Bitcoins are traceable! This is proven by the recent FBI seizure of the ransom paid by Colonial Pipeline to the Hackers known as Darkseid. This is not to say Bitcoin transactions are completely transparent and people can see all the transactions and who made them. No of course not! But they are not as anonymous as most people think!
Ok. So, most people believe that Bitcoin is completely untraceable and completely safe! In fact, this has been one of the perceived promises of Bitcoin that made it so enticing. That Bitcoin is anonymous and is immune from governmental control and manipulation.
So much so that - notoriously, Bitcoin has become the preferred payment method of nefarious characters. Which includes hackers and criminals.
Actually, Bitcoin’s very nature makes it very traceable! All Bitcoin transactions are stored publicly and permanently on the network, also known as the blockchain, which means anyone can see the balance and transactions to and from any Bitcoin addresses. That sentence comes from bitcoin.org, actually. Let that sink in for a minute. That should already foreshadow the traceability of bitcoins.
Let’s talk about why people think bitcoin is anonymous and secure enough to be the payment of choice for shady characters.
Well mostly this is because Bitcoin identifies users using keys which are alien looking codes. There’s a public key you use to send and receive bitcoins, which are better known as wallets. And there’s a private key you use to access bitcoins in the aforementioned wallets. Only you are supposed to have the private key.
Well you know how it works.
But here’s the catch! Where do you get bitcoins!?! Well you can mine it! Which is a whole other video topic. For now, just know that mining won’t get an average person very much bitcoins at all.
So where else do you get it? There are bitcoin ATMs which are arguably anonymous, but most people nowadays get their bitcoin through places like Coinbase or Binance. Or other similar places. Now these places DO require that you give your personal information. Now you see, there is now real identifiable information for someone. And this information goes into the blockchain and it stays there forever. And then this information can be linked to every transaction made on the blockchain with this wallet. So with more and more wallets also making transactions back and forth, as you can probably imagine, through some very determined detective work and technology, identity is found and traced!
Now it’s important to note that the coinbase personal info is not even the only way a person can be traced on the blockchain. There are things like your face getting caught on camera when you go to a bitcoin atm or your browsing history showing that you go to places like bitadddress.org which gives you a bitwallet. And those are just two that I can think of off the top of my head. There are probably a million more ways.
Well things came to a head when the FBI was able to trace and recover a big part of the ransom money paid to the hacker group Darkseid for the Colonial Pipeline ransomware attack. Not all, mind you, but a big portion of it.
And this news was very public. This news proves two things: Darkseid isn’t undefeatable, and that bitcoin isn’t as untraceable as criminals would want! By the way, great job FBI!
Actually, criminals may actually be better off just using good old fashioned banks, which are in fact much more opaque when compared to blockchains. To get access to bank records, investigators will actually need a warrant and go through lengthy procedures to get the green light to look at somebody’s bank account through the bank. I’m sure you can imagine.
But with bitcoin, all the transactions are out in the open (or actually, in the blockchain) for everyone to see! It’s just a matter of tracing and tracking the movement. And then with good detective work and deduction using known identity, bitcoins can be traced!
It’s difficult of course. It’s very very difficult. But of course, with enough resources, enough tenacity, good enough tools, enough manpower each with enough will, It can be done! And law enforcements do have all those things! And also the power of being the good guys to boot!
In fact, according to a New York Time article, Madeleine Kennedy, a spokeswoman for Chainalysis, the start-up that traces cryptocurrency payments says that in the end “cryptocurrencies are actually more transparent than most other forms of value transfer.”
