Despite its promise of anonymity, University of California, San Diego (UCSD) researchers have shown that an analysis of the public log of Bitcoin digital currency transactions could enable law enforcement to pinpoint user identities.
Bitcoin is used for illegal gambling, as well as for illicit purchases of drugs and other items on the online marketplace Silk Road. The U.S. Department of Homeland Security so far this year has seized $5 million from Mt.Gox, the largest exchange between Bitcoins and conventional currencies.
"The Bitcoin protocol still has huge potential for anonymity, but the way that people are using it is not achieving anonymity at all," says Sarah Meiklejohn, who led the research project.
The analysis hinges on Bitcoin software that maintains a log called the blockchain, recording the unique addresses of individual wallets for every transaction. The UCSD team created maps from the blockchain that could help law enforcement find companies that could identify specific users. The maps could enable an agency, for example, to follow an illegal transaction to a Bitcoin exchange and then subpoena that company. "That would not be hard to do with the current patterns of how people are using things," Meiklejohn says.
From Technology Review
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