If you’ve been within the crypto sphere for a while you’ll be aware of the anonymity, or lack of, that comes with trading. Crypto trading and how you develop your strategy is a very personal thing. Some people prefer to have all of their cards on the table and be transparent about their trades, whereas many of us prefer to only reveal the minimum personal information needed (or none at all) to trade.
People have their reasons when they prefer to remain anonymous. For one, crypto crime is very real and trading anonymously can help to keep your personal data and funds more secure. According to cyber security company SonicWall, global crypto-jacking crimes have risen by 20% over the last year. But don’t worry! Read on to learn all about the benefits (and a few drawbacks) of trading anonymously so you can continue to trade in a way that is the safest way possible.
So is cryptocurrency anonymous?
Well, yes, and no. Cryptocurrencies and blockchains are designed on the concept of transparency. For example, every transaction that takes place on the Bitcoin blockchain is accessible to anyone who is on the network, and they can track most of the details from a transaction such as a date and time, the digital addresses of participants, and the value of each transaction. However, the identities of the people behind the addresses are not accessible. For example, a user’s ID is usually in a pseudonymous form to keep the transaction and identity data separate and secure. Essentially, people can know what you’re doing but not necessarily have a name or face to put to an activity or transaction.
So in sum, cryptocurrency is entirely anonymous but equally transparent and trackable. It’s anonymous in the sense that you can own a crypto address without revealing anything about yourself or your identity within that address. In theory, you can hold as many addresses as you wish and there would be nothing to link those addresses together or link them to you. In the original whitepaper for Bitcoin, the Bitcoin inventor Satoshi Nakamoto even advised users to use a new address for each transaction to avoid them being linked to a common owner:
“As an additional firewall, a new (address) should be used for each transaction to keep them from being linked to a common owner… The risk is that if the owner of an address is revealed, linking could reveal other transactions that belonged to the same owner.”
Due to Bitcoin’s algorithm structure, and the structure of other cryptocurrencies, everything that happens on their blockchain is trackable. This level of transparency may be off-putting to some users, so that’s why we’ve listed some of the benefits and drawbacks of trading crypto anonymously.
What are the benefits of trading crypto without KYC?
You may already trade anonymously and prefer to, or maybe you’re dipping your toes into this form of trading. So here are the top three benefits of trading anonymously:
Protection from data leakage. You’re better protected from data leakage. Data leakage is the unauthorized transmission of data from within an organization, or server, to an external recipient. With minimal details involved with anonymous trading, your personal information is less likely to fall into the wrong hands, mainly because you haven’t handed it over during KYC.
Privacy when making transactions. Trading anonymously allows you to keep all of your transactions private. This is similar to how you spend physical cash: there’s no traceable line back to you. With most decentralized cryptocurrency exchanges it’s not mandatory to hand over KYC verification (Know Your Customer) meaning that you’re essentially trading without attaching your personal information to each trade.
Safety from identity theft. When making electronic transactions there is the vulnerability of having your identity stolen. This affects millions of people every year and trading crypto is no different. However, by using an anonymous exchange this risk can be greatly reduced.
Are there any drawbacks to no KYC crypto trading?
It’s important that you see both sides of the story, and that’s why we’ve put together this list of drawbacks you may encounter when trading crypto anonymously.
Increased difficulty of tracking down criminal activity. Due to the nature of anonymous trading, it makes it harder for law enforcement to track down illicit activities. The vast majority of people simply want to invest and trade crypto in an honest way, but unfortunately, there are some people out there who use it for illegal purposes.
The danger of untrustworthy exchanges. Not every anonymous exchange you come across is legitimate. You have to be careful of where you decide to invest and trade, so we recommend thoroughly researching the exchange you use or plan to use before making your next transaction.
Limits for trading. When you’re trading anonymously there may be limits on what and how much you trade which can affect you directly if you plan to trade high amounts of funds. If you’re only trading small amounts of crypto this shouldn’t be a problem for you.
How does anonymous crypto trading work on DEXs?
A decentralized anonymous trading exchange (DEX) usually works based on not requiring KYC checks, this means users can begin trading as soon as they’ve generated a wallet. But you may be wondering “how is this possible”?
DEXs can offer a no KYC verification service because they’re non-custodial and operate on smart contracts (a self-executing agreement coded into the exchange). DEXs were set up to remove the requirement for any authority to oversee and authorize trades performed within a specific exchange. They’re usually non-custodial, which means you keep full control of their wallet’s private keys. Essentially, they facilitate the transactions you make through their smart contracts, but they don’t hold your funds (non-custodial). When you use a DEX to trade crypto your anonymity is preserved safely within the DEX. One thing to consider is that although DEXs offer anonymity, their trading tools can be limited. However, bitoftrade offers both anonymity and advanced trading tools.
How does anonymous crypto trading work on bitoftrade?
bitoftrade is a no KYC crypto exchange on the Ethereum blockchain. We aim to make a difference with our platform by providing a unique user experience complete with easy-to-use advanced trading tools. The advantages of using bitoftrade include:
- No need to open an account with us.
- We have a minimal verification process.
- We don’t require KYC data or store your personal information.
With bitoftrade, you can utilize leverage, limit, and swap trades for over 900 tokens on the Ethereum network. What’s more, we have a great range of your typical exchange features whilst still being a decentralized platform.
To begin trading, all you need to do is sign up and connect your MetaMask wallet. This way, you’re free to trade crypto while securely holding your funds in your digital wallet. Our fees are 100% transparent and you’re in full control of your crypto funds at all times.
Read more about how anonymous trading works on bitoftrade and start trading with us today!
