Skeptic’s lens: Bitcoin's fungibility issue

One of the key attributes of money is fungibility. Money is fungible if individual units are essentially interchangeable, each of its parts indistinguishable from any other. But as blockchain analysis companies continue to improve, Bitcoin’s fungibility is being threatened.

Bitcoin is pseudo-anonymous — all transactions are recorded on a public ledger. Blockchain analysis companies (Chainalysis, CipherTrace, Elliptic etc.) have gotten very good at de-anonymizing the transactions. They practice the data sharing model where they collect the transactional data from all the businesses they work with. This also means that the more clients they service, the better, or rather the more precise the product gets. The blockchain analysis firms can then fairly accurately score each transaction and asses the corresponding risk.