Bitcoin & The Privacy it Offers

Let's talk about Bitcoin and privacy

The majority of people believe that Bitcoin is an anonymous cryptocurrency. Typically users are not required to submit extensive personal details to create a Bitcoin wallet. However, when users make transactions it is possible to see the recipient’s and the sender’s wallet address and amount. This is possible because of the nature of the blockchain technology used by the bitcoin network.

Additionally, many platforms that allow users to buy and sell bitcoin require them to provide some basic information. When users withdraw their bitcoin from the exchange, the exchange acknowledges their wallet address. The exchanges have their clients’ information and can associate a wallet with the holder’s identity. Numerous events in the past have shown that trusting corporations with personal information can be a risky proposition. Aside from evident privacy concerns, this can also expose clients to unsolicited attacks. Hackers can possibly use the wallet holder's personal information to access data that can reveal their private keys. 

Anonymity vs Pseudonymity

Anonymity in Crypto

Transactions carried out through many cryptocurrencies, including bitcoin (BTC) are more traceable than cash transactions. Governments, blockchain analytics firms, etc. have been surveilling the Bitcoin blockchain, which has resulted in the privacy offered by the network being tainted over the years. However, some cryptocurrencies such as Monero (XMR), have implemented a solution that provides full anonymity and hides the senders, recipients, and even the amount from the public.

Although anonymity in crypto has been utilized to conduct nefarious activities, it is still a primary human right and can have a positive social impact. For example, an individual who lives in a non-LGBTQ+ friendly state can use crypto to contribute to an organization fighting for LGBTQ+ rights without exposing their identity.

Pseudonymity in Crypto

Many individuals that are part of the crypto community employ pseudonyms for privacy to protect their identity or as a move towards self-sovereignty. Many crypto enthusiasts find Bitcoin appealing, as it has pseudonymity built into the protocol by default. When you open a bank account, you are required to provide identity proof. This links your financial transactions to your identity, which leaves your bank in charge of your transactional history. These transactions are neither anonymous nor pseudonymous, as financial forensics can be used on your transactions to link them back to your real-world identity. 

There has been a lot of back and forth between privacy supporters and legislators about the pros and cons of pseudonymous and anonymous cryptocurrencies. With the advancements in blockchain technology and widespread adoption of cryptocurrencies, only time will tell what the masses lean towards. 

Blockchain and Privacy

Anonymity and privacy are not simply a benefit for Blockchain users. If the users' digital investment is lost due to cyberattacks, chasing the attacker and recovering the investment can be extremely complicated. However, there is no doubt that Blockchain has enhanced user privacy to a new level. Maintaining the privacy of the users' data is one of the cornerstones of the crypto and blockchain industry.

The emergence of the digital industry over the last couple of decades has resulted in a world where our lives are extremely intertwined with technology. Billions of individuals have their private data stored in digital databases with private institutions or governments. Over the years, we have seen such data being exploited by companies or governments for their personal gain. Privacy has become a huge topic of concern and is affecting people’s lives on a social and financial level. 

Developing Blockchain technology delivers the hope of a more suitable space for maintaining your privacy in the digital world. Decentralized ecosystems such as blockchain networks aim to take the control away from single entities and distribute it among all participants of the network. This makes manipulation, censorship, and the surveillance of digital information tough on a large scale.

Advantages of The Privacy Offered by Bitcoin

Privacy is one of the biggest advantages of Bitcoin, among other advantages such as cheap and efficient transfer of value, security, etc. It was designed to offer a decentralized, private and secure way of directly transferring value without the intervention of a third party. 

When you transfer bitcoin from one wallet to another, the transaction is recorded on the blockchain. This record only contains the sender’s and the receiver’s wallet address and the amount transferred. Hence, it cannot directly be linked to your real-world identity. This privacy provided by Bitcoin has attracted people looking to make transactions while saving on taxes. This is possible as the transaction can be made between two parties without interference from another entity, may it be governments or private companies. Whereas, if you are buying or selling bitcoin through an exchange, your identity is more likely to be linked to your wallet if you are making transfers between your wallet and exchange.

How to Sell Bitcoin anonymously 

Over the last couple of years, Bitcoin has received a lot of mainstream media coverage. However, there are many misconceptions that still remain. Bitcoin transactions are not anonymous, instead, they are pseudonymous. 

If you are looking to sell Bitcoin anonymously, you can take further precautions to ensure that your information is protected. Some common ways of selling/buying bitcoin anonymously are:

• In-person: You can sell your bitcoins to another person by looking for a buyer and setting up a meeting with them. You can make the transfer from your wallet to theirs and receive cash in return.
• Two-way bitcoin ATMs: Like fiat ATMs, there are Bitcoin ATMs that allow users to buy bitcoin for cash. You can also find two-way ATMs that provide a way to sell your bitcoin and receive cash in return.
• Peer-to-peer exchanges: A peer-to-peer exchange is an exchange that connects sellers and buyers directly and allows them to conduct a trade. Instead of acting as a broker, a P2P exchange only acts as an intermediary and facilitates transactions.

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