Your cryptocurrency is not that private; there are forensic tools which are letting authorities understand the whole cryptocurrency transactions going on. Technology is evolving, and in cases of cybercrime, it has resulted in methods of figuring out who the culprits are.
Cryptocurrencies that you are trading, sending or receiving is all linked to an address which is a random string of letters and numbers. It helps transactions take place with no intermediaries and at a speed which is unbelievably fast.
This technology is made for the benefit of humanity; however, cybercrime has started to take place. A US think-tank startup called Elliptic and the Center on Sanctions and Illicit Finance has found large-scale illegal operations working on Bitcoin blockchain. It reports more than 102 criminal entities operating in the dark web marketplaces. There are also Ponzi schemes and ransomware which have utilized cryptocurrency, and so safety is primary in cryptocurrency technology.
The dark web marketplaces which are involved are Silk Road, Silk Road 2.0, Agora, and AlphaBay.
Cryptocrime is even seen to affect offline crime with people forcing investors to hand over account details of their digital currency at knifepoint.
Cryptocurrencies are untraceable however a technique introduced by Sarah Meiklejohn and her colleagues at the University of California can trace it. This method is by a simple idea called clustering. The clustering helps scrutinize blockchain activity, and traceability of accounts from the same Bitcoin wallet is now possible. These patterns start growing recognizable.
After realizing which transactions belong to whom, identities can be revealed. Many cryptocurrency investors have to fill know-your-customer forms which result in identifications being given.
Chanalysis and Elliptic are startups which are using machine learning to help cluster addresses, and in time Artificial Intelligence will be tracking blockchains in real time.
These cluster techniques can be compared to, dropping a coin in a jar full of similar coins, shaking it, taking it out again, and figuring out whether it’s the same coin.
Beware of posting your private addresses in forums, as this is one of the significant ways your identity starts getting revealed.
The traceability of Bitcoin and has started to lead to new cryptocurrencies like Zcash and Monero being used for private transactions.
Zcash, for example, uses zero-knowledge proof to verify transactions, and so information is not revealed. Zcash also lets you replace your coins with new coins mined, which is like trading your marked bills for cleaner ones at the bank.
Monero is a big tumbling network and when a transaction happens your address is mixed with a bunch of others, and hence no one knows which is being spent.
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