Experienced Bitcoin users will gladly tell people how the popular digital currency will not help much regarding privacy and anonymity. Even though mainstream media outlets keep preaching the exact opposite of that statement, a new study by Rutgers shows how transactions are not as privacy-centric as people assume. Plus, there are still some questions regarding Bitcoin’s convenience that need to be addressed.
Rutgers: Bitcoin ‘Ideal’ but not Anonymous
To many people who have never used Bitcoin or any other digital currency, the entire concept seems to revolve around user privacy and anonymity. Nothing could be further from the truth, however, as the recent Rutgers study indicates Bitcoin is neither privacy-centric nor anonymous by any means. However, the popular digital grants user some level of pseudonymity.
For people looking to gain more financial privacy or anonymity, Bitcoin has very little to offer them. In fact, one could argue that cash is the most anonymous form of monetary exchange in the world, as it is impossible to track its origins or whereabouts outside of bank accounts.
Bitcoin, on the other hand, is a protocol where transactions are broadcasted on a distributed public ledger. Anyone in the world can track Bitcoin payments from its source to destination in real-time, without having to register for access to the system. This effectively removes any illusion of privacy or anonymity when using digital currency.
There is a major difference between privacy-centric, anonymous, and pseudonymous. Even though plenty of people want to see Bitcoin as anonymous, it isn’t. This is also part of the reason the popular digital currency should not be used for criminal activities, as the truth will always prevail sooner or later.
Pseudonymity, on the other hand, is something Bitcoin does provide up to a certain extent. Any digital currency user can be identified based on their Bitcoin wallet address, although that piece of information will not reveal any other information that isn’t associated with the address. This concept is no different from using an alias in a chatroom, or your in-game character name when playing an online game. It is important to distinguish pseudonymity is far from being anonymous, although it is not hard to see why people would confuse these two terms.
Nevertheless, the study did reveal that once the information was presented to new users, the participants saw it as an “ideal” system for payments.
People who have never used Bitcoin […] don’t think they ever could. Even Bitcoin users are not well-versed in how it works and overestimate, for example, the privacy of transactions […] Still, study participants overall viewed Bitcoin as an ideal payment system.
Improving Crypto’s Ease-of-Use
Another issue that needs to be addressed in the world of Bitcoin and digital currency is convenience. Experienced users will explain Bitcoin as if it is the most convenient payment method in the world, and up to a certain extent, that is true. But for novice users, there are multiple mental entry barriers to overcome.
Obtaining one’s first piece of a bitcoin can be done in a variety of ways. The most obvious choice would be to sign up for a specialized Bitcoin exchange platform, and purchase digital currency that way. But at the same time, these platforms are forced to stick to very strict AML and KYC regulatory requirements, which means every user will have to go through a verification procedure.
Another option is buying bitcoin from a Bitcoin ATM, although these devices are not as common as one would like. While the number of Bitcoin ATMs around the world is on the rise, there are still less than 1,000 of these devices available. Plus, most of the ATMs have rather high fees when it comes to purchasing Bitcoin, making less appealing than online exchanges.
But the biggest challenge comes in the form of mental entry barriers. The Rutgers study indicates that people who are new to Bitcoin are worried it is too “difficult” or “scary” to use cryptocurrency. Some people would like nothing more than to see government insurance of Bitcoin deposits, which is the contrary of what digital currency is all about.
The final findings of the Rutgers report will be published in May 2016.
What are your thoughts on the misconceptions surrounding Bitcoin? What can be done to change this in a positive manner? Let us know in the comments below!
Images courtesy of Rutgers, Shutterstock