Is crypto anonymous? Understanding privacy on the blockchain
Every payment creates a permanent public record. While your name isn't visible, the transaction amount, time, and wallet addresses are permanently recorded on an open ledger for anyone to see.
This is the fundamental reality of cryptocurrencies like Bitcoin and Ethereum: they are not anonymous, but pseudonymous.
This guide breaks down what that means for you, how different blockchains expose your data, and the essential steps to reclaim your financial privacy.
Privacy, anonymity, and pseudonymity
It's helpful to understand three key concepts:
- Privacy is about the control and secrecy of your information and actions. It's the ability to keep your transactions, holdings, and data confidential, even if the parties involved are known.
- Anonymity is about the concealment of your identity. Your actions may be visible, but who performed them is not.
- Pseudonymity is about operating under a persistent, alternative identity. Your real identity is hidden, but all your actions under that pseudonym are linkable together.
Who can see your activity?
A blockchain is a public ledger. This means transaction details are for anyone to see.
If someone knows your cryptocurrency address, they can look it up and see its transaction history.
Your privacy relies on managing how your addresses are discovered and linked together.
- Someone you pay sees the specific address you use for that transaction.
- An exchange connects your verified identity to the addresses you use for deposits and withdrawals.
- An online store will associate your address with your order and shipping information.
- Your wallet interface may see your addresses to retrieve your balance and transaction history.
How blockchain design shapes privacy
Most blockchains follow one of two fundamental designs for tracking ownership: the UTXO model, used by Bitcoin, and the account-based model, used by Ethereum.
Bitcoin's electronic cash: The UTXO model
Bitcoin operates on a model. This design is fundamental to how the network functions and is key to understanding its transparent nature.
A UTXO is best thought of as a piece of bitcoin, similar to a specific bill or coin in your physical wallet. Each one has a specific value and a transaction history.
- When you receive bitcoin, you are receiving one or more UTXOs to your address.
- Your total balance is the sum of all the UTXOs your wallet controls.
- When you receive bitcoin, you are receiving one or more UTXOs. Each UTXO has a specific value determined by the amount sent to your address in that transaction.
- To send bitcoin, your wallet selects UTXOs that add up to at least the amount you want to send. If the total value of the selected UTXOs is greater than your payment amount, your wallet will create a new UTXO for the "change" and send it back to a new address in your wallet.
Because this process of combining and splitting UTXOs is recorded on the public blockchain, it creates a clear, traceable history. If one of your addresses is ever linked to your identity, this transparency can allow others to analyze the blockchain and discover other addresses you control.
To dig deeper into how UTXOs work, see our full guide: What is a UTXO?
Ethereum's account-based model
Ethereum uses an account-based model, which is more akin to a traditional bank account with debits and credits, but with one critical difference: every single transaction is permanently recorded on a public, traceable ledger. This presents different privacy challenges than Bitcoin's UTXO system.
- You typically use a single, static address for all your activity.
- This same address is used across Ethereum Mainnet, Layer 2 networks (like Arbitrum or Optimism), and even other EVM-compatible chains (like BNB Smart Chain).
- Reusing this one address across DeFi protocols, NFT marketplaces, and different chains links all your activity together into one permanent, public profile.
- This makes it easy for others to see your entire transaction history, track your portfolio balance, and can enable targeted attacks like address poisoning (sending tiny, fake transactions to trick you) and phishing.
- Public identifiers like ENS names (.eth domains) can directly link this comprehensive financial profile to your real-world identity.
How to improve privacy on the blockchain
The simplest and most effective strategy for blockchain privacy is compartmentalization: treating your wallet addresses like separate aliases or hats you wear for different purposes.
- Use a new address for every single transaction. This is the most important habit. It prevents outside observers from easily connecting your transactions into a single story.
- Use different accounts or wallets for different activities. Keep your long-term savings, your daily spending, and your DeFi trading in separate places. This contains any potential privacy leaks and limits exposure.
Trezor Suite makes this easy to manage. You can create multiple, clearly labeled accounts (e.g., "Savings," "Online Shopping," "NFTs"). This helps you maintain compartmentalization without getting confused, keeping your financial contexts separate. Learn how to use labels in Trezor Suite.
Practical privacy habits
You can take control of your financial privacy with disciplined habits.
- Use self-custody: A Trezor hardware wallet ensures you alone control your keys and manage your transactions.
- Generate new addresses: For networks like Bitcoin, use a new address for every single receipt of funds.
- Create new accounts: Use separate accounts or wallets to isolate different types of activity (e.g., savings, donations, trading).
- Use Tor in Trezor Suite to hide your IP address from network observers. Learn how to use Tor in Trezor Suite.
Conclusion
Cryptocurrency is not anonymous. It is pseudonymous and transparent. Your activity on Bitcoin, Ethereum, and similar blockchains is often publicly visible and can be analyzed.
True privacy requires conscious effort. By understanding how blockchains work and adopting strong habits, you can take meaningful steps to protect your financial information in a transparent world.