blog/data/2014-01-29-bitcoin.txt

   1 Title: A fist full of non-anonymous Bitcoins
   2 Tags: english, bitcoin
   3 Date: 2014-01-29 14:10
   4
   5 <p>Bitcoin is a incredible use of peer to peer communication and
   6 encryption, allowing direct and immediate money transfer without any
   7 central control.  It is sometimes claimed to be ideal for illegal
   8 activity, which I believe is quite a long way from the truth.  At last
   9 I would not conduct illegal money transfers using a system where the
  10 details of every transaction is kept forever.  This point is
  11 investigated in an peer reviewed article in USENIX ;login: from
  12 December 2013, in the article
  13 "<a href="https://www.usenix.org/system/files/login/articles/03_meiklejohn-online.pdf">A
  14 Fistful of Bitcoins - Characterizing Payments Among Men with No
  15 Names</a>" by Sarah Meiklejohn, Marjori Pomarole,Grant Jordan, Kirill
  16 Levchenko, Damon McCoy, Geoffrey M. Voelker, and Stefan Savage.  They
  17 analyse the transaction log in the Bitcoin system, using it to find
  18 addresses belong to individuals and organisations and follow the flow
  19 of money from both Bitcoin theft and trades on Silk Road to where the
  20 money end up.  This is how they wrap up their article:</p>
  21
  22 <p><blockquote>
  23 <p>To demonstrate the usefulness of this type of analysis, we turned
  24 our attention to criminal activity. In the Bitcoin economy, criminal
  25 activity can appear in a number of forms, such as dealing drugs on
  26 Silk Road or simply stealing someone else’s bitcoins. We followed the
  27 flow of bitcoins out of Silk Road (in particular, from one notorious
  28 address) and from a number of highly publicized thefts to see whether
  29 we could track the bitcoins to known services. Although some of the
  30 thieves attempted to use sophisticated mixing techniques (or possibly
  31 mix services) to obscure the flow of bitcoins, for the most part
  32 tracking the bitcoins was quite straightforward, and we ultimately saw
  33 large quantities of bitcoins flow to a variety of exchanges directly
  34 from the point of theft (or the withdrawal from Silk Road).</p>
  35
  36 <p>As acknowledged above, following stolen bitcoins to the point at
  37 which they are deposited into an exchange does not in itself identify
  38 the thief; however, it does enable further de-anonymization in the
  39 case in which certain agencies can determine (through, for example,
  40 subpoena power) the real-world owner of the account into which the
  41 stolen bitcoins were deposited.  Because such exchanges seem to serve
  42 as chokepoints into and out of the Bitcoin economy (i.e., there are
  43 few alternative ways to cash out), we conclude that using Bitcoin for
  44 money laundering or other illicit purposes does not (at least at
  45 present) seem to be particularly attractive.</p>
  46 </blockquote><p>
  47
  48 <p>These researches are not the first to analyse the Bitcoin
  49 transaction log.  The 2011 paper
  50 "<a href="http://arxiv.org/abs/1107.4524">An Analysis of Anonymity in
  51 the Bitcoin System</A>" by Fergal Reid and Martin Harrigan is
  52 summarized like this:</p>
  53
  54 <p><blockquote>
  55 Anonymity in Bitcoin, a peer-to-peer electronic currency system, is a
  56 complicated issue. Within the system, users are identified by
  57 public-keys only. An attacker wishing to de-anonymize its users will
  58 attempt to construct the one-to-many mapping between users and
  59 public-keys and associate information external to the system with the
  60 users. Bitcoin tries to prevent this attack by storing the mapping of
  61 a user to his or her public-keys on that user's node only and by
  62 allowing each user to generate as many public-keys as required. In
  63 this chapter we consider the topological structure of two networks
  64 derived from Bitcoin's public transaction history. We show that the
  65 two networks have a non-trivial topological structure, provide
  66 complementary views of the Bitcoin system and have implications for
  67 anonymity. We combine these structures with external information and
  68 techniques such as context discovery and flow analysis to investigate
  69 an alleged theft of Bitcoins, which, at the time of the theft, had a
  70 market value of approximately half a million U.S. dollars.
  71 </blockquote></p>
  72
  73 <p>I hope these references can help kill the urban myth that Bitcoin
  74 is anonymous.  It isn't really a good fit for illegal activites.  Use
  75 cash if you need to stay anonymous, at least until regular DNA
  76 sampling of notes and coins become the norm. :)</p>
  77
  78 <p>As usual, if you use bitcoin and want to show your support of my
  79 activities, please send Bitcoin donations to my address
  80 <b><a href="bitcoin:15oWEoG9dUPovwmUL9KWAnYRtNJEkP1u1b&label=PetterReinholdtsenBlog">15oWEoG9dUPovwmUL9KWAnYRtNJEkP1u1b</a></b>.</p>