Deep Dive Into Monero XMR: Understanding Privacy CoinsFebruary 2, 2022
Anonymity is one of the main features of a cryptocurrency. A user does not need to provide personal data to perform transactions. The Bitcoin blockchain records the digital addresses of wallets and the amounts. The identity of the creator of the first and most popular cryptocurrency is also unknown. It is hiding under the pseudonym Satoshi Nakamoto.
Experts point out most cryptocurrencies are “pseudo-anonymous”. Another basic principle of the blockchain is the transparency and publicity of transactions. You can track and determine the chain of operations of any network member. You can even detect the frequency and volume of transfers. The system also provides any user with the opportunity to write out the addresses the coins arrived from. You can use them for a new search. And if the owner left their data somewhere, establishing their identity will be no big deal. Such a situation can occur when you order something in an online store or leave your info on a forum.
Commitment to KYC
Cryptocurrencies are often accused of being used in illegal activities. It is due to the anonymity of this payment method. Thus, the crypto market is under close scrutiny of regulators and special services. The emergence of cryptocurrencies has become a new trouble for them.
In 2014, Philip and Diana Cauchy created a program. It allowed downloading information about cryptocurrency transactions and analyzing their sequence. They connected the addresses of bitcoin wallets with the IP addresses of the computers containing the network nodes. Thus, special services and large financial organizations became interested in their developments.
The deanonymization of the crypto market is also facilitated by global regulators. They demand more transparency and compliance with the KYC (Know-Your-Customer) policy from exchanges.
The European Union plans to introduce mandatory verification of users of cryptocurrency exchanges. The New York prosecutor’s office recently sent letters to the largest cryptocurrency exchanges. They asked for information about their activities and internal control. Coinbase asks the client to verify their identity and binds the data to the bitcoin address. Some Reddit users state the popular crypto exchange LocalBitcoins also requires customers’ verification. However, it was not proved.
How to protect the anonymity of cryptocurrencies?
Deanonymization allows fighting the greytrade. However, anonymity lets cryptocurrency owners protect themselves and their savings within reasonable limits. Many experts believe it is necessary to ensure the anonymity of personal transactions. It is done to prevent the attacker from linking the virtual asset wallet to a real person. Without protection, it may lead to physical harm for financial gain.
One of the main problems of cryptocurrency users is carelessness. People often leave the information on forums or personal pages and forget it.
To maintain anonymity, you should not leave the information that will allow connecting you with a cryptocurrency address on the Internet. For example, don’t use the same combination of login and password on different pages. You should also avoid browsers that remember passwords. It is better to use those that guarantee anonymous searches.
You should avoid making transactions from the same address. A thief may examine all your transactions and link the wallet to your actual data. Experts say you should use several wallets with complex passwords created using different services. This will help protect your transfers.
Read Also: Wireframing Is Very Important For UI And UX
Monero is a truly anonymous cryptocurrency
Another option is to use cryptocurrencies with anonymity. For some services, anonymity is their main feature. Monero is one of the most popular among them.
Monero is a common cryptocurrency and payment system. It rests on the CryptoNote algorithm. Thanks to this algorithm, transactions in the system can occur safely and anonymously. We can’t say the same about bitcoin since the user’s financial transactions can be tracked. To transfer 1 XMR to BTC, it will be enough to enter your wallet number.
Monero remains one of the most sought-after cryptocurrencies in the market today. Monero uses an integrated approach to ensure the privacy of its users. It consists of several mechanisms:
- The CryptoNote algorithm helps encrypt the personal data of the sender and recipient, as well as the transaction amount.
- The Ring signature technology can confuse a transaction. That is, several addresses sign the transfer at once. It makes it is impossible to find out which of them actually take part in the transaction.
- The RingCT (Ring Confidential Transactions) technology anonymizes the number of coins transferred. It is impossible to find out the transaction amount.
Read Also: How Minimalism Impacts Your Business and Private Life
Experts believe that most cryptocurrencies will become anonymous in the near future. This will happen despite the bans and restrictions imposed on them on the part of governments.
Time will show if digital currencies with an increased level of privacy can withstand pressure from regulatory structures. The pursuit of privacy strengthened in society gives rise to optimistic predictions for the future. As many suggest, Monero is the undisputed leader in this direction so far.