anyone have insight on this?
If you send 10 BTC (Coinbase or other KYC exchange) > into a non kyc lightning wallet, let's say WoS or Bitcoin Jungle app, then you zap it to another LN wallet > then send it to an on-chain address back into self custody, are these the same UTXOs in the end? Does this break KYC? I wouldn't think you'd get the same sats back at then end.
Seems like coinjoins or whirlpool but without the high fee assuming you do this in a low fee Environment.
Is this dumb?
The exchange's record of your purchase and withdrawal are still tied to your identity, but the resulting UTXO(s) would not be directly tied to you.
Thanks for the response! That's certainly what I thought. I guess I'm asking about the economics and complexity of using a mixer vs. using a method like this where you just send the sats off the chain into LN and back on chain. Why do people care so much about KYC if it's that simple to break the KYC?
There's still a recorded purchase of 10 BTC to your name which tax authorities or their pals might get at some point, but after obfuscating your UTXOs through the LN they wouldn't be able to follow your spending
some people may not have the option to buy nonkyc so more privacy concerned individuals in tighter jurisdictions will coinjoin and use a lightning cleaning machine
but yea it’s the exchange knowing your original balance that’s why people care
Yea essentially they are two methods of achieving similar results: breaking the on chain connection between your original UTXO and your resulting UTXO. It doesn't erase the record of purchases on a KYC'd exchange, but it can obfuscate where those sats went and who owns them after they were withdrawn. Reasons to care about doing this will differ depending on where a person is from (legal jurisdiction), what they're intending to use the sats for, etc. There are other methods too, like such as utilizing Liquid. As to why a person may choose one method over another, it may just be what they've been told to do by their friends, or the only method they know of. I'm sure on some very technical level there may be pros and cons to each.
Thanks Corn! I know it's a Star Wars reference but I always imagine you're driving a Delorean.
This might be treated as a tax event.
"Sir, have you sold your bitcoin to an unidentified wallet? Please provide the reciever information and pay the fine, taxes etc."
The "travel rule violation" or something could used againt you in the future.
The point is not to buy bitcoin tied to you in the first place.
That makes a lot of sense. I recently received a 1099-B for Strike even though I didn't sell any BTC. There are two transactions listed as "sold or disposed" my BTC either went to cold storage or to a relative. The two UTXOs that went to a relative are the ones showing up on the form 1099.
