Sandia National Laboratories Reveal More Details on Bitcoin De-anonymization Tool

Bitcoin has often been referred to as an anonymous form of payment. That is far from the truth, though, as all transactions on the network are visible in real-time. Moreover, anyone in the world can see these transfers, rather than just a select few institutions or groups. But Sandia National Laboratories is planning to end whatever is left of Bitcoin anonymity with their new projects.

Sandia National Laboratories Uses Different Tactics

As we reported earlier this week, the Department of Homeland Security is not in favor of Bitcoin anonymity. The agency has hired external developers to create a better analytics tool to track suspicious Bitcoin payments. Ever since that announcement, more information has become available to the public.

The company in question is called Sandia National Laboratories, a US Department of Energy RD facility. The team of engineers have created a set of specific requirements to analyse Bitcoin transactions. Moreover, the graphical user interface Homeland Security requested will be tested soon, and may find its way into the hands of other law enforcement agencies.

At the same time, there is a positive note to mention as well. Despite this “privacy invading” work the company is doing, Sandia firmly believes Bitcoin has a bright future ahead. Otherwise, they would not develop a tool that will help analyse future transactions. The [limited] potential for anonymity could be an adoption hurdle, though.

Moreover, the company is also not in favour of what central banks are doing right now. Creating permissioned and non-anonymous versions of bitcoin has a certain appeal. One big problem is whether or not permissioned blockchains can leverage the network effect that powers Bitcoin. Permissionless blockchains have a bigger appeal than locked-down solutions right now.

Removing The Illusion of Bitcoin Anonymity

De-anonymizing Bitcoin transactions is another option to remove the barrier to entry. Companies such as Elliptic and Chainalysis are working on such solutions. However, since there is no real anonymity in Bitcoin, to begin with, there is no real point in developing such a concept. However, Sandia is focusing on analysing the blockchain network to find out more about suspiciously behaving Bitcoin users.

Sandia Researcher Brian Cox explained it as follows:

“It doesn’t mean that we get their actual names because there aren’t any names associated with Bitcoin,But it will show that some transactions are controlled by the same user.  Then, when one of the transactions is de-anonymized and linked to a criminal, law enforcement will be able to refer back to the rest of the associated Bitcoin addresses they need to deal with. “Our clients are happy about the requirements we’ve developed and the research we’ve done on what types of tools and capabilities are needed.“

Among the tools being used by this company are different algorithms. One uses a mix of traditional and newer investigative techniques, although no specific details were revealed. At the same time, criminals tend to outsmart law enforcement quite often, and adapting these tools will be a constant necessity.

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About JP Buntinx

JP is a freelance copywriter and SEO writer who is passionate about various topics. The majority of his work focuses on Bitcoin, blockchain, and financial technology. He is contributing to major news sites all over the world, including NewsBTC, The Merkle, Samsung Insights, and TransferGo.