One of the biggest problems with bitcoin and other digital coins is that once they are stolen, they are almost impossible to recover.

A professor at the University of Cambridge has come up with a potential way for folks to recover stolen bitcoin.

Professor Ross Anderson discusses three methods for tracing bitcoin: poison tainting, haircut tainting, and FIFO tainting. He is planning on making publicly available his FIFO tainting methodology and files so that law enforcement can use them to track down stolen bitcoin. He noticed that when you use the FIFO tainting methodology, bad bitcoin appears to keep circulating among bad actors — rather than being dispersed throughout the entire bitcoin community.

A question Professor Anderson does not address is whether cryptocurrency “tumblers” or “mixers” can defeat tracing. Bad guys use tumblers or mixers to make tracing extremely difficult, if not impossible. These tools split up bitcoin and other crypto into lots of smaller pieces, throw them into a blender with a lot of other folks’ coins, and redistribute the reshuffled coins on the other end. This makes tracing your bitcoin very difficult. 

You can hear Professor Ross Anderson describe the process in this video.

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Lisa Bragança recovers losses for investors all over the country, protects whistleblowers, and defends individuals and businesses in government investigations. As a Branch Chief with the SEC Division of Enforcement, Lisa conducted and supervised insider trading investigations and a wide range of investment fraud and Wall Street misconduct. Lisa represents participants in the digital coin/cryptocurrency industry so she thinks a lot about what money is.