Hacker News Reader

Comment by ef4 | Hacker News Reader

His point on trace-ability is true, and one that lots of Bitcoin supporters don't fully appreciate. The system is not anonymous. It is pseudonymous, which is not nearly the same thing.

Here's some interesting work on getting to real anonymity:

http://blog.cryptographyengineering.com/2013/04/zerocoin-mak...

View on HN

I'm no bitcoin expert, and you seem to be more knowledgeable than me, so I have a question regarding this trace-ability. As far as I understand it, every transaction is essentially a digitally-signed source/dest/amount tuple. Where source and dest are bitcoin wallet addresses. These wallets/addresses can be created and destroyed at any time. So if I transfer bitcoins to a wallet/address I generated that we'll call wallet1. And then later transfer those bitcoins to another wallet I generated we'll call wallet2. If I now delete wallet1, how is the flow of bitcoins traceable?

It's entirely possible that were discussing two types of traceability here. The traceability of bitcoins from wallet/address to wallet/address will always be possible. But the wallet/address to owner traceability seems impossible. But maybe I'm misunderstanding.

Wallet/address to owner is potentially traceable when you sell coins for cash, as that money has to go to a real account somewhere. I think that's the point the author is making when he says none of the stolen coins have been spent yet. I'm wondering though, if there's anyone watching these stolen coins to see when they change hands. It seems like it would be fairly simple to flag certain addresses as "in possession of stolen goods" and ban them from trades on major hubs.

But that "real account" is no more than numbers and letters, i.e 1AfGbnmksjdk. Or do you mean once they transfer the sold bitcoins to a real bank account?

The latter.

That's correct. That's why it is pseudonymous. You just have to make sure that any addresses you use can't be traced back to you.

Following your example, the act of transferring bitcoins from wallet1 to wallet2 is made public, as part of the blockchain.

Put simply: when sending bitcoins, you must send from the address that received them. You cannot, for example, receive bitcoins on one address, create a new address, and then send those same coins from that new address. You have to essentially "pay" that new address from the first address, and that action is public and traceable.

Reply on news.ycombinator.com