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A comment on US Law Enforcement Traces Bitcoin Transfers to Nab ‘Largest’ Child Porn Site. Parent comment

Re:US Law Enforcement Traces Bitcoin Transfers to Nab ‘Large... by thaumasiotes on Wednesday October 16, 2019 @06:42PM (#21276808)
Interestingly, as far as I understand it, the bitcoin protocol does not technically allow bitcoins to be combined, only split. The blockchain records transactions (balance transfers, basically) sourced from other transactions, so any output of the mixer wallet is conceptually traceable right through the mixer back to the input wallet[1]. There is an explicit link in the protocol.

Now, the rules of operation of the mixer may (and in practice, definitely do) invalidate that link in reality, but it still exists in the protocol and can be the subject of legislation.

[1] For example, if the mixer wallet is created with nothing and receives 100 BTC from 8 other wallets, there's no record that looks like "Mixer Wallet: 100 BTC". Instead, there's a set of records that looks like this:

    Mixer received 52 BTC from tx 5d41 [which deposited 2,000 BTC in Kingpin]
    Mixer received 20 BTC from tx 402a [which deposited 20 BTC in Whore]
    Mixer received 10 BTC from tx bc4b [which deposited 100 BTC in Hitman]
    Mixer received 13 BTC from tx 2a76 [which deposited 2,000 BTC in Kingpin]
    Mixer received  5 BTC from tx b971 [which deposited 8 BTC in Smuggler]
And payouts from the mixer create records that are in turn explicitly sourced from those. This mixer can't pay out more than 52 BTC in a single transaction, because that is the largest single amount it received.
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Re:US Law Enforcement Traces Bitcoin Transfers to Nab ‘Large... by hnick on Wednesday October 16, 2019 @07:05PM (#21277016)
I think the idea is you'd have mixers for each denomination e.g. 5 BTC, 100 BTC, etc, and you'd just send that amount so everyone gets the same payout and you can't tell clean coins from dirty.

Which IMO just makes everyone liable, the law usually doesn't look favourably upon intentionally tricky bullshit.

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Re:US Law Enforcement Traces Bitcoin Transfers to Nab ‘Large... by thaumasiotes on Wednesday October 16, 2019 @07:24PM (#21277181)
The denomination doesn't mean much. When the mixer pays out 5 BTC, it must source those 5 BTC from a transaction that gave at least 5 BTC to the mixer. In the example, that's all of the transactions, but if you wanted to pay out 15 BTC at once, you'd be limited to the first two.

A transaction has only one source, so that payout is obviously attributable to the source transaction. If the mixer gave you 5 BTC from Whore, you're holding Whore bitcoins. If the mixer gave you 5 BTC from Kingpin, you're holding Kingpin bitcoins.

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Re:US Law Enforcement Traces Bitcoin Transfers to Nab ‘Large... by cortesoft on Wednesday October 16, 2019 @10:22PM (#21278368)
The idea is that 100 people put in the 5 bitcoins, then each of those 100 get back 5 bitcoins to a different address... yes, you can track the bitcoins themselves, but you don't know which of the new wallets belonged to which of the old wallets... the 5 tainted bitcoins (from an illegal activity) might end up going to a totally different person who had nothing to do with the illegal activities.

In your example, the original owner of the whore coins would end up with the kingpin coins and vice versa.

It is described here: https://en.wikipedia.org/wiki/Cryptocurrency_tumbler

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Re:US Law Enforcement Traces Bitcoin Transfers to Nab ‘Large... by thaumasiotes on Thursday October 17, 2019 @03:03AM (#21279594)
Yes, I understand this idea, and it is what I mean when I say that the rules of operation of the mixer invalidate the link -- in reality -- between the coins that you got from a mixer (post-mixing) and the coins that were given to the mixer (pre-mixing).

But the protocol doesn't reflect the reality of the mixer; the mixer is built on top of the protocol. Within the protocol, those coins are still linked, allowing perfect tracking of coins as they pass through the mixer.

You can argue in court that your kingpin coins aren't really kingpin coins, but you'll always be hamstrung by the evidence. What you really have are plainly-labeled kingpin coins and an admission to purposefully receiving contraband.

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