Blockchain Analysis is the process of watching the public ledger that governs the Bitcoin network, interpreting the data, and using this to learn a range of information. For example, a person analyzing the Blockchain may be interested to know where you send your coins once you get them. If they have your “starting” address, they could very easily track your activity.
The process of blockchain analysis goes deeper than simply watching coins jump from one address to another. Through complex data analysis, people can – and do – “tag” groups of Bitcoin addresses. In some cases. they may even identify who they belong to and what they are being used for.
Who can track me using blockchain analysis?
There are many kinds of people who might be interested in tracking you and your spending habits. These can include:
Law Enforcement Agencies
In the event a law enforcement agency suspects you of criminal activity, they may try to track your Bitcoin activity to see if they can link it to suspicious sites or services such as Darknet Markets. Alternatively, they may identify addresses belonging to Darknet Markets and follow the trail in the hope that users “cash out” their coins without protecting their anonymity, in order to identify who is using Bitcoin for illegal purposes.
Cyber criminals may notice that you have a lot of coins in one of your wallets, and target this wallet with the intention of identifying you, hacking your computer, and stealing your coins. Both Law Enforcement Agencies and Cyber Criminals would probably use a combination of Blockchain Analysis and Social Engineering to unmask you, but their end goals are different.
Many people analyze the Blockchain – and in some cases, your specific transactions – with the simple goal of research in mind. The intention of researchers is generally to improve and refine ways of analyzing the Blockchain. This in itself is not particularly damaging. However, the more that is known about Blockchain Analysis. The harder it becomes to leave a clean trail behind. Most importantly, the easier it is to find you.
Known Blockchain Analysis companies.
Preventing Blockchain Analysis
Using a bitcoin mixer is the best way to achieve maximum anonymity. Most traditional bitcoin mixers or tumblers will have a large stash of coins on reserve. Mixers use to provide their customers with new coins. When a user deposits their bitcoins to the mixing service, these coins are then moved into the mixer. When the coins are withdrawn, the user receives new coins randomly from the large stash. At some point down the line, new coins are moved into the large stash.
Traditional mixers tend to offer additional features to further protect their users anonymity. These are often optional, but you should always use them where possible. For a complete guide on bitcoin mixers, visit Bitcoin Mixers