How Anonymous or Private Is Bitcoin?
We sometimes compare bitcoin transactions to “anonymous” email — both involve sending and receiving addresses, while bitcoin transmits value instead of just information.
Like email, an address does not necessarily identify an individual. However by analyzing messages, times, recipients, etc., it’s possible to identify an email address that doesn’t contain its owner’s name. That’s how bitcoin works too. The blockchain shows only sending and receiving addresses, yet some are well-known to belong to particular people.
If you use a brand-new address to send bitcoin to a new recipient, that transaction is more private than most. It still isn’t 100 percent untraceable to an individual, but it would take a lot of work to connect the dots.
‘Pseudonymous’ Not Anonymous
Likewise, if you use the same bitcoin address repeatedly, the chances of someone connecting it to your real-life identity increase. For this reason it’s advisable to use new send/receive addresses for each transaction, for privacy. Most wallet software these days does exactly that.
It will always be possible, however, to see exactly how much bitcoin each address has, and who it has transacted with in history.
Software developers play a kind of cat-and-mouse game in this arena. Blockchain forensic investigators are always working on new ways to analyze blockchain traffic and identify users. Meanwhile, privacy advocates are always working on new ways to make bitcoin more private.
Now that you know more about how private Bitcoin is, you may have even more questions, such as:
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