Every transaction that occurs within Bitcoin is stored in a public ledger. This allows anyone and everyone to verify that someone does actually hold coins, and it allows for tracking them back to their roots – all the way back to when the first block was mined. But this completely visible blockchain brings with it both good and bad aspects, and it completely changes the game when it comes to finance.
The Good – Public Verification, Decentralization, and Historical Checking
Balances in Bitcoin are visible and verified through the blockchain, which is essentially like a database that tracks transactions between addresses and creation of new coins. As new transactions are verified by miners, they are cemented, and are visible to everyone. Some sites even bring this to us in a human-readable fashion, such as Blockchain.info. Using this type of site, you can quickly look at any transaction from the sender’s address, the receiver’s address, the block number it was mined in, or the transaction ID itself. Along with this, it also has a streaming list of all transactions occurring, as well as charts and other tools.
The pro to all of this is that you can check to verify what users claim is true. For example, if someone says they want to purchase an item from you for 50 BTC, they can sign an address (requiring their private key, therefore confirming they can access the funds), you can verify that the signature matches that address, and look at the blockchain to see how many coins it currently holds. It’s a quick, easy, and guaranteed way to prove ownership.
Along with proof of ownership, you can also easily track both where coins came from and where they went. Due to the lack of actual identities stored within the blockchain, you are not able to get personal information on someone, but trails are definitely created, and they can usually be followed to see where they end up. If a site/person claims they lost access to their coins, for example, you can watch the address and see if they ever move – if they do, you have confirmation that they were being dishonest. This is also done in other high-profile situations, such as watching Satoshi’s coins to see if they’re ever touched. And if they are, you can be sure that it will make headlines.
The Bad – Information Leakage and Coin Tainting
If you’re not careful when using cryptocurrencies, it’s easy to accidentally leak some important information. If you buy coins on Coinbase, for example, and then do something nefarious, the information can be subpoenaed and it can be used to track exactly what happened with the purchased coins. At the same time, there is a concept of “coin tainting,” which refers to coins that have been marked like fiat – money that is considered illegitimate for one reason or another. Coinbase is notorious for marking some coins as tainted and then shutting down accounts of anyone who comes into contact with them, despite the fact that they can be obtained from anywhere: a sale you made, a purchase of coins, an exchange, etc. Using blockchain analysis, they are able to follow every coin on their site back to their roots, seeing if any are on their own “blacklist” of sorts. While there are a few other cases of other sites doing similar things, they are very rare and are usually only in specific situations and against very specific coins that are assumed to only affect the wrongdoers, rather than everyone as a whole.
Fun, Visual Ways to View the Blockchain
To conclude, there are a couple of neat websites that can be used to see the blockchain visually (and audibly)! Both of these sites are taking transactions live as they pass through, so should have approximately the same results (though it is worth noting that due to technical specifics behind nodes, they may not both be exactly the same and will usually have delays between them).
BitListen: This site lets you see bubbles for transactions, and it plays music. You are able to customize some of the music settings to match what you’d like to hear, and it’s just a soothing, random music creator.
BitBonkers: This is a visualizer of the actual blocks and transactions. Marbles are dropped on a platform whose sizes depend on the transaction sizes themselves, and large blocks are dropped when they’re mined. It comes complete with physics, and it’s in 3D.