If you’ve spent any time exploring the bitcoin black hole or purchasing bitcoin from an exchange, you’ve probably heard of the term KYC (Know Your Customer). You’ve probably also taken part in the process by giving that exchange a ton of personal information in order to buy bitcoin. You now own what is known as “KYC bitcoin” after making your transaction.
What even does that mean? It implies that the bitcoin you bought and the wallet address where it is stored as a UTXO are now linked to your identity (unspent transaction output).
IS KYC BITCOIN REALLY A WORSE DEAL?
The quick answer is yes if you value your privacy and freedom highly. A significant piece of identifying information that may be used to trace your transactions is KYC bitcoin. Many contend that KYC is incompatible with everything a Bitcoin maximalist holds dear. The typical bitcoin user frequently has no idea of this. For those who are interested, I will discuss personal preferences and tools later. This is not intended to be a privacy manual, but rather to share with readers some tools that I have found useful in regaining some privacy.
The public blockchain for Bitcoin stores the details of performing a straightforward on-chain transaction, such as sending bitcoin from one address to another. I advise checking at a Bitcoin block explorer like mempool.space, where you may enter bitcoin wallet addresses and view their transaction history, if you have never done so or are just interested. In addition to this publicly available information, having completed KYC with an exchange enables the exchange to record transaction details. They will be able to link that transaction to your location and ID, as well as the amount of bitcoin that was purchased and transferred to another wallet address.
Although many believe this is not a problem, as was already said, I believe it is crucial for both new and experienced Bitcoin users to be aware of the information exchanged with KYC exchangers.