A long-time avenue for privacy advocates to make online purchases without having their data snagged by sleazy marketers and government officials is now closed. Help Net Security reports that all Bitcoin transactions can now be traced to their user’s real identity – even if the user is engaging in practices meant to stymie that identification, such as Bitcoin mixing.
When Bitcoin first started, it was heralded as a way for people to make anonymous purchases. In today’s surveillance society, every single bit of privacy that someone wants to keep requires a fight. As the noose tightens, necessity creates invention, and those who don’t want their every purchase to be known find new ways to get around the ever-watching Big Brother.
Users in the United States usually have to provide a driver’s license or other proof of identity to purchase Bitcoin; the U.S., of course, is the only country that requires that. Once users bought the Bitcoin, anyone with motivation and the right tools could trace back purchases made with that Bitcoin address, defeating the entire purpose of anonymous purchases.
To combat that, some digital privacy experts advised people to engage in a practice called Bitcoin mixing. Through a particular process, users could shuffle their Bitcoins around different wallets. It was the Bitcoin equivalent of trading $1 bills marked with “Where’s George?” for anonymous, unmarked currency. The trail would then be much harder to track. Some took it a step further and changed their Bitcoins into other cryptocurrencies using sites like Shapeshift.io. That’s more like changing those marked $1 bills to Euros, then Japanese yen, then Canadian dollars, then back to Euros, and finally back into unmarked U.S. currency.
While changing cryptocurrencies incurred fees just as if you changed paper, they were often minuscule; since digital cryptocurrency can be split into infinite fractions, it could cost as little as .00001 of a Bitcoin.
Now, however, researchers warn that even those extreme measures are not enough; there is a way to identify even those using mixing techniques to hide their purchases. Third party trackers – embedded into most online vendors – can now see who you are, even if you’ve just spent the last few hours, days, or even weeks setting up a mixed, anonymous Bitcoin account.
Based on tracking cookies, the transaction can be linked to the user's activities across the web. And based on well-known Bitcoin address clustering techniques, it can be linked to their other Bitcoin transactions," they noted. "We show that a small amount of additional information, namely that two (or more) transactions were made by the same entity, is sufficient to undo the effect of mixing. While such auxiliary information is available to many potential entities -- merchants, other counterparties such as websites that accept donations, intermediaries such as payment processors, and potentially network eavesdroppers -- web trackers are in the ideal position to carry out this attack," they pointed out.
There is still a way to make anonymous purchases, but it requires a tradecraft process that is so onerous, that most peopare will not implement that involves using a computer, not in your usual area, not being picked up on surveillance cameras, not using your own car in the process, and only using the Bitcoin address once. A host of other security protocols and practices would need to be used as well – and most users aren’t that motivated.
Considering two states now allow complete strangers to petition a judge to take away your firearms – and let the police to show up on your doorstep and confiscate them – being able to make anonymous purchases is becoming a big deal. With several states now regulating everything from magazine capacity to the amount of ammunition purchased, the need for privacy only grows.
For those who may turn their nose up at the idea of private transactions, or think that “only criminals have something to hide,” Glenn Greenwald had the perfect answer.
When we think we’re being watched, we make behavior choices that we believe other people want us to make,” he said. “It’s a natural human desire to avoid societal condemnation. That’s why every state loves surveillance — it breeds a conformist population.
