Potential for Bitcoin and Blockchains to Become De-Anonymized

With governments and companies concerned with increased levels of anonymity and encryption in technology, there has been a drive by some governments to impose laws preventing companies from creating encryption without backdoors to let the authorities investigate potential terrorist or illegal activities. Naturally, consumers of such technology are up in arms about this as it will also make it easier for anyone to hack into their private data – weaknesses in software aren’t available exclusively to the good guys!

Speaking on the subject, Vijay Michalik, Research Analyst for Digital Transformation at Frost & Sullivan commented that there was no such thing as anonymity in bitcoin. Whilst one of the benefits of bitcoin and the bitcoin blockchain is known to be its transaction transparency, most people think that as they are only assigned a code and not required to give any personal information, they are unable to be identified.

Michalik brings up blockchain analysis – a new process which could eventually lead to bitcoin accounts being linked to the companies and individuals that use them. Data collected by blockchain analysis provides information that can be pieced together to uncover an accounts history of dealings and funds. As the blockchain is able to be viewed by anyone, this would give everyone the possibility of seeing a person’s complete bitcoin financial history. The impact of widespread de-anonymization could be huge but whether or not it would stop the progress of bitcoin and blockchain technology would have to be seen. In the meantime –be careful what you spend your cryptocurrency on!