You think you can't get tracked down for illegal purchases? Think again
Forbes ran a test. An employee made 3 transactions on the darknet and then asked a bitcoin-focused computer science researcher to see what she could dig up with only their Coinbase wallet address to start.
When I asked Meiklejohn to try to trace Forbes' transactions, I started by giving her the Bitcoin addresses associated with our account on the popular Bitcoin wallet service Coinbase--information that could in theory be obtained by any investigating law enforcement agency that sends Coinbase a subpoena. With just that list of my public addresses, she was able to identify every transaction we had made, including deposits to the Silk Road, to competitor sites Atlantis and Black Market Reloaded.
To be fair, Meiklejohn had seen my story on our three experimental drug buys, which obviously informed her guesses. But her ability to identify the Silk Road transaction didn't involve any such cheating. To spend bitcoins on sites like Silk Road, users must first deposit them in their account on the site. Meiklejohn was able to trace Forbes' deposit to our Silk Road account by tying the deposit address to around 200 other addresses, several of which she had identified as associated with the Silk Road in her clustering analysis. After we sent .3 bitcoins to that Silk Road deposit address, the blockchain showed that our bitcoins and small amounts of bitcoins from all of those other addresses--including the known Silk Road addresses--were aggregated together in a 40 bitcoin account. That proves, Meiklejohn explains, that whoever had control of the deposit address we used also must have had control of Silk Road addresses, which means our earlier transaction could be identified as a Silk Road deposit.
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And the final lesson of Meiklejohn's experiment is that Bitcoin users seeking privacy should be careful about revealing their addresses in public or using a subpoenable Bitcoin service like Coinbase that might connect their Bitcoin addresses and real names. If we had taken the extra consideration of shuffling our bitcoin expenditures through other addresses created with desktop-based wallet software, or gone to the further effort of sending them through a bitcoin "laundry service" such as Bitlaundry, Bitmix or Bitcoinlaundry, tracing them would have become much harder or even impossible.
Tumbling is a waste of money. It's generally not difficult to defeat.