Is DeFi completely anonymous?

Asked 2 years ago

Hi. I've read that defi is anonymous but how anonymous is it?

Anderson Ezie

Wednesday, February 02, 2022

Anonymity in crypto is a hard question to discuss. While crypto is anonymous a lot of things may be possible in the realm of hacking. For example, the IP address of an attacker or a person executing a transaction can be deciphered with time. Some stablecoins also have the power to freeze funds from malicious actors since hackers often try to run away by moving funds to stablecoins assets after they are stolen. A worst-case scenario will be moving stolen funds through privacy-based cryptocurrency platforms like Tornado cash or Monero.

These protocols use zero-knowledge proofs to blur traces between the sender and the receiver. Unless crypto is passed through such privacy-based protocols, it is possible to trace and see the movement of funds including messages included in crypto transactions. The only con is that there is no personally identifiable information in these transactions except for strings of random letters and numbers which make up addresses.

We can sum it up by saying the anonymity of crypto can be limited by the level of technicality of those trying to find the roots of transactions, but we can all see where funds are coming from and going to in block explorers.

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