Part 1: The Ultimate Bitcoin Privacy GuideKehinde LAWAL
Hi Guys! Today I want to share a very important topic which is about, how you secure yourself online when purchasing Bitcoin and other cryptocurrencies.
And to make the article more fun and interesting, I have divided it into 4 parts which I will be dropping over the course of the week. Thanks for being a loyal reader of this blog, now, lets dive into PART 1👇.
What Is Bitcoin?
Like traditional money, you can trade Bitcoin for goods or services (such as a VPN subscription) and exchange it for other currencies. Unlike traditional currencies, however, there is no “middleman,” such as a state-controlled bank.
Bitcoins are instead generated using a free computer program, at a predictable rate determined by the amount of processing power dedicated to their generation. This process is known as Bitcoin mining. In theory, anyone can do it.
A Bitcoin is not a physical thing; it is a cryptographic algorithm consisting of a public key and private key. Some vendors do sell physical notes and coins denominated in Bitcoin, but what they are really selling is a private key (usually protected by a seal which you must break) together with a public key that you can use to verify the balance.
In practice, Bitcoin mining requires a large amount of processing power – so much so that mining is impractical for most individuals. However, it is possible to join a Bitcoin mining pool (or similar organization) to help spread the costs (and rewards). The prohibitive cost of Bitcoin mining is in part responsible for the current craze for mining alternative cryptocurrencies such as Ethereum, which has a much lower entry point than mining for Bitcoins.
Since the release of Bitcoin in 2009, numerous other virtual cryptocurrencies have been developed. Many of these have features that offer distinct advantages over Bitcoin (including being more anonymous). None of these alternatives, however, have achieved anything near the popularity of Bitcoin. This limits their real-world usefulness when you want to buy things.
Bitcoin And Anonymity
There are two sides to the Bitcoin when it comes to anonymity. The first thing to stress is that Bitcoin is not inherently anonymous. However, it can be made so (at least to a high degree). Please always bear in mind that 100% anonymity can never be guaranteed.
Central to the concept of Bitcoin is the blockchain. This is basically a public ledger that records Bitcoin transactions. Transactions in the form payer X sends Y bitcoins to payee Z are broadcast to the Bitcoin network for all the world to see. Thus, from this perspective, Bitcoin is much less anonymous than, say, good old cash. As Sergio Lerner, CEO of Argentinian company Certimix, notes,
It is possible to purchase Bitcoins and hold a Bitcoin address without revealing your true identity. This only provides a form of pseudonymity, though. Interested parties can use advanced data analysis techniques to look for patterns to de-anonymize users. Such wide-scale and sophisticated data analysis is Google and Facebook’s entire business model.
However… You can use Bitcoin mixing techniques to further confuse who did what with Bitcoins. By randomly switching the ownership of Bitcoins, such techniques make de-anonymization via data analysis very hard to achieve. If you purchase and hold them without revealing your identity, and then properly mix them, Bitcoins can afford a high level of anonymity when performing transactions.
I discuss ways to mix Bitcoins later in this guide. To more fully understand how Bitcoin and the blockchain works, The ultimate, 3500-word, plain English guide to blockchain by Mohit Mamoria is a fantastic introduction, as is our own Blockchain Explained guide.
Thanks for reading this article, if you have any questions, don’t hesitate to put it down in the comment box below👇👇👇.
Note: Part 2 of this article will be posted 9:00 AM tomorrow morning. I look forward to having you on our blog tomorrow. Happy Reading!