It’s no secret that many of the pioneers of bitcoin and other cryptocurrencies are people who have made illegal transactions of various kinds. First, no financial intermediary (the same bank) can prohibit bitcoin exchanges. Second, you don’t have to reveal your identity to create your bitcoin wallet. On the Z-pay you can transact business through an anonymous account.
Many people, when listing the benefits of bitcoin, emphasise the fact that it is anonymous. But while that may be forgivable, the phrase completely anonymous does not apply to bitcoin.
Yes, no passport is required when creating a bitcoin wallet, but the public domain (blockchain) has information on all bitcoin wallet activity over time, which is the cornerstone of the bitcoin network. That is, anyone can see when and how much money was transferred to or from a particular wallet. It is also possible to trace the path of each “satoshi” from the moment of its generation by miners to its current location (a specific wallet).
At first glance, none of this matters; you don’t know who owns the wallets anyway. But if the security services (or anyone else) become interested in your wallet for whatever reason, they will only have to wait until you want to exchange bitcoins from your wallet for “regular” money and transfer them to some exchanger for their bitcoin wallet in order to identify you. Making enquiries about all the exchangers is a “technical matter” for the enforcers.
Even if that card (and/or wallet) is not in your name, sooner or later you will want to cash out or buy something with that money, and then the police (or someone else) will know either your identity (the video camera at the ATM) or the purchase details, such as delivery address.
The biggest case: a chain of bitcoin transfers became evidence in the trial of a US secret service agent who stole ~13,000 bitcoins from the trading floor accounts during the Silk Road investigation. He took them out to the exchange, where he was registered under his own name, and the court proved that they were the same bitcoins.
With all these weaknesses in mind, people have created bitcoin “mixing” services, so-called mixers. You just need to upload the necessary amount of money to such resource and specify to which wallet you want to send it — and you will get “pure bitcoins”.
Most bitcoin mixers use the following technology: client’s funds are divided into small pieces, and then these pieces are mixed randomly with pieces from other clients. As a result of all the operations, a given amount of cryptocurrency arrives at the final recipient, but in small batches from different randomly selected participants.
Additionally, such services employ tricks like charging random fees and delays before transferring the funds — this will not allow the transaction to be traced back to the exact amount or time.
There are two types: centralised services and peer-to-peer (decentralised) mixers.
The so-called centralised services belong to the first generation of mixers. Most of these services have not become very popular. It should be noted that access to the service’s logs can significantly reduce the level of anonymity.
Peer-to-peer (decentralized) mixers, on the other hand, allow users to contact each other: bitcoins are exchanged directly, without an intermediary. The possibility of cryptocurrency theft is reduced. Protocols such as CoinJoin, SharedCoin and CoinSwap allow multiple bitcoin users to join together to form a single transaction, which is conducted in multiple steps when the right number of participants are recruited. Apart from the server that handles the mixing, none of the clients store the sender and recipient addresses. This operation can be carried out several times for different recipients to complicate the analysis operation.
We hope this information has been useful to you.
