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The “Off-ramp Dilemma”: Is Bitcoin Truly Untraceable?

Image Credits: MichaelWuensch / Pixabay.

$2.3 million.

That was the amount recovered by the Justice Department of the Federal Bureau of Investigation (FBI) from a group of online hackers known as “Darkside”, earlier this month. It was also revealed that the federal agency had recouped more than 1 billion dollars in Bitcoin value from investigating chains of fraudulent activities. Also, a Czech national, Tomas Jorikovsky had his assets seized in connection with stealing a $40 million bitcoin equivalent sometime in 2015. This, and a host of others have become a slow but humbling discovery. Yet, it is not only stunning but also a positive oddity.  

Bitcoin is widely recognized as a decentralized, secure, and most importantly, anonymous crypto-currency which involves the exchange of value through a virtual network. It is built in such a way as to shield the identity of persons involved in any bitcoin transaction, and whose activities are registered on a decentralized ledger system known as Blockchain. Put simply, it is a form of digital currency which operates independently of any 3rd party oversight. Thus, due to its anonymous character, bitcoin has been utilized by many to perpetrate and finance an array of crimes ranging from tax evasion, money laundering among others, since its launch in 2009.

As earlier indicated, bitcoin has no physical balances and only makes use of a somewhat “pseudonymous” makeup to facilitate transactions. This makes it susceptible to be used in shady deals to defraud people of their money in bitcoin value. Once this is done, it is nearly impossible to track or even recover the lost sum. Yaya Fanysie, an adjunct Senior Fellow at the Center for a New American Society noted that bitcoin is a choice for scammers just because of its anonymous elements. 

Moreso, we witnessed how the Twitter accounts of influential persons like Bill Gates and Obama were hacked in the past year and millions of people were scammed of their money in a bitcoin scheme. That was the last to be heard of it. 

If the narratives were true, how then have law enforcement agencies been able to break the jinx, recover stolen money from bitcoin and nab criminals? The answer lies in clarifying a prevalent myth that bitcoin is “entirely” untraceable. Since the records of a bitcoin exchange are recorded on a public, transparent and permanent ledger (blockchain), it leaves a trail for these agencies to latch on. This is intensified by using particularly sophisticated programs devised by software companies to do just that. Therefore, when criminals convert their coins to traditional currencies or want to spend the same, they are quickly highlighted for enforcement agencies who make the move on them. So granted, bitcoin is anonymous. However, it is not as private as is widely misconstrued. This leaves room for its traceability, if and when necessary. 

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