Since its inception, one of the key features and goals of Bitcoin — and many other cryptocurrencies — is anonymity for its users and their transactions.
However, there exists a common misconception among the general public that all people who use or advocate for Bitcoin must be participating in some criminal activity because it allows them to move funds around in a way that is untraceable.
While it is true that cryptocurrency offers extra layers of security and anonymity, it is still possible for individuals or agencies with advanced knowledge and tools to track and trace accounts, transactions, and ultimately even the location of senders or receivers.
It is, after all, a ‘public’ ledger.
A Few New Tricks
Many of the new privacy protocols being developed for Bitcoin involve cryptographic encryption that skews the senders’ and receivers’ information or the information of a transaction.
One of the systems with the most potential is a method called ‘CoinJoin.’
The CoinJoin method is a trustless system that essentially takes many Bitcoin transactions and mixes them up in a combined pool to create one single large transaction — making it more difficult for outside parties to determine who sent what amount and where they sent it.
There are a few different iterations of this system in development, although CoinJoin is apparently the only one that could be implemented now without any changes to the underlying Bitcoin protocol.
Another company, Samurai Wallet, is even taking the CoinJoin method one step further with a method it calls ‘Stonewall.’
In the Stonewall system, multiple transactions are generated from a single transaction that simulates a CoinJoin transaction. The extra multiple transactions that are generated then act as decoys, making it difficult for an outside party to pinpoint exactly which transaction was genuine.
The continuing development of security and privacy protocols for Bitcoin and cryptocurrency may be pivotal in attaining true mass adoption in the near future.
If the general public is to adopt the use of cryptocurrency in their daily lives, they will need to be sure their funds are safe and that their private information cannot be obtained by those looking to do harm or infringe upon their rights to privacy.
Do you think privacy and anonymity are important features of digital currencies? Let us know your thoughts in the comments below!