Cryptocurrencies like Bitcoin and Ethereum are popular in privacy circles for handling any and all transactions. They’re typically understood to be more secure and anonymous than normal, mainline bank accounts are, but is this true? And if so, why?
Before we talk about the extent to which crypto is or isn’t secure, we first have to understand what it is.
To put it simply, there are “tokens” whose ownership is verified cryptographically. This verification process is extremely computationally expensive, and is known in the community as “mining.” Typically, miners receive new crypto tokens as a reward; however, that is not its primary function.
If it helps, you can think of it like a special coin that you prove you own with a secret code. If you give that special coin to a computer, and that computer is able to confirm that it’s valid using math, then you can trade it for goods or services.
In short, it’s really not.
The original architects of cryptocurrencies engineered them in such a way that mining was the exclusive way to verify ownership; however, times have changed since those days. The massive electricity consumption from mining computers pushed people to come up with shortcuts. Without getting into too many specifics, you basically prove you own the coins without having to “mine” them in a process called “staking”.
That being said, that isn’t the only way in which crypto isn’t fully anonymous. At the end of the day, all coins are transferred into publicly viewable wallets. These wallets aren’t inextricably linked to a person’s real life identity like a bank account is; however, they’re only as untraceable as any other online pseudonym is.
Even though crypto isn’t entirely anonymous, if you’re careful, you can make it extremely difficult for anybody to trace any purchases back to you. For that reason, it is technically more private and secure; however, this is going to be a minimal gain for most users - especially people who are just using it to speculate.
If you’re willing to take the steps necessary, then cryptocurrencies are absolutely a more secure option for transactions than your traditional bank account. Otherwise, it’s basically an extremely volatile gimmick commodity to speculate on.