Must-Read: Are Cryptocurrency Transactions Traceable? Find Out
Since its inception, cryptocurrencies have gained popularity in several parts of the world. The first crypto to be invented was Bitcoin in 2009, and 11 years later, it remains the most popular overall. These digital currencies have experienced hard times and good times alike.
If you’re looking to invest in cryptocurrencies, there’s a lot that you’ll need to learn. All that starting from the basics of real-life investment can be obtained from the internet. This blog discusses cryptocurrency transactions and whether or not they’re secure. Can they be traced? Read on to find out more.
Can You Trace Cryptocurrency Transactions?
This question arises because many people have raised concerns about cryptocurrency transactions and learn more from Bugis Credit. Experts and governments have mentioned that cryptos are ideal ways of carrying out illegal activities. They say, drug peddlers, terrorist groups, and other criminals hide their acts in them. So, is it true that when you make a cryptocurrency transaction, it can be traced?
Most cryptos have a measure of privacy but are also traceable. According to one study, they are traceable unless designed not to be. Further, we cannot answer a direct ‘yes’ or ‘no’ to the question. Traceability depends on the type of cryptocurrency involved and the purpose for which they’re used. Some people would like to make payments using cryptos, but they shy off because of security and privacy concerns. Blockchain technology is meant to offer security enhancement methods, yet like any other technology, it also has limitations.
Understanding Cryptocurrency Traceability
What does a traceable transaction mean? Most cryptocurrency operates with a high level of transparency that you might not be familiar with. All transactions are public and permanently kept in the blockchain (a distributed public ledger). This means that you can get all the ones you’ve made since the day you joined the industry there. All your activities on the exchange are internally recognizable and adequately accounted for.
Addresses are the only information that describes where cryptos are assigned and where they’re sent. Participant’s wallets privately create the lessons. After using a particular address, it becomes contaminated by all the transactions linked to it. Anyone can see your balance and every activity of the address.
The anonymity of Cryptocurrency Transactions
Some cryptos are well-known for their privacy-related features. Others like Monero use the blockchain technology but are still designed to obscure transaction details like sender and recipient identities. That makes it challenging to trace them.
Even if privacy is significant to many users, it also allows for criminals to hide their activities. That has caused some governments to interfere mainly with the crypto industry while trying to bring down criminals. Non-traceable and non-anonymous cryptos exclude capital control while risking the safety of users’ information.
Let’s now talk more about Bitcoin, which is the most known cryptocurrency with the highest number of users. Unlike other cryptos, Bitcoin has the best-advanced technology aimed at improving the security of all users’ transactions. It’s professed as an anonymous payment network and possibly the most transparent. When used appropriately, it can offer unprecedented levels of privacy.
Although it’s decentralized, all transaction details are kept in the blockchain that’s regularly updated. Both wallet and exchange transactions are held in this ledger. Users are guaranteed pseudo-anonymity. Bitcoin transactions are fully traceable, meaning that we can track any of the coin’s activities. Yet still, there are some limits. It can’t be easy to follow some of Bitcoin’s origins if individuals mix up or create everyday transactions.
People who would like to enhance their security can do so by avoiding those with suspicious activity or whose activities aren’t easy to trace. Depending on how the transactions are dealt with in terms of input and input amounts, addresses can be grouped in clusters so that participants can get to know who owns particular addresses. These addresses can’t remain fully anonymous. Because of the blockchain’s permanency, it’s vital to note that something non-traceable now might become insignificant to trace in the future. Thus, you should only use an address once and take care not to disclose its information.
Like other cryptos, a Bitcoin address is merely a long string of numbers and codes, each unique to a wallet. This results in privacy concerns since anyone can access the information and view any transactions you’ve made from the wallet. The advantage is that blockchain doesn’t record everything like the transacting parties’ identities. This makes Bitcoin pseudonymous instead of anonymous, meaning addresses are recorded, but identities aren’t.
Ways to Protect Cryptocurrency Privacy
Your transaction privacy is crucial while you undertake it within the crypto industry. You can protect it using four methods; hiding IP address, not publishing your address, limiting mixing services, and using your address only once.
- Take care not to publicize your address. This can happen when you’re using public networks like social media. Unless you intend to obtain available payments with complete transparency, promoting a crypto address on social networks isn’t a wise thing to do. Watch out not to publish details about your transactions and purchases that might enable someone to identify your address.
- Use new addresses after making a payment. Remember, every time you make a payment, your address is linked to all past transactions. Anyone can access them plus your balance. Using a different address when creating a new payment, therefore, can help prevent anyone from tracing all your transactions. Even senders won’t see your balance. You can also use multiple wallets for various purposes to isolate each transaction so that it’s impossible to link them together.
- Hide your IP address. Most crypto networks are peer-to-peer; thus, it’s possible to log IP addresses. Use software like VPNs to mask your IP address. That way, even if it’s logged, no one will trace it back to you when it’s hidden.
The Bottom Line
Cryptocurrencies strive to offer users with the best security through anonymity and traceability. Even so, it’s upon individuals to further safeguard their privacy. We trust that as the crypto industry continues to grow and become stable, more improvements will be made to ensure smooth operation. Meanwhile, you can reread this blog to understand how cryptocurrency transaction traceability works. What if you aim to invest in cryptocurrency? Visit Instant Loan to see the currency to try out this year.