Anonymity in Bitcoin

Presenter: Muhammad Anas Imtiaz

Based on: ‘An analysis of anonymity in the Bitcoin System’ [1], and ‘Tracking digital footprints: anonymity within the bitcoin system’ [4]

Introduction

• Decentralized, P2P cryptocurrency introduced by Nakamoto[2] in 2008

• First transaction in January, 2009

• All-time high market cap of $300+ billion [3]

• Transactions published in a public ledger

• Nodes maintain copy of ledger to validate transactions

Introduction

• Concerns regarding untraceability• US: FBI [5], senators

• Europe: Der Bundesverband Digitale Wirtschaft

• Tax evasions, money laundering, illegal transactions

• General unawareness regarding anonymity throughout Bitcoin community

• Is it really anonymous?

Transaction

• Transfer of Bitcoin from a source account to a destination account

• An account is a public/private-keypair

• Signed with private key of sender

• Destination is the public key of recipient

https://bitzuma.com/images/posts/20140327/alice-bob-transaction.png

Transaction

• An input may be claimed only once

• Multiple inputs, multiple outputs

• Sum of the values of inputs ≥ sum of the values of outputs

https://freedomnode.com/uploads/images/ad1f3d1790b9f1f7764fbc72f2337b6c44cd5adfba10324a9a8a65e5b6b09125.png

Block

• A set of transactions

• Created by participants of the Bitcoin network

Blockchain• A collection of blocks

ordered chronologically

• Each block is linked to the previous block

• Public ledger

• Each node has its own copy

https://www.ybrikman.com/assets/img/blog/bitcoin/bitcoin-block-chain-risk.png

Features of Interest

• Public availability of the ledger

• Transactions with multiple inputs and multiple outputs

• Payer and payee identified through public-keys• Multiple public-keys

Features of Interest

• Public availability of the ledger

• Transactions with multiple inputs and multiple outputs

• Payer and payee identified through public-keys• Multiple public-keys

• Allow to create two network structures• The transaction network

• The user network

Transaction Network

• Flow of Bitcoins between transactions

• Vertex: transaction

• Directed edge: output of source transaction to input of target transaction; value of transaction

Transaction Network

User Network

• Flow of Bitcoins between users

• Vertex: user

• Directed edge: input-output pair of a single transaction; value of transaction

User Network

• Flow of Bitcoins between users

• Vertex: user single public-key

• Directed edge: input-output pair of a single transaction between users public-keys; value of transaction

User Network

Features of Interest

• Public availability of the ledger

• Transactions with multiple inputs and multiple outputs

• Payer and payee identified through public-keys• Multiple public-keys

• Allow to create two network structures• The transaction network

• The user network

User Network

“Some linking is still unavoidable with multi-input transactions, which necessarily reveal that their inputs were owned by the same owner. The risk is that if the owner of a key is revealed, linking could reveal other

transactions that belonged to the same owner” [2]

User Network

Analysis• De-anonymize users

• No user directory

• Off-Network information• On-line stores, exchanges etc.

• Voluntary disclosure

https://twitter.com/wikileaks/status/80774521350668288

• More information can be derived

Analysis

Analysis

Case Study

Case Study

Case Study

Further Analysis• Is this really helpful for law enforcement agencies?

• Do exchanges require user information?

Further Analysis• Round 1

• Tor, fake information (name, birth date, email)

• Submitted as real to exchanges

Further Analysis• Round 2

• Ninja Cloak, fake information (name, birth date, email), correct information (street names, numbers)

• Submitted as real to exchanges

Possible Workarounds (?)• Use a mixing service

• Requires trust

• Mixing services may store information

• Don’t store all Bitcoin in one location

Interesting Links

• Bitcoin theft: https://bitcointalk.org/index.php?topic=16457.0

• Paper thrashing: https://bitcointalk.org/index.php?topic=31662.0 and https://bitcointalk.org/index.php?topic=31539.0

• Patching Bitcoin: https://bitcointalk.org/index.php?topic=24784.0

• BitcoinWiki on Anonymity: https://en.bitcoinwiki.org/wiki/Anonymity

https://memegenerator.net/img/instances/66724882.jpg

References

[1] Reid, Fergal, and Martin Harrigan. "An analysis of anonymity in the bitcoin system." Privacy, Security, Risk and Trust (PASSAT) and 2011 IEEE Third Inernational Conference on Social Computing (SocialCom), 2011 IEEE Third International Conference on. IEEE, 2011.

[2] Satoshi Nakamoto. Bitcoin: A peer-to-peer electronic cash system.

[3] https://blockchain.info/charts/market-cap

[4] Reynolds, Perri, and Angela SM Irwin. "Tracking digital footprints: anonymity within the bitcoin system." Journal of Money Laundering Control 20.2 (2017): 172-189.

[5] Bitcoin FBI. https://www.wired.com/images_blogs/threatlevel/2012/05/Bitcoin-FBI.pdf