Bitcoin is a incredible use of peer to peer communication and +encryption, allowing direct and immediate money transfer without any +central control. It is sometimes claimed to be ideal for illegal +activity, which I believe is quite a long way from the truth. At least +I would not conduct illegal money transfers using a system where the +details of every transaction are kept forever. This point is +investigated in +USENIX ;login: +from December 2013, in the article +"A +Fistful of Bitcoins - Characterizing Payments Among Men with No +Names" by Sarah Meiklejohn, Marjori Pomarole,Grant Jordan, Kirill +Levchenko, Damon McCoy, Geoffrey M. Voelker, and Stefan Savage. They +analyse the transaction log in the Bitcoin system, using it to find +addresses belong to individuals and organisations and follow the flow +of money from both Bitcoin theft and trades on Silk Road to where the +money end up. This is how they wrap up their article:
+ ++"To demonstrate the usefulness of this type of analysis, we turned +our attention to criminal activity. In the Bitcoin economy, criminal +activity can appear in a number of forms, such as dealing drugs on +Silk Road or simply stealing someone elseâs bitcoins. We followed the +flow of bitcoins out of Silk Road (in particular, from one notorious +address) and from a number of highly publicized thefts to see whether +we could track the bitcoins to known services. Although some of the +thieves attempted to use sophisticated mixing techniques (or possibly +mix services) to obscure the flow of bitcoins, for the most part +tracking the bitcoins was quite straightforward, and we ultimately saw +large quantities of bitcoins flow to a variety of exchanges directly +from the point of theft (or the withdrawal from Silk Road).
+ +As acknowledged above, following stolen bitcoins to the point at +which they are deposited into an exchange does not in itself identify +the thief; however, it does enable further de-anonymization in the +case in which certain agencies can determine (through, for example, +subpoena power) the real-world owner of the account into which the +stolen bitcoins were deposited. Because such exchanges seem to serve +as chokepoints into and out of the Bitcoin economy (i.e., there are +few alternative ways to cash out), we conclude that using Bitcoin for +money laundering or other illicit purposes does not (at least at +present) seem to be particularly attractive."
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These researches are not the first to analyse the Bitcoin +transaction log. The 2011 paper +"An Analysis of Anonymity in +the Bitcoin System" by Fergal Reid and Martin Harrigan is +summarized like this:
+ ++"Anonymity in Bitcoin, a peer-to-peer electronic currency system, is a +complicated issue. Within the system, users are identified by +public-keys only. An attacker wishing to de-anonymize its users will +attempt to construct the one-to-many mapping between users and +public-keys and associate information external to the system with the +users. Bitcoin tries to prevent this attack by storing the mapping of +a user to his or her public-keys on that user's node only and by +allowing each user to generate as many public-keys as required. In +this chapter we consider the topological structure of two networks +derived from Bitcoin's public transaction history. We show that the +two networks have a non-trivial topological structure, provide +complementary views of the Bitcoin system and have implications for +anonymity. We combine these structures with external information and +techniques such as context discovery and flow analysis to investigate +an alleged theft of Bitcoins, which, at the time of the theft, had a +market value of approximately half a million U.S. dollars." ++ +
I hope these references can help kill the urban myth that Bitcoin +is anonymous. It isn't really a good fit for illegal activites. Use +cash if you need to stay anonymous, at least until regular DNA +sampling of notes and coins become the norm. :)
+ +As usual, if you use Bitcoin and want to show your support of my +activities, please send Bitcoin donations to my address +15oWEoG9dUPovwmUL9KWAnYRtNJEkP1u1b.
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