Well, I haven't posted here before but since this topic relates to some knowledge I actually have I guess I'll contribute.
There is absolutely a "trail" embedded in each bitcoin. It is part of the currency itself. Imagine a list of every transaction automatically added to each dollar bill as that dollar was used to pay for something.
So, that seems alarming at first right? How can this be a great currency for privacy if you are being tracked? The key to all of this is the very essence of what is called asymmetric cryptography. The transaction that occurs between person A and B is recorded but what is recorded isn't your name but an apparently random string of letters and numbers identifying you. The magic of this is that if someone - like LE - intercepts the coin and looks at the transaction history there is no way to reverse the process and identify who belongs to what. Bitcoin uses SHA256 (a variant of SHA-2) to generate its hashes and although a new SHA-3 standard has been accepted SHA256 has yet to be broken.
So, that's the techno mumbo jumbo. I cannot vouch for bitcoin's economics. In fact, I'm very skeptical.
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