Connecting wallets to KYC platforms breaks pseudonymous characters

[aylabadia05]

But it turns out there's nothing wrong with either of these characteristics. Why? Because we always view Bitcoin as an asset, so we always exchange Bitcoin for fiat currency, and so we inevitably connect our wallets to platforms that require KYC

But if we use bitcoin like we use USD (not exchanging it while using it), then the pseudonymous character will be maintained. Although every transaction is transparent and trackable through the blockchain, the pseudonym is not broken. It is only when connecting to a KYC platform that the pseudonym is broken

There are non-KYC exchanges that can be used if you want to do so. But since you mentioned that you consider Bitcoin to be an asset that can be exchanged for fiat currency, I don't see a problem with that, and that is one of the advantages of using Bitcoin, considering that not all Bitcoin users can use Bitcoin as a means of payment in their daily lives.

Actually, Bitcoin is open, which means that other people can find out about Bitcoin transactions as long as they know the address. Everything is recorded. If you can use an exchange without KYC, that's even better.

[goldkingcoiner]

One of Bitcoin's characteristics is pseudonymity. However, this characteristic is broken if we connect our wallet to a platform that requires KYC (such as an exchange). Initially I thought there was a contradiction between the pseudonymous character and transparency character, on the one hand it is pseudonymous but on the other hand it is easy to track each transaction through the block.

But it turns out there's nothing wrong with either of these characteristics. Why? Because we always view Bitcoin as an asset, so we always exchange Bitcoin for fiat currency, and so we inevitably connect our wallets to platforms that require KYC

But if we use bitcoin like we use USD (not exchanging it while using it), then the pseudonymous character will be maintained. Although every transaction is transparent and trackable through the blockchain, the pseudonym is not broken. It is only when connecting to a KYC platform that the pseudonym is broken

Bitcoin was never mean to be anonymous and one should never expect to be anonymous, especially with the very public Blockchain it sits on...

Pseudoanonymous is not really any different than "not really anonymous".

The KYC process can be dangerous though, for other reasons than has to do with Bitcoin. For example your KYC documents and data could fall into third party hands, in a leak or on purpose. And that opens the doors to scary things such as identity theft.

[Cookdata]

Ooh trust me buddy, it turns out that majority ends up using centralized exchanges today despite the hate. Bitcoin as a p2p electronic cash system was already perfect, but a lot of people seek convenience, and that's what their local fiat offers because that's literally what every businesses/stores accepts even without questioning. So, the whole concept of KYC, completely eliminates the pseudonymity and a lot of users have already accepted it. I feel, discussions about pseudonymity, anonymity, privacy, etc, might continue to decrease as the society/world keeps getting advance because a lot of people are definitely going to lose interest.

The thing Bitcoin marketing is unique, it doesn't force, it doesn't add anything to convince you to know that this is how you must use Bitcoin but centralized exchanges has ended up to convince everyone that the are the best in everything they do. When they say centralized exchanges are scam and can run away with your coin, they bring a narrative that they have insurance to cover funds, proof of reserves and all that just to convince people that they can do whatever Bitcoin can do for them.

Another lazy reason is that people don't want to be liable for their own coins, they don't want to be responsible for their coins, instead the rush to centralized exchanges where they can register with an email, a password and 2fa and that's it, they become your custodial. I'm nor against the use of exchanges, that's a personal choice but don't ever use an exchange for any custody. Those who are ignorant of history should always remember how FTX collapse.

[Zaguru12]

Pseudoanonymous is not really any different than "not really anonymous".

The KYC process can be dangerous though, for other reasons than has to do with Bitcoin. For example your KYC documents and data could fall into third party hands, in a leak or on purpose. And that opens the doors to scary things such as identity theft.

I read through the thread I can see that many people are actually very confident with centralized exchanges and clamoring for it, yes we might be involved into centralized exchanges asking for KYC but there is no justification to that. People are narrowing the risk to it been that only your exchange and government can have access to it, but do people actually know that it’s a third party platforms that actually carry out this KYC protocol which means they have access to the details too.

Plus also we have seen more frequently that scammers hack into exchanges most at times not to steal funds but to steal user identity which is used for social engineering attacks or other scam like even phishing attacks.

[hd49728]

I read through the thread I can see that many people are actually very confident with centralized exchanges and clamoring for it, yes we might be involved into centralized exchanges asking for KYC but there is no justification to that. People are narrowing the risk to it been that only your exchange and government can have access to it, but do people actually know that it’s a third party platforms that actually carry out this KYC protocol which means they have access to the details too.

Centralized exchanges and KYC are very dangerous and many reminders about that.
Reminder: do not keep your money in online accounts.
Events made you scare about custodial wallets, centralized exchanges.
Be careful using Binance & Centralized Exchange
Recent events should make everyone withdraw all their coins to their own wallets.
Recent events should make you withdraw all your coins to your own wallet: Part 2.
Recent events should make you withdraw all your coins to your own wallet: Part 3.
[Part IV] Get your coins out of custodial wallets now.

Plus also we have seen more frequently that scammers hack into exchanges most at times not to steal funds but to steal user identity which is used for social engineering attacks or other scam like even phishing attacks.

Hacks can possibly directly into the databases of centralized exchanges with customer sensitive documents and data or databases of their third-party partner companies which do KYC verifications for centralized exchanges. With a trendy model of hiring a third party company for KYC verifications, user data and documents will be stored on at least two databases and it doubles risk for customer privacy.

[FinneysTrueVision]

KYC and centralized intermediaries are not part of the Bitcoin protocol. Bitcoin’s pseudonymity isn’t broken because someone decides to give up their privacy willingly in order to use a centralized exchange. Only the person connecting their identity to their addresses is impacted. Even if you are disclosing your personal information to an exchange, you could try to limit how much they can know about you by doing basic things like not always using the same address.

[Outhue]

You have missed decentralised exchange/swap platforms with centralised exchanges, you don't need to connect your crypto wallet to any centralised exchanges because that option isn't available on centralised exchanges, they have their own wallet addresses for all customers and it's stick with each and everyone's profiles on the exchange.

The only places where you can connect to your wallet to in the likes of Uniswap, dodo, bswap and others, these are swap platforms and they work like decentralised platforms because they don't ask for KYC verification before you can trade, the only thing that these platforms lack is margin and futures trading, which makes centralised exchanges the top choice for many people.

[rezakurnia66]

Trough blockchain your privacy difficult for protecting exactly when selling bitcoin assets using third platform connected with KYC require, one thing to hidden your privacy in cryptocurrency sent your assets firstly to platform can mixing your assets.
The KYC requirement for all exchange market right now because regulation from government if won't KYC we can't use exchange any more and how possibility to buy bitcoin assets without an exchange market.
Many bad respond about KYC requirement but several exchange have been collapse there are not any document of user publishing yet, I know how many document selling at dark website not come from KYC exchange but your public document.

[davis196]

One of Bitcoin's characteristics is pseudonymity. However, this characteristic is broken if we connect our wallet to a platform that requires KYC (such as an exchange). Initially I thought there was a contradiction between the pseudonymous character and transparency character, on the one hand it is pseudonymous but on the other hand it is easy to track each transaction through the block.

But it turns out there's nothing wrong with either of these characteristics. Why? Because we always view Bitcoin as an asset, so we always exchange Bitcoin for fiat currency, and so we inevitably connect our wallets to platforms that require KYC

But if we use bitcoin like we use USD (not exchanging it while using it), then the pseudonymous character will be maintained. Although every transaction is transparent and trackable through the blockchain, the pseudonym is not broken. It is only when connecting to a KYC platform that the pseudonym is broken

OP, you are thinking out loud about obvious stuff. May I ask why did you made this forum thread? Do you want to ask a question?
If you are too obsessed with anonymity and privacy just use Monero. Most Bitcoin users have to comply with KYC if they want to buy or sell BTC and other cryptocurrencies. Most BTC users have to reveal their bank account details when they sell BTC in exchange for fiat money. Maybe there is a way to create a bank account with another person's data instead of your own sensitive data, but this seems really sketchy and it comes with it's own risks.
And by the way, never connect your wallet to centralized exchange or crypto casino. Some crypto drainers have phishing web pages of crypto trading platforms and casinos.

[OsaiEmma]

Well I think it largely depends on the country you are residing, some non-custodial wallets like Trustwallet allows you to buy and sell your coins from and to fiat without any form of KYC, now I said depends on the country because some countries allows this and some doesn't, if you're from a country that haven't banned Bitcoin and cryptocurrencies, then you can certainly do that without any hiccups.

But the truth is, the service that does this can still link your address to you through your bank details, for instance, Trustwallet uses moonpay for on/off ramp exchange of coins (i.e buying and selling of coins through a third party service provider using fiat), this service provider receives your coin for off ramp and sends the equivalent fiat to your provided details and vice versa, so with this, they can link your address to you, but it is still a kinda pseudo because, no body can like explicitly trace it or link it to you.

[dansus021]

Connecting wallets to KYC platforms breaks pseudonymous characters the short answer is yes and the long answer is yes.

the reason is Because the blockchain is a permanent ledger
and now there are specialized firms like Chainalysis, Arkham, or Elliptic use "Wallet Clustering" to track every movement after that withdrawal. So unless you mixing your coin your wallet will be keep be tainted and can be tracked although it takes time

That is why we always need an P2P exchange or Exchange that KYC free

[betswift]

Connecting wallets to KYC platforms breaks pseudonymous characters the short answer is yes and the long answer is yes.

the reason is Because the blockchain is a permanent ledger
and now there are specialized firms like Chainalysis, Arkham, or Elliptic use "Wallet Clustering" to track every movement after that withdrawal. So unless you mixing your coin your wallet will be keep be tainted and can be tracked although it takes time

That is why we always need an P2P exchange or Exchange that KYC free

It wouldn't be an issue for the time before they will need your specific info and they will surely pull all the info you described for that. So yeah, it's really important to stay vigilant.

[Die_empty]

Yes, I agree, the government has very strong powers to track things in its territory. We don't really worry if we're not doing anything illegal or breaking the law. But sometimes taxes are very high, and that's one of the most annoying things.

However, for those who own large amounts of Bitcoin, privacy is crucial, especially from the potential threat of hackers

People have the right to live a private life. I am not engaging in any criminal activities but I don't also want people to know how I spend my money and how much I am worth.

The government wants to control the financial life of the people, which is why they are coming up with laws that restrict the services of privacy platforms. This is not about curbing illegal activities but a plan to monitor and control the people.

Tax is another issue. They are taxing crypto heavily to discourage people from owning and using it.

[betswift]

People have the right to live a private life. I am not engaging in any criminal activities but I don't also want people to know how I spend my money and how much I am worth.

The government wants to control the financial life of the people, which is why they are coming up with laws that restrict the services of privacy platforms. This is not about curbing illegal activities but a plan to monitor and control the people.

Tax is another issue. They are taxing crypto heavily to discourage people from owning and using it.

Unfortunately, crypto is seen by them as the competitor where they are the monopolists.

They see something that gives people freedom - and they want to influence it / be at the head of it..

[Cryptomultiplier]

Connecting wallets to KYC platforms breaks pseudonymous characters the short answer is yes and the long answer is yes.

the reason is Because the blockchain is a permanent ledger
and now there are specialized firms like Chainalysis, Arkham, or Elliptic use "Wallet Clustering" to track every movement after that withdrawal. So unless you mixing your coin your wallet will be keep be tainted and can be tracked although it takes time

That is why we always need an P2P exchange or Exchange that KYC free

To use different addresses, running your own Bitcoin node and coin joining, remains a wise mask to cover digital trail and is the best way to maintain pseudonymity, because using various wallets of which you send a particular amount to at a particular time, can be tracked based on IP address, the timing of your transactions and amount you normally send.

[Ucy]

First of all, Bitcoin identity feature is best described as anonymous rather than pseudonymous because no fake, false or fictioius name is used to represent users except maybe for vanity addresses which are rarely used. Users are represented by numbers+letters, inform of randomly generated addresses. One has to be careful with the word pseudonym since it involves false identity, but I hope it's properly or well defined to mean the use of choice or privacy names. We want Bitcoin and its users to be as honest and transparent as possible.


Concerning the issue you raised about the potential to expose one's identity when connecting anonymity-friendly wallets to platforms that require kyc, well you don't need to worry too much about that if such platform is operating according to the law, is not malicious/abusive and your bitcoins are gotten or earned morally,


The anonymous and transparency feature of Bitcoin are for users and their activities. The users identities are hidden to help protect them from evil while their activities are transparent for record keeping, open verification, monitoring the Bitcoin system for unlawful uses or attacks. So nothing is contradictory between privacy and transparency if no private data or information, like users IPs or names is exposed to the public. Only data/info that is OK to be public is transparent


And ofcourse, decentralized p2p exchange of Bitcoin for goods and services will preserve privacy and minimize the exchange to fiats. That's why the community is currently working hard on Bitcoin "circular economy" or a system that makes that possible/easy .

[dkbit98]

But if we use bitcoin like we use USD (not exchanging it while using it), then the pseudonymous character will be maintained. Although every transaction is transparent and trackable through the blockchain, the pseudonym is not broken. It is only when connecting to a KYC platform that the pseudonym is broken

This is not always the case, except in cases when you are sending coins p2p.
I see more websites in EU having to comply with mica rules and they are asking for all bitcoin crypto payments to have customer personal information.
This still doesn't include sending photos, videos and personal documents, but I can see that happening in future.
I guess you can still write any random information, at risk of getting your account flagged and banned.

[Antotena]

KYC and centralized intermediaries are not part of the Bitcoin protocol. Bitcoin’s pseudonymity isn’t broken because someone decides to give up their privacy willingly in order to use a centralized exchange. Only the person connecting their identity to their addresses is impacted. Even if you are disclosing your personal information to an exchange, you could try to limit how much they can know about you by doing basic things like not always using the same address.

It was when scams and fraud in crypto became so rampant the government introduced anti money laundering scheme but the question is has that stop anything they have been preventing. We have watch scammers laundered billions of dollars through a protocol but the government couldn't stop it neither was able to identify who was behind such heist. This is the reason why I think this stop nothing in crypto, people that will fraud will still do it.

I don't think a scammer will be foolish to get a stolen Bitcoin and the next thing he is going to do is to send the money to centralized exchanges, they know very better what it's going to cost them if they do that, they will find a way for them to spend that coin into another one and nobody will get away with it. That's how coins are with privacy but thi sdoesn't on give anyone to want to scam and steal innocent people's money.

[X-ray]

That's definitely the point and it's being called pseudonymous and not anonymous for a reason. You will stay anonymous and private if you stay away from the centralized ecosystem that needs to connect to your real identity and you will be exposed if you do the opposite.

If bitcoin is true privacy like monero, satoshi would call it anonymous blockchain but it's not. It's pretty transparent ledger and honestly, without this transparency I doubt the adoption will be this smooth for institutional investors.

[sana54210]

I understand that KYC makes sure that entry and exit positions are covered by the governments so that you can be traced, but I have never heard of it used for anything other than illegal activity search. Like let's say that you made money, and should be paying the IRS a lot of tax for the profit you have made, if you are not paying it, it is not the KYC place or the crypto exchange that they get you from, it's the bank account you withdraw from.

So in theory, if you do p2p trading, and your exchange account, which has your KYC so all your information, is the place you send crypto to someone, and you get cash from that person, as in banknotes in a duffel bag type of deal, then IRS will not know, because exchange will not share that, it's only the banks that share this information because you withdraw it to your bank account.