In 2008, Satoshi Nakamoto released the ingenious paper called “Bitcoin: A Peer-to-Peer Electronic Cash System”, laying the foundation for fundamental change in the execution of global payments and the transformation of entire industries as concerns data management. Bitcoin is a revolutionary force in banking and technology, and even if it’s not the first cryptocurrency, its popularity can’t be disputed. If you’re looking to buy Bitcoin with bank transfer, you should use a reputable exchange and wallet provider. Your funds, private data, and account should always be safe. Trading with a mobile app helps you find the best available price on the market in real time.
Cryptocurrency is the best way to move money around anonymously. Units of value built on blockchain technology, which enables complete decentralization, can function in the absence of oversight and control from a governing body. While it’s primarily perceived as an anonymous payment system, Bitcoin is actually the most transparent blockchain network worldwide, so explorers can map activity on the blockchain. Having said that, it’s important to stress that Bitcoin supplies acceptable levels of privacy when used correctly. With a proper understanding of the underpinning technology, you can send, receive, and hold Bitcoin privately.
Cryptocurrency Like Bitcoin Is More Pseudoanonymous Than Anonymous
Most cryptocurrencies, including Bitcoin, are pseudoanonymous, which means there’s traceability in Bitcoin’s transactional data. Indeed, it’s possible to send and receive funds without giving any personally revealing information, but achieving perfect anonymity is out of the question. Pseudonyms are used for privacy to protect the user’s identity or ensure self-sovereignty. The pseudonym is the Bitcoin address, and every transaction involving that address is stored forever in the blockchain. In Bitcoin’s whitepaper, it’s recommended to use a new address for each transaction to avoid it being linked to the owner.
Blockchain technology is a shared, immutable ledger, that is, a reliable method for recording transactions among multiple parties in a demonstrable, tamperproof way. Simply put, Bitcoin’s blockchain monitors how a token moves around to prevent fraud; if the ledger were anonymous, it wouldn’t be possible to retrieve this information. Owing to this transparency, transactions can be securely managed via an online wallet and tracked using the blockchain explorer. Ethereum and Solana also have blockchain explorers, visualizing blocks, transactions, and network metrics.
An Ever-Increasing Number of Countries Are Implementing KYC
KYC is an acronym, and it stands for Know Your Customer, a mandatory framework for banks and financial institutions for customer identification. It protects against money laundering and other types of financial crime. More and more countries are actively implementing KYC rules, collecting information such as name, address, date of birth, and government-issued ID number. By disclosing your identity, it’s easier for authorities to see what transactions you’ve undertaken and what’s in your Bitcoin wallet. U.S. cryptocurrency exchanges must verify users’ identity before allowing them to onboard and perform transactions. Privileges are only revoked if the KYC check reveals something troublesome.
Personal data must be supplied to trade on a centralized exchange, so your identity will be linked to your Bitcoin address. The data of previous transactions isn’t removed, so viewing past transactions is possible. In other words, once the Bitcoin address is used, it’s compromised by the history of all transactions involved; anyone can see the balance. KYC can accelerate cryptocurrency adoption, faced with several obstacles on its path. The crypto-asset phenomenon is reshaping the dynamics of the global economy, but a notable hesitation remains, mainly due to misconceptions or lack of proper guidance.
No One Can Hind Behind Bitcoin: Busting the Myth of Anonymity
Probably the most common misconception is that Bitcoin and its users are anonymous. Anyone can view transactions, addresses, and balances, so it’s up to you to adopt good practices to safeguard your privacy. Addresses, which are strings of numbers and letters, aren’t intrinsically connected to a given user or wallet, so Bitcoin is pseudoanonymous. A 27-year-old grad student managed to bust the myth that Bitcoin and other public ledger-based cryptocurrencies are anonymous, proving it’s the opposite. Sarah Meiklejohn, a fifth-year PhD in Computer Science at the University of California, experimented with Bitcoin and closely observed the digital trails she created. Her work changed the way law enforcement investigates crimes in cyberspace.
How Do You Protect Your Privacy When Using Bitcoin?
Since Bitcoin relies on blockchain technology, there’s complete transparency, with the digital ledger organizing transactions by account. The ledger is available for general public viewing and verification. Since you must reveal your identity to receive goods and services, it’s impossible for Bitcoin addresses to remain completely anonymous. Bitcoin can support strong privacy, so take into account these practical tips:
- Use a new wallet address for every transaction: Use a new Bitcoin address each time you send or receive a new payment. Using the same address for all transactions makes you easier to track, so don’t take anything for granted. Isolate at least some of your transactions in a way that’s not possible to connect them together. To create a new address, you must run your own Bitcoin node.
- Don’t publicly share your Bitcoin address: Publishing your Bitcoin address on a public space isn’t a good idea, lest you want to receive public donations or payments with full transparency. Think of your Bitcoin address as an email, which is safer without spam. If you’re concerned about privacy, don’t publish it on a website or social media site.
- Hide your computer’s IP address: Bitcoin is a peer-to-peer network, which means it’s possible to identify transaction relays and log their IP addresses. Transacting with a VPN can help mask your IP address, disassociating traffic from you. Using Tor with your Bitcoin wallet is recommended.
The Takeaway
All in all, Bitcoin is pseudoanonymous rather than fully anonymous, so even if your identity is disguised, transaction details and your address are still traceable. With new KYC guidelines, maintaining anonymity is more challenging, and there have been cases of frozen wallets. Blockchain technology is crafted for transparency, so hiding transactions goes against what it stands for.