Will Bitcoin Lose Its Anonymity Soon?

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Virtual currencies, such as Bitcoin, may soon be subject to security rules and regulations as tech-savvy criminals increasingly use the systems for illicit endeavors.

The anonymous nature of Bitcoin appeals to people engaged in illegal behaviors. Although the currency was developed for legitimate and legal purposes, it has widely been used by criminals for activities such as drug deals, securities fraud, and embezzlement.

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At Sandia National Laboratories, a research branch of the Department of Justice, scientists have developed a new analysis tool that could help to stem the use of Bitcoin in criminal undertakings.

Sandia researcher Andrew Cox says that the main hurdle to their work was identifying the primary patterns associated with Bitcoin use. “There is not a ‘silver bullet’ algorithm to effectively de-anonymize Bitcoin,” he says. “To be successful, the reality is it’s going to take different types of algorithms and additional types of investigative techniques including good old-fashioned police work. They’re all going to have to be combined.”

The systems analyses conducted at Sandia will allow law enforcement officials to link Bitcoin addresses with different aliases. Although the technique won’t actually provide investigators with names, it will be able to tie different Bitcoin transactions to the same users – which could be a major advancement in the fight against the illicit use of virtual currency systems.