Bitcoin Forum

We all know that most of the illegal transactions take place through bitcoins as it cannot be tracked.
But I read in some websites that many intelligence agencies have started to find a method and have had significant progress.
Is it true?would our trading be at risk as many of us earn a lot and don't pay any tax to the government.

It is only true if you don't know how to use your bitcoin anonymously. Bitcoin can be tracked if you know who owns the bitcoin address because you can see where the coins are sent and where the coins are cashed out into fiat. Usually cashing out to fiat is where people get caught. However, if you use bitcoin mixers where your coins will be spread across different addresses, you can add a layer of anonymity and safely cash out without knowing where your coins came from.

jmigdlc99 is correct, i only wanted to add one thing: the rumour bitcoin is anonymous and cannot be tracked has always been a myth. From the very beginning, bitcoin was not designed to be 100% anonymous, the best it ever did was being pseudo-anonymous.

jmigdlc99 has already indicated that converting BTC <-> fiat is one of the identification points. However, buying BTC with fiat and buying physical good with BTC is just as dangerous.
Exchanges use KYC regulations, localbitcoins might attrackt undercover LE buyers/sellers, ATM's have camera's... Every website is tracking your ip... And every on-chain transaction is on an unencrypted public ledger forever...

By using bitcoin mixer would it take more transaction fee?is there any VPN type service which can hide or show a wrong bitcoin adress?
and thanks for your suggestion .

1) yes, some mixers don't charge a mixing fee, however, they're businesses so they have to make money (wich means that even 0% fee mixers will have a way to make you pay a small amount of money), and you'll always have to pay for the miner's fee of the transaction depositing the funds, and probably also for the transaction from the mixer's wallet to yours (i don't think the mixer will ever pay your transaction fee)

2) you can use a VPN if you want, but "hiding or showing a wrong bitcoin adress" is not really to the point. If you use an spv wallet, you have to send a request for fetching the unspent outputs for your address, there is no way around it... If you run a full client, you download the blockchain and broadcast signed transactions, but you don't usually send out your address...
There are no ip's recorded in the blockchain, and your peers can, theoretically, save the ip of the node sending them a block or a transaction, but they will never know if that ip is the creator of the block/transaction, or merely somebody that is just broadcasting a block/transaction they received from an other node... So there is little use in saving ip's unless you have a whole network of nodes and you can start running statistics on all of your nodes.

This is actually a racing game as to who can develop a good tacking system for Bitcoin users so as to compel them (or maybe should I say 'us') to declare and pay the correct taxes especially on capital gains. I heard last month that the IRS has already a system like this and that they are already using it now...as to how effective their tracking system that we would known in the coming months once IRS would be reporting on possible cases that can be filed as the results for the system's effectiveness. To make thing fair and square, this kind of scenario is not exclusive to Bitcoin as the government (any government for that matter) has had been battling tax evasion since time immemorial. I guess the question of taxation for many Bitcoin transactions will always be accompanying us for a long, long time.

First of all, I would like to correct by saying that it is not most of the illegal transactions, but some of them (a little, if I may say, because not much people makes use of bitcoin. Then as of whether the government will start tracking everybody, I don’t think they will.

I believe they are just finding a way to trace those uses Bitcoin for evil, and not those that simply does business with it. Trading is not illegal as far as you’re trading on a registered platform.

The transaction fee to mix your coins is usually what others charge and it doesn't seem so high to me.
As far as the comcern of using VPN, nothing can change your bitcoin address when it comes to checking status of address on public ledgers.
But you can surely hide or show wrong identification using VPN. the best VPN i can recommend is Express VPN

What do you mean "cannot be tracked" bitcoin is psuedo-anonymous, meaning its not completely anonymous as you understand it. Of course being psuedo-anonymous, government agencies that do and track every transactions you have made. That's why  there are the so called mixing services, which provided another later of security.

But guess what, its not enough. Go check the closure of Bitmixer.io, its one of the trusted mixing services before, but they gave in to the government's demand that's why they have to closed and shut down their operations. If you want complete anonymous, you should try Monero instead and not bitcoin.

They have done closing silkroad because it can be tracked.
You will need to do steps if you want to make it really happen.
One example is trading websites. Once you deposited bitcoin there then withdrawal will be hard to track without the help of the trading website itself.
Another are mixers. There were created for that reason to make the anonimity still intact.
You cant just trade p2p directly from your address to the address of the person who sells illegal items.

Yea this is so because  the guy or a group or anything named Satoshi , who actually created Bitcoin is not verified  or has hidden is identity on purpose . There are many theories or stories about him and people have Also tried to claim themselves as him.

No, we don't know that. maybe you get your stats from somewhere that we are not aware of. in which case share your source for this statement.

many have been doing that for years. there are even companies for "blockchain analysis" out there that will do it for a fee. there is one that also has a free limited service out there called walletexplorer.com
nothing about their techniques has changed though. it is the same as before.

none of these things have anything to do with this question!
if you don't pay your taxes on trading that you do non-anonymously on exchanges, you are performing some illegal activity called "tax evasion" and you are at risk. they don't need any "intelligence agencies" or blockchain analysis or any progress to find you either! you are already giving them your information when you trade on exchanges!

I originally bought my Bitcoins through Coinbase which requires identification and bank account information. Every time I move Bitcoins around from that point to paper wallets or exchanges, those Bitcoins can be traced. There may be ways to cover up the path such as using a mixer, but if the authorities wanted to track my Bitcoin activity, I think they can do so most of the time.

Also, I plan to cash out with Coinbase so they will see what went in and what comes out. I plan on paying taxes on my gains as well when I cash out so that I don’t have to worry about them coming after me.

Although what you have said is right and government is too serious to trace the transaction details but what about when we are dealing only in cash not involving the bank transfers from localbitcoins? There will not be any identification point, i think government can't tax bitcoins over the network, your bitcoins are only taxable when converted to fiat.

This is true but there is just one thing i wanted to clarify bitcoin was designed not to be anonymous, also there are ways so that can be made in order to make this untrackable but the thing is that is for the hackers or other people who have technical knowledge about it. However, there is nothing to be afraid of if you are not one of the people who does illegal things with bitcoin.

I don't see any threat whatsoever in what government is trying to do to unravel the anonymity behind bitcoin because I don't have anything to hide. Even aside bitcoin, there is a way to know the sites you visits and every activities you carried out on those sites and its the responsibility of government to do their job in keeping the citizen safe so, if they are doing their job there is no reason for me to go against that because if they come after me, they won't find anything illegal ad the only thing I can be guilty of in an extreme case would be tax liabilities which is even a civil case.

I know the transactions related to bitcoin is as they say "untraceable"; however, it's not like you can totally make it banish, there are other means to track the trail of transactions done using cryptocurrencies. I think the big difference that supports the anonymity aspect is the fact that you can hold and transact bitcoin even if you don't give out your real identity. That's an aspect that makes it different than money because with it, you need to give your details to have yourself to enroll in banking and other means which uses cash assets.

I don't know who told you that most bitcoin transactions are criminal, but perhaps it is the same idiot who told you that bitcoin was anonymous. And yes, the IRS and governments around the world are tracking all bitcoin transactions and have the tools to start going back and figuring who owes back taxes. They will be able to go back to 2014 or so. They are not "starting" to find methods, they have software to automate it already. Remember that every Tx you have ever done is sitting on the chain waiting to be analyzed.

Read and weep = https://www.chainalysis.com/

Yes, you will receive a bill for your taxes and late fees, penalties, maybe some jail time.
You didn't think they were just going to ignore the law and let you keep the money, right? That is not going to happen.  Your best bet is to start paying back taxes before you get the letter. Then you may be able to claim ignorance and make the case that you were not trying to cheat on your taxes. You will still owe, but it may lighten your sentence.

I don't quite seem to be in line with this development, tracking a Bitcoin address and nailing it down to a particular person is not quite easy, because most Bitcoin wallets will always produce a new address upon each transaction, and there is no name or documents attached to this.

Public keys can be tracked back and forwards. If you used id to buy the bitcoin like most places require there's not much anonymity. One work around is to exchange it for a more secretive currency like Monero or zcash, move it around a bit and then transfer back to bitcoin.

I do not think this is true, I believe perhaps that if a government agency really wanted to find out who was behind an address they could but they would only be doing this in very rare circumstances instead of it being a thing they did for every bitcoin address.

Bitcoin is not annons.
There are many good anons coin there now

BTC is pseudo, it can be traced

Like i said in my previous post, localbitcoins isn't 100% safe either:


- localbitcoins might log your ip
- if you verified your account in some way, they have that information
- law enforcement might be setting up a sting
- there is GPS data from both you and the other party
- there might be camera surveilance at the place where you do the transaction

Sound paranoid? I'll leave you with this coindesk article, it was the first one that popped up when googling for "localbitcoins sting"
https://www.coindesk.com/localbitcoins-user-pleads-guilty-undercover-sting/

This is one of the things that we can use from bitcoin, every bitcoin transaction is currently very well preserved and yet there is no method that can really fully know the transactions done. Perhaps the tax could be one of the reasons why the government prohibits the use of bitcoin, until now there is no tax liability for every transaction using bitcoin. I'm also worried that one day the government will take an action that can reduce the risk of bitcoin movement, perhaps one of them is by banning using bitcoin.

Lol that’s true. Bitcoin is not completely anonymous as many people believes it to be. In fact, I think the whole anonymity of a thing is all fake. I have seen lots of stories where people that played scam through were captured by the government and sentenced to jail. So tell me, if those people were able to be captured and sentenced, what makes bitcoin anonymous then?

They just can track bitcoin transaction from an exchange, or to an exchange and then contact that exchange to get users info. If a transaction between 2 bitcoin annoymous wallet, they can check the ip address, but really hard.

which ip address would they check? The ip address of the node that broadcasted the transaction to them? There is a really big chance that this node wasn't the node that created the transaction in the first place, but just a node that was connected to a node that initially received the transaction from the transaction creator (altough that first node also didn't know it received the transaction from the transaction creator, there is just no way to know this for sure)..

Offcourse, if you use online wallets, ip logs can be checked... But you were talking about anonymous wallet...

Also, if you really, really want, core and electrum do support tor, and a VPN can always be used if you want to.