University of Luxembourg researchers have published a paper that finds the Bitcoin cryptocurrency is not as anonymous as you think, and overcoming Bitcoin anonymity is neither hard nor expensive.

The paper, presented to the Association of Computing Machinery conference by Alex Biryukov, Dmitry Khovratovich and Ivan Pustogarov, found that a basic investment of a “few computers, ” along with a budget of $1867 for servers and traffic charges was enough to start unmasking Bitcoin user addresses with up to 60 per cent accuracy.

The report’s abstract explains that the methodology presents an “efficient method to deanonymize Bitcoin users, which allows to link user pseudonyms to the IP addresses where the transactions are generated.”

The techniques are said to work for “the most common and the most challenging scenario when users are behind NATs or firewalls of their ISPs” delivering the ability to “link transactions of a user behind a NAT and to distinguish connections and transactions of different users behind the same NAT,” according to the researchers.

Tor, though, is not a barrier to the method: “the natural countermeasure of using Tor or other anonymity services can be cut-off by abusing anti-DoS countermeasures of the Bitcoin network.”

The paper describes the four steps in the process:

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1. Getting the list of servers. This list is regularly refreshed.
2. Composing a list of Bitcoin clients for deanonymization.
3. Learning entry nodes of clients from when they connect to the network.
4. Listening to servers and mapping transactions to entry nodes and then to clients.

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The method delivered an estimated success rate is between 11 percent and 60 percent depending on how stealthy an attacker using the method wanted to be.

The researchers propose a number of counter measures, including preventing Tor blacklisting, and blurring the connectivity footprint.

The full paper is available for download here.

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