Blockchain Isn't Anonymous: How Chainalysis Links BTC Wallets to Real People

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A Technical Overview of Transaction Clustering and KYC Leaks on Exchanges

Introduction: The Bitcoin Anonymity Myth​

Many people still believe that Bitcoin is an anonymous currency. In fact, Bitcoin is a public, transparent, and fully traceable system. Every transaction is permanently recorded on the blockchain, and modern analytics tools like Chainalysis, Elliptic, and TRM Labs make it possible to accurately link a wallet to a real-world identity.

In this article, we'll provide an in-depth technical analysis of how address clustering works, why KYC exchanges are a major source of leaks, and how one mistake leads to a problem.

Part 1: Bitcoin Architecture – Transparency by Default​

How does blockchain work?​

• Each transactioncontains:
  • Inputs (where the money comes from),
  • Exits (where the money goes),
  • Amounts,
  • Timestamps.
• All data is public — anyone can download a full copy of the blockchain.

Key fact:
Bitcoin is pseudonymous, not anonymous.
The address 1A1zP1eP5QGefi2DMPTfTL5SLmv7DivfNa is not a name, but it can be linked to an individual.

Part 2: Address Clustering – How Chainalysis Builds Profiles​

Operating principle​

Chainalysis uses clustering algorithms to group addresses belonging to the same owner.

Key methods:

1. Common Input Ownership Heuristic
   • If multiple addresses are used as inputs in a single transaction, they belong to the same owner.
2. Change Address Detection
   • When you send $10 from a wallet with a balance of $15, $5 is returned as "change." Chainalysis identifies this address as yours.
3. Behavioral analysis
   • Recurring patterns (e.g. regular transfers to the same address).

Clustering example:​

Code:
Адрес A → отправляет $100 → Адрес B
Адрес A + Адрес C → отправляют $200 → Адрес D
→ Chainalysis выводит: Адрес A = Адрес C

Result:
From a single known address, Chainalysis can reveal hundreds of related addresses.

Part 3: KYC Exchanges – The Main Source of Leaks​

Why are stock exchanges dangerous?​

When you register on Binance, Coinbase, Kraken, you go through KYC (Know Your Customer):

• Upload your passport,
• Confirm your address,
• Link a bank account.

This information is linked to your BTC address when withdrawing or depositing. Therefore, always register accounts under the name of a drop you have access to in case your funds are blocked.

How does a leak occur?​

1. You buy BTC on Coinbase (KYC passed),
2. Withdraw BTC to your personal wallet (Address X),
3. Use Address X to pay the scammer in Telegram,
4. Scammer sends BTC to Binance (KYC passed),
5. Binance reports the transaction to Chainalysis,
6. Chainalysis links Address X to your passport.

Part 4: How You Get Found – A Step-by-Step Guide​

Step 1: Transaction with a suspicious address​

• You send BTC to the seller on a carding forum or in Telegram.

Step 2: The seller transfers to a KYC exchange​

• Even if the seller is a honeypot, he transfers funds to the exchange to legitimize them.

Step 3: The exchange reports to Chainalysis​

• Binance/Coinbase are cooperating with law enforcement,
• Send transaction data to Chainalysis.

Step 4: Clustering and Identification​

• Chainalysis finds your source address,
• Links it to KYC data.

Stage 5: Arrest​

• Subpoena to the exchange → getting your name/address,
• Subpoena on ISP → IP confirmation,

Statistics (2026):

• 95% of crypto fraud problems are related to KYC leaks.

Part 5: Can You Avoid Tracking?​

Impossible solutions:​

• Using one wallet enhances clustering,
• Sending "dust" - modern algorithms ignore small transactions.

Limited measures:​

1. Use Monero (XMR) - a truly anonymous cryptocurrency,
2. Never use KYC exchanges - only P2P via LocalMonero,
3. Never reuse addresses - every payment from a new wallet.

But even this does not guarantee security if you link XMR with BTC.

Conclusion: Blockchain is a mirror, not a shadow​

Bitcoin doesn't hide your actions — it records them forever. And analysis tools are becoming more powerful every year.

Final thought:
If you're not prepared for your transaction to be visible to everyone, don't make it.
Because in the blockchain world, privacy is an illusion, and responsibility is eternal.

Stay aware.