4. Bitcoin and Anonymity. Is privacy dead?

With digital issues we are not as cautious as with our day-to-day issues, but mostly due to ignorance, because there are also tools to safeguard our interests.

When you receive an email, when you have a conversation, when you watch a video, when you make a purchase … On the Internet everything, and absolutely all the actions you do, leave information about what you like, what you don’t like, what you consume, where you go, where and who you sleep with, what solidarity campaigns you finance, … and even, with the right algorithms, our future can be predicted guessing our behaviors before they happen.

It is for the same reason that Bitcoin has its improvable ways of guaranteeing privacy in the case of its own community, but there are as many open and closed doors in this web world.

The blockchain technology that sustains it, the peer-to-peer network on which it is based, its decentralized condition as it is not backed by any government or central bank. It’s based on a Proof of Work system that uses as consensus mechanism and its open code protocol.

In a sense, Bitcoin is even more controllable than FIAT: any payment we make is visible to public scrutiny, and you don’t need to be anyone special or have “power” to know the status of an account that receives and sends money. The data of the transactions that are recorded in your chain of blocks usually include the issuer, the amount and the recipient, but none of these data is really linked to an identity, however there is the possibility of tracking it

Many people believe that Bitcoin is an anonymous currency. This is partly true, and wrong on the other hand. Bitcoin is generally described as an anonymous payment network, but in reality, bitcoin is pseudo-anonymous: all bitcoin transactions are public and traceable in the block chain, but without the identity of an individual visibly attached to those transactions.

Of course, there are updates that aim to improve the initial protocol for the best development of the base program, but the purpose is to make it a global financial system, decentralized and completely anonymous, or at least that’s the utopia of the matter.

Bitcoin is supported by a structure that doesn’t make it necessary to reveal data related to our identity when using it, but if it is used carelessly one can be exposed to public scrutiny.

Unlike companies that, legitimately, seek an economic benefit and in exchange for a service without economic cost they trade with your private information (thus making benefit), bitcoin has Open Source software which is free, public and is developed by people generally altruistic.

Bitcoin can afford to live without the traffic of your personal information, because it does not look for an economic benefit.

The tracking is viable, depending on whether an information link can be found between a public address and the identity of an individual. In this way, through the blockchain, you can view the history of operations in which the user participated.

What remains stored in the Blockchain is data that, at first glance, may seem complicated to understand, but … a few Bitcoin addresses of origin and destination, some quantities and dates … Where does it say who I am? In principle nowhere.

If we have 3 premises in mind, it is a matter of time that we can have the necessary information:

• The data does not expire.

• The machines work very fast and do not get tired.

• The human being is not a machine: he makes mistakes, he leaves tons of information behind every day, he gets tired and he acts slow.

Although it is true that there are very few cases where transactions have been successfully tracked, with the arrival of Big Data and algorithms this is beginning to change: Blockchain is starting to tell its secrets.

Where is the anonymity then? It resides in that it isn’t necessary to reveal your identity when making payments in bitcoins. But your identity can be revealed without your consent, with everything that it implies: many sellers in Silk Road and buyers from the Darknet markets would have liked to be a little more cautious when using their accounts, now because of their carelessness they face criminal charges based in part on tracking the directions in the block chain and analyzing “big data” or large pieces of data.

Obviously, if we do not disclose that an account is ours, nobody can know how we use it: the account can be monitored but it cannot be linked to a person.

But we often lose our anonymity without much warning, and this can happen in two ways: technical and social.

The “technical” ways to violate our anonymity are all those in which the use of our account is linked to an IP that at the same time links us to an identity of our own. When our computer or mobile sends a transfer, it records our own data, including the IP of our hardware which is the one sending the data.

They say that there have been large computers for some time stalking all the Bitcoin transfers that swarm through the nodes of the common network and storing the source IP of those movements. Knowing the current level of espionage on the part of the states (some more than others) it wouldn’t be illogical at all that their intelligence services pursue that data, and that the rest of the “services” want them to be able to use them.

Although many users prefer anonymity in the Bitcoin platform, the fact that it is not completely anonymous has its points in favor. Although the cryptocurrency was created with a purpose of transparency in its operations, it has been used for illicit purposes during these years due to the lack of controls in its operation.

However, the fact that a person can still be tracked by the addresses with which transactions are made, allows to find the whereabouts of these individuals and thus clear the network of this type of inappropriate uses.

As we have explained previously, Bitcoin works thanks to an accounting book (also known as ledger) that keeps everything and that anyone can see.

This means that Blockchain transactions can be viewed in real time, and the data of absolutely all those that have been made are available, from the first in 2009 to the last. There is none that does not appear and this ledger is impossible to manipulate, so there is no way to erase the information that has been already registered.

However, despite it being fully anonymous or not, one thing is certain, Blockchain-based platforms have a great advantage because the responsibility to maintain the integrity and efficiency of the network that transmits messages is linked to the financial interests of a large number of people and not to a centralized organization that sees its users as products or data points.

This makes Bitcoin and the rest of the Blockchain platforms more difficult to censor, manipulate and shut down; it also makes it impossible to extract data, on a large scale, from the digital life of people.

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