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Can Bitcoin Be Traced and Can People See Your Identity? – Yes and No

Can Bitcoin Be Traced

You may have heard that in the early days of Bitcoin it was used as somewhat of an untraceable stealth currency that was popularly used for illegal activities, such as for the famous Silk Road online drug bazaar. But was Bitcoin ever really a stealth currency? Can Bitcoin be traced and can people find out how is send what where and who is receiving? The answers to these questions are both yes and no. I know this seems strange but you will see what I mean.

Just think… you have probably heard about governments requiring Bitcoin users to pay taxes on various Bitcoin transactions now right??? But at the same time how come we can’t figure out who the heck Satoshi Nakamoto is?, which is the name used by the creator of the Bitcoin for those who don’t know.

Well… I’ll explain why this is.


Bitcoin… The Completely Traceable Currency

For as long as bitcoin has been around it has been completely traceable. The only reason that people thought it was somewhat of a stealth currency early on is because not many people knew the technology behind it, including governments. As I just mentioned above silk Road which was an online drug marketplace was at one point in time the most popular place for bitcoin transactions. There was more bitcoin going back and forth their then anywhere else in the world, and everyone thought that they were going to get away with it.

Fast forward to now where bitcoin technology is pretty much mainstream, governments are well aware of their ability to trace transactions.

I’m sure you have heard the term “blockchain” associated with bitcoin. In a nutshell the blockchain is a public ledger where all bitcoin transactions are recorded. This blockchain is available to the public and anyone can take a look at it to see every transaction that has ever taken place on the bitcoin network. This is how it is and how it has always been it’s just that early on people didn’t really understand how it all worked.

Literally every single transaction that goes on with bitcoin is traceable and will never be deleted. So it doesn’t matter if you sent a transaction five or six years ago, it can still be looked up.

However, just because the transactions are traceable does not mean that the identity of those sending and receiving bitcoin’s is able to be shown.


Traceable Transactions But No Identity

Bitcoin is called a cryptocurrency for a reason… because of its basis in cryptography. This form of public key cryptography encrypts data with pairs of public and private keys, so for every public key there is one private key and only one.

How does this relate to bitcoin? Well… with bitcoin your wallet address, which is the address that your bitcoin funds are stored at, is your public key. This public key is a string of letters and numbers that has data associated with it. Your private key is kind of like a password. The private key is used to verify ownership over the account of a public key.

So in layman’s terms, the public key is your bitcoin wallet and the private key is the password to give you access to that wallet.

Since private keys are only known to the person who owns the particular wallet they cannot be traced. Only the public keys can be traced. However… As I just mentioned above, the public key is a string of letters and numbers. That’s all there is to it really. There is no name, address, telephone number, or any sort of identifying information associated with a public-key a.k.a. wall address.

So although bitcoin transactions are completely traceable, they are only traceable back to public keys which offer absolutely nothing to identify the person or entity that assumes that bitcoin wallet address. This is why no one knows who Satoshi Nakamoto really is. This person, or group of persons, wallet address is known and people are well aware of it, but that is all that is known. There is nothing to link this address to any person or persons.


How People Can Find Out Your Identity From Your Bitcoin Address

I know this makes absolutely no sense because I just went on and on about how identities cannot be linked to bitcoin addresses, and this is true. However there are ways that identities can become known on the bitcoin network, which have nothing to do with the bitcoin network itself revealing identities or giving the ability to reveal identities.

I’ll give you some examples of what I’m talking about:

#1 – Exchanges

Nearly all of the cryptocurrency exchanges out there require users to verify their identity in some way. So let’s take Coinbase for example since they are one of the most popular exchanges out there. Let’s say you create an account there. You will have to provide identification to Coinbase before you can use the exchange. So let’s say you do that and then you buy some bitcoin, which then is deposited into your Coinbase bitcoin wallet.

In this case Coinbase knows the identity associated with the bitcoin wallet, because they were the ones that force you to provide your identity and set you up with a wallet. They aren’t going to reveal this information to anyone, but if they were subpoenaed or required to do so by law enforcement then they would have to.

#2 – Did You Buy Something With Bitcoin?

Let’s say you buy something online and pay with bitcoin. When you do this you are going to have to enter a shipping address so that you can receive the product right? Well… Now there is an address associated with the account that you sent the bitcoin from.

This is something else you have to consider.

There are plenty of other examples of how an identity could be linked to a bitcoin wallet address, all of which have to do with some third-party requiring you to enter identifying information. But if you do not do anything like this and you have nothing to worry about.


Is It Possible To Keep Your Identity Hidden?

It is nearly impossible for most people to completely keep their identity hidden these days.

Just think about it. If you go to buy bitcoin how do you do this? If you go through popular exchanges that accepts fiat money like USD and euros, for example Coinbase and GDAX, you are going to have to show proof of identification as I went over above. Or if you use a peer to peer cryptocurrency marketplace where you can purchase bitcoin’s from another person and pay with a variety of different methods, like at Paxful or LocalBitcoins, you are still going to have to give your identity when you create your account on these exchanges in the first place.

I suppose one of the best ways to keep your identity hidden when buying bitcoin would be to purchase bitcoin from someone with cash and have them send it to a wallet that you own, not a wallet that is hosted by third-party such as in exchange. So for example a hardware wallet like KeepKey or TREZOR. Or I suppose you could mine bitcoin yourself, but this is not plausible for 99% of the population.


Summing Everything Up

Okay so let me sum up everything here: Bitcoin is completely traceable and every transaction is recorded on the blockchain which is like a public ledger. But… Bitcoin wallet addresses don’t necessarily have identities linked to them. But… They often do due to some third-party being involved with a transaction and requiring identification in some way.

One thing is for sure, bitcoin is not a good currency to use if you are trying to remain anonymous. There are great if the currencies out there that are designed for the purpose of being stealth, such as Monero and Verge.

In closing, I hope you provided some good information here in cleared up some questions that you may affect. If you have any questions or concerns that you would like to be heard please leave them below and I will get back to you soon 🙂

About the author

Mr Hodl

Hi, My name is Kyle but as the creator of this site I go by "Mr Hodl". After my first encounter with Bitcoin back in 2015 and becoming increasingly intrigued with the new emerging world of cryptocurrency, I thought it would be a good idea to create this site to provide guidance to others who are involved or looking to get into it. I hope you find my site helpful and thank you for stopping by!

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