Pseudonym — What Does It Mean in Crypto?

In crypto, pseudonymity is the practice of using an alternative, digital identity, such as a wallet address, instead of your real name to conduct transactions and participate in networks. While transactions are recorded publicly on the blockchain and are traceable, your real-world identity is not directly linked to these pseudonymous addresses, offering a level of privacy and security without being fully anonymous.

How it works

• Cryptographic addresses: act as your digital pseudonym or alias.
• When you create a crypto wallet, you get a unique address that identifies your wallet.
• All transactions made from that wallet are linked to this address, creating a transparent but not fully identifiable history.

Key characteristics

• Privacy: Users can interact with the network without revealing their real-world identity.
• Traceability: Because transactions are public and linked to a consistent address, they are traceable on the blockchain.
• Not Anonymity: Unlike full anonymity, where there's no link at all, pseudonymity allows for a consistent identity (the wallet address) to be associated with activities. If this address can be connected to a real-world identity (e.g., through an exchange account), the pseudonymity is broken.

Why it's important

• Security: It protects individuals from cybercrime, harassment, and other potential threats by shielding their true identities.
• Trust: It allows for participation and trust-building on the network without requiring users to disclose personal information, which is crucial for a decentralized system.