Obscurity via Cross-Coin Exchanges

[cathalgarvey@cathalgarvey.me (Cathal Garvey)]

Hey all,
As it came up in the Mt Gox asides in one of the variously titled
threads on Nakomoto etc.: Bitcoin's pretty pseudonymous, rather than
anonymous. Coin transactions are public, and some can be pinned to real
identities, vendors or products, while others can be well inferred,
leaving a smaller, hard to quantify set of "really anonymous" addresses,
coins and transactions. Added to that, you have coin "taint" and badly
patched wallets that mix coins from other addresses when sending
payments, correlating various receiving addresses in one single transaction.

There are laundries, but my understanding is that they're not highly
regarded; their methods may be questionable, potentially they can be
untangled. Without a large enough set of users, you have little
guarantee of laundering; if only Alice and Bob pay in, and Alice and Bob
receive out, then the recipient set is clearly too bad to protect them!

OK, big problem. Zerocoin was designed to help fix that problem, by
minting a zero-knowledge-proof based 'coin, but it hasn't yet been
implemented.

What about simply exchanging different blockchain based coins, though?
Would that not help to "launder" with reasonable efficacy, provided both
participants use crypto to hide the transaction? From the outside,
transactions occur on both blockchains, but there's no "data trail"
correlating the transactions with one another as there is within each
blockchain.

So, Alice buys .4 btc from a friend, but knows the friend's opsec might
be poor, or that the transaction may have occurred over a bad channel,
or that the coins were purchased from an exchange that demands valid
phone numbers, etc.: she wants to launder.

She contacts Bob, a Dogecoin seller, to set up a private exchange. She
asks him to sell her 0.4btc worth of Dogecoin in two transactions of
unequal value (to prevent analysis by exchange rate to ID their
transaction). They conduct the exchange over an encrypted channel.