Anonymity in the context of cryptocurrency refers to the unique ability of one user to remain hidden from the public. This means that no one outside of their virtual wallet can tell who created the transaction and to whom it went. Anonymity is possible in the digital world given that there are numerous methods one can use to hide their identity when interacting online.
Cryptocurrency transactions use a process called “ring signatures” to keep activities anonymous. Basically, a ring signature involves combining multiple inputs of wallets owned by different people into one transaction. Therefore, instead of seeing who may have sent what to whom, the records appear as if they all came from one source.
This provides individuals with a reasonable level of privacy when engaging in digital commerce. Another factor that adds anonymity to blockchain networks is the use of mixer services. In this case, individuals send their funds to an online platform that randomly mixes and distributes them among different wallets.
This way, the original sender’s wallet cannot be traced and their activities are kept anonymous. Anonymity is one of the most appealing features of cryptocurrencies for traders, investors, and crypto enthusiasts looking for privacy and security. Without anonymity, individuals would have to constantly go through KYC (Know-Your-Client) or AML (Anti-Money-Laundering) procedures to be able to engage in digital activities – which is usually a lengthy and very tedious process.
Being able to remain anonymous helps users protect themselves from being monitored, tracked, or even hacked without them knowing it.