At the heart of blockchain technologies is the ability to make transactions in a trustless environment. People no longer need to trust each other in order to transact directly with each other. The advent of blockchain technologies ushered in a new era where trust is automated. Complete strangers can now transact securely with one another, verify and confirm purchases as well as review transaction histories – all without a central authority pulling the strings in the background.
Undoubtably, the level of transparency brought forth by blockchains is remarkable. But are you aware that it’s also risky? You see, the fact that transactions are traceable on a blockchain is a double-edged sword. On one end, it gives you the confidence to trust a stranger on the network. On the other end, if you’re not careful about protecting your identity, it’s also what makes you susceptible to having your activities tracked and monitored.
Unfortunately, many believe that they are transacting anonymously on public blockchains when they really aren’t. On the contrary the published address, which is supposed to be shared when making a transaction, is pseudonymous with most cryptocurrencies (including popular ones such as bitcoin, ether, litecoin etc…). Additionally, when these addresses are used to make a transaction, they are stored on the ledger forever. As a result, cybercriminals can trace your published address in order to determine how much money you received and calculate how much you have left. They can even string together your personal information and uncover your identity based on your activities. Consequently, the transparency often touted for curbing theft, fraud and corruption on blockchains is also what can be used against you.
So how can you protect yourself?
Use a unique address for every purchase
• Reusing the same address for multiple transactions increases your chances of being traced. When you publish the same address repeatedly, you’re not only risking your own privacy and security, but you’re also putting everyone who transacts with you at risk.
• Purchase a crypto wallet that automatically generates new addresses for you. However, you still need to monitor your addresses to avoid accidental loss or theft.
Use a virtual private network (VPN)
• A VPN will conceal your IP address and encrypt traffic from your computer so that you can make transactions securely and privately.
• Some VPNs allow you to route only traffic from your wallet so that you can keep it separate from other Internet based activities.
• VPNs are also used to bypass geoIP bans in countries where cryptocurrency trading is banned.
Use a tumbler or mixer
• Tumblers and mixers (terms that are often used interchangeably) are services that pool unrelated transactions.
• These services mask the source of transactions and make them difficult to trace.
Use anonymity-centric cryptocurrencies
• There are a number of privacy driven cryptocurrencies such as dash, monero, verge & Zcash (and many more).
• Their platforms typically have features that hide user information and thereby enable users to transact privately.
Remember, there is no central authority to protect your privacy or to secure your transactions on public blockchains; the responsibility is entirely yours.
Click on the heart icon directly below this post's title if you liked what you read and/or leave a comment.