Cryptocurrency Basics – 3: Anonymity

One of the main characteristics of Bitcoin is that it has anonymous usernames. Because in this network, instead of the user account model, the public key encryption system is used, in which the participants are represented by encrypted key data.

Further reading: What is Blockchain in its simplest explanation, how does it work?

Bitcoin addresses; It consists of 26 to 35 alphanumeric characters beginning with 1, 3, or bc1. Although there are applications that match the names of cryptocurrency users to their public addresses to create an easy-to-use interface, the default use of Bitcoin is only encrypted key pairs.

No need for a third-party service provider

Encrypted keys are essential for online privacy. They function as the basic building block of various privacy-based systems such as digital currency, email, routing protocols such as Tor. Encrypted keys are ubiquitous thanks to countless IT and communications companies that are part of our lives. However, most systems optimize this experience with keys managed and coordinated by trusted third-party service providers rather than users.

It may interest you: What is a Bitcoin node? How does it work?

Cryptographic or encrypted key pairs not only serve as identity but also as assets in the context of Bitcoin. Encrypted keys, often referred to as “wallets” because they allow people to send and receive Bitcoin among other public key addresses, act as the digital bearer giving the owner sole ownership of the digital asset it contains.

There is a saying that is often repeated in the world of cryptocurrencies:

If the key is not yours, the money is not yours.

One of the most revolutionary features of Bitcoin is that one can access real property and manage their assets without relying on escrow services offered by third-party service providers.

It may interest you: How is the security of cryptocurrencies guaranteed?

So can Bitcoin’s privacy model cope with modern solutions? While the privacy of Bitcoin has been one of the defining characteristics of the currency and a frequent dispute with regulators over the years, data analysis from blockchain networks has improved so much that Bitcoin transactions are no longer so Anonymous as they used to be.

Bitcoin transactions are not so “anonymous”

Since all transaction data is open, public key addresses, the stock market, and other fiat entry / exit ramp points can be examined to access the transaction data.

Further reading: How to track Bitcoin transactions? Query TXID

Anonymity solutions, such as cryptocurrency mixers, can help hide the flow of transactions and block connections between external accounts and real identities, but governments are beginning to block these tools.

Much of the future development of the Bitcoin protocol has focused on strengthening its privacy features.

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