A majority of traders joined the crypto trading industry mainly for the many uses and high volatility of digital assets. However, this isn’t always all that everyone loved it for. Bitcoin (BTC) was introduced as the eventual replacement for modern banking and anonymity is one of its major selling points along with decentralisation.
Anonymity is the concept of keeping your identity hidden within a certain scope. In this context, you are promised complete privacy when exchanging digital assets. However, this property is not exactly as it was advertised because of how the blockchain works. It is even more important to clarify the definition of anonymity with regulations incoming.
Digital assets are more accurately described as ‘pseudonymous’
Crypto maintains anonymity not just by hiding who you are but because it really doesn’t know you. When you sign up for a wallet, it generates your wallet address then this becomes your ID in the blockchain. However, this isn’t technically anonymity but ‘pseudonymity’.
Your wallet is your ID and it’s your key to using the platform’s services. Every payment you make, including deposits to a crypto casino, is linked to this account. The only time anyone will know it’s you is if you declare that the wallet address is yours.
True anonymity means that nobody on the same network is recorded or screened. This makes it impossible to keep track of Bitcoin ownership and that’s why it’s not ideal for crypto trading. Pseudonymity creates a name made of characters that can be credited for ownership.
The pros and cons of pseudonymity in crypto use
Why is clarifying crypto as pseudonymous rather than anonymous important for a trader? The reason is to give you a proper understanding of its advantages and disadvantages. You will participate in the digital asset industry whether you’re an investor, a trader, or a gambler at a Bitcoin casino and you have full autonomy for your assets.
Having autonomy in decentralised finance (DeFi) means you are solely responsible for what happens to your assets. With this in mind, these are the pros and cons you need to know regarding crypto pseudonymity:
Pros
- Easy to validate
Having a pseudonym helps the decentralised ledger technology (DLT) to recognise you at all times. It also simplifies traders with other holders because this is all you have to send them to engage in a transaction with you. People can share real names and it’s a pain to validate IDs but your wallet address is always verified by the blockchain.
- Masks your true identity
Pseudonymity is not inferior to anonymity in any way because you can still hide behind it at most times. It works perfectly well to help you use online services without needing to publicly disclose this information. That includes playing at any Bitcoin casino where you just need to link your wallet and not your ID.
- Regulations still protect users
Regulations are the key to online security for all kinds of businesses and crypto is no exception. Governments worldwide are improving their definitions of digital assets and their uses which is why many investors can feel safer in using it than ever before. It’s a reassuring fact because its industry is often targeted by thieves, scammers, and hackers.
Cons
- Protection from regulators requires compromise
Regulations don’t often come free from compromise because the government needs ways to keep track of all users. Many regulators are promoting the idea of setting limitations to how much crypto can be traded while protected by pseudonymity.
An example of this is the Travel Rule which states companies must screen both the sender and recipient if a payment is worth more than $1000. Such regulations mean users need to provide personal information for identification under know your customer (KYC) protocols.
- KYC can link your pseudonym to you
While pseudonymity helps the blockchain recognise you in a way that anonymity won’t allow, it also opens the possibility of revealing who you are. Once you’ve filled a KYC from a service like a crypto casino, people can know who you are by comparing transaction histories of your pseudonym and your registered account.
Fortunately, this is not a common practice online and there are millions of other users to sort through before they can get to your history. This is only an issue if you become a big player in the crypto industry whether as a whale or as a recipient of a large amount of money. It’s not an issue in gambling but Bitcoin institutional trading can make you a target for bad actors.
Privacy and validity are both important in crypto
Pseudonymity is the best way blockchain technology can keep your privacy. However, modern regulations demand compromise that could eliminate one of crypto’s appeal in the first place. It’s better that you meet regulators halfway because having a validated account at the best Bitcoin casino ensures that you are protected both by law and service provider.