Bitcoin is not anonymous. Too many people make this wrong assumption. It's the least anonymous currency/payment system I've ever seen. After all every single transaction is public.

Of course it depends on who is trying to get the data about you. If it's the hoster then yea, he wont get it. But if it's the authorities/government then they'll get it. Plus theres a chance of you by accident exposing all your payments with your name...

Bitcoin is traceable. This means that it does not provide privacy. Note that cash is also traceable in edge cases thanks to serial numbers.

Bitcoin is definitely anonymous. Consider: a wallet has no PII attached to it, beyond what you give it via transactions. Contrast this with a credit card, which typically has PII as an integral part of the way it operates.

A bitcoin wallet without transactions is useless[1]. Transactions are how you put bitcoins into it, and how you use bitcoins to pay for things. If you create a wallet, but never use it to transact anything, it doesn't do you much good.

[The exception here being mining. I don't believe that you release PII as a miner, yet you bring in bitcoins.]

This is true. There are ways to transact which don't compromise your identity. They are a pain; it's a trade-off.

To your point at [1], I am not aware of any way which mining can compromise PII.

Anonymity is different though. Every single transaction is public, yes, but that only leads you to a bitcoin address, which is trivial to change. Perhaps there's a way to unmask them (even if you are smart about changing your "bitcoin identity"), but it is far more anonymous than many other options.

If you open a new wallet, it has no money. Any transfer you make from your old wallet to the new one is public and trivially traceable. It's not anonymous to anyone who puts 5 minutes work into tracing you.

It just depends on where you get your bitcoins from. You could:

- Mine bitcoins.

- Steal bitcoins (i.e. hack an exchange)

- Pay cash for bitcoins[1]

- Pay for bitcoins with stolen credit card info.

- Pay for bitcoins with anonymous pre-paid credit cards[2]

Of course, that just gets you a bitcoin wallet that isn't necessarily tied to you. Now you have to figure out a way to spend them without leaking personal information.

[1] The person that you pay could identify you, but if you give false information, and aren't picked up on surveillance (CCTV, etc), then it becomes a difficult to track down link.

[2] Same issue as [1]. Your weak link is the point-of-sale for the pre-paid credit card.

You missed a biggy, which is "Receive bitcoins as payment".

You could set up a bitcoin gambling website, sell some sort of SaaS for bitcoins or, perhaps the most popular and profitable route right now, sell some drugs for bitcoins. Hypothetically, depending on your state/country, you could acquire weed legally and then (illegally) send the weed through the post in exchange for bitcoins.

You would have to provide it as a Tor hidden service though, otherwise all of your expenses in running the site would open the way for your anonymity to be breached (i.e. your domain name, your hosting provider, etc).

Basically if you're providing a service to someone, then there is a possibility of said service revealing who you are. E.g. if you're sending drugs to people, then maybe the packages are traced to a source.

Okay, maybe I'm not understanding something.

Since you can generate unlimited wallets, lets say I have two, A and B.

Wallet A is known to belong to me. Coins I buy off of Mt. Gox end up in this wallet.

I create wallet B, and then send coins to it.

Using wallet B, I then send coins to a hosting company's wallet for for a server.

The fact that I sent coins from Wallet A to Wallet B is public information. The fact that I own wallet B is not public information.

If I was a government type trying to trace someone down, how would I prove who owns wallet B?

Let's assume I generate a new wallet every time I pay for hosting when the bill comes due. The path is even murkier.

If I was really paranoid, I could create wallet B, hop on Tor, make a post on a bitcoin board somewhere selling some kind of non existent goods, posting my Wallet B address for payment, regenerate my Tor circuit, post as another account on the same board indicating interest in these goods and post my wallet A address.

How does this look to any observer like anything but some guy sending coins to some other guy who ends up using those coins to buy hosting, or any other good or service?

If someone buys something illegal, and the cops look up the transaction in the bitcoin network, it narrows things down to just a few wallets where the funds might possibly have originated. If they look back a few links in the chain and the find bitcoin exchange where you initially got the money, they now know that you exchanged just the right amount of money to make the illegal purchase. It doesn't take much work to put 2+2 together.

>it narrows things down to just a few wallets where the funds might possibly have originated.

This can be defeated, either manually or via a tumbling service to make the link chain so huge as to be useless for evidence purposes.

Again, it's easy to link me to wallet A assuming I just buy from a service with links into the traditional financial system. It's significantly harder to prove I own any of the wallets I send money to.

>If they look back a few links in the chain and the find bitcoin exchange where you initially got the money, they now know that you exchanged just the right amount of money to make the illegal purchase.

This could be defeated by sending more than the amount required when you fund the second wallet.

Again, nobody knows that I own wallet B. Given a sufficiently plausible public exhibition on a trading site, it may look entirely like it's owned by another person outright, and if your goal is to avoid legal scrutiny, so much the better.

The transactions are public, the actors are not.

This makes it anonymous.

Looks like we have a classic case of not understanding the currency.

Bitcoin can be anonymous because you can create wallets and transact between them without any proof of ownership of the wallets.

Put another way, yes, they can see that one coin that you originally owned eventually made it to a specific party, but they can't prove that you were the parties in between.

tldr; Don't make assertions about stuff you don't understand.

Sure you can spread out your money across many addresses but at some point they are going to merge at least a bit again when you want to make a payment. Unless you split the money in big enough chunks to make payments from them.

Example: you have 10 BTC, spread it to 3 addresses (A: 2 BTC, B: 5 BTC, C: 3 BTC) and want to make a payment over 6 BTC. Now you will have to either create a new address which gets money from B + (A || C), then transfers it to the seller or transfer from said combination directly to the seller. Since one can see B and one other address working together, one could assume they both belong to the same owner.

This is just one example of how you can still track address owners with varying chances of success. One can with great care probably make Bitcoin anonymous but the average user wont.

> tldr; Don't make assertions about stuff you don't understand.

Yes, that pretty much covers your comment. It's not like they won't just investigate all wallets intermediate to major exchanges/merchants as leads. It's not like FinCEN doesn't have decades of experience tracking mass flows. It's not like they won't invoke guilt by association for any of the four horsemen.

Please, take a look at the properties of Brands's blinded signatures for an example of an actually anonymous currency (it has other problems though).