Bitcoin is NOT Anonymous!
On the contrary, the entire bitcoin blockchain, including every transaction's information since the first bitcoin coinbase transaction, is stored on from every full bitcoin node in the world. While many of these bitcoin nodes are private, over 15,000 bitcoin nodes are publicly reachable. Not all of these nodes are full nodes. Some hold partial, or pruned versions of the blockchain, allowing them just enough data to continue verification of unspent transactions eligible for spending.
So,can bitcoin be private?
Yes! With proper knowledge and consistent use of privacy strategies and tools, bitcoin can be a very private way to send or receive funds anywhere in the world.
Bitcoin Privacy and Bitcoin Fungibility
Bitcoin is pseudonymous (written under a false name), meaning that bitcoin funds are not directly tied to known entities but instead to bitcoin addresses. This can shield the owner of bitcoin address private keys from being associated to the funds held under their addresses. Although owners of bitcoin addresses are not explicitly identified, all transactions on the blockchain are public as described above. Additionally, transactions can be linked to individuals and companies through "idioms of use" (e.g., transactions that spend coins from multiple inputs indicate that the inputs may have a common owner) and corroborating public transaction data with known information on owners of certain addresses. Additionally, bitcoin exchanges, where bitcoins are traded for traditional currencies, may be required by law to collect personal information, such as the "Know Your Customer" laws in the United States.To heighten financial privacy, a new bitcoin address should be generated for each transaction. Many wallets utilize special features to help protect bitcoin privacy when sending transactions. Some bitcoin wallets, such as JoinMarket, utilize a type of CoinJoin transaction to further obfuscate transactions and provide additional privacy to the owners of those bitoin inputs and outputs. If you don't control the private keys to your wallet, you don't control the bitcoins. This also means, of course, that private keys must be protected with the best established digital security practices, and that responsibility falls solely on the holder of the bitcoin private keys.
While the Bitcoin network treats each bitcoin the same, thus establishing the basic level of fungibility, applications and individuals who use the network are free to break that principle. For instance, wallets and similar software technically handle all bitcoins equally, none is different from another. The history of each bitcoin is registered and publicly available in the blockchain ledger, and that can allow users of chain analysis to refuse to accept bitcoins coming from controversial transactions. For example, in 2012, Mt. Gox froze accounts of users who deposited bitcoins that were known to have just been stolen.
It is also highly likely that world wide governments are utilizing blockchain analysis to identify financial transactions that may hold national security interests for their jurisdication, and may have tools not available to the public to assist in identifying the actual holder of those bitcoin private keys. It is equally likely that similar tools have been developed privately for use in both legal and illegal business activites, and perhaps even for personal coding hobbiest. Some developers of secure wallets and privacy tools will also work privately on attack vectors, to help improve the defensive strength of their products, or suggest improvements to the bitcoin network protocol.
Never share information on social media or anywhere else that may lead to compromising your bitcoin wallet. This also means, don't use easy to guess passwords or passwords you have used elsewhere to secure your bitcoin wallet. Bitcoin privacy is an ever-developing production, with actors of various ethics working both to increase, and decrease, the privacy of bitcoin transactions. It is important to stay informed, and keep your bitcoin wallet up to date.
