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If it's possible (seemingly trivial?) to determine that any given individual is possession of a bitcoin at any given time, then... uh... How is bitcoin an "ano

If it's possible (seemingly trivial?) to determine that any given individual is possession of a bitcoin at any given time, then... uh... How is bitcoin an "anonymous" cryptocurrency? I mean, I feel kind of stupid for even asking such a question, but given the circumstances, wouldn't that be an exceptionally important detail? Based on all these second-hand accounts that I read about, sometimes written by journalists with an amateurish technical competency (which, by proxy, also renders me an amateur), it sounds like bitcoins are about as anonymous as an AOL e-mail addresses, or prepaid cellular phones. It doesn't seem like they were actually conceived an anonymous system, but rather that some people devised processes through which they could produce an effective anonymity with transactions carried this instrument. The cryptographic aspect of bitcoins seems to be geared only in favor of authenticity, and not anonymity. Were bitcoins ever conceived with true anonymity in mind? Are these revelations of identity just, due to elaborate and highly technical side-channel attacks? Am I wrong in my perception that bitcoins seem to be an object where it's only happenstance that you can craft an anonymous position? ...that they are actually only offer pseudonymity?

DougWebb 13y ago
Here's an analogy: every bill in your wallet has a unique serial number on it, right? Every bank account also has a unique ID number. Imagine that every wallet and cash register also has a unique ID. Now imagine that there's a shared database that gets a new entry every time a bill moves from one place to another where the entry just says "bill #X moved from location #Y to location #Z." If you're careful, and you don't let anyone know the ID of your wallet or your bank account, then it doesn't matter if someone knows the transactions that involve your bills because no one knows that they're yours. Your anonymity doesn't break down until someone can tie one of those account numbers to you: by asking your bank for the owner of the account, for example, or by confiscating your wallet and looking at its serial number. So, it's possible to be anonymous with bitcoin, but it's not easy when you want to actually buy something that has to be delivered to you or convert them to another currency.
- qwerty_asdf 13y ago
  Hmmm... Thanks for the explanation! Just thinking that through, and from what I can gather from all my other osmosis and grokking of bitcoin (without actually participating and risking/investing real money in it), I think I get the general concept that (a certain degree of) anonymity can be had with bitcoins without a particularly sophisticated methodology. That the anonymity remains real, as long as certain behavioral protocols are maintained (not unlike the kind of behavior that must be adopted to successfully implement a password, such as don't write it down, don't type in front of video cameras, don't e-mail it, etc etc...). The whole transaction history aspect bothers me at a gut level (much in the way that exit node analysis is a deep systemic flaw of TOR), and in many ways affirms for me that anonymity is an emergent behavior and byproduct of other factors inherent to bitcoin. True anonymity doesn't seem to have been an original design goal of the system.
  - DougWebb 13y ago
    The transaction history aspect is necessary though. Going back to my analogy, imagine that your bills were just a bill-sized piece of transparent plastic with a serial number on it and absolutely no other distinguishing marks; not even a special type of plastic or ink. If someone handed you one, how would you know it's authentic and has any value at all? For Bitcoin, the answer is that you can look up the history of that serial number and verify that it's part of the blockchain, and you know that the blockchain is cryptographically secure and vetted by thousands of bitcoin miners expending a tremendous amount of computing power to make sure every serial id in the chain is valid. That just can't happen without a fully public transaction history going all the way back to the first bitcoin block.
    - qwerty_asdf 13y ago
      ...necessary for bitcoin, but problematic from the anonymity perspective. The idea gnawing that the back of my mind is that, with the bitcoin equivalent of carrier-level traffic analysis, where a truly VAST swath of transaction/bitcoin history is known purely by way of the bitcoins themselves, "someone/anyone" might know much more than we would ordinarily expect them to, given our commoner's understanding of the total network state (in non-real-time) as an ordinary, layman participant at the ground level. Worse still, is the idea that such large-scale network awareness would then enable "parallel evidence construction" or bizarre trading strategies for market manipulation, denying any understanding to participants that such problems even exist. This is not just a problem for criminals, but also from a large-scale trading perspective, when approaching a global population of participants where many, many entry-level players have serious disadvantages, compared to higher-order traders. Instinctively, to me at least, the barrier to manipulating bitcoin value feels drastically lower than traditional currencies. Maybe these sorts of baked-in fundamentals play a role?

DougWebb 13y ago

Here's an analogy: every bill in your wallet has a unique serial number on it, right? Every bank account also has a unique ID number. Imagine that every wallet and cash register also has a unique ID. Now imagine that there's a shared database that gets a new entry every time a bill moves from one place to another where the entry just says "bill #X moved from location #Y to location #Z." If you're careful, and you don't let anyone know the ID of your wallet or your bank account, then it doesn't matter if someone knows the transactions that involve your bills because no one knows that they're yours. Your anonymity doesn't break down until someone can tie one of those account numbers to you: by asking your bank for the owner of the account, for example, or by confiscating your wallet and looking at its serial number. So, it's possible to be anonymous with bitcoin, but it's not easy when you want to actually buy something that has to be delivered to you or convert them to another currency.

qwerty_asdf 13y ago
Hmmm... Thanks for the explanation! Just thinking that through, and from what I can gather from all my other osmosis and grokking of bitcoin (without actually participating and risking/investing real money in it), I think I get the general concept that (a certain degree of) anonymity can be had with bitcoins without a particularly sophisticated methodology. That the anonymity remains real, as long as certain behavioral protocols are maintained (not unlike the kind of behavior that must be adopted to successfully implement a password, such as don't write it down, don't type in front of video cameras, don't e-mail it, etc etc...). The whole transaction history aspect bothers me at a gut level (much in the way that exit node analysis is a deep systemic flaw of TOR), and in many ways affirms for me that anonymity is an emergent behavior and byproduct of other factors inherent to bitcoin. True anonymity doesn't seem to have been an original design goal of the system.
- DougWebb 13y ago
  The transaction history aspect is necessary though. Going back to my analogy, imagine that your bills were just a bill-sized piece of transparent plastic with a serial number on it and absolutely no other distinguishing marks; not even a special type of plastic or ink. If someone handed you one, how would you know it's authentic and has any value at all? For Bitcoin, the answer is that you can look up the history of that serial number and verify that it's part of the blockchain, and you know that the blockchain is cryptographically secure and vetted by thousands of bitcoin miners expending a tremendous amount of computing power to make sure every serial id in the chain is valid. That just can't happen without a fully public transaction history going all the way back to the first bitcoin block.
  - qwerty_asdf 13y ago
    ...necessary for bitcoin, but problematic from the anonymity perspective. The idea gnawing that the back of my mind is that, with the bitcoin equivalent of carrier-level traffic analysis, where a truly VAST swath of transaction/bitcoin history is known purely by way of the bitcoins themselves, "someone/anyone" might know much more than we would ordinarily expect them to, given our commoner's understanding of the total network state (in non-real-time) as an ordinary, layman participant at the ground level. Worse still, is the idea that such large-scale network awareness would then enable "parallel evidence construction" or bizarre trading strategies for market manipulation, denying any understanding to participants that such problems even exist. This is not just a problem for criminals, but also from a large-scale trading perspective, when approaching a global population of participants where many, many entry-level players have serious disadvantages, compared to higher-order traders. Instinctively, to me at least, the barrier to manipulating bitcoin value feels drastically lower than traditional currencies. Maybe these sorts of baked-in fundamentals play a role?