A common misconception of Bitcoins (or most cryptocurrencies for that matter) is that they are anonymous.However, this is not the case. themselves have clearly stated on their site that: It is easy to see why Bitcoins are often mistaken to be anonymous as it is often advertised as an “anonymous digital currency” and made infamous as a criminal’s currency of choice on Silk Road, the world’s largest online illegal marketplace.To learn why cryptocurrencies like Bitcoin are not fully anonymous, we must first learn the basics of how these transactions work.When sending/receiving Bitcoins, you need a Bitcoin address, a single-use token containing a string of random numbers and letters which looks like this: You would send Bitcoins to another person’s Bitcoin address the same way you would send an email to someone’s email address.Because Bitcoin is decentralized and people exchange value without intermediaries, every transaction is always recorded on a public record for all to see.

This online ledger is known as the blockchain.Bitcoins are pseudonymous, not anonymous.Much like book authors writing under pseudonyms, pseudonym addresses used when transferring cryptocurrencies are the same.If the real identity of the author was interconnected to their pseudonym, all their works which were written under the pseudonym has now been associated with their true identity.Similarly, all transactions with Bitcoin using your pseudonymous address is stored forever in the blockchain.Thus, if this address is ever linked directly to you, the whole world will know every transaction you have ever made.Cryptocurrencies are electronic cash.And like anything digital, it is bound to leave a trail.Bitcoins use electronic wallets that send digital cash directly to one another.Some might argue that you do not need your real name/identity to perform anonymous transactions, just the Bitcoin wallet address.This only applies if you can keep your Bitcoin wallet address secret.Users can have many different Bitcoin addresses and a unique address should be used for each transaction.

Bitcoins can be pretty easy to trace since every transaction between pseudonymous addresses is publicly recorded.This was one of the ways which eventually led to the capture of Ross Ulbricht (operating under the pseudonym ‘Dread Pirate Roberts’), the man convicted of running the Silk Road online drug marketplace.Ross Ulbricht, alleged creator of Silk Road (Photo source: Motherboard) When Ulbricht was arrested in a San Francisco public library back in 2013, Ulbricht’s personal laptop held the key to all answers.FBI agent, Ilhwan Yum, cross-referenced Bitcoin wallet addresses found in the Silk Road website's computer servers in Iceland and Ulbricht's confiscated laptop to the Bitcoin blockchain and he was able to identify Ulbricht’s wallet.Agent Yum even noted that the “publicly available blockchain records made it even easier to figure out than if a criminal had used a legitimate bank”.There are various techniques one may adopt to increase their anonymity when dealing with cryptocurrencies.

These may include performing multi-input transactions, maintaining multiple wallets, utilising mixing services to trade out Bitcoins or using web-hosted 'eWallets' to mask the original owners.However, these efforts would amount to little if the stores and retailers you are liaising with are linking your identity to your Bitcoin address.bitcoin credit card redditWhat’s more, this not only applies to online stores but the payment processors which the retailers are using who can link your identity.bitcoin wallet ios 8For instance, if you are paying Bitcoins to your online retailer which may be taking your customer identity information, you are already allowing them to link that identity to your blockchain pseudonym.bitcoin dash chart

Since users usually have to reveal their identity in order to receive services or goods when paying online, cryptocurrencies will never remain fully anonymous.Take Hungry.dk for example.Their service provides takeout delivery ordered online and accepts payment in the form of Bitcoins.bitcoin bancontactIn this case, they would be linking the physical delivery address expecting the food with the specific Bitcoin address they received payment from.github bitcoin miningUnder the Bitcoin protocol, when you send coins, the transaction is posted to Bitcoin's nodes unencrypted and in plain sight.bitcoin lottery appSimilarly communication between nodes is also unencrypted.bitcoin mining widgetEven anonymity cryptocurrencies such as Dash, Monero, Zcash and Zcoin have yet to implement encrypted node traffic.bitcoin transaction basics

Anyone monitoring the network such as ISPs can obtain information on where transactions and blocks originate and can link Bitcoin addresses to IP addresses, which can be used to de-anonymize users.A VPN (virtual private network) like BolehVPN can protect your privacy when using cryptocurrencies by: Bitcoin + VPNs should always come hand-in-hand.bitcoin in dublinRead Why You Should Pay For Your VPN in Bitcoin.Home > Vol 16 (2016) > Szetela Dependency Analysis between Bitcoin and Selected Global Currencies /10.12775/DEM.2016.009 Abstract Keywords Full Text: PDF References Alberg, D., Shalit, H., Yosef, R.Badev, A., Chen, M. (2014), Bitcoin: Technical Background and Data Analysis, Finance and Economics Discussion Series 2014–104, Board of Governors of the Federal Reserve System (U.S.).Bank of Canada (2014), Decentralized E-Money (Bitcoin), Backgrounders, http://www.bankofcanada.ca/wp-content/uploads/2014/04/Decentralize-E-Money.pdf.

Bouoiyour, J., Selmi, R.(2015), Bitcoin Price: Is it really that New Round of Volatility can be on way?, MPRA Paper 65580, University Library of Munich, Germany.Brandvold, M., Molnár, P., Vagstad, K., Valstad, O.Cheah, E.-T., Fry, J. (2015), Speculative bubbles in Bitcoin markets?An empirical investigation into the fundamental value of Bitcoin.Chiu, J., Wong, T.-N.(2015), On the Essentiality of E-Money, Staff Working Papers, Bank of Canada, 15–43, http://www.bankofcanada.ca/wp-content/uploads/2015/11/wp2015-43.pdf.Chu, J., Nadarajah, S., Chan, S.Law Library of Congress (2014), Regulation of Bitcoin in Selected Jurisdictions.Global Legal Research Directorate Staff.CPMI (2015), Digital Currencies.Doman, M., Doman, R.(2014), Dynamic Linkages in the Pairs (GBP/EUR, USD/EUR) and (GBP/USD, EUR/USD): How Do They Change During a Day?, Central European Journal of Economic Modelling and Econometrics, 6(1), 33–56.Dopierała, Ł., Borodo, A.(2014), Znaczenie waluty kryptograficznej Bitcoin jako środka wymiany (The importance of cryptographic currency Bitcoin as a medium of exchange), Contemporary Economy Electronic Scientific Journal, 5(2), 1–12.

Draghi, M. (2015), Letter from the President of the ECB to Mrs.Eva Kaili concerning the schemes of virtual currency (VCS), Eurpean Central Bank, http://www.ecb.europa.eu/pub/pdf/other/150421letter_buonanno_3.en.pdf.ECB (2012), Virtual Currency Schemes, Frankfur am Main: European Central Bank, https://www.ecb.europa.eu/pub/pdf/other/virtualcurrencyschemes201210en.pdf.Gans, J. S., Halaburda, H. (2013), Some Economics of Private Digital Currency, Bank of Canada Working Paper, 38, http://www.bankofcanada.ca/wp-content/uploads/2013/11/wp2013-38.pdf.Gronwald, M. (2015), The Economics of Bitcoins – Market Characteristics and Price Jumps, CESifo Area Conference on Macro, Money and International Finance, 5121.(1994), Time Series Analysis, Princeton, Princeton University Press.(2016b), Hedging capabilities of bitcoin.Is it the virtual gold?International Journal Of Marketing, Financial Services & Management Research, 4(4), 29–35.Karame, G. O., Androulaki, E., Roeschlin, M., Gervais, A., Čapkun, S.

Liu, J., Kauffman, R., Ma, D.(2014, 4 1), Popping the Bitcoin Bubble: An application of log-periodic power law modeling to digital currency, University of Notre Dame Working Paper.(1963), The Variation of Certain Speculative Prices, The Journal of Business, 36(4), 394–419.Mandjee, T. (2014), Bitcoin, Its Legal Classification and Its Regulatory Framework, Journal of Business & Securities Law, 15(2), http://digitalcommons.law.msu.edu/jbsl/vol15/iss2/4.Matuszewska, A., Witkowska, D.(2006), Analiza Zmian Kursu Euro/Dolar: Model VAR i Perceptron Wielowarstwowy (Analysis of Change Rate Euro/Dollar: VAR model and Multilayer Perceptron), Zeszyty Naukowe Szkoły Głównej Gospodarstwa Wiejskiego w Warszawie.Ekonomika i Organizacja Gospodarki Żywnościowej (Annals of Warsaw Agricultural University SGGW-AR.Economics and Organization of Food Economy.), 241–250.Mills, T. C., Markellos, R.(2008), The Econometric Modelling of Financial Time Series (Third Edition), Cambridge University Press.Montgomery, D., Jennings, C., Kulahci, M. (2008), Introduction to Time Series Analysis and Forecasting, John Wiley & Sons.

V., Murphy, M., Seitzinger, M. (2015), Bitcoin: Questions, Answers, and Analysis of Legal Issues.Pesaran, M. H. (2015), Time Series and Panel Data Econometrics, 1st Edition, Oxford Uni-versity Press.(2013), Regulating Digital Currencies: Bringing Bitcoin within the Reach of IMF, Chicago Journal of International Law, 14, 377–408.Quaicoe, M., Twenefour, F., Baah, E., Nortey, E.Rogojanu, A., Badea, L.(2015), The issue of “true” money in front of the BitCoin's offensive, Theoretical and Applied Economics, 22(2), 77–90.(2016), The use of control charts in the study of bitcoin's price variability, Kounis L.D.Quality Control and Assurance – An Ancient Greek Term Re-Mastered, InTech.(2015), Bitcoin: Perils of an Unregulated Global P2P Currency (Transcript of Discussion), Security Protocols XXIII.(2016), A Bitcoin Standard: Lessons from the Gold Standard, Bank of Canada Staff Working Paper, 2016–14, http://www.bankofcanada.ca/wp-content/uploads/2016/03/swp2016-14.pdf.ISSN (print) 1234-3862ISSN (online) 2450-7067