Getting blacklisted when using Incognito

Anon · 26 August 2020 13:08

The LocalMonero co-founder also said that it’s not inconceivable that BTC addresses that are linked to the incognito project will automatically get blacklisted (Binance, for instance, blocked withdrawals to the privacy-focused Bitcoin wallet, Wasabi). This would make any Bitcoin coming out of Incognito “worth less than ‘clean’ bitcoins.”
https://decrypt.co/20383/theres-a-new-way-to-anonymously-swap-bitcoin-for-monero?utm_content=buffer747ad

Just have read this article. Could this really happen? This would be really become a problem if at some point somene wants to sell his BTC, ETH etc. for FIAT on an traditional exchange. Is it inevitable to leave a trace, showing that incogntio has been used? Any solutions for this problem?

Jamie · 14 July 2020 14:30

I don’t have the details but it sounds a bit over the top.

It would mean I can invalidate large amounts of BTC by just sending a small amount to every address in the BTC blockexplorer.

andrey · 14 July 2020 14:45

hey @Anon, nice name btw

Yep, there are coupl of possible solutions for this

Decentralized custodians, which means the gateway to Incognito will be decentralized and do not link to one wallet address. Dive in details here Trustless Custodians: A Decentralized Approach to Cryptocurrency Custodianship
In a long way, exchanges will have Incognito gateway, and users will be free to move funds to the exchange and out. If an exchange is regulated and users want to use it and pass compliance, there is no conflict.

I can come up with several more ideas in terms of how and why users should not give up with privacy.

Revolve · 14 July 2020 23:01

I also had an idea, I believe I commented it in another post.

The CENTRE Consortium blacklisted a USDC address in response to a law enforcement request, freezing $100,000 worth of the stablecoin.

Would it be possible to change the back end, so when you shield crypto, the crypto get’s split up into a bunch of newly created cold wallets in specific denominations? When another person unshields they get given access to a bunch of those wallets equaling the total amount they want to withdraw. The network itself can process which denominations are needed the most, and split up newly shielded crypto accordingly. This would make it impossible for someone to blacklist the crypto inside of the Incognito network.

[Call it “super shield” and make it cost extra PRV. It could be in it’s own separate pool if migrating is to complicated. You would only be able to withdraw from the super pool for the amount of value you put in. Otherwise you have to withdraw your pCoins the normal way. You would also be able to add regular pCoins to the super pool (for a PRV fee) because it would just unshield the pCoin and then put the crypto through the super shielding process]

Anon · 14 July 2020 23:20

Thanks

This sounds really interesting, good to know that there are solutions. I guess right now we won’t have problems gettingn blacklistet. But long term once we have grown exponentionally it might be different.