Crypto News

Is Bitcoin anonymous?

Bitcoin is often described as anonymous because it can be sent and received without providing any personally identifiable information. However, achieving reasonable anonymity with Bitcoin can be quite complex and perfect anonymity may be impossible. As Bitcoin.org puts it: “Bitcoin is designed to allow users to send and receive payments with as much privacy as any other form of money. However, Bitcoin is not anonymous and cannot provide the same level of privacy as cash.”

Bitcoin is a pseudonym

Anonymous Bitcoin Sending and receiving Bitcoin is like writing under a pseudonym. If an author's pseudonym was once associated with their identity, then everything they ever wrote under that pseudonym will now be associated with them. In Bitcoin, your pseudonym is the address you receive Bitcoins from. Any transactions associated with that address are stored in the blockchain forever. If your address is linked to your identity, then any transactions are linked to you.

In the original white paper, Bitcoin users were advised to use a new address for each transaction to avoid transactions being linked to a common owner. “As an additional firewall, a new (address) should be used for each transaction to prevent them from being linked to a common owner….The risk is that if the owner of one (address) is revealed, linking could reveal other transactions that belong to the same owner,” Satoshi Nakamoto said. This is the equivalent of writing multiple books under different pen names. If one of your pen names is related to you, the others remain secret. But is this method enough to ensure complete anonymity? While this is still the best method, it is not enough to ensure complete anonymity since transactions have multiple inputs. Multi-Input Transaction

A multiple input transaction occurs when you receive payments into your wallet to different addresses, but then you send payments out of the wallet to get Bitcoin from multiple addresses. The outgoing transaction will include multiple addresses as inputs, proving that they are in the same wallet and belong to the same entity. If your identity is ever linked to any of these addresses, none of them will maintain their anonymity.

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