Additionally, people can always create new wallet IDs and self-launder the money, assuming they aren't using the Bitcoin Laundry (http://bitcoinlaundry.com/) to do it for them.
That is interesting, but the trail is still there; i.e. the block chain we are following as it never changes. It's not the transferring them from BC wallet to BC wallet that I'm worried about, but the cashing out for fiat.
no its not. you put your 'marked' 100$ in the laundry service and you get 100$ that came from some random dude. Assuming the laundry service doesn't keep logs (very big assumption though) the money that came through such a service can't be used to identify anyone
Logs are critical for this tracing to work, without them the trail ends. I was looking over Bitcoin Faucet and it does appear that, at least, they log all ip address. Then I made my way to http://blockexplorer.com and was able to trace all those block.
In the end, BitCoin is only as anonymous as you make it.
