Recently, I noticed a common misconception among newbies who believe that Bitcoin is completely anonymous and private, so that no one can track their finances or identify them. Sorry guys, but today I'm gonna tell you it's not true. Yes Bitcoin gives you the opportunity to be anonymous, but it won't make you 100% protected "out of the box".
I'm not sharing my data
The Bitcoin's privacy is based on the fact that you can create an unlimited number of anonymous identities and there is no personal data required to have Bitcoin wallet. Just generate a key pair and hold the private key. But on the other hand all Bitcoin transactions are public. Yes, no one knows that 148d4kTYZhPeKocd1AVhcytXvh5gL6MLSo is John Doe from Johnson Street. But the fact that you have not told anyone this yet does not mean that someone can not figure it out himself...
How can I be tracked?
Bitcoin is currency (cryptocurrency, but still currency). Why do we use currency?
Yep, for paying...
So, when you are paying for some services, ordering products using Bitcoin the receiver is able to see the address where money came from. Almost all merchants and exchanges (especially US based ones) are required to conduct a verification procedure (KYC) before accepting payment with cryptocurrency.
And since Bitcoin transactions are all public, once your wallet is identified they can always see your current balance and all the transactions you made. It's only a matter of time before the "Big Brother" starts collecting the database of Bitcoin wallets and their owners (Oh, I think they are already doing it).
What if won't share anything?
Even if you're are using services which doesn't require your personal data and paying only for digital goods (otherwise you'll need to provide your address at least) you can still be tracked, at least your public IP address can. Yes, it's still the old good Internet, where each of your actions is associated with your IP address and at least your Internet provider know your Bitcoin address.
F*ck! Bitcoin didn't solved the problem!
Yes, Bitcoins didn't completely solved the problem of anonymity and privacy, but it shouldn't. Bitcoin's main goal is the economics which doesn't require to trust the third parties and share your personal data, and it reached it's goal.
But I wanna be anonymous!
Ok, you can. But not just by using Bitcoin. Contrary to the common misconception Internet is not anonymous by design.
Some coins like Dash, Monero, ZCash may hide sender's address solving the first problem with KYCs, but there is the second one, which may scare non-tech users.
There are technologies like Tor and I2P, which may increase your privacy. But they are not integrated with Bitcoin and overall users will not just use them. The better decision would be just to use more appropriate cryptocurrency providing anonymity "out of the box".
There may are some cryptocurrencies trying to provide maximum anonymity for users, my choice was DeepOnion. I've already posted about this coin earlier talking more about economic. But it's there the main reason I'm using DeepOnion is it's technical features. Currently it only provides anonymous financial transactions and file verification (I'll write more about this later) and anonymous voting is coming, too. And I'm sure in the future there will more be features for things that really needs anonymity.
So, what is the essence of my post?
Bitcoin is awesome, and it's solving many problems, but anonymity is not the main goal, at least for now.
So, if you are a connoisseur of anonymity you have to drop a little deeper :)