Cryptocurrencies are considered an “anonymous payment method”, but many things are pointing to the fact that technological barriers and continued restrictions made it almost impossible to use e-coins completely anonymously. Does it mean that independent cryptocurrency trade is no longer possible?
Anonymity of cryptocurrencies?
Just a few years ago cryptocurrencies were anonymous in the context of law, as registering crypto trade was not required. It doesn’t mean, however, that using them made you completely invisible. Ever since the beginning, the technology behind e-coins made it impossible to be fully anonymous.
It is because public keys of e-coin transactions are visible for anyone. A public key is the part of the transaction that can be viewed by anyone in the code of a functioning cryptocurrency and it includes information about the sender’s wallet address, the receiver’s wallet and the transaction amount. Of course, the names of the wallet owners are not visible, but a careful observer could use the obtained data. Especially in the case of many big cryptocurrency transactions it’s possible to trace who exactly owns the accounts.
Currently, aside from the possibility to analyze data available in public keys, there’s one more thing contributing to the diminishing anonymity of e-coins. It is the issue of having to pay taxes for your investments, as well as confirming your identity during registration on a crypto exchange or online crypto-cantors. Any illusion of making anonymous transactions goes away when cryptocurrency transactions are listed not only on the account linked to a name, but also in the IRS. Although there are e-coins which grant users a higher level of invisibility, most of the big cryptocurrencies lost the remains of anonymity with time.
Cryptocurrency in the context of the law
Laws concerning cryptocurrencies depend on the decisions of each individual country, so in various places around the world e-coins have different legal statuses. In some countries, like Algeria, Bolivia, Morocco, Nepal, Pakistan and Nepal, all activities that include cryptocurrencies have been banned. Other places, like Qatar and Bahrain, took on a more liberal approach, only banning the citizens from taking part in creating new e-coins, but allowing them to invest in the ones that already exist. There are also countries that do not ban their citizens from investing in cryptocurrencies, but impose restrictions on the transactions that include e-coins. These places include Bangladesh, Iran, Thailand, Lithuania, Lesotho, and Colombia.
Regulations also apply to buying e-coins, as according to the EU law, each crypto exchange registered in the EU area must require the users to verify their identity with the use of a valid identity document. It serves to seal the taxation system. Most of the big, famous exchanges operating out of EU (i.e. USA ones) also require identity verification. Because of this it’s impossible to use e-coins anonymously on the exchanges registered in this country. But independently from the legal status, it’s hard to talk about the anonymity of e-coins in a situation when there are so many laws regulating every aspect of their usage. A more detailed description of the legal aspects are available here:
Independent cryptocurrency trade
Although transactions made with most cryptocurrencies are not fully anonymous, there were quite a few attempts at creating new coins, with much higher degrees of invisibility. They were mostly e-coins, which allow for hiding the transactions on the blockchain. Currently we have coins like Lisk, TRON or Monero, which ensure a higher level of anonymity for their users. How is this possible? Well first of all, the technology behind these coins is based on masking public keys of their users. Without the access to these keys it’s hard to track the “who” and “when” of transactions.
There are also additional ways to enable both anonymous buying and trade of cryptocurrency. They include the so-called mixing, which is a service that mixes various streams of potentially identifiable cryptocurrency. It enhances the aspect of autonomy in cryptocurrency trading, as data available in the public key gets lost during mixing. The sender transfers the cryptocurrency, which is then mixed with units of other users and placed in the account of the receiver. What does it mean for the users? Most of all, mixing makes it harder to find the ties between the original transaction and the address of the receiver. In addition, the amount can be chosen randomly, thanks to which the transfer is composed of many smaller partial payments spread in time, which reduces the possibility of any third party finding out the amount that was transferred. But mixing services are quite expensive – the fees are usually between 0,25 to 3% of the transfer worth. That’s why mixing is usually recommended if an investor is trading a large sum and doesn’t want it to be tracked. In most other cases it’s enough to use a cryptocurrency cantor without registration
The last bastion – cryptocurrency cantor without registration
Most cryptocurrency exchanges and crypto-cantors verify the identity of their users, but there are still a few that do not. For example, Nominex allows users to pay out up to 3 BTC a day without the need for a verified account. Nominex is registered in the Seychelles, which allows it to bypass the verification requirements. There’s also Bybit, a derivative instrument exchange. This Singapore-based company doesn’t require verification, although it’s unavailable in many places, including the USA.
There is also the Crypto-ATM crypto-cantor – one of the most trustworthy cryptocurrency cantors without registration available online. It gives its users the option to exchange 3 fiat currencies (PLN, EUR, USD) for as many as 8 different e-coins, including rare altcoins like Lisk and TRON. Aside from that, it’s one of the last places you can buy cryptocurrency online without the need to set up an account – Crypto-ATM doesn’t offer registration at all! This cantor also charges a relatively small fee, compared to most crypto-cantors that do require registration, mostly due to the lower operational costs, as they do not have to verify the identity of all their users and manage this data.
And so it seems like the methods of remaining anonymous while using cryptocurrencies should be used as long as they are available. No one knows what the future will bring us – new, even more invisible e-coins, or the definite end of internet anonymity?