Bitcoin is a digital currency and electronic payment system operating over a
peer-to-peer network on the Internet. One of its most important properties is
the high level of anonymity it provides for its users. The users are identified
by their Bitcoin addresses, which are random strings in the public records of
transactions, the blockchain. When a user initiates a Bitcoin-transaction, his
Bitcoin client program relays messages to other clients through the Bitcoin
network. Monitoring the propagation of these messages and analyzing them
carefully reveal hidden relations. In this paper, we develop a mathematical
model using a probabilistic approach to link Bitcoin addresses and transactions
to the originator IP address. To utilize our model, we carried out experiments
by installing more than a hundred modified Bitcoin clients distributed in the
network to observe as many messages as possible. During a two month observation
period we were able to identify several thousand Bitcoin clients and bind their
transactions to geographical locations
