JVTech News Are Bitcoin and cryptocurrencies still synonymous with freedom and anonymity?
The project of the founder of Bitcoin, Satoshi Nakamoto, was to design a payment system that advocated freedom and anonymity. 14 years after its commissioning, does cryptocurrencies still carry its core values?
Are the professionals depriving Bitcoin and other cryptocurrency holders of freedom?
After the recent events in the crypto ecosystem, a number of users are questioning the anonymous and libertarian nature of Bitcoin.
As a reminder, Bitcoin, the first cryptocurrency, was designed by Satoshi Nakamoto to become a decentralized and anonymous means of payment. Thanks to its architecture built around a blockchain network, Bitcoin offers the possibility of making decentralized payments, i.e. without going through a third party or a trusted authority. In short, it is the computing power of the machines that acts as a trusted third party. In this logic, Bitcoin was initially created to be an alternative to banks after the 2008 financial crisis.
However, the collapse of cryptocurrency giants such as Terra LUNA or the FTX exchange platform has demonstrated some flaws in the sector. Indeed, the fall of these giants has had a real impact on all users, as well as other companies competing in the industry. Many customers who stored or deposited cryptocurrencies on troubled exchanges ended up not having the freedom to withdraw them in time, due to the lack of liquidity on these platforms.
In the Bitcoin ideal, everyone is in control of their currency and takes responsibility for their transactions. Thus, when an organization temporarily blocks the withdrawal of cryptocurrencies from its users, it reflects a flagrant lack of decentralization.
These CEXs therefore seem less and less faithful to the initial values of Bitcoin, because they are managed by central companies, such as a bank. However, it is important to remember that these cryptocurrency exchanges have largely contributed to the mass adoption of Bitcoin and cryptocurrencies, making buying, selling and storing more intuitive.
Bitcoin increasingly regulated
Beyond the downside of the privatization of cryptocurrency services, over time some of these companies have become so financially large that they have to abide by certain rules. These measures put in place by authorities and governments aim to regulate the sector in order to combat the misuse of cryptocurrencies, such as money laundering or illicit transactions, for example.
Most cryptocurrency exchanges (especially CEX, centralized exchanges) require users to enter personal information to register. Generally it is necessary to provide an e-mail address, a telephone number, but also information relating to your identity – most often verified by a KYC system (verification of identity documents).
With this information, the various companies are able to monitor and track user transactions. While this is the very principle of public blockchain, namely to provide a transparent transaction record, what changes here is that the company knows the identity of the sender and sometimes the recipient. Therefore, it is clear that this set of measures plays on the anonymity of bitcoin and cryptocurrency transactions.
Furthermore, to respond to this growing desire for anonymity, many services have regained interest. This is the case with DEXs which are often considered more aligned with Bitcoin values. These decentralized platforms are not based on any central entity, transactions are made directly between users. Widely used by hackers, cryptocurrency mixers have also seen their user numbers grow. They allow you to split 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 really synonymous with freedom and absolute anonymity. This does not come from Bitcoin and cryptocurrencies, but from the supervision of cryptosphere professionals and institutions.