To transfer bitcoin anonymously and without adding to the immutable & public blockchain history, couldn't one just exchange the wallet for an account containing exact amount of BTC, "out of bounds" (via email, pgp, whatever), instead of performing a BTC transaction on the network?
You have to then fully trust your counterparty to not have retained a copy of the key to do his own BTC transaction on the network, later, forever.
You could probably use trusted computing/smartcards with a wallet inside them to do some kind of awesome self-attesting "no one has seen my key yet" physical payment token. Sort of like those Casascius coins, but without the need to trust the maker so much.
Hypothetically someone steals a lot of money from somebody else, if the amount is large enough the victim may be willing to do a lot of detective work in order to trace the funds.
This detective work might include...
* Blockchain analysis
* Offering money to bitcoin mixers in return for information
* Traditional private investigation
Cash has the same problem, bills can be tracked if the parties involved are motivated enough. Cash does go a long way to providing privacy though, for example in days gone by a husband might have bought a pornographic magazine with cash and the wife would be unaware.
This will annoy the libertarian crowd, but a truly anonymous and untraceable medium of exchange is not only most likely impossible, but also undesirable. The failed war on drugs aside, a lot of the things people want to do completely anonymously are illegal for good reasons (CP, human trafficking, etc).
It remains to be seen if bitcoin can offer the same kind of privacy that cash does, if bitcoin adoption continues I expect blockchain analysis to become very sophisticated.
This will annoy the libertarian crowd, but a truly anonymous and untraceable medium of exchange is not only most likely impossible, but also undesirable. The failed war on drugs aside, a lot of the things people want to do completely anonymously are illegal for good reasons (CP, human trafficking, etc).
Does child pornography make cameras "undesirable"? How about USB external hard drives? Or the Internet?
Does human trafficking make chains and locks "undesirable"? White cargo vans with blacked-out windows? Freeways?
Seriously, let's focus on attacking the unjust behavior itself, not blaming tools and implements that have no inherent intent or character, for good or for evil.
Cameras, USB HDDs and the internet -- the non undesirable uses far outweigh the criminal ones. I'm not an ideologue, I'm a pragmatist.
Freeways is an interesting one, most places license people to drive, for very good reasons (just one of them being a help to law enforcement).
It seems like a bit of silly argument considering I don't believe a truly anonymous untraceable currency is possible but let's suppose it is. My pessimistic nature makes me think that the top 3 things it would be used for would be tax evasion, bribery and extortion.
