How private are P2P transactions really?
178 sats \ 7 comments \ @SimpleStacker 29 Jul 2022 bitcoin
I was just wondering something about tools like Bisq / Robosats. Presumably, the person you're buying sats from (call him SELLER) got it from a KYC exchange. You're also paying from your bank account to SELLER's bank account. A state actor can easily correlate a SELLER's outgoing btc transactions with SELLER's incoming bank transactions based on time and amount and therefore identify you.
It seems like the only real way to avoid this is to meet up in person and transact with cash. Am I missing something?
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8 sats \ 4 replies \ @P2P_bitcoin 29 Jul 2022
You are correct. Trading using a KYC'd payment method means your counterparty then knows about your payment method (e.g., bank account).
The list of KYC-Free payment methods includes Postal money order, cash-in-mail, prepaid gift cards, and face-to-face (F2F) / in-person cash.
Lightning network can give better financial privacy than an on-chain transaction, so Robosats has an edge over Bisq, but with Robosats keeping transaction amount limits low yet, Bisq is where most of the volume (in terms of amount of bitcoin) occurs. And Bisq v2 is being built to have support for Lightning network.
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30 sats \ 1 reply \ @sb 29 Jul 2022
I foresee trading face to face over Lightning at Bitcoin meetups for cash being a popular mechanism to avoid KYC.
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11 sats \ 0 replies \ @P2P_bitcoin 29 Jul 2022
Yes, they can work well in matching repeat sellers (e.g., miners, or those who get paid in bitcoin) with repeat buyers who prefer to trade KYC-Free and with cash.
Even though there are KYC-free P2P trading platforms like Bisq, LocalCoinSwap, LocalCryptos, HodlHodl (outside U.S.), Agora Desk, etc. there's not a lot of in-person cash trading. It doesn't take long for a repeat seller to get more requests from buyers than the supply, so those sellers stop listing on the P2P platform. But the trading continues. Same for Telegram and Whatsapp trading groups in certain regions (e.g., Hong Kong, London, Tapei, etc.) where a lot of in-person cash trading for bitcoin occurs but those traders don't even need to list on a P2P platform.
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5 sats \ 1 reply \ @P2P_bitcoin 29 Jul 2022
Doh, I forgot -- there are bitcoin ATMs that are KYC-Free (e.g., up to $900). And there are also voucher sellers (e.g., Azteco) where cash can be used that are KYC-Free.
Here's a list of methods. The ones that are KYC-Free are generally indicated.
Person-to-Person bitcoin Trading Platforms https://cointastical.github.io/P2P-Trading-Exchanges
There's also this list of physical locations. Some are KYC-Free, but that's not indicated.
Physical Stores where you can Buy or Sell bitcoin https://cointastical.github.io/Physical-Locations-Bitcoin/
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120 sats \ 0 replies \ @om 30 Jul 2022
It might be worth mentioning that EU has just buried both KYC-free ATMs and Azteco with its travel rule and MiCA shit. They still exist, but only until the new directives get transposed into laws.
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20 sats \ 1 reply \ @P2P_bitcoin 29 Jul 2022
But even with a bank trade, ... there's not a huge risk. Take this hypothetical.
State actor is trying to identify Eva who sold some illegal drug on a dark market to an undercover law enforcement agent. So the state actor knows the bitcoin address LE sent the payment to. And then Sally buys the bitcoin from Eva, and pays with, oh say Zelle. So LE can see that the bitcoin being traced went eventually to Sally. Then Sally deposits the BTC at a KYC'd exchange (to buy shitcoins, let's say), which lets LE figure out that Eva's coins went to Sally. Then they find that Sally did a Zelle transfer a day after the agent did the dark market buy.
So yes, at that point -- LE then knows both Sally's name and Eva's name, and their bank accounts used in the trade. But they aren't after Sally the shitcoiner, they are after Eva, so there's probably no real issue (today) for Sally.
If Sally wanted to lessen the chance that LE or anyone else would know about the bitcoin trade, Sally could use CoinJoin or one of the other methods to maintain financial privacy. So even though Sally deposited bitcoin with a KYC'd exchange, there's nothing to tie those bitcoin to the ones Sally bought from Eva.
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101 sats \ 0 replies \ @om 30 Jul 2022
they aren't after Sally the shitcoiner, they are after Eva
knock on Sally's door where tax?
Sally could use CoinJoin Sally deposited bitcoin with a KYC'd exchange
KYC'd exchange: OMG did you use CoinJoin? Get out!
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