Cryptocurrencies were praised for the high safety compared to the traditional currencies. But using the popular cryptocurrencies definitely isn’t the most private or anonymous way to make transactions. Some altcoins may ensure a certain degree of privacy, but the more mainstream coins usually do not.
Full anonymity?
Creators of some altcoins made efforts to ensure more anonymity and privacy.
These altcoins, called “privacy coins”, are usually associated with the Darknet and illegal transactions, but there are also many lawful reasons people use them. As security coins become more and more popular, we have a lot of options readily available. Monero, zcash, dash, xeonbit are four popular altcoins that offer more anonymity when compared to Bitcoin.
Bitcoin was praised for ensuring better security in comparison to fiat transactions. When we speak of safety, we generally mean the difficulty in stealing or copying money. Greater safety level is a result of blockchain techoology’s characteristic.
Every block in the chain contains a link to the previous one, which makes changing a block very difficult. And so, with every block that is added to the chain, the past transaction becomes more and more secured. Even the newest block that is supposed to be added to the chain would be hard to manipulate. Some altcoins improved the security measures, but from that point of view bitcoins are still considered a very solid solution.
Assets hidden in the network…
On the other hand, Bitcoin isn’t all that private or anonymous. Every transaction, including the wallet addresses of the sender and the receiver, the amount, date and time are stored in a public ledger. It can be considered using a pseudonym, as there are no surnames on the list, but it would be relatively easy to track down most of the wallet addresses using hints like the IP address or transaction history.
Although it is possible to make Bitcoin transactions more anonymous, it takes a lot of effort. When it comes to Bitcoin, it’s mostly about mixing coins, sometimes called cryptocurrency laundering. To mix coins is to make various transaction to mask the link between the sender and the receiver. If done properly, mixing can almost completely prevent the transaction from being tracked.
The thing is, coin mixing requires many steps, including creating many new wallets with new e-mail addresses. This process can be very inconvenient and time-consuming, especially if it has to be done regularly. For constant anonymity it’s more convenient to use a cryptocurrency, which will provide the option to make anonymous transactions without additional complications.
Who wants to take control?
Traditional currencies have worth, because the governments say they do. But for an increasing amount of people this promise isn’t particularly attractive. Governments control traditional currencies. They use central banks to emit or destroy money, using the so-called monetary policy as economic leverage. They also decide in what way can be the traditional currency transferred, which enables tracking the currency flow and dictating, who can profit off of this flow, taxing them and tracking criminal activity. This whole control collapses, when non-governmental bodies start to create their own currencies.
Currency control influences every economic sector, especially the country’s tax policy, business and crime control efforts. But people who use cryptocurrency don’t need the existing banking system. The currency is created in the cyberspace. If Bitcoin or any other cryptocurrency becomes widely accepted, the whole banking system might become unnecessary.
Cryptocurrency mixers
Cryptocurrency mixing was already mentioned in this article.There are a few mixers operating on the market, aiming to ensure the biggest possible reward. A mixer’s algorithm is usually simple – the user sends their cryptocurrency to the address of a mixer that is registered individually for every user. Next, the coins are mixed with other people’s transactions or distributed among hundreds of wallets belonging to the mixer. After the process is done, “clean” tokens are moved to the initially set up memory – or back to the sender, or a new owner.
Dividing the coins among many wallets makes it impossible to establish a link between a sender and a receiver. The user can also divide the input data by denominations to obscure the real amount. Mixer owners charge a 0,5-3% transaction fee for their services. You should remember, though, that if you send your coins to another person’s wallet, you might not get them back.
Using a mixer is not much different from using an exchange platform. You have to provide an address where you want to send the mixed bitcoins, pay the service fee, and press “next”. You’ll then be redirected to a page with the mixer’s address, where you have to send your currency.
The address is valid for 24h. After this time the transaction won’t be processed.
Is it safe?
The main advantage of mixers is that they can provide safety and protection for cryptocurrency transactions. If you constantly use a big amount of crypto on a daily basis, using a mixer to increase anonymity is recommended.
Probably the biggest flaw of using mixers is the fact, that criminals and people who do money laundering can also easily obscure their transactions from the eyes of the police. Coin mixers are especially popular among those, who own a lot of cryptocurrency. That’s because these people have to look for a way to hide their fortune from the public eye. By using blockchain you can easily deduce who has a lot of Bitcoins, if the transactions made are big. It is a threat, as hackers can use these informations to attack the wallet owner and steal their coins. Using coin mixers helps users to avoid such situations.
The risk of theft is also a bit of a problem when it comes to mixers. To gain access to the service, the user has to send their digital currency to the provider. It’s a risky situation as there is no way to submit a complaint if the provider won’t return the mixed coins as expected. Finally, the service fees also raise concerns. They are a percentage of the transaction, which can come up to astronomical amounts when the commission is big enough.
The cryptocurrency industry was always plagued with controversies. The good part is, the technology is constantly being adjusted to the needs of the users. Major investors generally agree that mixing tools are a great way to ensure greater privacy and protect the interests of people dealing in cryptocurrencies.
