More than 300,000 addresses are activated daily to participate in the network that gives life to the most valuable cryptocurrency in the world. Users do not know that they are being followed and spied on to discover their private data and, therefore, their true identity.
In cyberspace, privacy is increasingly violated, even when it is enshrined in article 12 of the Universal Declaration of Human Rights. Bitcoin, as part of this virtual world, does not escape threats. Above all, due to the combination of efforts between governments, institutions and private companies to be extremely vigilant.
Its objective is to prevent cryptocurrencies from being used to commit crimes. To do so, they start from the principle that everyone should be watched, despite the fact that this is detrimental to privacy.
Companies such as Chainalysis, Blockseer, CipherTrace and Elliptic, among others, are dedicated to the analysis of blockchains to track the information that is publicly available. They are allies of governments and their security agencies to maintain vigilance in the ecosystem. Although less than 1% of the value moved with bitcoin and cryptocurrencies comes from crime, as a study found earlier this year.
Even so, the vigilance on users has been redoubled with the travel rule of the Financial Action Task Force (FATF). This regulation stipulates that exchanges and other service providers in the cryptocurrency industry must exchange, among themselves, personal data of customers if the amount of the transaction exceeds USD 1,000.
Privacy in Bitcoin varies depending on the particular choice that each user makes regarding the centralized services or platforms they use. It also varies according to the methods of using the network or the sophisticated capabilities and tactics used by the attacker who wishes to take away your privacy.
Bitcoin is pseudonymous and free choice digital money
The search for privacy and freedom is what has caused activists, journalists, researchers, organizations and civil groups to express their interest in bitcoin for its strengths. This is because within the Bitcoin ecosystem, cryptography, privacy and data protection has always been a key priority element for a community that values these elements above all other considerations.
Based on this data protection, the Bitcoin protocol is designed for two parties to exchange their assets without the intervention of a third party, without both revealing their personal information, as happens when one person gives cash to another.
The Bitcoin blockchain is essentially a transparent database available to public access, where all BTC transactions made from the moment the Genesis block was mined are visible. This means that the entire trading history, as well as all BTC addresses, including transferred amounts, can be observed using a block explorer.
In any case, although bitcoin transactions do not link names or telephone numbers, it is possible to identify their owners.
How Anonymous is Bitcoin? A Bitcoin address consists of a series of letters and numbers and is therefore not tied to a specific identity. It does not contain enough data to find out directly who it belongs to, that is, you cannot directly know who is the person who is in possession of the private key of a certain Bitcoin address.
However, it is necessary to consider to what extent Bitcoin actually contributes to privacy. Especially because, when talking about the first of the cryptocurrencies, it is necessary to understand that users participate in the network hiding their true identity. This happens under a pseudonym that is nothing more than the set of random numbers and letters that make up your public address.
In that sense, the Bitcoin blockchain guarantees a kind of anonymity by offering a pseudo-identity to the user as a support to protect their privacy, but does not provide protection against the tracking of their transactions to discover their real identity. In fact, anyone can silently and secretly try to de-anonymize a user’s identity without the user even realizing that he is being attacked or that his true identity has been compromised.
However, that the public information of each user is kept anonymous on the bitcoin blockchain depends a lot on how each person handles himself, because when trading between the different alternatives that exist and registering his personal data in exchanges and centralized service operators, he must have note that you will voluntarily renounce your anonymity.
Multiple service providers in the cryptocurrency industry require KYC verification or Know Your Customer, the procedure that is part of the anti-money laundering standards prescribed by the FATF. The regulations require that customers verify their personal data by presenting their identity documents, attach a photograph of their face, residence address and telephone number, among other information.
When trading bitcoin on centralized platforms, you must understand that the exchange or service provider you chose can provide enough information to link your real identity to your transactions. To achieve this, a set of pattern recognition techniques known as “heuristics” are used, with which it is possible to segment suspicious addresses and add them to a black list.
As a result, entities motivated to do so can request the personal data of users with the idea of discovering how they are using their bitcoins, how much they have and with whom they have been conducting transactions. This could happen, for example, in compliance with a court order or to determine who is behind a cyber attack.
There are also countless ways you could be tied into a trade, even without having directly interacted with an entity that knows who you are. This is because Bitcoin transactions are generally sent over the Internet and the source IP address can be identified by various means.
For these reasons, it must be borne in mind that there is no perfect privacy solution for any activity carried out over the Internet. Also, privacy is never static, but continually evolves. So much so that there is a permanent battle between those who develop tools to protect it and those who create methods to destroy it.