[jgalt212]

What a colossal waste of electricity. Great, they've created a general ledger and currency formed by individual untrusted participants, but who in the aggregate are trusted.

What about this: Why not just diversify your risk by doing transactions or investing in currencies/assets across a diversified set of untrusted counterparties? Same net effect, and a lot less electricity wasted.

[ikeboy]

Huh? How does this "diversifying risk" idea let you do any of the major bitcoin applications? (For example, how would your idea that has the "same net effect" as bitcoin allow anonymous markets?)

[jgalt212]

Bitcoin is not anonymous. The entire ledger history is exposed. Through network analysis you can figure out who the original anonymous holder is. And as soon as that holder tries to convert to a fiat currency their identity will be exposed. It's precisely because Bitcoin is way more traceable than cash, the US government has not tried to shut it down despite a lot illegal activity being paid for via bitcoin.

As soon as Satoshi tries to convert any of his coins into dollars or any other legacy currency everyone will know who he is.

[ikeboy]

This is wrong. Plenty of people have converted to fiat and not been caught, there are ways of mixing coins.

[jgalt212]

Actually, we're both wrong. Just because you have not been caught does not mean there hasn't been loss of anonymity. And if you mix enough coins you can decrease the chances of being pinpointed exactly as the source, but you cannot definitively remove yourself from the bucket of suspects.

[ikeboy]

>And if you mix enough coins you can decrease the chances of being pinpointed exactly as the source, but you cannot definitively remove yourself from the bucket of suspects.

Not in my understanding. I have some coins X that are tainted. I send them to you, Y. You, Y, happen to have other coins completely unrelated to the address I sent my X coins to, and you send them to me at address Z. There's no blockchain link between X and Z.

I suppose physically tracking you down, assuming you keep logs, could hurt me, but if I trust you not to keep logs then I'm safe after you delete the logs.

[jgalt212]

This is what I mean about reading the whole ledger. If wallet X is a target, then anyone who transacts with X is a target (which includes Y (anyone with a direct link to X) and Z (anyone with an indirect link to X)). We are dealing in probabilities here, but we definitely don't have untraceable transcations. The authorities have a finite number network paths/leads they can track down.

Of course, the more washing transactions you do with dirty coins the harder it is to track down the original wallet. That being said, the blockchain is somewhat self limiting in how many transactions it can processes per unit of time and thus the its obfuscating capabilities are diminished.