In a nutshell, cryptocurrencies aren't completely anonymous. All transactions have an audit trail and can be linked to the creator. Although some central banks are unsure of the usefulness of cryptocurrencies as a product, there are many websites that accept cryptocurrencies as legitimate payments. Therefore, they are not anonymous or illegal.
Companies have emerged that sell bitcoins at a profitable price and offer ATMs where you can convert them into cash. All transactions in and out of this wallet are recorded on the blockchain, which is open to the public. If privacy is an issue, investors will be relieved to discover that bitcoin is one of the most secure payment solutions available. Bitcoin, the Internet currency loved by computer scientists, libertarians and criminals, is no longer invulnerable.
Bitcoin address tracing supposedly links all that money to illegal online drug sales tracked by the FBI and Interpol. Meiklejohn, who says she regularly works with law enforcement, but doesn't feel comfortable discussing the details, was one of the first researchers to explore Bitcoin mixing services. Criminal activity can be prevented in the pass with tools that match customer data with bitcoin transaction histories. This system worked so well that it was carelessness, not any privacy flaw in Bitcoin, that led to the breakthrough in the Silk Road investigation.
In fact, in their early days, it was supposed that, because cryptocurrencies like Bitcoin were untraceable and anonymous, they were a safe haven for criminals. Meanwhile, Glassnode data shows a jump in the proportion of bitcoin supply absorbed by entities with a low statistical history of spending on it. However, as organizations and the public better understood blockchain technology, it became clear that Bitcoin's public transaction ledger was, in fact, a gold mine of information for authorities. It was specially designed to be inefficient, downloading a copy of every data packet transmitted by each computer on the Bitcoin network.
Strictly speaking, Bitcoins are nothing more than amounts associated with addresses, unique strings of letters and numbers. However, interest in cryptocurrency privacy coincides with bitcoin's diminishing function as an anonymous currency. Cryptocurrency, and especially Bitcoin, has a reputation for being a completely anonymous form of payment, free from tracking and interference. If the data flowing through the network were perfectly coordinated, with everyone's computer sending and receiving data just as often as everyone else, then it might be impossible to link Bitcoin addresses to IP addresses.
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