Cryptocurrency ABCs: Anonymity
Entering the world of cryptocurrency for the first time can be difficult. Learning all the terminology can be confusing and it is easy to feel overwhelmed. In this series, Cryptocurrency ABCs, we are going to cover important cryptocurrency terms and concepts from A-Z starting with cryptocurrency anonymity! Each post will cover a topic based off a letter in the alphabet.
Let’s kick this series off with the letter A!
Is Bitcoin Anonymous?
Many people believe that cryptocurrency like Bitcoin is anonymous. They believe this because when sending Bitcoins, you are not required to provide any personal information. This gives users some increased privacy but remaining completely anonymous is almost impossible.
“Bitcoin is pseudonymous. Sending and receiving bitcoins is like writing under a pseudonym. If an author’s pseudonym is ever linked to their identity, everything they ever wrote under that pseudonym will now be linked to them.
In Bitcoin, your pseudonym is the address to which you receive Bitcoin. Every transaction involving that address is stored forever in the blockchain. If your address is ever linked to your identity, every transaction will be linked to you. ” There are other cryptocurrencies that offer more privacy. Monero is a secure, private cryptocurrency which claims to be untraceable. Monero uses ring signatures and ring confidential transactions (RingCT) to obfuscate the amounts, origins, and destinations of all transactions creating cryptocurrency anonymity.
Using RingCT, the network hides the sender, amount and receiver in the transaction. While it is difficult to say that anything is completely anonymous, Monero is on the cutting edge of cryptocurrency privacy.
Another token called Z-Cash also shields transactions, hiding the sender, recipient, and value on the blockchain. Z-Cash uses something called zk-SNARKSs (zero-knowledge Succinct Non-Interactive Arguments of Knowledge). This is a way to prove some computational fact about data without revealing the data. More simply put, this is the privacy technology behind Z-Cash.
Today, October 17, 2017, J.P. Morgan announced it will be integrating privacy tech derived from Z-Cash into their Quorum Blockchain. Quorum will use this tech to create protected and auditable transfer of token ownership on the JPMorgan blockchain. This is the first implementation of this technology in an enterprise blockchain.
There is clearly demand for privacy and anonymity. Projects like Monero and Z-Cash are great examples of where cryptocurrency is headed in the future.
Anonymity: What to Remember
Remember, Bitcoin is not totally anonymous. Bitcoin is pseudonymous, meaning if your address is ever linked to your identity, every transaction will be linked to you. If you want improved privacy and security or cryptocurrency anonymity, consider using Monero or Z-Cash. Both tokens incorporate advanced security technology to protect their users.
Expect companies and institutions to invest heavily in privacy tech in the coming years. J.P. Morgan may be the first to incorporate Z-Cash tech in an enterprise blockchain, but it won’t be the last.
As more information and commerce is put on the blockchain, security will play an increasingly important role. Savvy investors may want to take advantage of this trend by holding some privacy tokens like Monero or Z-Cash.
Monero trades under the symbol XMR
Z-Cash trades under the symbol ZEC
Stay tuned for Cryptocurrency ABCs: The letter B!