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This is the part which confuses me about Bitcoin the most. It's meant to be anonymous, yet with some diligent data mining, it can become pretty clear who's who

This is the part which confuses me about Bitcoin the most. It's meant to be anonymous, yet with some diligent data mining, it can become pretty clear who's who from their spending patterns by observing the ledger. How is that remotely anonymous?

vorpalhex 7y ago
Bitcoin is not anonymous. It does not require a third party to authorize transactions.
vtail 7y ago
it’s a common misconception: bitcoin is NOT supposed to be anonymous (it has a full ledger), but pseudonymous.
deleted 7y ago
[deleted]
whyrusleeping 7y ago
Bitcoin isnt anonymous, and doesn't claim to be. If you want an anonymous currency check out something like Zcash or monero. They use some fancier crypto to obscure transaction inputs and outputs, which gets you a bit farther towards being anonymous.
- hughw 7y ago
  It's pseudonymous.
  - proverbialbunny 7y ago
    Far less anonymous than using a bank. Bitcoin has and always will be a way to cut down transaction costs, cutting out the middle man ie cutting out the banks. To do that, everyone has to be able to audit every transaction and verify authenticity of a transaction. In this way bitcoin is anti anonymous, always has and always will be.
ColanR 7y ago
> It's meant to be anonymous Unfortunately, Bitcoin (BTC) is not anonymous, as you pointed out. It never was; and with tax laws requiring copious transaction information, it is particularly easily traceable. That's the idea behind Monero & Co., which tries to mix things up a bit (literally). The anonymity is still not perfect, especially against state-level actors.
- Ambele 7y ago
  Bitcoin can be anonymous though in certain use-cases. You can create a new bitcoin public/private key pair on a computer that has never (and will never) touched the internet. Once you send the coins from an address to this new address, the network will now know the IP address of the sender, but it won't know anything about the unknown recipient.
  - hobofan 7y ago
    It knows that in some way/shape/form the old address is associated with the new address, so most likely it is the same entity, or a transaction partner. Bitcoin is not supposed to be anonymous, and very unsuitable for use-cases where you want any kind of anonymity guarantee.
    - Ambele 7y ago
      >Bitcoin is not supposed to be anonymous But it can be used anonymously and probably in some industries is still used anonymously. A counterparty that is willing to swap anonymously acquired and sent altcoins for Bitcoin can provide a privacy conscious individual with anonymous Bitcoins. If using proxy-chains, Tor, or a real person in another country to broadcast your trade isn't your cup-of-tea because you don't trust them, there is still another less practical way. If you secretly give someone your Bitcoin private key (for example: written on a small piece of paper), you can give or trade those Bitcoins to someone without the network knowing about the transaction. >so most likely it is the same entity, or a transaction partner. Conceivably, the transaction could be broadcasted from an important individual's hacked phone or computer without a trace. This is where being innocent until proven guilty becomes important.
perennate 7y ago
I don't think it was really "meant to be anonymous". The original whitepaper at https://bitcoin.org/bitcoin.pdf https://bitcoin.org/bitcoin.pdf has a section on privacy, which mentions that public keys can be kept anonymous but acknowledges that all transactions are announced publicly: > The traditional banking model achieves a level of privacy by limiting access to information to the parties involved and the trusted third party. The necessity to announce all transactions publicly precludes this method, but privacy can still be maintained by breaking the flow of information in another place: by keeping public keys anonymous. The public can see that someone is sending an amount to someone else, but without information linking the transaction to anyone. This is similar to the level of information released by stock exchanges, where the time and size of individual trades, the "tape", is made public, but without telling who the parties were. > As an additional firewall, a new key pair should be used for each transaction to keep them from being linked to a common owner. Some linking is still unavoidable with multi-input transactions, which necessarily reveal that their inputs were owned by the same owner. The risk is that if the owner of a key is revealed, linking could reveal other transactions that belonged to the same owner. Recently there are newer cryptocurrencies like Monero and ZCash that focus specifically on anonymity/privacy.
- josh2600 7y ago
  There’s a lot of different veils to privacy in transactions. There’s the IP record of the user hitting the server that processes their request (it might be your own box if you’re storing the whole chain yourself but most people use thin clients). Then there’s the list of inputs (cryptonote based currencies like monero use ring signatures which provide obfuscation but not binary privacy). Then there’s the list of outputs, which may be able to be linked to inputs revealing the transaction graph (zcash helps solve this with their circuit proving technology, but it’s limited in temporal scope by the fact that there’s a transition between transparent and hidden addresses). Then there’s the amounts of a given transaction (modern cryptocurrencies use range proofs to conceal the amounts but older currencies don’t). To recap, there’s access information like IP, transaction information that can be used to reassemble the transaction graph, and balance information which, again, can be used to reassemble the transaction graph. The broad point is that if you can assemble the transaction graph, any additional information, like a list of known addresses, will severely deprecate the privacy of the entire system. There are potentially ways around this, but they all involve breaking transaction linkability, which is fraught with peril for a variety of reasons (such that no currency has actually achieved this in a meaningful way so far).
yardie 7y ago
Bitcoin was never meant to be anonymous. It was designed to be stateful. The only information that is visible is the wallet address. And if you work at it long enough you can tie that back to the owner. It’s more anonymous through obscurity. Now, there true anonymous cryptocurrency but bitcoin isn’t one of them.
colechristensen 7y ago
It isn't anonymous. Having a public transaction record makes it possible, even easy to identify and track behaviors of anyone. Everyone you give money to knows exactly where all of that money has been and presumably who you are. You can make it more anonymous by doing some things, but then it's just ordinary money laundering, but honestly, more difficult.
cwkoss 7y ago
Bitcoin enables privacy when used properly, but privacy is not an inherent feature.
- FartyMcFarter 7y ago
  In what way does it do that? Or in other words, what makes that sentence more true than sentences replacing the word Bitcoin with the words phone/email/pigeon carrier/etc? Genuine question, not rhetorical - I don't really follow bitcoin.
  - cwkoss 7y ago
    Those alternatives require a durable namespace for 'targeting' your communications: a phone number, email address, physical location the pigeon arrives, etc. Bitcoin can be used with novel targets (receiving addresses) for each uniquely received transaction: i.e. instead of having one bank account with all your transactions, each transaction is in its own anonymous bank account. By doing this, outsiders cannot know that two transactions are owned by the same person without that owner otherwise revealing the association via co-mingling funds or revealing ownership off-network (ex. sending to exchange that does KYC+AML).
    - toast0 7y ago
      You can be careful to not comingle funds or participate in KYC, but you have no forward security --- the person you paid (or their successor payees) can always comingle funds or participate in KYC. At which point, they may recall you paid them. Also, I can't imagine it's very convenient to manage a large number of separate keys.
      - lixtra 7y ago
        > Also, I can't imagine it's very convenient to manage a large number of separate keys. You can have one secret master key and then derive many keys from that [1]. Without the master key you cannot tell that they are linked. [1] https://en.m.wikipedia.org/wiki/Key_derivation_function https://en.m.wikipedia.org/wiki/Key_derivation_function
lawn 7y ago
I think Satoshi wanted to make Bitcoin anonymous, but didn't know how to (and Bitcoin was still a pretty big achievement). Today Monero or maybe ZCash is leading the privacy department and they do offer the anonymity you're after (with some weaknesses of course).
- deleted 7y ago
  [deleted]
- maitredusoi 7y ago
  BTCP can be a good example of BTC + Zcash like (ZCL) , but it hasn't recovered yet from ashes ;)
kerng 7y ago
A key feature of Bitcoin is its transparency, because it's an open ledger accessible to anyone. The intent of Bitcoin is not to be anonymous, it's not a feature the designers were trying to a achieve.
deadmik3 7y ago
if I have a wallet on my computer and send it to your wallet on your computer that would be anonymous. it's when you connect the transaction to some bank (like, when you transfer from the wallet on your computer to Coinbase where they have your tax ID number, then withdraw to your real-world bank) that it can be so easily traced. but if you just keep some btc in a wallet and do business out of that it's effectively cash. even if you bought bitcoins on Coinbase then transferred to your local wallet, once it leaves Coinbase the wallet ID itself doesn't have anything tying it to the laptop in your friend's basement in Brazil. from there who knows where it goes, I just bought pizza with it officer idk what the guy who sold me the pizza spent it on a transaction ledger itself isn't inherently identifiable. otherwise we would know who just transferred $1B+ in this article and not have a bunch of comments wondering who it is lol
skizm 7y ago
The ledger does not record in person transactions. Theoretically, I can hand you a USB stick containing BTC and no one would know until it is sent to another wallet.
- Wheaties466 7y ago
  you must be joking. Only a person who has no understanding of bitcoin would accept that type of transaction. The person "Paying" the other person could have backed up the private key and simply recovered it at a later date to send to another wallet. Bitcoin is not gold, so don't think of it like gold.
- tromp 7y ago
  That is not a secure method of transfer. Giving someone a copy of your private keys just makes you joint owners, where either one can spend the money. The recipient would be wise to immediately spend the coins to an address only they know, unless they have absolute trust in the giver. As they say: not your keys, not your bitcoin...
bduerst 7y ago
Bitcoin isn't anonymous. The entire history of every transaction between every wallet is visible. This means if someone knows your wallet ID (i.e. you bought something from them and shipped it) they know exactly how much bitcoin you have in that wallet. Some people try to be anonymous on it, but as some of the drug dealers on Wall Street Market found out, that's pretty hard to do. Law enforcement was able to track down some of them by tracing their bitcoin transactions.
Aaronstotle 7y ago
Bitcoin is open and transparent by design, people think it's anonymous because it was used for dark markets before the Feds caught on. Monero, and to a lesser extent, Zcash are coins that were designed to be anonymous (Although Zcash has opt-in privacy, whereas Monero is default)
maitredusoi 7y ago
BTc is not anonymous but pseudonymous from the start (e.i. the white paper)
callmeal 7y ago
>It's meant to be anonymous, yet with some diligent data mining, it can become pretty clear who's who from their spending patterns by observing the ledger. How is that remotely anonymous? It's not anonymous anymore. Transactions are being tracked to the ip addresses they originated from. This tracking has been going on since 2014[0] From the article: >But there is no top-down coordination of the Bitcoin network, and its flow is far from perfect. The Koshys noticed that sometimes a computer sent out information about only one transaction, meaning that the person at that IP address was the owner of that Bitcoin address. And sometimes a surge of transactions came from a single IP address—probably when the user was upgrading his or her Bitcoin client software. Those transactions held the key to a whole backlog of their Bitcoin addresses. Like unraveling a ball of string, once the Koshys isolated some of the addresses, others followed. > >Ultimately, they were able to map IP addresses to more than 1000 Bitcoin addresses; they published their findings in the proceedings of an obscure cryptography conference. .... [0] https://www.sciencemag.org/news/2016/03/why-criminals-cant-hide-behind-bitcoin https://www.sciencemag.org/news/2016/03/why-criminals-cant-h...
pepepupu 7y ago
Bitcoin network is designed for transparency. If you seek for privacy, then privacy coins like Beam, Grin is for you.

vorpalhex 7y ago

Bitcoin is not anonymous. It does not require a third party to authorize transactions.

vtail 7y ago

it’s a common misconception: bitcoin is NOT supposed to be anonymous (it has a full ledger), but pseudonymous.

deleted 7y ago

[deleted]

whyrusleeping 7y ago

Bitcoin isnt anonymous, and doesn't claim to be. If you want an anonymous currency check out something like Zcash or monero. They use some fancier crypto to obscure transaction inputs and outputs, which gets you a bit farther towards being anonymous.

hughw 7y ago
It's pseudonymous.
- proverbialbunny 7y ago
  Far less anonymous than using a bank. Bitcoin has and always will be a way to cut down transaction costs, cutting out the middle man ie cutting out the banks. To do that, everyone has to be able to audit every transaction and verify authenticity of a transaction. In this way bitcoin is anti anonymous, always has and always will be.

ColanR 7y ago

> It's meant to be anonymous Unfortunately, Bitcoin (BTC) is not anonymous, as you pointed out. It never was; and with tax laws requiring copious transaction information, it is particularly easily traceable. That's the idea behind Monero & Co., which tries to mix things up a bit (literally). The anonymity is still not perfect, especially against state-level actors.

Ambele 7y ago
Bitcoin can be anonymous though in certain use-cases. You can create a new bitcoin public/private key pair on a computer that has never (and will never) touched the internet. Once you send the coins from an address to this new address, the network will now know the IP address of the sender, but it won't know anything about the unknown recipient.
- hobofan 7y ago
  It knows that in some way/shape/form the old address is associated with the new address, so most likely it is the same entity, or a transaction partner. Bitcoin is not supposed to be anonymous, and very unsuitable for use-cases where you want any kind of anonymity guarantee.
  - Ambele 7y ago
    >Bitcoin is not supposed to be anonymous But it can be used anonymously and probably in some industries is still used anonymously. A counterparty that is willing to swap anonymously acquired and sent altcoins for Bitcoin can provide a privacy conscious individual with anonymous Bitcoins. If using proxy-chains, Tor, or a real person in another country to broadcast your trade isn't your cup-of-tea because you don't trust them, there is still another less practical way. If you secretly give someone your Bitcoin private key (for example: written on a small piece of paper), you can give or trade those Bitcoins to someone without the network knowing about the transaction. >so most likely it is the same entity, or a transaction partner. Conceivably, the transaction could be broadcasted from an important individual's hacked phone or computer without a trace. This is where being innocent until proven guilty becomes important.

perennate 7y ago

I don't think it was really "meant to be anonymous". The original whitepaper at https://bitcoin.org/bitcoin.pdf https://bitcoin.org/bitcoin.pdf has a section on privacy, which mentions that public keys can be kept anonymous but acknowledges that all transactions are announced publicly: > The traditional banking model achieves a level of privacy by limiting access to information to the parties involved and the trusted third party. The necessity to announce all transactions publicly precludes this method, but privacy can still be maintained by breaking the flow of information in another place: by keeping public keys anonymous. The public can see that someone is sending an amount to someone else, but without information linking the transaction to anyone. This is similar to the level of information released by stock exchanges, where the time and size of individual trades, the "tape", is made public, but without telling who the parties were. > As an additional firewall, a new key pair should be used for each transaction to keep them from being linked to a common owner. Some linking is still unavoidable with multi-input transactions, which necessarily reveal that their inputs were owned by the same owner. The risk is that if the owner of a key is revealed, linking could reveal other transactions that belonged to the same owner. Recently there are newer cryptocurrencies like Monero and ZCash that focus specifically on anonymity/privacy.

josh2600 7y ago
There’s a lot of different veils to privacy in transactions. There’s the IP record of the user hitting the server that processes their request (it might be your own box if you’re storing the whole chain yourself but most people use thin clients). Then there’s the list of inputs (cryptonote based currencies like monero use ring signatures which provide obfuscation but not binary privacy). Then there’s the list of outputs, which may be able to be linked to inputs revealing the transaction graph (zcash helps solve this with their circuit proving technology, but it’s limited in temporal scope by the fact that there’s a transition between transparent and hidden addresses). Then there’s the amounts of a given transaction (modern cryptocurrencies use range proofs to conceal the amounts but older currencies don’t). To recap, there’s access information like IP, transaction information that can be used to reassemble the transaction graph, and balance information which, again, can be used to reassemble the transaction graph. The broad point is that if you can assemble the transaction graph, any additional information, like a list of known addresses, will severely deprecate the privacy of the entire system. There are potentially ways around this, but they all involve breaking transaction linkability, which is fraught with peril for a variety of reasons (such that no currency has actually achieved this in a meaningful way so far).

yardie 7y ago

Bitcoin was never meant to be anonymous. It was designed to be stateful. The only information that is visible is the wallet address. And if you work at it long enough you can tie that back to the owner. It’s more anonymous through obscurity. Now, there true anonymous cryptocurrency but bitcoin isn’t one of them.

colechristensen 7y ago

It isn't anonymous. Having a public transaction record makes it possible, even easy to identify and track behaviors of anyone. Everyone you give money to knows exactly where all of that money has been and presumably who you are. You can make it more anonymous by doing some things, but then it's just ordinary money laundering, but honestly, more difficult.

cwkoss 7y ago

Bitcoin enables privacy when used properly, but privacy is not an inherent feature.

FartyMcFarter 7y ago
In what way does it do that? Or in other words, what makes that sentence more true than sentences replacing the word Bitcoin with the words phone/email/pigeon carrier/etc? Genuine question, not rhetorical - I don't really follow bitcoin.
- cwkoss 7y ago
  Those alternatives require a durable namespace for 'targeting' your communications: a phone number, email address, physical location the pigeon arrives, etc. Bitcoin can be used with novel targets (receiving addresses) for each uniquely received transaction: i.e. instead of having one bank account with all your transactions, each transaction is in its own anonymous bank account. By doing this, outsiders cannot know that two transactions are owned by the same person without that owner otherwise revealing the association via co-mingling funds or revealing ownership off-network (ex. sending to exchange that does KYC+AML).
  - toast0 7y ago
    You can be careful to not comingle funds or participate in KYC, but you have no forward security --- the person you paid (or their successor payees) can always comingle funds or participate in KYC. At which point, they may recall you paid them. Also, I can't imagine it's very convenient to manage a large number of separate keys.
    - lixtra 7y ago
      > Also, I can't imagine it's very convenient to manage a large number of separate keys. You can have one secret master key and then derive many keys from that [1]. Without the master key you cannot tell that they are linked. [1] https://en.m.wikipedia.org/wiki/Key_derivation_function https://en.m.wikipedia.org/wiki/Key_derivation_function

lawn 7y ago

I think Satoshi wanted to make Bitcoin anonymous, but didn't know how to (and Bitcoin was still a pretty big achievement). Today Monero or maybe ZCash is leading the privacy department and they do offer the anonymity you're after (with some weaknesses of course).

deleted 7y ago
[deleted]
maitredusoi 7y ago
BTCP can be a good example of BTC + Zcash like (ZCL) , but it hasn't recovered yet from ashes ;)

kerng 7y ago

A key feature of Bitcoin is its transparency, because it's an open ledger accessible to anyone. The intent of Bitcoin is not to be anonymous, it's not a feature the designers were trying to a achieve.

deadmik3 7y ago

if I have a wallet on my computer and send it to your wallet on your computer that would be anonymous. it's when you connect the transaction to some bank (like, when you transfer from the wallet on your computer to Coinbase where they have your tax ID number, then withdraw to your real-world bank) that it can be so easily traced. but if you just keep some btc in a wallet and do business out of that it's effectively cash. even if you bought bitcoins on Coinbase then transferred to your local wallet, once it leaves Coinbase the wallet ID itself doesn't have anything tying it to the laptop in your friend's basement in Brazil. from there who knows where it goes, I just bought pizza with it officer idk what the guy who sold me the pizza spent it on a transaction ledger itself isn't inherently identifiable. otherwise we would know who just transferred $1B+ in this article and not have a bunch of comments wondering who it is lol

skizm 7y ago

The ledger does not record in person transactions. Theoretically, I can hand you a USB stick containing BTC and no one would know until it is sent to another wallet.

Wheaties466 7y ago
you must be joking. Only a person who has no understanding of bitcoin would accept that type of transaction. The person "Paying" the other person could have backed up the private key and simply recovered it at a later date to send to another wallet. Bitcoin is not gold, so don't think of it like gold.
tromp 7y ago
That is not a secure method of transfer. Giving someone a copy of your private keys just makes you joint owners, where either one can spend the money. The recipient would be wise to immediately spend the coins to an address only they know, unless they have absolute trust in the giver. As they say: not your keys, not your bitcoin...

bduerst 7y ago

Bitcoin isn't anonymous. The entire history of every transaction between every wallet is visible. This means if someone knows your wallet ID (i.e. you bought something from them and shipped it) they know exactly how much bitcoin you have in that wallet. Some people try to be anonymous on it, but as some of the drug dealers on Wall Street Market found out, that's pretty hard to do. Law enforcement was able to track down some of them by tracing their bitcoin transactions.

Aaronstotle 7y ago

Bitcoin is open and transparent by design, people think it's anonymous because it was used for dark markets before the Feds caught on. Monero, and to a lesser extent, Zcash are coins that were designed to be anonymous (Although Zcash has opt-in privacy, whereas Monero is default)

maitredusoi 7y ago

BTc is not anonymous but pseudonymous from the start (e.i. the white paper)

callmeal 7y ago

>It's meant to be anonymous, yet with some diligent data mining, it can become pretty clear who's who from their spending patterns by observing the ledger. How is that remotely anonymous? It's not anonymous anymore. Transactions are being tracked to the ip addresses they originated from. This tracking has been going on since 2014[0] From the article: >But there is no top-down coordination of the Bitcoin network, and its flow is far from perfect. The Koshys noticed that sometimes a computer sent out information about only one transaction, meaning that the person at that IP address was the owner of that Bitcoin address. And sometimes a surge of transactions came from a single IP address—probably when the user was upgrading his or her Bitcoin client software. Those transactions held the key to a whole backlog of their Bitcoin addresses. Like unraveling a ball of string, once the Koshys isolated some of the addresses, others followed. > >Ultimately, they were able to map IP addresses to more than 1000 Bitcoin addresses; they published their findings in the proceedings of an obscure cryptography conference. .... [0] https://www.sciencemag.org/news/2016/03/why-criminals-cant-hide-behind-bitcoin https://www.sciencemag.org/news/2016/03/why-criminals-cant-h...

pepepupu 7y ago

Bitcoin network is designed for transparency. If you seek for privacy, then privacy coins like Beam, Grin is for you.