Track Me If You Can or How To Track A Bitcoin Transaction

The myth of Bitcoin being anonymous and thus perfect for any criminal activities has been debunked on many occasions. Bitcoin is not the best for any illicit activities due to some of its core characteristics.

Since Bitcoin is public, permanent and traceable, this cryptocurrency would not be ideal if any criminals or hackers would want to get around the system.

Properties of Bitcoin that make it traceable

As was mentioned in the introduction, amongst other things, Bitcoin’s blockchain is public, permanent and traceable. These properties are also reasons why on-chain analytics or forensics firms exist. Companies such as CipherTrace or Chainalysis are just a few examples of entities that are using these properties of Bitcoin to track the activities of the Bitcoin users. It can be easily estimated that in the future, governments will be working very closely with these companies not only to track and trace criminals, but also to tax their citizens on their Bitcoin profits.

In this very short and very simple article, we will look at how they can do that thanks to only two tools. Moreover, users need to have in mind the fact that these two tools are free and public, which means that it is likely that companies such as CipherTrace or Chainalysis or governments as such, will have access to more sophisticated and complex tools to help them even more.

Track me if you can

One of the first tools these companies, or anyone else, can use is blockchain.com. Its explorer shows all the history of transactions with countless information connected to them. In here, the users can simply find any transactions that occurred, as well as unconfirmed transactions in case they wanted to check whether their recently sent/expected transactions are being processed.

Binance hack transaction in the blockchain explorer Source blockchain com

The image shows probably one of the best examples of transactions for on-chain forensics. It is the transaction connected to the Binance hack in 2019, during which more than 7000 BTC was counterfeited. And thanks to on-chain forensics, we can see how they moved, where they were going or what wallets received them.

For that, the second tool is necessary. Oxt.me is a tracking platform that not only stores all the essential information about Bitcoin transactions, but also helps to visualize them in a rather simple way.

Details of the Binance hack transaction <em>Source oxt me<em>

The image above shows the same transaction that was shown in the picture above, but with some of the details connected to it. This has information such as inputs and outputs, which show whether the transactions moved to an anonymous wallet or an exchange for instance. It also has annotations, where, in this case, you can find a note “Binance heist.”

However, what is more intriguing is the tools section, which contains the mentioned option of visualization of the flow of transactions. Through this, you can actually see how the bitcoins have been moved around and can explore it more. In this given example, the orange colors mark very big transactions (not all of them, only some), to portray how easy it is actually to trace what is going on the chain.

Visual representation of the Binance hack <em>Source oxt<em>

While the transactions initiated in the middle of the big circle, you can clearly see how the hacker was slowly trying to move the funds around. Upon closer look or more in-depth analysis, anyone can see how much each transaction was worth, from which address it was sent and which address received it.

It can obviously be a bit tedious to try to see how each transaction moved and what the hacker did with it, however, these companies usually do have the tools to make the tracking automatic or to automatically highlight a transaction that just does not seem right.

Moreover, if the transaction at any point reaches a KYCed address, meaning an address whose owner is known and verified, he or she can get into trouble really quickly, as it can draw suspicion. Amongst other things that is one of the reasons why not to KYC any of your wallets with bitcoins or satoshis if possible.

Bitcoin Mixer as an anti-tracing tool

To make it a little more difficult for these companies to snoop around, there are solutions such as bitcoin mixers or bitcoin tumblers. And while it may sound like coin-mixing services allow hackers to get away with their crimes, this is far from the truth. The truth is that the bitcoin mixer enables financial privacy on the bitcoin blockchain.

Payment privacy is a key component of financial security and personal autonomy. Some people may not want others, such as employers, advertisers or the government, to be able to see their financial activities. Payment privacy helps them protect their right to financial autonomy and freedom without fear of surveillance or discrimination.

Payment privacy is also important to merchants, companies and other businesses that process payments. They have a moral and legal obligation to keep their customers’ private information private and secure.

Especially with tools like oxt.me or blockchain.com, users can often be spied on once they KYC their bitcoins. However, if they value their privacy, they would do everything in their power to ensure that their wallets are not linked to their identities. If this is the case, companies like CipherTrace or Chainalysis would have a very hard time finding out who is behind certain wallets.

Conclusion

Some of the properties of Bitcoin make it really easy to trace all the movements that happen on-chain. That is how Bitcoin was designed, which means that this was by default. However, putting the real identities to the wallets is something that people started doing because of regulations or misinformation. This can simply lead to loss of privacy on-chain.

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