Proxies and blockchain: how cryptocurrency projects hide their tracks and traders optimize trading

In a cryptosystem, user privacy and data protection are top priorities. Proxies help hide actions and ensure the confidentiality of transactions. In this article, let's look at how proxies are integrated into the blockchain and what benefits they provide. 

Masking IP addresses to increase anonymity

Every connection to the Internet leaves a digital footprint in the form of an IP address. In blockchain systems such as Bitcoin or Ethereum, transactions can be traced back to the sender's IP address.

Proxy servers mask the real IP. This makes it more difficult for those trying to trace the source of a transaction. For example, a cryptocurrency trader may use a proxy to hide location and prevent trading activity from being tracked.

Protection against cyberattacks using proxy servers

Proxy servers help protect users from threats in several ways: 

• IP address masking. A proxy hides the user's real IP address, which makes it difficult to identify and track the user. This is important when conducting transactions or working with cryptocurrency services. 
• Traffic encryption. Proxies support SSL encryption, which makes traffic interception and analysis useless for attackers. This protects the user from MITM attacks and sniffing. 

Not only traders, but also developers of decentralized applications can use proxies to secure connections to blockchain networks and ensure user privacy. Proxies also facilitate the optimization of access to decentralized resources like IPFS.

IPFS (InterPlanetary File System) is a distributed network that stores and shares files using content-based addressing and a network of similar peers. In content addressing in IPFS, each file is attributed to a unique hash of its content instead of its location.  The IPFS peer network is composed of nodes that communicate directly with each other, this enables the distribution and access of files without the need for a centralized server. 

Whale Alert is a service that monitors large transactions involving cryptocurrency, it employs proxies to conceal the origins of its requests on the blockchain. This circumvented the blocking of resources and allowed for uninterrupted observation.

Alerta regarding whales is provided by Mixers like Wasabi Wallet which utilize proxies to combine transactions, this makes it difficult to follow transactions and increases the anonymity of the user.

Proxy for traders

Traders who are Arbitrageurs utilize proxies to maximize their trading. Here's the process: 

Minimizing holdups

Each cryptocurrency exchange is associated with some geographic information and has its own infrastructure. For those involved in arbitraging, it's essential to minimize the amount of time it takes to transfer information from their systems of trading to exchanges and back. Proxies facilitate the speeding up of the process by re-directing requests and transactions through the fastest paths and nodes.

Combining access to multiple trading platforms

Traders often have multiple ways of conducting business with multiple cryptocurrencies at the same time in order to differentiate the prices of the same assets. Proxies facilitate this management, ensuring a consistent and rapid connection to every exchange. 

Proxy servers have become associated with the blockchain and cryptocurrency system because they provide users with additional levels of security, privacy and convenience. In a world where data protection and safe transactions are paramount, the use of proxies can be crucial to safeguarding users. How do you like the result?