Is Bitcoin less anonymous than we think?
I guess that question is more of a individual question that each of us must answer, however, in general terms the overall answer is probably "yes"!
One of the major benefits of using Bitcoin is because it is anonymous, or at least mostly anonymous, right?
We can move money around all over the world if we want to without revealing explicitly who we are.
That was the dream at least.
However, it looks like those days might be numbered.
The truth is that Bitcoin is less anonymous than people think.
According to a report out recently, the IRS is currently using special software to reveal Bitcoin users identities in order to find out who is failing to pay their taxes (among other reasons probably).
A contract was discovered between the IRS and Chainalysis where it was revealed that the IRS is paying them to help identify the owners of digital wallets.
Not that surprising, but how much do they really know?
That is where it gets a little scary...
A letter from the co-founder of Chainalysis to the IRS reveals that the company has information on over 25% of all Bitcoin addresses.
A screenshot of the letter can be seen here:
Not to mention they have tags on other accounts which may be used to find the identities of those accounts at some point.
Chainalysis is based in Switzerland (ironically?) and has an office in New York.
The IRS is out for blood.
The hiring of Chainalysis goes right along with the earlier crackdown on Coinbase by the IRS. Where they tried to get information from Coinbase on all their accounts in order to catch tax evaders.
Luckily Coinbase wouldn't play ball, so now the IRS is requesting information only on suspected tax evaders.
The IRS claimed that only 802 people declared a capital gain or loss on Bitcoin in 2015, which is a shockingly small number considering millions of transactions took place during that year (including hundreds of thousands by Americans) and the coin went from roughly $12 to $1200 over a couple year stretch.
There is a very high likelihood that many people made a lot of money during that time but decided they didn't have to report that income.
The IRS wants a piece of the action.
Bad news for some...
The bad news is that there are likely many people who thought they had gotten away with not reporting their gains from 2013-2015, and this new contract makes it look like these people are about to have some Bitcoin related tax trouble in the very near future...
The slight glimmer of hope is that the IRS seems to be focusing on transactions over $20,000, (at least they were with Coinbase), so it appears they are mostly going after the larger accounts.
Which should give a little comfort to the little guy who perhaps also didn't report his gains...
Stay safe and stay informed my friends.
Source:
http://fortune.com/2017/08/22/irs-tax-cheats-bitcoin-chainalysis/
Image Sources:
http://www.anonews.co/anon-war-neonazi/
http://fortune.com/2017/08/22/irs-tax-cheats-bitcoin-chainalysis/
Follow me: @jrcornel
All income needs to be report. Period. If the USA is able to track down evaders using numerical accounts in safe havens hidden by identity and foreign corporations surely they are going to find out if they want to.
Privacy is surely one of the main reason why people started and invested in Bitcoins and, as you so so well yourself, it is not surprising to see the IRS colluding with the Chinese trying to mingle in such affairs...
This single fact may very well bring forth a reassessment of the value of cryptos by many involved and therefore provide for a decentralization of investments toward Bitcoins into a much wider realm of cryptocurrencies that actually provide for a full anonymity. It wouldn't surprise me and actually greatly look forward to that day, especially now that we have the technology to do so.
Great article, as always, thanks! Namaste :)
Good comment @eric-boucher !
I look forward to the day bitcoin is replaced by better cryptos!
Thanks, same here!!! Namaste :)
May it be so!
Well our opinions are different of course. I know that Bitcoin keeps a record of every transaction every account makes a "ledger". So yes, it's not all that anonymous.
Wow, I can't believe Bitcoin made it onto Family Guy. To bad its a skit where Peter makes it sound like an awfule "Peter" type of idea. Lol
use a bitcoin mixer :)
What would a Bitcoin mixer do and is
They say they can trace your block address on the front and back of a washer now. Bitcoin might as well be Capital One.
I have a hypothesis on how to by pass prying eyes but it requires a ton of wallet swaps, exchanging and stealth using properly configured tails and tor. And it's far from tested so I won't go into details until it's worked out.
And while slick $100 cold wallets bought off a website may be the safest way to hold coins I'm not convinced yet that the actual contents can't be logged somewhere else everytime you plug in.
If you buy something on a normal market they probably have your wallet address, your home address, email and can tell if your holding, spending and where your spending. Running through a washer (that the feds probably own by now) is no good either.
With a mixer it can be, that you get bad-marked btc also.
I think the better way is to get Monero and change back.
It's better to switch to a privacy by default coin like Monero (XMR) if you are serious about privacy. If your security\privacy settings aren't default or extremely simple to use they will be mostly useless. Look at PGP as an example. Great encryption but awful usability so it's pretty much useless since people using it use it wrong and then leak their message or private keys
Holly Molly. Why would anyone use Bitcoin mixer to get "shady bitcoin income" exchanged for others "shady bitcoin income" while using shady bitcoin mixer with anonymouse owner just waiting for big "order" to run away with?
Especially when I can trade BTC for XMR, Zcash or DASH, hide transaction history, and purchase back BTC from legit sources.
And this would cost me less than Bitcoin mixer service.
They are probably going after accounts over $20k initially. If it bears fruit you can be sure they will be going after smaller accounts as well. Get your taxes in order!
Yep, that is probably true. What is the statute of limitations? 7 years?
Not where I live!
I didn't know it was anonymous to start with!
Haha well you are already ahead of the game then! ;)
looool
I don't actually see privacy in the blockchain, I see transparency.
Yes there are private coins, however, the main benefit of a truly open system is that no-one can hide, nor should anyone be trying to.
The main concern is now it is everyone's responsibility to properly manage their own universe and make sure everything has it's place.
Being sovereign comes at a cost.
Great comment! I couldn't agree more...
It's the opposite of it. The Blockchain saves everything. Just look at how the Gov has been tracking bitcoin through like 10 transfers through different wallets!
So basically anyone who HODL Bitcoin will have to pay tax. What if in say 5 years 1 BTC is over 20k dollar?
Also maybe that is why Monero is getting more popular and the price almost doubled today (i read there were some other less legal things behind the price jump but still).
That is exactly why. That and more Bitcoin hardfork concerns are bubbling up again...
US Politicians will pass laws requiring the same identification needed at banks for exchanges. Bitcoin may become a government's dream, they can monitor and track every transaction.
The greedy government will stop at nothing to get their way. The more main stream bitcoin will get the more aggressive the government will get at tracking and tracing. The sad thing is that other governments worldwide will follow suit. Lets see how far they will go with this :)