What are VPNs for?

Keeping your information a secret is a VPN’s bread and butter. That is to say, if you’re turning to a cryptocurrency because you value your anonymity, a VPN is right up your alley.

VPNs use IP masking and encryption to ensure that your actions online are safe from prying eyes.

Another great reason to use a VPN is to access websites that could be blocked in your region.

For example, if you’re looking to use one of the largest cryptocurrency trading platforms in the world, but it’s inaccessible from the US, you could use a VPN for Binance.

Why do people use cryptocurrencies?

People love their privacy, almost as much as they love their freedom.

Endeavouring to gain more of both, cryptocurrencies were invented.

Attempting to offer an anonymous form of currency free from government interference, “an electronic payment system based on cryptographic proof instead of trust” was created.

That quote is from a 2008 paper by Satoshi Nakamoto, the creator of Bitcoin.

These claims may have been true when they were written, but you’d be justified in questioning their veracity today. The best cryptocurrency books and other news media articles have recently featured many counter-examples which might have you wondering whether the best cryptocurrencies to invest in don’t live up to their pro-privacy branding.

How secure is crypto, really?

Given that one of the original causes behind the creation of cryptocurrency was freedom from government interference, it’s a big deal for that to come into question.

This incident from June 2021, which is described as “a blow to crypto fans who have lauded its untraceable nature,” could be cause for concern for individuals using cryptocurrency to elude potential consequences.

This leads to the next question, are cryptocurrencies actually anonymous? How can you invest in cryptocurrency securely?

Pseudonyms and the Blockchain

Cryptocurrency is not inherently anonymous. Most cryptocurrencies are, instead, pseudonymous, which means that your crypto wallet is associated with an address, a long string of letters and numbers that is unique to you.

It may not ask for your information when creating an address, but that doesn’t mean your address can’t be used to discern your identity.

Most cryptocurrencies like Bitcoin work on a blockchain. What exactly that is gets a little complicated, but basically, it’s a ledger of when each Bitcoin was created, every time it was exchanged, and by whom.

This list is entirely public. Anyone in the world can view the daily transactions of every Bitcoin wallet and the associated address.

That sounds alarming, it’s like your bank statements are public and exposed to the whole internet. 

Frankly, that’s not far off.

While this address isn’t directly linked with your identity, the blockchain can be used in combination with other information to determine that you are the owner.

Like any pseudonym, once it has been attached to the owner’s true identity, there’s no putting the cat back in the proverbial bag. 

That string of numbers and letters would be as secure as your first and last name, and anyone who knew it could take a look at the ledger to get a detailed view of your financial activities.

Prevention

There are several ways this address can be tied to you, KYC and AML verification being the most obvious way, but there are a few that might surprise you.

According to this article, cookies and web trackers can make it “straightforward to link individuals with the Bitcoin transactions they make.”

These bits of code are built into almost every website, logging all kinds of information for advertisement and consumer analytics.

This information is usually sent to numerous third parties and could potentially be intercepted by anyone from malevolent hackers to government agencies.

Simple information like the purchase date and amount paid could be cross-referenced with the blockchain and used to link your address to this transaction.

Furthermore, sensitive info like your e-mail, name, and your home address could be leaked as well, altogether leaving you without a shred of anonymity.

How can this be avoided, you might ask? That’s where a VPN comes in.

Using VPNs for crypto trading is a solution

VPNs specialize in privacy, with encryption hiding all of your data from the websites you visit, and essentially nullifying the idea that your information could be leaked this way.

While a VPN alone won’t make you anonymous when using cryptocurrency, combined with proper caution, it’s as close as you can get.

Proper caution here means avoiding KYC and AML checks and choosing a VPN that has sophisticated encryption and protocols in place to protect your information.

You’ll want a VPN that has a no-logs policy, which means they don’t save your information, so you know your information isn’t being sold or accidentally leaked.

Features like an automatic kill-switch, which terminates your connection if your VPN fails for any reason, go above and beyond to safeguard your IP address and private information.

Keep in mind what you need from a VPN when browsing for one, and don’t settle for anything less.

All in all, with so much questioning your anonymity, you should use a VPN for trading crypto if you value your privacy.