Is Bitcoin the Best Source for Execution of Private Transactions?

Making its first appearance in the financial market space as the world’s first-ever digital or virtual currency, Bitcoin can be considered as the pioneer in the evolution of a new-age payment settlement mechanism. Cryptocurrencies operate on blockchain technology, which is a distributed ledger network where transactions get stored securely via cryptography. Digital currencies are entirely different from fiat money as they do not exist in paper and metal coins, they are considered to be designed for facilitating private transactions the keep the origin of funds and the owner anonymous.

A Take on Bitcoin and Anonymity

Interestingly, Bitcoin has always been popularized as a payment system that supports the anonymity of the owners in the best possible way. In contrast to general thinking, Bitcoin is, in reality, one of the most transparent payment networks available in the industry at the present time. The globally reputed coin is neither wholly anonymous and nor truly transparent; rather, it follows the mid path where a person’s financial activities can be unveiled depending upon the efficiency of the adversary and the choice of tools made by the user.

Anonymous Bitcoin transactions are those wherein no third-party had any knowledge about the transaction executor. On the other hand, a private Bitcoin transaction is that wherein no third-party has to access to transaction details like the amount involved. It is necessary to understand the difference between anonymity and privacy before drawing an inference. Bitcoin trading activities are predominantly anonymous and not private. The identities of the owners are not recorded on the Bitcoin blockchain, but all the confirmed transactions are permanently secured on the network and are visible on the blockchain. The Bitcoin blockchain supports immutability that and so no changes can be made in the blockchain secretly without the knowledge of the owners.

Are Bitcoin Transactions Traceable?

The owners of Bitcoin need to store their assets in crypto wallets, which have unique identification addresses. The identities of the owners do not get stored in the blockchain network, but the addresses of the crypto wallets do get stored. These addresses help the public operating on the blockchain to keep track of the flow of the assets from one address to another. This tracking ensures transparency of the transactions in the network and allows Bitcoin to establish itself as a decentralized currency.

The owners are able to access Bitcoin through portals that allow their entry in the platform only after the completion of KYC norms, which require them to reveal their personal identities. In case of any serious misconduct or fraud, the government agencies can link the users’ activities with their KYC identities.

For the customers who use Bitcoin via online wallets and exchanges, they need to link their personal identity with their Bitcoin assets. This makes Bitcoin lose its anonymity. However, this is only for legal authorities and not for the public at large.

Timestamping of Blocks and not Transactions

The transactions on the blockchain are not timestamped; rather, blocks are timestamped. These block timestamps are not truly accurate, but by assuming that the miners are accurate in their time reports, all the blocks are likely to be correct within a few hours range. As sometimes transactions take a longer time to get included in the block, it is not necessary that the block timestamp is accurate within a few hours range to its transactions’ broadcast times. A few block explorers display the time they saw the transaction on the network, and this gives a clear and accurate picture of transactions’ broadcast times.

IP Address Anonymity

Every computer that is a part of the decentralized network and hosts a bitcoin node is provided with a complimentary source of deanonymizing information. This information if the suite of IP addresses of the systems that offer new Bitcoin transactions.

Transaction propagation via the node network starts with the system that first broadcasts the transaction to its peers. The system then transfers the event to the peers in the form of an information cascade that reaches all the nodes in the network within a few seconds.

A person can connect to a majority of nodes by controlling a sub-network of nodes disbursed over many devices; the very first node to relay the event is the originator of the transaction. There exists a risk factor if multiple transactions are relayed from the same IP address. The use of a TOR router allows protection against IP address revelation, and it opens doors to other threats for the user.


Bitcoin is undoubtedly less anonymous in comparison to cash, but the users who are adamant about finding ways to use Bitcoin anonymously can find multiple ways to achieve their targets. As Bitcoin is heading towards a successful future adoption, there are possibilities for the birth of advanced techniques that will help in increasing the privacy and confidentiality of operations among the users. Mention must be made here of Bitcoin Mixing, a unique concept that makes Bitcoin transactions all the more anonymous and private. Bitcoin mixers help users mix their coins with other users and thereby, maintain their privacy. With Bitcoin mixing, users can use Bitcoin more privately by obscuring the relations between their Bitcoin addresses and real-world identities.

Trevor Holman

Trevor Holman follows crypto industry since 2011. He joined CryptoNewsZ as a news writer and he provides technical analysis pieces and current market data. He is also an avid trader. In his free time, he loves to explore unexplored places.

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