original blockchain.
| magicjosh wrote:
| Ah my mistake! Wrapped Monero isn't Monero, got it.
| magicjosh wrote:
| It really does seem like the main purpose Bitcoin is succeeding
| at is sort of a digital gold. It's not good as cash, privacy,
| or anything else. Lightning seems like a joke compared to the
| types of efforts happening on Ethereum.
|
| Appreciate this thorough analysis of problems with
| cryptocurrency.
|
| Disclosure: crypto owner
| dmihal wrote:
| One project I'm following is Aztec Protocol. It's an Ethereum
| L2 (so faster & cheaper transactions, similar to Lightning)
| but it supports any Ethereum asset (ETH, USDC, WBTC) and is
| fully private.
| itvision wrote:
| The only thing that goes for Ethereum is the fact that it's
| used for creating worthless numerous other pump and dump
| crypto currencies on top of its blockchain where Shiba Inu
| is the latest glorious example. Solves nothing, serves no
| purpose but increases the demand for Ethereum transactions
| which ultimately drives the cost of Ethereum. All those
| poor sods who have invested in Shiba Inu? Plain idiots to
| put it mildly.
|
| Oh, and NFTs as well. Another worthless crap just to create
| more Ethereum transactions. Why worthless? Because ...
| Ethereum is just one of multiple crypto currencies/block
| chains and tell me again why your particular NFT on top of
| Ethereum is worth more than the same object on another
| blockchain? And how many times can the same object be
| (re)sold on all other blockchains? Do you need to own all
| of them? Or Ethereum NFT is somehow better?
| stavros wrote:
| Aren't NFTs very very useful for money laundering?
| magicjosh wrote:
| Neat can you talk more about what makes it fully private?
| How does it work?
| opportune wrote:
| Lack of fungibility makes Bitcoin worse than gold in that
| area. Gold doesn't have a "permanent record" like Bitcoin.
| It's more like a virtual deed to a plot of land that you
| can't rent or use
| tomcam wrote:
| > It's more like a virtual deed to a plot of land that you
| can't rent or use
|
| Or, you know... gold
| giaour wrote:
| Gold often has distinguishing markings on it, but in the
| end, a bar can always be melted down and recast.
| billions wrote:
| Can you expand on "Lightning seems like a joke compared to
| the types of efforts happening on Ethereum" ? I was just in
| El Salvador and Lightning was a faster and more convenient
| experience than credit cards...
| magicjosh wrote:
| Happy to hear more about your experience!
|
| To answer your question, what I've read about Lightning it
| sounded convoluted. The need to have a watcher keeping a
| channel open, invoices, just seems overly complex. I have
| tried receiving sats from online Lightning faucets and that
| part was impressive.
|
| Ethereum's L1 growth and improvements seem more logical to
| me.
|
| Is there a good place to go to track the adoption of
| Lightning?
| [deleted]
| itvision wrote:
| > Bitcoin is often touted as a fungible and private asset
| [skipped]
|
| By whom? There's nothing like that here
| https://github.com/bitcoin/bitcoin
| https://bitcoin.org/bitcoin.pdf
|
| > and digital cash alternative
|
| That was the case from the beginning but it hasn't worked out.
|
| > Each bitcoin in circulation has a distinct history attached to
| it ensuring that 1BTC != 1BTC.
|
| What? The value is the same. Paper bills also have a distinct
| history.
|
| > While coin histories can be somewhat ofuscated with tools like
| CoinJoin, the fungibility of Bitcoin remains distinctly lacking.
|
| What? How's 1 BTC is not fungible [to another BTC] unless you're
| wanna hide your bitcoin transaction history? Is this what it's
| all about? Sorry to break it to the author but he seems to imply
| that Bitcoin is a privacy oriented electronic currency. It has
| never been "private". The whole ledger is public. If you don't
| like it, don't use it. You have Monero, Dash and Zcash and
| Bitcoin mixers if you wanna deal with ecurrencies without anyone
| being able to trace you.
| zepto wrote:
| > Paper bills also have a distinct history.
|
| No they don't. Nobody records the serial numbers of each bill
| they receive and pass and who they got it from and gave it to,
| in a publicly accessible ledger.
| PragmaticPulp wrote:
| > What? How's 1 BTC is not fungible [to another BTC] unless
| you're wanna hide your bitcoin transaction history?
|
| I think you're deliberately ignoring the entire point that the
| article is making. The fact is that tainted transactions are
| becoming a thing as exchanges realize that they need to do
| something about addressing theft and fraud.
|
| It's not even about your own transaction history. Assets
| acquired illegally, including Bitcoin, and and will be seized
| even after they change hands several times.
|
| Unless you mined the Bitcoin yourself (not through a pool,
| literally generates the block yourself) then it has a history
| attached that involves other people.
| toolz wrote:
| > that involves other people
|
| well if we're going this abstract then everything everywhere
| involves "other people".
|
| Pragmatically mining, even through a pool does not show who
| you are or who you are associated with as no one can
| associate you with anyone if they can't associate your coins
| with you.
|
| This idea that exchanges will stop handling coins from
| flagged addresses is nonsense - DEXes already solve that
| problem anyways, so an exchange will be willingly giving up
| business for legit customers who may have happened upon a
| coin with a less-than-legit history and they'll do nothing to
| prevent money with illicit history from making its way onto
| their platform.
| vintermann wrote:
| Distributed exchanges by their nature only trade one type
| of crypto-asset for another. The problem always comes when
| you try to move value out. Whatever you trade for in your
| DEX, if you want to buy a house with it you'll need to be
| able to account for how you got it.
|
| Those who enforce money laundering laws don't mess around:
| If your money is clean, you're just shooting yourself in
| the foot by erasing the record of how you got it.
| toolz wrote:
| I'm in the process of buying a house, haven't had to
| prove a single thing after I traded into fiat and if I
| had really wanted to I could have traded into fiat via
| direct trades using sites like localbitcoin.com or
| similar.
|
| Guilty until proven innocent is an untenable practice if
| you want to run a profitable business. The market will
| sort out any ridiculous practices that makes you prove
| you haven't laundered in order to participate in a market
| and as I've said, the alternatives already exist.
|
| edit: as for DEXes that's my whole point, you trade a
| crypto with "bad history" for a crypto without bad
| history and just like that even the strictest exchanges
| will happily give you an off ramp into fiat
| vintermann wrote:
| > haven't had to prove a single thing
|
| Even in your jurisdiction, you may soon have to. From the
| linked article, you can infer that you got lucky - your
| attempt to cash out might have been stopped by an
| exchange, if you did it a little later or with a little
| dirtier coins.
|
| > and if I had really wanted to I could have traded into
| fiat via direct trades using sites like localbitcoin.com
| or similar
|
| Good luck meeting random strangers and trading BTC for
| cash with them safely AND anonymously. You're lucky if
| you get even one of those two.
|
| > Guilty until proven innocent is an untenable practice
|
| Tell that to financial crimes investigators, whatever
| they're called where you live. As I said, they don't mess
| around. They're not reasonable. The price for operating
| in the legal economy is that you have to be able to
| account for your assets. The exchanges don't do this
| because they want to, but because they have money
| laundering cops breathing down their necks - and you will
| too, if you're silly enough to try to cash out
| significant amounts through localbitcoin or similar.
| toolz wrote:
| > Even in your jurisdiction, you may soon have to
|
| and as I've stated, using a DEX to trade from dirty coins
| into clean coins is cheap and simple. I think this whole
| thing is just paranoia, but in the event it actually does
| become an issue for law abiding citizens (such as myself)
| the market has already accounted for the nonsense and
| given me an avenue to continue to operate effectively and
| legally.
|
| > Good luck meeting random strangers and trading BTC for
| cash with them safely AND anonymously. You're lucky if
| you get even one of those two.
|
| I've done both frequently and with nothing but success -
| I'm wondering if you've had experiences otherwise as I
| know plenty of people who use that site and have had
| nothing but success.
|
| > if you're silly enough to try to cash out significant
| amounts through localbitcoin or similar
|
| I'm sorry, what are you talking about? Legitimate
| services with legitimate clean money is not silly.
| vintermann wrote:
| > using a DEX to trade from dirty coins into clean coins
| is cheap and simple
|
| Cheap, but not free. You're paying a premium. Which
| illustrates the article's point.
|
| As exchanges are reined in, and off-the-record bitcoin
| for cash trades are cracked down on (google "localbitcoin
| arrests" to get an idea - that should also answer your
| two other lines), this premium will grow, and it may well
| grow enough to make the whole thing impractical.
| toolz wrote:
| so if trading USD into other currencies isn't free then
| USD isn't fungible? I'm not following your point
| telomero22 wrote:
| Ok, but you have the same thing with gold or any other
| "fungible" asset that will be traced to you if you don't take
| measures to obfuscate the trace.
|
| Gold has a real world trace that can be found out by simply
| asking intermediaries and numerous other means, Bitcoin has a
| digital trace, it's not that different.
|
| It's very difficult to make sure that the history of where
| that gold you got came from and to whom you sold it to is
| 100% erased.
| ricardobeat wrote:
| It's completely different. If no exchange will let you
| withdraw or accept coins from a mixer, how do you "take
| measures to obfuscate the trace"?
|
| Gold is literally untraceable. Nobody can stop you from
| smelting and selling it as you like.
| everfree wrote:
| In practice, there will always be at least one exchange
| that lets people trade coins that are tainted by some
| measure, because that particular exchange's idea of taint
| does not implicate the history of their coins.
|
| Once a person trades coins at that exchange (perhaps even
| into a different cryptocurrency for additional
| obfuscation), then in the eyes of the other exchanges
| those coins will become disconnected from the activity
| they are trying to hide.
| twic wrote:
| > By whom?
|
| By hyperhopper, for one:
| https://news.ycombinator.com/item?id=30156253
|
| I think it's a pretty widespread belief amongst people who
| haven't yet learned about tainting (as i myself only did a few
| weeks ago).
| matheusmoreira wrote:
| > What? The value is the same.
|
| Nope. It's impossible to cash out a tainted bitcoin since it
| cannot be deposited at exchanges. Its value is essentially
| zero.
|
| > How's 1 BTC is not fungible [to another BTC] unless you're
| wanna hide your bitcoin transaction history?
|
| Every bitcoin can be distinguished by its transaction history.
| If you try to use a mixing service, that fact will be known and
| the resulting bitcoins will be tainted. Exchanges will assume
| they are laundered funds.
| everfree wrote:
| > It's impossible to cash out a tainted bitcoin since it
| cannot be deposited at exchanges. Its value is essentially
| zero.
|
| Given the limitless number of cryptocurrencies coupled with
| the limitless number of exchanges, there will always be some
| series of hops that someone can make between cryptos such
| that by the end, there is no amount of algorithmic analysis
| your exchange can perform that will automatically connect the
| coins and block them. Manual intervention would be required,
| by a privileged law enforcement expert who is personally
| tracking that value across novel and disparate networks using
| domain-specific knowledge.
| ahtihn wrote:
| > Its value is essentially zero.
|
| No it's not. It's worth a bit less than face value, but you
| can cash it out by swapping to other cryptos.
| matheusmoreira wrote:
| And why would anyone ever accept tainted bitcoin in
| exchange for anything?
| everfree wrote:
| Because everyone's definition of taint is different, and
| coming up with a globally recognized universal definition
| of taint is logistically impossible.
|
| To you, you might be trying to break your link with a
| Bitcoin mixer by wrapping those bitcoins and uniswapping
| them for a different asset on Ethereum.
|
| To me, I simply went to Uniswap and bought some wrapped
| bitcoins, then deposited them on a traditional exchange.
| vintermann wrote:
| The cryptocurrencies that "fix" this problem vary in the
| cryptographic tricks they use, but it all boils down to drafting
| everyone to act as fences as a condition of partaking in the
| system at all.
|
| It's a technical solution to a social problem. It won't work. You
| can always move value in, but out is another matter. Trading your
| Monero (or whatever) for legal-economy assets or currency may be
| criminalized any day.
| matheusmoreira wrote:
| > it all boils down to drafting everyone to act as fences as a
| condition of partaking in the system at all
|
| Indeed. Monero uses ring signatures: every transaction is
| signed by 11 users and it's impossible to know which signature
| was responsible for the transfer.
|
| https://www.getmonero.org/resources/moneropedia/ringsignatur...
|
| https://www.getmonero.org/resources/moneropedia/ring-size.ht...
|
| > You can always move value in, but out is another matter.
|
| The ideal outcome is we start using Monero for everything.
| There should be no need to ever move value out.
| zozbot234 wrote:
| Isn't that the _definition_ of fungibility? Every user of
| currency is implicitly a "fence" for every other user.
| vintermann wrote:
| No. Oil is fungible too - any barrel of a given grade is
| treated the same any other - but that doesn't mean oil buyers
| and sellers are fences for each other.
|
| What you're thinking of is the "current" aspect of currency.
| That when I take payment for a bagel in my shop, I don't need
| to worry that the money used to pay me was stolen, I still
| get to keep it.
|
| But this is a social, legal concept, not a technological one.
| Calling it a currency won't make it current. Fungibility
| doesn't make anything current either (if I was stupid enough
| to take payment for a bagel with a barrel of oil, I WOULD
| have to return it if it turned out it was stolen. I should
| have known there was something fishy!). No amount of
| cryptographic cleverness can force society to treat it as
| current.
| ineedasername wrote:
| I'm pretty sure cash falls into the "stolen goods"
| category, and you don't get to keep them even if you didn't
| know they were stolen. You'd have to give the bagel cash
| back just as much as the barrel of oil.
|
| (Well, in my jurisdiction. Source: family member is a
| lawyer)
| vintermann wrote:
| Traditionally, you wouldn't have to, though - that's why
| they called it "currency", because it is "current".
|
| I believe it still works that way for bagel-level money
| in most parts of the world. If it's higher amounts, I'm
| not sure - you certainly have a lot of due diligence
| obligations, and if you didn't do them you certainly lose
| it (and you will be in trouble, too).
| ghostly_s wrote:
| You actually can be compelled to forfeit money paid to you
| if it is found to be stolen (in the US, anyway).
| Brian_K_White wrote:
| Cash has serial numbers printed on it.
| pyrale wrote:
| No, that's a consequence of fungibility in the context of
| some privacy uses, not its definition. The definition of
| fungible items is that you can mix them without altering
| their properties.
|
| Fungible items can be used as a commodity, for instance: if
| two people buy cereals, they may use the same silo to spare
| on warehousing costs.
|
| Fungibility is always true within a limited context, though.
| Examples of failed fungibility include Amazon comingling
| genuine products with fakes, or, to draw from the previous
| example, cereals from different areas will likely have
| different gluten or humidity rates, and while producers from
| an area may share a silo, the buyer may keep the same cereal
| from different geographic areas separated. Another example is
| electricity, with power being fungible in terms of who puts
| it in, but absolutely not when it comes to when power is
| provided.
| [deleted]
| lifewallet_dev wrote:
| Well, this argument falls whenever you try to use Bitcoin P2P
| (user to user shouldn't care where the coins come from) or with
| P2P exchanges like Bisq or Local Bitcoin.
|
| Now that's a different universe than what OPs lives (just by the
| fact Bitcoin goes up and down in fiat value would be enough to
| make it "non-fungible" by that logic), but I can assure you many
| of us exists.
|
| And I'm not even mentioning how Lightning Network fixes this as
| well, making coins very hard to impossible to track.
| magicjosh wrote:
| Got an article on how Lightning fixes this?
|
| This article is alarming to me as a normie user. I'm curious
| about going off the big exchanges and using my coins. What if I
| receive crypto through OpenSea that Coinbase deems soiled?
|
| Although I don't like it, I could see private verification
| service popping up for P2P. "We make sure the coins are good
| before the transaction goes through".
|
| Makes me wonder how much of a "walled garden" Bitcoin is. Sure,
| hold it on exchanges all you want, but don't try to use it or
| we lock your account.
| therein wrote:
| It is no different than depositing to an exchange that
| doesn't do this and then withdrawing. Or some other service
| with a centralized wallet.
|
| That being said, those outputs will simply become someone
| else's problem later on, in limbo created by the uncertainty
| on whether them being held by an exchange clears their past
| history or not.
| darawk wrote:
| That would stop being true for P2P if exchanges started
| blocking tainted coins, though. If that happened at scale, then
| P2P users would have to start validating themselves before
| accepting them, which is a real privacy nightmare. Of course,
| eventually exchanges will start blacklisting anyone with a
| mixer in their history, too.
| advisedwang wrote:
| I think it basically still holds - I wouldn't want the bitcoins
| from someone I suspect got them from crime, knowing they could
| be traced forward and cause problems for me.
| rglover wrote:
| For the sake of consistency, would you say the same thing
| about paper/fiat currency?
| mypastself wrote:
| I'm not the person you're responding to but yes, if the
| transaction history of tainted cash was publicly available
| and easily traceable, I'd be vary of receiving it.
| wmf wrote:
| At least in the US, paper money is exempt from _nemo dat_
| but crypto isn 't.
| https://en.wikipedia.org/wiki/Nemo_dat_quod_non_habet
| advisedwang wrote:
| If I sell my couch for paper money to a someone that got
| that money through a crime or in violation of a sanction, I
| don't realistically have to worry that someone could try
| and claw back that money from me by tracking the payment.
|
| Paper money has serial numbers, but likely nobody record
| them during the criminal transactions. Even if they KNOW
| which serial numbers are involved in a crime (maybe they
| robbed the mint), there's no database that tells them I
| have that note now and no infrastructure to catch someone
| from spending it.
|
| (Of course perhaps the money is clawed back because there's
| text messages on the criminal's phones about buying the
| couch. But that's another story)
| danlugo92 wrote:
| Web3 + Lightning fixes this.
| Brian_K_White wrote:
| This aversion to "mixing" is interesting.
|
| When my pile of $20 bills with serial numbers on them gets
| converted into $100 bills with other serial numbers, and my $100
| came from some place that collected $20s from other people, is
| this not exactly the same mixing?
|
| I feel like there are people in all governments who are thinking
| all day every day "Yes, and we are working on this insane hole in
| our control as hard as we can and the day is coming close when we
| can finally outlaw cash."
| capitalsigma wrote:
| I imagine it is very hard to launder, say, $320 M
| (https://www.cnbc.com/2022/02/02/320-million-stolen-from-
| worm...) in cash. Google says that a $20 bill weighs about 1
| gram, so 320 M / 20 = 16,000 kg or ~3.5k lbs. About the weight
| of a car.
| acdha wrote:
| I think it comes down to scale & other means of controlling
| illegal activity. They don't need to ban changing $20 bills if
| they're fairly comfortable that e.g. banks are going to ask
| questions if you show up with a suitcase full of them.
|
| Scale also matters because it's hard to ramp up businesses: the
| mafia can't claim that their restaurant is doing $100M/year in
| sales so there are going to be more people involved (i.e.
| chances for the police to find an in) and they can focus on
| businesses which do tons of anonymous transactions.
| skybrian wrote:
| It seems like a matter of degree. To what extent do people treat
| it as fungible? Will that change?
|
| For example, paper money has serial numbers. In theory, it could
| be tracked. ATM's could record serial numbers with accounts for
| any cash they give out. Stores could scan all the money they get
| for serial numbers, looking for counterfeits. Maybe they could
| share data to discover interesting trends?
|
| In practice, it would be hard with banks and stores acting as
| mixers as part of ordinary business. It's easier to track things
| with Bitcoin.
| TekMol wrote:
| Can Bitcoins still be tainted now that the Lightning Network is a
| thing?
|
| Sending them through a Lightning Channel would make them
| disappear without a trace, right?
| javert wrote:
| I don't think so. I think you're likely to get tainted coins
| out of lightning, even if the coins you send in are untainted.
| jonathan-adly wrote:
| Monero is too good at evading government surveillance. It will
| never be allowed to reach critical mass of usage to survive as
| the premier cryptocurrency.
|
| It will continue to have a role and prosper next to Bitcoin
| though. We need both. One to decouple from government control,
| and the other to evade surveillance.
|
| It's a well-known secret that you can change your Bitcoin to
| monero, then the Monero back to Bitcoin to "wash" your Bitcoin.
| Also, with enough time, all the Bitcoins would be dirty.
|
| P.S. don't bother responding if you are coming from the privilege
| of never having lived under a terrible government.
| magicjosh wrote:
| For those interested in mixers, I'm just starting this episode
| of the Zero Knowledge podcast myself:
|
| Mixers with Tornado.cash
|
| https://zeroknowledge.fm/111-2/
| matheusmoreira wrote:
| > It will never be allowed to reach critical mass of usage to
| survive as the premier cryptocurrency.
|
| Why? How are they going to keep it down?
|
| I will keep talking about it and trying to use it. Actually
| managed to get paid with it once. Ironic that the one coin
| that's actually usable as currency remains obscure.
| whimsicalism wrote:
| Did you manage to convert that pay to fiat?
| smt88 wrote:
| El Salvador and China have shown us that Bitcoin is not
| sufficient to evase government control.
|
| Also, exfiltrating value via crypto is not sufficient for most
| people in oppressive countries. The overwhelming majority need
| to be able to spend the money locally, which isn't possible in
| any oppressive country except El Salvador.
| mathverse wrote:
| Crypto is de facto banned in China and yet I see an
| incredible amount of chinese even those working for state
| owned corporations trading crypto. Even openly with their
| profile pics on Twitter. China is sometimes too ridiculous
| for me to understand.
| jonathan-adly wrote:
| China is a perfect example. A Chinese citizen only needs a
| VPN and USB drive to exit the highly-controlled digital yuan
| and put his savings in Bitcoin. When he needs to get to a
| local currency or USD, a P2P exchange like Bisq would do it.
|
| The other person at Bisq would simply wash his bitcoins
| through monero - and that would be that.
|
| Not only its good for Chinese citizens, it is very good for
| western democracies to funnel money to opposition figures in
| hostile countries (or plain old spies). In a world where the
| digital Yuan reigns supreme (where everything is monitored),
| would the US want to pay a Chinese spy in paper USD, washed
| bitcoins, or digital yuan?
| kragen wrote:
| How does exiting the highly-controlled digital yuan work?
| jonathan-adly wrote:
| I have x amount of savings of Yuan. I keep 6 month
| expenses in Yuan and the rest in Bitcoin.
|
| When I need to make an unapproved transaction (donating
| to a Muslim charity if you are a Yighur for example). I
| go through the hassle of using Bitcoin, either directly
| or after changing to USD by P2P exchange.
| olah_1 wrote:
| > It will never be allowed to reach critical mass of usage to
| survive as the premier cryptocurrency.
|
| Monero is getting to the point where it will not need
| permission.
|
| It will soon be added to the decentralized exchange Thorchain.
| On top of that, the Haveno project is making great progress and
| will be a Monero version of Bisq.
|
| Thorchain will be swaps that don't require specific orders,
| much higher liquidity. Haveno is the traditional platform where
| someone puts out an order and someone buys that exact amount.
|
| Oh and I almost forgot about regular atomic swaps which also
| exist today.
| mateuszf wrote:
| > It will soon be added to the decentralized exchange
| Thorchain.
|
| I've heard about XHV and Monero being added to Thorchain a
| year ago, described as coming soon. Somehow it feels more
| like marketing than a real thing.
| Barrin92 wrote:
| >Monero is getting to the point where it will not need
| permission.
|
| If you're interested in actually using your currency for
| anything in the real world other than swapping it for other
| cryptocurrency you'll always need permission.
|
| If I want to go to the supermarket and pay with Monero that
| will require that legislators deem Monero a legitimate
| currency.
|
| https://xkcd.com/538/
| olah_1 wrote:
| > If I want to go to the supermarket and pay with Monero
| that will require that legislators deem Monero a legitimate
| currency.
|
| A lot of people use giftcards. That's what people do with
| bitcoin too.
|
| > https://xkcd.com/538/
|
| Completely irrelevant to this conversation.
| kingo55 wrote:
| I've been paid for work in Monero before. It's not a far
| stretch.
|
| As long as governments begin to accept Bitcoin, it becomes
| trivial to accept altcoins because they're often easily
| exchanged for Bitcoin.
| garren wrote:
| This is news to me. I'm not super informed regarding
| cryptocurrencies, but it seems like this would also affect erc-20
| "fungible" tokens on Ethereum, wouldn't it? Do such tokens not
| also have traceable histories?
| scyclow wrote:
| I wouldn't think so. BTC uses an unspent transaction output
| model, which is like breaking up a plot of land into smaller
| pieces, and treating each square inch as fungible. ERC20 tokens
| are based on an accounting model, so you're just incrementing
| and decrementing balances -- nothing to trace there.
| olalonde wrote:
| The "accounting model" is even easier to trace, I'm not sure
| what you mean by that. For example, here are all USDT
| transactions: https://etherscan.io/token/0xdac17f958d2ee523a2
| 206206994597c...
| magicjosh wrote:
| I never thought of it that way. I wonder what the article's
| author thinks about Ethereum's privacy.
| olalonde wrote:
| Yes, Ethereum is even worse for privacy because it doesn't
| allow CoinJoin style mixing.
| tromp wrote:
| Monero pays a large price for its fungibility, by making the UTXO
| set of (potentially) unspent outputs equal to the set of ALL
| outputs. Whereas synced bitcoin full nodes can forget all about
| spent outputs, Monero full nodes must keep some info about them,
| and be able to efficiently index this info.
|
| For its initial block download, a node must download and verify
| rangeproofs for all outputs, not just the unspent ones.
|
| Wallets must be able to sample decoys from a large fraction of
| all historical outputs.
|
| This makes Monero much more bloated than Bitcoin.
|
| A more detailed comparison between Monero and Bitcoin can be
| found at
| https://gist.github.com/phyro/ec37d8bfedd36102b0ea5824580d06...
| vmception wrote:
| Hop into a lightning channel and then back out in a different
| address. That should theoretically work to break these heuristic
| models right?
|
| Exchanges are using software that assigns a threshold to each
| address' inputs or funds. You can easily trick the threshold.
| 28194608 wrote:
| what if the output of lightning came from mixed coins?
| toolz wrote:
| What if every coin is mixed, eventually? You think exchanges
| will just shutdown their bitcoin trades and throw away their
| likely biggest revenue stream?
| matheusmoreira wrote:
| Exchanges are already prejudiced against "unhosted"
| wallets. I think they'll eventually stop accepting deposits
| from any source other than other well known exchanges.
| toolz wrote:
| I've moved "unhosted" coins into at least 5 different
| exchanges at this point with zero issues.
| cliftonk wrote:
| Output of a lightning channel is almost certainly more likely
| to contain mixed coins. The UTXO model is hopelessly
| outdated.
| toolz wrote:
| I strongly disagree, UTXO model will be necessary to scale
| smart contract platforms in the future as the account model
| will never hold up with the necessarily expensive sync
| operations it performs.
|
| UTXO model, or a derivative will win out when it comes to
| distributed blockchains that can scale way beyond current
| distributed blockchains capacity.
| kevinak wrote:
| Even better: never leave The lightning network and you'll never
| really have these issues
| Ekaros wrote:
| Now I wonder would it be possible to taint all big players and
| pool productions by some action? How much would this cost in the
| end?
| zozbot234 wrote:
| It's not just possible, it's arguably the very threat that's
| driving this unraveling of the market in the first place.
| Because every large player will then seek to reject "tainted"
| coin/transactions, lest they be tainted in turn.
| magicjosh wrote:
| The article mentions an account frozen after a deposit from a
| "far-right donor". I wonder how cryptocurrencies will fill the
| void left by platforms like GoFundMe. GoFundMe apparently just
| locked a $10M campaign as it violated their terms and conditions:
| https://www.opindia.com/2022/02/gofundme-removes-campaign-tr...
| [deleted]
| ferdowsi wrote:
| GoFundMe is a facilitator for fundraising efforts. If someone
| wanted to start a far-right crowdfunding site they could
| without involving digital gold.
| darawk wrote:
| Or we could just have a politically neutral monetary system
| in the first place. Imagine that.
| cortesoft wrote:
| I mean, we do? Dollar bills are politically neutral.
| wyldfire wrote:
| The money's pretty neutral but brokers like GoFundMe aren't
| and IMO shouldn't be compelled to be.
| darawk wrote:
| I agree with that, except in cases where the number of
| brokers is small and monopolistic. That's not strictly
| true for platforms like gofundme, but it is true for
| payment processors, who are the real choke points in the
| ecosystem.
|
| My issue with Gofundme isn't that they aren't politically
| neutral, it's that they took the money first, and _then_
| just decided to hold it hostage. Had they not accepted
| the trucker 's money, or just refunded all the donors, or
| disbursed the funds to the org and then refused to accept
| anymore, any of those things would have been fine. But
| what they are doing here is tantamount to theft, and that
| I do believe brokers should be compelled not to do.
| [deleted]
| joelbondurant1 wrote:
| timeon wrote:
| This rules out Bitcoin.
| notreallyserio wrote:
| IIRC that's what Hatreon was intended to do, provide
| crowdfunding for far-right organizations, but it shut down. I
| wonder if it would have been successful if it went with
| Bitcoin instead of relying on Visa et al.
| magicjosh wrote:
| I had not heard of Hatreon so went looking.
|
| According to a few sites, Visa shut them down. After that
| Hatreon didn't (yet) get another payment processor setup.
| Their homepage [1] says: "This site's services were
| suspended by VISA in November of 2017."
|
| Kicking alt-right people off platforms is a band aid
| solution. A storm is forming that will explode at some
| point. You can't just silence people like that an expect
| good outcomes long term.
|
| I imagine the next big wave of cryptocurrency use will be
| by alt-right users. They're coordinated, resourced, and
| tech savvy enough.
|
| Crypto-enabled Spotify, crypto-enabled Patreon/Kickstarter,
| Crypto-enabled YouTube...basically writes itself at this
| point. I wonder if there's an alt-right HackerNews out
| there already.
|
| [1] https://hatreon.net/
|
| Also the founder is the 3D printed gun guy!
| magicjosh wrote:
| My understanding is a lot of interesting stuff gets blocked
| at the payment processor level. So far-right dildos, drug
| parphanelia etc may have issues that cryptocurrencies solve.
| If you've never tried to break the rules it's easy for this
| stuff to be invisible.
|
| Here's a post from Stripe on this issue:
|
| "Behind the scenes, we work closely with payment networks
| (such as Visa and Mastercard) and banking partners across
| more than two dozen countries. Each institution has strict
| legal regulations that govern them and specific rules about
| the types of businesses they do and do not work with."
|
| https://stripe.com/blog/why-some-businesses-arent-allowed
| mullingitover wrote:
| "Bitcoin has these problems because coins that have been through
| mixers are tainted [lists examples of coins being tanted]. So use
| Monero, where the entire cryptocurrency system is a huge mixer."
| pmontra wrote:
| All of this is new to me. So there are almost two Bitcoins, clean
| BTC and tainted BTC. If merchants can check if the history of a
| coin is clean or tainted they could refuse the sale or ask a
| higher price to hedge the risk of not being able to use the coin.
| Is there any service like that? Is that double prices dynamic
| already happening?
|
| Mining creates clean BTC, anything else risks tainting them. I
| expect that the ratio between prices in tainted / clean BTC will
| grow if the set of tainted coins increases compared to clean
| ones.
| toss1 wrote:
| Which means that if you really want to clean dirty BTC, you
| need to simply use it to pay for miners, then mine clean BTC.
| vmception wrote:
| > I expect that the ratio between prices in tainted / clean BTC
| will grow if the set of tainted coins increases compared to
| clean ones.
|
| I don't. I expect the absurdity will become more clear and make
| the whole attempt to flag them irrelevant.
|
| for example, after a national or municipal government seizes
| bitcoin under some semblance of due process or even an actual
| criminal charge and reauctions them, we are supposed to pretend
| those bitcoins are magically clean? do all the exchange
| softwares update to know that? they still have the transaction
| history from the event that flagged them to begin with. the
| answer is easier when it involves a government you respect like
| when the US Marshalls auction off a drug kingpin's seized
| bitcoin. but what about a government you don't respect? welp a
| sovereign nation seized it so they're clean now. If so, some
| random jurisdiction with some level of sovereignty can just
| become the bitcoin washer as a service, if not then exchanges
| are acting too arbitrarily and are going to lose business for
| no legal reason. Exchanges flag bitcoin to stay within an
| imagined impending compliance burden of being able to prove
| they don't accept dirty money. If they flag bitcoin with the
| clearest outcome of having been seized by the state and
| reintegrated into the economy, then they have made a hopeless
| error. People with ambiguously acquired bitcoin already have a
| dozen ways of getting it into bank accounts and cash, and will
| have even more in the future. So it's just the merchants and
| exchanges that have to make sure they are attracting business.
| For those reasons I don't see a separate exchange rate forming,
| its an average of fungibility that leads to the same result.
| xiphias2 wrote:
| Trezor also added KYC: https://cryptonews.com/news/trezor-
| ditches-controversial-kyc...
|
| It's a strange thing, because I always thought of Slush as a
| great guy who understands the importance of fungibility (and he
| was the main reason I bought Trezor instead of something else),
| but the company changed over time.
| magicjosh wrote:
| Wow lots to unpack there.
|
| For those reading, the title says "Trezor Ditches a
| Controversial KYC Feature, Plans Features to 'Cut Off
| Regulatory Overreach'"
|
| Apparently Trezor added a KYC system called AOPP. Then
| backlash. Then they said they would roll it back (as of the
| article).
|
| Have they rolled it back yet? They said it will be rolled out
| in February. Edit: Trezor blog post about the rollback here:
| https://blog.trezor.io/a-decision-on-aopp-789540c2930b?gi=f3...
|
| I always wondered what Trezor's fundraising plan is. My guess
| is once they started to see the money come in from taking fees
| they started to say "we'll be the next Coinbase!!!".
|
| Do you have any more analysis of this addition to Trezor? As a
| Trezor user, this reminds me of Apple's push for on-device
| scanning. That Trezor even added this feature temporarily has
| me looking for alternatives. Anyone have suggestions?
| xiphias2 wrote:
| ColdCard is coming out with a new version, I just listened to
| an interview with him by Stephan Livera, and he seems like a
| person with integrity if you are looking for BTC only wallet.
|
| The only problem for me in practice was that the red light
| was blinking instead of the green, which shouldn't have been
| happening (I reflashed the software on the device in my
| multisig setup, which I decreased the trust somewhat). If I
| would have been more patient, I would have sent back the
| device for a replacement.
| magicjosh wrote:
| I will check out ColdCard again, thanks! Last I checked
| they were Bitcoin-only. edit: still bitcoin-only
|
| Seems like Trezor "blinked" here and tried to keep everyone
| happy. I wonder if Block/Square is going to eat Trezor's
| lunch by providing a badass wallet for people that don't
| care about KYC. And then ColdCard will be for users that
| are strictly anti-KYC. And Trezor gets stuck in the middle
| and goes out of business.
| xiphias2 wrote:
| I'm Bitcoin only as well, and Block/Square hardware
| wallet will be the same, so it probably won't be good for
| you either.
|
| There are lots of features in Bitcoin that are important
| and not addressed by mixed wallets because of the lack of
| development time, so these two types of wallets are
| getting separated by the market (which I see as a good
| thing both for Bitcoiners and mixed-coiners).
| wcoenen wrote:
| The core bitcoin wallet has a "signmessage" API call that can
| be used to sign a message with the private key behind an
| address, thus proving ownership of the address. So it seems to
| me that by this logic, the core bitcoin wallet also "has KYC".
|
| edit: in fact that AOPP thing appears to be just a thin layer
| on top of signmessage. https://gitlab.com/aopp/address-
| ownership-proof-protocol/-/b...
| Andrew_nenakhov wrote:
| I'll do you one better. Send a few tainted sats to a non-empty
| address of a person you don't like, and hurray, his coins are now
| tainted, giving him endless headache.
| ______-_-______ wrote:
| Something similar has been done trying to deanonymize wallet
| owners. It's called a "dusting attack". In theory you can
| protect yourself by manually choosing which outputs to spend
| when you're building a transaction.
| sharperguy wrote:
| Nowadays most wallets will let you choose which UTXOs to spend
| so you can simply choose not to spend those.
| Andrew_nenakhov wrote:
| That is a major pain/inconvenience, and also who knows what
| setting the antitainting mechanics will look like in the
| future, can very well make all your money compromised in the
| future.
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