Are bitcoin and cryptocurrencies still synonymous with freedom and anonymity?

News Are bitcoin and cryptocurrencies still synonymous with freedom and anonymity?

Published on 01/15/2023 at 18:20

Bitcoin founder Satoshi Nakamoto’s project was to develop a payment system that upheld freedom and anonymity. Does the cryptocurrency retain its key values ​​14 years after it was launched?

Professionals imprison owners of bitcoins and other cryptocurrencies?

Following recent developments in the crypto ecosystem, a number of users are questioning the anonymous and libertarian nature of Bitcoin.

Recall that Bitcoin, the first cryptocurrency, was designed by Satoshi Nakamoto to become a decentralized and anonymous means of payment. With its architecture built around the blockchain network, Bitcoin offers the possibility of decentralized payments, i.e. without recourse to a third party or trusted authority. In short, it is the processing power of machines that acts as a trusted third party. By this logic, Bitcoin was originally created as an alternative to banks after the 2008 financial crisis.

However, the collapse of the giants of the crypto industry, such as Terra LUNA or the FTX exchange platform, has demonstrated certain shortcomings in this sector. Indeed, the fall of these giants has had a real impact on all users as well as other competing companies in the sector. Many clients who held or deposited cryptocurrencies on troubled exchanges ended up not being able to withdraw them on time due to the lack of liquidity on those platforms.

Ideally, Bitcoin everyone controls their currency and takes responsibility for their transactions. Thus, when an organization temporarily blocks the withdrawal of cryptocurrency from its users, this indicates a blatant lack of decentralization.

So these CEXs seem to be less and less true to bitcoin’s original values ​​because they are run by central companies like a bank. However, it is important to remember that these crypto exchanges have greatly facilitated the mainstream adoption of bitcoin and cryptocurrencies by making it more intuitive to buy, sell, and hold.

Bitcoin is getting more regulated

Aside from the downside of privatizing crypto services, over time some of these companies became so big financially that they had to stick to certain rules. These measures, taken by authorities and governments, aim to regulate the sector in order to combat the misuse of cryptocurrencies, such as money laundering or illegal transactions.

Most cryptocurrency exchanges (especially CEXs, centralized exchanges) require users to enter personal information in order to register. As a rule, it is necessary to provide an email address, a phone number, as well as information regarding his identity – in most cases it is verified by the KYC system (identity document verification).

With this information, various companies can control and track user transactions. Although this is the very principle of a public blockchain, namely providing a record of transparent transactions, what changes here is that the company knows the identity of the sender, and sometimes the recipient. Thus, it becomes clear that this set of measures plays on the anonymity of bitcoin and cryptocurrency transactions.

Moreover, to respond to this growing desire for anonymity, many services have shown renewed interest. This applies to DEXs, which are often considered more in line with the value of bitcoin. These decentralized platforms do not rely on any central organization, transactions are made directly between users. Widely used by hackers, cryptocurrency mixers have also seen a rise in user numbers. They allow you to separate and mix funds to make them less traceable.

In conclusion, although cryptocurrencies are still considered more private than the current banking system, they are no longer synonymous with freedom and absolute anonymity. This is not due to bitcoin and cryptocurrencies, but due to the observation of professionals in the cryptosphere and institutions.

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