Read the original Bitcointalk thread on BitLaundry. Answer the questions and post your answers below:
https://bitcointalk.org/?topic=963.0
1.Alice doesn’t know Bob’s real public address. Bob doesnpt know Alice’s private address.
2. It could be compromised if there are no other transactions over some time. Then it would be clear that Alice sent money to Bob.
3. They get a a little share of the transaction. If they are not honest, it will be known inmediately and the business would stop.
4. If some transaction would be much higher thatn any revenue expected, they could just take the money and run.
Their Bitcoin Addresses aren’t directly linked to one another.
When they send bitcoin to each other without using a service such as bitlaundry.
To get a good reputation so his service can continue.
If a large transaction was sent to bitlaundry to complete on behalf of a client they could decide to send the bitcoins to themselves
Alice uses BitLaundry to send funds to Bob. What information specifically is ‘private’ for Alice and Bob?
That they did a transaction directly, any observer from outside will see Alice sending to “someone” and Bob receiving from “otherone”.
Explain a situation where Alice’s and Bob’s privacy could be compromised?
If private keys (or wallet.dat) from BitLaundry are revealed to someone, you can track history by transaction ammounts.
What is BitLaundry’s incentive to be honest?
Reputation, keep the service running.
What is BitLaundry’s incentive to be dishonest?
Sell information to chainanalysis companies, cooperate with goverments and save taxes or steal a good ammount of coins and disapear.
) from the right behaviour. However, on the long run it would probably be unwise as offering such a system could enable it to operate (and make profit) for years on the market.Alice uses BitLaundry to send funds to Bob. What information specifically is ‘private’ for Alice and Bob?
It basically is the same with regards to Alice and Bob as if they were using a custodial exchange, except that no KYC for Alice. Bob will not know the funds originate from the address of Alice (normally will know because generated a designated address for this transaction or the amount is unique) so Alice will be able to keep the origin address private from Bob and others regarding this transaction.
Explain a situation where Alice’s and Bob’s privacy could be compromised?
If BitLaudry just as an exchange with KYC compromises the information, does not delete the database with transaction history or gets compromised by third party.
What is BitLaundry’s incentive to be honest?
fees, it says 0.5% that’s very high to be an incentive. Failing to be honest would drive them out of this lucrative business.
What is BitLaundry’s incentive to be dishonest?
Stealing the user funds, being offered a lot of money to sell the data. Planning an exit scam or making extra money on the user data.
Alice uses BitLaundry to send funds to Bob. What information specifically is ‘private’ for Alice and Bob?
The address is the information that is kept private since they are using a dummy address as middleman, that address is going to be recorded on the transaction, but being a one time use, in the middle of a lot of one time use addresses used from bitLaundry is not gonna be possible to link alice to bob but just alice sending to bitLaundry and bob receiving from bitLaundry.
Explain a situation where Alice’s and Bob’s privacy could be compromised?
if the service is largely used the security is granted by the crowd of inputs and outputs going in and out at random times, but if alice and bob are the only users in that time stack, is easy to connect them.
What is BitLaundry’s incentive to be honest?
Being a paid service if they are not malicious the diffusion and utility of the service is gonna spread, otherwise after a number that can be as small as 1 “stolen” transaction, the users could stop using the service
What is BitLaundry’s incentive to be dishonest?
if a transaction value is so high to dwarf all the years of revenue that the service could ever expect, bitLaundry could decide to send the value of the tx to an address controlled by the creator of the service.
Alice uses BitLaundry to send funds to Bob. What information specifically is ‘private’ for Alice and Bob?
Alice doesn’t want anyone to know that she sends btc to Bob.
Explain a situation where Alice’s and Bob’s privacy could be compromised?
public keys of Alice and Bob compromise their privacy.
What is BitLaundry’s incentive to be honest?
Keeping the business alive and running.
What is BitLaundry’s incentive to be dishonest?
Other people money at there full control.
@Grant_Hawkins this lecture was really fun! I especially liked question nr 4 
Also now I wonder, what happened to bitlaundry, was it raided by the SEC or by some other “nice” government agency?
I did my quick research about bitlaundry, here what I found:
Wow, I was assuming such a service would have already closed down… I wonder how is it possible it survived with all those KYC and anti-money laundering laws! I mean look at ShapeShift and Changejelly: they both had to give up user’s privacy and implement KYC… Soon or later bitcoin-laundry will end up the same 
And here my answers to the quiz:
1. Alice uses BitLaundry to send funds to Bob. What information specifically is ‘private’ for Alice and Bob?
They don’t want anyone to be able to make a link between them. Especially Alice doesn’t want anybody to know that she sent funds to Bob.
2. Explain a situation where Alice’s and Bob’s privacy could be compromised?
If the bitlaundry website is raided by some government agency, or if such an agency (NSA does this all the time) implants some backdoor and spies everything, the db records and logs that the website claims to delete directly after each transaction may be leaked to these agencies. With the requests IP addresses in the logs they can easily find Alice’s identity and can create the link between her and Bob, that she wanted to hide. They can of course not only see the link, but also he amount she sent.
3. What is BitLaundry’s incentive to be honest?
They get 0.5% fee on the transaction’s value, which is really a good cut. If it turns out that the service is a scam, people would stop using it and they would be out of business and stop gaining those good fees.
4. What is BitLaundry’s incentive to be dishonest?
If somebody would use the service to transact a big amount of money, I mean a life changing amount such as several millions worth of crypto, the website may just grab these funds and disappear.
1. Alice uses BitLaundry to send funds to Bob. What information specifically is ‘private’ for Alice and Bob?
The direct transaction between Alice and Bob. And Bob does not know Alice real adress.
2. Explain a situation where Alice’s and Bob’s privacy could be compromised?
If there aren’t a lot of transactions going in and out of the laundry system, you could observe the transactions from Alice to the temporary adress and then keeping a look out for a transaction with that exact amount being sent out to a new adress (Bob).
(And if i understod correctly they have the transaction between the temporary adress and Bob stored in a database before getting deleted after the transaction has gone trough, that would would intern mean that if the database got hacked they could see these temporary transactions from there aswell.)
BitLaundry could also be selling information about their customers behind the scenes and straight out steal from them if they wanted to.
3. What is BitLaundry’s incentive to be honest?
They gain money from it by collecting small fees for every transaction and by showing that they are honest their buisness would grow and become more profitable.
4. What is BitLaundry’s incentive to be dishonest?
They could just steal the money they recive, from the temporary adress or sell the information for money. This eliminates the “no trust needed” concept of blockchain by adding a third party (that also has a centralised database if i understod correctly)
Alice uses BitLaundry to send funds to Bob. What information specifically is ‘private’ for Alice and Bob?
Alice’s address.
Explain a situation where Alice’s and Bob’s privacy could be compromised?
If, in a 30 minute time windows, only Alice is using the service. Only her transaction will be made.
Also, if BitLaundry’s servers get compromised, an attacker may get logs, private keys and other data compromising the privacy of the transactions.
What is BitLaundry’s incentive to be honest?
The fees charged for using the service and increased “anonymity” as more users use the service.
What is BitLaundry’s incentive to be dishonest?
If the service is popular, they can accumulate a lot of transactions (until the users detect the “dishonesty”) and just transfer the funds to themselves.
Thanks for the bg info!
The connection between sender and receiver.
If the time or to short or not random enough between send and receive. If the amount is to unique and seems to only belong to those two. If they do this often and by human behavior create patterns. 10 BTC transfer every Tuesday at 3pm from Allice to Bob. Then using min and max of random wait time break down the addresses that got 10 TBC after 3pm Tuesday each week. Just one example of a pattern. There can be many patterns all used together to paint a profile of both users and take away privacy.
The service is useless if it does not provide privacy. So credibility is built into the business model.
If state actors threaten jail or fines. If the funds value causes them to exit scam.(If they created non custodial version that would be less relevant.) I think this is a custodial solution though but I have not looked into it in depth.
1none
2.someone bullies bitlaundry to give up the adresses
3. none
4. steal bitcoin
1. Alice uses BitLaundry to send funds to Bob. What information specifically is ‘private’ for Alice and Bob?
a. the address from alice and bob have no link.
2. Explain a situation where Alice’s and Bob’s privacy could be compromised?
a. when there are no other transactions or when alice an bob transfer money togther without a landry service
3. What is BitLaundry’s incentive to be honest?
a. reputation - if the reputation is low, nobody will use it
4. What is BitLaundry’s incentive to be dishonest?
a. if it is "big" enough, steal all locked funds in an "exit scam"Their public keys
With publicly known fees the amount Alice is sending to Bitlaundry might be linked to the amount Bitlaundry sends to Bob. Besides counterparties should trust centralized entity which requires trust and may be a subject to regulations.
Minimum of 1 BTC per transaction is pretty good incentive to stay in business as long as possible. Being honest is critical for this.
They might be forced by governments to disclose client information. The fact that person decides to use laundry service might seem suspicious to them. Besides, at some point the owner of the service might decide to go out of business by stopping outgoing payments and disappearing with funds (exit scam).
Alice uses BitLaundry to send funds to Bob. What information specifically is ‘private’ for Alice and Bob?
The direct transaction is not visible. Bob will not know the public address from Alice. Alice ofcourse will have Bob’s public key to give the right address to BitLaundry.
Explain a situation where Alice’s and Bob’s privacy could be compromised?
When there are less transactions going on you could probably attack the log file?
What is BitLaundry’s incentive to be honest?
Getting more customers by doing good will be the incentive?
What is BitLaundry’s incentive to be dishonest?
When this is a huge amount to steal. Greedy is still a feature of a human.