Bitcoin has grown in popularity in terms of being a payment method. But do you know that it’s not completely anonymous? In this post, we discussed the different ways on how to use BTC as a payment method without compromising your privacy.

How do you use Bitcoin as a payment system without revealing your identity?

Undeniably, Bitcoin has revolutionized the way people trade goods and services. The rise of Bitcoin has become a new era for e-commerce as it allows for a faster, more secure transaction between a seller and a buyer.

However, as the popularity of Bitcoin as a payment method increases, many of its users started to demand Bitcoin to increase their privacy protection. Why is this so?

Contrary to popular belief, Bitcoin, like many other cryptocurrencies, are not perfectly anonymous. Bitcoin is powered by a global, open-source ledger called the Blockchain. It is where all the transactions are being recorded, tallied, and balanced. Being an open-source asset, the Blockchain and the information it contains can be accessible to everyone who knows how to access it. This poses several different privacy concerns for individuals.

While the Blockchain does not necessarily contain Personally Identifiable Information (PII) like names, personal addresses, email address, and phone numbers, accessing the information the can be found in the Blockchain network can answer the following questions:

  1. Where did a transaction originate? (Wallet address of the sender)
  2. Where was the fund sent to? (Wallet address of the receiver)
  3. How much was sent?
  4. How much money is contained in a wallet address?
  5. When did the transaction occur? (Date and time)
  6. What was bought in the transaction?

With this information available to anyone who has access to the Blockchain, it is extremely important that users protect their privacy while using Bitcoin as a payment method.

3 Compelling Reasons Why You Should Pay Using Bitcoin Anonymously

Businesses are watching you

One of the most compelling reasons why you should pay with Bitcoin anonymously is because businesses are watching every transaction you make. Have you ever thought how Google and Facebook serve ads to you after you checked out a certain item in an online store? It happens because business is looking at the things you are interested in and tailor their advertisement according to your online behaviour. While this is not as dangerous as the two other reasons below, it is still worthy to not allow businesses to snoop into your economic transactions.

Criminals are watching you

Criminal elements sometimes follow the trail of money to determine who they will victimize next. If your purchase behaviour catches the interest of criminal elements, it is possible that you will be their next target. The attacks could range from infectious malware that has the capability to loot your coins, to ransomware that encrypts your device for a ransom to physical violence like kidnapping and blackmail.

The police are watching you

It is true that a lot of criminals are using Bitcoins in their transactions. This is the reason why law enforcement agency are always on the lookout in the Blockchain to follow the trail of money earned or looted by criminals. But just because you are not a criminal does not mean you should not be concerned that the police is watching you. The thing about Bitcoin is that at a certain point in time, the number of Bitcoins is limited (until miners create new ones); this means that the Bitcoin you have right now came from someone else. If the coins that are in your possession can be linked to a crime, there is a chance that you will be investigated – even if you did not do anything illegal.

These compelling reasons are enough for you to reconsider adding up layers of privacy in the transactions you make using Bitcoin. Unlike cash, Bitcoin can be traced to a specific wallet which can be linked to an IP address which is also linked to a name or identity.

But there are several ways that you can anonymize your Bitcoin transactions. Here are a few tips on how to pay using Bitcoin compromising your identity.

Tips on how to make Bitcoin payments anonymously

Tip #1: Buy your Bitcoin anonymously

The most important thing about using Bitcoin as a payment method is to make sure that the Bitcoin that you own is bought anonymously. There are different ways you can buy Bitcoin without the need for identity proof and validation IDs. One of the most effective methods is to buy directly from another person using cash. Other method includes buying through LocalBitcoins and buying through Bitcoin ATMs. We have posted a separate article on the best ways on how to buy Bitcoin anonymously, and you can read it here.

Tip #2: Use a ToR Browser and VPN when making Bitcoin payments online

Bitcoin transactions are usually done online. But in order to make sure that you protect your identity while paying your coins to a seller, it is best to do it with a ToR browser. A ToR browser works similarly as your regular browser like Google; however, the most significant difference is that it masks your online identity by rerouting your internet traffic to a free, worldwide, volunteer overlay network with more than seven relays. This way, you can ensure that no one is spying on your internet traffic as you pay for the stuff you bought with Bitcoin.

Another important tool to use is a VPN. It is a software that allows you to mask your IP address and use an auto-generated IP address from a different location. It aims to prevent third parties from linking the internet traffic – in this case, your Bitcoin transaction – to your actual IP address, which could be used to identify your device and your identity.

Tip #3: Mix your coins

When paying or sending money through Bitcoin, the Blockchain records the transaction, and people will have access to your address, the address of the seller, and the amount paid during the transaction. What Bitcoin mixing does is it breaks the trail in the transaction from your wallet to the wallet of the receiver of funds.

When you use a Bitcoin mixer like MyCryptoMixer, instead of sending the payment to the actual receiver of the money, you pass it through a software (the Bitcoin Mixer). The mixer will receive your coins and mix it with the coins sent by other users. From the pool of mixed coins, you can then transfer the money to the merchant of the product you bought. The difference between the two methods is when using a mixer, the seller will receive random coins that are not connected to your wallet anymore. This way, you can pay Bitcoin without the fear of an observer linking your wallet to the purchase (whatever that purchase maybe).

Final Thoughts

Bitcoin is growing in popularity as an effective, secure, and efficient payment system. However, one of the downsides of using Bitcoins as your method of payment is that it is not completely private – others can see your transactions. However, there are several workarounds to make sure that you use Bitcoin privately. The tips listed above are only a few of the many ways you can employ to protect your privacy while making purchases using Bitcoin. You can start your research from there. What’s important is that you now understand the need for you not to let your privacy be compromised.