How far can the government track you with crypto? or, an intro to privacy coins

tl;dr to the ends of the earth, assuming you interacted with a CEX (Centralized EXchange). No, CoinJoin doesn’t help. Bitcoin wasn’t made for this, just use a different chain if you want total privacy.

Due to the sideways price action, I have recently started chopping up carrots and onions and storing them in my fridge. This is from a Youtube channel called Wok With Tak and he talks a lot about his FAST cooking system which is a mindset that makes cooking everyday not a chore:
1. F: always try to combine flavours together, makes cooking fun
2. A: chop up all ingredients in advance, right when you get back from the supermarket, so cooking is just heating things up
3. S: stir fry in a wok
4. T: Think in templates, not recipes. For example, frying aromatics in oil for flavour -> heat up main ingredients, making allowances for whatever special treatments they need -> make up any seasoning mix to add twists to the flavor just before serving.

Yes, that’s a head and shoulders pattern! Tom Bulkowski explains

Market Situation

The head and shoulders pattern usually breaks down bearish.
Crypto media says bullish indicators are here, institutional money is building up positions at this price range, we’ll be going up again.
Mainstream media (I don’t follow it) is talking about energy consumption, El Salvador, and useless things like Tesla/Elon Musk.

Overall, because everyone expects it to go up, my gut feeling is it will go down. The plan is still the same: look for new projects that haven’t gone up at all this year.

Privacy Coins

Chainalysis is a company that earns big bucks from the US government to track cryptocurrency flows. Their tools are used from IRS “we see you” to tracking crypto scams, Lazarus Group (a hacking group thought to be North Korea’s way of getting money despite all those sanctions), and Middle Eastern Jihad groups seeking donations in Bitcoin.

What do they think about…

Monero

Interview with former Chainalysis employee: very good design, few flaws that can be used only on targeted individuals

Chainalysis webinar on privacy coins: jump to 44:25, where the guy says “converted into Monero… and from there… who knows?”

Dash

CoinJoin, which, if you watch their webinar on privacy coins, you can see they’ve cracked.

Zcash

Zcash has zkSNARKs, which are the state of the art. Unfortunately shielded addresses are opt in only, which means most people won’t turn it on, which means if you use shielded transactions, you’ll stick out like a sore thumb.

Grin/BEAM (Mimblewimble)

He didn’t talk about it at all (too few users actually use it), but the unique thing about Mimblewimble is that it actually throws away information while still being able to prove that all transactions were valid (this also keeps the blockchain size down). As such, I’d expect it to be a fundamentally harder nut to crack.

Privacy techniques you can rely on

Privacy by default: private balances, transaction flow must be enabled by default for all its users, because anonymity is a huge part of privacy too.

Zero knowledge proofs: since the 80s, it has been theoretically possible to prove that a computation was done correctly without actually computing it yourself. Let the big brain Vitalik Buterin tell you how it’s possible.

Mimblewimble (whitepaper): instead of transactions being inside blocks, we imagine a block as one large transaction.

I call my creation Mimblewimble because it is used to prevent the blockchain from talking about all user’s information [7].

Tom Elvis Jedusor

All of these were originally proposed as improvements for Bitcoin, and as stated in the whitepaper, Mimblewimble is simply some of those improvements combined together. Oh well.

Monero is still relevant

Unlike Bitcoin, Monero will always be a probabilistic analysis problem

CipherTrace-Dave

Although Monero has none of these improvements (it predates them by quite a bit), it is where all the privacy freaks gather. They’ve gone to extreme lengths to keep mining decentralized, and to keep Monero private despite old tech and the US government offering up to 1.25 million USD to crack it. And it’s on every exchange.

As far as I can tell, Chainalysis and Ciphertrace are just using already known weaknesses, and can only target individuals, not mass surveillance.

Although the US government is very motivated to crack it, If you stay smart and don’t expose information through other means, Monero is good enough.

Funny how ‘good enough’ wins.

p.s. if you have a US passport you might wanna give it up. Quite frankly their policies strike me as antagonistic and rent-seeking. Other countries aren’t quite so shameless in their money-grabbing.

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