Ever since Bitcoin started gaining notoriety, there have been misconceptions about anonymity and blockchain technology. Many people believe that Bitcoin is indeed anonymous and have voiced their concern about this, often arguing that if bad actors were to use this cryptocurrency, it would be nearly impossible to catch them. Nevertheless, this argument is based on a lack of understanding about how Bitcoin’s blockchain works. The blockchain allows users to be pseudonymous but not anonymous. Other blockchains developed afterwards, like Monero’s and Dash’s, allow their users to make P2P transactions anonymously.
The development of blockchain technology that allows for anonymous transactions, might raise some concerns. Blockchain anonymity has its advantages, but if it is used in a way that may generate suspicions, the legitimacy and credibility of the system might be jeopardized. Perhaps this is one of the reasons why pseudonymous cryptocurrencies are still more popular than the anonymous ones.
The Desirability of Anonymity
There is also a chance that the market is not ripe for blockchain anonymity just yet. In fact, more recent blockchain technology deployment has been focusing on the opposite. Projects like Civic and others are focusing on uploading people’s identities to a blockchain – where identity data will be kept immutably. These projects aim to protect people from identity theft and other calamities, by encrypting personal identities on a blockchain, only to reveal them partially or in a way that the owner of the identity would be protected.
Other projects and businesses require people to disclose their identity even if they make a purchase using cryptocurrency. The travel industry is a good example. Even if people were able to pay for a plane ticket using Monero or Dash, they would have to disclose their identity at some point to catch the flight. Therefore, anonymity in blockchain systems might not always be a desirable feature; it might not be at all possible to safeguard user anonymity in certain cases either.
Understanding the Need for Anonymity
This doesn’t mean that anonymity should be regarded as a useless feature in future blockchain deployments. When it comes to certain transactions, especially now that governments around the world are looking for ways to make societies go cash-less, anonymity might become a more desirable feature on the blockchain. Furthermore, if governments keep on insisting in eliminating cash altogether, people might start using and accepting the anonymous cryptocurrencies that are not as popular as the pseudonymous ones right now, precisely because they want to protect their privacy.
The Future of Anonymity in Blockchain Projects
This is especially the case now, after recent data breaches of all kinds have highlighted the weaknesses in centralized systems, which governments use to store identity information among other crucial data, which in turn can also be a boon to projects like Civic. Anonymity might be a desirable feature and one that becomes increasingly important as governments and corporations get hold of more data that can be tied directly to users through their identities. Then again, there is a case for supporting the deployment of blockchain-based identity data management systems to counteract certain aspects of unwanted identity exposure, however counterintuitive this might sound.