Crypto Anonymity: Fact or Fiction?
Cryptocurrency has become much more popular in the last few years for several reasons. It allows users to have more control over their funds, is very profitable to trade, and offers privacy. The latter has been an especially lauded benefit for users who want a break from the traditional financial system.
One of the promises of cryptocurrency is that you can send your funds to whoever you want without anyone knowing and under the full cloak of anonymity. But is cryptocurrency truly as anonymous as some of us would like to think? The answer to this is not as straightforward as some might imagine.
Why Is Crypto Anonymity Wanted?
Many crypto users flock to these digital assets partially because they offer much more anonymity than your average currency or investment vehicle. There are several reasons for this. First, there are people who simply want privacy for its own sake. In our digital world, it can feel as though so much of our lives are visible to others that crypto can feel like an escape from this.
There are also people who turn to crypto for utility purposes and to access certain services anonymously. Take gambling, for example, which usually requires a lot of identifying info to be provided and could face restrictions from traditional banks. Crypto casinos, on the other hand, often allow players to gamble anonymously. Naturally, they’ve become very popular over the years and only seem to be getting bigger.
Cryptocurrency has also been found to be a method of funding for activism and given how activism could be at odds with oppressive governments, the privacy of cryptocurrency could also be useful in such cases.
How Does Crypto Anonymity Work?
To understand whether crypto is anonymous, we need to understand how it works in the first place. Payments using cryptocurrency are confirmed by its underlying blockchain network. When a transaction is confirmed, it is part of a larger block of transactions and recorded on a public ledger. As such, crypto-based transactions are technically public. If you wanted to, you could see all the transactions that have taken place on the Bitcoin network, for example. You would see the amounts that were moved, the wallet address they originated from and their destination.
Now, this doesn’t mean that crypto transactions are 100% open to the public. While you might be able to verify that a certain wallet address has moved a certain amount of crypto, you won’t know who owns the wallet, and they are able to retain some of their privacy. After all, whale-watching sites exist that monitor wallets with millions of dollars in crypto and still don’t know who these people are.
Keep in mind, however, that there are privacy tokens like Monero that offer full-blown anonymity. Its blockchain uses privacy-enhancing technology to ensure that its transactions cannot be traced at all. These privacy coins are the top options for privacy-loving crypto users, but they are the minority of crypto.
Another way that anonymity within the crypto world works is that you can open a wallet while providing minimal information about yourself. If you were opening a traditional bank account, you would need to provide government-issued identification, proof of address, and other sensitive information. With a crypto wallet, you often only need a username or email and a password. Even the wallet provider might know very little about you if you don’t want them to.
So, in essence, your crypto transactions will almost always be public but details like your name and location can be kept private. It is not 100% anonymous but is much more than you will find in the traditional financial system.
Conclusion
Anonymity has and will probably continue to be one of crypto’s biggest strengths. Users can move their funds while keeping their identities a secret and this remains one of its selling points. Cryptocurrency is not 100% except in the case of privacy tokens, but it does give users much more control over their identity than they would get elsewhere.
Anyone getting into crypto for privacy benefits should consider what they intend to do with the crypto and what platforms and tokens would best meet their needs.
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