An Analysis of Anonymity in the Bitcoin System
anonymity-in-bitcoin.blogspot.com
anonymity-in-bitcoin.blogspot.com
Bitcoin is not anonymous, but finding out who did what is damn hard.
With careful precautions, Bitcoin can, I'm sure, be used anonymously. (Mine the coins yourself, connect to the network using TOR, never use your computer for anything else, be paranoid, never pay for a transaction that could be linked to you, etc).
By this argument, credit cards can be used anonymously too. But everyone isn't going around saying that credit cards are anonymous.
If, sometime in future, Bitcoin happened to be commonly used for online commerce, by casual, semi technical users, then, with the system as its currently implemented in clients, most of most peoples transactions are going to be very obviously linked to other transactions that are linked to their real identities.
If, as the implementation currently stands, casual users were doing their Amazon.com shopping using Bitcoin, Bitcoin probably wouldn't look very anonymous to Amazon at all.
I can only guess how anonymous it looks to Mt Gox.
Now, if you google for it, you will find people out there that are very careful about their privacy, and so go through great lengths to acquire and use credit cards that are not bound to their identity.
I can't speculate why they do this. My point is really that you wouldn't say 'the credit card system is anonymous' even though it can, with great care, probably be used anonymously.
Equally, people shouldn't say 'Bitcoin is anonymous', if the case is that it can be anonymous if used with care, but when used casually, it also leaves information that can be used to link user accounts. People should not think of it like cash.
We made a decision not to reveal names (or forum names, etc), because we are doing academic research here. Our motivation is to let people know they aren't inherently anonymous when they use Bitcoin, rather than to publicly compromise the privacy of as many individuals as we can.
We could have published a mapping between information we had (typically bitcoin forum usernames, twitter handles, lists of names of organisations) and sets of bitcoin addresses. This would probably have made our point in a harder-to-argue-with way, but probably wouldn't be a good thing to do.
Of course we don't typically have names and addresses of the people using Bitcoin.
We weren't interested in arguing that its often possible to go from, say, forum IDs, or twitter accounts, to names and addresses. I suspect everyone knows that.
What we were trying to show is that Bitcoin doesn't automatically hide your identity, and that a lot of activity on Bitcoin, that seems superficially hard to analyse, can actually be analysed. Our point was that a lot of people might think the Bitcoin system is making them anonymous, because they are often using different Bitcoin addresses, but that people had better be careful (say, if they are using Bitcoin while living in a repressive regime) because its much easier to link your different addresses than you might think.
I'm one of the authors, if another discussion does start here, I'll be happy to try and answer questions.
This is important, if you would like to be anonymous (along with a few other tools).
This patch goes a substantial way to mitigating one of the big issues we discuss; the issue is that, in the protocol, separate balances, when used as inputs to the same transaction, are revealed to be controlled by the same individual.
As the official client does not allow balances to be selected individually, many of the addresses within a wallet end up being revealed to be controlled by the same individual user, which users do not expect; this patch goes a long way towards fixing that.
I still would not assume it is sufficient to guarantee anonymity, with Bitcoin. There may be other forms of information leakage that allow accounts be linked, or linked with a certain degree of confidence, but the fact that it shows key linking to users, will go a long way towards helping users understand that they may have linked accounts without meaning to.