Differences between anonymity & privacy

[BlackHatCoiner]

I think that the beginners should know the differences between those two. People tend to confuse them or consider them the same, but they have a very different meaning. I intend to compare them with Bitcoin each time to make it clearer.

• Privacy

Privacy is the ability of people to seclude information about themselves. In other words, it is the right for someone to not be subjected by unauthorized invasions such as government's. For example, a corporation may want to receive your personal details to serve you the appropriate advertisements. Google invades your privacy with AdSense; if you watch a video or google a sentence about “Pets”, you're most likely going to see Pet Shops/Food/Toys whenever you find a google ad.

In Bitcoin, your privacy can be invaded. Let's say that Charlie and Bob received 5 BTC from Alice in a transaction that looks like this:

1ALice...   10 BTC --> 1CharLie...  (5 BTC)
                       |  --> 1Bob...        (5 BTC)

Alice & Charlie now know that Bob's address is 1Bob[...]. This means that if Bob chooses to transfer these 5 bitcoins, he can be tracked down. Let me give you another example; let's say that Bob wants to get rid all of his bitcoins by selling them into an exchange. He chooses to combine all of his inputs and create one output.

1Bob...   5 BTC --> 1Exch4nge... (25 BTC)
16Uw...  2 BTC
1Ku8...   8 BTC
1HA8...  10 BTC

Alice & Charlie can now observe that the signer of the address that received 5 BTC previously is/was the owner of three addresses with 2, 8 and 10 BTC. Even if they don't succeed on finding that the receiving address is an exchange's, they already know too much. Bob is exposed and every transaction made from any of his four addresses can be censored by individuals. In other words, if Bob made an illicit activity from the 1Bob[...] address, they will all be considered what we call “tainted bitcoins”, because they were all in possession of a criminal. Even if someone made a completely legal transaction with Bob, he or she will be censored. People use mixers or/and mixing protocols to enhance their privacy.

Here's a nice technical thread to read: [Education] Bitcoin Privacy and Anonymity

• Anonymity

Anonymity is when the identity of a person is unknown and there is no technique that could identify or reach him. On this forum, I'm registered by the name “BlackHatCoiner”, but if my IP got leaked somehow, you could theoretically use a technique to reach information about my identity. So, am I anonymous? No. An example of anonymity that happens in real life is free elections.

In Bitcoin, while your addresses don't reveal anything about your identity, the block chain shows the transactions you make, the amounts transacted and when they were made. If you ever wanted to purchase something from a store and you used an input of 10000 BTC, the seller would now know how many bitcoins you at least have. So, is it anonymous? No. It's pseudonymous.


So, privacy is a concept that describes activities that you want to keep them for yourself, privately. On the other hand, anonymity is when you want from people to know what you're doin', you just don't want them to know that it's you doin' it.

• Anonymity is when you donate to a charity using cash.
• Privacy is when you lock the door in the bathroom; not because you have anything to hide, you just need to keep the activity there to yourself.

[BlackHatCoiner]

Reserved.

[Upgrade00]

Bob is exposed and every transaction made from any of his four addresses can be censored by individuals. In other words, if Bob made an illicit activity from the 1Bob[...] address, they will all be considered what we call “tainted bitcoins”, because they were all in possession of a criminal. Even if someone made a completely legal transaction with Bob, he or she will be censored. People use mixers or/and mixing protocols to enhance their privacy.

I will like to understand more about what you mean by censoring. Being aware of someone's address is one thing, being able to affect what they do with that address is another. If Bob was accused of being engaged in an illegal activity through the known address no one can still technically 'censor' that address or stop then from moving it around, except it's an exchange address.

I agree that privacy and Bitcoin are different and Bitcoin transactions are not completely anonymous, as addresses are linked to amounts, but no real life identity behind them; reason why there are so many strategies to enhance privacy and remain as anonymous as possible.

[BlackHatCoiner]

If Bob was accused of being engaged in an illegal activity through the known address no one can still technically 'censor' that address or stop then from moving it around, except it's an exchange address.

True, Bitcoin is censorship resistant, but what I want to define here is that someone may reject accepting your bitcoins. There are cases where exchanges will reject your mixed bitcoins, whether if it's from a mixer or coinjoin-ed.

The address from a scam site that has 10 BTC will soon be blacklisted and thus, that money will be censored. Sure, no one can move your coins, but if the majority of the places that accept Bitcoin simply deny your deposit, you're essentially censored.

[UserU]

The address from a scam site that has 10 BTC will soon be blacklisted and thus, that money will be censored. Sure, no one can move your coins, but if the majority of the places that accept Bitcoin simply deny your deposit, you're essentially censored.

Usually regulated entities are bound to screen through transactions.

One time I had my funds parked at a custodial wallet, and my withdrawal got rejected just because it was sent to a faucet. Not to mention it took up to 7 days for manual review.

[Charles-Tim]

Although, the ledger which is blockchain is available to the public in which any Bitcoin transaction can be tracked or traced. But what I like about Bitcoin transaction is that it can be tracked on blockchain but can not be linked to users, this means Bitcoin transactions are pseudonymous. The transaction would have been said to be anonymous if the transaction can not be tracked on blockchain just while using Monero, Dash and Zcash, but not anonymous. The pseudonymity of Bitcoin transactions makes many Bitcoin users to be careful and want to maintain privacy.

That is why many Bitcoiners prefer to just have privacy, some people prefer to make use of decentralized exchanges like bsiq because making use of centralized exchanges will result to users information and account details stored on database while buying and selling Bitcoin, but it is not the case one decentralized exchanges in which privacy can be maintained while using it.

The wallet bitcoin users are using is also part of the reason privacy can not be maintained, most Bitcoin wallets do not have coin control, coin control feature is very important while dealing with Bitcoin. Like the example about how transaction can be leaked above using Bob, Alice and Charlie as an example, coin control can help while not necessarily mean to combine inputs for privacy reasons. Some people can set aside a particular address(es) for such purpose of buying and selling in which only linked transactions of the address can be linked, and can not be linked to other addresses.

Another issue is the use of coin freeze and address freeze, all these can help to maintain privacy. Like when dust amount of Bitcoin is sent to someone, some people will not have option than to send it to a mixer while wallets like Electrum can freeze such coin forever.

There is no one one to privacy, the use of IP makes people not to have privacy also which can invade the pseudonymity characteristics of Bitcoin, it can lead to users identity to be known, that is why Tor can be very helpful, also the use of reputed DPN or VPN can help in maintaining privacy.

But what I am just concerned about, most Bitcoin users today do not even know what these privacy and pseudonymity is, all they know is to buy Bitcoin, and most of them are using centralized exchanges for the buying and selling, and lack privacy which can be the problem tomorrow, that is why decentralized exchanges is not having high trading volume, but I think Bsiq trading volume is still okay enough for certain amount.

About mixers and CoinJoin, they are very important for privacy, but it is very important to know about how to make tainted coin difficult to be recognized in a way it won't be seized on centralized platforms after using CoinJoin.

[QueenVera]

From my understanding of your thread, one can have privacy while not be anonymous and that's the current state of bitcoin if use as it was intended without some additional security measures like the mixers.

The bitcoin ecosystem using a public blockchain which means all out transaction are open for the public for viewing provided those seeking for this information has the right idea on how to go about it, so technically Bitcoin isn't as secure as we think it's, is that the information you're trying to pass across?.

This could just be my opinion but I believe what majority are after is just privacy and not more of anonymity and this must have been put under consideration before Bitcoin was created to operate this way. I'm ok with you knowing funds are moving around but not knowing what I'm using it for or who's moving it is all that matters.

[Charles-Tim]

The bitcoin ecosystem using a public blockchain which means all out transaction are open for the public for viewing provided those seeking for this information has the right idea on how to go about it, so technically Bitcoin isn't as secure as we think it's, is that the information you're trying to pass across?.

This has nothing to do with bitcoin security, it deals with privacy and pseudonymity. Bitcoin make use of blockchain, available to the public but resistant to 51% attack, while the nodes are only validating only valid transactions while invalid ones are invalidated.

[BlackHatCoiner]

From my understanding of your thread, one can have privacy while not be anonymous and that's the current state of bitcoin if use as it was intended without some additional security measures like the mixers.

A mixer isn't a security measure, but a private one. Remember, if you mix your coins, you're making tracking useless; you will receive some inputs that have no connections in the block chain with your outputs and thus, you've succeeded on staying private from a block chain analysis.

In Bitcoin you cannot be anonymous, but only behave pseudonymously for the reasons I explained above. If the destination, the amount transacted and the date were completely unknown, you'd have accomplished anonymity. If we exclude the fact that each banknote contains a unique code, then cash are completely anonymous. In the cryptocurrency industry, monero is private & anonymous.

This could just be my opinion but I believe what majority are after is just privacy and not more of anonymity and this must have been put under consideration before Bitcoin was created to operate this way.

Satoshi was having a discussion with a forum user about Bitcoin's fungibility, but he/she then disappeared and the project was stuck with that consensus. Usually the creator affects the project's operation, unless there is no creator left.

The wallet bitcoin users are using is also part of the reason privacy can not be maintained, most Bitcoin wallets do not have coin control, coin control feature is very important while dealing with Bitcoin.

Yep, that is very important. I'm afraid that the majority is unaware about coin control and that's justified; they shouldn't understand Bitcoin in that technical level. Those things should be automated for the average user which leaves me the conclusion that Bitcoin is a bad privacy oriented currency for the majority.