Bitcoin right now is not really anonymous . While Bitcoin addresses aren’t necessarily linked to real-world identities, they can be. Monitoring the unencrypted peer-to-peer network, analyses of the public blockchain and Know Your Customer (KYC) policy or Anti-Money Laundering (AML) regulations can reveal a lot about who’s using Bitcoin and for what.
This is not great from a privacy perspective. For example, Bitcoin users might not necessarily want the world to know where they spend their money, what they earn or how much they own; similarly, businesses may not want to leak transaction details to competitors.
Additionally, the fact that the transaction history of each bitcoin is traceable puts the fungibility of all bitcoins at risk. “Tainted” bitcoins, for example, may be valued less than other bitcoins, possibly even calling into question Bitcoin’s value proposition as money.
There are potential solutions that may increase privacy and improve fungibility in Bitcoin. But most of these solutions are either partial, works-in-progress or just largely theoretical.
The Bitcoin Scenario