Bitcoin transaction tracking

Bitcoin transaction tracking

Since the invention of Bitcoin, the virtual currency has been promoted as an innovative way to move money and pay for goods and services anonymously. In reality, Bitcoin is not anonymous, and neither are the transactions made with it. There is a handful of ways how to track Bitcoin transactions. In this article, we'll try to explain the transaction tracking in more detail.

Bitcoins are stored in the wallets of individual users. Every user can have multiple wallets—a desirable feature to keep Bitcoins separate.

The wallets don't contain names, emails, or other private information. Instead, the "name" of the wallet is its alphanumeric code—an identifier (or shortly ID) unique for each crypto wallet.

When you say that the Bitcoin has been sent to another user, in fact, it hasn't been sent. Instead, the Bitcoin has been placed in another wallet. The transaction of moving Bitcoins from one wallet into another is considered successful when a Bitcoin from one wallet ends up in another.

How to track a Bitcoin transaction

Details of all Bitcoin transactions are stored in the blockchain. The transactions in the blockchain do not include the sender's or receiver's name. Instead, they consist of the wallet's unique ID, the balance of Bitcoin addresses, and the history of transfers.

Surprisingly, blockchain is available to everyone, and people from all around the world can access it and track the Bitcoin transactions of other users.

Imagine walking into a bank and finding a board with all the transactions the bank has made. Instead of actual names of people, the board would list unique IDs. Even though tracking the IDs to the real identity is a tricky business, the anti-money laundering, and government agencies proved it's possible.

For the transaction to be considered successful, it has to be saved in the blockchain through blocks. Blocks are the confirmation of the transactions, and there are usually six or more confirmations required for the transaction to be completed.

Miners who process the transactions opt for processing the ones with higher transaction fees first. Therefore, the transactions with higher fees take a couple of minutes, while the transactions with low fees can take even days.

Tracking confirmations

If you are one of the concerned users, tracking enables you to see how many confirmations your Bitcoin transaction has.

Tracking transactions duration

When you want to make the transaction, you can check if the network is up and running. Additionally, you can determine what fee it takes for a transaction to complete and opt for a higher fee if you prefer your transaction to execute promptly.

Tracking stuck transactions

You can check if the transaction is in a standstill. As Bitcoin is gaining popularity, the transaction traffic is increasing, which leads to increased processing time. If you decide to use a lower transaction fee, your transaction can get stuck as miners might prefer other transactions with higher fees instead.

Tracking by hackers

As the value of Bitcoin rose, wallets and crypto exchanges become more appealing to hackers. Dozens of crypto exchanges and an endless number of accounts and wallets have been subject to hacking attacks.

For example, Virtual Private Server provider Linode has been ripped off for tens of thousands of Bitcoins. The same year, Bitfloor was hacked and lost over 24,000 Bitcoins. Even the most significant bitcoin exchange Mt.Gox was hacked in 2014 in a heist, which led to a $460 million loss at that time. The hacking attack left its users penniless and pushed the exchange into bankruptcy.

By using a Bitcoin transaction tracker, a hacker can trace different Bitcoins, as well as the value people are sending and receiving. Hiding against hackers is one of the primary reasons why people choose to mix their Bitcoins.

Tracking by government agencies

It was just a matter of time when the governments around the globe would start tightening their grip around cryptocurrencies. National governments and tax agencies are investing a lot of money and effort to keep up with the development of Bitcoin and its networks.

Some countries even prepared cooperation plans which allow them to exchange information on suspicious activities, such as a recent deal between Russia and Japan.

Other countries are not behind. Governments and institutions around the globe use various tools and crypto analytics software for extracting personal data from crypto traders and Bitcoin transactions.

Recently, both the EU and the UK adopted a joint anti-money laundering (AML) and tax evasion campaign against the illegal activities accomplished through the Bitcoin transactions, also known as the fifth directive.

Tracking one's real identity

While the Bitcoin gained on value, it lost on anonymity. In fact, Bitcoin transactions are not anonymous—they are rather pseudonymous. Your wallet is a unique ID, which is not related to your identity. However, as it is unique, if somebody manages to connect the dots, they will be able to recognize who you are.

If you think that nobody knows the ID of your wallet, think again. If you are sending your Bitcoin towards a particular wallet ID, anyone who knows this wallet ID can track the transaction back to your wallet, and recognize all your past transactions.

Tracking a real identity is like putting a puzzle together. Once you have found the corner of it, it's just a matter of time when the remaining pieces will fall into place.

Bitcoin tracking software

Some of the most popular tools for tracking and analyzing Bitcoin transactions are Chainalysis and CipherTrace. They are primarily on the lookout for the transactions made to buy illicit goods and services on the Dark web.

Lately, Chainalysis shed light on the shocking event that two Secret Service agents were stealing coins from a wallet of a drug dealer while investigating darknet market Silk Road. They pleaded guilty and were sentenced to prison.

Tools you can use

If you are the one who prefers to track your Bitcoin transactions, here is the list of a few handy tools you can use:

  • Block Explorer is a straightforward tool that lets you find transactions by the sender, recipient, or transaction ID.
  • SoChain offers a detailed overview of the transaction and it's completion status. To track the transaction, you need to know the transaction ID.
  • CoinTracking is an application that lets you generate a thorough analysis of your transactions, tax reports, unrealized gains, and profits made.

There are many more applications that function similarly to the above. Many of them are free and available online, or for most common desktop as well as mobile platforms.

Summary

If you are one of those who enjoy tracking your Bitcoin transactions, then you can choose from a handful of tools you can use.

The above applies to Bitcoin, only. If you prefer to stay out of sight and use dedicated privacy coins such as Zcash or Monero, then your options are limited.

In any case, if you prefer to "clean" your Bitcoins and erase their transaction history, then use our Bitcoin mixer, or anonymize your Bitcoins to erase their history entirely.