Linus Torvalds\u2014developer behind the Linux operating system and the Git distributed version control system. The story here is that apparently someone changed a Github Linux kernel repository<\/a> to say \u201cI am satoshi\u201d<\/a> \u2026 but he has since come out to say it was just a jokester who took advantage of how GitHub works to make it seem like that was coming from him.<\/p>\n\n\n\n So all in all we are still unsure of who the mysterious creator of Bitcoin really is, but it poses an interesting question\u2026what role does an unknown creator or participant mean in the grand scheme of crypto?<\/p>\n\n\n\n At the beginning of the cryptocurrency, one of the biggest arguments against it was that it was being used largely by criminals and for illegal purposes because no one could \u201ctrack it\u201d.<\/p>\n\n\n\n In fact, \u201cSilk Road\u201d, a popular online dark-web marketplace, was a place where bitcoin gained some early traction as it was seen as an easy means of transacting in a value exchange anonymously… but how anonymous is it really?<\/p>\n\n\n\n As the technology continued to become more popular there were lots of debates as to how and why this (at the time) peculiar digital currency was being used. Those defending it were stating the obvious facts: bitcoin has an open, permissionless, public ledger. This means that ANYONE can easily go and view each and every transaction that takes place.<\/p>\n\n\n\n Seems pretty silly to do a criminal transaction out in public for everyone to see right?<\/p>\n\n\n\n Well, this is where the question of anonymity comes into play in regards to how we view our economy.<\/p>\n\n\n\n If a criminal is doing transactions on the public blockchain using something like bitcoin, how traceable are they really?<\/p>\n\n\n\n The transactions themselves are public and anyone can indeed see them if they are moved on the blockchain. It\u2019s actually very easy to see them, you can even use a site like this to see all of the recent transactions:<\/p>\n\n\n\n What you will notice though, is that you cannot necessarily tell WHO is making that transaction, though there are a variety of ways to determine this. All you see is a long string of numbers and letters followed by the time and the amounts.<\/p>\n\n\n\n When moving bitcoin, you will need to have some sort of wallet to store the strings of code that equate to your crypto holdings. When people say \u201cnot your keys, not your crypto\u201d what they mean is that the keys to the WALLET in which you are storing your crypto, don\u2019t actually belong to you.<\/p>\n\n\n\n This is common with popular centralized exchanges like Coinbase. They set up a wallet for you in THEIR custody which means they\u2019re taking care of it for you. Now of course, they are a reputable company, but if they were to get hacked or decide they want to do something with your crypto, they technically own it and have the ability to do so. I prefer to \u201cself-custody\u201d my crypto and store it on a wallet that is owned and controlled by ME and only me.<\/p>\n\n\n\n There are popular self-custody software wallets<\/strong> that live online such as \u201cMetamask\u201d and also popular self-custody hardware wallets<\/strong> that live offline such as a \u201cLedger Nano\u201d.<\/p>\n\n\n\n Most centralized exchanges also have what is called a KYC for all of their customers.<\/p>\n\n\n\n A KYC stands for \u201cknow your customer\u201d and means that in order to set up a wallet with them and use their exchange, they must obtain all of your personal information and identification.<\/p>\n\n\n\n A centralized exchange that is regulated (especially in the U.S.) has to obtain this information and pass it along to the governing bodies, so yes…if you make transactions through here, the IRS can certainly see them.<\/p>\n\n\n\n When making a transaction from a centralized exchange that has your KYC information, you can imagine that it would be PRETTY darn easy to see exactly who owns that wallet on that particular exchange and figure out what types of moves they have made.<\/p>\n\n\n\n But what about with NON-KYC exchanges…or transfers made from wallets where people do not know who owns the wallet?<\/p>\n\n\n\n Sure, there are things like IP addresses that could help relate transactions and wallets back to their owners, but there are even ways to mask those…<\/p>\n\n\n\n Not to mention, the same way you could use cash today to have a transaction that\u2019s \u201coff the books\u201d, you could simply have crypto on a cold wallet (hardware device) and simply hand off the wallet for cash or some other transaction in return and it would be completely hidden.<\/p>\n\n\n\n Anyway, as you can tell with bitcoin, public transaction data, wallet addresses, timestamps, etc. makes it more \u201cpseudonymous\u201d than it is \u201canonymous\u201d. Meaning they may not know exactly WHO these wallets belong to in all cases, but they know a fair amount.<\/p>\n\n\n\n The point that I\u2019m making is whether it\u2019s using cryptocurrency or not, there has always been and will likely remain ways to hide transactions, maintain privacy, or even achieve complete anonymity.<\/p>\n\n\n\n There\u2019s already a handful of \u201cprivacy coins\u201d (alt-coins that provide higher levels of anonymity) that exist to fulfill this exact purpose. Here\u2019s a list of a few of the most popular:<\/p>\n\n\n\n These are all said to have more anonymity than bitcoin.<\/p>\n\n\n\n So FINALLY, we get back to the original point of this article… thank you for being patient \ud83d\ude04 How does anonymity play a role in a cryptocurrency (and economies as a whole)?<\/p>\n\n\n\n Anonymous<\/strong><\/p>\n\n\n\n Pseudonymous<\/strong><\/p>\n\n\n\n To summarize…<\/strong><\/p>\n\n\n\n Anonymity provides full privacy and allows for no reputational currency build-up over time, meaning you cannot establish reputation based on previous actions because the actions are anonymous.<\/p>\n\n\n\n Pseudonymity provides a medium level of privacy and enhances the ability to act freely while still allowing aliases to gain a reputation over time. But, pseudonymity (similar to anonymity) still gives leeway for popular technical attacks on blockchains such as a Sybil Attack.<\/p>\n\n\n\nI\u2019ll start by defining the 3 areas on the spectrum of anonymity:<\/strong><\/h3>\n\n\n\n
<\/strong>
<\/strong> \u201cAnonymity describes situations where the acting person’s identity is unknown. The important idea here is that a person be non-identifiable, unreachable, or untrackable.\u201d
<\/a><\/li>
<\/strong>
<\/strong> \u201cA pseudonym or alias is a fictitious name that a person or group assumes for a particular purpose, which differs from their original or true name.\u201d
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<\/strong>
<\/strong> For our purposes, this is someone who we can identify, track, trace, and is able to be recognized.
<\/li><\/ol>\n\n\n\nPros and Cons of each (regarding crypto):<\/strong><\/h3>\n\n\n\n
Pros<\/strong><\/td> Cons<\/strong><\/td><\/tr> You are not identifiable in a central system somewhere\/data is protected<\/strong><\/td> Makes it easier to do illegal things in society<\/strong><\/td><\/tr> Allows for private transactions and dealings (personal & business)<\/strong><\/td> Least amount of accountability, Reputation is not taken into consideration in any form<\/strong><\/td><\/tr> Helps prevent hackers \/ targeted attacks \/ improves security<\/strong><\/td> No recourse for if bad things happen, can\u2019t get help<\/strong><\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n Pros<\/strong><\/td> Cons<\/strong><\/td><\/tr> Hides personal information, but allows for reputation to continue (your alias gains its reputation)<\/strong><\/td> Not fully accountable, and can pick up a new pseudonym (re-create)<\/strong><\/td><\/tr> Allows free-thinking and free-acting without worry about recourse on their core identity<\/strong><\/td> Possibility for people to be operating under multiple pseudonyms to benefit themselves<\/strong><\/td><\/tr> Middle ground level of privacy and protection against centralized systems depending on how much they know about the person behind the alias<\/strong><\/td> Middle ground level of privacy and protection against centralized systems depending on how much they know about the person behind the alias<\/strong><\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n
<\/strong>Identifiable<\/strong><\/p>\n\n\n\nPros<\/strong><\/td> Cons<\/strong><\/td><\/tr> Fully accountable and reputation follows your one open identity<\/strong><\/td> No privacy: the ability to act, vote, think, or speak a certain way may be based on others\u2019 opinions or legal ramifications more easily<\/strong><\/td><\/tr> Higher degrees of trust when dealing with another member in an identifiable system<\/strong><\/td> Your data can be easily taken and used by others (for or against you)<\/strong><\/td><\/tr> Easier to govern and identify\/punish bad actors who are operating negatively in society<\/strong><\/td> The ability to be manipulated and controlled is significantly higher because you have fewer options and one singular identity\/reputation<\/strong><\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n
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