5

What is the difference if I'm using bitcoins that were given me by somebody I sold product to, or by some mixing bitcoin service?

After all, aren't I using those bitcoin at the same place and ordering what I want with the same name and address?

7

Bitcoin transactions are traceable, public and are recorded permanently. Although, there are some ways to minimize that, by not reusing addresses and have multiple wallets for different purposes. But even that is not foolproof because there are analysis services that can group addresses through data crunching.

Now imagine you get coins from someone that got them from someone, etc. Nothing wrong with that right? Unless, those coins are part of a bunch that were hacked from an exchange or traced back to a payment for some illegal activity. And some exchanges start blacklisting them.

A mixing service tries to remove that linkability/traceability.

IMO you would be better off just using a crypto currency with unlinkability and untraceability built into the protocol in way of a mixer.

  • To expand on this, it is possible that markets may form that trade those bitcoins with "bad history" at a discount. Thus, different bitcoins could have different value, based on their origin. There was already a company buying directly from miners (and thus clean history) and selling them at a premium to the normal bitcoin rate. From there, it becomes difficult consider bitcoin to be a currency, as it behaves more like a non fungible barter token (ie, I sell you this item for 4 oxen, but not this ox here, it looks anemic). The point of currencym fungibility, is lost with the ability to trace. – user36303 Jun 21 '16 at 12:28
  • For the record, US dollars aren't 100% fungible either. Anyone who has ever tried to put a crumpled bill in a vending machine knows this firsthand. In the financial world, underwriters for FHA loans look into where down payment money comes from, and will reject money from certain sources (for example, financial aid). – Jestin Jun 21 '16 at 14:30
  • @Jestin: and for that matter, if you deposit a large sum in bills whose serial numbers match a bank heist, then your bank will revert the deposit and send people with badges in your direction. But this tends to be all-or-nothing: the nominal value of your crumpled bill holds, you can get that value at a bank, and there's no legitimate market paying some cents on the dollar for crumpled bills unless you count people who charge for the service of transporting your cash take to the bank and depositing it on your behalf. There are of course criminal money-launderers. – Steve Jessop Jun 21 '16 at 15:24
  • 1
    Saying one would be better off using a different currency is irrelevant to the question, and not likely to be useful advice anyway since more often than not the market dictates the currency that must be used. – Carey Gregory Jun 21 '16 at 15:34
  • @Carey, I agree. That's my only real misgiving with this answer. It feels both irrelevant and like poor advice. – Jestin Jun 21 '16 at 15:36

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