Can Bitcoin be traced when in fact, it is often associated with anonymity and for its decentralized transaction system, two of the most highlighted features that has garnered its worldwide acceptance as legible digital currencies amongst people.
So, can bitcoin be traced?
Recently it has come to the notice that Bitcoin transactions aren’t as anonymous as they were once perceived.
Can Bitcoin Be Traced?
Web merchants are almost constantly leaking data periodically, which is more than enough to link users to their respective purchases.
Cybersecurity researchers are also being able to track illicit transactions and deals with Bitcoin.
This also is one of the primary reasons for its ban in various countries around the world. With Bitcoins increasing popularity, many online users are availing Bitcoin as a payment option for their products.
Current technology is also devising practical ways to track bitcoins.
Government clearly doesn’t want the Bitcoin users to be anonymous and so they are trying to devise regulations in a way that they can be monitored thoroughly.
People can be traced if they have used Bitcoin to pay for goods or services in particular on a website.
It is nothing new of that sort since people have been analyzing blockchain and Bitcoin tracking was done since its use on the internet.
In spite of their popular associations with anonymity, there are various ways to identify and trace the person exposed to their Bitcoin transactions.
Users relying on Bitcoin exchanges like Binance, Bitfinex, and Kraken to exchange Bitcoins with money are required to disclose their personal information before they are able to create accounts.
Can Bitcoin Be Traced? Are Bitcoin Transactions Really Anonymous?
One of the greatest promises that this particular technology has offered is its anonymity to its users in spite of having their transactions recorded in public ledgers. Security experts have called this pseudonymous privacy which can preserve the privacy of the users unless the pseudonym is discovered.
As soon as the pre-sale information gets leaked, these details can be linked to the concerned Bitcoin address, revealing the purchase history. This might raise concerns amongst people who want their transactions to be anonymous.
But how easy is it to link personal information with these transactions?
Experts have opined that it is a very simple process which is similar to the way details are often leaked during ordinary transactions. The details can eventually be linked to the users making their transactions even though they are under layers of additional privacy feature.
The web trackers and cookies are the primary culprits here since small codes are embedded deliberately on the websites which sends information to third parties, reporting the way users use their website.
Web trackers also send information to Google, Facebook and other sites, which track user stats, browsing habits and purchase history. In some instances, these tracers can also send private information and details such as email, name or addresses.
This is how information leaks unto the web where law enforcers, malicious users, and government analyze and collect the following to trace further.
The question here is, how easy is it for hackers to use this information against the users which also can point to their concerned Bitcoin address?
This is concerning, to say the least.
There are around 130 merchants where users can avail Bitcoin as a payment method, some of them are Microsoft, Dell, Overstock, and Newegg.
Companies such as Chainalysis have been busy identifying wallets that are linked to illicit or criminal activities like Darknet transactions. With the help of their software dedicated for blockchain analysis, online or public cues, they are being able to link these respective transactions to the real identity of the users.
Their most work has been while helping the FBI identify two of their rogue agents who were stealing Bitcoins from the wallet of drug dealer who peddled online.
Another company that has been working on blockchain analysis is CipherTrace which is a California based start-up. They have gone to the severity of compromising their own system with ransomware to track the coins which were used to decrypt their machines.
This seems like a plausible method to find the culprits behind such viruses and help law enforcement in future instances in recovering their money.
How can they be linked to their source?
It depends solely on the user, the most common practices of ownership for Bitcoin address is to reveal your post on the public platform.
For instance, if you own a private blog with a link to your Bitcoin address for monetary help, it quite obviously reveals.
Likewise, it can also be found if you are launching a website with the Bitcoin address of yours since clearly the domain is registered with your information.
Another way of tracing is through popular exchanges where users exchange their Bitcoin for FIAT currency.
These exchanges are mostly contained with regulations which prevents illicit activities such as money laundering and subsequently requiring the users to provide their information.
Your ISP can also determine your identity unless you are using a VPN.
Since Bitcoin lacks inbuilt encryption for peer-to-peer network, their clients are likely broadcast the transactions over the network.
The way leak occurs
Web trackers are often responsible for such leaks, especially during purchases that happen on sites. Interestingly enough, research has shown that there are about 54 sites out of these 130 that leak payment information to third parties which mostly happen through shopping cart tabs.
These leaks are mostly intended for analytical purposes and for advertising. Researchers have also claimed that additional information is also peddled here as well.
Apparently, there are some merchant sites that have leaked severe details and information, exacting the transactions made on the Bitcoin blockchain by the users.
This seems like bad news for those who expected anonymity from Bitcoin blockchain.
There are other popular applications which also link users without revealing their information which can be beneficial against tracking such as this. There are AdBlock Plus, uBlock Origin or Ghostery which these users can use to protect themselves from such intrusions.
Even though these tools are commonly used, they can miss trackers. But realistically they are far from being the perfect method for fending off the internet intrusion.
The myth behind Bitcoin’s anonymity
Bitcoin the most beloved digital currency which is hailed by libertarians, criminals and scientist alike. But unfortunately, they aren’t invulnerable. Bitcoin’s anonymity is acting as a powerful tool for criminals where virtual money is keeping these shady transactions a secret.
Researchers have largely contributed to the development of encryption for Bitcoin and they are also helping law enforcers regulate crime. They have been collecting data from sites such as Silk Road.
From the texts and images that describes purchases done through Bitcoin transactions, they have collected these details from these transactions that appear on the blockchain once they are closed. However, criminals can still feel the content as long as they are being careful and are behind the protected walls of cryptography.
After the purchase is done, the credit can be transferred directly into your bank account or the cards that you are using.
It can simultaneously be sent to your wallet as well. If someone were to make it harder to trace, they can easily create multiple addresses for the blockchain to randomly divide them in between, making it more anonymous and harder for blockchain analysis.
Bitcoin ATMs’ on the other hand can help you purchase coins anonymously since some of them only require identity scanning before being used. While storing your Bitcoins in any private portfolio, you don’t necessarily need to provide your personal details.
This helps you in transferring money out of your anonymous portfolio without the need to provide actual identification. However, with the decentralized technology at your disposal, users have their full autonomy over their funds.
Government have been tracking as of lately.
With the increasing popularity of Bitcoin, Governments have been turning their heads and giving more attention to Bitcoin technology and transactions. They have also been feverishly trying to trace other cryptocurrencies that are there.
But as the popular discourse goes, there isn’t absolute anonymity, rather pseudonyms. Primarily, it is one so by linking the transactions to their fixed addresses and also by keeping a public record of each of these transactions, made on the blockchain. With these, the governments can easily track the Bitcoins if they want to.
While many of the governance have decided to conveniently strap on this system, most of them are slowly progressing towards this direction.
Moreover, there exists private coins which doesn’t offer public record of the transactions linking to the wallet. Monero is on of the most prominent examples of this kind. But there are still ways to remain under the radar for the ones who wants to keep a low profile despite the government’s intrusion is tracing and tracking.
Even though tracking is increasing, investors and holder shouldn’t be needing the paranoia for governmental surveillance. Most of these tracking systems rely heavily on the inputs from the respective crypto exchanges, while the other rely on data scavenges which the user leave on the internet carelessly. With privacy coins, users shouldn’t be too concerned with the privacy compromise.
Author: Vijaya Bharti
With a background in finance and a passion for writing, she has made her passion her profession. Her endless desire to learn new things developed her interest in Blockchain Technology and the Crypto world. She enjoys writing and learning in the process as she believes there is no end to gaining knowledge. She likes to unwind by watching online series or reading when she is not working.