Can Bitcoin Transactions be Traced?

In the early days of Bitcoin, one of its biggest advantages was that it could be used to send money anonymously ?‍?. 

But, it’s been over a decade since Bitcoin was created. A lot has changed about it, including its privacy. Below, we’ll look into whether BTC transactions can be traced – and if they can, to what extent? ?‍♂️

Is Bitcoin Anonymous? 

Bitcoin is a decentralized cryptocurrency. This means that it is not controlled by any person, company, or government. You can easily open an account on a cryptocurrency exchange like Quidax and send Bitcoin to anyone, anywhere. 

Another feature of decentralization is that Bitcoin is private. In fact, in its early days, Bitcoin was a currency that was used on the Dark Web by some not-so-good guys ?. These people saw that Bitcoin was untraceable – unlike cash or online credit card transactions ?. So, they used it to transfer money. 

  • Bitcoin eventually grew from a currency for the online community to a currency for everybody
  • In truth, there is still some criminal activity that is being done with Bitcoin
  • Today, Bitcoin’s anonymity is one of the reasons why people criticize it. 

Can Bitcoin Transactions Be Traced? 

Now, let’s get into the specifics. 

Every Bitcoin purchase or sale includes a wallet. The wallet is where BTC moves in, and it stores the private and public keys of the owner. You can always read more about crypto wallets to know more✨. 

When a BTC transaction is made, all of its details are stored on a ledger known as the blockchain. Anyone can go to the blockchain to see the details of the transaction itself. But, the only thing they’ll see is that BTC moved from a specific wallet to another. They won’t be able to see your personal details. 

Here are a few things to note about wallets:

  • Because wallets are connected to the blockchain, it’s also possible to check a wallet’s balance
  • But, no one can move money from one wallet to another without the owner’s permission
  • Also, those who check wallet balances can only see the wallet’s public address – not the user’s name

So, if you don’t disclose your wallet address to anyone, they can’t know that it belongs to you. 

Exchanges and Identity Verification Requirements

Another way that Bitcoin addresses can be tracked is through cryptocurrency exchanges. In Bitcoin’s early days, exchanges allowed anyone to open accounts without checking. But, the last few years have been different. 

Now, exchanges have to abide by Anti-Money Laundering (AML) and Know-Your-Customer (KYC) rules. These rules have been put in place to prevent fraud and criminal activity . 

So, when you open an account with a crypto exchange, you might have to give them some information. This includes your email address, ID cards, and proof of residency. 

Exchanges use this information to link your identity with your wallet and account on their platforms. So, when a transaction is made with your wallet, the exchange knows it was from you. Any criminal activity that involves your wallet will also be linked to you ?. 

How to Protect Your Privacy 

If you’re worried about your Bitcoin and its privacy, the following tips will help you to stay safe: 

Never Publish Your Address ?

It’s never a good idea to share your Bitcoin address on social media. 

Mask Your IP Address ?

Since Bitcoin is a decentralized network, it’s possible to track transactions and know where someone is through their IP address. To make your transaction untraceable, you can mask your IP address with a Virtual Private Network (VPN).

But, make sure to use a paid VPN. Free VPNs (like Windscribe and Hotspot Shield) don’t have strong security features. You can learn more about VPN security here.

Use a Bitcoin Tumbler or Mixer ♻️

Bitcoin tumblers (or mixers) are online services that scramble transactions to make it more difficult to trace them. They take a small fee for their service, but they make it difficult for your transactions to be traced. Examples of Bitcoin tumblers include BitBlender and Bitcoin Laundry. 

Generally, tumblers are only to be used if privacy is an important necessity. If you’re sending money to a friend, you don’t need a tumbler. 

So, What Have We Been Saying?

  • Initially, Bitcoin was untraceable. But, things have changed a bit
  • You can still use Bitcoin privately if you have a standalone wallet
  • If you have an account with a crypto exchange, they’ve probably taken information about you 
  • You need to be careful about where you publish your wallet address these days 
  • VPNs are a great way to mask your IP address. 

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