Peeling

Peeling is used as an attempt to obscure Bitcoins on the blockchain, typically to hide Bitcoin obtained through theft or illicit activity. Peeling begins with a single “dirty” address that can be linked to theft or illicit activity, such as purchases on dark markets. A small amount is peeled off from this address, with the remainder sent to another address, which is peeled again. After potentially hundreds or thousands of hops, all the addresses holding peeled bitcoins might be mixed with bitcoins from other non-peeled “clean” addresses. They might be re-aggregated into a couple addresses and then peeled again. It is theoretically possible to trace all of these transactions but it is not practically feasible without dedicated computing resources.