Are Cryptocurrencies Anonymous

Ever since banking had become an essential part of society, the security of transactions has become one of the driving factors that affect people's decisions in choosing the right money transfer method, be it through banks or digital wallets. Although it is a revolutionary technology that promotes efficiency and ease of use and access, cryptocurrency is no exception to the public's evaluation of anonymity and security. In this article, we will explore the areas and concepts of cryptocurrencies concerning anonymity.

Transaction Records

All cryptocurrency transactions are processed by blockchain technology and stored through a public ledger. This means that to confirm if a transaction is legitimate and valid, it has to go through a process that requires the computing power of other people's computers (called miners), which solve complex mathematical puzzles. Public ledgers are a database that stores information of transactions for the public to view, similar to the database of a private company for the C-level officers to oversee the company's employees' activities. Once the transaction finishes going through this process and the legitimacy of the exchange is confirmed, the records, such as the information of the time and amount of money being sent and received, are stored in a "block," which are then tied to all the previous blocks of that certain cryptocurrency. In retrospect, while more and more people continue to use the platform, the more secure it becomes because of the rapid growth of the public database.

For a hacker to manipulate the blockchain successfully, they need to have access to more than 50% of the blocks. Even if a single is manipulated, all the other blocks containing the hashcode of the block being tweaked will “vote” to correct the error in the code. To do this, the hacker must have an overwhelming amount of resources and money. Likewise, counterfeiting and double-spending in cryptocurrency would be impossible as the currency only has a digital copy with unique codes and no physical embodiment.

However, hackers can be sophisticated in their methods and the risk to a user’s privacy is not remote. It would really be best to have a crypto service that can guarantee log-free transactions to preserve the user’s anonymity. UniJoin, with its innovative technology, is perfect for keeping anonymous transactions.

Transparency

Anyone with internet access can view blocks that contain all the information. One might ask, "How is this really anonymous if the information is stored publicly?" Well, only the details of the transactions are revealed, not the identity of the parties involved in the transaction. To put this concept into perspective, covering the tracks of transactions and ownership in cryptocurrency are similar to when a writer creates a piece under a pseudonym. In a cryptocurrency user's case, their pseudonym is the fake address that they use for transactions. The address refers to the long series of letters and numbers that serve as code to ensure that the transaction is unique and traceable. This is why people who engage in cryptocurrencies prefer to use the term "pseudonymous" instead of "anonymous" when talking about the transparency of the exchange to help guide others with the important distinction.

Traceability

Despite all the promise of anonymity and privacy established by blockchain technology even during its early stages of development, one of the ironies of its features is that everything that happens within a certain cryptocurrency can be traced by following the addresses. Although you can almost always expect the address to be masked at this point, the transactions behind those addresses are guaranteed to be real. However, as a user, shaking things up in the system to stay anonymous is still possible by changing your address for each transaction you do. In its early development and original white paper of Bitcoin, this method of covering up your tracks during exchanges was encouraged to provide anonymity. More recently, a concept in cryptocurrency known as "coin mixing" has been introduced in platforms like LocalBitcoins that offer this kind of service. This is a way for people to ensure that their properties are in safe hands. It shuffles the user's coins before it is used in the exchange to make it ultimately random but contains the same value. Although this service doesn't guarantee full user anonymity, it serves as an additional layer for the transaction to be incredibly difficult to trace. This prevents the public from cross-referencing the address you use and ultimately viewing the balance you have in your account and therefore avoiding suspicions. You may also choose to use an emerging technology, known as Coinjoin Technology, which is used by Unijoin to give you an optimum coin mix while keeping you untraceable.

Cryptocurrency Choices

As of 2021, there are thousands of cryptocurrencies already active. Some don't even have any monetary value yet, like Pi Network's relatively new but promising platform. However, not every cryptocurrency in existence is equally secure and anonymous. Already established cryptocurrencies like Bitcoin and Ethereum are some of the most analyzed coins in the market, and this is almost relatively tied to their still rising popularity in the world of finance. Bitcoin, for instance, remains at the top of cryptocurrency values by market capitalization. Because of its popularity, the large quantity of the coin makes it easier for the authorities to access and bypass the masking of addresses used in the transactions.

Despite the attempts to take away users' privacy, some cryptocurrencies still provide their users with a safe transaction using the same method as coin mixing. Zcash, for instance, has a built-in premium service that does just that. However, it was found that only a few people use this service, making it almost equally useless as not subscribing to it at all because coin mixing relies solely on the number of users who paid for the premium service as relative to its difficulty to be traced.

Browser Fingerprinting

As established earlier, Bitcoin is one of the most popular cryptocurrencies out there, making it one of the most analyzed and transparent. Tracing an account's activity on a platform like this would be similar to a website's ability to recognize a user who already accessed the website once or twice before, called browser fingerprinting. This works by collecting the user's data through plug-ins and the type of browser being used to access the website. Such technology can be applied to multiple usages, one of which is mass surveillance and for the website to bombard the user with targeted ads.

In the case of cryptocurrency, the same concept can be applied to monitor a wallet's spending, buying, and selling of the coin. The most important distinction is that instead of the user's data being kept by the website that acts as a private entity, the information that contains a cryptocurrency wallet's activities is publicly accessible. Conversely, data brokers also sell data of users that involve their financial transactions. This blurs the line between traditional banking and cryptocurrency being different at all since most traditional banks now use digitized databases in overseeing transactions.

Regulation

Most people who engage in cryptocurrencies prefer the platforms to be free of government intervention, yet this outlook is one of the things that gave birth to its drawbacks, like security risks and practical limitations. Ever since the arrest of Silk Road founder Ross Ulbricht, government agencies across the globe have attempted to find ways to impose regulations on cryptocurrencies to prevent illicit activities. Silk Road was a platform that perpetuated illegal activities by not accepting any other form of currency other than Bitcoin, keeping the website in business and evading authorities. Actions from the regulatory agencies of major countries like the US, UK, and Japan to prevent this kind of incident hurt the core concepts of cryptocurrency as a libertarian platform that promotes individual privacy. Additionally, the UK Parliament released a report that cryptocurrencies are lacking in consumer protection and marketplace regulation. Government regulations not only endanger the promise of privacy of cryptocurrency, but they also directly force the fees of a handful of services to 1increase, one of which is coin mixing. The dangers of the unregulated marketplace that is the main feature of cryptocurrencies are as real as they got when the same thing was easily allowed in the US before. Misbehavior of brokers, business owners, and even users themselves can certainly contribute to the lack of stability of the coin.

Conclusion

Perhaps, it is safe to assume that the people who got into cryptocurrency were seeking a respite from the discomfort of having private and government entities overseeing their money and properties.

The leakage of the US National Security Agency’s “Follow the Money” program probably aggravated, if not triggered, the feeling of unease in those people. The program aimed to track and prevent the fundings of terrorist organizations. The whistleblower, Edward Snowden, found the program invasive as it had too much potential to threaten the privacy of anyone's financial life.

Currently, it seems that the libertarian community of cryptocurrencies and the government are stuck in an impasse, with the former advocating privacy and anonymity and the latter keeping their responsibility to prevent chaos in the financial world.

So, are cryptocurrencies anonymous? Yes, it is anonymous in that your identity remains hidden through your crypto address. You may even have multiple addresses without anyone knowing that these are owned by a single person, much less link those addresses to you. But on the other hand, if your identity in one of these addresses is revealed, the risk of tracking all your other addresses to you is high; therefore, you lose your anonymity.

The bottomline is cryptocurrency anonymity is like protecting yourself from any criminal activity -- you need to educate yourself on the risks and preventions.