Is it true that each single Satoshi can be traced back to the block it was mined in?

With the recent (stupid) talk about "blood" bitcoin and "dirty" bitcoin, there often comes the assertion somewhere in the comments, that it is possible to trace back each single Satoshi all the way to the block it was mined in.

I don't think that this is actually true in cases where multiple UTXOs were consolidated into a single UTXO - or is my understanding of how Bitcoin transactions work flawed?

Let's say I have in my wallet 2 bitcoin. One of them in address A (in a single UTXO) and the other in address B (also in a single UTXO). The bitcoin in A can be traced to CleanBlock, the bitcoin in B to DirtyBlock.

Now I consolidate these two bitcoin into a single UTXO in address C by creating a transaction that includes both of these UTXOs as inputs, with the UTXO in address C as the single output. So at the end I have 2 bitcoin minus fees in address C, again in a single UTXO.

Now I want to pay Bob 1 bitcoin. I use address C for this and make a transaction that sends Bob 1 bitcoin and that sends the rest back to one of my change addresses.

At this point, wouldn't it be impossible for Bob to know if the 1 bitcoin I sent him originally came from CleanBlock or from DirtyBlock?

If he followed the tracks in the blockchain, he would see that his bitcoin came from the single UTXO at address C, and he would see that this UTXO was in turn funded from two different UTXOs that ultimately lead back both to CleanBlock and to DirtyBlock. At this point, Bob would no longer be able to trace back his bitcoin to the exact block it was mined in, but he would end up with two blocks, that were both possible sources of his bitcoin.

And obviously, if the history of Bob's bitcoin is a bit more complex and includes a few more UTXO consolidations before it reaches Bob, there would probably be many more other possible source blocks. And it would indeed be totally impossible for him to trace back his bitcoin (or every single one of his 100 million Satoshis) to the exact block it was mined in. He could only determine a set of blocks where his bitcoin/Satoshis potentially came from.

Unless I am overlooking something? If so, I would be thankful to learn what it is.

submitted by /u/BitcoinAcc
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from Bitcoin - The Currency of the Internet https://ift.tt/33o3vHS

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