- There are different reasons crypto users may prefer anonymous transfers ranging from reluctance to pay taxes, avoiding excessive personal selling, and cutting out wrongful targeting.
- Some ways to transfer crypto anonymously are using decentralized exchanges, crypto ATMs, peer-to-peer exchanges, crypto mixers, etc.
- The risks involved in anonymously sending crypto may not be higher than those in sending them normally, but, the more anonymous you are, the less likely anyone will be able to assist you if you make a mistake.
- The high premium people place on privacy and security will keep inspiring the development of new ways to make anonymous crypto transfers. However, it is left for the individuals who take to these options to exercise extra care.
Keywords: transfer, cryptocurrencies, anonymous, transactions, privacy, wallets
One of the earliest value propositions of cryptocurrencies is the ability to make transactions anonymously. There are many reasons crypto users may prefer anonymous transfer. These reasons could sometimes be due to a reluctance to pay taxes. In many cases, law-abiding users also choose not to make their activities public so as not to attract scammers' attention. Other use cases for anonymous transactions include:
- Avoiding excessive personal selling that comes with transaction tracking.
- Cutting out wrongful targeting by authorities.
How to Transfer Crypto Anonymously
1. Using Decentralized Exchanges
The coming of centralized exchanges was the beginning of the decline of the true anonymity of crypto transactions. Therefore, using a decentralized exchange remains one of the ways of making anonymous crypto transfers. You can install a decentralized wallet such as Metamask to your internet browser and transfer funds to that wallet. The decentralized wallet works with many blockchains, including Ethereum. This compatibility makes it possible to trade numerous cryptocurrencies. Often, each blockchain has its decentralized exchange offering different tokens. The hardest part is getting funds into your Metamask wallet without using a centralized exchange to purchase crypto. However, the fact that decentralized exchanges are not controlled or regulated by a centralized authority makes them riskier than centralized exchanges. There are many worthless coins on decentralized, and a buyer must exercise caution when using them for transactions.
2. Using Crypto ATMs
Another way to transfer crypto anonymously is to use crypto ATMs. This method works by entering the amount you want to transfer, scanning the destination's wallet address, and then inserting cash into the machine. While you could transfer crypto using this method to anyone with a wallet, or your decentralized wallet, the fees are often relatively high. It could be as much as 20%. This technique has proven to be one of the most effective ways to transfer crypto anonymously, only that it is also the most expensive.
3. Using Peer-2-Peer Exchanges
You can also transfer crypto anonymously using a peer-to-peer exchange. This approach implies that you either buy crypto directly from another person at the price they demand or sell it to another person at your preferred price. Using crypto as the paying method will further ensure anonymity. Nevertheless, using peer-to-peer exchange may not be completely anonymous because any wallet linked to a centralized exchange can be traced. This option often involves using escrow, where the crypto is held until the funds are cleared.
4. Using crypto Mixers
A crypto mixer is a relatively new way to transfer crypto anonymously. For example, if you want to send a fund from wallet A to wallet B, you will send the fund from wallet A to the mixer. Following this, the mixer will take your crypto and mix it with other people's funds before sending it to wallet B. Using this technique; it's impossible to tell the origin of that fund. You can also set a time on some of the mixers to determine the length you are willing to wait for the crypto to arrive in wallet B. There are two types of coin mixers: centralized and decentralized. Firms that receive, let's say, Bitcoin
and send back different BTC for a fee are referred to as centralized mixers. Decentralized mixers, on the other hand, use protocols like Coinjoin to obscure transactions using a coordinated or peer-to-peer approach. The protocol, in this case, allows a large group of users to pool an amount of crypto and then redistribute it. Yet, no one can trace who received what or where it originated. Closely related to this method is the use of anonymous bridges. By using an anonymous bridge, you can transfer crypto across different blockchains without being able to trace where it originated. One major criticism against crypto mixers is laundering issues, as they reportedly process about a quarter of incoming illicit Bitcoin
5. Privacy Coins
Privacy tokens also give users a high degree of anonymity for crypto transfer. They are tokens that are specially designed to conceal transaction data. Privacy tokens allow for non-disclosure of identity by obfuscating money flow across the network. Examples of privacy tokens include Monero
, Verge, Zcash, and DASH
For example, Monero
is a privacy coin that uses a private ledge and employs CryptoNote technology and Ring Signatures, Ring Confidential Transactions, and Stealth Addresses to keep transactions anonymous. Verge XVG allows anonymous transfer by concealing the IP addresses and locations of transactions using its anonymity tool, Tor. ZCash is also an intriguing privacy token that allows the sender to transfer both regular transactions (visible to everyone) and anonymous transactions (shielded, not visible to anyone). DASH
uses Privatesend to split transactions into specific denominations and combine them with other people's transactions. After a few combinations, the tokens will be indistinguishable from other tokens on the network.
6. Using Gift Cards
Another method of transferring crypto anonymously is the use of gift cards. Some websites allow you to buy gift cards using crypto. You can use crypto to purchase gift cards from different popular brands and businesses such as Uber, Cineplex and Best Buy. You will transfer your crypto from a private wallet to these sites to pay for your order. You could then use the gift card much like cash.
Risks Attached To Transferring Crypto Anonymously
The risks involved in anonymously sending crypto may not be higher than those in sending them normally. Both ways, you could fall victim to a scam or transfer crypto to the wrong wallet address. However, the more anonymous you are, the less likely anyone will be able to assist you if you make a mistake. Some centralized exchanges will provide insurance in the event of a hack, which means you may be compensated. If you fall victim to an attack or scam and the adversary transfers funds to a centralized wallet, you can contact the exchange, which may freeze their account.
However, if you intend to remain completely anonymous, you will not want to contact a centralized exchange for assistance, which means you will lose your funds forever.
In peer-to-peer exchanges, you may be able to meet the seller in person to pay cash. This approach also carries some risks.
Anyone can list a cryptocurrency on a decentralized exchange, and unfortunately, many of them are scam coins. If you fall victim to a scam, a decentralized exchange cannot assist you in any way. Crypto is inherently risky, but exercise extra caution if you intend to send crypto anonymously.
As cryptocurrencies make inroads into mainstream finance, more regulations are on their trail. These regulations constrain the avenues for anonymous transfers as governments and authorities are interested in tracking crypto transactions. However, the high premium individuals place on privacy and security will keep inspiring the development of new ways to make an anonymous crypto transfer. It is left to the individuals who take to these options to exercise extra care because of the risks attached.
Author: Gate.io Observer: M. Olatunji
* This article represents only the views of the observers and does not constitute any investment suggestions.
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