Bitcoin transactions are completely trackable, meaning that we can follow the actions of any of the coins. Bitcoin transactions are easy to track for anybody online, at least on the wallet address level.
Cryptocurrency transactions are traceable. However, they are meant to be anonymous, but their anonymity has been jeopardized before. This is because the blockchain technology they use relies on hashing to produce anonymity, yet the hashing ciphers can be cracked in some cases.
Despite The Bitcoin Project itself disclosing this information itself on their site, many people assume the mangled nature of their wallet addresses means payments cannot be tracked. Since users typically need to disclose their identities to get services or goods, Bitcoin addresses cannot stay completely anonymous.
Since one Bitcoin address may be linked to all your past transactions and cryptocurrency balances, it is necessary to make use of several addresses to receive payments. Using different addresses when creating new payments, then, can help to keep everyone from tracking all of your transactions. With multiple wallets, use a different Bitcoin address for each transaction, so a single transaction does not expose your overall balance or history of transactions.
What People Can See by Bitcoin
With one Bitcoin address, everyone can see your balance and any transaction details. You will be able to see all previous transactions, along with the addresses where Bitcoins were sent. Given a Bitcoin address, you will be able to see all transactions ever made with it.
Through a Bitcoin address, transactions are traceable, but to grasp the full scope of the traceability, you first need to understand history. For instance, if someone’s identity is linked to their Bitcoin address, then every transaction that they do is traceable to them. Traceability depends on the type of cryptocurrency involved, and on the purpose, which these transactions are being used.
This means most cryptocurrency service providers, such as exchanges, are required to implement some level of a Know Your Customer (KYC) solution, thus linking real-world identities with Bitcoin addresses and transactions. Recent research suggests real-life identities may be linked to the addresses of these cryptos, as well as the transactions using them. While bitcoin is frequently touted as an entirely private, anonymous method of conducting commerce, there are ways in which users’ identities can be revealed.
It may be difficult to track down certain bitcoins ancestry, should individuals shuffle around or make mundane transactions. There are ways around this, most notably privacy coins such as Monero, which does not publicly display transaction data, and mixing services, which attempt to disrupt transaction chains by taking Bitcoins from a bunch of unconnected users and trading them arbitrarily. There are a few services on the web that suggest mixing tracing among users, and sending and receiving identical amounts using separate Bitcoin addresses.
Factors Affecting Traceability
There are some other factors, like wallets, IP addresses, and networks, which make Bitcoin trackable, but we will cover ways you can safeguard your privacy to help maintain anonymity later on in the article. If you want to trace to where a specific wallet address is sending bitcoins, you will just need to enter the public address into Blockchain Explorer. Your bitcoin wallet address is a pseudonym used for making transactions over the bitcoin network. Creating an IP address for yourself can be vital in protecting your privacy with bitcoin.
This feature of Bitcoin allows individuals to associate their wallets with their real-world identities. This makes Bitcoin pseudonymous rather than anonymous, meaning addresses are recorded, but identities are not. Bitcoin addresses are intended to serve as a single-use token for individual transactions on the blockchain. People need bitcoin addresses to transfer bitcoins between themselves – a process that is also the same for most other types of cryptocurrencies.
Every single transaction that happens on Bitcoin is available to everyone on the network. Whereas banks may reveal the ledger only to their account holders, and perhaps law enforcement, everyone can access any information stored in Bitcoins Blockchain on the Bitcoin Network. Because of storage, Bitcoin users are guaranteed pseudo-anonymity, which means that while Bitcoin facilitates economic freedom and strong security, transaction histories are stored on the blockchain so that anyone can view them.
While bitcoins may be mined, moved, and stored without oversight from any central authority such as a government, every Bitcoin transaction is recorded in a permanently accessible public ledger known as a Blockchain.
The Confidentiality of Blockchain Ledgers
While anyone, including a third party, can verify a cryptocurrency transaction has taken place, nobody can tie the sender and recipient back to an individual, because the blockchain, or ledger, records transaction information only, and no personally identifying information. The blockchain is not centralized, and the full blockchain copy is stored on every participant in bitcoin (miners) and crypto exchanges.
Transactions stored in this ledger include details like amount, timing, which wallet sent the money, and which wallet received it. Anyone can analyze other transactions made from the same wallets sending and receiving money. The CEO of US Bitcoin ATM operator CoinFlips commented in June 2021, that bitcoin transaction are more trackable than cash, and it would be stupid to launder dirty money using Bitcoin.
A cryptocurrency exchange-hosted wallet knows each public key the user has ever used for his/her wallet at an exchange, and anybody can look through blockchain data to see every transaction ever sent from, or received, that was laundered. Investigators can track transactions back to crypto exchange locations, or to other choke points that require a user to register using his/her real identity.
This means, essentially, nothing is stopping one user from opening hundreds of addresses and using them to move money among accounts with no warning, and this is why cryptocurrencies are rapidly becoming the oft-used money laundering method by criminals, which we explored in a recent blog post.
For instance, knowing your friend John spent money on a particular service – a VPN, say – on a particular day, you can go into the blockchain and see what Bitcoin addresses spent money on that VPN back then. The people sending you bitcoin cannot see how many coins you have, or any of your past transactions. Nothing links the user to the transaction other than the bitcoin address — the string of alphanumeric characters that is generated by the cryptocurrency.