Blockchain History Visualization Illustrates Bitcoin’s Privacy Problem

Track Bitcoin Transactions

Elliptic is a well-known company in the bitcoin space due to their insured bitcoin storage offering, but the company is now branching out into anti-money laundering (AML) compliance services. A new project, known as The Bitcoin Big Bang, allows users to view an interactive visualization of historic and real-time transactions on the bitcoin network. While all bitcoin transactions are public by default, Elliptic has taken the time to connect real-world identities to many of the pseudonymous addresses on the bitcoin blockchain.

Anti-money laundering services

The main goal of this new project from Elliptic is to help businesses identify criminal activity on the blockchain and avoid interacting with those participants in the network. As Elliptic CEO Dr. James Smith put it via email, “Our primary goal here is to detect links to criminal activity, not to track bitcoin transactions.”

In a press release, Elliptic also noted that various illicit marketplaces, such as Silk Road, have discouraged bitcoin’s mainstream adoption by the finance industry. Dr. Smith went on to state, “If digital currency is to take its legitimate place in the enterprise it inevitably must step out of the shadows of the dark web.”

Exposing weak privacy in bitcoin

Elliptic’s ability to track various participants in the bitcoin network should be an eye-opener for anyone who still thinks the digital money can be easily transferred in an anonymous manner. When asked about his thoughts on future privacy enhancements for bitcoin, Dr. Smith explained:

“We welcome increased privacy features, and such new technology will inevitably change the way we have to detect crime, but increased privacy does not necessarily have to equate to more freedom for criminals.”

While there are a number of different companies working on ways to identify bitcoin users, there are also cryptographers and developers working on bringing more anonymity to bitcoin. Whether it’s through zerocash, a confidential transactions sidechain, or some other development, it seems clear that privacy in bitcoin will eventually be improved.

An issue for fungibility?

There is also a contingent in the bitcoin community who feel that the current lack of privacy in bitcoin could lead to problems with bitcoin’s usefulness as a money. These individuals claim that bitcoins could eventually become blacklisted by governments if everyone has the ability to see that funds are being transferred from a politically-controversial entity.

Dr. Smith does not seem to agree with this claim. He noted:

“Bitcoin is fungible within a transaction (i.e. the funds flowing into a transaction are indistinguishable when they flow out), but flow of funds from one transaction to another can be clearly tracked. In practice, this means that investigating recent history for incoming funds is feasible, but that nobody could ever blacklist a particular bitcoin.”

Others, such as MIT’s Madars Virza and Blockstream’s Adam Back, see the lack of privacy in bitcoin as a huge issue in terms of fungibility. In the long run, it’s likely that this debate won’t matter as bitcoin users gain access to new technology that allows them to enjoy true anonymity with their online transactions.

You can follow @kyletorpey on Twitter.

Top brokers for buying and trading cryptocurrencies

  • Platform
  • Features
  • Rating
  • Visit Site
  • Excellent choice for U.S. customers
  • Paypal accepted
  • CySEC & FCA regulated
  • Buy 12+ cryptocurrencies

eToro Reviews

    eToro Reviews your account
    Hide eToro Reviews
    • Best broker for non-US countries
    • Established stock-exchange listed company
    • Trade crypto CFDs, forex and stocks
    • No withdrawal or deposit fees and low spreads

    Plus500 Reviews

      Plus500 Reviews your account
      Hide Plus500 Reviews
      Remember, all trading carries risk. Views expressed are those of the writers only. Past performance is no guarantee of future results. The opinions expressed in this Site do not constitute investment advice and independent financial advice should be sought where appropriate. This website is free for you to use but we may receive commission from the companies we feature on this site.

      Comments are closed.