One of the biggest misconceptions about cryptocurrencies is that they are perfectly anonymous. This school of though could have sprung from the fact that you are not providing your personal information while making a transaction.

Have you ever thought if cryptocurrencies are really anonymous?

Cryptocurrencies have grown popular among users in the past few years. The new-found belief of people on digital coins was brought upon by different factors, including its usually misconstrued promise of anonymity and privacy.

It is true; using cryptocurrencies is far more secure and private than using other forms of digital payment systems and credit or debit cards. However, cryptocurrencies are not perfectly anonymized. This means that using cryptocurrencies does not necessarily guarantee you that your transactions would not be traced back to you.

Cryptocurrency transactions are pseudonymized. This means that making a transaction is similar to writing a story using a pseudonym. When transacting using cryptocurrencies, you don't need to provide your personal information or proof of identity; instead, you will be able to interact with the blockchain using a pseudonym or what we call a wallet address. Of course, wallet addresses do not necessarily bear your name or your real-world home address, but there are people who can actually link your identity to the transactions you make; hence, cryptocurrencies are not truly anonymous but are pseudo-anonymous.

The rise of private coins

With the heightened emphasis of people on data privacy and the growing call for cryptocurrencies to improve their privacy mechanisms, private coins emerged and are now growing in popularity. Private coins are the safest way for users to make blockchain transactions without exposing their financial and personal information on the wild. These coins have built-in privacy-centric functions like stealth addresses or private transactions, which provides users with new layers of privacy.

There are a number of private coins being used nowadays. Here are a few of them:

XMR

Monero is one of the most popular private coins that exist. It allows users to have complete command over their data privacy and has set up systems to keep transactions completely anonymous within the blockchain network. It is cryptographically private in nature and uses several techniques to obscure traces of someone's identity while using the digital coin.

It uses several privacy-oriented features like stealth addresses, ring confidential transactions and a ring signature. Monero uses a network of stealth addresses or addresses that are generated on a one-time basis every transaction. This allows users to disconnect their identities from the blockchain network.

Monero also employs Ring Confidential Transaction technique which works by creating cryptographic proof to show the blockchain network that the transaction is balanced – meaning the input and the output amounts are equal – without showing the actual numbers. This way, users can be assured that the blockchain network would not be able to see the amount of each transaction they made through Monero.

Zcash

Zcash, which started as a fork of the bitcoin blockchain back in 2016, employs a totally different strategy to keep your identity confidential. The basic privacy mechanism used by Zcash is zero-knowledge Succinct Non-Interactive Argument of Knowledge proofs (zk-SNARKs). This feature allows traders to reveal the number of coins they have to another trader while keeping other information totally private.

Dash

Similar to Bitcoin, Dash is another private coin that protects the anonymity of users through coin mixing. However, in addition to the usual mixing feature, Dash includes the option for instant and private transactions that are not currently being offered by Bitcoin.

Dash in your digital wallet consists of disparate inputs that serve as separate, completely discreet coins. This private coin breaks down the transaction inputs into standard denominations and mixes them with the inputs of two other people without the coins leaving your wallets.

Bitcoin is starting to improve its anonymity features

It is, at this point, a public knowledge that Bitcoin does not offer perfect anonymity to its users. As reported by CoinTelegraph, one of the world's biggest news outfits regarding cryptocurrencies, Bitcoin has already taken steps in improving its privacy features.

As the global call for heightened privacy in different facets of technology, there are now existing different plug-ins and services that can help users protect their anonymity while using Bitcoin. As CoinTelegraph puts in, these improvements in the Bitcoin ecosystem is a threat to private coins.

One of the most effective way to conceal your identity while using Bitcoin is to use Bitcoin mixer like MyCryptoMixer. They allow people to make transactions – buy and sell – using bitcoins without having a fear of the transaction being traced back to their wallet address. It works by pooling the coins of different users into one storage, randomly swap them, and send a new, fresh, and untraceable coins to the users. According to the Wasabi Wallet, mixed transactions constituted 4.09% of all Bitcoin transactions as of April, with the total has increased by over 300% in only nine months.

Final Thoughts

Cryptocurrency is a secure way to conduct online transactions in this day and age. However, as it is a digital asset, complete privacy could not be guaranteed. With the heightened demand from users for cryptocurrencies to improve their privacy mechanism, private coins began to become popular alternatives. With the same pressure, Bitcoin, one of the biggest cryptocurrencies in the world, has been picking up the pace and is starting to take steps to protect their user's privacy further. Nonetheless, amid these privacy protocols, users still need to be responsible in the way they are using their digital coins. Protecting your privacy is on your hands. Check out the list of the best Bitcoin mixers according to MyCryptoMixer!