What is Tor?

Tor, short for The Onion Router, is an open-source software that enables anonymous communication over the internet. It is designed to protect users' privacy and prevent online tracking by routing internet traffic through a global network of volunteer-run servers, or nodes. This process encrypts the data multiple times and sends it through a series of nodes, effectively obscuring the user's location and activity.

How Does Tor Work?

Tor's multi-layered encryption is often compared to peeling an onion, hence the name. Here's a simplification of the three-step process:

  • Entry Node: The user's traffic enters the Tor network and is encrypted.
  • Relay Nodes: The traffic is routed through several intermediary servers, each decrypting a single layer and forwarding the traffic to the next node.
  • Exit Node: The final layer of encryption is removed, and the traffic exits to the public internet.
    Throughout this process, only the entry node knows the user's IP address, while only the exit node sees the traffic's destination, ensuring anonymity to the user.

How Does Tor Benefit Crypto Users?

  • Anonymous Transactions: While blockchains like the one Bitcoin operate on are public and can be traced, using Tor when accessing wallets or blockchain networks adds an extra layer of privacy by hiding the user's IP address and location.
  • Access to Private Services: Some privacy-centric cryptocurrencies and decentralized exchanges have .onion sites accessible only through Tor. This ensures secure, private interactions with crypto services that prioritize user anonymity.
  • Protection Against Tracking: Tor helps users avoid surveillance by hackers, ISPs, or governments that might monitor cryptocurrency transactions or blockchain activity.

Other Glossary Terms

DeFi

DeFi, or decentralized finance, refers to blockchain-based apps that offer financial services without banks. It runs on smart contracts, giving users full control over their assets.

Blockchain trilemma

The blockchain trilemma is the challenge of achieving scalability, security, and decentralization at the same time. Learn why it matters — and how projects try to balance the trade-offs.

Crypto Address

A crypto address is a unique identifier used for sending and receiving cryptocurrency on blockchain networks. Linked to a wallet

Public Blockchain

A public blockchain is an open, decentralized network where anyone can participate, validate transactions, and view the ledger. Learn how it works, its benefits, and the challenges it faces in scalability and security.

Circulating Supply

Circulating supply is the number of crypto tokens actively available in the market. It impacts price, market cap, and scarcity, making it a key metric for investors. Bitcoin has ~19.5M BTC circulating, while Ethereum's supply fluctuates.

Block in a blockchain

A block in a blockchain is a digital record that contains a batch of verified transactions, along with metadata such as a timestamp, cryptographic hash, and a reference to the previous block.