U.S. Government is Backing Research Projects in Hopes of De-Anonymizing Bitcoin Transactions

Sandia Research is being backed by the U.S. Government in the creation of a tool that will help law enforcement de anonymize bitcoin transactions.

Bitcoin is becoming all but mainstream these days, with more and more businesses and entities all over the world accepting bitcoin as a method of payment. People even work, and get paid in Bitcoin. With the gain in popularity, it’s no wonder that law enforcement would want to be able to link bitcoin transactions to a physical identity, rather than a stream of numbers and letters.  While Bitcoin is not very hard to use, it is extremely hard to fully understand the technology that drives this ever growing, ever expanding cryptocurrency.

Law enforcement is going to be setting its sights on more illegal operations, opposed to your everyday, law abiding citizen’s daily transactions.

Andrew Cox, lead researcher for Sandia said that the teams job is to understand how bitcoin works. He noted that the semi-anonymous currency could very well change the face of transactions for the benefit of the national economy.

In a blog posted by Sandia National Laboratories, Cox stated that, “It has been clear that criminals have been pioneers in using bitcoin. The use it for drugs, for guns, child pornography, and all sorts of terrible stuff.”

In fact, this is why Sandia has conducted research backed by the U.S. Department of Homeland Security. They hope to set up a graphical interface for users so that law enforcement, as well as other agents will be able to test the algorithms that they utilize in their real time investigations.

“This will allow us to adjust what we’re doing to make sure we’re being of maximal use to them,” the blog went on to say.

The amount of time and resources needed is what law enforcement agencies claim are slowing, and even halting investigations. The rate of growth of bitcoin has caused law enforcement to fall behind in technology. They simply do not have the tools in place to encounter the problems they have tracking these cryptocurrency transactions.

Cox has stated that Sandia needs to understand the numerous patterns that bitcoin transactions might make. By looking through past investigations to figure out other configurations Sandia, and Cox hope to achieve this. He was more than willing to admit this is no easy feat.

“There is no ‘silver bullet’ algorithm to effectively de-anonymize bitcoin,” Cox stated further in the post.

Sadia has been conducting research on illegal businesses that focus on bitcoin. They do this by conducting experiments with other algorithms that can de-anonymize illegal cryptocurrency users. They are focusing on those investigations that have ended successfully for law enforcement.

One the transaction is de-anonymized, law enforcement will be able to trace the bitcoin addresses to the owner, providing them with the information they need.

“It doesn’t mean that we get their actual name because there aren’t any names associated with bitcoin, but it will show that some transactions are being controlled by the same user,” Cox stressed in the blog.

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