Slashdot Mirror
Bitcoin Is Not Anonymous After All
Taco Cowboy points out a new study that shows it is possible to figure out the IP address of someone who pays for transactions anonymously online using bitcoins. "The Bitcoin system is not managed by a central authority, but relies on a peer-to-peer network on the Internet. Anyone can join the network as a user or provide computing capacity to process the transactions. In the network, the user's identity is hidden behind a cryptographic pseudonym, which can be changed as often as is wanted. Transactions are signed with this pseudonym and broadcast to the public network to verify their authenticity and attribute the Bitcoins to the new owner. In their new study, researchers at the Laboratory of Algorithmics, Cryptology and Security of the University of Luxembourg have shown that Bitcoin does not protect user's IP address and that it can be linked to the user's transactions in real-time. To find this out, a hacker would need only a few computers and about €1500 per month for server and traffic costs. Moreover, the popular anonymization network "Tor" can do little to guarantee Bitcoin user's anonymity, since it can be blocked easily."
Only idiots thought it was anonymous.
Bitcoin was NEVER meant to be anonymous. EVER.
No,
Bitcoins is an improvement in that it is centralized and the government can't prevent the transfer of coins. A government might say it is illegal to receive/spend/use bitcoins, but there is and always has been an underground economy that has ignored such laws. This gives those people the ability to do that in the same way that cash does. The government can easily prevent paypal, master card, etc from allowing people to send money to “lawless” foreign casinos. They can't do that with bitcoins. They can merely outlaw it. That won't stop people from creating them nor selling them. It may come at a risk, but so does every underground transaction.
It's not in its anonymity. It is its enablement say no I won't abide by that unjust law and/or other abuses by government (wikileaks is a good example).
Besides that even if none of this were the case. It's always been a step in the right direction toward anonymous payment transfer and those who say that the anti-government types think otherwise are morons. IE YOU!
There are solutions being implemented to solve the anonymity problem with bitcoins. One real solution is zerocoin. It's an extension to bitcoin protocol. Unlike most alt coins zerocoin is not just another altcoin. It's not an altcoin at all actually. It might be adopted by altcoins or by bitcoin itself. However it's a real world mathematically correct solution to anonymity you can't easily argue with. I'd go as far to say bitcoin was not even psudo-anonymous. Zerocoin on the other hand is mean to add provable anonymity to bitcoin and/or altcoin.
Apart from the whole "bitcoin is only pseudo-anonymous" anyway, the article is wrong.
The IP you can trace a transaction back to is only the IP of the person that told you about the transaction. So unless you're connected directly to the person that made the transaction on the p2p network you're just getting the IP of the client that told you about it. Even then, you don't know if that is the person making the transaction or someone telling you that the transaction was made.
Bad research by people who should know better.
To be perfectly fair, computer science has a lot of things that "any student can tell you are true" that have not been proven to be true, and the difference is a really big deal in academia (where a significant portion of your job is proving things and publishing the paper explaining the proof).
For example P!=NP is widely believed, highly intuitive, and the bases for some high profile algorithms (cryptography) but has never been proven.
They have confiscated enough bitcoins that they can actually track most of the market now, for various reasons that have been explained on slashdot in the bitcoin-related stories.
No noticeable country says that bitcoin is illegal. Barter is legal almost everywhere, so currencies are also legal. And the fact is, when it comes to bitcoin the US Government is a major market participant at this point.
Bitcoin is way less anonymous than US Dollars, there is no question of that. No question at all. So if you're self-identifying as one of the "anti-government types," then yes, that is exactly what I was talking about. You believe something less anonymous to have been a step towards anonymity. You seem to fail to notice that I didn't pass any judgment or present any opinion on if anonymous payment is good or bad. I'm just pointing at the popular set of opinions that contract themselves. I would expect people who really believe in anonymous payment to use only non-electronic payment, at least until there is some sort of central authority that is trusted to maintain anonymity can back an electronic currency. You can't have a fiat currency without trust; you either need a trusted central authority, or the ability to track units of currency back to their original source, as in bitcoin. Lacking those, the most anonymous you can be is with cash, and things like CC cards purchased with cash, gift cards, or even money orders using an unknown alias.
And how can bitcoin be a protest against unjust laws, when bitcoin is legal? That makes no sense at all.