Dangers of Bitcoin for MA: Risks to Undercover Operations
Bitcoin seems ideal for performing covert online transactions; the digital currency lacks identification requirements and remains popular among both legitimate and criminal web marketplaces.
However, Bitcoin could actually put you at risk of exposing your alias. To understand why, and to see how to prevent this kind of mission failure, we need to unpack how Bitcoin functions.
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Ownership of coins are recorded by a distributed public ledger, or blockchain. The blockchain contains a history of every previous bitcoin transaction. Anyone can access the blockchain and identify source destinations for every transaction. Third-party tools automate the analysis of the blockchain to understand coin transfer patterns.
While bitcoin accounts lack real-world identifiers, creating, acquiring, and using bitcoins can leave traces which could attribute them. Before you can spend bitcoin, you must either mine or purchase them from some source. Information concerning this initial sourcing is easily discoverable, putting your alias at risk. When you make purchases with coins, the merchant who provided those products or services maintains information about the bitcoin wallets used to buy their items.
Thus, you could be identified in two ways: through your initial bitcoin acquisition, or the backtracking of any coin purchases.
For example, if you utilize a single wallet to buy products from three different merchants using three differing aliases, any transaction you make with one merchant could be linked back to that same wallet. Once your wallet has been identified, analysis of the blockchain will reveal any other purchases you might have made while undercover. This will strongly tie those aliases together.
Creating multiple wallets to obscure the flow of transactions might seem like a solution to this problem. Unfortunately, those diversified transactions still remain traceable to the single initial source wallet.
One method to prevent the tracking of your coin trail involves completely separating transactions for each alias. If you operated under three different aliases, you would purchase bitcoins three different times to complete those three separate transactions. Each transaction would appear on its own chain, ensuring your three aliases wouldn’t link back to the same bitcoin wallet.
Bitcoin tumblers offer another potential solution for obscuring transactions. Tumblers take coins from multiple sources and reassign them randomly, which prevents the coin owners from being discovered. However, tumblers can be costly, and tumbler operators aren’t always trustworthy.
Instead of bitcoins, you might also utilize other cryptocurrencies, such as Zcash and Monero. However, those privacy-focused cryptocurrencies are not widely used—making transactions difficult to hide—nor are they accepted by most legitimate merchants.
Although these potential risks might dissuade you from utilizing bitcoin during covert online operations, it is sometimes necessary. By separating your bitcoin purchases onto different chains, you can avoid alias exposure. With the proper precautions and rigorous OPSEC, your mission objectives remain feasible, even while manipulating bitcoin.
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