How a 27-Year-Old Codebreaker Busted the Myth of Bitcoin’s Anonymity

Billionaire Mike Novogratz Still Believes Bitcoin Will Reach $500,000

JUST OVER A decade ago, Bitcoin appeared to many of its adherents to be the crypto-anarchist holy grail: truly private digital cash for the internet.

Satoshi Nakamoto, the cryptocurrency’s mysterious and unidentifiable inventor, had stated in an email introducing Bitcoin that “participants can be anonymous.” And the Silk Road dark-web drug market seemed like living proof of that potential, enabling the sale of hundreds of millions of dollars in illegal drugs and other contraband for bitcoin while flaunting its impunity from law enforcement.

This is the story of the revelation in late 2013 that Bitcoin was, in fact, the opposite of untraceable—that its blockchain would actually allow researchers, tech companies, and law enforcement to trace and identify users with even more transparency than the existing financial system. That discovery would upend the world of cybercrime. Bitcoin tracing would, over the next few years, solve the mystery of the theft of a half-billion dollar stash of bitcoins from the world’s first crypto exchange, help enable the biggest dark-web drug market takedown in history, lead to the arrest of hundreds of pedophiles around the world in the bust of the dark web’s largest child sexual abuse video site, and result in the first-, second-, and third-biggest law enforcement monetary seizures in the history of the US Justice Department.

That 180-degree flip in the world’s understanding of cryptocurrency’s privacy properties, and the epic game of cat-and-mouse that followed, is the larger saga that unfolds in the book Tracers in the Dark: The Global Hunt for the Crime Lords of Cryptocurrency, out this week in paperback.

All of it began when a young, puzzle-loving mathematician named Sarah Meiklejohn started to pull out traceable patterns in the apparent noise of Bitcoin’s blockchain. This excerpt from Tracers in the Dark reveals how Meiklejohn came to the discoveries that would launch that new era of crypto criminal justice.