Any thoughts on if this is a good way of un-KYCing Bitcoin? \ stacker news ~bitcoin

pull down to refresh

Any thoughts on if this is a good way of un-KYCing Bitcoin?

52 sats \ 13 comments \ @timechain 23 May 2022 bitcoin

KYC Exchange, withdrawn with Lightning to a custodial LN Wallet (Wallet of Satoshi, or Bluewallet), swapped to onchain with a swapping service (fixed float or swapzone) and sent to a new onchain address.

Anyone know if this method would be fairly safe? Would i get any benefits from making an extra hop by withdrawing to a custodial LN wallet and sending to a second LN wallet before the swapping service?

view all related items

190 sats \ 4 replies \ @sethforprivacy 23 May 2022

All those steps do is introduce middle-men just making it slightly harder to trace funds back to your wallet/node.

You cannot remove the fact that you bought Bitcoin via KYC using any privacy tools, you can only prevent that fact from being known by avoiding KYC exchanges.

If you just want to properly prevent tracing after withdrawal, you should withdraw to Samourai Wallet, mix the funds, and then you can submarine swap them into LN or open a channel with them etc. The exchange/gov will still know how much Bitcoin you bought and who you are, but will not be able to trace it back to your on-chain/off-chain activity (assuming you don't do something to mess that up in the future.

More on Bitcoin privacy here: https://bitcoiner.guide/privacy/ More on avoiding KYC here: https://bitcoiner.guide/nokyconly/

1 sat \ 3 replies \ @timechain OP 23 May 2022

Thanks Seth! (By the way, love your podcast!)

I understand if I buy KYC, the gov may want to know what happened to it, for tax purpises or other reasons, still if I can hide where it went, thats still pretty good. (Ie. controversial causes like the canadian truckers)

I have heard of some exchanges (usually the lame ones) giving people trouble about people withdrawing directly to wallets that do coinjoins. Maybe putting an extra hop or hopping off chain and then back on chain before getting to the Samouri Wallet could be a smart move, right?

21 sats \ 2 replies \ @sethforprivacy 23 May 2022

Yes, the main issues with KYC are:

Gov/exchange knows how much you purchased when, so could easily knock on your door to confiscate or force you to disclose what you did with the sats
Allows governments to build nice, tidy lists of Bitcoiners to go to if they decide Bitcoin is too problematic for them and they want to stop it's use
Allows hackers/criminals to steal KYC data from exchanges (who are notoriously poor at cybersecurity) and then hit you with a $5 wrench attack to send them all your sats, as they have an address, face, and amount of Bitcoin purchased/withdrawn to leverage
Allows govs/exchanges to easily surveil Bitcoiner's usage of Bitcoin post-withdrawal and build deterministic links between IDs and on-chain activity

If you use proper privacy practices after withdrawing, it only prevents the simple surveillance that exchanges/governments are doing today on Bitcoin post-withdrawal, but it doesn't prevent the other three issues.

As for your other question -- so far there are no known cases of exchange accounts getting shut down for withdrawing to Samourai Wallet as far as I am aware. The only known case of exchange blacklisting is one user at Bottlepay getting their deposit rejected post-mix:

https://sethforprivacy.com/posts/fungibility-graveyard/#samourai

At this point it doesn't seem to be a major issue for people, but that could rapidly change. Just another reason to stop asking permission and go no-KYC-only ;)

1 sat \ 1 reply \ @timechain OP 23 May 2022

Thanks Seth, and thanks for your work in this space.

21 sats \ 0 replies \ @sethforprivacy 23 May 2022

Of course, thanks for the kind words on what I do and my pod :)

Hoping to focus next season on Bitcoin/Lightning/Monero and do some deeper dives on topics like sender privacy, receive privacy, circular economies, avoiding KYC, etc.

110 sats \ 2 replies \ @TheBTCManual 23 May 2022

I think everyone's definition of KYC might be different, for me the moment you purchase from a KYC exchange you cannot un-kyc you've always got that record to your name, and adding another meta data point with an email address via the custodial wallet seems a little pointless. so trying to do all these swaps, to just break chain analysis tracking doesn't solve the problem that all you have is deniability that you still own the coins

You can purchase KYC free sats directly on lightning in several ways that may be a better solve for your problem, you will pay a premium for that privacy though.

If your goal is just to break the path, then yes its an okish method, you can also just remove the custodial wallet step anyway, since you're using lightning, but make sure you're using your own node if you do

1 sat \ 1 reply \ @timechain OP 23 May 2022

Withdrawing from a KYC exchange straight to your node doesn't dox it?

21 sats \ 0 replies \ @TheBTCManual 23 May 2022

Yes, but how is that different from being doxed by the custodial wallet's node? I guess both have the potential to be captured, but I mean that extra hop costs you very little if you want to add it for some reason, but I don't see much point in it. I guess it's all about who you feel would be the weaker of the 2.

If we ever get payjoins and channel factories, I think this will be a thing of the past,, but always glad to hear more people taking their opsec seriously

21 sats \ 0 replies \ @2big2fail 23 May 2022

just privacy via obscurity since the middlemen know your destinations

0 sats \ 0 replies \ @e18bd02b7f 9 Jan freebie

Hi, I'm so sorry for my newbie questions and for reviving this discussion, I just found that this post matches very well with my doubts. I have reading a lot about the LN and I'm also interested in using it as an alternative to get non-kyc btc.

I have some sats in binance and, in my case, I would greatly appreciate your thoughts about this setup and questions below:

binance > (on-chain) > phoenix > (LN) > breez (LN) > fixedfloat (on-chain) > Blockstream Green > (on-chain) HW

my doubts about the above method: 1- is it really necessary to use on-chain to transfer from binance to phoenix? should I use the LN option already offered by binance? (I'm afraid that, somehow, using LN from binance will give them more control over my future transactions).

2- I guess that, if I move on-chain from binance to phoenix, the initial fund required by phoenix to open a channel would be subtracted from this transfer. But, if it's better to use the LN option from binance, I would fund phoenix's channel creation with an external transfer from a non-kyc wallet and non-kyc bitcoin I have. Could this action "compromise" my non-kyc wallet/bitcoin because technically I would "mix" non-kyc with kyc bitcoin? The same could apply to breez, since I would need to fund it with my non-kyc bitcoin (although I don't know if the LN transferred to breez [in my above example] will be already non-kyc enough. I included breez in the equation in case another hop is useful here).

3- Once fixedfloat finishes to exchange breez's LN and I get on-chain bitcoin in Green, should I have peace of mind? Moving that bitcoin to a HW is not an immediate necessity, I just included it in the equation in case I want to do that. If Green will be a safe place for that btc, I just plan to hodl, but if someday I want to spend some of these funds, I would use Green's LN function to do a LN transfer to a completely different LN wallet (e.g. WoS, or a 2nd breez in my 2nd phone), and spend from there.

4-I don't have a super large sum of bitcoin on binance, but my moving plan would include at least 3 transfers: a 1st small one (~20 usd), just to check if the system works fine; a 2nd with half of my btc and a 3rd one with the other half (with a few days of spacing between transfers from the CEX, and several hours of spacing for the on-chain-LN-LN-on-chain route). Is it reasonable?

Please note that, even if the result of this process is getting a non-kyc bitcoin, I'm paranoid enough to consider these funds "non-kyc-ish", so that's why right now I have an external non-kyc mobile wallet (the one mentioned in [2]), always funded through P2P via DEX, and I never want to mix these bitcoin (my "official" non-kyc btc) with the ones coming from binance. I plan to use a HW for the non-kyc in the future, so, in the long run, I expect to have a HW for my non-kyc, and Green for my "non-kyc-ish" (or, if deemed necessary, a 2nd HW).

Thank you very much in advance :)

96 sats \ 2 replies \ @deleted231216 23 May 2022

deleted by author

110 sats \ 1 reply \ @timechain OP 23 May 2022

Thanks I really should make the jump out of kyc. There's an atm around me that i heard only needs a phone number, and getting a temporary one for that is pretty easy. After I get some corn from that, I can jump into the bisq rabbithole.

21 sats \ 0 replies \ @deleted231216 23 May 2022

deleted by author