The Wall Street Journal recently disseminated an exposé pertaining to the disclosure of Bitcoin’s supposed “anonymity” by the United States federal authorities. Specifically, the outlet’s report pertained to James Zhong’s alleged $3.4 billion cryptocurrency fraud scheme. However, as has been reiterated countless times within the industry, Bitcoin does not operate under an anonymous facade.
Despite the successful execution of Zhong’s illicit scheme, Bitcoin’s anonymity is not compromised. Industry insiders have been vexed by the general public’s erroneous perception that the Bitcoin network is anonymous. While it is possible that the media outlet’s choice of words was ill-advised, it is critical that the notion of Bitcoin being anonymous is decisively debunked.
Rather, Bitcoin is pseudonymous and lacks full privacy, unlike privacy coins such as Monero. Bitcoin is indeed traceable, albeit identifying someone would require a degree of effort. However, the growth of the market has facilitated such endeavors, as the advent of more sophisticated tools and processes is contributing to this trend.
The WSJ headline claiming that the US cracked Bitcoin anonymity is far from accurate. Zhong executed the theft during his time as a 22-year-old student by exploiting a loophole on the defunct dark web Silk Road. Zhong moved the funds frequently across multiple accounts to conceal his tracks over the course of eight years. However, his efforts were ultimately futile.
The concept of the existence of digital breadcrumbs that can be traced has always existed in the market. To reiterate, Bitcoin was never anonymous to begin with. The sole disparity is that it has become easier to track. Companies such as Chainalysis have played a pivotal role in enabling such feats.
It is crucial to note that Bitcoin is pseudonymous, a term that is frequently emphasized by cryptocurrency advocates. Wallet addresses are merely pseudonyms for their holders, and these addresses can be categorized as suspicious or otherwise. It is plausible to trace someone’s identity through this avenue.
However, there exist methods to circumvent such pseudonymity, such as the use of Bitcoin mixers. The US government is cognizant of this and has worked towards eliminating cryptocurrency mixers.
Blockchains serve as an ideal platform to store evidence, as information stored on the ledger is immutable and can be traced back to its origin.
This report comes in the wake of the New York Times publishing an article concerning the energy consumption of the Bitcoin mining industry. The report assessed the emissions and energy usage, but industry insiders disapproved of the methodology.
The crypto community continues to contest how mainstream media scrutinizes and reports on the cryptocurrency asset class. This has been a long-standing issue, and it is imperative that mainstream outlets comprehend the technology better.