Myth 2

A Bitcoin Transaction is Anonymous

Satoshi Nakamoto, the founder of the bitcoin, claimed that bitcoin would allow users to complete transactions anonymously, as the transactions which are logged on the blockchain do not contain any information which could be used to identify either party. The blockchain makes use of cryptographic pseudonyms, and a user can create multiple pseudonyms. Which is why Wikileaks requests donations in bitcoin.

However, the reality is quite different. The majority of people who use bitcoin have the same level of privacy which they would have if they completed the transaction using their own bank account, and probably experience less privacy than they would if they donated to Wikileaks using brown envelopes stuffed with cash.

This is because by carrying out a forensic study of different blockchain transactions, it is possible to establish patterns which can make it easier to identify the owner of the bitcoin account. Many coin exchanges now insist that customers verify their ID and address before you will be allowed to purchase bitcoins, which further compromises your anonymity. Some users attempt to get around this issue by using coin mixers which attempt to mask transactions by mixing them with others on the blockchain.