In the aftermath of the revelation of PRISM, the NSA spying program that collects user data from nine major U.S. tech companies, many have highlighted alternate options from organizations that are not known to be cooperating with government surveillance efforts.
Among those alternatives, Bitcoin has been pegged as a more private payment option. At Prism-Break.org, which lists alternatives to all the services that fall under the PRISM umbrella, Bitcoin is the only listed alternative to online payment services, such as PayPal and Google Wallet.
But users should know that Bitcoin is not as anonymous as it seems, and while there is no evidence that Bitcoin services are collaborating with federal agencies, information on Bitcoin transactions is readily available to them on the Internet.
A 2011 study conducted by University College Dublin researchers Fergal Reid and Martin Harrigan concluded that although anonymity has been one of Bitcoin's main selling points, "Bitcoin is not inherently anonymous."
"We have performed a passive analysis of anonymity in the Bitcoin system using publicly available data and tools from network analysis," the researchers wrote in a blog post. "The results show that the actions of many users are far from anonymous. We note that several centralized services, e.g. exchanges, mixers and wallet services, have access to even more information should they wish to piece together users' activity. We also point out that an active analysis, using say marked Bitcoins and collaborating users, could reveal even more details."