Introduction to Cryptocurrency ATMs Part 6

Introduction to Cryptocurrency ATMs Part 6

Anonymity and the mechanics of transactions on blockchain networks.

 

The fact that any user on a blockchain network can see all the information about all the transactions means that most cryptocurrency networks are not anonymous in the true sense of the word anonymity. They are pseudo anonymous, with the exception of several truly anonymous cryptocurrencies such as ZCash and Monero. Bitcoin, Ethereum and other major digital currencies are not on this list because their blockchains are public. While it is true that transactions on Bitcoin, Ethereum and other cryptocurrency networks do not have fields with personal identification information, even looking at the blockchain can give law enforcement a lot of information. For instance, if you know that a certain person is supposed to get a certain amount of money at a certain time, you can be monitoring the blockchain for that exact amount. Monitoring wallet addresses can help identifying the time zone of the user that an address belongs to and so on.

For this reason, when you see someone saying that cryptocurrencies are used only by criminals because they provide complete anonymity, this is simply not true. For example, for many people in the real estate industry willingness of a seller to sell a mansion on Upper East Side in New York City has sent a clear signal that even “old money,” of which on Upper East Side of New York City there is a lot of, is treating cryptocurrencies seriously. According to an article in Curbed New York from April 12, 2018, Claudio Zanett, a hedge fund executive, listed his Upper East Side mansion for sale with prices both in United States dollar and cryptocurrencies. He was willing to accept Bitcoin, Ethereum or Ripple. The mansion went on the market about a month after a buyer purchased two apartments at 389 East 89 Street in New York City with cryptocurrencies. The difference between the mansion of Zanett and other apartments is that Zanett is a high-level executive who has spent a lot of time in the financial industry and who is not using cryptocurrencies because of a dire need. This also means that cryptocurrencies do have a future and they have already entered the mainstream, which is why the appearance of more and more cryptocurrency ATMs is only a question of time.

Proof of the statement of the cryptocurrencies entering the mainstream discussion is easy. Even KFC Canada ran a promotion in the early 2018 when it was possible to buy a Bitcoin Bucket of Chicken. The company was accepting payments in cryptocurrencies using Bitpay, which during the promotion was one of the checkout options on KFC’s website.

Bitpay is a global provider of cryptocurrency payment solutions. The company is based in Atlanta, Georgia. It has been in business since 2011 and is available in about one hundred countries.

 

The mechanics of transactions on blockchain networks

When a user on a blockchain network initiates a transaction, the transaction immediately broadcasts to the entire network. Such a transaction is known as an unconfirmed transaction. Here, for example, you can see a list of unconfirmed transactions that are entering the Bitcoin network as you are reading this article: https://www.blockchain.com/en/btc/unconfirmed-transactions and here you can see unconfirmed transactions (also known as pending transactions) on the Ethereum network: https://etherscan.io/txsPending

Broadcasting transactions to the entire network is the first step in solving the double-spending issue because when a transaction becomes visible to everybody on the network, then sending the same funds to a different party and claiming that the funds have not been sent before becomes much harder. For a transaction to become valid, the transaction needs to get several confirmations. A confirmation of a transaction is an inclusion of the transaction into a block of the blockchain. All blocks of blockchain are connected via hashes, which is why when a transaction becomes a part of a block, all the subsequent blocks have a reference to that transaction via hashes.

 

Cryptography hashes

A hash is a result of an application of a cryptography algorithm to a set of data. A hash is a string of data that is shorter than the original data. For instance, block #531955 of the Bitcoin blockchain contains full information about 1318 transactions, including wallet addresses, amounts of bitcoin sent and timestamps, yet the hash for all this information is 000000000000000000241d9895c1025be792a6904ee3478f7c1fa76059f2e8a0.