Bitcoin Transactions Aren’t as Anonymous as Everyone Hoped – MIT Technology Review

Bitcoin Transactions Aren’t as Anonymous as Everyone Hoped

  • by Emerging Technology from the arXiv
  • August 23, 2017

An enlargening number of online merchants now suggest the capability to pay using the cryptocurrency Bitcoin. One of the good promises of this technology is anonymity: the transactions are recorded and made public, but they are linked only with an electronic address. So whatever you buy with your bitcoins, the purchase cannot be traced specifically to you.

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This is handy for some, but the anonymity is by no means ideal. Security experts call it pseudonymous privacy, like writing books under a nom de plume. You can preserve your privacy as long as the pseudonym is not linked to you. But as soon as somebody makes the link to one of your anonymous books, the ruse is exposed. Your entire writing history under your pseudonym becomes public. Similarly, as soon as your private details are linked to your Bitcoin address, your purchase history is exposed too.

That raises an significant question for people hoping to use Bitcoin to make anonymous purchases: how effortless is it to link them with their Bitcoin transactions?

Today we get an reaction thanks to the work of Steven Goldfeder at Princeton University and a number of pals. These guys say the way information leaks during ordinary purchases makes it straightforward to link individuals with the Bitcoin transactions they make, even when purchasers use extra privacy protections, such as CoinJoin.

The main culprits are Web trackers and cookies—small chunks of code deliberately embedded into websites that send information to third parties about the way people use the site. Common Web trackers send information to Google, Facebook, and others to track page usage, purchase amounts, browsing habits, and so on. Some trackers even send personally identifiable information such as your name, address, and e-mail.

In this way, information about a transaction leaks onto the Web, where governments, law enforcement agencies, and malicious users can readily collect and analyze it.

The question that Goldfeder and co investigate is how effortless it is to use this information to connect people to their Bitcoin transactions. This process requires the eavesdropper to know an individual’s personally identifiable information—name and e-mail, for example—and then to link that with a specific Bitcoin address.

The team began by listing major merchants that permit Bitcoin transactions. They came up with one hundred thirty of them, including Microsoft, NewEgg, and Overstock.

They then studied how Web trackers leak information from each of these sites during the purchase process. “We find that at least 53/130 of merchants leak payment information to a total of at least forty third parties, most frequently from shopping cart pages,” say Goldfeder and co.

Most of this information leakage is intentional for the purposes of advertising and analytics. But the researchers also say some extra information is also sent. “We find that many merchant websites have far more serious (and likely unintentional) information leaks that directly expose the exact transaction on the blockchain to dozens of trackers,” they say.

That’s bad news for people hoping to keep their Bitcoin purchases anonymous. But even when the exact transaction is kept hidden, it is still possible to make the link when the leak includes the amount and time of the purchase.

In that case, the eavesdropper needs to convert the purchase amount into Bitcoins using the exchange rate at the time and then search the blockchain for a transaction of that amount at that moment. This exposes the Bitcoin address of the user. Any other purchases made using that address are then trivial to track down.

There are a duo of extra factors that make this process trickier. The Web tracker might leak the cost of the product but not include shipping, so the total Bitcoin purchase may not be clear.

There may also be a gap inbetween the time the user viewed the page the information leaked from—the checkout cart, for example—and the time when the purchase was actually made. Bitcoin purchases are time-stamped, so it becomes firmer to track them down if the time is not known accurately.

The purchase amount is usually given in a local currency such as dollars or pounds and then converted into Bitcoin at the instant of purchase. Because of the large variability in Bitcoin exchange rates, it can be hard to work out the exact Bitcoin value if the purchase time is not known accurately.

All these factors make it stiffer to link individuals to their Bitcoin transactions, but it is by no means unlikely. “We find that unique linkage is possible in over 60% of cases for realistic values of these parameters,” the researchers say.

There are ways to further hide Bitcoin transactions. One of the most popular is CoinJoin, a service that links users who want to make similar payments and then permits them to pay together. This mixes their bitcoins, making it stiffer to identify them.

But Goldfeder and co point out that if an individual uses CoinJoin to make several purchases in this way, it is straightforward to link them back: “If the victim employs three rounds of CoinJoin and the adversary observes two of the victim’s payments, he can link them back to her wallet (despite mixing) with 98% accuracy.”

There are several ways buyers can protect themselves using contraptions such as Ghostery, AdBlock Plus, or uBlock Origin. These are useful but can sometimes miss trackers and at other times prevent purchases entirely. “Such defences can be fairly effective, but they are far from ideal,” say Goldfeder and co.

All this will come as depressing news to people hoping to preserve their privacy online.

But it will also be music to the ears of law enforcement agencies hoping to track nefarious activities. “Like virtually all deanonymization attacks on cryptocurrencies, our technics could be used to build forensic devices for law enforcement use,” admit Goldfeder and co.

And like all deanonymization technologies, that will have advantages and disadvantages.

Ref: pack/1708.04748 : When the Cookie Meets the Blockchain: Privacy Risks of Web Payments via Cryptocurrencies

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