The Relationship Between Bitcoin and Illegal Transactions
Regulators around the world are usually skeptical and pessimistic about Bitcoin, mostly because of its supposed role in illegal activities and transactions. While it’s true that Bitcoin has been used for this purpose, the argument against it fails to recognize that Bitcoins are mostly used for normal transactions and are not as anonymous as you might think.
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Implications that Bitcoin is for Illegal Transactions
The biggest recorded case of Bitcoins being used for illegal transactions was the exposure of the Silk Road website on the dark web. This site was used for selling drugs, firearms, and other illegal items. Transactions on the site were completed using Bitcoins, which led many people to think that this virtual currency was tied too strongly to illegal uses.
What Makes Bitcoins Attractive for Illegal Activity
If you asked the average person (who had some idea of what Bitcoin is) about why Bitcoin can be used for illegal purchases, you would probably hear that it’s because the transactions are anonymous. Bitcoin has a reputation for being untraceable and completely anonymous. However, this is not entirely accurate.
Bitcoins are sent to - and received from - online wallet software. These wallets are not connected to your personal information. In this way, Bitcoin transactions are anonymous. Where they fail to be anonymous, on the other hand, is the fact that they can still be used to trace the IP addresses of senders. Sometimes, this uncovers personal information that can be connected to a particular wallet.
It is possible for those who want to remain anonymous to employ tactics that will help reduce the risks of transactions being traced, yet the biggest problem that exists for Bitcoin anonymity is that the blockchain records all transactions which take place with any Bitcoins in the entire world. As methods to improve anonymity increase, there is an equal or greater increase in methods to reduce anonymity and trace transactions.
Why This is a Bad Argument
The argument that Bitcoins are a very useful currency for illegal transactions is not a solid argument, because cash currency is still the most effective and most widely used method for conducting illegal transactions. Cash is - and will continue to be - untraceable when exchanged between two individuals. Whereas bitcoins leave a mark when they are transferred, cash leaves no mark unless someone takes the time to record it and keep the record safely.
So, can Bitcoins be useful for illegal transactions? Yes. However, they are not the best method for making illegal transactions and they will never be a fully anonymous way to conduct shady business. Cash will probably hold that position for the foreseeable future and will continue to be used for most illegal transactions around the world.
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