Anonymity and privacy in bitcoin escrow trades

Abstract

As a decentralized cryptocurrency, Bitcoin has been in market for around a decade. Bitcoin transactions are thought to be pseudoanonymous, however, there were many attempts to deanonymize these transactions making use of public data. Escrow services have been introduced as a good private and secure way to handle Bitcoin payments between untrusted parties, where the escrow service acts as the arbitrator in case of disputes. In our work, we examine the privacy and anonymity level of trades done through one of the Bitcoin trading websites offering such escrow services and how using the data they provide for open access through their APIs along with some public scraped data can compromise the privacy and anonymity of trades in some cases. In this paper,we suggest some heuristics and methods to deanonymize Bitcoin escrow trades done on LocalBitcoins.com, a well-known escrow service used especially by people seeking anonymity, and link them to suspect sets of Bitcoin transactions in the blockchain and suspect sets of users. Our research spots privacy weakness points of using escrow services that affects the privacy and anonymity of their users trades and identities. It also shows how tracking down criminals activities across escrow services is possible even without any authority on the escrow service making it less attractive for criminals to use cryptocurrencies and leading it to gain more trust.