A pseudonym is a fake name used by individuals to protect their identity or build a reputation separate from their real identity. Public keys are used to allow Bitcoin users to receive bitcoin while remaining pseudonymous with regards to the blockchain. However, this does not guarantee users of the Bitcoin blockchain will remain pseudonymous. It only ensures that the blockchain will not require personally identifying information.
Chain analysis companies and governments attempt to deanonymize users of the blockchain and connect pseudonyms—addresses and public keys—to real life identities. Bitcoin exchanges often assist these parties by providing KYC-AML information on customers as well as the Bitcoin addresses of their users. Once a Bitcoin address is connected with a user’s physical identity, the pseudonym is useless and their identity is known.
