Why Financial Privacy Isn't All About Shady Online Transactions

Do people use bitcoin to buy drugs, traffic human beings, and sell illegal weapons?

Well, one drug dealer from the UK made between £275,000 and £1.5 million ($368,183 to $2,008,275) in under three years by using Bitcoin transactions to sell drugs on the dark web site, AlphaBay.

So the short answer is yes. Some people use Bitcoin to fuel their illegal ambitions.

But, as with all sophisticated technologies, that answer doesn’t tell the whole story.

In fact, only 5% of the entire bitcoin community is active on the Silk Road — perhaps the largest black market to ever hit the dark side of the internet.

If that’s as bad as it gets, it’s probably safe to assume that the other 95% of people outside the black market are not using bitcoin for heinous pursuits.

And that makes sense. Believe it or not, plenty of people are using Bitcoin to protect their financial privacy in other regards. Not just to deal drugs and buy guns.

In fact, here are the details on why Bitcoin can help you protect your financial privacy.

How Private is Bitcoin?

“It’s totally anonymous. The FBI does not have a prayer of a chance of finding out who is who,” according to one forum commentator.

Well, forum commenter, you’re partly right… and partly wrong.

Yes, Bitcoin does a nice job of protecting your financial privacy, but it doesn’t do the best job. You need to understand how Bitcoin transactions work and what makes them so private in the first place.

Blockchain — the technology that fuels Bitcoin and other cryptocurrencies — is the reason that these transactions are so private.

Here’s how it works.

Someone requests a transaction through Bitcoin. Then nodes or computers process that transaction. Once the transaction is validated, it turns the transaction into a “block,” gives it an address, and adds it to the “blockchain” database (thus the name).

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However, the address that the blockchain technology assigns to your transaction has virtually no connection to your own private information.

That makes it difficult (if not impossible) for onlooking eyes to successfully determine which transactions you participated in and which you had nothing to do with.

At least, that’s the idea.

But the system isn’t quite as foolproof as some people would have you believe.

Three researchers from the University of Luxembourg — Alex Biryukov, Dmitry Khovratovic, and Ivan Pustogarov — tried to draw connections between personal information and Bitcoin transactions, supposedly “de-anonymizing” those individuals.

Their results?

For those of you who were counting on complete privacy in Bitcoin transactions, you might want to close your eyes.

They had a success rate between 11% and 60% in connecting Bitcoin transactions to actual people. That means they were able to identify one in ten transactions on a bad day and six in ten transactions on a good day.

That isn’t very promising privacy.

One expert said that “Average users should be aware that [Bitcoin] is certainly less anonymous than cash.”

However, with a minor change to your web browsing security, Bitcoin still makes a great starting place. In fact, with the use of a VPN and Bitcoin, you’ll be practically unstoppable.

A Virtual Private Network (VPN) is a piece of software that allows you to change your IP address and block your browsing sessions from hackers, governments, and corporations.

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However, before you choose a VPN to use, you might want to make sure that it’s legal in your own country. China and Iran, for instance, have either partially or completely outlawed the use of VPNs. As have many others.

Once you have Bitcoin and a VPN on your side, then your privacy will truly be private.

But what’s the point of it all? Why might you want to consider using Bitcoin for financial privacy?

(Outside of dealing drugs and selling babies, that is.)

You Can Make Legal Purchases Apart From Peering Eyes

Do you feel like you have control over your private information?

If you’re like 90% of consumers, you don’t.

That’s right. Only 10% of consumers feel that they have control over their own information. And 85% of people say that cybersecurity and privacy are two of the biggest challenges facing society today.

In other words, if you’re a bit (coin) on-edge about the privacy of your information, you’re not alone. So is everyone else.

The bad news is that it’s not getting any better. The good news is that you can use Bitcoin and VPNs in cadence to protect your privacy and steer clear of peering eyes.

But what kind of transactions, you might ask, might you want to keep private?

The answer to that question is as numerous as the number of antsy consumers. Some people might use it for pornography, others for addiction treatment confidentiality, and others still because they simply dislike the idea of advertisers and governments having access to their every purchase.

When it comes to nosy advertisers, four of the biggest information selling companies are Facebook, Microsoft, Google, and Apple.

And they don’t keep their agenda a secret.

Just consider this snippet from Facebook’s privacy policy:

“We collect the content and other information you provide when you use our Services, including when you sign up for an account, create or share, and message or communicate with others. This can include information in or about the content you provide, such as the location of a photo or the date a file was created. We also collect information about how you use our Services, such as the types of content you view or engage with or the frequency and duration of your activities.”

And here’s Google’s tactful way of putting it:

“We use the information we collect from all of our services to provide, maintain, protect and improve them, to develop new ones, and to protect Google and our users. We also use this information to offer you tailored content – like giving you more relevant search results and ads.”

And Microsoft:

“Microsoft uses the data we collect to operate our business and provide you the products we offer, which includes using data to improve our products and personalize your experiences. We also may use the data to communicate with you, for example, informing you about your account, security updates and product information. And we use data to help show more relevant ads, whether in our own products supported by advertising like MSN and Bing, or in products offered by third parties. However, we do not use what you say in email, chat, video calls or voice mail, or your documents, photos or other personal files to target ads to you.”

And Apple trying to be subtle:

“We also use personal information to help us create, develop, operate, deliver, and improve our products, services, content and advertising, and for loss prevention and anti-fraud purposes.”

They try to make it sound nice. But the truth is the same.

These places aren’t just collecting your information. They’re selling it to advertisers.

That’s why you often see Google advertisements for a website you just visited, for instance.

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And the others — Apple, Microsoft, and Google — are no different.

They make money off of your information by selling it to advertisers who pay them for that information. End of story.

In other words, all of those free services are only free if you consider your private information worthless.

For that reason, 25% of consumers feel that corporations handle their private information irresponsibly.

And beyond the fact that places are bartering with consumer information, most consumers are fed-up with all of the advertisements they see on a daily basis.

83% of people want to filter out obnoxious advertisements, 91% of people feel that ads are more intrusive today than a few years ago, and 79% of people feel like they’re being tracked by retargeted ads — which, of course, they are.

However, it’s not all bad. 77% of consumers wish they could filter ads instead of blocking them completely.

In other words, most people don’t mind advertisements. They just hate intrusive, disruptive, and creepy advertisements.

In fact, those are the top three reasons that consumers use ad blockers in the first place.

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And it’s no wonder that consumers like yourself are fed up with corporations selling their information to advertisers. The average American sees somewhere between 4,000 and 10,000 ads every single day.

Unfortunately, consumers have even worse perceptions of how federal governments handle their personal information. 66% of consumers say that they want to prevent the government from using their private data.

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Naturally, it’d be ridiculous to assume that 66% of people only want that privacy so they can buy drugs and guns with their Bitcoin.

Rather, people want privacy from the government, advertising corporations, and cybercriminals for a variety of reasons.

  • They might not want their data stolen and used inappropriately.
  • They don’t want to be overwhelmed by advertisers.
  • They don’t want the government to have final say in their online transactions.
  • They want anonymity for personal reasons (like drug rehabilitation or pornography).

And there’s plenty of other legal reasons for wanting financial privacy as well.

In fact, not understanding everyone’s reasons is kinda the point in the first place. Most democracies consider privacy a basic human right. As it turns out, using Bitcoin and a VPN might just be the best way to achieve that dream of true online privacy.

Conclusion

Do some people use Bitcoin to buy drugs, traffic human beings, and sell illegal firearms?

Yes. Unfortunately, some people do.

But can you name one revolutionary technology from the past that wasn’t used in the same way?

The internet? Nope. Email? Nope. Social Media? Nope.

The reality is that criminals will find ways to use every tool toward their dark ends — even the purest and most perfect of tools.

Bitcoin is no exception.

Some people will use it to gain privacy for shady transactions, but the vast majority of people don’t. Most people use it because they want to protect their personal information from advertisers, massive corporations, and federal governments.

In the end, isn’t that their right?