Bitcoin isn’t anonymous and the creators of Bitcoin knew this
The First Blockchain Wasn’t Meant to be Anonymous.
It’s completely understandable to approach Bitcoin and the majesty of Blockchain with healthy doses of skepticism and modesty, especially early in your crypto journey. Trustlessness is a tough concept to engage with, yet here is a technology that is inherently requiring you to trust that it is “trustless.” (Bitcoin is trustless because the system was designed so that nobody has to trust anybody else in order for the system to function. Every form of digital currency before the invention of bitcoin required a central authority that you had to trust in order to use the currency). This uncomfortableness around the adoption of Bitcoin was exponentially worse in the early days as concerns around the cryptocurrency were being formed that Bitcoin was a completely anonymous peer-to-peer transfer of value, perfect for the black markets and criminals around the globe.
An FBI report leaked back in 2012 titled “Bitcoin Virtual Currency: Unique Features Present Distinct Challenges for Deterring Illicit Activity” is a prime example of how law enforcement was seeing Bitcoin at the time. In the report, the FBI expresses concerns surrounding the anonymity of Bitcoin and how it “…might logically attract money launderers, human traffickers, terrorists, and other criminals”. The FBI was quick to identify possible early use cases of Bitcoin, mostly unsavoury, but continued to note that Bitcoin is not fully untraceable and sited research from the University College of Dublin focusing on the limits to Bitcoins anonymity. It’s around this time that people, outside the developers and fanatics, were slowly beginning to notice that Bitcoin wasn’t the untraceable currency they once thought, and this wasn’t a secret.
From the inception of the Bitcoin, and specifically the release of the Bitcoin whitepaper, Satoshi Nakamoto was careful not to claim that Bitcoin was completely untraceable. In fact, the only use of the word anonymous appears in reference to a user’s public keys. The Whitepaper reads: “… privacy can still be maintained by breaking the flow of information in another place: by keeping public keys anonymous.” In other words, the anonymity of Bitcoin stops at the public keys, the public key is your pseudonym.
Privacy in Bitcoin stopped at the public keys
Pseudonymity is in the same camp as anonymity but the difference between the two is subtle and meaningful. Being anonymous largely implies that there is no trackable path to follow back to the true identity of the person or group. Pseudonymity is more in the naming practices and how a person or group may use a name to obfuscate their actual identity. For example, the author Samuel Clemens used the pseudonym Mark Twain to write under and keep his true identity secret. Mr. Clemens was pseudonymous because during his career he wrote under a fictitious pen name. However, he was not anonymous because the identity Mark Twain was in the public’s eye and even after Clemens was found to be the true identity of Mark Twain, the pseudonym was carried forward into pop culture.
