Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of Blockgeeks
Bitcoin is associated in the popular media with the so-called “darkweb,” shady dealings, and black marketeering. This is an odd fate for what is, by design, the most transparent financial system ever made. Contrary to being hidden, all bitcoin transactions are as public as the town pump, and full transaction records are stored in countless computers for anyone to see.
For instance, I can tell you that on the 26th of October, 2016, the bitcoin address 129TQVAroeehD9fZpzK51NdZGQT4TqifbG, which is the donation address of The Pirate Bay, received 0.0004 BTC from 12DDnANTJ9sozyP1bA2T54MoKBuxeQwFmU. I can tell you that 26 donations were made to The Pirate Bay’s address in the month of October. Not only is this information public, but it is mathematically guaranteed – due to the way the data is cryptographically tangled up with hash functions and Merkle trees, it cannot be forged or tampered with.
There are several online interfaces that allow you to dig around this information. This article will dive into the best-known of them: blockchain.info.
The top of the page is devoted to information about the latest few blocks. (A ‘block’ is the sum of all bitcoin transactions that happen in about ten minutes.) You can see how many transactions were made in each block, the total number of bitcoin sent in all the transactions, and how many minutes ago the block was added to the chain. (Hey, do you think that could be why they call it a blockchain?) The ‘Height’ of the block simply means the number of the block; the first block made when bitcoin launched in 2009 was numbered 0, and that has counted up every 10 minutes since then. At the time of writing, the size of each block is always about one megabyte, and there is an impassioned debate about increasing it to two. ‘Relayed By’ tells you which mining group discovered the block.
You’ll see that the Height is clickable. Clicking on it takes you to a page like this:
Most of the information about this block is pretty self-explanatory, but the ‘Output Total’ and ‘Estimated Transaction Volume’ can be a bit confusing. To understand the difference between these, you have to understand that bitcoin works a bit like cash:
Suppose I want to buy a banana that costs €0.50. I hand the shopkeeper €5, and he hands me back €4.50. Money has crossed the counter twice, €5 once, then €4.50, totaling €9.50, even though the purchase was only for €0.50. In one sense, €9.50 was exchanged, and in another sense, €0.50 was.
It’s the same with bitcoin transactions. A lot of transactions fly back and forth, but the majority of them are just change being given to balance the books. The ‘Output Total’ listed for the block is the total amount of money that crossed the counter, while ‘Estimated Transaction Volume’ is blockchain.info’s guess at the total value of purchases.
If you want to make your finances transparent, you can make your bitcoin address known publicly, allowing anyone to see these records. This might be desirable for something like donations received by a non-profit. Such transparency could also help prevent stealing or corruption within an organization, as no one can siphon funds from the account without it being visible. On the other hand, if you want to keep your financial information private, you can cycle to a new address every transaction, so that no one knows which address is yours. Many wallets support this function.
The IP address is the mining node that first broadcast the transaction to the wider network. Sometimes the ‘whois’ data will tell you where in the world that IP is located. You may ask, “Does this tell me where the transaction was made?”
The correct answer to this question is, “Kinda, maybe. Probably not. I don’t know, man!” In some cases, yes – your transaction request gets picked up by a mining node near you, and that node broadcasts the transaction from its IP address. However, this is not always the case: if the network near you is congested, a more distant node may pick up your transaction. And a significant fraction of bitcoin transactions are made using TOR or another method of hiding the IP. The IP address is certainly useless as a forensic tool to try and track down who is behind a transaction. It is at most an unreliable hint as to where the transaction may have originated.
Clicking on ‘View Tree Chart’ takes you to an interesting visualization of transactions. Look at this one:
In the top chain, you can see that a Korean node broadcast a transaction, sending coins that in turn were sent to a Ukrainian IP address, and so on. Clicking on the yellow/orange bubbles will show the next step those bitcoins took on their adventure through the blockchain. The gray/blue bubbles still have the bitcoin sitting in them now.
These trees can be useful for tracking bitcoins moving through the blockchain. In this tree, you can see the biggest bitcoin heist in history. The tree starts with a massive 400,000 bitcoin in a single address, owned by MtGox. At the time, MtGox was the biggest bitcoin exchange in the world, and those 400,000 bitcoin were worth over 0,000,000. You can see the tree splitting into multiple wallets of exactly 50,000 BTC while still under MtGox’s control (probably in order to store them in secure offline wallets), then a bit later, splitting into a huge number of transactions for small amounts, making it extremely difficult to trace.
This example shows both aspects of bitcoin: transparency and privacy. If MtGox had wanted to assure investors it had assets, it could point to this blockchain data as mathematical proof. When people want to hide their funds, although we can see that *someone* did *something* with these bitcoins; it is impossible to tie it to any individual.
Conor O'Higgins is the founder of Decipher, a creative agency helping design and market encrypted, decentralized tech. After working for years in mainstream internet marketing, he now applies his skills to promoting projects that will create the kind of Web we always wanted.
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