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Deanonymizing Tor: Your Bitcoin Transactions May Come Back To Haunt You (wired.com)
jwhyche, Slashdot reader #6,192, writes:
If you bought some illegal narcotics off Silk Road or even gave money to Wikileaks. Researchers at Qatar University and Hamad Bin Khalifa University have been able to link these transactions with real world identities. They have been able to do this even if the transactions are years old. Their research shows how easy it is to link accounts to these transactions without using any of the tools available to law enforcement like search warrants or subpoenas.
The researchers started with 88 unique bitcoin addresses from Tor hidden services, and then searched 5 billion tweets and 1 million pages on the Bitcoin Talk forum -- ultimately linking 125 unique users to 20 Tor hidden services. "Bitcoin addresses should always be considered exploitable," the researchers conclude, "as they can be used to deanonymize users retroactively."
Their paper is titled "When a Small Leak Sinks a Great Ship: Deanonymizing Tor Hidden Service Users Through Bitcoin Transactions Analysis," and Wired summarizes one of their conclusions. "Even deleting profile information that includes bitcoin addresses may not be enough if a post has been cached or captured by services like the Internet Archive, they point out. 'If you're vulnerable now, you're vulnerable in the future.'"
The researchers started with 88 unique bitcoin addresses from Tor hidden services, and then searched 5 billion tweets and 1 million pages on the Bitcoin Talk forum -- ultimately linking 125 unique users to 20 Tor hidden services. "Bitcoin addresses should always be considered exploitable," the researchers conclude, "as they can be used to deanonymize users retroactively."
Their paper is titled "When a Small Leak Sinks a Great Ship: Deanonymizing Tor Hidden Service Users Through Bitcoin Transactions Analysis," and Wired summarizes one of their conclusions. "Even deleting profile information that includes bitcoin addresses may not be enough if a post has been cached or captured by services like the Internet Archive, they point out. 'If you're vulnerable now, you're vulnerable in the future.'"
This stopped working in the current state of Bitcoin, because you pay a fee for the amount of data you use on the blockchain, and the more addresses you accumulate, the more horrible the fees become.
Fees have got so high that addresses with a small balance (somewhere around $15-ish last time I checked, which is crazy) are effectively lost, because the fee is higher than the amount stored in the address.
The problem compounts for paying people. If I want to send you $15, I may have to spend somewhere around $15 in fees to do so, costing me a total of $30. At the end of this you will have an address with $15 worth on it, but which can't be actually spent, so I paid you, but you have effectively nothing anyway. At this point either you bump your prices, or try to consolidate your accounts through a very low fee transaction that might or not get processed, and that may take a week or so.
TL;DR: The modern bitcoin is completely useless as a payment system, and only remains of interest to people who hoard it and hope the price will rise. I expect it to crash and burn eventually as the realization sets in that it's not good for anything anymore except as a kind of gambling system.
Those people interested in something that approximates a currency can go with Bitcoin Cash, which is a fork that's far more in line with what Bitcoin used to be, or something else like Ethereum.