Bitcoin is not entirely anonymous as the public address could be traced back to an IP address or exchange account through a proper network analysis
Bitcoin is probably the most sought-after new asset class in the market today. However, with an unprecedented level of transparency and immutability, most people using Bitcoin for everyday purchases may not be used to have their transactions publicly viewable by anyone. The public, traceable and permanently stored information on the blockchain may be concepts that are potentially disruptive to the financial world, however the risks involved with a growing number of projects and solutions (such as blockchain analysis) dealing with Bitcoin may be worth people’s attention. Since users will have to share their wallet address to make a purchase using Bitcoin (BTC), anyone who got hold of the wallet address will then be able to see the balance and all transactions of the address, through a blockchain explorer. It is also important to note, that as the technology adoption grows, more solutions that are aligned with the government regulations will be created to trace any addresses to an individual in the future. Because of the possibility, it is of paramount importance to start protecting your identity and privacy rights, from the beginning of using BTC as a new way to pay for products and services.
Implementing Privacy Measures
Fortunately, there are as many new and innovative privacy-focused measures as there are for transaction-tracing tools. With the right implementation, anyone could still use the most popular cryptocurrency while retaining their anonymity as well as their privacy rights. As a general rule of thumb, any privacy-conscious individual should use a new and different Bitcoin address each time you receive a BTC payment. Multiple wallets can be used for varying purposes. By doing so, it allows you to separate each transaction such that it is not possible to associate them, which may result in anyone discovering your transaction activity. For instance, if you are publishing a Bitcoin address on a public domain (such as on brochures, websites or social media platforms) to receive donations or payments, the address should only be used solely for the specific purpose. Anyone could use a blockchain explorer platform to view all transaction records with the published address. Thus, you should prepare other Bitcoin wallet addresses for personal or investing purposes. Do note however, that anyone with access to a blockchain explorer can still view the transaction details should you wish to move the BTC funds from your donation wallet to your investment wallet, thereby revealing a pattern and identify your investment wallet address as a result.
Because Bitcoin is hosted on a peer-to-peer (P2P) blockchain network, it is also possible to decipher a user’s IP address from transaction relays. Therefore, additional privacy tools such as using TOR browsers might be useful to obfuscate your IP address, since TOR browsers.
A simple way to full anonymity - Bitcoin Mixer
If the above mentioned privacy measures may be too complex or tedious to perform on a day-to-day basis, there is an online service known as Bitcoin mixing (or Bitcoin tumbling) which might make your path to attaining full anonymity simple and straightforward. In simple terms, a Bitcoin mixer (or Bitcoin tumbler) works by mixing the user’s BTC to a large pool of BTC coins from miners and other users. What the user gets in return would be a fresh new set of equivalent amounts of BTC in the user’s newly assigned wallet address. The bitcoin mixing service ensures that upon completion of the mix, your BTC will be untraceable and remain anonymous from blockchain analysis and other unwarranted users who are trying to track your transaction activity and personal information. While it is worth noting that the legality of using bitcoin mixing services might vary and are subjected to different regulatory rules in each jurisdiction. Fortunately, more governments around the world are accepting cryptocurrencies as they are adopting the underlying blockchain technology for official reasons.
Due to the anonymous nature of Bitcoin mixers, the user does not have to create an account with these providers to use their services. Thus, it is important to choose a trustworthy and customer-centric mixing service provider such as MyCryptoMixer to prevent your BTC funds from being stolen or trackable (reliable Bitcoin mixers do not store any transactional logs for more than 24 hours on their servers). It is a well-known fact these days that any online website or platforms are prone to scams, through a cloned site or malware. So, users are strongly advised to perform their due diligence check and regular anti-malware scans, to ensure that the visited bitcoin mixing site is correct and not risk your BTC funds from being stolen by hackers or bad actors.
Effective use of a Bitcoin mixer
Although most bitcoin mixing services do not accomodate a large BTC transaction mix, users who are looking into mixing a significant amount of BTC coins could break the fund into numerous mixing rounds. It is worth mentioning that since the mixing service could ensure the user’s BTC transactions to be untraceable, splitting up a large transaction could effectively improve the security and anonymity level. To further illustrate the above points, we have come up with a real-life example of Ben.
Ben is an individual who values his privacy and anonymity. He is against the idea of giving up his personal information and payment details to ecommerce companies, which will sell his data to advertisers. He is also an avid Bitcoin investor who wishes to contribute to the ecosystem by spending his BTC for everyday purchases. In order to make an anonymous purchase online, he has learnt to use TOR browsers to hide his IP address and utilises a privacy-oriented burner email addresses (ie. Guerilla mail) to complete a purchase through an online store. He also makes large anonymous donations to a charity organisation which accepts BTC, every month.
Since the charity organisation posted the public donation wallet address, he knows that if he were to send a huge amount of BTC to this donation wallet, anyone will be able to trace the donor’s wallet address and disclose his transaction record. By using a bitcoin mixer, he would have removed any possibilities and links to his own Bitcoin wallet, since a bitcoin mixer allows him to assign to multiple addresses (including the charity’s wallet) at any one time.
Setting up a burner email and anonymous wallet
Through our example of Ben’s Bitcoin spending activity, we have shown how an individual could safely spend using BTC, while at the same time ensuring that the transaction is untraceable and secure. Within this example, we have also pointed out the use of privacy-oriented email addresses and internet browsers. To complete a truly anonymous process with a Bitcoin mixer, the user can also choose to further improve their anonymity by using burner email addresses from providers (such as Guerilla Mail) that give anonymity and privacy to users. A burner email is randomly generated email addresses that will auto-destruct within a few minutes or hours and is perfect for new Bitcoin wallet generations. If the user requires an email account for ecommerce shopping, privacy-oriented email providers such as ProtonMail will be ideal for such purpose, since creating accounts on sites like an online store often require a two-factor authentication via a mobile number of email address.
Keep Anonymity from Analysis Tool
Many people are buying Bitcoins as a form of investment opportunity, but there is also an increasing number of holders who are intending to use BTC for daily purchases and even for donations. As the Bitcoin adoption grows, so is the rate of BTC usage, as well as criminal activities involving the theft and personal safety of Bitcoin users. Therefore, it is highly recommended of Bitcoin users to implement privacy measures that are comfortable to deploy for their transaction purpose. There are numerous ways to eliminate the traceability of a Bitcoin transaction, and using a Bitcoin mixer is a commonly used approach to complete anonymity. The pseudonymous bitcoin will no longer be an issue for those who value their personal information from being compromised, and coupling with a comprehensive mixing process will certainly uphold the privacy rights of Bitcoin users.