Characterizing Payments Among Men with No Names

How much can you learn about Bitcoin users by simply engaging in transactions and data mining the blockchain? Researchers from UC San Diego and and George Mason University answered this question with a seminal paper published in 2013. From the paper:

“[Our goal is] to identify certain idioms of use […] that erode the anonymity of the users who engage in them.”

How were they able to achieve this goal?

“We engaged in 344 transactions with a wide variety of services, including mining pools, wallet services, bank exchanges, non-bank exchanges, vendors, gambling sites, and miscellaneous services.”

The researchers combined information they gleaned from these transactions with public sources of identifying information, such as Blockchain.info’s tagging service and the Bitcoin Talk forums. Armed with this database tying Bitcoin addresses to the names of individuals and businesses, the researchers applied heuristic algorithms to the full list of transactions provided by the blockchain, grouping related addresses together and associating previously unknown Bitcoin addresses with the ones the researchers had already identified.

What did the researchers conclude? The same thing that crypto-currency privacy advocates have been saying for years, now:

“Even our relatively small experiment demonstrates that this approach can shed considerable light on the structure of the Bitcoin economy, how it is used, and those organizations who are party to it.”

Bitcoin privacy is broken, and in desperate need of a fix. I’m sad to report that, although this research was published in late 2013, we still have not seen a software fix for these issues. It’s up to users to educate themselves on the art of obscuring their funds from the world.

If you’d like to learn more about the research, but aren’t attracted to the idea of reading an academic paper, check out this video presentation on the research, filmed at the University College of London on October 17th:

The Bitcoin Privacy Newsletter contains new posts and Bitcoin privacy tips from Kristov Atlas every week.