BitFury has successfully de-anonymized over 1/6 of the entire Bitcoin blockchain, increasing privacy concerns for cryptocurrency users.
Known primarily as a mining company, BitFury has recently entered into the ream of blockchain analysis for aiding law enforcement in criminal investigations. In a Medium article to promote a new analysis whitepaper, BitFury outlines their approach to ending Bitcoin’s assumed privacy. According to the CEO of BitFury Group Valery Vavilov, the new analysis employs a technique known as clustering to trace Bitcoin transactions to their users.
“Currently, bitcoin users can have multiple addresses, making it easier to conceal identities and commit crimes on the Blockchain. The ability to link related addresses, called ‘clustering,’ is an important new tool that helps law enforcement agencies conduct criminal investigations.”
Analysis beyond blockchain including social media accounts
Beyond simple analysis of the Bitcoin blockchain, BitFury has had success filling in the missing data points by drawing on off-chain information. According to the whitepaper, this includes social media activity and other identifying information:
“Tags could be collected either passively or actively. The passive approach means web crawling of public forums and user profiles (for example, Bitcointalk.com, Twitter and Reddit) and Darknet markets (for example, Silkroad, The Hub Marketplace and Alphabay). The active approach means manual analysis of Bitcoin companies and data actualization procedures.”
This more comprehensive approach means that even users who have taken care to never associate their Bitcoin activity with their public identity may be at risk.
Privacy breaches underscore Dash’s competitive advantage
These revelations emphasize the utility of cryptocurrencies with enhanced privacy offerings such as Dash. PrivateSend allows Dash to be sent anonymously by trustlessly mixing inputs of several different parties so that the original sender is hidden. When used properly, this has as of yet proved to be completely untraceable.
An added benefit of Dash’s privacy features is its effect on the ecosystem as a whole. While maintaining the ability to choose whether or not to enable enhanced privacy for transactions depending on the situation and result desired, the overall fungibility of the Dash network is improved each time PrivateSend is used. This means that links between transactions long-term are more obscured even for users who have not implemented PrivateSend, making the whole blockchain more difficult to analyze by outside actors such as BitFury.
In addition to using PrivateSend mixing whenever possible, Dash users should also maintain good privacy practices for their online activity such as using a VPN and encrypting communications. Finally, users should keep a low financial profile and refrain from participating in any activity that would put them in a difficult position if publicly revealed.