In order to address the issue of the pseudonymous Bitcoin transaction, more holders and investors of the cryptocurrency has relied on privacy tools to protect their identities
On 3rd January 2009, the first genesis block of Bitcoin was minted, thereby marking the launch of Bitcoin. Over the years, it has undergone several halving events that attracted more people in each halving cycle to invest in the unstoppable ‘currency of tomorrow’. Although the revolutionary digital currency was created by an unknown inventor, who went by the name of ‘Satoshi Nakamoto’, its origin has not stopped the world from recognising Bitcoin as an investable asset.
This year, Bitcoin and the rest of the cryptocurrency market are experiencing a renewed interest with the third ‘Halvening’ and decentralised finance (DeFi) setting off a largely smooth sailing year for the market so far. But just as more people are hopping onto Bitcoin, there remains a significant group of investors worldwide who may have a lack of understanding of the new asset class - Bitcoin. In this article, we will be sharing more about Bitcoin, and how you can protect your cryptocurrency investment in this ever changing landscape of a digitally connected world that we are living today.
Bitcoin and Privacy
These days, most people who have come across the term “Bitcoin” may either associate the cryptocurrency and its underpinning blockchain technology as a by-product to create a financial system without intermediaries, or more commonly known as a decentralisation of traditional financial systems. Satoshi wanted to enable people to send and receive funds anonymously and quickly from anywhere in the world, without the need of banks and costly transfer fees charged by these third parties in managing such money transfer.
Bitcoin can also provide the level of security that is required by people in which transactions are transparent and immutable, or non-changeable by anyone, since blockchain is virtually unhackable by any means. But its transparency feature may be a double-edged sword for Bitcoin users, as the design of Bitcoin and its blockchain allows anyone with access to one’s Bitcoin wallet address to view every transaction online through a blockchain explorer. Hence, it has brought forth a new issue that was overlooked in the early development of Bitcoin, that users of Bitcoins may be faced with privacy concerns that are increasingly important in the digitalisation era. Your identity and transaction activities can be traced by blockchain analytics firms and even hackers, should they identify your wallet address. Additionally, the world is struggling to find a solution in the digital world that could offer effective privacy protection for everyone on the Internet. Bitcoin is essentially part of the digital world, thus it is also tricky to be totally anonymous as a consequence.
Anonymity - One of the central tenets of Bitcoin
While some may argued that it is possible to achieve full privacy with the use of privacy coins such as Monero and ZCash, they may be surprised to learn that due to various design flaws, blockchain analytics firms are actually still be able to track the identities of individuals even if one is to use a privacy coin. On top of that, Bitcoin is the most valuable and liquid cryptocurrency in the market, so the susceptibility to privacy breach is something that should be worked on. This is the reason why Bitcoin addresses should only be used once, unless you are willing to give up your privacy like how you did with Internet giants like Google, Facebook and Microsoft today. Fortunately, there is a way towards anonymity while dealing with Bitcoin.
As more people are concerned about pseudonymous transactions of Bitcoin, several privacy tools are introduced to Bitcoin users which allow you to use them anonymously.
Secure your Bitcoin with Privacy Tools
It is crucial to remember when attempting to remain anonymous when you buy Bitcoin is not to reveal your identity. Unfortunately, with the recent intervention of government bodies, most entities like centralised exchanges which handle cryptocurrencies have to enforce regulation set by the former, hence AML and KYC validations are unavoidable for most. But, with privacy tools such as anonymous Bitcoin wallets and Bitcoin mixers, you can enjoy anonymity even if you did purchase your Bitcoin from these entities. At MyCryptoMixer.com, we strongly encourage Bitcoin users to deploy at least two privacy tools to protect yourself and your funds.
Anonymous Bitcoin Wallet
First of all, it is advisable for anyone who owns a significant stake in Bitcoin to own additional Bitcoin wallet addresses instead of relying on your exchange wallet, for instance. Generally speaking, if you do not own the private key of any Bitcoin wallet, the fate of your funds lie in the hand of the private key owner (e.g. centralised cryptocurrency exchanges like Binance or BitMEX). So, keep in mind to have an additional wallet or two that you can be wholly accountable for your funds.
In the past, we would recommend a hardware wallet like Ledger Nano S or Trezor to act as the ‘storage wallet’ for funds that you are holding for investment purposes. However, with recent reports that exposed vulnerabilities and July’s data leak, we will suggest you to refrain from trying out hardware wallets until they have proven to be 100% secure. Instead, software wallets are more than likely to protect your identity and funds in 2020 and beyond.
As it happens, a software wallet is the most popular type of anonymous Bitcoin wallet as they are easy to use and grant the user complete control over their funds with the provision of the public and private key of your wallet. Getting a software wallet can be done simply by downloading it onto your computer or mobile device. To date, the best software wallet that provides the best anonymity benefit to the user is called Electrum.
First launched in 2011, Electrum is one of the best anonymous Bitcoin wallets available for anyone, both beginners and experienced Bitcoin users. No registration is required to own an Electrum wallet. It is also worth noting that your Electrum wallet private keys are encrypted and it also offers you with a password seed to recover your funds in case that you lose your private keys. As long as these two credentials are kept safely, your funds should be secure. One thing to note, however, is that you will need to ensure that the device you have your wallet downloaded has to be free from viruses or malwares.
Alternatively, if for any reason that you prefer to have an anonymous Bitcoin wallet on your mobile devices, Unstoppable would be the preferred option for you. The open source wallet has garnered a healthy traction among Bitcoin users who value anonymity and security for their funds and transaction activities.
The anonymous Bitcoin wallet app is, to a great extent, run on a peer-to-peer (P2P) basis. The only centralised part about Unstoppable is the live Bitcoin exchange rates data, which is offered by third-party. What makes Unstoppable even more appealing is its support of more than 50 coins, including Bitcoin and other ERC-20 tokens. Similar to Electrum, you are not required to register for an account, KYC or input any of your personal details to own an Unstoppable wallet. Moreover, no third-party servers store your transaction data since you are solely responsible for your wallet.
It is available free for download on both Android and iOS mobile devices.
How to spend with an anonymous bitcoin wallet?
Perhaps some of you may be wondering if it is safe to use such wallets for daily purchases. You may wish to connect your wallet with Tails, if you are using Electrum. In this case, for every transaction, you will have to re-download the wallet. It may sound troublesome, but the process actually takes less than a few minutes. Spending that extra bit of effort could ensure you to safely spend your Bitcoins with the wallet. However, be it Electrum or Unstoppable, it is necessary to send those funds to a second wallet. To do this, you can utilise another crypto privacy tool known as a Bitcoin mixer (or tumbler). With this online mixing service, you are able to make your transactions untraceable from blockchain analytics, hackers and bad actors
What is a Bitcoin mixer (or tumbler)?
Engaging a second privacy tool for the anonymity and safety of your Bitcoin transactions are vital for anyone that values privacy to their Bitcoin transaction activities online. Coupling the use of a Bitcoin mixer and an anonymous Bitcoin wallet can effectively break the traceability of your transactions. A Bitcoin mixer like MyCryptoMixer disconnects your anonymous Bitcoin wallet by swapping your coins with other coins from other Bitcoin addresses with the equivalent amount. It allows the user to distribute those mixed coins to five different addresses.
For example, if you create five different anonymous Bitcoin wallet addresses, and send your mixed coins to these wallets, your transaction trail will be exceptionally difficult to track on the blockchain by anyone.
Eliminating the ‘pseudonymity’ in Bitcoin
All in all, even though Bitcoin fails to address the privacy concerns of its users when it comes to transactions, there are still ways to conceal your identity and transaction records from anyone through the blockchain explorer. As we embrace digital innovation, online privacy is only to get even more important, especially for Bitcoin transactions. Everyone has a right to privacy, and therefore spend Bitcoins securely and anonymously at the same time.
However, as governments gradually enforce cryptocurrency regulations onto most exchanges and merchants which accept cryptocurrencies, it is only a matter of time before we start to think of ways to properly hide our traces to preserve our privacy rights. So, do keep in mind the importance of anonymity with Bitcoin transactions, through an anonymous Bitcoin wallet and Bitcoin mixer like MyCryptoMixer.