Crypto and Blockchain – Anonymous or Pseudonymous?

After being somewhat underground for years, it is safe to say that cryptocurrency is more mainstream than ever before. The number of active crypto wallets is much higher, digital assets are more publicly visible, and institutional support is at an all-time high. However, as more of us are exposed to crypto, we must confront some of our beliefs about it.

For example, is the blockchain fully anonymous?

Many discussions about blockchain tout it as the height of anonymity, but is it better described as pseudonymous?

We will explain this below!

At their core, blockchains are decentralized networks in which processing power is shared among a mass of computers. Take the Bitcoin blockchain. Anyone with the right hardware or software can sign up to confirm transactions on the blockchain and earn rewards in exchange.

This spreads the network across millions of devices around the world and makes sure that no one, not even the creator of Bitcoin, can completely control it. 

Now, the thing about blockchain transactions is that they typically function as public ledgers, with all transactions being made available. At the same time, anyone can create a crypto wallet without needing to provide their personal information. 

From the outside looking in, it can be a bit confusing; do blockchain users enjoy complete privacy or are their activities open for everyone to view? The truth is that blockchains offer some level of both anonymity and pseudonymity. When you set up a crypto wallet and begin transacting, your name is not attached to it. 

If someone looked at the public blockchain ledger, they would see combinations of numbers and letters sending funds to each other. But that doesn’t mean that these transactions are cloaked in secrecy.

Take whale watching, for example, which is when crypto users with large amounts of assets in their wallets are monitored by others. It is not unusual to see reports of millions of dollars worth of crypto being moved in and out of these wallets. While we might know that a certain whale has moved money, we can’t confirm who it is. 

This is essentially how all crypto users engage with blockchains; our transactions are always visible but our identities are not revealed, though others could piece it together if they wanted to. 

Still, there are several ways that crypto users leverage their tokens to enjoy privacy. Take the gambling sector, for example. Usually, you would have to disclose much of your personal information to an online casino if you wanted to sign up. 

Think of things like your name, address, government ID, and so on. But when you gamble with cryptocurrency, you don’t necessarily have to. In fact, when you look at crypto casino resources such as this list, you’ll see that there are anonymous casinos that only require you to connect your wallet. So while crypto is not always 100% anonymous, there are ways to enjoy more privacy with it.

Speaking of privacy, there is a category of cryptos called privacy tokens which use cryptographic technology to observe their transactions. When you use tokens like Monero and zCash, none of your transactions are visible to the public. 

So, while we acknowledge that the privacy afforded by blockchain is limited, there are still ways that consumers can enhance their privacy if they want to:

• Multiple Addresses: Looking at the transaction history of a single crypto wallet, you might be able to piece together what it is being used for and who owns it. But if every transaction has a different wallet address, this is much harder. As such, one way to preserve privacy is to opt for tools that automatically generate new wallet addresses for each transaction. By never using the same wallet twice, you make it harder for anyone to trace your identity and also make it harder for your tokens to be stolen by hackers. There is a plethora of tools in the market for this purpose, so it would be best to take advantage of them.
  
  
• Token Mixing: If keeping track of multiple addresses to protect your privacy is not your style, you might want to consider token mixing. You see, the trajectory of various tokens can be tracked across the blockchain. If you focused on a single batch of tokens, you could see every address they were sent to and this is often used to track whales and even criminal activity. Token mixing refers to a service that essentially scrambles a bunch of cryptos together so no one can tell where they originally came from. While many of these services exist, some have been sanctioned by world governments due to their use by criminals. 
  
  
• Using Privacy Tokens: As we’ve explained in this article, there are cryptos that have been designed to protect users’ privacy to the highest degree. Thanks to their cryptographic technology, transactions done using tokens like zCash and Monero cannot be traced by anyone. If you opt for them, you will enjoy a level of privacy you can’t get anywhere else. And these tokens aren’t shadowy assets only found on the dark web either. Privacy tokens can be bought and sold on most major exchanges, allowing you to conduct your business as usual, so no special tools or procedures are needed.

Blockchain technologies offer very complex and cutting-edge tools that have changed the way we use money and engage with each other. As we’ve explained in this article, most traditional cryptos offer pseudonymous transactions for users, though not completely anonymous. Those looking to enjoy full anonymity have several options to do so, including using multiple addresses for various transactions, mixing their tokens to avoid detection, and using privacy tokens.

Privacy tokens offer the highest form of anonymity of any digital assets and are virtually untraceable. Should you choose any of these forms of crypto use, make sure you leverage legitimate tools and platforms to safeguard yourself. Those crypto owners who comply with certain established rules of this niche will dodge the potential issues and enjoy all the benefits that crypto offers.