Is Bitcoin Anonymous?

Bitcoin was the first crypto and in the earliest years, it was considered to be anonymous. The very first use cases were buying and selling (mostly illegal) goods online via dark markets. The first dark market was called the Silk Road and had a reputation for having anything for sale. Imagine a global eBay for criminals.

In those early days, Bitcoin was the coin of choice for buying and selling. A Bitcoin address is a long string of numbers and letters (both upper and lower case) which people believed made it impossible to trace. While each wallet address is unique, they all look the same because we humans do not process random strings of numbers and digits easily. However, wallet addresses are not actually anonymous — they are pseudonymous, which means that they act as a placeholder for the wallet owner’s identity.

What Is Chain Analysis?

When Silk Road founder Ross Ulbricht was arrested by the FBI, they were careful to ensure that he was arrested with his laptop open and that he was signed into the admin system — they needed to physically connect the man with his online presence.

That market had been a middleman to process transactions, which meant that the FBI was now able to link together buyers and sellers and their Bitcoin wallets. While there were many thousands of wallets at that time, this provided the launchpad for authorities to analyze the blockchain and connect wallet addresses with real people and their real addresses. The process of connecting these dots is known as chain analysis and is now a widely used process to track criminal transactions.

Is It Possible To Buy Bitcoins Anonymously?

When it comes to the buying and selling processes, it is now very difficult to do this anonymously. Since the majority of exchanges are now registered and regulated businesses, they keep records of funds being sent to wallets. However, there are some services that match buyers and sellers for in-person transactions for cash. The first and most famous of these services is — a peer-to-peer site for exchanging cryptocurrency for fiat. However, the most anonymous form of exchange — meeting a stranger and handing over cash in exchange for crypto — is no longer supported on LocalBitcoins due to their growing adherence to regulations.

What Does A Bitcoin Mixer Do?

Since the earliest crypto enthusiasts were libertarians, this reduction in privacy was the catalyst for the creation of coin mixers. A coin mixer is a service that shuffles coins through a number of addresses for a small fee. They are also known as tumblers. The shuffling happens with other coins from other people who also want to use the same service. While this does not guarantee anonymity, it makes tracing coins incredibly difficult, which is almost the same thing.

The Bitcoin Rich List

One other privacy-related aspect that is either a real strength or weakness of Bitcoin and other crypto-assets is that their blockchains are public. It is possible to view the transactions on every block, forever. This also means that it is possible to see the transaction history of each and every wallet. This is the equivalent of having a public record of transactions for every bank account in the world, forever. Needless to say, this is a very long way from anonymous.

What Is The Most Anonymous Cryptocurrency?

If reading this short description has made you more interested in the technology behind privacy on cryptocurrencies and you are feeling brave, I suggest that you do some further reading and research. Googling the terms “zk-SNARKS explained” and “zk proofs explained” will open up a whole new world of technology. Good luck!


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