
68% of total Ethereum transaction value controlled by one system - bmj1
https://blog.cyber.fund/huge-ethereum-mixer-6cf98680ee6c
======
ve55
Why is the link at the top of this article ('cyber•Fund') to
[https://cyber.fund/system/Paragon](https://cyber.fund/system/Paragon), a page
for 'Paragon', a very shifty high-budget ICO?

Given the other things Paragon has paid big bucks for (anything you can
imagine, from paying Youtubers 5 figures per video to get their subscribers to
'invest' in them to paying for mass reddit vote manipulation to buying very
expensive ads and sponsorship programs to lying about their company model,
CEO, etc), it seems really out of place to me that this article links to them
as the first link.

~~~
KGIII
At first, I thought you might be hyperbolic or had fallen for some sort of
propaganda (for lack of a better term). I don't know much about ICOs and I
know/knew less about Paragon.

I figured I'd check and just let you be, figuring I'd not get involved.

So, I went to Google and entered, "Paragon ICO complaints Reddit."

In two minutes, probably less, I'd confirmed that they were as bad as you
claim. I spent about a half hour and read a bunch. If anything, you didn't
even mention some of the biggest issues.

The whole thing is shady as hell. They mysteriously went from two to five
'programmers' retroactively. Not only will they not name the programmers, they
won't show any of their previous work, such as a GitHub account. The owner
probably isn't the owner, but is her husband and he has a storied past that
makes me question his ethics.

And it goes on and on. It's like the Equifax of crytocurrency, with regards to
a continued stream of negative results. One of the complaints is that they are
just in it for the money. Well, yeah... I can see that. I can even rationalize
that. But, instead of sticking with their agreed pre-sale amount, they sold
like five times as many coins.

How the heck is this even legal? I bet US currency was involved and it has
been shown before that that's all it takes for the US Feds to get involved and
go stomping across borders.

Seriously, how is it legal?

You didn't even exaggerate! They appear worse than your claim!

As for how they ended up on that site and as the top-most link, I find it hard
to give the benefit of doubt. It took me one single search to confirm what you
said. I only spent the additional time because I like a good train wreck.

I will give them some credit, their balls must need a cart to carry them
around. This kind of money attracts strong enemies, regardless of the
legality. There is no way in hell that this is legal.

~~~
ve55
Haha, I appreciate the response, I'm glad that upon doing your own
investigation you found that my wording was reasonable.

As far as legality goes, it's difficulty to say. I think that a project like
this is likely paying lawyers good money to make sure they stay 'in the
green', but lawyers can only do so much to protect you when you do the things
that they're doing. We all know that projects like Paragon and many others are
the reasons why regulations will come even harder in these areas.

As for to what extent the law needs to protect investors from making terrible
investments, I'm not sure, the game changes a lot when companies start
completely lying to their investors, and that does seem to me (as a non-
lawyer) like one of the many good places where lines can be drawn.

~~~
KGIII
The only thing you might be guilty of is minimizing it.

I figured if I was doubtful, other people might be doubtful. Rather than have
you be dismissed, it seemed to me that confirming your post was the prudent
thing to do.

I was pretty shocked. That's fodder for a whole HN link and thread. I really
figured you were blowing it out of proportion. Nope... Hell, the list of
complaints goes on and on.

I'm reminded of when drones were gaining in popularity and people, notably on
Slashdot, were saying all the things they were doing and how nobody could stop
them. I told them that is how you end up with draconian regulations. I was
moderated quite heavily in the downward direction. Fast forward a few years
and they are complaining about draconian regulations.

Which is to say you're right. They are going to end up coming down on this,
and coming down on this hard. I'm sure some rebels will say it can't be
prevented, but laws don't work like that. They don't prevent anything. They'll
just make cryptocurrency illegal, use and possession, and selectively
prosecute the offenders.

That's worst case scenario, I guess. They may just regulate ICOs heavily and
stop the regular person from investing. I doubt that will bother the wealthy
and established players much. Even better, they'll be doing it 'for your own
protection.' Those sound bites will appeal to the masses.

By the way, this is one of those times I wish an HN poster had been wrong.

~~~
ve55
A bit interesting, just posted after you made this comment was
[https://news.ycombinator.com/item?id=15335146](https://news.ycombinator.com/item?id=15335146).

So maybe companies like Paragon will get in trouble with the SEC for their
dealings, even if they do not sell 'securities'.

------
dahdum
Aren't these the temporary deposit addresses that exchanges give out? You
deposit and then they sweep the balance to their hot/cold wallets as
necessary?

Also the ReplaySafeSplit and related contracts were due to the ETH/ETC split,
you had to move your coins to be safe.

I see no evidence of a "mixer" being the cause.

~~~
homakov
Such a waste of tx!

Ethereum should allow sending directly to 0xAddr#input where input could be
kind of tag that is used to identify you.

~~~
DennisP
This actually is possible. Every Ethereum transaction has a data field that
can store an arbitrary amount of data.

Normally this is used for function calls to contracts. An exchange could make
a contract that lets the user put in their userId when sending eth, and then
everybody would be sending to the same address while still being identifiable.
It would even be possible to reject deposits which do not include the userId,
or which have an unknown userId.

I think the main reason exchanges don't do this is that they deal with lots of
cryptocurrencies, so they use the simplest method that works for all of them:
just make a unique deposit address for each user.

~~~
homakov
Yes, that's what I said. The ABI-intended input field could easily be used as
personal ID. Furthermore in some cases you need to transfer money to other
wallet specifically so it could call some method, and this way you would
literally run any method by passing #methodIdarg1arg2. Clumsy but tx cost
saving

------
alexjray
“Ethereum transactions” and “quantity of ETH transacted” are two very
different things. This title (and article) is deceiving.

Please see Vitalik Buterin response to this before reading.

[https://medium.com/@VitalikButerin/i-think-this-article-
real...](https://medium.com/@VitalikButerin/i-think-this-article-really-
deserves-a-bold-clarification-correction-1bed386b056b)

------
ChrisClark
Good to clarify, it's actually 68% of the value, the amount transferred. They
are only about 10% of the number of transactions.

------
atomical
This is obvious if you've ever poked through a few random transactions on
etherscan. The big exchanges use temporary accounts to move funds to users. It
makes sense that would make up a majority of eth transactions because fiat is
the only way to purchase ether.

------
shemnon42
Is the story that 68% of the traffic is naked laundering or that 68% of the
traffic is people buying into ICO that are not already enfranchised in
ethereum?

~~~
Alex3917
It's not laundering, it's spoofing by some of the earliest Ethereum holders
who are trading with themselves on the exchanges to create the appearance of
volume and liquidity to drive up the value of their coins.

~~~
mst
Genuine (but possibly stupid) question: How do I tell the difference between
that and the 'exchange temp accounts' theory promulgated upthread?

------
TeeWEE
These are just temporary addresses at exchanges:

You pay the exchange x euro, the exchange gives you y ether to adress (temp)
E, then you transfer from E to your own wallet K

------
Animats
This mixing ramped up around the same time as the price did. Etherium was
around $8 at the beginning of 2017, where it had been for years. By midyear it
was in the $300-$400 range.

Is this mixing somehow involved with a scheme to pump the price?

~~~
Taniwha
Doesn't this screw up people's taxes, making them liable for realised capital
gains, and also making them completely screwed if the value of the currency
goes back down again

~~~
charlesdm
You are only liable for CGT if you sell an asset (= realised gain).

So, if you buy a stock at $10 and it goes up to $100, your CGT liability is a
certain percentage of $90 ($100 - $10) upon liquidation.

If you buy a stock at $100 and it goes down to $10, you end up with a $90
(generally carry forward, some jurisdictions allow carry backwards) loss that
can be used to offset other gains.

~~~
Taniwha
yes - but isn't that what's essentially happening here when you run your coin
thru a mixer and mix it with other coin (which must have the same value) - you
sell your coin and get back a new one with today's value - voila a taxable
event ....

~~~
charlesdm
I would assume you would argue that you merely moved money (or assets) around,
just like you would wire money from A to B. Moving stocks with unrealised
gains from broker A to B is also not taxable.

The only person you would ever have that conversation with would be the IRS
(or your local tax authority outside of the US), and they are bound by
confidentially.

~~~
Taniwha
yes but that act of mixing your coin with others effectively gives you back
mostly other people's coins .... what's their value if not today's value?

~~~
uncoder0
If I go get change for $10,000 in $100 bills and ask for all $1's do I realize
10,000 dollars in capital gains because those are "other people's dollars"

~~~
Taniwha
but they're dollar bills, the currency we pay taxes in, they're always worth
$10k no matter what happens to their actual intrinsic value ... a better
example is:

I buy 10oz of gold for $1000 (this was a while ago), this week I exchange my
gold for a different 10oz of gold (less a small commission to the exchange)
currently worth $10,000 - is that a taxable transaction? I suspect yes

------
atomical
I would be interested in seeing the charts on etherscan modified so that these
temporary accounts are removed.

[https://etherscan.io/chart/address](https://etherscan.io/chart/address)

It's going to screw up a lot of analysis.

------
XR0CSWV3h3kZWg
The article doesn't seem to support the claim.

------
thisisit
This whole analysis is very confusing.

The first analysis about temporary addresses makes sense. Addresses used only
for one hour. But what bearing does "transaction value" has? The real metric
of a mixer controlling a currency would have been number of transactions.
Mixing is about spreading the transactions far and wide and across many
addresses to make it difficult to trace. When you look at the graph below, the
mixer accounts for barely 11% of the transaction volume.

If I go further and read about the core and shell, the analysis falls apart
even more.

The idea proposed is that the shell accounts are the ones responsible for
generating output and inputs to external accounts like the exchanges and also
talk to core which consists of 90% temporary accounts. Fair enough.

"In the end, it turned out that the total amount transferred into and out of
the core is 4 times higher than the total that entered and left the shell and
the core taken together." How is this even possible?

If assume flow of 1 ETH ignoring fees. Poloneix -> Shell -> core -> Shell ->
Kraken

From the statement "total that entered and left the shell and the core taken
together" = 1 ETH into shell + 1 ETH into core + 1 ETH out of core + 1 ETH out
of shell = 4ETH

Total for core is 2 ETH - 1 in and 1 out. If shell is there to interact with
the core, how is core doing 4 times the amount. Unless of course the confusion
is dividing the total in and out of 4 by actual transaction of 1 ETH.

All exchanges need to segregate customer amounts to ensure everything works
smoothly. Let's assume I have 1 ETH, then sent it to Kraken. No trades done
and simply withdrew the ETH. Here's what will happen:

Me -> Kraken Temp account + network fees (mostly pool accounts ~ 0.0002) -> Me
+ Kraken account for withdrawal fee ie 0.005 + network fees (again pool)

In which case, two scenarios can occur:

a. Kraken temp account is tagged - So my account and pool accounts can be
considered to be the shell. The in and out total for me is 1.9946 worth of ETH
(1 ETH out + 0.9946 ETH in after Kraken and network fees). On the block fees
side, in and out of the shell is 0.0004 ETH. Total is 1.995 in and out of the
shell. While Kraken is doing 0.005 ETH.

b. The worse case scenario - Kraken temp account is unmarked. In this case the
temp account becomes the shell while my personal account and pool becomes the
so called core. Now this happens: Core transaction volume - 1.995 ETH Shell or
Kraken temp account - 0.9998 In (after fees) + 0.9946 out (after Kraken and
network fees) = 1.9944 ETH Kraken - 0.005 ETH

Actual volume is 1 ETH but counting the transaction volume blows this thing
up.

------
seibelj
It's an ETH mixer, it helps you obfuscate ETH, the same exists in BTC and all
other crypto currency systems without inherent privacy.

~~~
cgb223
But since its still on a permanent immutable blockchain, couldn't someone
still trace Bitcoin/Eth transactions with perfect accuracy?

~~~
dsp1234
Let's say you hand me a $100 bill, and that you have marked that bill. I then
take that bill to a bank and ask for 3 $20 bills and 4 $10 bills. The bank
takes that $100 and puts into the vault, and takes out the bills I asked for
out of the vault. Later, someone comes in with $100 worth of bills, and asks
for a $100 bill. The bank goes to the vault and gets the marked $100 and gives
it to that customer.

Tracking the bill doesn't help, because as soon as it's in the bank, what
happens to it (and how it's exchanged), is hidden from you. Mixers work the
same way.

~~~
dahdum
You're right, but the article didn't find a mixer. They found the temporary
deposit addresses every exchange uses and then wrote a FUD article to drive
traffic and awareness of their sketchy ICO.

------
45h34jh53k4j
Oh no! The emperor's has no clothes!

