For the typical Bitcoin enthusiast, a fundamental reason for adopting it is the fact that transactions are secure and independent from third party manipulation. How true is this? In the following brief article we are going to examine the accuracy of the above assertions and learn to what extent Bitcoin is really private.
A brief overview of the Bitcoin platform
Why is it that a cryptocurrency that essentially operates based on a public ledger have a reputation for trust? Bitcoin uses consensus management from its community to trade and make payments using the digital currency.
Transactions made on the blockchain are visible to everyone on the network. Other users help to verify the transactions.
What is really fascinating is that this mode of operation where the users have mutual distrust is exactly what is behind the allure of Bitcoin.
The decentralization is what brings about the trust users have in the system. There is no central institution that has the final say on transactions.
Privacy when using Bitcoin
The most the user can do on the Blockchain in concealing their identity is through the use of a pseudonym as opposed to complete anonymity.
The pseudonym may hide the real names but anyone with a certain degree with internet sophistication and using devices such as IP address monitoring nodes can track a user’s computer to its location using the IP address of their computer.
Besides, even though wallets utilize uniquely-coded identifiers there have been certain occurrences where the wallets were linked to the identity of individual users. An interesting conclusion by Adam Ludwin, Co-Founder of Chain.com, is as follows:
“Average users should be aware that Bitcoin is certainly less anonymous than cash.”
This statement can be illustrated by looking at the use of cash in daily life compared to Bitcoin. Take for instance someone buys anti-depressants from a pharmacy, other than the doctor’s prescription there is nothing to prove that they are mentally ill, which is informational that a typical patient would want to keep private as possible.
Take it to be that the medicine is bought on a blockchain network. The transaction is available to the public meaning that the entire world can know that they are indeed crazy.
In summary it there are a few ways of going past the anonymity that Bitcoin offers
- For a scenario whereby a Bitcoin Wallet has been registered bearing real personal details of a user, potential breach of Bitcoin data is made easier for hackers and cybercriminals.
- If hackers are able to can connect to the Bitcoin network through a number of nodes or computers there is a high likelihood that they can obtain information to figure out where the transactions originated from.
- The pubic nature of the blockchain makes it possible for transactions to be analyzed and even be linked to the initiator of a certain transaction.
Virtual Private Networks
For users to whom complete anonymity is a priority, use of a VPN is the way to go. This is because a potential hacker would go through much trouble only to get to a dead end. It is the only way to guarantee full anonymity.
In conclusion the privacy of user data is as secure as the extent the individual goes to ensure that. It will be interesting to follow new developments in the cryptocurrency world on matters privacy.