6 Ways To Guarantee Anonymity When Making Bitcoin Transactions

Hiding your identity in this digital world is quite tricky, as you often leave behind several digital footprints.

Since Bitcoin is part of the digital world, it’s also quite tricky to be completely anonymous when using this cryptocurrency.

Did you know that Bitcoin transactions are not anonymous (Pseudo anonymous) and can be tracked?

Bitcoin transactions, by design, are not linked to a person or identity. Public addresses are used for transactions- alphanumeric strings publically recorded on the blockchain.

A person’s name, physical address, or email is found nowhere in the transaction. But a person’s identity can still be tracked down using public address info and IPs.

That’s why Bitcoin transactions are called pseudo-anonymous.

But how is this possible when there’s no name attached to the public address or IP?

Well, sometimes the user of the Bitcoin public address declares their name along with the public address. Identity can also be traced if you are using a private wifi connection. Here we generally give our proof of ID, through which our identities can be matched against our IP.

There are several other ways to track you down digitally, but cutting a long story short, there are some tricks which can help you use Bitcoin anonymously.

Here are some identity-hiding things to do while using Bitcoin.

Best Methods to Make Bitcoin as Anonymous as possible:

1. Bitcoin Mixing

Bitcoin Mixing

Bitcoin transactions are recorded on a public ledger. Anyone who traces a public address can know the origin and/or destination. There is no protocol level procedure to anonymize these bitcoins, which is why a Bitcoin mixer is required to hide identity.

Bitcoin mixing is a process which tries to break the linkability or traceability.

Mixing breaks the link between Bitcoin addresses by either creating temporary addresses or by swapping coins with other addresses of the same value. This makes the trail hard to follow on the blockchain.

Bitcoin mixing is also referred to as Bitcoin laundering, Bitcoin washing, or Bitcoin tumbling, and it is a paid service.

A couple of services which provide bitcoin mixing are:

2. Tor- Onion Router to stay anonymous

You can use a Tor browser to connect with the Bitcoin network. Tor is a volunteer community which beliefs in anonymity and surveillance-free internet usage. If you are looking for something fancy, Brave browser should be your go-to browser. It’s free, faster than Chrome and have Tor feature in-built. Infact, this is the browser I use personally.

Tor nodes encrypt and route your internet traffic to random computer nodes on the Tor network before it reaches its final destination. Hence, it becomes extremely difficult to pinpoint the IP address or system from which the message or transaction was broadcasted.

In simple words, your transactions & other activities couldn’t be pointed to your I.P & thus helps you stay anonymous. However, if you use a KYC enabled Bitcoin sites like CEX, Coinmama or any other, then using TOr is not so useful.

Personally, when you are using P2P based sites like LocalBitcoins or Bisq, using Tor or a VPN is highly recommended.

There are several ways to use Tor on different devices, but if you are using a Windows PC, then you can run your Tor client and connect to the Bitcoin network using the localhost address 127.0.0.1 via standard Tor port 9050.

3. Use Logless VPN

A logless virtual private network (VPN) is a network which doesn’t store the history of your activities on their servers. It encrypts all of your Internet traffic and routes it through multiple servers of your choice at different locations before arriving at the final location.

Some logless VPNs also maintain a shared IP address for multiple users, hence making it difficult to pinpoint and trace one person’s identity.

Using lossless VPNs to connect to your Bitcoin client is another away to improve the privacy of your Bitcoin transactions. But in this case, you have to trust the VPN service provider not to log your activities.

Here are a few popular Non-USA based Logless VPN Service Providers:

Check my detailed list of Best VPN for no logs. Just one thumb rule, Avoid USA/UK based VPN Services due to strict surveillance law. 

4. Always use New Address for Transactions

New Address for Transactions

Most of the popular Bitcoin wallets are HD wallets. That means you can generate any number of receiving address & every time you receive bitcoins from anywhere, use a new address. This at times also confuses new users, as they wonder why their receiving address has changed.

However, just know that if you are using an HD wallet like Ledger Nano X, Samourai wallet, Trezor or any other, you can generate as many Bitcoin receiving addresses as you want.

This is a good practice to ensure anonymity when using Bitcoins on a regular basis. This way, it would be hard to link to 2 or more transactions to you.

You may think when the bitcoin’s blockchain is hack proof why can’t you re-use the same address and what’s the threat.

Yes! it’s true that you can re-use the same address unless you don’t care about your own privacy and security.

As you might know, BTC blockchain is also public and transparent. Anyone who knows about your address can see your spending habits and can check how much balance you hold. Consider these examples of how re-using same BTC address can put you in trouble and jeopardize your financial privacy.

Example 1

  • Let say you use a Bitcoin Paper Wallet to store your wealth.
  • You bought some BTC for cash from LBC and transferred it to your paper wallet.
  • The person from whom you bought BTC follows your address trail on the blockchain.
  • And he finds that you have accumulated $ 100 K in bitcoins on your paper wallet address.
  • He mentions this openly in a public place and this word gets spread. (Chances of this is low but again possibility can’t be denied)
  • Next day a kidnapper kidnaps your child/family member and knows exactly how much to demand in ransom.
  • Or maybe the next day he raids your home and takes the Bitcoin paper wallet from you on a gunpoint which also contains the private keys.

Example 2

  • Let suppose you are a merchant who sells electronic items.
  • You have started accepting Bitcoins as payment.
  • And have put a public address QR code on display in your shop for customers to see.
  • Now imagine some robbers come on gunpoint to rob you.
  • And you say you have not done enough business this month and don’t have any cash to give.
  • If they are tech-savvy robbers, it will take seconds for them to just check the displayed Bitcoin public address.
  • The robbers check the address on the blockchain and found that you have 100 BTC.
  • Your lie is caught and you lose your earned BTCs of the month.

You might think I am scaring and discouraging you by such examples, but I am not. I am just trying to explain some unfavorable scenarios which can come up. So that’s why handling your BTCs with some level of anonymity and care is of paramount importance.

So quick piece of advice from us:-

  1. If you accidentally or willingly exposed your Bitcoin public address, then stop using it and use a new public address.
  2. Use HD wallets like Ledger Nano X,  Trezor or any other, so that you can generate as many Bitcoin receiving addresses as you want.
  3. And don’t transfer funds to the previously exposed public address for which you had revealed your identity from this new address. (You can get tracked !)
  4. Remember to use your new public address while using a Tor browser or VPN (or both). And when you have to spend your funds from the same new address, connect to Tor and/or VPN again and then to your Bitcoin network to transact. This way your IP will not be tracked.

Rule of Thumb: Don’t publicly disclose any address or associate any address with your true identity. This way, it becomes difficult to track you down.

5. Buy/Sell Bitcoins in Cash

Buy/Sell Bitcoins in Cash

Another anonymous way of dealing in Bitcoin transactions is doing face-to-face cash transactions. Services like LocalBitcoins provide this service.

How is a face-to-face interaction through an Escrow service anonymous?

Follow the recommended do’s and don’ts to stay anonymous on LocalBitcoins:

  1. Always Access LocalBitcoins using a VPN or Tor.
  2. Register at LocalBitcoins using a fake name generator and burner email like guerrilla mail. (Don’t use your email or address or real name.)
  3. Find a trustable seller/buyer on LBC for a cash trade. Sellers/buyers with good feedback and a high reputation are safe.
  4. Use a public phone or a burner phone to coordinate the meeting.
  5. Choose a public place for a meeting where you have access to free public wi-fi.
  6. Reach the venue, transact, and wait for 2-3 confirmations.
  7. Don’t use your personal vehicle to commute as your vehicle number can expose your identity.

Following these steps, you will maintain a high degree of anonymity. For a step-by-step procedure on how to buy bitcoins using cash, have a look at this guide.

6. JoinMarket

JoinMarket

Let’s say you want to play it safe and don’t want to trust a centralized website administrator like Smartmixer to anonymize your coins.

Then you can try JoinMarket.

This is not a software or a service; rather, it’s a market. In JoinMarket, market makers and takers come together to make special transactions called CoinJoin transactions. This market arranges the right amount of coins at the right time and the right place.

Takers of this market pay a nominal fee to the makers who are ready to mix their coins. The CoinJoin mechanism enables mixing without Escrow or centralized parties.

In this type of transaction, private keys are always under the control of the user.

However, at present, the market is not so popular and there is not much traffic on it. Also, installing the JoinMarket app takes considerable knowledge and time. But if you want to give it a shot, head toward this link for more information.

Join JoinMarket

How To Make Anonymous Bitcoin Transactions

Bitcoin, by design, is not anonymous, but if used safely, it can give you more than enough privacy. These are just workaround solutions to make Bitcoin anonymous. The technology still has a long way to go as it is still fresh.

On the other hand, Bitcoin is already facing competition from its peer currencies like (Dash and Monero) which offer anonymity as core features at the protocol level.

As cryptocurrencies mature, things like complete anonymity will become commonplace.

But for now, we need these workarounds.

So which method of anonymity are your using? Let me hear your comments and thoughts!

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Further Suggested Readings:

27 thoughts on “6 Ways To Guarantee Anonymity When Making Bitcoin Transactions”

  1. Hi CoinSutra team

    I liked your post. I have a few questions for you

    1) Recently both Etherum and Blockchain had been losing value. Any specific reasons for it? What do you see as a fundamental price for both of them?
    2) What are ICOs? Which are good ones in the near future?
    3) Can you suggest a few resources that one can read to get a good idea on cryptocurrency market from investing standpoint? Thanks

    1. Hello Priyanka

      Here are my answers.

      1) Crypto market is not governed by a single factor and that’s why it’s too volatile. And I am no price predictor to do that…Even if I may do on, It can be wrong or right depending upon these factors such as demand/supply/speculation and of course the fork drama. Both ETH and BTC have now undergone at least one fork. So there is not any one specific reason for the price rally or rekt.

      2) ICOs are Initial Coin offerings like IPOs. But IPOs and ICOs have many differences. CoinSutra will publish a detailed guide on ICOs so stay tuned.

      3) You can keep an eye on CoinSutra not as an investment advisor but as an information source as we cover some well researched and legit Altcoins too.
      And you can keep an eye on Coindesk as well as they are the pioneers in covering any crypto-news which can be a potential investment signal.

  2. If I believe my bitcoin address has been doxxed, would it be enough to exchange my BTC -> Monero on an exchange that doesn’t require accounts. (Shapeshift)

    If I then send my Monero to a second Monero wallet, and then send it back to different BTC paper wallet, would it be completely anonymous again?

    Many thanks, great post

  3. Hello , if I shapeshift some BTC to an alt coin , litecoin , dash coin or any other one by a desktop wallet ( exodus ) by using a VPN , and then change it back to BTC and then if I want to convert BTC to cash and go to a exchange having my ID info then can someone trace me again ?

    So shortly I want to ask , if we shapeshift some BTC to an altcoin , all trace info may get lost because of shapeshifting ?

    1. You are giving your ID so how come you can’t be tracked…moreover ShapeShift also logs your transactions. Not the best way I would say.

  4. You gave two good examples where anonymous address is important. But how to make sure a government can not track you with a hardware wallet like Nano S that runs on a Chrome Browser! Should we have a separate computer that is always used in a public place and used only for the wallet?

  5. If I shapeshift BTC to Zcash, Dash, Monere or Verge , and then transfer these alt coins to another desktop wallet like Exodus , and then transfer these altcoins back to BTC by using VPN , is that safe ?

    And finally can I convert this BTC to cash ?

    1. Here , I want to use VPN to hide my connection IP , and I want to use the method of shapeshifting and then transferring these altcoins to another wallet , to hide which address these altcoins are transferred . You know in Verge , and Zcash , people can not see to which address these altcoins are transferred.

  6. Your personal information can be tracked and stolen from the provider’s end, which mind you also include your private key, and then used by hackers to gain access to your Bitcoin wallet and steal your money – source: purevpn blog

  7. you are forgetting that VPN providers can and do log your real IP… better use a cyber cafe or similar computer and then use a VPN.

    also, using hardware wallets that depend on browser plugins can give a point of attack for the more security paranoid. better then use a TAILS boot USB pen

  8. CoinSutra team please help me i want to know that if i have 100 bitcoin I exchange all that bitcoin with monero through some online exchanger like shapeshift or exchanger and then send all those monero from one wallet to another monero wallet and then exchange all those monero to bitcoin using online exchanger all this method i will do using VPN can Indian government or anybody trace this transaction?????

  9. Good article but as I used Bitmixers and similars I wasn’t very happy. Also it is possible to trace it back. I would suggest that if you want to Convert Bitcoins or Ethereum to any Altcoin like Ripple XRP etc take a look at the iOS App “Bitcoinchange” there is also another Version for Android. As I know there is also a similar website. This way you can completely exchange your Cryptos without KYC and Anonymous

  10. Very interesting – I regret I can’t like and share as to do so would highlight the reason I found you!!

    Continuing to read tho – nice work, keep it up!!

  11. Shapeshift is not enough. Have two wallets (Electrum, Exodus). One for “clear” bitcoins, one for “dirty” bitcoins. Use Xmr.to for cleaning and transfer from “clear” to “dirty” wallet and reversed.

    Always use no logs VPN like NordVPN plus Tor browser.

    The best way to clean your bitcoins using Monero:

    Buyer: USD =Exchange=> BTC =Shapeshift.io=> XMR =XMR.TO=> BTC

    Vendor: BTC =Shapeshift.io=> XMR =XMR.TO=> BTC =Exchange=> USD

    The full journey of the value looks like this:

    USD =exchange=> BTX =Shapeshift.io=> XMR =XMR.TO=> BTC =DarknetMarket=> BTC =shapeshift=> XMR =XMR.TO=> BTC =exchange=> USD

    That’s pretty involved, and you incur fees from each bitcoin transaction, each exchange, and each monero transaction. But you will stay fully anonymous.

  12. 1. If the guy from localbitcoins did not take care of privacy and will sell you his coins, there will always be a connection between us.

    2. What about anonymous atm’s in swiss for example?

  13. Hello,
    I want to purchase LTC then purchase something online with it how do i purchase LTC & transfer it multiply times to make it anonymous. Please help step by step thank you

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Howdy, Welcome to the popular cryptocurrency blog CoinSutra. Here at CoinSutra, we write about Bitcoin, wallet management, online security, making money from Bitcoin & various aspects of cryptocurrencies. You can read more about CoinSutra on the “About” page.
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