Researchers found a way to trace Bitcoins back to their owners. In a new study researchers were able to find the IP-addresses of Bitcoin users. They did so with success rates of 11 to 60 percent.
Bitcoins should usher in a new era of electronic payments by allowing payments which are not subject to government control. However recent studies have shown that the anonymity part of the up-and-coming digital currency system has not been completely established yet.
Researchers at the University of Luxemburg were successful at finding the IP-addresses of Bitcoin users based on their Bitcoin transactions. They estimate that the overall cost for their “de-anonymising solution” would be around $ 1,500 a month.
Depending on the method used, they were able to achieve success rates of 11 to 60 percent. In order to achieve the 60 percent success rate the researchers made use of a “small Dos attack”. However, outside of a test environment the attack would probably be noticed. Nevertheless cryptography experts have clearly demonstrated significant shortcomings in the Bitcoin system.
Even Tor connections are no real help since Bitcoin servers can end or prevent Tor connections. Which would also be noticed of course. However we have to take into account that governments have more and more advanced technologies to their disposal than the Luxembourg researchers.
The basic idea behind these findings is that Bitcoin entry nodes, to which the user’s computer connects in order to make a transaction, form a unique identifier for the duration of user’s session. This unique pattern can be linked to a user’s IP address. Moreover, transactions made during one session, even those made via unrelated pseudonyms, can be linked together. With this method, hackers can reveal up to 60 percent of the IP addresses behind the transactions made over the Bitcoin network
Although the success rate is not excessively high, the results do questions the anonymity of Bitcoin transactions. Not only the government but also criminals might try and use this method or a similar one to gain access to the identity of Bitcoin users.