The online world and its generous presence of web cognoscenti have long been paranoid about the legitimacy of Bitcoin privacy.
The proponents of blockchain technologies and the associated cryptocurrency industry have always been wary about the possibility of being tracked by law enforcement agencies.
Specifically, people have been worried that United States security agencies have focused their scope on digital currencies. The question about the validity of this claim is somewhat straightforward.
Essentially, Bitcoin has been the favorite virtual coin for people that believe in the get-rich-quick narrative.
The popular cryptocurrency began as an ambitious project to foster discretion regarding financial transactions.
Various theorists provide that governments have responded to their primal instincts by targeting to thwart the proliferation of Bitcoin and other forms of digital currencies.
This is because virtual coins undermine the need to have central banks across the global divide by establishing a “new financial order.”
Glossing over hypotheticals, now-leaked classified documents show that conspiracy theorists were right—The U.S. government has been tracking Bitcoin users.
Secret information provided by Edward Snowden, a renowned whistleblower, indicates that the National Security Agency (NSA) targeted Bitcoin users in global destinations.
The agency was able to successfully obtain critical information that would allow them to monitor the Bitcoin blockchain and identify users on the network.
The classified passage of a 2013 NSA report shows that the organization had established a structure that would expose Bitcoin users through their transactions.
The obtainment of this information seems to have advanced the NSA’s capability to collect and analyze internet traffic while, according to documents, being able to penetrate the boundaries of an unnamed user anonymity software.
The papers intimate that the operation occurred successfully and extended beyond an analysis of the Bitcoin blockchain. In this taste, the procedure availed personal details to the NSA, which would be sourced from users’ computers.
The agency harvested password details, web activity and the MAC addresses of some Bitcoin users that were identified as “targets.”
The Bitcoin spy operation appears to have been enabled by the NSA’s known ability to channel traffic from the internet and transport the same throughout the world.
Sometime in 2013, The NSA established a program dubbed “OAKSTAR,” which would spearhead the resolve to track Bitcoin users across the globe.
OAKSTAR was founded on the grounds of secret corporate partnerships that would empower the organization with tools necessary for monitoring communications.
Specifically, the program targeted Bitcoin through MONKEYROCKET, a branching of OAKSTAR.
The sub-program is said to have amassed crucial data from three continents and the Middle East. Following its inception, MONKEYROCKET was the primary source of signals intelligence development for the NSA which had joined the club of governmental bodies that have come up in arms against the growth of digital currencies.
Moreover, the secret documents provide that the data obtained in the operation was the product of rigorous network analysis, and some data sessions were stockpiled for future studies.
The same documents related MONKEYROCKET as an online anonymity service that appealed to many users in Iran and China. Hitherto, the specific descriptions of MONKEYROCKET remain obscure, but the consensus is that the program was advertised online under “pretenses.”
The NSA points out that the program was created to appeal to targets engaged in terrorism who would use the product for regular browsing applications. Indeed, this was an ambitious long-term strategy that was meant to arrest critical terrorist masterminds and extend to other criminal sectors in additional locations.
Whatever this program was, it was created to be the ultimate Bitcoin user trap. It worked as a typical privacy program that would trick individuals into adopting its use. Bitcoin users would obliviously employ the privacy functions of MONKEYROCKET, which functioned to transport user data to the NSA.
While covert surveillance moves are the staple of NSA, it is quite inimical that an organization of the NSA’s stature would operate under the veil of false pretenses. This aspect is especially worrying in the particular context of international operations.
In The Intercept, Matthew Green, a seasoned cryptocurrency developer and Johns Hopkins University scholar, came out to condemn the NSA’s onslaught against Bitcoin users. According to his view, the tracking of cryptocurrency users is harmful and would beget the distrust of online privacy networks.
Notably, it is worrying that MONKEYROCKET’s success will go a long way in aggravating the extent of adverse impressions against the U.S. as a nation that infringes on people’s privacies.
Can Bitcoin Be Trusted?
The various exploits of the NSA beget the question about whether Bitcoin offers its users the luxury of absolute anonymity.
Arguably, this digital currency provides many offerings that shadow its traditional counterparts, fiat currencies. The fundamental aspect of Bitcoin’s appeal is its decentralized approach. There are no financial institutions mandated with monitoring the virtual coin and its spenders.
It is practical to engage in Bitcoin transactions that eliminate the need for exchange brokers or the submission of personal data. As explicated in a paper revealing Bitcoin’s initial concept, Bitcoin transactions cannot be linked to an individual, even though the public may view such exchanges. This is a draw for Bitcoin proponents across the social divide who are interested in the ability to transact anonymously.
Undeniably, the same attribute provides that Bitcoin poses a significant ultimatum to the global financial status quo. The privacy promised by Bitcoin has thus affected law enforcement efforts that target criminal rings thriving on the Bitcoin blockchain.
It has been exceedingly difficult for governments to associate virtual money to particular offenders in criminal cases. This factor is highlighted in a series of letters to Congress penned by five federal agencies in 2013.
In the reports, Homeland Security officials affirmed that the inception of cryptocurrencies encouraged the germination of criminal syndicates, a factor that has prompted Homeland Security to heighten its aggressive stance.
However, Bitcoin has always been misunderstood to provide 100% online anonymity. In fact, its transactions are typically connected to accessible identification codes that are embedded in the blockchain. Bitcoin exchanges usually require personal data to successfully convert Bitcoin to forms of fiat currencies such as the dollar. Such personal data may include banking information that may be held dearly by its owners.
Nonetheless, Bitcoin indeed offers better privacy compared to traditional currencies, which demand the submission of personal data including Social Security numbers.
It is for this reason that Bitcoin has been implicated in the advancement of money laundering schemes and the drug trade. In the past, the world has witnessed the high-profile case of Trendon Shavers, as well as that of Ross Ulbricht, founder of the Silk Road.
The Trendon Shavers case involved the story of a Texas man that pleaded guilty to allegations of orchestrating a Bitcoin Ponzi scheme between the years 2011 to 2015.
In the Ross Ulbricht case, Bitcoin formed an essential basis for his court trial. The virtual coin had long been a stronghold for the Silk Road darknet market. It is believed that Silk Road Bitcoin user popularity culminated in the increase in value for the popular cryptocurrency.
Escrow wallets were used to manage transactions in a practical sense that upheld safety. Drug dealers would be able to circumvent the long arm of the law for this reason.
Details surrounding the apprehension of Ulbricht, and his conviction of the charges, were interwoven with Bitcoin troubles. The same medium that had made Silk Road very successful had become the enemy of his defense.
The public Bitcoin ledger exposed Ulbricht’s financial worth and a plethora of illicit transactions that would further hinder his efforts at being exonerated. His wallet address had been unraveled and used as evidence in court proceedings. In this surprising twist, the man’s source of economic success had become the perfect “nail in his coffin.”
It is from this episode that casual observers noted the vulnerabilities associated with Bitcoin and the fact that the virtual money did not offer absolute anonymity after all.
Essentially, the cases of Shavers and Ulbricht cannot be separated from each other. The court trials depended on information sourced from the blockchain that sustains Bitcoin transactions. In both cases, scholars and Bitcoin experts played a significant role in concluding the trials.
But Should Bitcoin Users Worry?
Speaking at a recent conference, Edward Snowden issued a warning against Bitcoin users and the proponents of cryptocurrency trading. He provided that Bitcoin’s public ledger is marred with flaws that are detrimental to the very efforts of achieving privacy in transactions.
The NSA whistleblower believes that this reality may be welcome to governments that are passionate about banning Bitcoin. The prerogative to trace Bitcoin transactions would allow the police, in theory, to stalk transactions that terminate in wallets used for illegal activity. These transactions may even be tracked up to the point where they end up at Bitcoin exchanges.
Derick Smith, a blockchain pundit, once gave comments concerning this vital subject. In his view, Bitcoin transactions are primarily designed to be traceable unless they are created otherwise. This can be seen in the case of cryptocurrencies like Dash’s Darksend.
Paul Glass, another expert, also expressed his opinion on this matter through an article titled “How secure is blockchain?” He intimated that blockchain technologies might not avoid events of data alteration.
In totality, these cases and testimonies demonstrate the potential vulnerability of the Bitcoin network and its associated ramifications, which may affect the perceived privacy enjoyed by ardent Bitcoin users.
Bitcoin privacy is still the holy grail of the cryptocurrency industry. While important progress has been made on the Bitcoin blockchain, various de-anonymization tools are being engineered to counter the expansion of crypto trading.
Moreover, the NSA interest in the crypto war is, by all means, unfortunate for online privacy—Bitcoin users cannot endure the predicament of being watched by American spies 24/7, not for long.