Friday, October 4, 2013

"Only the Dumbest Criminals Use Bitcoin"

Yesterday afternoon, I met with a key insider in the Bitcoin world. He's a major player who is going to take Bitcoin to the next level, by making the purchase of bitcoins a much easier transaction.

Early on, our conversation turned to Ross Ulbricht, the alleged operator of Silk Road, who was arrested earlier this week by the FBI. While not having specific application to the clues the FBI followed to nab Ulbricht, this insider told me that it is only dumb criminals that use bitcoins.

As I have pointed out here many times, bitcoins are not anonymous and in fact are very traceable. My insider reminded me that unless very extraordinary measures are taken, an individual's entire Bitcoin use can be traced back to the start.

He put it to me this way, "If you buy drugs on the street and you are caught, that is one single transaction law enforcement has you for. If they catch you buying drugs via Bitcoin, it is very likely law enforcement will be able to trace back every transaction you ever made with Bitcoin." Not a very bright move.


  1. It's fairly simple to break the bitcoin tracing trail. Search "coin mixer" or "bitcoin laundry". New tools are currently in development to convert the process from "simple" to "easy".

    The real problem is receiving illegal goods from a stranger as the receiver is exposed to a high degree. In this case, reputation is the real currency - the reputation of the sender/dealer.

    The take down of Silk Road has made drug use less safe. The feedback and rating system was great. It improved quality and reduced violence. Try rating the drug dealer who sold you that weed in the back alley. These systems are anti-fragile.

    When a wall is knocked down it is likely to be rebuilt better and stronger. Chances are you will see new and improved versions pop up soon.

    BTW, have you seen the bitcoin price lately? Honeybadger doesn't stay down long...

  2. Bob, this would make a good post: Bitcoin users are sending micro-payments with Public Notes re: CIA drug operations & other government malfeasance to the Public address of the seized Silk Road coins.

    Here is the link to the public address:

    Here is the Reddit thread:

  3. Bob -- concentrating on Bitcoin's traceability is part of the PR narrative necessary now that it has so much attention from law enforcement and financial regulators. "Only the dumbest criminals use Bitcoin" is an exaggeration and oversimplification designed to soothe LE. YES, all transactions are traceable, but it's relatively easy to sever connections between two of your addresses.

    If you care to learn more, post in Bitcointalk once the forum is up and you'll hear a variety of ways to obfuscate the flow of Bitcoin funds. Or you can search on coin mixers and bitcoin laundry's as a previous commenter suggested.

  4. I'd modify this to "Only the dumbest bitcoiners use Coinbase".

    Coinbase is a product of Fred Ehrsam, Goldman Sachs boy wonder. It exists to let the powers that try to get a hold of the Bitcoin market as well tying peoples' real world ID to their Bitcoin addresses.

    What a waste of a non-state currency, allowing actors for the State to get your ID.