From the start, fans of the nascent world of crypto couldn’t stop raving about this new, anonymous, decentralized means of payment. However, a study from the University of Houston (Texas) about to be published demolishes these assertions with figures in support. First observation: at its beginnings, bitcoin was very far from actually being a decentralized crypto.
Only 64 Bitcoin carriers were responsible for the vast majority of trading (by volume) and mining – so according to the researchers “Wealth, income, and resources during this time were highly centralized in the Bitcoin community.” The researchers add that from the start, data analysis techniques likely made it possible to lift the anonymity of the owners of the crypto wallets.
Why Bitcoin has always fallen short of its “decentralized and anonymous” ideal
“Bitcoin seems to have become, completely out of step with public perception, a sort of perfect tool for mass state surveillance”, say the researchers. To reach this conclusion, they only had to look at the public data taken from mining between the launch of Bitcoin in 2009 and the achievement of price parity with the dollar in 2022.
It was then that they realized that everything was more or less concentrated around only 64 individuals. The latter mined together during the period no less than 2,676,800 Bitcoin representing a whopping $84 billion at the current price. According to the researchers, it is even this hyperconcentration which is at the origin of the first successes of the blockchain.
The study points out that this small group seems to have agreed above all to help the blockchain to develop, even though it would have been easy for them to generate easy money at the expense of the project. As for anonymity, the researchers show with techniques of data mining how bad bitcoin is at this.
The study details techniques known as “address-linking” which consist in monitoring the exchanges within ramages of portfolio addresses. After a number of trades, depending on their volumes, currency conversions and purchases in the real economy, it becomes relatively trivial to put a face to a Bitcoin wallet.
Thanks to these techniques, the researchers claim to have succeeded in identifying key players in the early years of Bitcoin. The paper nevertheless refuses to reveal all these identities with the exception of cases already confirmed for a long time, such as Ross Ulbricht (aka DradPirateRoberts creator of the illegal platform Silk Road) or Michael Mancil Brown (aka Dr. Evil).
The police have also repeatedly shown their ability to find owners of crypto wallets. Moreover, monitoring these exchanges reveals much more than one would think because it “uncovers activities that many users thought were protected by pseudonymization”.
The researchers also note that it is “likely organizations like the NSA, China’s Ministry of State Security, and Israel’s Unit 2800 have long had access to this information and have chosen not to betray that ability to preserve the pseudonym myth and reinforce the impression that their transactions were private”.
In other words, the reality around Bitcoin is more subtle and nuanced than one might think. What raise new questions about its genesis, the relationship between the blockchain and intelligence agencies, and of course the real identity of its creator Satoshi Nakamoto.