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Revelations about the US government's internet surveillance programme Prism appear to have sent the price of bitcoins plummeting.

Specifically, the unveiling on 9 June of 29-year-old Edward Snowden, a former National Security Agency (NSA) contractor, as the source of the leak coincided with a sudden drop in the value of bitcoins, as this CoinDesk article details.


Like any freely traded commodity, the change in Bitcoin price reflects the sentiments of the market, individuals buying and selling the goods.

The price has since recovered slightly, but with some misguidedly suggesting Bitcoin as a Prism-proof way of conducting transactions, the sell-offs could be a sign that users are concerned about the US government's ability to track their bitcoins.

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Despite the popular misconception, Bitcoin is not truly anonymous. Granted, it's easier to trace a purchase made using a debit card and Amazon.com than one made using bitcoins, but as some businesses are discovering, the bitcoin infrastructure relies on public metadata about transactions. Metadata that could be used to help identify you. "Bitcoin transaction privacy is really complicated," Gaven Andresen, chief scientist with the Bitcoin Foundation, previously told Wired.com. "If you want to be sure that your transactions are going to be private, then you probably need to hire a cryptography PhD to analyse your system."

Every Bitcoin transaction is recorded publicly on the Bitcoin network. This ensures that every Bitcoin is accounted for, and that people aren't able to spend bitcoins that don't belong to them. If you know a person's Bitcoin address, which is analogous to an email address, it's possible to track every transaction linked to that address.


Vice-versa, patterns of transactions could help to begin to identify individuals. In 2006, anonymous AOL search data was processed to identify a specific user, a 62-year-old widow from Georgia, US, the New York Times reported.

Of course, Bitcoin data is different to text-based search data, but as this 2011 study by software developer Martin Harrigan and Fergal Reid shows, it's still possible to de-anonymise the Bitcoin network. "[A] straight-forward passive analysis of public data [...] allows us to de-anonymise considerable portions of the Bitcoin network," they wrote in a blogpost detailing the study. "We can use tools from network analysis to visualise egocentric networks and to follow the flow of bitcoins. This can help us identify several centralised services that may have even more details about interesting users."

The study specifically addressed supposedly anonymous donations to Wikileaks, with the authors saying, "our point is that, by default, a donation to WikiLeaks' 'public' public-key may not be anonymous." "It is important that users do not have a false expectation of anonymity," they conclude.


Why Bitcoin, currency of choice on the dark web, would be of interest to an intelligence service like the NSA is straightforward.

The kinds of activities that people engage in when they think they're not being watched are exactly the kinds of illegal, or political, activities a government would want to stamp out or monitor.

And while it's possible to use bitcoins more or less securely, all you need to do is slip up once for your Bitcoin identity to be connected with your real life identity. At some point you might want to convert those bitcoins into traditional currency via a Bitcoin exchange. And those real world portals are not beyond the law.