With the recent cryptocurrency craze, the number of people that used blockchain wallets in 2017 more than doubled. This is in line with the growing crypto economy, with more than 1,500 different types of cryptocurrency tokens being traded all over the world.
The number of users is growing steadily, and one of the major reasons behind this growth is the anonymity that is promised by Bitcoin and other cryptocurrencies. However, are these digital currencies actually totally anonymous? The answer to this question is yes and no.
Yes, since cryptocurrencies provide you with a significant level of privacy, which the normal internet fails to provide you. However, no, because it is not totally anonymous and just like any other internet application, its data can be traced too. A very simple solution that ensures a lot more privacy while you perform transactions is through using VPNs. VpnMentor provides a list of the various VPN services that you can choose from, some free, while others offer paid services.
To understand how your communication can be traced, you need to have a basic understanding of how the internet works. The most basic, meaningful form of data transfer is a packet. A packet is further divided into its components, which hold data such as, your IP address and information about the destination.
When you communicate with a website, the communication is basically carried out in the form of packets. It does not matter if you’re communicating with a blockchain or if you’re trying to access Facebook. The method remains more or less, the same.
So, in theory, if anyone intercepts your packets while they are in transit they can not only access your personal data but also trace the route of the data.
Blockchain Anonymity Gaps
One thing that needs to be made clear is that your Internet Service Provider (ISP) has access to all of your packets. So, if you are performing blockchain transactions you should understand that the ISP or any surveillance agency that has access, can easily intercept and read your data.
Whenever you perform a transaction on the blockchain, your address and the address of the destination, along with the amount that is attached to the transaction are sent to the blockchain. You do not attach your own identity to the transaction, but if anyone were to intercept this packet of data and determine the address it came from they can eventually link a particular address with a particular person.
Users can create a new address with every transaction, but that’s a headache and extends the length of time for performing transactions. Since the transactions are communicated over packets, which also contain your IP address, there is also the risk of finding out the owner of crypto tokens by tracing back the IP address.
How VPNs can help
As we have discussed, your IP address can be the main tool that someone might use to trace your transactions. To protect your IP address, you can use VPNs, which basically reroute your traffic to some other server in another part of the world, to provide you with a certain level of anonymity.
There are different kinds of VPNs, some just provide simple rerouting, while others provide in-depth coverage and protection from being traced back. This depends on whether you are choosing a free VPN or a paid one. Regardless of the type, a VPN will still provide you with extended protection from being hacked.
Buying Bitcoin Anonymously
You can always use the techniques mentioned above to make your transactions more secure. However, if you still feel unsafe while performing transactions there are other ways around it. For one, you can always go and buy Bitcoins in person.
LocalBitcoins is a popular site, which allows you to buy and sell Bitcoins after meeting face-to-face with the other party. For further anonymity, always open the site after you’ve started a VPN application or use the Tor browser and use fake names and addresses so that the transactions do not trace back to you.
Another innovative way to buy cryptocurrencies is through the cryptocurrency ATMs, which are popping up all over the world. These ATMs are appearing at popular spots and in offices, and you can buy crypto tokens with cash from them.