Does Anonymity Matter?
When it comes to crypto, anonymity is a topic that pops up time and again. Are cryptocurrency transactions anonymous? Well, it depends. Is your wallet anonymous? That depends, too.
People often think that cryptocurrency = anonymity. This is not true.
Cryptocurrency transactions are usually traceable to certain people, should anyone want to spend the time and effort to trace a wallet’s transaction history. Since most cryptocurrencies have a public blockchain ledger, this means that every transaction ever is recorded (via the public key) and can be viewed by anyone. If you don’t set up a wallet safely and securely, then then it can be traced directly to you. Your transaction history alone may be enough to directly link your crypto transactions to you. “Detective” firms, like Chainalysis, utilize the power of big data to do this sort of tracing on the daily.
While in the early days of Bitcoin this sort of tracing was far too difficult to do on a larger scale, compute power and data science advancements have now made it possible.
Do I need anonymity?
Privacy and anonymity is slowly going out the window, as your phone automatically tracks your movements via GPS, your government can identify you by voice, and Amazon knows your consumer habits intimately.
If you are concerned about more governments and businesses knowing exactly what you (and everyone else) is doing, and using that data to create advertising, sell products, and lead you into decisions you may not necessarily have made otherwise, then anonymity should be of interest to you.
The alternative: Privacy coins
While anonymity in regular cryptocurrencies dies out, privacy coins have been gaining traction as an alternative. Monero is currently the largest privacy coin, in which payments can be made without anyone else see the payment amount, sender, or destination — nor can the account balance of any Monero wallet be determined by an outsider.
For those looking for more anonymity in their crypto trading, privacy coins are a must-have.
The downside to private coins is that they aren’t as readily available to trade on many exchanges, and that further legislation regarding privacy coins may well be on the way in many countries.
What this means is, not necessarily that trading with these coins will be banned, but they will be regulated to ensure that people are paying their taxes, not money laundering, etc.
At the time of print, your best bet for anonymous cryptocurrency trade is ensuring you set up a wallet safely and securely offline, then purchasing a private coin on a trusted exchange, and remember that some exchanges will required ID at registration, so consider what this means in terms of privacy as well.
This article is part of our Getting Started with Crypto Series; follow Academy’s medium page for more articles like this.
