Here’s the difference between Privacy and Anonymity
By Jason Nelson
What is the difference between Privacy and Anonymity? This question lies at the heart of cryptocurrency and privacy advocates. Let’s start with a few definitions from the Merriam-Webster Dictionary:
Of unknown authorship or origin
Not named or identified
Lacking individuality, distinction, or recognizability
The quality or state of being apart from company or observation
Freedom from unauthorized intrusion
Satoshi Nakamoto, the pseudo-anonymous creator of Bitcoin, created Bitcoin as a means of sending money without the need for a trusted third party.
While you would have a hard time finding a member of the crypto space that does not believe in the need for privacy. There does seem to be a conflict concerning the question of anonymity.
So what is the difference? Can privacy exist without anonymity and vice versa? In an October 2, 2013 post to the Privacy News Online blog for Private Internet Access VPN, Rick Falkvinge wrote:
“Privacy is the ability to keep some things to yourself, regardless of their impact to society. To take a trivial example, I lock the door when I go to the men’s room – not because I’m doing something criminal or plotting to overthrow the government in the men’s room, but simply because I want to keep the activity there to myself.”
So let’s expand on this. You are an employee, you are known to the company, you are known and therefore not anonymous. You go to the restroom and shut the door behind you and lock it, you now have privacy. Your employer knows you are in the office, they may even know your in the restroom but they do not know what you are doing. That’s privacy.
Anonymity is different.
When Anonymous undertakes a mission and someone with a Guy Fawkes mask, appears on YouTube to explain. That person is not attempting to keep their actions private. Far from it, they want you to know. But you don’t know the person in the video. All you see is a mask. That person is Anonymous, and it could be anyone.
So how does this relate to crypto?
The reason why Satoshi is a pseudonymous is that they made their presence known. Satoshi Interacted with others, and wrote and published the Bitcoin WhitePaper but to this day we do not know who they are.
Another example of privacy vs anonymity is in regard to witness protection. Privacy is your neighbor not knowing you are in witness protection. pseudonymity is your neighbor not knowing your real name.
Privacy is a person not knowing what you bought with your Bitcoin. Pseudonymity is looking at a Bitcoin address and not knowing to whom it belongs. The pseudonymity of Bitcoin goes away once you cash out into a Coinbase wallet. You still have the privacy aspect because Coinbase has no idea what you plan to do with your Bitcoin. But because of KYC, you are no longer anonymous. Transactions can be identified based on the addresses you used to send Bitcoin to Coinbase.
Privacy in itself is challenging to maintain in the age of social media and smart devices. Anonymity is harder still. As more platforms, especially financial, require some form of Know Your Customer policy.
Being private and anonymous requires work. Privacy requires work because a person has to not share personal information or PII. Anonymity requires work to keep identity, actions, and whereabouts hidden. Try to remain invisible in a sea of people.
Most people who use Bitcoin are not using Bitcoin as intended. Using the same address over and over, going through KYC is not in the whitepaper. In Section 10 of the Bitcoin whitepaper Satoshi wrote:
The traditional banking model achieves a level of privacy by limiting access to information to the parties involved and the trusted third party. The necessity to announce all transactions publicly precludes this method, but privacy can still be maintained by breaking the flow of information in another place: by keeping public keys anonymous. The public can see that someone is sending an amount to someone else, but without information linking the transaction to anyone. This is similar to the level of information released by stock exchanges, where the time and size of individual trades, the “tape”, is made public, but without telling who the parties were.
As an additional firewall, a new key pair should be used for each transaction to keep them from being linked to a common owner. Some linking is still unavoidable with multi-input transactions, which necessarily reveal that their inputs were owned by the same owner. The risk is that if the owner of a key is revealed, linking could reveal other transactions that belonged to the same owner.”
Bitcoin is a funny thing. On the one hand, Bitcoin a great tool to maintain privacy and pseudonymity. But on the other hand, blockchain is a public ledger whose transactions are transparent for anyone to see. Using Coinjoin and mixers is a way to improve privacy and anonymity.
Coinjoin and mixers allow users to mix their transactions. Making multiple transactions appear as a single transaction obfuscating the users. Of course, the users would need to avoid sending their joined coins to a KYC’d wallet. Doing so would negate the whole point of using the mixer.
Privacy is an ideal that many strive for, especially in the age of social media. Still, our desire to be private gets overruled by our desire to connect. For a desire for convenience and because of loneliness.
It’s a trade-off that not many can live. But as the saying goes, “You have to do what you have to do.”
“Definition of ANONYMOUS.” 2019. Merriam-Webster.Com. 2019. https://www.merriam-webster.com/dictionary/anonymous.
“Definition of PRIVACY.” 2019. Merriam-Webster.Com. 2019. https://www.merriam-webster.com/dictionary/privacy.
“How Does Privacy Differ From Anonymity, And Why Are Both Important?” 2013. Private Internet Access Blog. October 2, 2013. https://www.privateinternetaccess.com/blog/2013/10/how-does-privacy-differ-from-anonymity-and-why-are-both-important/.
Nakamoto, Satoshi. n.d. “Bitcoin: A Peer-to-Peer Electronic Cash System.” https://bitcoin.org/bitcoin.pdf.
“Coinjoin.” 2019. Investopedia. 2019. https://www.investopedia.com/terms/c/coinjoin.asp.