Anonymous Bitcoin: How To Remain Untraceable

Anonymous Bitcoin: How To Remain Untraceable

One of the most common things people boast about Bitcoins is the anonymous nature of transactions. Because no personal information is attached to any transaction, it is often assumed that Bitcoins are a fully anonymous form of payment. Yet this is only partially true.

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Are Bitcoin Transactions Really Anonymous?

Yes, it’s true that your personal details are not attached to the transactions listed in the blockchain ledger. However, it is possible for people to gain access to some of your information in a few different ways:

Tracing transactions back to your IP address

Someone with one node connected to the mining process won’t be able to reliably find out where Bitcoins are coming from but, if they have multiple node connections, they are more likely to be able to uncover the IP address of the one who initiates the transaction. While this isn’t personal information, it could then potentially be used to find out more about you.

Clustering transactions from the same wallet

Because it’s rare for a Bitcoin to be sent in its entirety, most transactions are made up of multiple different actions. This means that if you are purchasing something worth 1.5 Bitcoins, you will originally send 2 Bitcoins and .5 Bitcoins will be sent back to your wallet.

Different addresses may be used for both the sender and receiver, but a few strategies can be used to connect those separate actions into one transaction. This will effectively link your wallet addresses together to those who are looking.

Connecting your real identity to your wallet address

If any one of your wallet addresses is, in any way, connected to real world information, such as if you have received money as a vendor or if you’re a Bitcoin broker, your wallet addresses can be linked using the cluster method. Your identity can be discovered as a consequence.

These personal details can be connected to a wallet address any time it is part of a transfer. You might not even think about it while it’s happening, as most real identity information is harmless and it won’t surprise you to give out your name or other details when making or receiving payments.

How to Maintain Your Anonymity

There’s no way to remain 100% anonymous through Bitcoin transactions but, currently, there are a few methods to maintain a higher level of Bitcoin anonymity than others:

1 - Use a mixer software

Mixers take a lot of different Bitcoins from a large number of wallets and redistribute them. Essentially you will be trading a Bitcoin from your wallet and receiving the same amount back from a different wallet. This helps to jumble up the information and make it more difficult to cluster your transactions together.

2- Pass Bitcoins through TOR

If you want to stop people from tracing your IP address via your transactions, you can use TOR, an open network designed to increase anonymity online. Assuming it works as it’s supposed to, it will be completely impossible for anyone to trace your IP address.

3 - New addresses for all transactions

Generating a new wallet address for every transaction can help to make it harder to cluster your transactions together. A lot of the modern day wallets do this automatically, meaning you should have this basic level of security already if you use a more recently created wallet application.

How to Buy Bitcoins Anonymously

If you simply go to a Bitcoin exchange site and buy with via the typical means, be it a anonymous bitcoincredit/debit card, a bank transfer, or otherwise, you will not be buying Bitcoins anonymously.

The best way to keep your anonymity is to either use an anonymous exchange site or to buy with cash. Cash transactions will always be the most anonymous, but many sites exist online to help you keep your anonymity when buying Bitcoins. If you wish to use an online service but want to remain anonymous, do some research before using such an exchange.

For some people, staying anonymous isn’t a priority yet, for many others, it is one of the biggest appealing factors of Bitcoin. These tips will help cover any holes that may currently exist, ensuring you remain anonymous for as long as you want.

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