Usually, when some bad guy do something, he requests a payment using Bitcoins. Given that the demanded payment is not common, wouldn't be easy to trace the attackers when they retrieve the money back? Assuming that the bad guy wants to retrieve all the money.

For example:

A) X requests 1000000 BTC.

B) Y is monitoring all transactions and notice about a payment of 1000000 BTC to qwerty

C) Y reports to all banks about the address qwerty, as it looks suspicious due to that recent income.

D) X goes to Z to withdraw the money, but as Z knows about that address, it blocks the funds and call the police.

  • What is "X goes to Z"? Who is Z in this example? Commented Oct 27, 2015 at 23:05

3 Answers 3


All bitcoin transactions are actually traceable by protocol definitions. Basically the blockchain is a long list of all the transactions throughout the history of bitcoin. The problem arises when trying to pinpoint who owns the address the transactions are being sent to. You can create as many BTC addresses as you want. Also with services like coin join and tumbling you can make tracing the coins much harder. Basically what your saying is possible but there are ways to easily mitigate any tracing being done.

The "bad guy" requests payment to a certain BTC address, they then tumble the coins through multiple intermediary addresses. At this point it's pretty hard to trace where the money actually ends up. Tumblers have built in features that convert a 100 BTC transation into multiple 10 BTC transactions that all end up at the same address in the end, making you tracking idea much harder. They also have features to delay a transaction making it harder to trace on the way out since you are expecting the transaction to happen immediately and instead it was delayed by a random increment of time. Tumblers also institute a random fee usually varying from 1-3% meaning the value coming out of the tumbler is not going to be easily traced to the value going in.

  1. Wallet (A) is sent 100 BTC
  2. Wallet (A) tumbles 100 BTC over 10 transactions of 10 BTC increments to wallet (B)
  3. repeat until satisfied.

Since the attacker can create as many BTC addresses as they want they can easily hide the trail of where the BTC is being sent.

Basically bitcoin transactions are traceable, there are just ways to make it not worth attempting to trace.


Mixer services don't send out the same coins they take in. For example, at a physical bank, you deposit ten $100 bills. When you come back next week to make a withdrawal, you won't get those same ten bills back. The bank gives you different ones.

Similarly, a bitcoin mixing service will accept say, 1000 BTC, and then using other BTC they already have on hand, will make say, ten 100 BTC payments to the destination address. The traceability is lost.


The fundamental problem is this:

  1. Alice steals some Bitcoins.

  2. These Bitcoins are sent to Bob.

  3. These Bitcoins are sent to Charlie.

  4. Charlie tries to spend the Bitcoins.

We now have two possibilities:

  1. Charlie could be an innocent person who just happened to get the Bitcoins Alice stole.

  2. Alice, Bob, and Charlie could all be the same person.

This is why if you have a $20 bill stolen from you, you can't report the serial number stolen. A person who deposits that $20 bill at a bank might be the guy who stole it or might be an innocent person who just happened to receive that bill.

And if you think about it, if we had such a system, people would have to get rid of cash as quickly as possible. If cash sat in your drawer or wallet, you'd be taking a risk that some prior owner of that bill would report it stolen and cause you headache when you tried to spend or deposit it. So we don't have any tracking of stolen dollar bills.

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