Cryptocurrencies and anonymity: how privacy is changing
Anonymity has always been a much debated aspect of cryptocurrencies. At the beginning of the year, this debate reached the World Economic Forum, where the Director General of the IMF drew attention to a very real danger, that is the use of digital currencies for illicit operations such as the financing of terrorism and money laundering.
The above-mentioned debate, led to a focus on the importance of putting systems into place which are able to ensure the legitimate use of cryptocurrencies. In recent years, legislators have not been idle on this matter. In fact, there are already several very specific European regulations which oblige those operating in that sector to identify their trading counterparts.
A key contributor to the demise of the close relationship between cryptocurrencies and anonymity could be Amazon. Bezos’ colossus has in fact come up with a technology capable of combining into a single data flow both Bitcoin transaction data and the personal details of those making the transactions.
As things currently stand, the only way to identify them is by their wallet address (electronic wallet). This address is an alphanumeric sequence which is not traceable to a physical person. This feature has been fundamental in the success of Bitcoin and other cryptocurrencies.
Amazon, as mentioned above, is aiming to overcome this system by using the cross-checking of data gathered from sources like the IP addresses of those carrying out transactions. Mapping the IP addresses of Bitcoin users could be quite easy. Each single client of the bitcoin network – also called the Peer to Peer hub – is in fact able to gather IP addresses from other network hubs, limiting the total number to a list of 20480 units.
If address requests are received from other hubs, the user sends back a maximum of 2500 IPs. Thanks to that process, the compilation of an extensive list of IP addresses of the hubs which form the network may turn out to be a relatively straightforward process.
Some say that with the TOR network, an IP address can be easily hidden. It cannot be denied however that TOR is not infallible and it is possible to force an already configured hub to reject connections to this anonymity service.
Regarding the technology that Bezos’ company is working on, it is important to remember that they could also take other data into consideration, such as the physical addresses to which the merchandise purchased online using cryptocurrencies is delivered.
In other words, by making use of Big Data and the support of Artificial Intelligence, they would be able to trace and identify every single cryptocurrency transaction.
This project has been in the pipeline for many years. Amazon submitted their patent request in 2014. Only in April this year was it possible to obtain some feedback on an idea which, according to the spokesperson for the Seattle colossus, could be life-changing for governments, the police and organisations which operate in the financial sector.
Once the data management method has been perfected, it will be possible to keep track of all the currency transactions which take place online on any single day (an estimated volume of around 500 billion dollars per year).
At present, considering that the company has not yet released an official statement, all that remains is to await the development of this technology dedicated to cryptocurrencies and find out how many partners Amazon will manage to find for this project and who they will be.
Translated by Joanne Beckwith
