Bitcoin users have been given glimpses into some analysis firms’ capabilities via court filings, but the details have been substantially incomplete. Regardless of what blockchain analysis tools are developed, when and by whom, the only safe assumption is that the Bitcoin network is under constant surveillance by a privacy stripping adversary with unlimited resources.
The truth is unless you bought it with cash or mined it yourself, your name is irreversibly linked to the Bitcoin blockchain by Blockchain Analysis groups. How can we protect our privacy? Wasabi Wallet provides easy access to the mathematical processes known as CoinJoin via open-source software that will allow us to break the clustering models and free ourselves from the tyranny of the information purveyors.
We don’t know how many Blockchain Analysis organizations exist. While we sometimes learn about privately-owned companies from their corporate filings or leaked sales pitches, state actors have no incentive to tell anyone. We could theoretically purchase access to expensive corporate tools that governments use to scan our own Bitcoin trail, but even then we must assume that the NSA and other state actors have databases of information better than anything the private sector could ever offer.
Bitcoin has an unchangeable ledger that can be audited by anyone at any time. Soon after the popularization of blockchain technology by the darknet marketplace Silk Road in 2011, several groups such as Chainalysis began to gather data from multiple sources to build a large powerful database that tracked who was sending money to whom. Their goal is to combine the information available on the public blockchain with more and more private data. They “cluster” bitcoin addresses into an “entity” which they then label as an exchange, a marketplace or with an individual’s name.
It is easy to become part of the bitcoin network; just run the application on a computer. It’s so easy, in fact, we can assume interested parties have set up a large number of nodes to carefully record all activity. These “spy nodes” could make up over 10% of the Bitcoin network and we would not know it.
Let’s examine what information can be gleaned by watching the blockchain closely:
- Location of a transaction - which IP address sent the transaction to which Bitcoin Node
- Change addresses - small slivers of Bitcoin created on the fly as a result of most transactions
- Timing of a transaction - human behavior heuristics help here
- Input addresses - most critical - multiple slivers of Bitcoin spent at the same time are assumed to be from the same entity
The most problematic issue facing Bitcoin today is that it can be very easily associated with a person’s real-life identity. In order to comply with global regulations, Bitcoin purchasing websites require their users to supply driver’s license data to join. Further insight is gained by information sharing; all “Blockchain Alliance” members agree to share their combined information with law enforcement (and nearly every exchange in the world is a member).
Wasabi Wallet, unlike others of its kind, only sends data via the anonymizing Tor network which eliminates the IP address attack vector, and sends each transaction to a random bitcoin node. Wasabi provides detailed coin control so you know how anonymous each slice of your BTC is at any given time. Most importantly, Wasabi Wallet 2.0 performs a WabiSabi CoinJoin which puts multiple names on all coins fed into the privacy booster, breaking the multiple-input heuristic and making your bitcoin more anonymous (since you can’t remove your own name). Better yet, the more people that use Wasabi Wallet, the more secure we all become.
The future is bright if we all work together - Bitcoin Freedom isn’t free: it requires CoinJoins.