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Bitcoin [BTC]: Privacy comes at cost only when privacy techniques are expensive, claims former BTC developer

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Bitcoin [BTC]: Privacy comes at cost only when privacy techniques are expensive, claims former BTC developer
Source: Pixabay

In a recent discussion, Claudia Diaz, a Professor at the University of Leuven, and Peter Todd, early Bitcoin Core Developer, teamed up on the sidelines of the Magical Crypto Conference 2019 to talk about Bitcoin’s crypto-anarchist image and privacy issues.

Talking about Bitcoin, which is not private and is being “sold as a crypto-anarchist tool” that seeks to facilitate privacy, the developer was asked whether it was the fundamental flaw with Bitcoin. Peter Todd responded by stating that it is a fundamental trade-off:

“When you look at Zcash and Monero, both of them had bugs with potential inflation that could have destroyed the currency because the supply wouldn’t be limited”

Bitcoin is less private and for the purpose of preserving value and keeping it safe for a long period of time, he vouched that Bitcoin was a lot safer because of its transparency.

When asked about a scenario in the future where the entire world was using Bitcoin, Diaz asserted that the most interesting aspect about the largest crypto-asset was that it had opened the possibility of having a functioning financial network that runs on this kind of a system. She also admitted that despite the fact that Bitcoin was the one that spearheaded the entire crypto-industry, whether the coin would grow to become a technology that would survive in the future remained uncertain.

The developer, however, responded that it was not possible for the entire world to be on a transparent ledger. According to him, the only way to scale this type of tech was by adding privacy protocols to it. He also said that the Lightning or the layer 2 scalability network, despite being highly vulnerable to attacks against its privacy, “by default, was relatively good privacy”.



Referring to Monero, the duo was asked whether “privacy came at a cost” and whether Monero was a “heavier chain”. To this, Todd responded,

“Privacy only comes at a cost when you use privacy techniques that comes at a cost. Monero happens to use the technique that comes at a cost, but in general, privacy comes at a benefit which is things of scale”

He also explained that in case of the Lightning Network, the marginal transaction cost was zero and it had “excellent” privacy.





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Huobi, Bitfinex, and other exchanges allegedly linked to laundering/mixing of Bitcoins

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Huobi, Bitfinex, and other exchanges are allegedly linked in laundering/mixing of Bitcoins
Source: Unsplash

On 19 May, 2019, @Whale_Alert tweeted a transaction of 2000 BTCs between Bitfinex and an unknown wallet, which after in-depth research by a Twitter user, confirmed that it was linked with wash-trading, mixing and laundering of funds. The funds circulated over various exchanges like Bitfinex, Binance, Huobi, Coinbase, and others, raise serious questions regarding AML laws and more.

The flagged transaction was sent from 1HL5rZWw5rGzFAB1mThEMxwazEBtWigs7B to two distinct addresses.

The Twitter user, @Proofofresearch, flagged this transaction and revealed the exchanges involved [directly or indirectly]. The user tweeted,

The user flagged a few addresses in the clusters which sent a significant amount of funds, shown in the image attached below.

Source: Twitter | CryptoMedication

The entity 145631092, as seen in the above chart, the funds sent by Huobi from this cluster ended on July 21, 2017. Another wallet “17hf5H8D6Yc4B7zHEg3orAtKn7Jhme7Adx”, linked to having transactions with Huobi has one particular transaction that stands out as it has an op_code named “People! help!”, which was transferred on March 30, 2019.

Source: Smartbit

The wallet address “19V5joogtZCCj3YWcP9pNT8eKLSZybc1Kq” has only four transactions in total. Upon checking the previous transaction for this address, the transaction with hash “bee4795db198230d6baad2e9dbba42b597c635b2471101641cce99e1ff0e91e4” stands out, since it is linked to darknet market places, the user tweeted.

Source: Twitter | CryptoMedication

Further, the address “3M1QVCjXn38AUdUxbLCH4WUZc1ai72ZKgr” that sent funds to the above-mentioned wallet, has a strong connection to darknet market places like the Hydra Market place.

Source: Twitter | Cryptomedication

The source of these funds was directly linked again with Hydra Market place, with the user tweeting,

The Twitter user further alleged that the addresses linked to these clusters were attached to fraud and some user[s] was “selling accounts at Coinbase/Huobi/Bittrex/Binance.” The Twitter user also urged the compliance team of the respective exchanges to close these flagged accounts ASAP.

The user added that all the funds linked to darknet market places were later deposited in Huobi exchange, which according to the user, gets mixed by Huobi.



Additionally, the user added,

“There are zero customers involved in any of these transactions at this point. That much is obvious. These addresses are not functioning as customer deposit addresses. That’s a guarantee. Funds go to Binance/OKex/Poloniex/BTCBox.com… By FAR, Okex is the most frequent recipient of funds from these Huobi-controlled addresses. Please keep in mind that these are not deposit addresses. These are addresses where Huobi is literally mixing the funds and sending them to other exchanges for some reason.”

One particular address connected to Bitfinex in this fiasco, “1LSgEKji3ZoGdvzBgkcJMej74iBd38fySb,” has received 1 million Bitcoins, according to the user. The user added,

“As stated before, Binance/Coinbase/Bitfinex/Huobi/Bittrex/Coinbase/”Bitbank”/Bithumb/OKex are all pals in this laundering scheme together. They mix and mash funds and operate in a symbiotic fashion – replenishing stores when necessary… In this case, Huobi’s hands are dripping if there’s such a thing as catching someone ‘red-handed’.”





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