Anonymity vs Pseudonymity

Last Updated on 3. May 2023 by Martin Schuster

Anonymity means that the identity of a person is unknown and its actions are not trackable.

Pseudonymity, however, is a much weaker form. It means that a person’s identity is unknown, but it is possible to assign actions to the same person.

The first figure shows a situation where the person’s identity is unknown. But all the actions the person made can be linked to this person.

The second figure shows a situation where a person’s identity is unknown and it is impossible to link any transaction to a specific person.

Blockchains like Bitcoin or Ethereum are pseudonymous instead of anonymous. The address is a pseudonym for the person holding the corresponding private key. Every action done with this address can be tracd back to this person, although its identity might be unknown. And since all transactions are stored in the blockchain, it is possible for everybody to trace them back, even though this transaction lies long in the past.

There are so-called privacy coins like Monero or ZCash that allow for real anonymity through cryptography. Here, transactions cannot be linked to individual addresses.