Quote from: enquirer on August 05, 2011, 02:02:06 AM

So every transaction can be traced to its origin. If I connect to the network through TOR and generate 50 BTC, and then buy some substance with it, it's very hard to trace that to me. But even if I bought coins at an exchange, and they, as required, have verified my identity, I can still do the following:

- create another wallet (possibly online, like instawallet)
- transfer some BTC to that wallet
- buy substance with that second wallet
- erase that second wallet

now I can always say in court that I paid some other guy for his service (drug withdrawal consultancy?) and that's him who later bought the substance. While obvious lie, can that be considered a proof beyond reasonable doubt that I indeed bought the substance?

I think trying to explain how the Bitcoin system works to a jury will most likely be a lost cause, unless & until BTC become much more mainstream. Most people won't understand how it works, so they won't understand how the law enforcers would connect the dots from you to the drug dealer.

Unless I'm mistaken, what kji is trying to say is that the police likely wouldn't use the BTC as direct evidence. More likely, the investigators will use the transaction history to draw up a list of potential suspects, which will include you and a bunch of other people who have nothing to do with the drug transactions. Then, they will dig further into each suspect using standard, existing investigative techniques. They'll narrow the list to a few suspects (including you) and gather evidence in the "traditional" way (surveillance, phone taps, paid informants - whatever they currently do), and finally arrest you based on that evidence.