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October 26, 2021

Can You Trace The Owner Of A Bitcoin Address? (3 Areas Of Vulnerability)

Can You Trace The Owner Of A Bitcoin Address or more to the point can anyone?

So there can be some weak spots when it comes to the anonymity of your address.

Just below I’ll discuss 3 of them with you.

Can You Trace The Owner Of A Bitcoin Address?

Well to start with, instead of bitcoin addresses being anonymous they’re actually Pseudonymous. This means the same way authors use fake names to hide their identity you’ll use a public key to conceal yours. However, there are still ways that people can figure out who you are. For instance, you have to take into account that every bitcoin transaction is recorded on a public ledger that is available for everyone to see. Which could give certain clues to your identity. Then if you use bitcoin to pay for deliverable items, you’ll probably need to give your name and most certainly need to give a physical address. Also, if you buy bitcoin through exchanges using fiat currencies then that exchange will definitely be keeping tabs on you. Not to mention if you use the exchanges wallet or most other hosted wallets as well. Finally, If you plan on getting donations online be sure you don’t have your real identity connected to your bitcoin address somehow. 

1. Bitcoin is Pseudonymous

Bitcoin is Pseudonymous

A pseudonym is basically just a fake name that people (usually authors) use to conceal their identity. 

Now bitcoin is considered pseudonymous because when you transact in it you use a fake name (public key) that is not tied to any of your personally identifiable information. 

A shortened or hashed version of your public key is what is used to create your bitcoin wallet address. 

Now essentially your bitcoin transactions or holdings aren’t connected to your name, physical address, or email. 

So if you wanted to trace the owner of a bitcoin address you would need to connect their pseudonym (public key) to their real identity.

2. Bitcoin Transactions & The Blockchain

Bitcoin Transactions & The Blockchain

Bitcoin is a virtual currency, so every bitcoin transaction is done online. 

Now just so you know all bitcoin and other crypto transactions are traceable to a certain point. 

Even the privacy coins like Dash, Zcash, and Monero. 

This is because of the attributes of most blockchains. 

All of the transactions on the bitcoin blockchain are recorded and put on a public ledger, which means everyone has access to this ledger. 

Now this ledger is decentralized which means that all these records are stored on thousands of nodes (basically computers) all over the world. 

Some of the information that you’ll find on this public ledger is the time the transaction was done, the amount of bitcoin within the transaction, the wallet address the bitcoin was sent from, and the address where it was sent to. 

So you see everyone has access to all of these transactions made from any particular wallet. 

That is why Satoshi Nakamoto (Bitcoin’s inventor) wrote in his original whitepaper that it was recommended for every Bitcoin user to use a new address for each transaction to keep those transactions from being linked to a common owner. 

3. Finding Your Identity

Finding Your Identity

3.1. Bitcoin Payments

Whenever you purchase services or products using bitcoin it’s not that easy to hide your identity. 

First, as I told you earlier, the wallet address that you send the bitcoin from will be recorded on the public ledger for everyone to see. 

Also if you’re purchasing tangible goods that need to be shipped that adds another layer of visibility. 

Since whenever you do that, you’re going to have to provide your name and mailing address at least. 

Finally, whatever payment processor is used to complete the purchase will keep a record of your personal and transactional details as well.

3.2. Bitcoin Exchanges 

If you intend to use fiat currency (regular money) to fund an account at an exchange in order to buy or trade bitcoin, then that comes with its own set of privacy concerns. 

Most exchanges that deal with fiat currencies have to abide by money laundering regulations. 

This means that you would have to upload an image of your ID, as well as give them your banking information. 

Once you have done this the exchange will know exactly who you are unless the documents you provide are forgeries, which I definitely don’t recommend, and by the way, these exchanges tend to keep this information on you forever. 

Not only that a lot of exchanges are also starting to require KYC (Know Your Customer) ID's. 

So now every time you do a transaction using the account that you created on the exchange it will be linked back to you personally.

3.3. Hosted Wallets

Hosted Wallets

The reason they’re called hosted wallets is that it’s when a third party holds your crypto for you. 

It’s the same way a bank or credit union would hold your money for you in a checking or savings account. 

Except I’m pretty sure these exchanges aren’t going to pay you interest for any bitcoin that you hold with them. 

Also, these hosted wallet sites are going to have a lot of info on your bitcoin address because you’re using their wallet and their servers. 

Not only that but if you have given them any other information when you signed up for their services like a phone number or email address, then they’re going to have that too. 

So if you put it all together that’s a lot of clues available for you to use on the trail to find someone’s real identity as far as their bitcoin address goes.  

3.4. Donations Anyone

After everything we’ve discussed so far, this next topic is the number one reason people discover who the owner of most bitcoin addresses is. 

People put their bitcoin addresses online in hopes of getting donations while having them tied to their real identity. 

You see it in a lot of places. 

I’ll lay out a couple of them for you here. 

First, some people create a website and then they place their address on the site in order to solicit donations. 

The only problem is that they used their real name when they got the site's domain name. 

Next, you have other people who put their bitcoin address on a forum, but they used their real identity to register for the forum. 

So I think it’s safe to say that it wouldn’t be too hard to find out who the owner of those bitcoin addresses was.  

So what did we find out?

For one thing, even though your public key which is what your bitcoin address (wallet address) is made from isn’t directly tied to your identifiable information it still isn’t totally anonymous. Whenever you do any transactions using bitcoin a record of those transactions is stored on the blockchain indefinitely. Now that record doesn’t include your personal information per se. However, it does include little bits of info that someone, some group, or some government could use to try and find out who you are. Also, if you buy something that will be delivered to your home using bitcoin, then there will be a record of your home’s address and probably your name too. Another thing, using fiat money (regular money) combined with exchanges will bring about the need to come off some personal info as well, especially if you’re using the exchanges wallet or a hosted one. One more thing, if you want to remain anonymous be very careful if you use your bitcoin address to ask for donations online. Be sure not to have any personally identifiable information connected to it. That’s where most people slip-up concerning their identity and their bitcoin address. Finally, I hope what I just wrote didn’t give off the impression that it’s easy to find out the owner of a bitcoin address. I just wanted you to know that it’s possible.       

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