Can Crypto Wallets Be Traced? An Expert's Perspective

Cryptocurrency transactions are often seen as anonymous but can crypto wallets be traced? Learn how real-world identities can be linked to specific wallets and transactions.

Can Crypto Wallets Be Traced? An Expert's Perspective

Cryptocurrency transactions are often seen as anonymous, but is this really the case? Can a crypto wallet be traced? The answer is yes, though it's not as simple as it may seem. Since users must reveal their identity to receive services or goods, Bitcoin addresses cannot remain completely anonymous. As blockchain is permanent, it's important to keep in mind that something that is not currently traceable may become something trivial to track in the future. A Bitcoin address alone is not traceable, since there is no identifying information stored directly on the blockchain.

However, there are ways that a person's identity can be linked to specific wallets they own and the transactions they've made. In other words, Bitcoin doesn't store any real-world identities. But it is possible to link real-world identities to bitcoin addresses by using bitcoin analysis software. Bitcoin wallet records can be viewed by the public, but there is no way to identify owners manually.

It's not easy to track the owner of a wallet using “crumbs” of information along the money trail, but researchers can use them. A wallet for Bitcoin does not require proof of KYC (know your customer) identity. The flow of funds in Bitcoin is more traceable and open than that of any current bank, in short. Many people believe that Bitcoin is completely anonymous.

However, it is very likely that a Bitcoin address used in a transaction will be tracked if it is analyzed by forensic experts. Bitcoin transactions are actually pseudo-anonymous because they are not completely anonymous. Bitcoin wallet addresses alone do not provide information about the user. When creating a wallet, users are given an address that allows them to receive coins.

This address is just a long string of numbers and letters, but each one is unique to the wallet. This raises privacy issues on the network, since anyone can log in and see any transactions you have sent from that wallet. Since Bitcoin is based on a public ledger, which is a public ledger, everyone can see the address of their crypto wallet. Wallets contain a collection of public keys that are derived from the private key, which is the key that can unlock the wallet and provide access to your funds. Now, if you can identify the encryption service, you can investigate the identity of each address that interacts with that encryption service if you have implemented KYC solutions.

With Coinpath APIs, you can monitor blockchain transactions, investigate crypto crimes such as bitcoin money laundering, and create crypto forensic tools. Because virtual asset service providers (VASPs), such as cryptocurrency exchanges, require users to comply with know-your-customer (KYC) standards, exchanges provide one Bitcoin wallet per user. You can only access your funds if you have a Coinbase account or if you have a wallet that is not hosted, such as a non-hosted wallet.

Greg Myslim
Greg Myslim

Friendly crypto evangelist. Subtly charming social media lover. Unapologetic web buff. Incurable bacon lover.

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