Yes, your Bitcoin transactions can be tracked – and here are the companies that are doing it


Since its inception, Bitcoin has been thought of as an anonymous way to move money. Recently, however, some companies have created software that can track coin movement and help order forces keep track of illicit gains.

Pseudo-anonymous transactions

When creating a wallet, users are given an address that allows them to receive coins. This address is only a long series of numbers and letters, but each one is unique to the portfolio. This raises privacy issues on the network, as anyone can enter and view all the transactions you've sent from that wallet.

This Bitcoin property allows people to link portfolios with real-world identities. For example, send coins from your personal portfolio to your exchange portfolio. The exchange portfolio could be linked to your identity. If anyone knows, then you can assume that Wallet 1 also belongs to you.

Blockchain analysisCompanies like Chainalysis have identified portfolios linked to criminal activities, such as Darknet transactions. With their blockchain analysis software and other public online clues, they were able to link transactions to real identities. The most famous work of Chainalysis was to help the FBI identify two dishonest agents who were stealing Bitcoin from the portfolio of an online drug market operator.

Another company that works in blockchain analysis software is the CipherTrace startup in California. They even went to infect their systems with the ransomware to track down the coins that are used to decrypt the machines. This can lead you to find out who's behind many of these viruses, along with helping the forces of order in recovering the money.

private life coins

Private currencies such as Zcash and Monero can however create problems for blockchain analysts. Zcash uses a technology called "zn-SNARKS" to hide transaction data, including the sender, recipient and the negotiated amount. Chainalysis CEO Miceal Gronager does not see Zcash as a problem, however. Very few people use the privacy options on Zcash, and it is still possible to collect data on who. Matching the timestamps of private transactions with real-world events, such as buying something online or selling coins for the fiat, can decant users.

Monero uses RingCT and invisible addresses to obscure data, which makes Monero private by default. When sending a transaction to Monero, another six random signatures are extracted from the blockchain and included in the transactions. Anyone viewing the transaction on the blockchain would not be able to understand which signature belongs to the sender.

The localization technology has more cases of use than the simple capture of criminals. With the increase in the number of investors entering the scene, blockchain analysis can help banks and other financial institutions to comply with KYC / AML – Know Your Customer and Anti-Money Laundering.

This software could also be used to observe market trends. The increase in Bitcoin's trade in foreign countries, such as China or Venezuela, could mean pressure on national legal currencies. It could give investors an overview long before official statements are issued.

What do you think of tracing Bitcoin and other cryptocurrency transactions? Do you think that private coins will see greater use? Let us know in the comments below!

Images courtesy of Bitcoinist Archives, ZCash, DepositPhotos

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