Re: How 'Anonymous' is Bitcoin?

[TonyT]

There are a number of ways you lose your privacy with bitcoin.

You need to connect to other nodes for blocks, so your IP is revealed.

Spv wallets - the nodes these connect to have the IP, and a huge list of addresses all owned by that person.

All transaction history is public, unchangeable, so retrospective analysis is possible. If you were up to no good on the silkroad, imagine the FBI set up a node to service SPV clients? And they logged the IP of owners of addresses linked to the silk road? Are you sure you removed that key from your wallet? :-p

Into transactions now.. Services that use multisig are bad for privacy if you don't tumble coins. If you pay into a multisig address s, coins can't be mixed up (not talking about bitfog here, just the wallet preferentially spending older coins to keep fees low - this means seller might get diff coins to the one you lodged). So, if I have a list of multisig addresses a marketplace used, I can learn the address of the buyer and seller.

If someone redeems the funds from the multisig, everyone learns the public keys of the people involved. Imagine you keep that key in your wallet, expecting to never use it again... But your node gives away that you own it by bloom filters mentioned above?

There is a full stack of software to understand.. Plus, have you read all the research papers on the topic? Martin and Harrigans was in 2011, so you've plenty to read from between now and then.

You seem knowledgeable.  So please answer this:  if I change the Bitcoin address every time I send money to somebody using my heavy Armory client, isn't that 100% anonymous?  Or is ISP/internet address recorded in the XYZ Gibabit 'blockchain' in every transaction, regardless of whether or not you change the Bitcoin address?  Assume also I've received money at my Armory client, using a Bitcoin address, but assume that every time I receive money, I always change the Bitcoin address.

TonyT

[arvindr]

IP logging can be an issue with bitcoins. Here is more info on the anonymity part of bitcoin: https://bitcoin.org/en/protect-your-privacy

[fsb4000]

IP logging can be an issue with bitcoins. Here is more info on the anonymity part of bitcoin: https://bitcoin.org/en/protect-your-privacy

use Tor or i2p with bitcoin.

[sgk]

IP logging can be an issue with bitcoins. Here is more info on the anonymity part of bitcoin: https://bitcoin.org/en/protect-your-privacy

use Tor or i2p with bitcoin.

Are paid VPN services useful?
I recently tried out paid version of CyberGhost VPN (http://www.cyberghostvpn.com/en) where you can fake your IP to your choice of country.

Does this provide anonymity, given that we use new BTC address for every transaction?

[arvindr]

IP logging can be an issue with bitcoins. Here is more info on the anonymity part of bitcoin: https://bitcoin.org/en/protect-your-privacy

use Tor or i2p with bitcoin.

How do we use tor for bitcoin wallet, considering its just a browser?

[Foxpup]

How do we use tor for bitcoin wallet, considering its just a browser?

Tor is not a browser.

[fsb4000]

How do we use tor for bitcoin wallet, considering its just a browser?

Tor is not a browser.

+1

How do we use tor for bitcoin wallet, considering its just a browser?

1. Run Tor
2. Bitcoin Core -> Settings -> Options -> Net -> Connect through SOCKS proxy -> IP = 127.0.0.1 ,    Port = 9150 if using TOR BROWSER BUNDLE
                or Port = 9050 if using TOR
3. Restart Bitcoin Core.
That's all  

[Bernard Lerring]

You can use electrum wallet and connect to a SOCKS5 anonymous server to make transactions when you run electrum from the Linux terminal. I believe that Tor is used by the server so your transactions remain anonymous in that your IP isn't revealed.

Someone correct me on this if I'm wrong.

[cr1776]

IP logging can be an issue with bitcoins. Here is more info on the anonymity part of bitcoin: https://bitcoin.org/en/protect-your-privacy

use Tor or i2p with bitcoin.

Are paid VPN services useful?
I recently tried out paid version of CyberGhost VPN (http://www.cyberghostvpn.com/en) where you can fake your IP to your choice of country.

Does this provide anonymity, given that we use new BTC address for every transaction?

Paid VPN can be useful as a part of a strategy. Alone, no.  It also depends on what attack vectors you are trying to protect against, how you are paying for the VPN etc.

[TonyT]

OK time for a concrete example on bitcoin security or lack thereof.

Examine this URL: https://www.biteasy.com/blockchain/addresses/1P62VZZ9kL97dzzcWhG7JZDssaW2MDgn82

Note the person(s) using this bitcoin address are not using a different bitcoin address for every transaction, but instead are receiving and sending a lot from this address (it seems to me, unless I am misreading the data).

1) Why don't people use a unique bitcoin address every time they receive money?  is it convenience, or maybe they advertise the bitcoin address and cannot change it easily (such as: 'please donate to my charity at this bitcoin address: 1P62...etc"?) ** UPDATE:  I see that Armory, a decent bitcoin wallet, will only generate 100 unique addresses before you need a new copy, see here: http://bitcoin.stackexchange.com/questions/9828/do-i-need-to-backup-a-wallet-every-time-i-generate-a-new-address   ("Please note that by default, Armory only generates 100 addresses. This means that when you use more than 100 and you lose your wallet, after you restore the back-up, the client will at first only see the first 100 addresses. You will have to specifically tell Armory to look for more addresses." so I supposed people don't want to go through extra effort in creating addresses is one reason, but apparently Armory can generate, if you let it, an infinite number of addresses, see: https://en.bitcoin.it/wiki/Deterministic_Wallet   So I supposed laziness / indifference is the main reason people use the same address over and over again?  ***

2) Where is the IP address associated with the address above?  Where is it buried in the blockchain?  I cannot find it.

TonyT

[OnkelPaul]

OK time for a concrete example on bitcoin security or lack thereof.

Examine this URL: https://www.biteasy.com/blockchain/addresses/1P62VZZ9kL97dzzcWhG7JZDssaW2MDgn82

Note the person(s) using this bitcoin address are not using a different bitcoin address for every transaction, but instead are receiving and sending a lot from this address (it seems to me, unless I am misreading the data).

I didn't look at the blockchain data but there are lots of addresses of this kind. Most belong to companies, and the association between company and address is known to quite a number of users/customers/etc. so why bother with hiding it?

1) Why don't people use a unique bitcoin address every time they receive money?  is it convenience, or maybe they advertise the bitcoin address and cannot change it easily (such as: 'please donate to my charity at this bitcoin address: 1P62...etc"?)

The charity example is actually a pretty good one. In such a case, the incoming funds address can be well-known, and for better transparency regarding management of their funds, charities might actually prefer to have all incoming donations on one address.

2) Where is the IP address associated with the address above?  Where is it buried in the blockchain?  I cannot find it.

TonyT

IP addresses are not in the blockchain. The only place where IP addresses and transactions can be connected is when a node receives a transaction from another node. Depending on the connectedness of the originating client, the transaction might originally come from that IP. For example, big mining pools often send their payments through few IP addresses to many well-connected nodes such as blockchain.info. Such a node can make an educated guess about the origin of the transaction. It is relatively easy to avoid by using a proxy and keeping only a few outgoing connections to small nodes which are unlikely to do IP/transaction analysis.

Onkel Paul

[Furio]

NO ip address in the blockchain, my life is a lie!! . But seriously, it is in the blockchain right?

[cr1776]

NO ip address in the blockchain, my life is a lie!! . But seriously, it is in the blockchain right?

If you are asking if an IP address is stored in the blockchain, the answer is no. Nodes will just see a transaction was relayed by X which may be your IP address or not.

[OnkelPaul]

But seriously, it is in the blockchain right?

No, why should it be?
See http://bitcoin.stackexchange.com/questions/193/how-do-i-see-the-ip-address-of-a-bitcoin-transaction
All you need in the blockchain is transactions and the proof of work as shown by the block hash. IP addresses are meaningless in this context.

Onkel Paul

[Furio]

NO ip address in the blockchain, my life is a lie!! . But seriously, it is in the blockchain right?

If you are asking if an IP address is stored in the blockchain, the answer is no. Nodes will just see a transaction was relayed by X which may be your IP address or not.

And those nodes can only be revieling atm of the transaction, after that it's gone?!

[OnkelPaul]

And those nodes can only be revieling atm of the transaction, after that it's gone?!

Of course those nodes can keep a log of where they got a transaction from. If they show the information from this log, it's available to everybody. However, as they can only know the IP address from which they received a transaction, a node that wants to stay out of the spotlight could just send the transaction through another node that's not recording IP addresses, and then this node sends the transaction to other nodes who can't see from where it originally came.

Onkel Paul

[TonyT]

Thanks to OnkelPaul for the replies.

Here is a good article that's not too technical that explains how not reusing bitcoin addresses would make bitcoin virtually anonymous.  But when businesses reuse addresses, they become easy to spot. see:

http://www.bitcoinnotbombs.com/innovations-that-enhance-bitcoin-anonymity/

I guess a simple example of this might be:  if anonymous buyers, "A", "B", "C" buy something from a seller "S" who does not change their bitcoin address, and the seller S then uses the money from A,B,C to buy from a supplier SS, who also don't change their bitcoin address, and S and SS constantly deal with each other you might get a diagram like: A, B, C <--> (single link from each buyer to S) to S, which then has multiple links to SS and back to S in the blockchain (and SS never deals with anybody but S).  You can conclude that A, B, C are random retail customers of S, S is the middleman, and SS is the sub-contractor or supplier to S.  At least that's the way I think of it.

Another example might be if a unique Bitcoin amount that is very distinctive like the sum of 789.12345678987654321 bitcoins is passed around, but each time it is passed between parties then 10 bitcoins are subtracted from the sum, and everybody except S and SS in the above example uses new bitcoin addresses, and say S and SS are known drug dealers, and reuse their bitcoin addresses, and the 'word on the street' is that a large cache of meth is circulating, being passed from party to party, then it follows that everybody who processed the bitcoin sum of 789.12345678987654321 (minus 10 every transaction) is a drug dealer who is trafficking this meth, and taking 10 bitcoins for their trouble (sorry it's kind of stupid but it's the best example I could think of at the moment).  

TonyT

[Newar]

[...]
** UPDATE:  I see that Armory, a decent bitcoin wallet, will only generate 100 unique addresses before you need a new copy, see here: http://bitcoin.stackexchange.com/questions/9828/do-i-need-to-backup-a-wallet-every-time-i-generate-a-new-address   ("Please note that by default, Armory only generates 100 addresses. This means that when you use more than 100 and you lose your wallet, after you restore the back-up, the client will at first only see the first 100 addresses. You will have to specifically tell Armory to look for more addresses."
[...]

There is a misunderstanding. Armory will generate as many addresses as you please. You will not even know when you have more than 100. Regarding this comment:

This means that when you use more than 100 and you lose your wallet, after you restore the back-up, the client will at first only see the first 100 addresses.

This is of concern only if you restore from a backup. The restored wallet will show 100 restored addresses, if you had more and want to see them you can do so from withing the client. However that has nothing to do with how many addresses Armory can generate.

[TonyT]

[...]
** UPDATE:  I see that Armory, a decent bitcoin wallet, will only generate 100 unique addresses before you need a new copy, see here: http://bitcoin.stackexchange.com/questions/9828/do-i-need-to-backup-a-wallet-every-time-i-generate-a-new-address   ("Please note that by default, Armory only generates 100 addresses. This means that when you use more than 100 and you lose your wallet, after you restore the back-up, the client will at first only see the first 100 addresses. You will have to specifically tell Armory to look for more addresses."
[...]

There is a misunderstanding. Armory will generate as many addresses as you please. You will not even know when you have more than 100. Regarding this comment:

This means that when you use more than 100 and you lose your wallet, after you restore the back-up, the client will at first only see the first 100 addresses.

This is of concern only if you restore from a backup. The restored wallet will show 100 restored addresses, if you had more and want to see them you can do so from withing the client. However that has nothing to do with how many addresses Armory can generate.

Yes, you are correct.  Apparently the comment I quoted was from an earlier version of Armory I just found out some minutes ago.  Just to show my ignorance, or lack thereof, I think the way Armory currently works is as follows ('deterministic wallet'):  you can generate an infinite number of bitcoin addresses with Armory.  Should you lose your private keys, if you know your Armory "root" key, which you can print out on a piece of paper when you first install Armory, you can then reconstruct all your private keys, now and forever more (infinitely many), and, then using the 50 GB+ blockchain, figure out how much bitcoin is associated with each private key (if non-zero), and then reconstruct your balance in your wallet.  It might take a few hours or days of computing power, depending on how many keys/transactions you've done, but it can be done.  At least that's what I understood, reading between the lines for the last few hours.  Please correct me if I'm wrong.

TonyT

[Newar]

[...] It might take a few hours or days of computing power, depending on how many keys/transactions you've done, but it can be done.  At least that's what I understood, reading between the lines for the last few hours.  Please correct me if I'm wrong.

TonyT

The few hours / days are mainly needed to get the underlying bitcoind to sync with the network and verify the addresses, once done Armory will build a database. But, say, if you restore your wallet on an online Armory system that has the blockchain and database already up to date, it probably takes not nearly as long (depending on amount of addresses and transactions those addresses were involved).

Armory is also working on an overhaul of their backend, so that will help speed things up further. Bitcoin Core devs are working to get bitcoind to download the blockchain from several peers (unlike just one, like it is now), so that will help speed up things too.