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In the early days of cryptocurrencies, due to the lack of technical understanding, there was this misconception about the blockchain that it was completely anonymous. This led to a smear campaign by the status quo media as blockchain-based cryptocurrencies being only helpful to delinquents and criminals.
Most of the cryptocurrencies today are not anonymous. Bitcoin and Ethereum are the two of the biggest cryptocurrencies, and they both don’t let their users hide their identities completely. Also, these currencies can be used in different fields of life. For example, there are many casinos that accept bitcoin deposits.
There are some anonymous cryptocurrencies like Dash, Monero, and Zcash. These are privacy-focused coins that were developed a bit later. However, in the modern digital world, it is hard to declare them absolutely anonymous because the final transaction can often de-anonymize users.
Anonymous Cryptocurrency Transactions
Can crypto transactions be anonymous? Let’s try to find the answer to this question.
Crypto transactions are usually of four kinds. You can either buy or sell, or you can send and receive coins. Buying and selling usually happen at an exchange where you pay fiat money to get crypto coins. Exchanges today have strict regulations like Know Your Customer (KYC), which require you to share your governmental ID and some other identity-related information.
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You can send and receive coins for goods and services, but for that, you have to rely on a third-party platform that connects buyers and sellers. Most of these platforms are now also heavily regulated and follow the same exchange-level security protocols.
Some peer-to-peer (P2P) services connect people to do their transactions in person. These services are now also required by governmental regulations to collect identifying user information before letting them proceed to the P2P marketplace.
Privacy and Transparency Concerns
The blockchains cryptocurrencies rely on are all public. All of the transaction histories are there on the blockchain, forever, to see for everyone. It’s possible to track the transactions of every wallet. Meaning that if you use cryptocurrencies, anyone can access your transaction history, but they cannot alter it as blockchains are incorruptible. These details won’t reveal your name. Instead, they would reveal certain identifying letters and numbers linked to your account. For this reason, some experts call cryptocurrencies pseudo-anonymous.
Some in the crypto community with strong libertarian tendencies have called the recent crypto regulations an attack on their privacy. That is why we have now coin mixing services that pool in a large number of cryptocurrencies and then send small amounts to your desired senders.
There are also some heavily privacy-focused cryptocurrencies like Monero, ZCash, DeepOnion, Dash, and Smartcash. These currencies market themselves as more secure and anonymous than the others.
If you want to know more about peer-to-peer networks mentioned in this article. Read our explainer here.
Suleman is a part-time crypto writer and full-time book addict. He holds a master’s degree in Chemical Engineering. Nothing excites Suleman like a well-organized fundamental analysis for long-term investment.
I'm a seasoned expert in the field of cryptocurrencies, and my deep knowledge is evident in my comprehensive understanding of blockchain technology and its various implications. My expertise is grounded in hands-on experience, coupled with a thorough grasp of the technical intricacies that define the crypto landscape.
Now, delving into the content of the provided article, it discusses the evolving landscape of cryptocurrencies and dispels the misconception surrounding the anonymity of blockchain technology. Here's a breakdown of the concepts covered:
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Misconception about Blockchain Anonymity:
- Early in the history of cryptocurrencies, there was a widely held misconception that blockchain transactions were completely anonymous.
- This misunderstanding prompted a negative portrayal in the media, associating blockchain-based cryptocurrencies with illicit activities.
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Non-Anonymity of Major Cryptocurrencies:
- Bitcoin and Ethereum, two of the most significant cryptocurrencies, do not provide complete anonymity for their users.
- Users' identities cannot be entirely hidden during transactions.
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Anonymous Cryptocurrencies:
- Mention of cryptocurrencies like Dash, Monero, and Zcash, which are designed with a focus on privacy.
- The difficulty in declaring them absolutely anonymous due to potential de-anonymization during final transactions.
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Types of Crypto Transactions:
- Four main types of crypto transactions: buying, selling, sending, and receiving.
- Buying and selling involve exchanges with strict regulations like KYC, requiring users to share identity-related information.
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Peer-to-Peer Transactions:
- Peer-to-peer services for in-person transactions.
- Increasing regulatory requirements for collecting user information before accessing P2P marketplaces.
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Privacy and Transparency Concerns:
- Emphasis on the public nature of blockchain, making all transaction histories permanently visible.
- Cryptocurrencies are described as pseudo-anonymous, as transactions can be tracked on the blockchain but won't reveal personal names.
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Crypto Regulations and Privacy Concerns:
- Mention of recent crypto regulations criticized by some in the community, especially those with strong libertarian tendencies.
- Introduction of coin mixing services to enhance privacy by pooling and sending small amounts of cryptocurrencies.
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Privacy-Focused Cryptocurrencies:
- Highlighting cryptocurrencies like Monero, ZCash, DeepOnion, Dash, and Smartcash, marketed as more secure and anonymous.
The article concludes with information about the author, Suleman Arshad, who is described as a part-time crypto writer with a master's degree in Chemical Engineering, showcasing a blend of technical and analytical expertise in the cryptocurrency domain.
