Security is the most important aspect of personal finance. If your bank accounts and other personal finance institutions didn’t promise a high level of security, banks wouldn’t be as prominent as they are. That said, security risks abound with these institutions, and there are still ways that unscrupulous characters can get a hold of your personal information. This begs the question, are banks really the best way to hold and use our money?
In today’s society, banks are a must. Cash may be anonymous but it is not an efficient way of making payments or purchases, especially in our predominantly online world. However, this trade-off often comes at the risk of revealing our personal information. Even with safeguards, this personal information is out there, and it can be used to identify us and access our finances and other vital information.
This is why cryptocurrency was so revolutionary when it was first released. Bitcoin was the first digital currency that gave users the ability to handle their own money, all while making it so that they didn’t have to send out personal and financial information in order to make payments or receive funds. It was an exciting time and one that came with great promise.
But is crypto truly anonymous?
Over time, we’ve discovered that most cryptocurrencies are not truly anonymous. Although you will not need to provide details like your name or credit card number in order to transfer money, all transactions are recorded on a public ledger and that information can be traced to users to determine where the money is going and find out who is sending it. Unless you are only using crypto for payments, there is also the additional issue of KYC/AML laws, which require exchanges to collect personal information in order to be able to use the platform.
Put simply, crypto is not truly anonymous and it is not always secure (something that can be clearly seen in the Binance hack that took place earlier this year). However, there are some products out there that do add some extra security and privacy to your transactions.
What Are the More Private Assets on the Market?
There are several products that boast improved privacy practices but the two assets on the market that stand out most and provide the privacy advertised are Monero and Zcash. Monero is a well-known digital asset that uses special ring signatures, confidential transactions, and stealth addresses to mask the trail that the digital currency leaves behind so that the only people who can view the transactions are those involved in them.
Meanwhile, Zcash, a cryptocurrency released two years after Monero, uses a protocol known as zk-SNARKs (Zero-Knowledge Succinct Non-Interactive Argument of Knowledge). Using this model, those with a z-address can send and receive crypto anonymously without having to share information and interact with the other party. However, it should be noted that these transactions are only fully anonymous when they are conducted between two individuals with z addresses. If there is a t-address involved, the transaction is more visible. Still, it is impressive that transactions can be masked.
To answer your question, crypto is not truly anonymous but there are some cryptocurrencies out there that can help you maintain anonymity if you use their network and understand the mechanics behind their platform. If anonymity is your goal, these types of crypto are likely your best bet in keeping your assets and transactions private. Otherwise, you will almost always be able to be tied to your digital transactions.