While I was in the Middle East I would often use the Tor onion browser to access websites that were not permitted by the host country I was in. I used the browser because it was (a) free, (b) seemingly charitable with free speech objectives, and (c) had a reputation of being the go-to for journalists and others who needed to circumvent state controls on internet browsing to file reports, and so on. The historical origins of the Tor program – that it was developed by the U.S. Naval Laboratory – were never an issue for me. We’re all on the same side, right?
Since then, there arose a number of Virtual Private Network ‘tunneling’ services that offer ‘secure’ access online. When people like me think of secure online access, the marketing soundbites probably resonate: free from government oversight, hackers (IP sniffing), unsecured Public Wifi, online activity, and tracking (E.g. see: https://www.anonymizer.com/how-it-works).
While most of these benefits hold true, one thing is assured – if you use any of these VPN or Tor-like services, the government of the country you are in, and the United States, have complete oversight of your activities.
The Domain Name Service (DNS) system is essential for the proper functioning of the IP/TCP protocol, and tunneling through VPNs requires TCP/IP to operate, even if other address information is buried within the so-called data component of the data packages. The government of the country you are in has complete visibility of all DNS computers on the network that may be connected to the internet backbone; DNS servers are the lifeblood of the internet and governments block sites at their discretion via their DNS. In other words, if you can access Tor or any other VPN service, the government is purposefully allowing the internet traffic from your computer to the IP address of that Tor/VPN server. You may log-in through a Tor/VPN application, but at the network level you are still logging in via that same DNS host. (This does not apply to wifi traffic security, since we are not talking about encryption security here. But who cares, since the government can monitor you from the comfort of the DNS rather than the street).
So what is happening then?
The characteristic of all these VPN services that ‘mask’ IP addresses is a process similar to DNAT/SNAT. Once the data from your IP address hits the Tor/VPN server, a DNAT/SNAT process (part of an IP routing service) masks your IP address (randomly), which means that whichever site or recipient you are sending data to does not know your IP address. Fine. But everything on the other side of that network connection – i.e. from your IP address to the IP address of the VPN/Tor service (and on the other side of the network too, before it leaves the country you are in) – is visible.
On the way back, all the data is translated back to your personal IP address by the Tor/VPN server and sent back to you by the government-monitored DNS server.
(In rare cases you might have the Ethernet protocol routing to a DNS. Nevertheless, the UDP protocol is not generally encrypted, and any access to the DNS server will be observed by government.)
This is fairly astonishing. What does it mean?
It means that if you use Tor or a similar VPN service, all of your data can be viewed by government as soon as you send it from your computer into the network. In countries were Tor or similar services are not allowed access to Tor/VPN, access is a government phish, since the government must permit your access via their internet backbone to the Tor/VPN server via DNS (regardless of any ‘tunneling’). The government thus can monitor any IP address logging into Tor/VPN services ; they know what IP address you have selected as a destination IP address; and they can track all the data back and forth at their leisure.
The result is that if you want to truly hide who you are when sending data from a country, you must use additional measures. You must utilize different computers using different IP addresses than your own, principally from publicly available sources. You should also use software masking techniques such as boot loading from Linux Tails via USB from your intenet café computer.
What does this mean for Bitcoin?
The bitcoin phenomenon is staggering. Bitcoin – and similar currencies – are fiat currencies fundamentally built on the energy expended from the processing power to solve the encryption algorithms associated with securing each transaction. Beyond that, their value as publicly traded commodities is largely sentiment driven. Their values seem to be skyrocketing. Why might that be?
On the one hand, bitcoin and similar currencies are fully transparent, transactional systems. Each transaction of each bitcoin (or part of bitcoin) is preserved – in perpetuity – on a public ledger that can be inspected by anybody. This has enormous implications for anti-corruption policies, since each transaction can be viewed linking two unique bitcoin ‘wallets’ to a time, date, and amount of bitcoins. (E.g. see https://blockchain.info/) . Such ideas have important implications for auditing and for charitable sectors (amongst others), as money can be assured to reach intended recipients.
Despite the audibility, Bitcoin has seemingly become a favoured route for money laundering, shifting money overseas (capital flight), and paying for illicit goods and services. The main reason this is because these users were able to access the bitcoin exchanges via Tor/VPN, and thus, these users believed, they had anonymity.
Hate to break it to those who might be taking advantage of this idea.(And extracting from the fact that Tor was developed by the U.S. Naval Laboratory):
With standard big data mining techniques on the public ledgers, bitcoin wallet value can trivially be assessed – along with each transaction associated with each wallet. See above for anonymity implications.
Presumably with the jump in value, the IRS, Inland Revenue and so on are now taking more of an interest (if they weren’t already) in wallet size… Unless these users were taking effective steps to dissociate their physical person (or persons connected to them) with IP addresses used to access the internet via a Tor/VPN browser (e.g. by disguise in an Internet café), they can be identified by authorities, along with what they have in their wallets, what they spent their money on, and/or who they received their money from.
To my mind, it seems to be the biggest government heist in history.
The upshot: the anonymization service was a good game played for a while by online ‘tunneling’ services, it still has a use, but not for masking currency transactions. The Tor/VPN service is a ruse by host governments to phish for people who wanted to bypass their systems.