Understanding Crypto - Anonymity
One of the most enticing parts of cryptocurrencies has always been its anonymity. Money travels from a wallet to a different wallet, from one string of numbers to another, without a name attached to them. It is clear that it is not a situation any government would ever allow to bloom. So, if crypto ever wants to become the mainstream technology, it will have to compromise. Many people don’t mind and are ready to comply with various safety measures, while others consider that to be against their rights. Not because they want to do something illegal, but because they value their privacy in all things and areas of life.
Is a blockchain anonymous?
The short version - yes. All the transactions happening on the network are completely anonymous. Everyone can see each transaction and everyone can see what happens in every wallet, but no one can know to whom that wallet belongs. It is only when you want to take the money out that it actually ties to your identity. The majority of all exchanges will want you to prove your identity by sending in your photo and ID. That is when it becomes clear who is the holder of said wallet. And, as all transactions are clearly visible to everyone, then anyone can find out what you have been doing.
Suddenly everyone knows all the transactions that someone has done from said wallet. You can try it out yourself. Once in a while someone will send you a spam email with some sort of a threat or blackmail and try to extort crypto from you. Those are all lies, of course, but before you delete and move on, you can actually check if someone has ever fallen for this specific scam email. Just copy the wallet address they want to receive the coins in and paste it in the Bitcoin explorer.
The address in the link is one of the most infamous Bitcoin addresses in the world. In 2020 many Twitter accounts were hacked (the likes of Elon Musk, Barack Obama and such) and a fake giveaway was published, with people being asked to send bitcoin to this address, claiming that they will get those coins back with an added bonus. When you open that link and look at all the transactions, it is clear that nobody got anything back and it was all a scam. The point is - every address can be explored and you can see all the transactions. So, if you know the address of your friend’s wallet and find that address among the many people who have sent money to fake Elon Musk, you are obliged to talk to him about the importance of being careful.
Why does it matter?
Very often people say that they do not care for being anonymous, as they do nothing wrong. Who cares if people know your wallet address? You never buy drugs, scam people or do anything illegal, so why should it matter? Actually, there are many reasons. For the simple fact that legality is defined by the government and it can change at any moment. What if one extreme ruling party takes over through a military coup and you want to finance the opposition? Or want to hide your assets before they are taken away? If you do it with your bank, you are found out instantly. Or if that same government decides to look over what positions you have held in the past? Your bank statement is a mirror to your life, your hobbies, ideologies and actions. It can find your family members, your friends and your associates. And anything of that can become illegal very fast.
And even if we are not talking about legal or illegal things, there are many transactions that are just shameful in today’s society. Paying for plastic surgery, curing a stigmatized illness or ordering items meant for adults. The world is full of legal things we would prefer to keep private. Even big companies would agree, considering that they need to make large payments to others before the deals are published. Various court settlements that are to be kept secret, different deals made that need to be a secret for a while, huge purchases of land in new locations. If it won’t be possible to keep these and other transactions as a secret, no big company will ever switch to crypto.
What can be done?
First things first: we discourage you from doing any illegal activities at all. Even in places where not listening to the government might seem like the right moral choice, as said government can be considered to be immoral, it is still unwise to take illegal actions. No matter what moral high ground one might have, it is always wise to remember that actions have consequences and they can be awfully dire. The more important it seems to stand against a tyrannical government, the bigger the chance that the government is actually a tyrant and will not care for finding “proof” or “evidence”. So again, a warning - these tools are to be used only for activities that you’d like to hide from your mom, not the government.
A good thing to do is to have many wallets. The best thing to do is to have many temporary wallets. So you have your main wallet you do all your transactions through, but you now want to buy something so that it doesn’t show up in your wallet. Easy - make another account in a different exchange. You do not even have to be secretive about this. You make an account somewhere else, buy the coins, trade them and never use the account ever again. It has all your data, but this new wallet has never made contact with your old wallet, so no third party can ever make the connection.
Exchanges without KYC
There are various rules that all financial institutions must verify each client. That applies to cryptocurrency exchanges too, meaning that the second you decide to take out your coins, you need to send in documents that identify you. Still, some exchanges have set limits that you can take out without completing the KYC (Know Your Customer) verification. As the rules can change and terms and conditions apply, we will not be listing nay here, but they can be easily found when using a search engine. And those are not small, shady companies either, but huge financial giants, having lenient rules.
This idea goes against many things that a blockchain originally stood for. It should have a huge ledger of transactions where everyone can see what has been sent to whom, so they can check these transactions and confirm them as valid. So how do you make a huge network where everything is seen by everyone, but no one can really see anything? Many different solutions have been found, all of them involving complicated verification mechanisms that are too difficult to get into in such a short article. These can be found by looking for Privacy coins. And you can be sure that these are heavily monitored by all kinds of law enforcement services, so use them only to get a sense of security and never as a 100% protective shield.
There are various services that are willing to hide the coins for you. To put it very bluntly without explaining the details, you send your coins to a special mixing pool. Many other people also send their coins there with the same intent. Then the “mixer” or “tumbler” randomly distributes the coins back, mixing everything in the process, creating new addresses and such. It does not make them untraceable and a person with enough time could manage to go through the transactions and calculate, but that would take a long time and patience and you just have to hope you’re not important enough for anyone to do that.
But all of that is useless if you do not follow the basic safety protocols yourself. If you have a laptop without any protection and are connecting to your blockchain through the Starbucks wifi, it doesn’t matter how secretive you try to be. Someone could be simply listening to the “conversation” your computer has with the network and seeing everything you are doing. Like trying to hide money in your room while someone is looking straight at you. So always make sure you follow the basic safety protocols before you even log in to your email.
Blockchains and crypto are not for illegal activities. Remember, the law enforcement agencies are always a few steps ahead of you and can use means that go beyond a simple decrypting tool. Even those who have managed to fool everyone for a long time get caught after a while. And a single mistake can get you in trouble and you will never get a do-over. And if you think that your government is so evil that you just must oppose it, always remember - it might be just so evil that it will get your confession without doing any investigation at all.
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