A great advantage that attracts more people to Satoshi Nakamoto’s creation, Bitcoin is the claim that transactions done by Bitcoin addresses are anonymous. People believe that the Bitcoin blockchain hides real-world identities. The transparency that a bitcoin node offers that makes it easy for everyone to look up transactions in the blockchain removes the anonymous cloak that Bitcoin offers.
Are Bitcoin Transactions Truly Anonymous?
Identities may not be on the Bitcoin protocol, but the transactions done are available for viewing by everyone on the blockchain.
With the growth of the crypto world, it is not surprising that many crypto exchanges and platforms require users to undergo KYC and AML procedures. When an identity has been linked to a transaction that occurs within a centralized exchange with information about the owner of the address, it defeats the anonymity and privacy elements.
Bitcoin Mixing Services: What Are They
Bitcoin is not anonymous in the true sense of the world, and that is where mixing services come into the equation if bitcoin users want to improve their privacy. Some users feel that bitcoin is often anonymous, hence it is easy to carry out money laundering activities with their address.
Bitcoin mixing services are innovations that allow Bitcoin users to receive payments in a truly anonymous manner by mixing their coins with those of other users. A bitcoin transaction done can’t be linked to identities when such services are in use.
Bitcoin Addresses : Anonymous or pseudonymous?
Most people tend to confuse Bitcoin addresses as anonymous, but they are “pseudonymous”. By pseudonymous, it means that though Bitcoin transactions may not reveal the identity of the owner of every transaction done in an address or may not carry a name tag like in a bank account, they can still be linked to real-world identities, in most cases. How is that possible on the blockchain? Does that mean for a blockchain user to remain anonymous, they should use a new address to receive payments in every transaction? If Bitcoin is not anonymous in the real world, does every Bitcoin address need mixing services?
It is easy to link a Bitcoin address to a person when they have used a centralized exchange that needed them to carry out some identification. This process of linking a Bitcoin address to a person, thereby removing the anonymous cloak that the blockchain seems to offer is blockchain analysis. As an advanced bitcoin transaction tracking method, it can be used to link one’s usage of a centralized exchange to their IP address. The alleged anonymity that bitcoin addresses tend to offer has made some users feel that they can carry out money laundering activities through the blockchain without fear of their identities being tracked with their IP address.
Types of Bitcoin Mixing Services
For someone that is craving the total anonymous cloak that blockchain technology is meant to offer, using a Bitcoin mixer to mask the transactions done on your bitcoin addresses is not a bad idea. Using a new address when you. utilize this service on the Bitcoin blockchain is futile.
Several mixing strategies have crept up over the years. There are the centralized models, where a user has to anonymize their bitcoin transaction via a centralized mixer. Users of bitcoin addresses have to trust the mixer. Many feel that using the centralized solution to anonymize transactions defeats the decentralization element that Satoshi Nakamoto had when the Bitcoin blockchain was created. An alternative to adding anonymity to an address is to opt for solutions that mimick Lightning Network-style payment channels. Some users of the blockchain technology prefer to use addresses linked to privacy coins such as Monero to achieve the mixing process.
When mixing strategies are used and a transaction occurs from the address, the risk of their private information being revealed plummets. They are no longer worried about people being able to know how many coins are linked to their address, how they spend their Bitcoin, what transactions they carry out, and much more.
Obscuring the link between a person and their address is feasible with a Bitcoin mixer.