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Does using cryptocurrencies imply privacy or anonymity?

Bitcoin has been in the news in recent months for its increase in price, which on November 30 broke a new record by breaking the all-time high of 2017. But price is not the only important thing about Bitcoin, and some wonder about others. features. Then the question arises: does Bitcoin offer privacy or anonymity?

And without a doubt, one of the great benefits of the Bitcoin network, in addition to security, is privacy.

The first comparison that can be made is with traditional banking and financial systems. We could ask ourselves: How much information do banks have about us? What about credit cards? Is it safe that they have our information? What if there is a hack or unfair employee?

Then the first and great contrast arises, and that is that with Bitcoin you can carry out sending and receiving operations of electronic money, without the obligation to provide personal data.

The Bitcoin network is not anonymous

An important clarification to keep in mind is that the Bitcoin network is not anonymous. In fact, a characteristic of its own is that all transactions in bitcoin are stored on the blockchain, therefore they are also traceable (the operations) and publicly accessible.

In this scenario, we can see that the Bitcoin network, unlike other systems, brings a lot of transparency. Anyone can see the amount of funds and movements of a particular address. We could then say that Bitcoin is pseudo anonymous. Although the addresses do not use personal names, there is a « public key » and each transaction is recorded.

Collections

Given this, it is necessary to know that it is the responsibility of each user to take precautions and do what is necessary to protect their privacy. The phrase « With bitcoin each user is his own bank » is forceful, real, and implies that, as Uncle Ben said to his nephew Spiderman: « Great power also implies great responsibility. »

The operations or transactions that take place on the Bitcoin network can be observed in real time. This is also impossible to manipulate, due to another great characteristic of the Bitcoin network that works like a journal where everything is stored: immutability.

Now, it should be taken into account that, in addition to the fact that Bitcoin keeps a transaction history in a database that is publicly accessible, the records of that information, however, do not show direct links with the identity of the users. And here you can see the privacy. However, depending on the characteristics of the crypto wallets, one could say that there are different levels of privacy for users.

Other cryptocurrencies

Bitcoin is not the only cryptocurrency. And this is where you have to make a very important observation. Each cryptocurrency, as well as the blockchains where transactions work, have their own characteristics. Therefore, before investing, transacting or saving, it is important to research, study, and learn about each of the crypto assets or cryptocurrencies that interest us.

For example, there are cryptocurrencies that put a special focus on privacy. Among them you can name Zcash, Dash or Monero, among others.

Ethereum and privacy

The Ethereum network brought with it the cryptocurrency Ether (also often called Ethereum). It also brought the possibility of generating tokens and the appearance of smart contracts. Then there were applications called DApps and hundreds of developments stridently announcing the arrival of Web 3.0.

In the beginning, the first applications to arrive were games and decentralized cryptocurrency platforms, but many more things have emerged. An example of these cases are applications such as Status, which combines a crypto wallet, an instant messaging client focused on privacy and a browser.

“Status is a communication tool designed to protect our basic human rights. Specifically, the right to security and privacy in our communication. We have the mission of guaranteeing that people can speak freely without fear of censorship and claim autonomy over their funds, ”they explained from the firm.

“The Internet, as we know it, has been controlled by some corporations, to collect and sell data. Status uses state-of-the-art technology to provide a private and secure communication tool, using a peer-to-peer (user to user) model that prevents third parties from controlling user data, ”they later remarked.

As detailed, the Status application integrates the super crypto wallet with a fully encrypted private messaging chat and a dapp (decentralized) web browser, which guarantees a more secure way to access Ethereum cryptocurrencies such as ETH and DAI, send p2p payments (person to person) contacting each other through the same chat, one by one, without the need to resort to banks, credit cards or exchanges.

Brokers and Exchanges

Brokers and exchanges are companies where users can exchange cryptocurrencies for fiat currencies or even make operations between different cryptocurrencies.

Here, you have to know that most of these companies work in a similar way to how banks work, in the sense that, to operate, you must first open an account, and that implies meeting requirements and providing data, such as KYC (Know Your Costumer). But this is something that has to do with operations, and it is not something implicit in cryptocurrencies themselves.

Let’s look at the example of Buenbit, a company already well known in Argentina. “At Buenbit we believe in the need to begin our relationship with each user with an exact identification of the same, requiring direct contact and due care. The Client Identification process is carried out digitally through the BUENBIT platform ”, they stated on their official website

“Buenbit offers a reliable digital identification that is effective in identifying and verifying a person. This procedure is called KYC, ”they added.

“As it is a remote identity verification process, the security level is higher, since sophisticated and effective technologies are used to determine that the documentary evidence of identity is genuine, not falsified, as well as the additional data and information that they help to verify the identity, and in this way, from Buenbit we will be able to identify the true will to operate with us on the part of the client ”, they also highlighted.

In addition, they indicated that from the Compliance area, Buenbit is committed to the practice of internationally recognized policies and procedures aimed at the Prevention of Money Laundering and Terrorism Financing. « We strive to protect our users from fraudulent activities and scams, » they stated.

“To avoid this, it is necessary to take measures to ensure customer verification and the security of financial transactions. These controls are mandatory for all users both at the time of registration and in various operations « , they pointed out.

*Analysis of Arigato Consulting