Receive all Bitcoinist news in Telegram! Understanding Privacy: How Anonymous Can Bitcoin Payments Be? Vpn anonymous bitcoin pool its inception, Bitcoin as a payment medium has a cemented an impression of being anonymous and privacy-centric. I think the fact that you can buy drugs and ammo with is actually a validator of the currency itself.
The downfall of Silk Road, however, speaks volumes about the imaginary shield that people think they are hiding behind when making bitcoin transactions. A consensus network that enables a new payment system and completely digital currency. It is the first decentralized peer-to-peer payment network that is powered by its users with no central authority or middlemen. From a user perspective, Bitcoin can be considered to be cash for the Internet. In his definition, Glantz explains how a network of people agree by mutual consent to exchange a digital currency without physical form.
The currency, as the definition explains, is unregulated and no financial institution has control over its price, supply, risks, valuation methods and distribution. Sounds like the perfect candidate for a completely anonymous payment method, right? Just How Private Are Your Bitcoin Transactions, Really? Every single bitcoin payment is recorded in a digital public ledger known as the blockchain. This blockchain records the transfer of bitcoin from user to user and links them to transactions.
The transparency of bitcoin transactions are the reason there is no privacy when using the system. Once a transaction is recorded, it is available for anyone to see and can be easily traced back to an IP address. But as all transactions in the network are stored publicly in the blockchain, allowing anyone to inspect and analyze them, the system does not provide real anonymity but pseudonymity. While Moser only looked at the concept theoretically, 3 researchers went a step ahead and tested the hypotheses. IP address, name, financial details etc.
3 researchers managed to bypass NAT Firewall protection of Bitcoin users, identifying their transactions made over the network. Tor or other anonymity services can be cut-off by abusing anti-DoS countermeasures of the Bitcoin network. This abuse of the Bitcoin network’s anti-DoS security that the researchers mention is usually accomplished by making a large number of small value transactions crowding the entire blockchain, hence, disabling other users from conducting transactions. IP address monitoring nodes, web-spidering, and many other mechanisms. Once broken this privacy is difficult and sometimes costly to recover. Even the staunchest advocates and experts of the cryptocurrency dismiss the idea of it being an anonymous method of transacting online.
Average users should be aware that is certainly less anonymous than cash. Ludwin’s conclusions can be verified by looking at the use of cash in daily life compared to Bitcoin. In case a Bitcoin Wallet has been registered against real personal details, the job becomes all that much easier for hackers and cybercriminals looking to breach Bitcoin data. The transparency of the blockchain allows transactions to be analyzed and possibly linked to the initiator of a certain transaction. The solution that most researchers, advocates, and Bitcoin users’ suggest is to change your bitcoin address or pseudonym for every transaction.
Alternatively, you can choose to do so manually. A crucial aspect that none of the research papers discussed was using a VPN together with Bitcoin network. A Virtual Private Network — or VPN — is an anonymity and privacy tool designed to ensure that not even the ISP would know about my online activities. After all this, I add funds to said Bitcoin Wallet using a prepaid credit card that I purchased with hard cash.