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Is Bitcoin Truly Anonymous?

By SiliconIndia   |   Monday, 23 April 2018, 10:59 Hrs
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It's no longer a secret. Bitcoin does not provide the type of anonymity some users hoped for. You know, the ability to make payments anywhere with zero chances of being traced. That may still be possible with cryptocurrencies like Monero, but not with Bitcoin. Here is why.



Bitcoin’s Traceability



When Satoshi Nakamoto launched Bitcoin in 2009, he introduced a digitized, decentralized public ledger known as the blockchain. This ledger would record all Bitcoin transactions in a transparent manner. Computer nodes would help maintain its transparency and accuracy. All transactions recorded on the blockchain can be viewed by anyone who wants to. If a user uses their public key to accept Bitcoins, this key can easily be used to trace their identity.



Is Bitcoin Truly Anonymous?



5 Ways your Bitcoin’s Address can be Linked to you



1. Publishing your Details Online



If you publish your name and Bitcoin address online, even once, any transactions you make with that address in the future can be linked back to you. It’s a common practice for Bitcoin developers, website owners and even merchants to publish their Bitcoin addresses online. Most people publish their addresses if they want to get donations in Bitcoins or if they want to receive payments in Bitcoins.



The only problem is that once you publish your name and Bitcoin address online, you can always be traced. Several cybercriminals have been apprehended for making the same errors. Notable drug trafficker cum Bitcoin millionaire, Ross Ulbricht, was arrested after using his nickname when launching a drug trafficking website. He further failed to protect his millions worth of Bitcoins, and they were confiscated by the FBI.



2. Buying Bitcoins on a Centralized Exchange



Nearly everyone nowadays buys Bitcoins from exchanges like Coinbase. These exchanges offer convenience and ease of purchasing Bitcoins without leaving the comfort of your house. With a simple email address and password, you can start buying Bitcoins online. In some exchanges, you must provide crucial personal details like your name, government ID, utility payments and passports.



Most of these exchanges ask you to provide enough information that could link your Bitcoin address back to you. The exchange can reveal details about your Bitcoin transactions to the government any time they are asked to. Fortunately, not every exchange asks for your personal info. Some Bitcoin exchanges work as no registration crypto exchanges and ask for no personal information. You can trade Bitcoins for other cryptos in such an exchange without revealing anything about you.



3. Buying Goods with bitcoins



One of Bitcoin's goals is to disrupt the finance sector and find a breakthrough as a payment currency. Somehow, Bitcoin has succeeded in this. There are currently over a hundred top merchants around the world who accept Bitcoin Payments. Overstock.com and other popular merchants all accept Bitcoins.



However, when you make a Bitcoin payment with any of the merchants, they record your personal information as well. They often ask for your name, address and contact details. With your information and Bitcoin addresses, the companies can reveal your address to the government or anyone else easily.



4. Revealing your Info to the Wrong Person



Every day you interact with other Bitcoin users; there is a chance that you reveal your address and name. Sometimes, you can reveal your address to the wrong person and this could turn out to be your worst mistake. In 2012, Roger Ver, the famous Bitcoin Angel investor, revealed personal information of a Bitcoin user just because he could. Roger has administrative privileges to Blockchain.info, a platform where info about Bitcoin users is stored.



As such, it's always important to keep in mind people you interact with when talking about Bitcoins. As it turns out, wronging the wrong person can, in this case, Roger could lead to your crucial data being revealed as well.



5. The Government coming for you



More than once, governments have shown their might by cracking down Bitcoin users involved in some sort of illegal activities. The most infamous Bitcoiner to have been apprehended was definitely Ross Ulbricht but he is not alone. Generally, Bitcoin does not offer privacy. Your Internet Service Providers always track your Internet data for marketing reasons.



But by tracking down your Internet usage, they can track all data linked to your IP address. Your country’s government can easily get hold of this information by cooperating with the ISP provider. Government agencies like the FBI also have the means to track you down as long as you don’t use Internet privacy tools like VPNs or Tor.



How to increase Anonymity when Dealing with Bitcoins



Although Bitcoin transactions are done in a transparent manner, they are never linked to a person. If anything, people complete Bitcoin transactions in a pseudo-anonymous manner. Bu by enforcing several measures, a Bitcoin user can make their payments anonymous. Here is how.




  • Using a different address with every transaction-some wallets generate a new Bitcoin address every time you make a payment. This helps you avoid using your public and private keys.


  • Anonymize your IP Address- use a virtual private network (VPN) or Tor to keep your IP address anonymous when making any payments.


  • Buy Bitcoins from exchanges with few verification details- exchanges like Flyp.me allow you to trade coins with no verification required


  • Buy bitcoin with cash or in person- some exchanges allow you to meet up with Bitcoin sellers to complete trades.


  • Mine Bitcoins- instead of buying them and risk revealing your info, invest in mining hardware and mine Bitcoins for yourself


  • Don’t publish your personal details alongside your Bitcoin addresses online


  • Make payments using anonymous cryptocurrencies like Monero-if you can do without Bitcoin, consider making crypto payments using completely anonymous coins like Monero



Conclusion



Keeping Bitcoin transactions private is every user’s dream. Even when you have nothing to hide, no one wants their details easily revealed for everyone to see. Fortunately, the partial privacy provided by Bitcoin is enough for many people. But if you want to use Bitcoin and still keep all of your personal info private, use the tips above.



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