Privacy on public blockchains: what is visible

Many people still describe Bitcoin as anonymous money. That description is wrong. A public blockchain is an open ledger: anyone with internet access can read every transaction ever made, with the amounts, times and addresses involved. What does not appear there is the name of the person behind each address.

This article explains what kind of privacy this design offers, where it fails and how the law treats the subject in Brazil and the United States. It describes concepts and limits; it does not teach how to hide transactions or get around controls. The situation described is as of October 8, 2026.

Pseudonymous is not anonymous

On the Bitcoin blockchain, you do not open an account with your name and CPF (Brazil’s individual taxpayer ID). You control addresses, identifiers derived from cryptographic keys. An address works like a pseudonym: it does not say who you are, but everything it does stays associated with it.

The 2008 Bitcoin whitepaper describes this choice directly. In banking, privacy comes from limiting access to information to the parties involved and the bank. Since Bitcoin must announce all transactions publicly, privacy would have to come from somewhere else: keeping public keys unlinked to identities. According to the paper, the public can see that someone is sending an amount to someone else, but without knowing who they are, much like the tape of a stock exchange, which shows the time and size of trades without revealing the parties (Nakamoto, section 10).

Bitcoin.org, a community-run site, sums up the point with a different emphasis: Bitcoin is often perceived as anonymous, but it is highly transparent. The balance and history of any address can be looked up by anyone, and that record is permanent. What is hard to trace today may become easy tomorrow (Bitcoin.org, Protect your privacy).

The case of Ethereum

On Ethereum, exposure tends to be even greater. The network uses an account model: each account has a balance and a transaction counter recorded in the network state (ethereum.org, Ethereum accounts). In the editorial team’s observation, it is common for a person to use the same account for a long time, to send, receive and interact with contracts, which concentrates much of their financial life in a single address.

The official documentation acknowledges the problem. The ethereum.org page on privacy, updated in September 2026, states that Ethereum is, by design, a public and transparent ledger, which is a privacy challenge in itself. The same page cites zero-knowledge proofs, which make it possible to prove something is true without revealing the underlying data, as one of the technologies for dealing with this (ethereum.org, Why digital privacy matters).

How an address leads back to you

The pseudonym only protects you as long as no link ties it to your identity. Those links appear more easily than you might think:

• Exchanges and stores. To buy crypto on a regulated centralized exchange, you identify yourself. When you withdraw to your own wallet, the exchange knows which address it sent to. The same applies to purchases that require a delivery address.
• Public disclosure. An address posted on social media, a website or a donation request is linked to whoever posted it.
• Network. The computers that relay transactions may log IP addresses, according to Bitcoin.org.
• Reuse. Using the same address many times gathers your whole history in one place. That is why Bitcoin.org recommends a new address for each payment.

The whitepaper already anticipated a technical limit. Generating a new key pair for each transaction helps, but multi-input transactions necessarily reveal that those inputs were owned by the same owner. And if the owner of one key is revealed, the links can expose other transactions belonging to them (Nakamoto, section 10).

Researchers turned this observation into a method. In 2013, a team from the University of California, San Diego and George Mason University clustered Bitcoin addresses based on clues of this kind and, by combining the clustering with transactions the researchers themselves made at exchanges and stores, associated about 1.9 million public keys with real-world services or identities (Meiklejohn et al., A Fistful of Bitcoins). The method and its limits are explained in Transaction tracing and on-chain analysis.

Why the transparency exists

Transparency is not an accidental flaw. In a network without a central authority, every participant needs to check that no one is spending the same coin twice. For that, transaction data has to be available for verification. Bitcoin solved the problem by publishing everything and protecting only the link between address and person.

This design cuts both ways. It allows anyone to audit the issuance and circulation of coins without relying on a bank. And it also allows companies, governments and criminals to study the financial behavior of anyone who has been identified. A scammer who knows the balance of an address linked to you has more information to plan an approach; see how these attacks work in crypto scams.

Privacy tools and their limits

There are technologies that try to reduce what the blockchain exposes. Broadly, they fall into three groups:

• Mixers, services or contracts that pool deposits from many people and pay out the amounts in a way that makes it harder to link inputs and outputs.
• Cryptocurrencies with protocol-level privacy, which hide part of the transaction data by default or optionally.
• Cryptographic proofs, such as zero-knowledge proofs, which make it possible to validate a rule without showing the data. They are also used for decentralized identity and verifiable credentials, where you prove an attribute, such as being of legal age, without handing over the whole document.

None of them is an absolute guarantee. Usage mistakes, network metadata and the moment money returns to an identified exchange keep creating links. And using these tools has regulatory consequences, as the best-known case shows.

The Tornado Cash case

On August 8, 2022, the U.S. Department of the Treasury sanctioned Tornado Cash, a mixer that runs on smart contracts on the Ethereum network. According to the Treasury, the service had been used to launder more than US$ 7 billion since 2019, including more than US$ 455 million stolen by the Lazarus Group, a hacking group linked to North Korea. The statement acknowledged that the service’s stated purpose was to increase privacy, but said criminals frequently used this type of tool (U.S. Treasury, 2022).

Users challenged the sanction. On November 26, 2024, the Court of Appeals for the Fifth Circuit ruled that Tornado Cash’s immutable smart contracts, which no one, not even their creators, can alter or remove, are not the “property” of a foreign national. Therefore, they could not be blocked under the economic emergency law used by the sanctions agency, OFAC, which had exceeded its authority. The court noted that the government’s money laundering concerns are legitimate and that it would be up to Congress to update the law (Fifth Circuit, Van Loon v. Department of the Treasury).

On March 21, 2025, the Treasury lifted the sanctions on Tornado Cash, citing its review of the “novel legal and policy issues” involved. In the same statement, it said it remained concerned about money laundering linked to North Korea and urged caution for those transacting in the United States (U.S. Treasury, 2025). The Fifth Circuit ruling itself notes that the United States indicted two of the project’s developers for money laundering; lifting the sanction did not address those charges.

The editorial team’s reading: the case did not declare privacy tools legal or illegal in general. It dealt with a specific point, the limits of a sanctions law when faced with immutable code. Anyone who uses or develops this type of tool remains subject to each country’s anti-money laundering rules.

And in Brazil

Brazil’s General Data Protection Law (LGPD) defines personal data as information relating to an identified or identifiable natural person. Anonymized data falls outside the law, except when the anonymization can be reversed with reasonable effort, taking into account cost, time and available technology (LGPD, arts. 5 and 12).

The law does not mention blockchain. In the editorial team’s assessment, however, the criteria in art. 12 weigh against treating an address as anonymous data when it can be linked to a person by reasonable means, such as an exchange’s customer records. The law also says that data used to build the behavioral profile of an identified person may be considered personal (art. 12, § 2). The exact classification depends on the case, and the editorial team has not found specific guidance on it from the national data protection authority.

On the business side, Brazilian exchanges are required to identify customers and report suspicious transactions, as explained in anti-money laundering on crypto platforms. Privacy on the blockchain therefore coexists with a financial system that knows who you are on the way in and on the way out.

Key takeaways

• Everything an address does on a public blockchain stays visible forever. The only protection is the lack of a link to your name.
• That link appears easily: exchange registration, published addresses, reuse and the patterns of the transactions themselves.
• Privacy tools exist and are evolving, but they do not eliminate links to the real world and are subject to anti-money laundering and sanctions rules that are still being tested in the courts.