It has been claimed that Bitcoin and many other cryptocurrencies are used in illegal activities, and they are frequently involved in activities that stimulate illegal behavior. This is one of the major debates that surrounds the use of Bitcoin and other cryptocurrencies. Many government officials, such as Janet Yellen, who serves as the Secretary of the United States Treasury, and Christine Lagarde, who serves as the President of the European Central Bank, have expressed their concern regarding the potential use of cryptocurrencies by criminal enterprises and terrorist groups.
With the development of the cryptocurrency space moving forward at full speed, this concept has developed into quite an exaggeration, regardless of what may or may not be circulating. Elliptic, a company that deals in cryptocurrencies, published a report almost two years ago stating that illegal and criminal activities involving cryptocurrencies have been recorded to be less than 1% of the total utilization of cryptocurrencies. The report was made available on their website.
When it comes to money laundering, the truth is that physical cash has always been a major source of funding for illegal activities and organizations. This is especially true because it can be difficult to track down physical cash once it has been laundered. Because cash is physically transferred from one person to another, there is almost nothing left behind that can be used by anyone to track and trace the origin of the cash being transferred or its final destination.
When compared to Bitcoin, every Bitcoin transaction is quite a trivial process that can be traced out, clearly highlighting information on both the source and the destination that those transactions carried. In contrast, the process of tracing out other cryptocurrencies can be quite difficult.
Now that we’ve gotten that out of the way, the next section of this article is going to delve even deeper into the level of traceability that surrounds Bitcoin and other cryptocurrencies that are operating around the world.
Finding Bitcoin Transactions Through Tracing
Transactions made using Bitcoin can, as was previously mentioned, be traced with relative ease. Even though Bitcoin can be created, moved around, and even stored without the consent or watchful eyes of a centralized body like a government, the information regarding each and every Bitcoin transaction is kept and stored inside of what is known as a ledger, which is also popularly known as a blockchain. This information is accessible to anyone who wishes to view it.
In all seriousness, it is possible to trace each and every Bitcoin with regard to information concerning both the origin from which it was transferred and the person who currently possesses it. It is important to keep in mind, however, that the blockchain is only responsible for storing what is known as the public address of digital cryptocurrency wallets. This address does not always accurately reflect the person who actually owns the wallet.
Because of this, Bitcoin is no longer anonymous in the strictest sense of the word; rather, it has taken on a more pseudonymous quality. In its most basic form, a Bitcoin wallet address is a type of coded address that is used for the purpose of facilitating the transfer of bitcoins on the relevant Bitcoin network. It is exactly the same as an email address or account number.
A further point to add to the section that discussed blockchain is that it is currently considered extremely difficult, if not impossible, to conduct Bitcoin transactions while maintaining complete anonymity. This is especially true given the existence of Bitcoin explorers.
The information regarding a Bitcoin transaction, from the source wallet address to the destination wallet address, can be easily seen by anyone thanks to the work of Bitcoin explorers, who assist and direct users in bringing to light the activities that take place on the Bitcoin blockchain. Because of this high level of transparency, following the transactions associated with Bitcoin is a very simple process. The blockchain can be thought of as a database that is accessible to anyone who wants to look through it.
If we take a look at some other examples of cryptocurrencies, such as Ethereum and Solana, we can see that both of these cryptocurrencies have their own explorers, which render their blockchains viewable to the public. Etherscan is the name of the explorer used for Ethereum, while SolScan is the name of the explorer used for Solana.
The transactions that took place on the blockchain can be tracked down easily using these explorers. This provides those who are interested with information regarding the addresses that were used and the amount of cryptocurrency that was transferred from one location to another. Nevertheless, despite the fact that all of this is true, there are still a great number of people who believe that completely anonymous transactions can be conducted using cryptocurrencies such as Bitcoin.
The issue that needs to be looked into is the fact that Bitcoin was initially designed in such a way to respect the users’ right to personal privacy when they used it. Because a digital wallet address can be generated with relative ease and without the need to reveal one’s true identity in relation to that address, the concept of a certain degree of anonymity is thought to be associated with the use of bitcoins.
In the first Bitcoin whitepaper, the creator of Bitcoin, Satoshi Nakamoto, pointed out that wallet addresses could be used to track down individual profiles that lead to a common identity. He also recommended that users of Bitcoin should use a fresh address to perform each transaction, which would aid them in maintaining a good level of privacy. Despite this recommendation, it is still important to remember that the transaction itself cannot be hidden in the blockchain.
Traceability of Bitcoin Transactions Due to the Following Factors
Transactions in Bitcoin can be easily traced, as was just made abundantly clear, because the ledger that underpins the cryptocurrency, known as the Blockchain, keeps a record that is open to scrutiny from any and all parties involved. This record contains details regarding each and every transaction that has ever been carried out.
There have been studies conducted on this subject for close to a decade now. It is not possible to conduct a transaction with complete anonymity at this time, despite the fact that it is theoretically possible to develop some kind of anonymity for cryptocurrency transactions. This is especially true when it comes to the fundamental ideas behind a blockchain ledger, which will continue to keep their current status of being completely open and accessible to anyone who is interested in looking at them. Despite this possibility, it is not currently possible to perform a transaction with complete anonymity.
Anyone is able to determine when and where a Bitcoin transaction took place as a result of the high level of transparency that exists in the Bitcoin network. In addition, since verifying the identities of those associated with Bitcoin addresses is a mandatory task, the transaction can be inspected in much greater detail. This makes it possible for anyone to see the path that a Bitcoin transaction took, when it took place, and which wallets were involved.
In addition, the good news is that as more nations have begun to concentrate their efforts on regulating cryptocurrencies, the majority of those nations have taken into consideration the decision of the Know Your Customer initiative (KYC). According to these rulings, any individual who accesses centralized trading solutions is required to unequivocally demonstrate who they are.
When governments have access to the identifies of individuals using these platforms, they are able to easily track down the transaction history of that individual and even have information regarding the assets that are stored on the wallet.
It is mandatory to provide information regarding identity to the respective exchange in order to make trades possible through centralized exchanges. With this information, Bitcoin wallet addresses can be associated with the respective identities that they relate to. The fact that the record surrounding Bitcoin transactions cannot be deleted is an important point to keep in mind because it means that authorities will always have the ability to view the history of any transaction if it is required.
Therefore, even if there were any criminal activity that involved Bitcoin transactions, investigative authorities can easily view the blockchain and track down the individuals involved in the process. This makes it a significantly better and easier thing to work with, particularly when compared to traditional cash. There is no denying the fact that numerous infamous criminals have claimed that dealing in cold hard cash has always been the most effective way to conduct illegal business.
It is said that the Bitcoin network is able to function without having a single authority looking after it, but cryptocurrency exchanges are not on the same page, as they are looked after by certain regulatory authorities, which means that they are required to use the KYC rulings for their customers, linking the wallet addresses to real-world identities. Despite this, it is said that the Bitcoin network is able to function without a singular authority looking after it. Therefore, if a person has consented to the policies and services of a cryptocurrency exchange, then it is highly likely that they have also consented to the KYC regulations.
How Can Transactions in Bitcoin Be Tracked?
Because of the proliferation of legislations and eyes on cryptocurrencies, governments are now able to track down any suspicious Bitcoin transaction very easily in order to discover the primary identity hiding behind the walls of cryptocurrency transactions. Over the course of time, numerous governments from around the world have amassed the equivalent of millions of dollars’ worth of cryptocurrency in their possession.
Criminals, aware of the high level of anonymity offered by cryptocurrencies, have made considerable efforts to carry out a variety of unlawful transactions; however, despite their use of the most astute strategies, they have been unable to remain completely anonymous. As a result of this, laws have become more stringent, as the motivation behind identifying any fraudulent criminal activities has significantly increased in order to catch those who are doing wrong.
Even if the true identity of the person behind the Bitcoin wallet is unknown, it is a simple task that can be done quickly. On the other hand, determining the true person behind a particular address can be a very difficult task. This makes it even simpler to identify the person behind the wallet and trace the path of the transaction in the event that a person is interested in exchanging cryptocurrencies for traditional currencies.
Because criminals can go to great lengths to conceal their identity by using multiple wallet addresses to move Bitcoin around, the use of Bitcoin explorers may become somewhat pointless at some point in the future, though it may not become completely pointless. In this context, the authorities make use of blockchain data platforms like Chainalysis in order to keep up in a manner that is significantly more effective.
Although the initial phase of this leads to grains of sand, such as small scams, the larger hourglass gradually starts to reveal itself as more and more activities, such as transactional history and KYC information, are tracked.
As of August of this year, Chainalysis reported that there has been a decrease in the number of scams; however, this improvement has been offset by an increase in the number of illegal hacking events.
According to a report by Chainalysis, after the first half of 2022 had passed, various hacker groups had stolen cryptocurrency assets worth approximately $1.9 billion from cryptocurrency exchanges, decentralized finance (DeFi) protocols, and other types of internet wallet services. This represents a more than 50% increase in the total amount of assets stolen when compared to the previous year.
The Department of Justice has quite an impressive track record when it comes to locating digital assets worth millions of dollars. The United States Department of Justice announced in June that it had been successful in recouping approximately 63 Bitcoin that had been taken in connection with a ransomware scheme.
Two years ago, the Department of Justice reported that they had used Chainalysis to track down approximately $28 million worth of cryptocurrencies that had been stolen by a North Korean hacker team. As a result of this, the North Korean hackers were unable to launder the money by using exchanges.
These are just a few of the many situations that law enforcement authorities have been involved in while utilizing the power of blockchain transparency to track down stolen funds. There have been a massive number of other situations as well.
Looking for addresses of Bitcoin wallets.
By utilizing a Bitcoin explorer, it is possible to obtain Bitcoin wallet addresses; however, obtaining the wallet address does not always result in the ejection of the original identity that was associated with the wallet. It is going to be very difficult to track down the original person behind a wallet, particularly if the information that is available is not very specific. Even though the blockchain explorer is able to successfully track down the associated transactions and addresses, it may take a considerable amount of time to determine the true identity of the person behind the wallet.
Although a Bitcoin wallet address is pseudonymous, as was previously mentioned, which means that it uses a coded name rather than a real name, it is most certainly still possible to discover the identity of the owner of the address provided that all of the data is present and connected.
Criminals have gone to great lengths in order to maintain complete anonymity, and they have come very close to achieving this goal. In addition to using a number of different wallets, criminals will also use something that is known as a Bitcoin mixer. Bitcoin mixers, in their most basic form, take Bitcoin transactions coming from a variety of sources within a pool, combine them, and then distribute the resulting transactions to their respective addresses. This makes it significantly more difficult to track the origin of the transactions on an entirely new level.
The use of multiple wallets is not only difficult to manage but also makes it very difficult to keep track of. If a person wants to conceal their actions on the Bitcoin network and remain untraceable, they can use a number of different wallets to create a sort of maze that will make it difficult for the relevant authorities to keep track of their transactions. When trying to manage and extract any results from a problem that involves tracking and mapping out all of the transactions and wallet addresses, law enforcement authorities are faced with a potentially extremely laborious challenge.
The two approaches each have their own level of difficulty; however, the combination of the two can become a hassle for authorities and trackers to manage. This is because tracking transactions and wallets requires a significant amount of time and resources to complete successfully.
The Availability of a Bitcoin Wallet That Can Remain Anonymous
There is such a thing as an anonymous Bitcoin wallet, but how the wallet is used is what determines the user’s level of anonymity. Your identity can be easily tracked down if there is even the slightest mistake, which eliminates the purpose behind using it in the first place. There is the possibility of creating a Bitcoin wallet that is anonymous, but it is important to note that this is not the only factor that can contribute to maintaining one’s anonymity.
When a single person is involved in a large number of transactions, it is possible to link a common identity to the wallet that has been used to carry out the various transactions. In addition, the Know Your Customer (KYC) regulations that come with exchanges make it nearly impossible to conduct transactions while maintaining complete anonymity.
Using a hardware wallet is one way to maintain complete anonymity. For the purpose of storing assets, for instance, an Electrum wallet may be combined with a hardware wallet. However, how Bitcoin will be transferred onto it remains a question, which is why the idea cannot be implemented. The level of anonymity is lost whenever Bitcoin is transferred through an exchange that complies with the KYC rulings; as a result, there is no point in attempting to achieve anonymity in the first place.
Providing others with your Bitcoin address
Although it is not necessary for you to be concerned about sharing a public key, it is of the utmost significance that you take every precaution to ensure that the private key is never divulged to a third party under any circumstances. Because it is possible to easily complete transactions by using the public key, there is no requirement to share the private key.
There is no point in stealing the public key because it is already available to the general public. The public key can be thought of as the equivalent of an email address or a bank account number that is connected to the wallet. Using the public key, assets can be transferred between parties; however, only the asset’s owner has access to the transferred assets. Because there are no cryptocurrency assets that can be stolen using the public key, it is perfectly safe to distribute it to other people. However, maintaining anonymity becomes impossible because transactions can be easily traced back to their original source.
If the private key is taken, it indicates that all of the assets stored within the wallets have been jeopardized and may never be retrieved again. Cryptographic assets can be recovered from one wallet to another wallet, but they cannot be recovered if the public key has been compromised. If the public key has been compromised, the slot in the blockchain where the assets are stored will become open to anyone who wants to remove the assets from it. The primary method of protection for the wallet is the private key. For your own safety, you should always follow the best practices and create multiple offline physical backups of this key.
The idea that Bitcoin and other types of cryptocurrencies are always used for illegal activities and terrorist plots is a completely baseless assumption that lacks any credibility whatsoever. Due to the fact that many people do not have the complete set of knowledge and skills behind the likes of cryptocurrencies, they can frequently see things with blind eyes and spread false information about them, which leads to the degradation of the image of the cryptocurrency space as a whole.
People will be able to have a much clearer vision to look upon how advantageous this type of technology can be, and how entities are utilizing it to revolutionize the financial space, as soon as they are able to put aside the horrible misinformation that is spread through local media and clearly understand the true meaning behind the use of Bitcoin and other forms of cryptocurrencies. This misinformation is spread through local media.