Correct me if I’m wrong but wouldn’t just using a custodial lightning wallet funded from a central exchange be private enough? How long you think Wallet of Satoshi can continue to operate without intervention? Seems like this is a great way to have a small cash account for people seeking privacy.
Discussion
That’s a fair point, although the exchange would still know how much BTC you purchased (and possibly spent). They just wouldn’t know who the recipient is or what they spend it on next. (My technical understanding of Lightning privacy here is limited so I could be wrong).
Just like taking cash from a bank to pay for things. I’m not required to keep a list of what I spent that money on. It’s spent gone in the possession of someone new.
That’s true. A couple thoughts
- if you hold the Bitcoin for a while and it’s fiat value increases when you spend it, you could have a taxable event
- this doesn’t help a newcoiner begin building a proper kyc-free stack
Although it might be a reasonable point of “entry” if you need to lock the 20-30K sat anti-scammer collateral on robosats when making a buy, if you don’t have enough kyc-free sats to start out with
The point of entry can be coinbase cryptodotcom whoever. I assume coinbase doesn’t know who walletofsatoshi (could be you or anyone else). Bitcoin can be assumed spent at the moment in time it is sent to wallet of satoshi. Does wallet of satoshi require Kyc to loop in? If not wallet of satoshi could be anybody. However the law may assume it is you unless you can provide proof that it was used in exchange for a good or service from somebody else.
Entry into the Bitcoin economy should be considered one way. Past performance has proven that holding Bitcoin is the best option. Exiting to a centralized network exchange should a last resort and the tax implications need to be considered.
To clarify wallet of satoshi is a hot wallet and should never be utilized to hold anything more than what you would carry in cash in your real wallet. Anything above should be looped out to an on chain address.
But would you be comfortable using Bitcoin that you purchased on Coinbase, sent to WoS, then sent to your cold storage, and considering that kyc? I wouldn’t personally but curious what you think… it’s a couple hops but not much, but LN helps
From a technical standpoint I believe it can be done although the exact process would be too complicated to easily outline. For accounting purposes no. I think it is important to have clear distinctions so that you can stay in compliance with the rules and regulations of your local government. That is unless you want to become a martyr.
Perhaps having a lighting wallet you use to receive and a separate one to spend would make it easiest to draw distinctions and account for what you are doing. If the person you are receiving from has no way to know who you are then I guess it’s achieving “non kyc”
I just think it’s 100 times simpler to strictly segregate KYC and KYC-free Bitcoin, and never need to worry about it lol
Part of the issue with kyc is having your identity linked during the initial purchase. In the gov’s eyes, it means you either still hold the coins or you’re liable for taxes on the capital gains.
Taxes aside (pay your taxes lol), it’s also a record of your Bitcoin buys which, if leaked, puts you at risk of theft etc.
It’s without a doubt better than nothing and a good idea for getting started. Just maybe best to keep those sats separate from a non-kyc stack you put in cold storage.