01 Jul Is Tracing Bitcoin really impossible? The myths and facts behind tracking.
Bitcoin and other cryptocurrency transactions have been marketed as entirely anonymous and private since the initial white paper describing blockchain technology in 2008. But how private are crypto transactions? Cryptocurrency enables direct peer-to-peer transactions via the internet, with just two individuals engaged in the transaction. There is no need for banks, governments, or middlemen. This looks to be the ideal structure for privacy and anonymity, however, this is not the case. Bitcoin is less anonymous and more pseudonymous.
Anonymity in Bitcoin:
Bitcoin is a decentralized cryptocurrency founded in January 2009 by a mysterious figure known as Satoshi Nakamoto. Bitcoin and its operation are not under the jurisdiction of any government body. As a result, several governments continue to oppose the usage of Bitcoin.
There have been reports of criminal activities with Bitcoin. This was made feasible by the pseudo-anonymity provided by Bitcoin. These perpetrators were convicted with the assistance of Bitcoin professionals and researchers. There have been examples of software and instructions capable of infiltrating the Bitcoin network and influencing the blockchain. Some of the possible flaws have already been identified.
Any transaction includes Bitcoin addresses that must be revealed in order to get goods or services. Anyone’s balance and transaction history may be viewed using these addresses.
Is Bitcoin Traceable?
Yes. Bitcoin is trackable. While bitcoin may be created, moved, and stored without the intervention of a centralized authority such as the government, each bitcoin transaction is recorded on the blockchain, a permanent publicly accessible ledger.
In truth, every bitcoin can be traced back to its initial wallet and tracked to the one it is presently in. The blockchain, on the other hand, only keeps track of crypto wallet public addresses, not real-world identities. As a result, rather than being anonymous, bitcoin is pseudonymous. Your bitcoin wallet address is merely an alias for transactions on the bitcoin network.
How to Protect Your Privacy?
When dealing with finance online, privacy is a key problem. Consider some of the following strategies to safeguard yourself.
Hide Your IP Address:
Because Bitcoin is a peer-to-peer network, it is feasible to listen to transactions and log IP addresses. You may hide your IP address with VPNs or the Tor browser to make it untraceable. Even though the IP address is logged, it is practically difficult to track back to you in some circumstances since you have disguised your IP address.
You may connect to the Bitcoin network using the Tor browser, which enables privacy and surveillance-free surfing. Tor nodes encrypt and redirect your internet data to several nodes, making it impossible to determine your IP address.
After each payment, create new addresses:
Because a Bitcoin address may be linked to all of your previous transactions as well as your crypto balance, you must utilize various addresses to accept payments. You can have numerous wallets to segregate your Bitcoins.
No one will be able to trace all of your transactions back to you once you start using multiple addresses. People that transfer you Bitcoin have no way of knowing how many coins you hold or your previous transactions.
Do not Publish your Address Publicly:
When it comes to preserving your privacy, publishing your Bitcoin address on websites and social media is not a smart idea unless you want to take public donations or payments with total openness. Even if you do disclose your public address, make sure you transfer any cash associated with it to another.
Use a Mixer:
By sending and receiving the same amount using various Bitcoin addresses, several online sites enable mixed traceability between users. While mixing can reduce traceability in small transactions, it becomes increasingly difficult in larger transactions.
As a user, you must guarantee that these services are reliable in order for them not to steal your money and keep a record of your requests. The legality of such services varies by jurisdiction.
Myths Behind Bitcoin Tracing:
The Bitcoin Blockchain Is Risky:
The transparency of the Bitcoin blockchain is sometimes misconstrued as a security flaw. However, the Bitcoin network’s open design allows it to be protected by the millions of miners, traders, and investors that use it. It would be necessary to control at least 51 percent of the processing power associated with the network in order to corrupt the Bitcoin blockchain. With millions of machines and users engaging in the Bitcoin network throughout the world, the ability for any one entity to control a majority of the network is quite restricted.
Bitcoin is completely anonymous:
One of the most popular misconceptions about Bitcoin is that its users are anonymous. This, however, is not the case. Because each bitcoin is associated with an address, each bitcoin has a clear and transparent history of ownership dating back to its birth. Furthermore, the Bitcoin blockchain allows anybody in the network to examine all transactions, allowing transactions, addresses, and supplies to be easily inspected by any and all network members.
There is no publicly available information on blockchain activity:
One of the most popular misconceptions about blockchain technology is that it is not open to the public. Contrary to common assumptions, the bulk of blockchain activities can be tracked. Furthermore, blockchain has no hidden secrets and no dark criminality related to its actions.
Criminals Prefer Cryptocurrencies:
True, decentralization and anonymity are particularly appealing to criminals, but they are equally appealing to law-abiding persons living in an economically or politically precarious environment. If you cannot trust local banks with your money owing to corruption, or if your nation is in danger of becoming unstable, it is undoubtedly the greatest location to keep your money.
Despite the fact that cryptocurrencies promise to promote economic liberty and anonymity, you must take precautions to preserve your privacy. Making your IP address is important for maintaining your Bitcoin privacy. Make sure you have various digital wallets set up to house your dispersed Bitcoin amount. Use separate Bitcoin addresses for each transaction if you have several wallets so that one transaction does not expose your whole amount or transaction history.