Is Bitcoin really anonymous?
A widespread opinion is that bitcoin transactions are anonymous. Likewise, bitcoin is regularly referred to as anonymous in the media. For example, Bitcoin is said to make it easier for criminals to launder money. Or terrorists can finance themselves anonymously with bitcoin without governments being able to trace it. But is bitcoin really anonymous?
Although it is possible to send and receive bitcoin without revealing an identity, all transactions are stored on the public and transparent Bitcoin blockchain. Anyone can view the history of a particular bitcoin address and potentially identify the person to whom it belongs.
Bitcoin Pseudo Anonymity
When you look at the bitcoin blockchain, you don't see a single name or any other personal information. However, the network is not completely anonymous. Because, in fact, bitcoin and all transactions are very transparent and accessible to everyone.
The Bitcoin Blockchain is Public
The public blockchain stores all transactions ever made. So if person A decides to send bitcoin to an address of person B, that transaction is forever immortalized in the blockchain for everyone to see.
The Bitcoin Address is Pseudonymous
A bitcoin address, which is similar to an IBAN, is pseudonymous. In this case, if someone uses the same bitcoin address over and over again to send or receive the cryptocurrency, it is relatively easy to track what the person's transaction history is.
Bitcoin wallet addresses are cryptographically encrypted in themselves. Thus, one cannot find out any clue about the person behind it. However, when buying bitcoin, fiat money must be exchanged for the cryptocurrency. Usually, users have to provide their personal information (KYC procedure) to the broker or exchange. This procedure is called KYC (= know your customer). Therefore, strictly speaking, bitcoin is not anonymous, but pseudonymous.
Regulations and Identification
In 2017, bitcoin went mainstream. This surge of interest led governments around the world to discuss bitcoin's anonymity. One area of focus was identification. Governments wanted brokers and exchanges to conduct identity verification (KYC) of their customers before allowing them to invest in bitcoin.
Who and how can Bitcoin Transactions be tracked?
The bitcoin network records all transactions through the use of the blockchain. In this regard, the blockchain works like a digital and public ledger. Anyone can access it with the help of a Blockchain Explorer and view the individual transactions.
What Data can be determined?
Using the Blockchain Explorer, all transaction-relevant data can be viewed. This includes the recipient address, the sender address, the amount, the transaction date, the time and the amount of the transaction fees paid.
It is also possible to search specifically for transaction numbers and wallet addresses. This makes it possible to view the bitcoin balance and the transactions made for each wallet address.
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